-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J764hK3eRKj55pNFaCB+bzLDjN0CjQIPPbfkI79YyZ/yG7jDBWg0AWFOPdobfyln SyRbre9ldwTHhx4h/utLlg== /in/edgar/work/0000025191-00-000090/0000025191-00-000090.txt : 20001017 0000025191-00-000090.hdr.sgml : 20001017 ACCESSION NUMBER: 0000025191-00-000090 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 20000831 FILED AS OF DATE: 20001016 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COUNTRYWIDE CREDIT INDUSTRIES INC CENTRAL INDEX KEY: 0000025191 STANDARD INDUSTRIAL CLASSIFICATION: [6162 ] IRS NUMBER: 132641992 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12331-01 FILM NUMBER: 740701 BUSINESS ADDRESS: STREET 1: 4500 PARK GRANADA BLVD CITY: CALABASAS STATE: CA ZIP: 91302 BUSINESS PHONE: 8182253000 MAIL ADDRESS: STREET 1: 4500 PARK GRANADA BLVD CITY: CALABASAS STATE: CA ZIP: 91302 10-Q 1 0001.txt 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended August 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________________ to __________________ Commission File Number: 1-8422 ------ COUNTRYWIDE CREDIT INDUSTRIES, INC. --------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 13-2641992 - --------------------------------------------------------- ------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 4500 Park Granada, Calabasas, California 91302 - ------------------------------------------------------------------------------ (Address of principal executive offices) (Zip Code) (818) 225-3000 ------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No -------- -------- Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Class Outstanding at October 13, 2000 ----- ------------------------------- Common Stock $.05 par value 114,999,273 PART I FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Dollar amounts in thousands, except per share data) A S S E T S August 31, February 29, 2000 2000 ------------------- ------------------- Cash $ 85,255 $ 59,890 Mortgage loans and mortgage-backed securities held for sale 1,399,375 2,653,183 Trading securities, at market value 3,324,807 1,984,031 Mortgage servicing rights, net 5,881,171 5,396,477 Investments in other financial instruments 4,894,414 3,562,458 Property, equipment and leasehold improvements, at cost - net of accumulated depreciation and amortization 409,288 410,899 Other assets 2,259,948 1,755,390 ------------------- ------------------- Total assets $18,254,258 $15,822,328 =================== =================== Borrower and investor custodial accounts (segregated in special accounts - excluded from corporate assets) $ 4,205,872 $ 2,852,738 =================== =================== LIABILITIES AND SHAREHOLDERS' EQUITY Notes payable $11,574,068 $ 9,782,625 Drafts payable issued in connection with mortgage loan closings 348,782 382,108 Accounts payable, accrued liabilities and other 1,310,927 997,405 Deferred income taxes 1,391,784 1,272,311 ------------------- ------------------- Total liabilities 14,625,561 12,434,449 Commitments and contingencies - - Company-obligated mandatorily redeemable capital trust pass- through securities of subsidiary trusts holding solely Company guaranteed related subordinated debt 500,000 500,000 Shareholders' equity Preferred stock - authorized, 2,500,000 shares of $0.05 par value; issued and outstanding, none - - Common stock - authorized, 240,000,000 shares of $0.05 par value; issued and outstanding, 114,619,707 shares at August 31, 2000 and 113,463,424 shares at February 29, 2000 5,731 5,673 Additional paid-in capital 1,200,794 1,171,238 Accumulated other comprehensive income (loss) 26,208 (33,234) Retained earnings 1,895,964 1,744,202 ------------------- ------------------- Total shareholders' equity 3,128,697 2,887,879 ------------------- ------------------- Total liabilities and shareholders' equity $18,254,258 $15,822,328 =================== =================== Borrower and investor custodial accounts $ 4,205,872 $ 2,852,738 =================== =================== The accompanying notes are an integral part of these statements.
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) (Dollar amounts in thousands, except per share data) Three Months Six Months Ended August 31, Ended August 31, 2000 1999 2000 1999 ---------------- -- -------------- -------------- -- -------------- Revenues Loan origination fees $ 89,928 $122,737 $174,222 $269,438 Gain on sale of loans, net of commitment fees 143,373 158,652 276,527 328,664 ---------------- -------------- -------------- -------------- Loan production revenue 233,301 281,389 450,749 598,102 Interest earned 338,826 264,977 597,420 540,539 Interest charges (336,501) (231,808) (597,975) (477,842) ---------------- -------------- -------------- -------------- Net interest income 2,325 33,169 (555) 62,697 Loan servicing revenue 291,020 247,937 563,223 475,091 Amortization & impairment/recovery of mortgage servicing rights, net of service hedge (134,091) (129,435) (252,250) (276,280) ---------------- -------------- -------------- -------------- Net loan administration revenue 156,929 118,502 310,973 198,811 Net premiums earned 66,298 5,990 128,303 11,681 Commissions, fees and other revenues 53,448 52,024 97,397 112,650 ---------------- -------------- -------------- -------------- Total revenues 512,301 491,074 986,867 983,941 Expenses Salaries and related expenses 188,902 184,329 360,433 369,755 Occupancy and other office expenses 69,736 68,216 136,254 140,425 Marketing expenses 19,988 21,080 39,747 40,603 Insurance net losses 25,835 - 51,473 - Other operating expenses 65,625 42,854 125,820 89,089 ---------------- -------------- -------------- -------------- Total expenses 370,086 316,479 713,727 639,872 ---------------- -------------- -------------- -------------- Earnings before income taxes 142,215 174,595 273,140 344,069 Provision for income taxes 51,180 68,092 98,646 134,187 ---------------- -------------- -------------- -------------- NET EARNINGS $ 91,035 $106,503 $174,494 $209,882 ================ ============== ============== ============== Earnings per share Basic $0.80 $0.94 $1.53 $1.86 Diluted $0.77 $0.91 $1.49 $1.79
The accompanying notes are an integral part of these statements. COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollar amounts in thousands) Six Months Ended August 31, 2000 1999 ---------------- ----------------- Cash flows from operating activities: Net earnings $ 174,494 $ 209,882 Adjustments to reconcile net earnings to net cash provided (used) by operating activities: Gain on sale of available-for-sale securities (13,595) (11,675) Amortization and impairment/recovery of mortgage servicing rights 247,838 39,309 Depreciation and other amortization 33,107 30,988 Deferred income taxes 98,646 134,187 Origination and purchase of loans held for sale (30,740,477) (42,818,201) Principal repayments and sale of loans 31,994,285 43,552,302 ---------------- ----------------- Decrease in mortgage loans and mortgage- backed securities held for sale 1,253,808 734,101 Increase in other financial instruments (1,483,829) (874,965) (Increase) decrease in trading securities (1,340,776) 36,745 (Increase) decrease in other assets (525,485) 204,106 Increase in accounts payable and accrued liabilities 313,522 18,759 ---------------- ----------------- Net cash provided (used) by operating activities (1,242,270) 521,437 ---------------- ----------------- Cash flows from investing activities: Additions to mortgage servicing rights, net (732,532) (786,646) Purchase of property, equipment and leasehold improvements, net (21,501) (59,553) Proceeds from sale of available-for-sale securities 260,401 59,269 ---------------- ----------------- Net cash used by investing activities (493,632) (786,930) ---------------- ----------------- Cash flows from financing activities: Net increase (decrease) in warehouse debt and other short-term borrowings 622,180 (767,395) Issuance of long-term debt 1,652,937 1,303,000 Repayment of long-term debt (517,000) (269,418) Issuance of common stock 25,882 11,146 Cash dividends paid (22,732) (22,564) ---------------- ----------------- Net cash provided by financing activities 1,761,267 254,769 ---------------- ----------------- Net increase (decrease) in cash 25,365 (10,724) Cash at beginning of period 59,890 58,748 ---------------- ----------------- Cash at end of period $ 85,255 $ 48,024 ================ ================= Supplemental cash flow information: Cash used to pay interest $ 584,369 $ 446,840 Cash used to pay income taxes $ 11,550 $ 173 Noncash investing activities: Unrealized gain (loss) on available-for-sale securities, net of tax $ 59,442 ($ 20,583) The accompanying notes are an integral part of these statements.
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (Dollar amounts in thousands) Three Months Six Months Ended August 31, Ended August 31, 2000 1999 2000 1999 --------------------------------- -------------------------------- NET EARNINGS $91,035 $106,503 $174,494 $209,882 Other comprehensive income, net of tax: Unrealized gains (losses) on available for sale securities: Unrealized holding gains (losses) arising during the period, before tax 161,709 (38,472) 106,735 (22,069) Income tax benefit (expense) (58,415) 15,005 (38,616) 8,608 ---------------- --------------- --------------- --------------- Unrealized holding gains (losses) arising during the period, net of tax 103,294 (23,467) 68,119 (13,461) Less: reclassification adjustment for gains included in net earnings, before tax (13,660) (481) (13,595) (11,675) Income tax expense 4,942 187 4,918 4,553 --------------- --------------- --------------- ---------------- Reclassification adjustment for gains included in net earnings, net of tax (8,718) (294) (8,677) (7,122) --------------- ---------------- --------------- --------------- Other comprehensive income (loss) 94,576 (23,761) 59,442 (20,583) ---------------- --------------- --------------- --------------- COMPREHENSIVE INCOME $185,611 $ $233,936 $189,299 82,742 ================ =============== =============== ===============
The accompanying notes are an integral part of these statements. COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Page 29 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the six months ended August 31, 2000 are not necessarily indicative of the results that may be expected for the fiscal year ending February 28, 2001. For further information, refer to the consolidated financial statements and footnotes thereto included in the annual report on Form 10-K for the fiscal year ended February 29, 2000 of Countrywide Credit Industries, Inc. (the "Company"). Certain amounts reflected in the consolidated financial statements for the six-month period ended August 31, 1999 have been reclassified to conform to the presentation for the six-month period ended August 31, 2000. NOTE B - MORTGAGE SERVICING RIGHTS The activity in mortgage servicing rights was as follows. ------------------------------------------------ --------------------- ------------------------- Six Months Ended (Dollar amounts in thousands) August 31, 2000 ------------------------------------------------ --------------------- ------------------------- --------------------- Mortgage Servicing Rights Balance at beginning of period $5,420,239 Additions 732,532 Scheduled amortization (224,262) Hedge losses (gains) applied (23,106) --------------------- Balance before valuation reserve at end of period 5,905,403 --------------------- Reserve for Impairment of Mortgage Servicing Rights Balance at beginning of period (23,762) Reductions (additions) (470) ---------------------- Balance at end of period (24,232) ---------------------- Mortgage Servicing Rights, net $5,881,171 ====================== ----------------------------------------------- -- ---------------- -- ---------------------- --
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) (UNAUDITED) Page 7 NOTE C - INVESTMENTS IN OTHER FINANCIAL INSTRUMENTS Investments in other financial instruments included the following. ------------------------------------------------------------ ----------------------------------------------------- August 31, February 29, (Dollar amounts in thousands) 2000 2000 ------------------------------------------------------------------- --- ----------------- --- ---------------- --- Servicing hedge instruments $2,122,039 $1,784,315 Securities purchased under agreements to resell 1,339,011 435,593 Mortgage-backed securities retained in securitization 898,171 775,867 Insurance company investment portfolio 535,193 520,490 Equity securities, restricted and unrestricted - 46,193 ----------------- ---------------- $4,894,414 $3,562,458 ================= ================ ------------------------------------------------------------------- --- ----------------- --- ---------------- ---
Securities purchased under agreements to resell are classified as receivables. It is the policy of the Company to take possession of securities purchased under agreements to resell. The Company's agreements with third parties specify its rights to request additional collateral. The Company monitors the fair value of the underlying securities as compared with the related receivable, including accrued interest, and requests additional collateral as necessary. NOTE D - AVAILABLE FOR SALE SECURITIES Amortized cost and fair value of available for sale securities were as follows. ---------------------------------- ---------------- - ------------------------------------ -- ---------------- --- August 31, 2000 ---------------- - ------------------------------------ -- ---------------- --- Gross Gross Amortized Unrealized Unrealized Fair (Dollar amounts in thousands) Cost Gains Losses Value ---------------------------------- ---------------- - ----------------- - ---------------- -- ---------------- --- Mortgage-backed securities retained in securitization $ 913,654 $ 11,131 ($26,614) $ 898,171 Principal only securities 1,234,831 91,274 (37,135) 1,288,970 Insurance company investment portfolio 532,814 5,782 (3,403) 535,193 ---------------- ----------------- ---------------- ---------------- $2,681,299 $108,187 ($67,152) $2,722,334 ================ ================= ================ ================ ---------------------------------- ---------------- - ----------------- - ---------------- -- ---------------- ---
NOTE D - AVAILABLE FOR SALE SECURITIES (Continued) ---------------------------------- ---------------- - ------------------------------------ -- ---------------- --- February 29, 2000 ---------------- - ------------------------------------ -- ---------------- --- Gross Gross Amortized Unrealized Unrealized Fair (Dollar amounts in thousands) Cost Gains Losses Value ---------------------------------- ---------------- - ----------------- - ---------------- -- ---------------- --- Mortgage-backed securities retained in securitization $760,619 $39,411 ($24,163) $775,867 Principal only securities 1,002,496 2,372 (52,028) 952,840 Insurance company investment portfolio 523,012 483 520,490 (3,005) Equity securities 63,136 3,193 (20,136) 46,193 ---------------- ----------------- ---------------- ---------------- $2,349,263 $45,459 ($99,332) $2,295,390 ================ ================= ================ ================ ---------------------------------- ---------------- - ----------------- - ---------------- -- ---------------- ---
NOTE E - NOTES PAYABLE Notes payable consisted of the following. ------------------------------------------------------------ ----------------------------------------------------- August 31, February 29, (Dollar amounts in thousands) 2000 2000 -------------------------------------------------------------------- -- --- ---------------- --- ----------------- --- Commercial paper $ 1,982 $ 103,829 Medium-term notes, Series A, B, C, D, E, F, G, H, I and Euro Notes 9,111,260 7,975,324 Securities sold under agreements to repurchase 2,258,383 1,501,409 Subordinated notes 200,000 200,000 Other notes payable 2,443 2,063 ----------------- ---------------- $11,574,068 $9,782,625 ================= ================
-------------------------------------------------------------------- -- ----- Commercial Paper and Backup Credit Facilities As of August 31, 2000, CHL, the Company's mortgage banking subsidiary, had unsecured credit agreements (revolving credit facilities) with consortiums of commercial banks permitting CHL to borrow an aggregate maximum amount of $5.0 billion. The facilities included a $4.0 billion revolving credit facility with forty-four commercial banks consisting of: (i) a five-year facility of $3.0 billion, which expires on September 24, 2002, and (ii) a one-year facility of $1.0 billion which was extended and increased to $1.2 billion on September 19, 2000 to September 19, 2001. As consideration for the facility, CHL pays annual commitment fees of $3.8 million. There is an additional one-year facility, which expires on April 11, 2001, with a total commitment of $1.0 billion. As consideration for the facility, CHL pays annual commitment fees of $0.8 million. The purpose of these credit facilities is to provide liquidity backup for CHL's commercial paper program. No amount was outstanding under these revolving credit facilities at August 31, 2000. The weighted average borrowing rate on commercial paper borrowings for the six months ended August 31, 2000 was 6.46%. The weighted average borrowing rate on commercial paper outstanding as of August 31, 2000 was 6.62%. In addition, CHL has entered into a $1.1 billion asset backed commercial paper conduit facility with four commercial banks. This facility has a maturity date of November 21, 2000. As consideration for this facility, CHL pays annual commitment fees of $1.4 million. Loans made under this facility are secured by conforming and non-conforming mortgage loans. No amount was outstanding under this facility at August 31, 2000. All of the facilities contain various financial covenants and restrictions, certain of which limit the amount of dividends that can be paid by the Company or CHL. NOTE E - NOTES PAYABLE (Continued) Medium-Term Notes As of August 31, 2000, outstanding medium-term notes issued by CHL under various shelf registrations filed with the Securities and Exchange Commission or issued by CHL pursuant to its Euro medium-term note program were as follows. - --------------------------------------------------------------------------------------------------------------------------- (Dollar amounts in thousands) Outstanding Balance Interest Rate Maturity Date ---------------------- ---------------------------- ------------------------------------------- Floating-Rate Fixed-Rate Total From To From To ------------------------------------------- ----------- ---------- -------------- ------------- Series A - $96,500 $96,500 7.41% 8.79% Aug. 2001 Mar. 2002 Series B - 251,000 251,000 6.65% 6.98% Mar. 2003 Aug. 2005 Series C 105,000 127,000 232,000 5.88% 7.78% Mar. 2001 Mar. 2004 Series D - 385,000 385,000 6.05% 6.88% Mar. 2001 Sep. 2005 Series E - 655,000 655,000 6.94% 7.45% Sep. 2003 Oct. 2008 Series F 311,000 1,344,000 1,655,000 6.16% 7.36% Oct. 2000 May 2013 Series G 5,000 581,000 586,000 5.35% 7.23% Oct. 2000 Nov. 2018 Series H 611,500 2,049,000 2,660,500 6.25% 8.25% May 2001 Oct. 2019 Series I 238,000 187,000 425,000 7.15% 8.00% June 2001 Aug. 2015 Euro Notes 652,406 1,512,854 2,165,260 6.10% 8.11% Nov. 2000 Jan. 2009 ------------------------------------------- Total $1,922,906 $7,188,354 $9,111,260 =========================================== - ---------------------------------------------------------------------------------------------------------------------------
As of August 31, 2000, substantially all of the outstanding fixed-rate notes had been effectively converted through interest rate swap agreements to floating-rate notes. The weighted average borrowing rate on medium-term note borrowings for the six-months ended August 31, 2000, including the effect of the interest rate swap agreements, was 6.88%. As of August 31, 2000, there were $1,511 million foreign currency denominated notes issued pursuant to the Euro medium-term notes program outstanding. Such notes are denominated in Deutsche Marks, French Francs, Portuguese Escudos, Japanese Yen and Euros. The Company manages the associated foreign currency risk by entering into currency swaps. The terms of the currency swaps effectively translate the foreign currency denominated medium-term notes into U.S. dollars. Securities Sold Under Agreements to Repurchase The Company routinely enters into short-term financing arrangements to sell MBS under agreements to repurchase. The weighted average borrowing rate for the six-months ended August 31, 2000 was 6.44%. The weighted average borrowing rate on repurchase agreements outstanding as of August 31, 2000, was 6.59%. The repurchase agreements were collateralized by MBS. All MBS underlying repurchase agreements are held in safekeeping by broker-dealers or banks. All agreements are to repurchase the same or substantially identical MBS. NOTE E - NOTES PAYABLE (Continued) Pre-Sale Funding Facilities As of August 31, 2000, CHL had uncommitted revolving credit facilities with the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac"). The credit facilities are secured by conforming mortgage loans that are in the process of being pooled into MBS. As of August 31, 2000, the Company had no outstanding borrowings under either of these facilities. NOTE F - FINANCIAL INSTRUMENTS The following table summarizes the notional amounts of derivative contracts included in the Servicing Hedge. - -------------------------------------- -------------------- -------------------- ------------------ --------------------- (Dollar amounts in millions) Balance, Dispositions/ Balance, February 29, 2000 Additions Expirations August 31, 2000 - -------------------------------------- -------------------- -------------------- ------------------ --------------------- Interest Rate Floors $50,500 1,000 (5,000) $46,500 Long Call Options on Interest Rate Futures $15,000 6,550 (20,000) $1,550 Long Put Options on Interest Rate Futures $1,750 3,500 - $5,250 Long Call Options on MBS $8,561 - (4,000) $4,561 Capped Swaps $1,000 - - $1,000 Interest Rate Swaps $1,500 - - $1,500 Interest Rate Cap $2,500 1,500 (1,500) $2,500 Swaptions $36,250 17,000 (1,000) $52,250 Principal - Only Swaps - 125 - $125 - -------------------------------------- -------------------- -------------------- ------------------ ---------------------
Fair Value of Financial Instruments The following disclosure of the estimated fair value of financial instruments as of August 31, 2000 and February 29, 2000 is made by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. NOTE F- FINANCIAL INSTRUMENTS (Continued) ---- ------------------------------------------------ ---------------------------------- --- ---------------------------- August 31, 2000 February 29, 2000 (Dollar amounts in thousands) Carrying Estimated Carrying Estimated Amount fair value amount fair value Assets: Mortgage loans and mortgage-backed securities held for sale $1,399,375 $1,399,375 $2,653,183 $2,653,183 Trading securities 3,324,807 3,324,807 1,984,031 1,984,031 Items included in investments in other financial instruments: Principal only securities purchased 1,288,970 1,288,970 952,840 952,840 Mortgage-backed securities retained in securitizations 898,171 898,171 775,867 775,867 Insurance Company investment portfolio 535,193 535,193 520,490 520,490 Securities purchased with agreements to rese1,339,011 1,339,011 435,593 435,593 Equity Securities - restricted and - - 46,193 46,193 unrestricted Items included in other assets: Rewarehoused FHA and VA loans 249,726 249,726 336,273 336,273 Loans held for investment 229,259 229,259 177,330 177,330 Receivables related to broker-dealer activitie399,441 399,441 22,612 22,612 Liabilities: Notes payable 11,574,068 11,136,874 9,782,625 9,459,011 Securities sold not yet purchased 241,367 241,367 181,903 181,903 Company-obligated mandatorily redeemable Capital trust pass-through securities of subsidiary trusts holding solely Company guaranteed related subordinat500,000 472,863 500,000 489,744 debt Derivatives: Interest rate floors 380,441 260,980 411,278 180,360 Forward contracts on MBS 3,421 (30,002) (11,080) (13,511) Options on MBS 67,329 37,751 75,950 32,415 Options on interest rate futures 15,982 3,162 8,921 6,032 Interest rate caps 20,576 8,672 47,348 39,088 Capped Swaps (2,668) (4,031) (5,619) (8,040) Swaptions 388,755 136,578 341,039 76,254 Interest rate swaps (22,060) (469,855) (23,228) (457,051) Principal - only swaps 1,791 1,791 - - Short-term commitments to extend credit - 72,900 - 52,500 ---- ------------------------------------------------ --------------- -- ------------- -- ------------- --- -------------
The fair value estimates as of August 31, 2000 and February 29, 2000 are based on pertinent information that was available to management as of the respective dates. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since those dates and, therefore, current estimates of fair value may differ significantly from the amounts presented herein. NOTE G - LEGAL PROCEEDINGS Legal Proceedings The Company and certain subsidiaries are defendants in various legal proceedings involving matters generally incidental to their business. Although it is difficult to predict the ultimate outcome of these proceedings, management believes, based on discussions with counsel, that any ultimate liability will not materially affect the consolidated financial position or results of operations of the Company and its subsidiaries. NOTE H - SUMMARIZED FINANCIAL INFORMATION OF SUBSIDIARY Summarized financial information for Countrywide Home Loans, Inc. was as follows. ---- ----------------------------------------- ---- ------------------------------------------------- August 31, February 29, (Dollar amounts in thousands) 2000 2000 ---- ---------------------------------------------- ------- -------------- ----------- -------------- Balance Sheets: Mortgage loans and mortgage-backed securities held for sale $ 1,399,375 $ 2,653,183 Mortgage servicing rights, net 5,881,171 5,396,477 Other assets 7,573,508 5,240,247 -------------- -------------- Total assets $14,854,054 $13,289,907 ============== ============== Short- and long-term debt $10,199,401 $ 9,224,956 Other liabilities 2,052,856 1,632,106 Equity 2,601,797 2,432,845 -------------- -------------- Total liabilities and equity $14,854,054 $13,289,907 ============== ==============
---- ---------------------------------------------- ------- -------------- - ----- ----------------------------------------- --- --------------------------- Six Months Ended August 31, (Dollar amounts in thousands) 2000 1999 ----- --------------------------------------------- ------- --------------- ---------- --------------- --------- --------------- ---------- --------------- --------- Statements of Earnings: Revenues $620,255 $783,355 Expenses 452,740 509,314 Provision for income taxes 61,143 106,876 --------------- --------------- Net earnings $106,372 $167,165 =============== =============== ----- --------------------------------------------- ------- --------------- -
NOTE I - SEGMENTS AND RELATED INFORMATION The Company has six major segments that are grouped into Consumer and Institutional businesses. Consumer Businesses include Mortgage Originations, Mortgage-Related Investments and Business to Consumer ("B2C") Insurance. Institutional Businesses include Processing and Technology, Capital Markets and Business to Business ("B2B") Insurance. The Mortgage Originations segment originates mortgage loans through the Company's retail branch network (Consumer Markets Division and Full Spectrum Lending, Inc.) and the Wholesale Division. This segment also provides other complementary services offered as part of the origination process through LandSafe, Inc., including title, escrow, appraisal, credit reporting and flood determination services. The Mortgage-Related Investments segment consists of investments in assets retained in the mortgage securitization process, including MSRs and residual interests. The B2C Insurance Segment, through Countrywide Insurance Services, Inc., acts as an agent in the sale of insurance, including homeowners, fire, flood, earthquake, life and disability insurance, primarily to the Company's mortgage customers. NOTE I - SEGMENTS AND RELATED INFORMATION (Continued) The Processing and Technology segment activities include mortgage servicing, as well as mortgage subservicing and subprocessing for other domestic financial institutions and foreign financial institutions (through Global Home Loans, Limited). The Capital Markets segment purchases mortgage loans through the Correspondent Lending Division, acts as a broker/dealer specializing in mortgages and mortgage-related securities through Countrywide Securities Corporation ("CSC"), and as an agent, facilitates the purchase and sale of bulk servicing rights through Countrywide Servicing Exchange, Inc. ("CSE"). The B2B Insurance Segment includes the activities of Balboa Life and Casualty ("Balboa"), an insurance carrier that offers property and casualty insurance (specializing in creditor-placed insurance), and life and disability insurance, along with Second Charter, Inc., a mortgage reinsurance company. Included in the tables below labeled "Other" is the holding company activities and certain reclassifications to conform management reporting to the consolidated financial statements. - ------------------------------------------------------------------- For the six months ended August 31, 2000 Consumer Businesses Institutional Businesses ---------- ---------- --------- ----------- ---------- --------- --------- ---------- Mortgage-Related Processing Mortgage InvestmentsB2C and Capital B2B (Dollars in thousandOriginations Insurance Total Technology Markets Insurance Total Other Total - ------------------- ---------- ---------- --------- ----------- ---------- --------- --------- ---------- -------- --------- External revenues $435,904 $252,544 $19,156 $707,604 $ 16,844 $116,347 $142,231 $275,422 $3,841 $986,867 Intersegment revenues - (131,651) - (131,651) 131,651 - - 131,651 - - ---------- ---------- --------- ----------- ---------- --------- --------- ---------- -------- --------- Total revenues $435,904 $120,893 $19,156 $575,953 $148,495 $116,347 $142,231 $407,073 $3,841 $986,867 ========== ========== ========= =========== ========== ========= ========= ========== ======== ======== Segment earnings (pre-tax) $60,354 $117,378 $1,949 $179,681 $24,679 $38,489 $30,002 $93,170 $289 $273,140 Segment assets $1,491,224 $9,202,073 $58,290 $10,751,587 $164,802 $6,412,999 $865,441 $7,443,242 $59,429 $18,254,258 - ------------------- ---------- ---------- --------- ----------- -- ---------- --------- --------- ---------- -- -------- --------
- ------------------------------------------------------------------------------------------------------------------------------- For the six months ended August 31, 1999 Consumer Businesses Institutional Businesses ---------- ---------- --------- ----------- ---------- --------- --------- ---------- Mortgage-Related Processing Mortgage InvestmentsB2C and Capital B2B (Dollars in thousandOriginations Insurance Total Technology Markets Insurance Total Other Total - ------------------- ---------- ---------- --------- ----------- ---------- --------- --------- ---------- -------- -------- External revenues $619,463 $184,385 $15,242 $819,090 $ 13,113 $130,101 $12,225 $155,439 $9,412 $983,941 Intersegment revenues - (111,191) - (111,191) 111,191 - - 111,191 - - ---------- ---------- --------- ----------- ---------- --------- --------- ---------- -------- --------- Total revenues $619,463 $ 73,194 $15,242 $707,899 $124,304 $130,101 $12,225 $266,630 $9,412 $983,941 ========== ========== ========= =========== ========== ========= ========= ========== ======== ======== Segment earnings (pre-tax) $193,950 $61,232 $2,207 $257,389 $17,352 $57,949 $12,099 $87,400 ($720) $344,069 Segment assets $3,700,124 $8,111,368 $32,735 $11,844,227 $118,072 $4,054,130$40,855 $4,213,057 $174,161 $16,231,445 - ------------------- ---------- ---------- --------- ----------- -- ---------- --------- --------- ---------- -- -------- ---------
NOTE J - SUBSEQUENT EVENTS On September 19, 2000, CHL renewed the $1.0 billion one-year portion of the $4.0 billion revolving credit facility. This renewal raised the facility to $1.2 billion and will expire on September 19, 2001. NOTE K - IMPLEMENTATION OF NEW ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS No. 133"). SFAS No. 133 establishes accounting and reporting standards for derivative instruments and hedging activities. It requires that an entity recognize the fair value of all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as (a) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows of a forecasted transaction, or (c) a hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-for-sale security, or a foreign-currency-denominated forecasted transaction. This statement will become effective in the fiscal year ended February 28, 2002. The Company has not yet determined the impact on the Consolidated Financial Statements upon the adoption of this standard. NOTE L - EARNINGS PER SHARE Basic earnings per share is determined using net income divided by the weighted average shares outstanding during the period. Diluted EPS is computed by dividing net income by the weighted average shares outstanding, assuming all dilutive potential common shares were issued. The following table presents basic and diluted EPS for the three and six months ended August 31, 2000 and 1999. - ------------------------ -- -- ----- ------------------------------------ -- ----- ---- Three Months Ended August 31, -- -- ----- ------------------------------------ -- ----- ---- 2000 1999 --------- --------- --------- ---------- --------- --------- (Dollar amounts in Per-Share Per-Share thousands, except per Net Amount Net Amount share data) Earnings Shares Earnings Shares - ------------------------ --------- --------- --------- --------- --------- ---------- Net earnings $91,035 $106,503 ========= ========== Basic EPS Net earnings available to common shareholders $91,035 114,302 $0.80 $106,503 112,991 $0.94 Effect of dilutive stock options - 3,842 - 4,355 --------- --------- ---------- --------- Diluted EPS Net earnings available to common shareholders $91,035 118,144 $0.77 $106,503 117,346 $0.91 ========= ========= ========== ========= - ------------------------ --------- --------- --------- - ---------- --------- ---------
- ------------------------ -- -- ----- ------------------------------------ -- ----- ---- Six Months Ended August 31, -- -- ----- ------------------------------------ -- ----- ---- 2000 1999 --------- --------- --------- ---------- --------- --------- (Dollar amounts in Per-Share Per-Share thousands, except per Net Amount Net Amount share data) Earnings Shares Earnings Shares - ------------------------ --------- --------- --------- --------- --------- ---------- Net earnings $174,494 $209,882 ========= ========== Basic EPS Net earnings available to common shareholders $174,494 114,047 $1.53 $209,882 112,871 $1.86 Effect of dilutive stock options - 3,180 - 4,568 --------- --------- ---------- --------- Diluted EPS Net earnings available to common shareholders $174,494 117,227 $1.49 $209,882 117,439 $1.79 ========= ========= ========== =========
- ------------------------ --------- --------- ---- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Page 15 FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q may contain forward-looking statements that reflect the Company's current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties, including those identified below, which could cause actual results to differ materially from historical results or those anticipated. The words "believe," "expect," "anticipate," "intend," "estimate," "should" and other expressions which indicate future events and trends identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The following factors could cause actual results to differ materially from historical results or those anticipated: (1) the level of demand for mortgage credit, which is affected by such external factors as the level of interest rates, the strength of the various segments of the economy and demographics of the Company's lending markets; (2) the direction of interest rates; (3) the relationship between mortgage interest rates and the cost of funds; (4) federal and state regulation of the Company's mortgage origination, mortgage servicing, capital markets and insurance operations; and (5) competition within the mortgage banking, capital markets and insurance industries. Quarter Ended August 31, 2000 Compared to Quarter Ended August 31, 1999 OPERATING SEGMENT RESULTS The Company's pre-tax earnings by segment is summarized below. - -------------------------------------------- --------------------------------------- -------- Three Months Ended (Dollar amounts in thousands) August 31, - -------------------------------------------- --------------------------------------- -------- 2000 1999 ------------- -------------- Consumer Businesses: Mortgage Originations $32,800 $81,800 Mortgage-Related Investments 55,212 45,212 B2C Insurance 889 1,015 ------------- -------------- Total Consumer Business 88,901 128,027 Institutional Businesses: Processing and Technology 14,174 10,851 Capital Markets 21,588 29,904 B2B Insurance 15,754 6,216 -------------- ------------- Total Institutional Business 51,516 46,971 Other 1,798 (403) ------------- -------------- Pre-tax Earnings $142,215 $174,595 ============= ==============
- ------------------------------------------------------------------------ Mortgage Originations Segment The Mortgage Originations segment activities include loan origination through the Company's retail branch network (Consumer Markets Division and Full Spectrum Lending, Inc.) and the Wholesale Division, the warehousing and sales of such loans and loan closing services. Total Consumer Mortgage loan production by Division is summarized below. - -------------------------------------------- --------------------------- (Dollar amounts in millions) Loan Production Three Months Ended August 31, - -------------------------------------------- --------------------------------------- -------- 2000 1999 ------------- ---------------- Consumer Mortgages: Consumer Markets Division $4,386 $ 6,054 Wholesale Lending Division 4,356 5,458 Full Spectrum Lending, Inc. 402 379 ------------- ---------------- Total $9,144 $11,891 ============= ================ - ---------------------------------------------------------------------------------------------
The decline in pre-tax earnings of $49.0 million in the quarter ended August 31, 2000 as compared to the quarter ended August 31, 1999 was primarily attributable to lower prime credit quality first mortgage loan production and reduced margins on prime credit quality first mortgages driven by a significant reduction in refinances. These declines were partially offset by increased margins on sub-prime loans and a reduction in expenses. Mortgage-Related Investments Segment Mortgage-Related Investment segment activities include investments in assets retained in the mortgage securitization process, including mortgage servicing rights, residual interests in asset-backed securities and other mortgage-related assets. The increase in pre-tax earnings of $10.0 million in the quarter ended August 31, 2000 as compared to the quarter ended August 31, 1999 was primarily due to an increase in servicing revenues resulting from servicing portfolio growth and improved performance of the residual investments. As of August 31, 2000, the Company serviced $270.5 billion of loans (including $5.9 billion of loans subserviced for others), up from $236.7 billion (including $4.3 billion of loans subserviced for others) as of August 31, 1999, a 14% increase. These positive factors were partially offset by increased interest expense related to financing the mortgage-related investments, increased impairment of MSRs and higher servicing expenses driven by the growth in the servicing portfolio, including the subservicing fee paid to the Processing and Technology sector. The growth in the Company's servicing portfolio since August 31, 1999 was the result of loan production volume and the acquisition of bulk servicing rights. This was partially offset by prepayments, partial prepayments and scheduled amortization. During the quarter ended August 31, 2000, the annual prepayment rate of the Company's servicing portfolio was 10%, compared to 15% for the quarter ended August 31, 1999. In general, the prepayment rate is affected by the level of refinance activity, which in turn is driven by the relative level of mortgage interest rates, and activity in the housing market. The weighted average interest rate of the mortgage loans in the Company's servicing portfolio as of August 31, 2000 was 7.8% compared to 7.4% as of August 31, 1999. B2C Insurance Segment B2C Insurance segment activities include the operations of Countrywide Insurance Services ("CIS"), an insurance agency that provides homeowners, life, disability and automobile as well as other forms of insurance, primarily to the Company's mortgage customers. The decrease in pre-tax earnings of $0.1 million in the quarter ended August 31, 2000 as compared to the quarter ended August 31, 1999 was primarily due to a slight decline in new policies sold. Processing and Technology Segment Processing and Technology segment activities include mortgage servicing, as well as mortgage subservicing and subprocessing for other domestic and foreign financial institutions. The increase in pre-tax earnings of $3.3 million in the quarter ended August 31, 2000 as compared to the quarter ended August 31, 1999 was primarily due to growth in the servicing portfolio and subprocessing for foreign financial institutions. Capital Markets Segment Capital Markets segment activities include primarily the operations of Countrywide Securities Corporation ("CSC"), a registered broker-dealer specializing in the secondary mortgage market, and the Correspondent Lending Division ("CLD"), through which the Company purchases closed loans from mortgage bankers, commercial banks and other financial institutions. The decrease in pre-tax earnings of $8.3 million in the quarter ended August 31, 2000 as compared to the quarter ended August 31, 1999 was primarily due to CLD's decreased production volume attributable primarily to the decline in refinance activity. This decline was partially offset by increased profitability of CSC, driven by higher trading volumes. B2B Insurance Segment B2B Insurance segment includes the activities of Balboa, an insurance carrier that offers property and casualty insurance (specializing in creditor placed insurance), and life and disability insurance together with the activities of Second Charter Reinsurance Company, a mortgage reinsurance company. The increase in pre-tax earnings of $9.5 million in the quarter ended August 31, 2000 as compared to the quarter ended August 31, 1999 was due to the acquisition of Balboa (on November 30, 1999) and increased mortgage reinsurance premium volume. Other The increase in pre-tax earnings in the quarter ended August 31, 2000 is a result of the Company selling it's investment in equity securities which resulted in a pre-tax gain of $4.9 million. CONSOLIDATED EARNINGS PERFORMANCE Revenues for the quarter ended August 31, 2000 increased 4% to $512.3 million, up from $491.1 million for the quarter ended August 31, 1999. Net earnings decreased 15% to $91.0 million for the quarter ended August 31, 2000, down from $106.5 million for the quarter ended August 31, 1999. The increase in revenues for the quarter ended August 31, 2000 compared to the quarter ended August 31, 1999 was primarily due to the acquisition of Balboa Life and Casualty ("Balboa") on November 30, 1999. Revenues for the quarter ended August 31, 2000, excluding Balboa, decreased 9% compared to the same quarter of the prior year. The decline in revenues, excluding Balboa, and net earnings for the quarter ended August 31, 2000 compared to the quarter ended August 31, 1999 was primarily due to a decrease in prime, first lien, loan originations attributable to a decline in loan refinancings. This was partially offset by increased net earnings from mortgage-related investments and the B2B insurance segment, together with increased production of non-traditional loan products (home equity and sub-prime loans). The total volume of loans produced by the Company decreased 17% to $16.2 billion for the quarter ended August 31, 2000, down from $19.6 billion for the quarter ended August 31, 1999. The decrease in loan production was primarily due to a decrease in the mortgage origination market and a decrease in market share driven largely by a reduction in refinances. Total loan production by purpose and by interest rate type is summarized below. - -------------------------------------------- --------------------------------------- -------- (Dollar amounts in millions) Loan Production Three Months Ended August 31, - -------------------------------------------- --------------------------------------- -------- 2000 1999 ------------- ---------------- Purchase $13,405 $13,712 Refinance 2,789 5,913 ------------- ---------------- Total $16,194 $19,625 ============= ================ ------------- ---------------- Fixed Rate $13,725 $16,809 Adjustable Rate 2,469 2,816 ------------- ---------------- Total $16,194 $19,625 ============= ================ - ---------------------------------------------------------------------------------------------
Total loan production by Segment is summarized below. - -------------------------------------------- --------------------------------------- -------- (Dollar amounts in millions) Loan Production Three Months Ended August 31, - -------------------------------------------- --------------------------------------- -------- 2000 1999 ------------- ---------------- ------------- ---------------- Consumer Mortgages $9,144 $11,891 Correspondent Lending Division 7,050 7,734 ------------- ---------------- Total $16,194 $19,625 ============= ================
- ----------------------------------------------------------------------------- The factors which affect the relative volume of production among the Company's Segments include the price competitiveness of each Segment's various product offerings, the level of mortgage lending activity in each Segment's market and the success of each segment's sales and marketing efforts. Non-traditional loan production (which is included in the Company's total volume of loans produced) is summarized below. - -------------------------------------------- --------------------------------------- -------- Non-Traditional (Dollar amounts in millions) Loan Production Three Months Ended August 31, - -------------------------------------------- --------------------------------------- -------- 2000 1999 ------------- ---------------- Sub-prime $1,392 $1,318 Home Equity 1,139 1,154 ------------- ---------------- Total $2,531 $2,472 ============= ================ - ---------------------------------------------------------------------------------------------
Loan production revenue decreased in the quarter ended August 31, 2000 as compared to the quarter ended August 31, 1999 due to lower production and reduced margins on prime credit quality, first lien, mortgages driven by a significant reduction in refinances. In addition, a change in divisional mix contributed to the decline. Consumer Mortgages (which, due to their cost structures, charge higher fees per dollar loaned than the Correspondent division) comprised a lower percentage of total production in the quarter ended August 31, 2000 as compared to the quarter ended August 31, 1999. These declines were partially offset by improved margins of sub-prime loans during the quarter ended August 31, 2000. Sub-prime loans contributed $62.2 million to the gain on sale of loans in the quarter ended August 31, 2000 and $48.2 million in the quarter ended August 31, 1999. The sale of home equity loans contributed $28.4 million and $26.5 million to gain on sale of loans in the quarter ended August 31, 2000 and the quarter ended August 31, 1999, respectively. In general, loan origination fees and gain on sale of loans are affected by numerous factors including the volume and mix of loans produced and sold, loan pricing decisions, and movements of interest rates. Net interest income (interest earned net of interest charges) of $2.3 million for the quarter ended August 31, 2000, was down from net interest income of $33.2 million for the quarter ended August 31, 1999. Net interest income is principally a function of: (i) net interest income earned from the Company's mortgage loan inventory ($31.2 million and $51.3 million for the quarter ended August 31, 2000 and the quarter ended August 31, 1999, respectively); (ii) interest expense related to the Company's mortgage-related investments ($100.9 million and $63.6 million for the quarters ended August 31, 2000 and August 31, 1999, respectively) and (iii) interest income earned from the custodial balances associated with the Company's servicing portfolio ($61.0 million and $41.2 million for the quarters ended August 31, 2000 and August 31, 1999, respectively. The decrease in net interest income from the mortgage loan inventory was primarily attributable to lower inventory levels combined with a lower net earnings rate during the quarter ended August 31, 2000. The increase in interest expense related to mortgage-related investments resulted primarily from an increase in amounts financed coupled with an increase in short-term interest rates. The increase in net interest income earned from the custodial balances was primarily due to an increase in the earnings rate from the quarter ended August 31, 1999 to the quarter ended August 31, 2000. The Company recorded MSR amortization for the quarter ended August 31, 2000 totaling $116.0 million compared to $118.1 million for the quarter ended August 31, 1999. The Company recorded impairment of $26.9 million for the quarter ended August 31, 2000 compared to recovery of previous impairment of $54.3 for the quarter ended August 31, 1999. The primary factors affecting the amount of amortization and impairment or impairment recovery of MSRs recorded in an accounting period are the level of prepayments during the period and the change, if any, in estimated future prepayments. To mitigate the effect on earnings of MSR impairment that may result from increased current and projected future prepayment activity, the Company acquires financial instruments, including derivative contracts, that increase in aggregate value when interest rates decline (the "Servicing Hedge"). In the quarter ended August 31, 2000, the Company recognized a net benefit of $8.9 million from its Servicing Hedge. The net benefit included unrealized net gains of $26.9 million and realized net expense of $18.0 million from the sale of various financial instruments that comprise the Servicing Hedge net of premium amortization. In the quarter ended August 31, 1999, the Company recognized a net expense of $65.6 million from its Servicing Hedge. The net expense included unrealized net losses of $37.1 million and realized net expense of $28.5 million from the sale of various financial instruments that comprise the Servicing Hedge net of premium amortization. The financial instruments that comprised the Servicing Hedge included interest rate floors, principal only securities (P/O Securities"), options on interest rate swaps ("Swaptions"), options on MBS, options on interest rate futures, interest rate swaps, interest rate swaps with the Company's maximum payment capped ("Capped Swaps"), principal only swaps ("P/O Swaps") and interest rate caps. The Servicing Hedge is designed to protect the value of the MSRs from the effects of increased prepayment activity that generally results from declining interest rates. To the extent that interest rates increase, the value of the MSRs increases while the value of the hedge instruments declines. With respect to the floors, options on interest rate futures and MBS, caps, Swaptions and P/O securities, the Company is not exposed to loss beyond its initial outlay to acquire the hedge instruments plus any unrealized gains recognized to date. With respect to the Interest Rate Swaps contracts entered into by the Company as of August 31, 2000, the Company estimates that its maximum exposure to loss over the contractual terms is $1 million. With respect to the Capped Swaps contracts entered into by the Company as of August 31, 2000, the Company estimates that its maximum exposure to loss over the contractual terms is $2 million. With respect to the P/O Swaps contracts entered into by the Company as of August 31, 2000, the Company estimates that its maximum exposure to loss over the contractual terms is $16 million. Salaries and related expenses are summarized below for the quarters ended August 31, 2000 and 1999. ---- --------------------------- -- -- ------ ------------------------------------------------- ----- -- ---- ----- (Dollar amounts in Quarter Ended August 31, 2000 thousands) -- ------ ------------------------------------------------- ----- -- ---- ----- ---- --------------------------- -- Consumer Institutional Corporate Businesses Businesses Administration Total ---- --------------------------- -- ----------------- -- ---------------- -- ----------------- - ------------------ Base Salaries $64,862 $36,531 $26,568 $127,961 Incentive Bonus 26,991 10,129 4,633 41,753 Payroll Taxes and Benefits 10,339 5,319 3,530 19,188 ----------------- ---------------- ----------------- ------------------ Total Salaries and Related Expenses $102,192 $51,979 $34,731 $188,902 ================= ================ ================= ================== Average Number of 6,238 3,786 1,694 11,718 Employees ---- --------------------------- -- ----------------- -- ---------------- -- ----------------- - ------------------
---- --------------------------- -- -- ------ ------------------------------------------------- ----- -- ---- ----- (Dollar amounts in Quarter Ended August 31, 1999 thousands) -- ------ ------------------------------------------------- ----- -- ---- ----- ---- --------------------------- -- Consumer Institutional Corporate Businesses Businesses Administration Total ---- --------------------------- -- ----------------- -- ---------------- -- ----------------- - ------------------ Base Salaries $73,415 $23,711 $26,419 $119,126 Incentive Bonus 30,790 6,267 5,107 42,163 Payroll Taxes and Benefits 10,943 3,185 4,492 23,040 ----------------- ---------------- ----------------- ------------------ Total Salaries and Related Expenses $115,148 $33,163 $36,018 $184,329 ================= ================ ================= ================== Average Number of 6,780 2,628 1,855 11,263 Employees
---- --------------------------- -- ----------------- -- ---------------- -- The amount of salaries increased during the quarter ended August 31, 2000 as compared to the quarter ended August 31, 1999 primarily due to an increase in staff in the institutional businesses due to a larger servicing portfolio and the acquisition of Balboa on November 30, 1999. The overall increase was partially offset by a decrease in consumer businesses due to a decline in mortgage originations. Incentive bonuses earned during the quarter ended August 31, 2000 also decreased primarily due to the decline in mortgage originations. Occupancy and other office expenses for the quarter ended August 31, 2000 increased to $69.7 million from $68.2 million for the quarter ended August 31, 1999. The increase was primarily due to the acquisition of Balboa partially offset by the continued effort of reducing costs in the production areas as a result of a decline in mortgage originations. Marketing expenses for the quarter ended August 31, 2000 decreased 5% to $20.0 million as compared to $21.1 million for the quarter ended August 31, 1999. This was primarily due to the initiation of cost reduction measures in the production areas as a result of a decline in mortgage originations. Insurance net losses are attributable to insurance claims in the B2B Insurance segment. Insurance losses were $25.8 million for the quarter ended August 31, 2000. These losses will increase or decrease during a period depending primarily on the volume of claims caused by natural disasters. Other operating expenses were $65.6 million for the quarter ended August 31, 2000 as compared to $42.9 million for the quarter ended August 31, 1999. The increase was primarily due to the acquisition of Balboa on November 30, 1999. Six Months Ended August 31, 2000 Compared to Six Months Ended August 31, 1999 OPERATING SEGMENT RESULTS The Company's pre-tax earnings by segment is summarized below. - -------------------------------------------- --------------------------------------- -------- Six months ended (Dollar amounts in thousands) August 31, - -------------------------------------------- --------------------------------------- -------- 2000 1999 ------------- -------------- Consumer Businesses: Mortgage Originations $60,354 $193,950 Mortgage-Related Investments 117,378 61,232 B2C Insurance 1,949 2,207 ------------- -------------- Total Consumer Business 179,681 257,389 Institutional Businesses: Processing and Technology 24,679 17,352 Capital Markets 38,489 57,949 B2B Insurance 30,002 12,099 -------------- ------------- Total Institutional Business 93,170 87,400 Other 289 (720) ------------- -------------- Pre-tax Earnings $273,140 $344,069 ============= ==============
- ------------------------------------------------------------ Mortgage Originations Segment The Mortgage Originations segment activities include loan origination through the Company's retail branch network (Consumer Markets Division and Full Spectrum Lending, Inc.) and the Wholesale Division, the warehousing and sales of such loans and loan closing services. Total consumer mortgage loan production by Division is summarized below. - -------------------------------------------- --------------------------------------- -------- (Dollar amounts in millions) Loan Production Six Months Ended August 31, - -------------------------------------------- --------------------------------------- -------- 2000 1999 ------------- ---------------- Consumer Mortgages: Consumer Markets Division $8,428 $ 13,089 Wholesale Lending Division 8,418 12,580 Full Spectrum Lending, Inc. 823 703 ------------- ---------------- Total $17,669 $26,372 ============= ================
- -------------------------------------------------------------- The decline in pre-tax earnings of $133.6 million in the six months ended August 31, 2000 as compared to the six months ended August 31, 1999 was primarily attributable to lower prime credit quality first mortgage loan production and reduced margins on prime credit quality first mortgages driven by a significant reduction in refinances. These declines were partially offset by increased loan production and sales of higher margin home equity and sub-prime loans and a reduction in expenses. Mortgage-Related Investments Segment Mortgage-Related Investment segment activities include investments in assets retained in the mortgage securitization process, including mortgage servicing rights, residual interests in asset-backed securities and other mortgage-related assets. The increase in pre-tax earnings of $56.1 million in the six months ended August 31, 2000 as compared to the six months ended August 31, 1999 was primarily due to an increase in servicing revenues resulting from servicing portfolio growth, a reduction in MSR amortization attributable to rising mortgage rates and improved performance of the residual investments. These positive factors were partially offset by increased interest expense related to financing the mortgage-related investments and higher servicing expenses driven by the growth in the servicing portfolio, including the subservicing fee paid to the processing and technology sector. The growth in the Company's servicing portfolio since August 31, 1999 was the result of loan production volume and the acquisition of bulk servicing rights. This was partially offset by prepayments, partial prepayments and scheduled amortization. During the six months ended August 31, 2000, the annual prepayment rate of the Company's servicing portfolio was 10%, compared to 18% for the six months ended August 31, 1999. In general, the prepayment rate is affected by the level of refinance activity, which in turn is driven by the relative level of mortgage interest rates, and activity in the housing market. B2C Insurance Segment B2C Insurance segment activities include the operations of an insurance agency, Countrywide Insurance Services ("CIS"), an insurance agency that provides homeowners, life, disability and automobile as well as other forms of insurance, primarily to the Company's mortgage customers. The decrease in pre-tax earnings of $0.3 in the six months ended August 31, 2000 as compared to the six months ended August 31, 1999 was primarily due to a slight decline in new policies sold. Processing and Technology Segment Processing and Technology segment activities include mortgage servicing, as well as mortgage subservicing and subprocessing for other domestic and foreign financial institutions. The increase in pre-tax earnings of $7.3 million in the six months ended August 31, 2000 as compared to the six months ended August 31, 1999 was primarily due to growth in the servicing portfolio and subprocessing. Capital Markets Segment Capital Markets segment activities include primarily the operations of Countrywide Securities Corporation ("CSC"), a registered broker-dealer specializing in the secondary mortgage market, and the Correspondent Lending Division ("CLD"), through which the Company purchases closed loans from mortgage bankers, commercial banks and other financial institutions. The decrease in pre-tax earnings of $19.5 million in the six months ended August 31, 2000 as compared to the six months ended August 31, 1999 was primarily due to CLD's decreased production volume attributable primarily to the decline in refinance activity. B2B Insurance Segment B2B Insurance segment includes the activities of Balboa, an insurance carrier that offers property and casualty insurance (specializing in creditor placed insurance), and life and disability insurance together with the activities of Second Charter Reinsurance Company, a mortgage reinsurance company. The increase in pre-tax earnings of $17.9 million in the six months ended August 31, 2000 as compared to the six months ended August 31, 1999 was due to the acquisition of Balboa and increased mortgage reinsurance premium volume. CONSOLIDATED EARNINGS PERFORMANCE Revenues for the six months ended August 31, 2000 increased to $986.9 million, up from $983.9 million for the six months ended August 31, 1999. Net earnings decreased 17% to $174.5 million for the six months ended August 31, 2000, down from $209.9 million for the six months ended August 31, 1999. The increase in revenues for the six months ended August 31, 2000 compared to the six months ended August 31, 1999 was primarily due to acquisition of Balboa on November 30, 1999. Revenues for the six months ended August 31, 2000, excluding Balboa, decreased 13% compared to the six months ended August 31, 1999. The decline in revenues, excluding Balboa, and net earnings for the six months ended August 31, 2000 compared to the six months ended August 31, 1999 was primarily due to a decline in prime, first line, loan originations attributable to a decline in loan refinancings. The decline was partially offset by increased net earnings from the mortgage-related investments and the B2B insurance segment, combined with increased production and sales of non-traditional loan products (home equity and sub-prime loans). The total volume of loans produced by the Company decreased 28% to $30.7 billion for the six months ended August 31, 2000, down from $42.8 billion for the six months ended August 31, 1999. The decrease in loan production was primarily due to a decrease in the mortgage market, driven largely by a reduction in refinances. Total loan production by purpose and by interest rate type is summarized below. - -------------------------------------------- --------------------------------------- -------- (Dollar amounts in millions) Loan Production Six Months Ended August 31, - -------------------------------------------- --------------------------------------- -------- 2000 1999 ------------- ---------------- Purchase $25,000 $25,434 Refinance 5,740 17,384 ------------- ---------------- Total $30,740 $42,818 ============= ================ ------------- ---------------- Fixed Rate $24,870 $38,420 Adjustable Rate 5,870 4,398 ------------- ---------------- Total $30,740 $42,818 ============= ================ - ---------------------------------------------------------------------------------------------
Total loan production by Segment is summarized below. - -------------------------------------------- --------------------------------------- -------- (Dollar amounts in millions) Loan Production Six Months Ended August 31, - -------------------------------------------- --------------------------------------- -------- 2000 1999 ------------- ---------------- ------------- ---------------- Consumer Mortgages $17,669 $26,372 Correspondent Lending Division 13,071 16,446 ------------- ---------------- Total $30,740 $42,818 ============= ================
- -------------------------------------------------------------------- The factors which affect the relative volume of production among the Company's Segments include the price competitiveness of each Segment's product offerings, the level of mortgage lending activity in each Segment's market and the success of each Segment's sales and marketing efforts. Non-traditional loan production (which is included in the Company's total volume of loans produced) is summarized below. - -------------------------------------------- --------------------------------------- -------- Non-Traditional (Dollar amounts in millions) Loan Production Six Months Ended August 31, - -------------------------------------------- --------------------------------------- -------- 2000 1999 ------------- ---------------- Sub-prime $2,832 $2,087 Home Equity 2,270 1,871 ------------- ---------------- Total $5,102 $3,958 ============= ================
- --------------------------------------------------------------------- Loan production revenues decreased in the six months ended August 31, 2000 as compared to the six months ended August 31, 1999 due to lower production and reduced margins on prime credit quality first mortgages driven by a significant reduction in refinances. These declines were partially offset by increased production and sales during the six months ended August 31, 2000 of higher margin home equity and sub-prime loans. Net interest expense (interest earned net of interest charges) of $0.6 million for the six months ended August 31, 2000, was down from net interest income of $62.7 million for the six months ended August 31, 1999. Net interest income (expense) is principally a function of: (i) net interest income earned from the Company's mortgage loan inventory ($51.8 million and $98.5 million for the six months ended August 31, 2000 and the six months ended August 31, 1999, respectively); (ii) interest expense related to the Company's mortgage-related investments ($187.7 million and $130.4 million for the six months ended August 31, 2000 and August 31, 1999, respectively) and (iii) interest income earned from the custodial balances associated with the Company's servicing portfolio ($112.8 million and $84.3 million for the six months ended August 31, 2000 and August 31, 1999, respectively). The decrease in net interest income from the mortgage loan inventory was primarily attributable to lower inventory levels combined with a lower net earnings rate during the six months ended August 31, 2000. The increase in interest expense related to mortgage-related investments resulted primarily from an increase in amounts financed coupled with an increase in short-term interest rates. The increase in net interest income earned from the custodial balances was primarily due to an increase in the earnings rate and an increase in the average custodial balances. The Company recorded MSR amortization for the six months ended August 31, 2000 totaling $224.2 million compared to $245.1 million for the six months ended August 31, 1999. The Company recorded impairment of $23.6 million for the six months ended August 31, 2000 compared to recovery of previous impairment of $205.8 million for the six months ended August 31, 1999. The primary factors affecting the amount of amortization and impairment recovery of MSRs recorded in an accounting period are the level of prepayments during the period and the change, if any, in estimated future prepayments. To mitigate the effect on earnings of MSR impairment that may result from increased current and projected future prepayment activity, the Company acquires financial instruments, including derivative contracts, that increase in aggregate value when interest rates decline (the "Servicing Hedge"). In the six months ended August 31, 2000, the Company recognized a net expense of $4.4 million from its Servicing Hedge. The net expense included unrealized net gains of $20.2 million and realized net expense of $24.6 million from the sale of various financial instruments that comprise the Servicing Hedge net of premium amortization. In the six months ended August 31, 1999, the Company recognized a net expense of $237.0 million from its Servicing Hedge. The net expense included unrealized net losses of $219.9 million and net realized expenses of $17.1 million from the sale of various financial instruments that comprise the Servicing Hedge net of premium amortization. Salaries and related expenses are summarized below for the six months ended August 31, 2000 and 1999. ---- --------------------------- -- -- ------ ------------------------------------------------- ----- -- ---- ----- (Dollar amounts in Six Months Ended August 31, 2000 thousands) -- ------ ------------------------------------------------- ----- -- ---- ----- ---- --------------------------- -- Consumer Institutional Corporate Businesses Businesses Administration Total ---- --------------------------- -- ----------------- -- ---------------- -- ----------------- - ------------------ Base Salaries $124,660 $69,450 $51,576 $245,686 Incentive Bonus 48,499 18,289 9,087 75,875 Payroll Taxes and Benefits 20,362 10,447 8,063 38,872 ----------------- ---------------- ----------------- ------------------ Total Salaries and Related Expenses $193,521 $98,186 $68,726 $360,433 ================= ================ ================= ================== Average Number of 6,024 3,671 1,670 11,365 Employees ---- --------------------------- -- ----------------- -- ---------------- -- ----------------- - ------------------
---- --------------------------- -- -- ------ ------------------------------------------------- ----- -- ---- ----- (Dollar amounts in Six Months Ended August 31, 1999 thousands) -- ------ ------------------------------------------------- ----- -- ---- ----- ---- --------------------------- -- Consumer Institutional Corporate Businesses Businesses Administration Total ---- --------------------------- -- ----------------- -- ---------------- -- ----------------- - ------------------ Base Salaries $145,532 $46,480 $51,301 $243,313 Incentive Bonus 63,962 12,974 11,012 87,948 Payroll Taxes and Benefits 23,184 6,796 8,514 38,494 ----------------- ---------------- ----------------- ------------------ Total Salaries and Related Expenses $232,678 $66,250 $70,827 $369,755 ================= ================ ================= ================== Average Number of 6,937 2,613 1,830 11,380 Employees ---- --------------------------- -- ----------------- -- ---------------- -- ----------------- - ------------------
The amount of salaries decreased during the six months ended August 31, 2000 as compared to the six months ended August 31, 1999 primarily due to a reduction in staff in the consumer businesses due to the decline in mortgage originations. The decline was partially offset by an increase in institutional businesses as a result of a larger servicing portfolio and the acquisition of Balboa on November 30, 1999. Incentive bonuses earned during the six months ended August 31, 2000 decreased primarily due to the decline in loan originations. Occupancy and other office expenses for the six months ended August 31, 2000 decreased to $136.3 million from $140.4 million for the six months ended August 31, 1999. The increase was primarily due to the acquisition of Balboa partially offset by the continued effort of reducing costs in the production areas as a result of a decline in production. Insurance net losses are attributable to insurance claims in the B2B Insurance segment. Insurance losses were $51.5 million for the six months ended August 31, 2000. These losses will increase or decrease during a period depending primarily on the volume of claims caused by natural disasters. Other operating expenses were $125.8 million for the six months ended August 31, 2000 as compared to $89.1 million for the six months ended August 31, 1999. The increase was primarily due to the acquisition of Balboa on November 30, 1999. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The primary market risk facing the Company is interest rate risk. From an enterprise perspective, the Company manages this risk by striving to balance its loan origination and loan servicing business segments, which are counter cyclical in nature. In addition, the Company utilizes various financial instruments, including derivatives contracts, to manage the interest rate risk related specifically to its committed pipeline, mortgage loan inventory and MBS held for sale, MSRs, mortgage-backed securities retained in securitizations, trading securities and debt securities. The overall objective of the Company's interest rate risk management policies is to offset changes in the values of these items resulting from changes in interest rates. The Company does not speculate on the direction of interest rates in its management of interest rate risk. As part of its interest rate risk management process, the Company performs various sensitivity analyses that quantify the net financial impact of changes in interest rates on its interest rate-sensitive assets, liabilities and commitments. These analyses incorporate scenarios including selected hypothetical (instantaneous) parallel shifts in the yield curve. Various modeling techniques are employed to value the financial instruments. For mortgages, MBS and MBS forward contracts and CMOs, an option-adjusted spread ("OAS") model is used. The primary assumptions used in this model are the implied market volatility of interest rates and prepayment speeds. For options and interest rate floors, an option-pricing model is used. The primary assumption used in this model is implied market volatility of interest rates. MSRs and residual interests are valued using discounted cash flow models. The primary assumptions used in these models are prepayment rates, discount rates and credit losses. Utilizing the sensitivity analyses described above, as of August 31, 2000, the Company estimates that a permanent 0.50% reduction in interest rates, all else being constant, would result in a $0.08 million after-tax loss related to its trading securities and there would be no gain or loss related to its other financial instruments. As of August 31, 2000, the Company estimates that this combined after-tax loss of $0.08 million is the largest such loss that would occur within the range of reasonably possible interest rate changes. These sensitivity analyses are limited by the fact that they are performed at a particular point in time, are subject to the accuracy of various assumptions used including prepayment forecasts, and do not incorporate other factors that would impact the Company's overall financial performance in such a scenario. Consequently, the preceding estimates should not be viewed as a forecast. An additional, albeit less significant, market risk facing the Company is foreign currency risk. The Company has issued foreign currency-denominated medium-term notes (See Note E). The Company manages the foreign currency risk associated with such medium-term notes by entering into currency swaps. The terms of the currency swaps effectively translate the foreign currency denominated medium-term notes into U.S. dollars, thereby eliminating the associated foreign currency risk (subject to the performance of the various counterparties to the currency swaps). As a result, potential changes in the exchange rates of foreign currencies denominating such medium-term notes would not have a net financial impact on future earnings, fair values or cash flows. Inflation Inflation affects the Company most significantly in the areas of Mortgage Originations, Mortgage-Related Investments and Capital Markets. Interest rates normally increase during periods of high inflation and decrease during periods of low inflation. Historically, as interest rates increase, loan production decreases, particularly from loan refinancings. Although in an environment of gradual interest rate increases, purchase activity may actually be stimulated by an improving economy or the anticipation of increasing real estate values. In such periods of reduced loan production, production margins may decline due to increased competition resulting from overcapacity in the market. In a higher interest rate environment, mortgage-related investment earnings are enhanced because prepayment rates tend to slow down thereby extending the average life of the Company's servicing portfolio and reducing amortization and impairment of the MSRs, and because the rate of interest earned from the custodial balances tends to increase. Conversely, as interest rates decline, loan production, particularly from loan refinancings, increases. However, during such periods, prepayment rates tend to accelerate (principally on the portion of the portfolio having a note rate higher than the prevailing mortgage rates), thereby decreasing the average life of the Company's servicing portfolio and adversely impacting its mortgage related investment earnings primarily due to increased amortization and impairment of the MSRs, and decreased earnings from residual investments. The Servicing Hedge is designed to mitigate the impact of changing interest rates on mortgage related investment earnings. Seasonality The mortgage banking industry is generally subject to seasonal trends. These trends reflect the general national pattern of sales and resales of homes, although refinancings tend to be less seasonal and more closely related to changes in mortgage rates. Sales and resales of homes typically peak during the spring and summer seasons and decline to lower levels from mid-November through February. In addition, delinquency rates typically rise in the winter months, which results in higher servicing costs. However, late charge income has historically been sufficient to offset such incremental expenses. Liquidity and Capital Resources The Company's principal financing needs are the financing of its mortgage loan inventory, investment in MSRs and the trading activities of its broker-dealer subsidiary (CSC). To meet these needs, the Company currently utilizes commercial paper supported by revolving credit facilities, medium-term notes, senior debt, MBS repurchase agreements, subordinated notes, pre-sale funding facilities, redeemable capital trust pass-through securities, securitization of servicing fee income and cash flow from operations. In addition, in the past the Company has utilized whole loan repurchase agreements, servicing-secured bank facilities, private placements of unsecured notes and other financings, direct borrowings from revolving credit facilities and public offerings of common and preferred stock. The Company strives to maintain sufficient liquidity in the form of unused, committed lines of credit, to meet anticipated short-term cash requirements as well as to provide for potential sudden increases in business activity driven by changes in the market environment. Certain of the debt obligations of the Company and Countrywide Home Loans, Inc. ("CHL") contain various provisions that may affect the ability of the Company and CHL to pay dividends and remain in compliance with such obligations. These provisions include requirements concerning net worth and other financial covenants. These provisions have not had, and are not expected to have, an adverse impact on the ability of the Company and CHL to pay dividends. The principal financing needs of CSC consist of the financing of its inventory of securities and underwriting activities. Its securities inventory is financed primarily through repurchase agreements. CSC also has access to a $200 million secured bank loan facility and a secured lending facility with CHL The primary cash needs for the B2B insurance segment are to meet short-term and long-term obligations to policyholders (payment of policy benefits), costs of acquiring new business (principally commissions) and the purchases of new investments. To meet these needs, Balboa currently utilizes cash flow provided from operations as well as through liquidation of it's investment portfolio. The Company continues to investigate and pursue alternative and supplementary methods to finance its growing operations through the public and private capital markets. These may include such methods as mortgage loan sale transactions designed to expand the Company's financial capacity and reduce its cost of capital and the additional securitization of servicing income cash flows. In connection with its derivative contracts, the Company may be required to deposit cash or certain government securities or obtain letters of credit to meet margin requirements. The Company considers such potential margin requirements in its overall liquidity management. In the course of the Company's mortgage banking operations, the Company sells the mortgage loans it originates and purchases to investors but generally retains the right to service the loans, thereby increasing the Company's investment in MSRs. The Company views the sale of loans on a servicing-retained basis in part as an investment vehicle. Significant unanticipated prepayments in the Company's servicing portfolio could have a material adverse effect on the Company's future operating results and liquidity. Cash Flows Operating Activities. In the six months ended August 31, 2000, the Company's operating activities used cash of approximately $1.2 billion on a short-term basis primarily to support an increase in trading securities and other financial instruments, primarily securities purchased under agreements to resale. In the six months ended August 31, 1999, operating activities provided cash of approximately $0.5 billion. Investing Activities. The primary investing activity for which cash was used by the Company was the investment in MSRs. Net cash used by investing activities was $0.5 billion for the six months ended August 31, 2000 and $0.8 billion for the six months ended August 31, 1999. Financing Activities. Net cash provided by financing activities amounted to $1.8 billion for the six months ended August 31, 2000 and $0.3 billion for the six months ended August 31, 1999. The increase in cash flow from financing activities was primarily used to fund the change in the Company's trading securities, other financial instruments and investment in MSRs. Prospective Trends Applications and Pipeline of Loans in Process For the month ended September 30, 2000, the Company received new loan applications at an average daily rate of $404 million. As of September 30, 2000, the Company's pipeline of loans in process was $9.6 billion. This compares to a daily application rate for the month ended September 30, 1999 of $314 million and a pipeline of loans in process as of September 30, 1999 of $9.8 billion. The size of the pipeline is generally an indication of the level of near-term future fundings, as historically 43% to 77% of the pipeline of loans in process has funded. In addition, the Company's LOCK `N SHOP(R) Pipeline as of September 30, 2000 was $3.1 billion and as of September 30, 1999 was $2.3 billion. Future application levels and loan fundings are dependent on numerous factors, including the level of demand for mortgage loans, the level of competition in the market, the direction of mortgage rates, seasonal factors and general economic conditions. Market Factors Loan production decreased 17% from the quarter ended August 31, 1999 to the quarter ended August 31, 2000. This decrease was primarily due to a smaller mortgage origination market, driven by reduced refinances. Home purchase related loan production was essentially unchanged during the same period. The prepayment rate in the servicing portfolio decreased from 15% for the quarter ended August 31, 1999 to 10% for the quarter ended August 31, 2000. This was due primarily to a decrease in refinances. The Company's California mortgage loan production (as measured by principal balance) constituted 21% of its total production during the quarters ended August 31, 2000 and August 31, 1999. Some regions in which the Company operates have experienced slower economic growth, and real estate financing activity in these regions has been impacted negatively. The Company has striven to diversify its mortgage banking activities geographically to mitigate such effects. The delinquency rate in the Company's servicing portfolio, excluding sub-servicing, increased to 4.11% at August 31, 2000 from 3.36% as of August 31, 1999. This increase was primarily the result of changes in portfolio mix and aging. Sub-prime loans (which tend to experience higher delinquency rates than prime loans) represented approximately 5% of the total portfolio as of August 31, 2000, up from 3% as of August 31, 1999. In addition, the weighted average age of the FHA and VA loans in the portfolio increased to 33 months at August 31, 2000 from 28 months in August 31, 1999. Delinquency rates tend to increase as loans age, reaching a peak at three to five years of age. Related late charge income has historically been sufficient to offset incremental servicing expenses resulting from increased loan delinquencies. The percentage of loans in the Company's servicing portfolio, excluding sub-servicing, that are in foreclosure increased to 0.42% as of August 31, 2000 from 0.28% as of August 31, 1999. Because the Company services substantially all conventional loans on a non-recourse basis, related credit losses are generally the responsibility of the investor or insurer and not the Company. While the Company does not generally retain credit risk with respect to the prime credit quality first mortgage loans it sells, it does have potential liability under representations and warranties made to purchasers and insurers of the loans. In the event of a breach of these representations and warranties, the Company may be required to repurchase a mortgage loan and any subsequent loss on the mortgage loan may be borne by the Company. Similarly, government loans serviced by the Company (23% of the Company's servicing portfolio as of August 31, 2000) are insured by the Federal Housing Administration or partially guaranteed against loss by the Department of Veterans Administration. The Company is exposed to credit losses to the extent that the partial guarantee provided by the Department of Veterans Administration is inadequate to cover the total credit losses incurred. The Company retains credit risk on the home equity and sub-prime loans it securitizes, through retention of a subordinated interest. As of August 31, 2000, the Company had investments in such subordinated interests amounting to $712.2 million. Servicing Hedge As previously discussed, the Company's Servicing Hedge is designed to protect the value of its investment in MSRs from the effects of increased prepayment activity that generally results from declining interest rates. In periods of increasing interest rates, the value of the Servicing Hedge generally declines and the value of MSRs generally increases. The historical correlation of the Servicing Hedge and the MSRs has been very high. However, given the complexity and uncertainty inherent in hedging MSRs, there can be no assurance that future results will match the historical performance of the Servicing Hedge. Implementation of New Accounting Standards In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS No. 133"). SFAS No. 133 establishes accounting and reporting standards for derivative instruments and hedging activities. It requires that an entity recognize the fair value of all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as (a) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows of a forecasted transaction, or (c) a hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-for-sale security, or a foreign-currency-denominated forecasted transaction. This statement will become effective in the fiscal year ended February 28, 2002. The Company has not yet determined the impact upon adoption of this standard on the Consolidated Financial Statements. Page 31 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 3.3.4 Amendment to Bylaws of Countrywide Credit Industries, Inc. dated September 28, 2000 10.3.4 Fourth Restated Employment Agreement by and between the Company and Angelo R. Mozilo. 10.4.2 First Restated Employment Agreement by and between the Company and Stanford L. Kurland 10.4.3 First Restated Employment Agreement by and between the Company and Kevin W. Bartlett 10.4.4 First Restated Employment Agreement by and between the Company and Thomas H. Boone 10.4.5 First Restated Employment Agreement by and between the Company and Carlos M. Garcia 10.4.6 First Restated Employment Agreement by and between the Company and David Sambol 10.4.7 First Restated Employment Agreement by and between the Company and Sandor E. Samuels 10.4.8 Fiscal Year 2001 Bonus Plan for Certain Executive Officers 10.8.8 Short Term Facility Extension Amendment dated as of the 20th day of September 2000 by and among CHL, the Short Term Lenders under the Revolving Credit Agreement dated as of September 24, 1997 and Bankers Trust Company as Credit Agent 10.27.2 Countrywide Credit Industries, Inc. Change in Control Severance Plan as Amended and Restated September 11, 2000 10.28 Summary of the Termination of Director Emeritus Plan 11.1 Statement Regarding Computation of Per Share Earnings 12.1 Computation of the Ratio of Earnings to Fixed Charges 27 Financial Data Schedules (included only in the electronic filing with the SEC). (b) The Company filed the following report on Form 8-K: (1) July 20, 2000 under Item 5, containing the 1999 Corporate Report of Balboa Life and Casualty for the period beginning January 1, 1999 and ending December 31, 1999, including the unaudited combined financial information at December 31, 1999 of Balboa Life Insurance Company, Balboa Insurance Company, Meritplan Insurance Company and Newport Insurance Company. Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. COUNTRYWIDE CREDIT INDUSTRIES, INC. (Registrant) DATE: October 13, 2000 /s/ Stanford L. Kurland -------------------------------------- Executive Managing Director and Chief Operating Officer DATE: October 13, 2000 /s/ Carlos M. Garcia -------------------------------------- Senior Managing Director; Finance, Chief Financial Officer and Chief Accounting Officer (Principal Financial Officer and Principal Accounting Officer) EX-3.3.4BY-LAWS 2 0002.txt AMENDED BY-LAWS RESOLUTIONS OF THE BOARD OF DIRECTORS OF COUNTRYWIDE CREDIT INDUSTRIES, INC. SEPTEMBER 28, 2000 AMENDMENT TO BYLAWS WHEREAS, the Board deems it to be in the best interests of the Corporation and its shareholders to allow shareholder actions to be voted electronically and telephonically. NOW, THEREFORE, BE IT RESOLVED, That Section 7 of the Bylaws of the Corporation be, and hereby is, amended in its entirety to read as follows: Section 7: Proxies At all meetings of shareholders, a shareholder may vote in person or by proxy. A shareholder may authorize another person or persons to act for him as proxy by the following means: (a) executing a written authorization signed by the shareholder or his attorney-in-fact; or (b) transmitting or authorizing the transmission of a telegram, facsimile, telephone call or other means of electronic transmission permitted by Delaware law. Such proxy shall be filed with the Secretary of the Corporation or other person authorized to tabulate votes before or at the time of the meeting. No proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. Every proxy shall be revocable at the pleasure of the shareholder executing it, unless it otherwise states that it is irrevocable and is coupled with an interest, or except as otherwise provided by law. Any copy of the writing or transmission created may be substituted or used in lieu of the original. EX-10.3.4 3 0003.txt EMPLOYMENT AGREEMENT FOURTH RESTATED EMPLOYMENT AGREEMENT THIS FOURTH RESTATED EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of September 11, 2000 by and between Countrywide Credit Industries, Inc., a Delaware corporation ("Employer"), and Angelo R. Mozilo ("Officer"). W I T N E S S E T H: WHEREAS, Officer currently holds the offices of Chairman of the Board of Directors, President and Chief Executive Officer of Employer; and WHEREAS, Employer desires to obtain the benefit of continued services of Officer and Officer desires to continue to render services to Employer; and WHEREAS, the Board of Directors of Employer (the "Board") has determined that it is in Employer's best interest and that of its stockholders to recognize the substantial contribution that Officer has made and is expected to continue to make to the Company's business and to retain his services in the future; and WHEREAS, Employer and Officer set forth the terms and conditions of Officer's employment with Employer under an employment agreement entered into as of March 1, 1991 (the "Original Agreement"); and WHEREAS, Employer and Officer entered into Amendment No. 1 to Employment Agreement as of November 5, 1992 ("Amendment No. 1"), entered into Amendment No. 2 to Employment Agreement as of November 10, 1992 ("Amendment No. 2"), entered into a Restated Employment Agreement as of February 2, 1993 (the "First Restated Agreement"), entered into a Second Restated Employment Agreement as of March 26, 1996, as amended by Amendment No. 1 to Employment Agreement dated as of July 25, 1997 and Amendment No. 2 to Employment Agreement dated as of February 4, 1998 (the "Second Restated Agreement) and entered into a Third Restated Employment as of March 1, 2000 (the "Third Restated Agreement"); and WHEREAS, Employer and Officer desire to set forth the continued terms and conditions of Officer's employment with Employer under this Agreement; WHEREAS, the effectiveness of the provisions of Section 4(b) of this Agreement is subject to the approval by Employer's stockholders of said provisions as required under Section 162(m) of the Internal Revenue Code of 1986, as amended. 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, in accordance with the terms hereof, for a term beginning on the Effective Date (as defined in Section 8(c) hereof) and ending on the expiration of the third Fiscal Year following Officer's receipt of the Notice of Termination (as defined in paragraph 5(g) below) from the Board terminating Officer's employment with Employer, unless earlier terminated in accordance with the provisions hereof. 2. Specific 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 and its subsidiaries as Chairman of the Board, President and Chief Executive Officer of Employer. Employer agrees that Officer's duties hereunder shall be the usual and customary duties of the offices of Chairman of the Board, President and Chief Executive Officer and such further duties consistent therewith as may be designated from time to time by the Board and shall not be inconsistent with the provisions of the charter documents of Employer or 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 that he may hold. All compensation paid to Officer by Employer or any of its subsidiaries shall be aggregated in determining whether Officer has received the benefits provided for herein. 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 subsidiaries, and matters related thereto, and shall use his best efforts and abilities to promote its interests. Officer agrees that he will diligently endeavor to promote the business, affairs and interests of Employer and its subsidiaries and perform 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 in such senior executive capacity not below the rank of Vice President for one or more (direct or indirect) subsidiaries of Employer as the Board may from time to time request, subject to appropriate authorization by the subsidiary or subsidiaries 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(d) 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 businesses then conducted by Employer. Officer may serve as a director or in any other capacity of any business enterprise, including an enterprise whose activities may involve or relate to the business of Employer, provided that such service is expressly approved by the Board. Officer may, without seeking or obtaining approval by the Board, (i) make and manage personal business investments of his choice; and (ii) serve in any capacity with any civic, educational or charitable organization, or any governmental entity or trade association. 4. Compensation and Benefits. ------------------------- (a) Base Salary. Employer shall pay to Officer a base salary in the 2001 Fiscal Year of Employer or portion thereof at the annual rate of $1,650,000. Employer shall pay to Officer a base salary in the 2002 Fiscal Year of Employer or portion thereof at the annual rate of $1,750,000; and on March 1 of each Fiscal Year of Employer or portion thereof during the term of this Agreement following Employer's 2002 Fiscal Year, Officer's base salary shall be increased for such Fiscal Year or portion thereof by an amount determined by the Compensation Committee prior to the beginning of the Fiscal Year as to which the increased base salary is to be paid, provided that such annual increase shall not be less than $200,000. (b) Incentive Compensation. Employer shall pay to Officer for each of the Fiscal Years during the term of this Agreement an incentive compensation award in the amount of the incentive compensation award paid to Officer in the previous Fiscal Year, multiplied by a fraction (the "Performance Ratio") the numerator of which is the earnings per share on a diluted basis of Employer as reported in the audited Financial Statements included in Employer's Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "EPS") during such current Fiscal Year, and the denominator of which is the EPS for the previous Fiscal Year (adjusted proportionately in the event Employer (A) declares a stock dividend on its common stock, (B) subdivides its outstanding common stock, (C) combines the outstanding shares of its capital stock into a smaller number of common stocks or (D) issues any shares of its capital stock in a reclassification of the common stock (including any such reclassification in connection with a consolidation or merger in which Employer is the continuing or surviving corporation)); provided, however, that the Compensation Committee of the Board (the "Compensation Committee") may reduce the amount of any incentive compensation award in the event there is a substantial distortion in EPS for the Fiscal Year in respect of which the award is being paid resulting from an acquisition, a divestiture, or a change in accounting standards. Notwithstanding anything to the contrary contained in this Agreement, in no event shall the Performance Ratio be less than zero. Employer shall pay the incentive compensation award described in this Section 4(b) for each Fiscal Year or portion thereof, as applicable, as early after the end of such Fiscal Year as practicable but in no event more than 90 days after the end of such Fiscal Year. In the event Officer's employment hereunder shall terminate, other than for cause pursuant to Section 5(d) below or as a result of a voluntary resignation pursuant to Section 5(f) below, on or before the last day of any Fiscal Year, Officer or his estate shall be entitled to receive an incentive compensation award for such portion of the Fiscal Year during which Officer was employed hereunder on the same terms as set forth in sub-paragraphs (i) and (ii) above except that it shall be calculated as follows: The compensation award as otherwise calculated pursuant to sub-paragraph (i) above shall be multiplied by a fraction, the numerator of which is the number of days during the Fiscal Year that Officer was employed hereunder, and the denominator of which is 365. Notwithstanding anything to the contrary in this Section 4(b), payment of any incentive compensation award hereunder must follow a decision by the Compensation Committee of the Board of Directors to the effect that the requisite performance levels were achieved. (c) Stock Options. Employer shall grant to Officer a stock option in respect of 500,000 shares of the Employer's common stock on or before June 1, 2000 in respect to Employer's Fiscal Year 2000, such option to become exercisable as to 166,666, 166,667 and 166,667 shares, respectively, on each of the first three (3) anniversaries of the date of grant. On each June 1 thereafter during the term of this Agreement (or on such other date following the expiration of a Fiscal Year of Employer as the Compensation Committee may, from time to time, designate), Employer shall also grant to Officer stock options for such number of shares of Employer's common stock as the Compensation Committee in its sole discretion determines, taking into account Officer's and Employer's performance in each of such Fiscal Years and the competitive practices then prevailing regarding the granting of stock options, provided that any such stock option grant shall not be in an amount less than 350,000 shares of Employer's common stock. All stock options granted in accordance with this Section 4(c) shall be granted pursuant to the Countrywide Credit Industries, Inc. 2000 Stock Option Plan (the "2000 Plan"), or such other stock option plan or plans as may be or come into effect during the term of this Agreement, shall have a per share exercise price equal to the fair market value (as defined in the 2000 Plan or such other plan or plans) of the common stock at the time of grant, and shall be subject to vesting, expiration and other provisions as determined by the Compensation Committee. In the event of a merger, consolidation or reorganization in which Employer is not the surviving corporation or in which it survives as a subsidiary of another corporation or entity (a "Transaction"), and the shares of equity securities of the surviving corporation or entity or parent thereof are publicly traded on a recognized stock exchange or over the counter market, the stock options to be granted pursuant to this Section 4(c) after the date of the Transaction shall be granted in accordance herewith with respect to securities of the surviving corporation or entity or parent thereof, as applicable, with the number of shares subject to options to be granted to equal the product of (x) the amount of shares subject to the options set forth in this Section 4(c) and (y) a fraction the numerator of which is the per share fair market value of the Employer's securities and the denominator of which is the per share fair market value of the publicly-traded common or ordinary equity securities of the surviving corporation or entity or parent thereof, in each case as of the date of consummation of the Transaction, and to give effect to the intent of the parties as set forth in this Section 4(c). The stock options granted pursuant to this Section shall consist of incentive stock options to the extent permitted by law or regulation. Any stock options granted hereunder in respect of any Fiscal Year from and after Fiscal Year 2001 shall occur not later than one hundred days following the Fiscal Year to which the grant relates. In order to qualify for any grant pursuant hereto, Officer must be employed by Employer on the last day of the fiscal year to which such grant relates. From and after the Termination Date, the Officer shall no longer be entitled to receive additional options under this Section 4(c) other than those which were due for previously completed fiscal years. (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, second-to-die life insurance coverage, executive medical examination program, executive long-term disability policy, financial planning services program 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. (e) Continuation of Benefits. If Officer's employment is terminated hereunder, pursuant to Section 5(a), 5(b) or 5(e) hereof, Employer shall continue for the period specified in Section 5(a) or 5(b) hereof or three years in the case of a termination pursuant to Section 5(e) hereof, as the case may be, to provide benefits that are no less favorable in the aggregate than those 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) which were being provided to the Officer and his dependents and beneficiaries immediately prior to Officer's Termination Date (or in the case of a termination after a Change in Control, those benefits which were being provided immediately preceding the Change in Control), but only to the extent that Officer is not entitled to comparable benefits from other employment. For a period of two years after the Termination Date, Employer shall provide the Officer outplacement services at its cost. (f) 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 do so in accordance with the terms and conditions of the Countrywide Credit Industries, Inc. Amended and Restated Deferred Compensation Plan (the "Deferred Compensation Plan"), or in the absence of such Deferred Compensation Plan or any successor plan that is substantially similar to the Deferred Compensation Plan, 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 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 the fifth anniversary of such notice, 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 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 Section 4(e) 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, Officer's employment shall terminate subject to the provisions of this Section 5(b). In such event, 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 provide to the Beneficiary during the twelve-month period following the date of the Officer's death the benefits specified in Section 4(e) hereof. If Officer's death occurs while he is receiving payments for Disability under Section 5(a)(i) above, such payments shall cease and the Beneficiary shall be entitled to the payments and benefits under this Subsection (b), which shall continue for a period of twelve months thereafter at the full rate of compensation in effect immediately prior to the Disability. This Agreement in all other respects will terminate upon the death of Officer; provided, however, that 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. (c) Expiration of Term. Officer's employment hereunder shall terminate at the end of the third Fiscal Year of Employer following Officer's receipt of a Notice of Termination (as defined in Section 5(g) hereof) terminating Officer's employment with Employer. Following the expiration of Officer's employment pursuant to this Section 5(c), 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 his incentive compensation payable pursuant to Section 4(b) hereof in respect of the final Fiscal Year of Employer during the term hereof and to all other benefits in which he has become vested or which are otherwise payable in respect of periods ending prior to his termination of employment. (d) 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 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 subsidiaries or permanently prohibiting him from participating in the conduct of the affairs of Employer or any of its subsidiaries. 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 subsidiaries' 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(d) 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. (e) Good Reason. Officer may terminate his employment for Good Reason. For purposes of this Agreement, "Good Reason" shall be deemed to occur if Employer notifies Officer of a termination of his employment other than for Cause or pursuant to Section 5(c) hereof, or if Employer breaches this Agreement in any material respect, or if the Board (i) elects a person other than Officer as Employer's President, Chairman of the Board or Chief Executive Officer without Officer's consent, (ii) reorganizes management so as to require him to report to a person or persons other than the Board, (iii) requires that Officer be based anywhere but fifty (50) miles from the office where Officer is located as of the date hereof, (iv) takes any action that results in the Officer not being able to travel domestically by private aircraft at the Company's expense, or (v) takes any other action which, in Officer's reasonable judgment, results in the diminution in Officer's status, title, position 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. Notwithstanding the foregoing, the Officer shall not have Good Reason to terminate employment with the Employer (or otherwise have the right to claim that he or she has been constructively terminated from employment) due solely to the fact that the Employer shall cease to be a public company and shall become a subsidiary of another publicly-traded corporation. Notwithstanding the foregoing, Officer may terminate his employment for any or no reason within two years following a "Change in Control" (as defined in Appendix A to this Agreement) and such termination shall be considered a termination for Good Reason hereunder. If Officer's employment shall be terminated by Employer other than for Cause or by Officer for Good Reason, then Employer shall pay Officer in a single payment, 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 three times the sum of (A) Officer's annual base salary at the Termination Date and (B) the greater of (x) the average of the aggregate bonus and/or incentive award, if any, paid or payable to the Officer for each of the two (2) Fiscal Years preceding the Fiscal Year in which the Officer's termination of employment occurs (or such fewer number of Fiscal Years for which the Officer was eligible to receive a bonus and/or incentive award) and (y) the bonus and/or incentive award paid for the Fiscal Year immediately preceding the date of the Change in Control. (f) Resignation. Except as provided in Section 5(e) 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(f) 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. (g) 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, except as provided in Section 5(c) hereof, 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, in addition to any incentive compensation awards or stock option grants to which Officer may otherwise be entitled pursuant to the express provisions of this Agreement, 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. (h) Payments. All payments required under this Agreement (other than the Additional Benefits payable pursuant to Section 4(e) hereof) as a result of the termination of Officer's employment hereunder shall be made within 15 days of the Termination Date or, if any portion is not then reasonably determinable, within five (5) days after such portion is so determinable. In the event of a dispute concerning the validity of a purported termination which is maintained in good faith, the Termination Date shall mean the date the dispute is finally resolved and Employer will continue to provide Officer with the compensation and benefits provided for under this Agreement, until the dispute is finally resolved without any obligation by Officer to repay any of such amounts to Employer, notwithstanding the final outcome of the dispute. Payments required to be made by this Section 5(h) are in addition to all other amounts due under Section 5 of this Agreement and shall not be offset against or reduce any other amounts due under Section 5 of this Agreement. Officer shall be required to render services to Employer during the period following his Termination Date but before the dispute concerning the termination is finally determined unless Employer fails to provide Officer with a reasonable opportunity to perform his duties under this Agreement during such period. (i) Excise Tax Gross-Up. ------------------- (A) Except as provided in subsection (B), in the event it shall be determined that any payment or distribution of any type, including accelerated vesting, to or for the benefit of the Officer, by the Employer, any "affiliate" (as defined in Rule 405 of the Securities Act of 1933, as amended) of the Employer, 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) who acquires ownership or effective control of the Employer or ownership of a substantial portion of the Employer's assets (within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder) or any "affiliate" of such "person," whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the "Payments"), is or will be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are collectively referred to as the "Excise Tax"), then the Officer shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Officer of all taxes (including any interest or penalties imposed with respect to such taxes), including any income tax, employment tax or Excise Tax imposed upon the Gross-Up Payment, the Officer retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (B) Notwithstanding subsection (A) or any other provision of this Agreement to the contrary, in the event that the Payments (excluding the payment provided for in subsection (A)) exceed by less than 10% or $100,000, the maximum amount of Payments which if made or provided to the Officer would not be subject to an Excise Tax, the Officer will not be entitled to a Gross-Up Payment and the Payments shall be reduced (but not below zero) to the extent necessary so that no Payment to be made or benefit to be provided to the Officer shall be subject to the Excise Tax; it being the intent of the parties that the Payments shall be reduced only if the economic detriment to the Officer (on a pre-tax basis) is less than the greater of $100,000 or 10% of the Payments. Unless the Officer shall have given prior written notice specifying a different order to the Employer to effectuate the foregoing, the Employer shall reduce or eliminate the Payments, by first reducing or eliminating the portion of the Payments which are not payable in cash and then by reducing or eliminating cash payments, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the "Determination" (as defined below). Any notice given by the Officer pursuant to the preceding sentence shall take precedence over the provisions of any other plan, arrangement or agreement governing the Officer's rights and entitlements to any benefits or compensation. (C) The determination of whether the Payments shall be reduced pursuant to this Agreement and the amount of such reduction, all mathematical determinations, and all determinations as to whether any of the Payments are "parachute payments" (within the meaning of Section 280G of the Code), that are required to be made under this Section, including determinations as to whether a Gross-Up Payment is required, the amount of such Gross-Up Payment and amounts relevant to the last sentence of this subsection (C), shall be made by an independent accounting firm selected by the Officer from among the five (5) largest accounting firms in the United States or any nationally recognized financial planning and benefits consulting company (the "Accounting Firm"), which shall provide its determination (the "Determination"), together with detailed supporting calculations regarding the amount of any Gross-Up Payment and any other relevant matter, both to the Employer and the Officer by no later than ten (10) days following the Termination Date, if applicable, or such earlier time as is requested by the Employer or the Officer (if the Officer reasonably believes that any of the Payments may be subject to the Excise Tax). If the Accounting Firm determines that no Excise Tax is payable by the Officer, it shall furnish the Officer and the Employer with an opinion reasonably acceptable to the Officer and the Employer that no Excise Tax is payable (including the reasons therefor) and that the Officer has substantial authority not to report any Excise Tax on his federal income tax return. If a Gross-Up Payment is determined to be payable, it shall be paid (including through withholding of taxes) to the Officer no later than the due date for payment of the Excise Tax. Any determination by the Accounting Firm shall be binding upon the Employer and the Officer, absent manifest error. As a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments not made by the Employer should have been made ("Underpayment"), or that Gross-Up Payments will have been made by the Employer which should not have been made ("Overpayment"). In either such event, the Accounting Firm shall determine the amount of the Underpayment or Overpayment that has occurred. In the case of an Underpayment, the amount of such Underpayment (together with any interest and penalties payable by the Officer as a result of such Underpayment) shall be promptly paid by the Employer to or for the benefit of the Officer. In the case of an Overpayment, the Officer shall, at the direction and expense of the Employer, take such steps as are reasonably necessary (including the filing of returns and claims for refund), follow reasonable instructions from, and procedures established by, the Employer, and otherwise reasonably cooperate with the Employer to correct such Overpayment, provided, however, that (i) the Officer shall not in any event be obligated to return to the Employer an amount greater than the net after-tax portion of the Overpayment that he has retained or has recovered as a refund from the applicable taxing authorities and (ii) if a Gross-Up Payment is determined to be payable, this provision shall be interpreted in a manner consistent with an intent to make the Officer whole, on an after-tax basis, from the application of the Excise Tax, it being understood that the correction of an Overpayment may result in the Officer repaying to the Employer an amount which is less than the Overpayment. The cost of all such determinations made pursuant to this Section shall be paid by the Employer. 6. Reimbursement of Business Expenses. During the term of this Agreement, Employer shall reimburse Officer promptly for all expenditures (including travel, entertainment, parking, business meetings, and the monthly costs (including dues) of maintaining memberships at appropriate clubs) to the extent that such expenditures 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 (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 the Employer or similar transaction. Employer shall not agree to any such transaction unless the successor to or assignee of the Company's business and/or assets in such transaction expressly assumes all obligations of the Employer hereunder. 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 4500 Park Granada, Calabasas, CA 91302 Attention: General Counsel/Secretary, with a copy to the Chairman of the Compensation Committee at the same address, or to such other address as Employer may from time to time in writing designate, and to Officer at his home address as reflected in Employer's records or at such other address as he may from time to time in writing designate. 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) Effective Date. This Agreement shall become effective on August ___, 2000 (the -------------- "Effective Date"). (d) 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, including, but not limited to, the Third Restated Agreement. No modifications or amendments of this Agreement (including, but not limited to the provisions of Section 4 hereof) shall be valid unless made in writing and signed by the parties hereto. (e) 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. (f) California Law. This Agreement shall be construed and interpreted in accordance with -------------- the laws of California. (g) 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 arbitrator hearing the matter shall find to be reasonable as and for the attorneys' fees of the prevailing party. (h) 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, (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. (i) 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, or from the performance of services to any other business entity, or both. (j) 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. (k) 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. (l) Arbitration. The parties acknowledge that they have previously entered into a Mutual Agreement to Arbitrate Claims (the "Arbitration Agreement"). The parties hereby incorporate herein by reference the terms of the Arbitration Agreement. Any dispute arising regarding this Agreement and/or any other matter covered by the Arbitration Agreement shall be subject to binding arbitration pursuant to the terms of the Arbitration Agreement, except as expressly provided herein. (m) Pooling Transactions. Notwithstanding anything contained in this Agreement to the contrary, in the event of a Change in Control of the Employer in a transaction which is intended to be treated as a "pooling of interests" under generally accepted accounting principles (a "Pooling Transaction"), the Board shall take such actions, if any, as are specifically recommended by an independent accounting firm retained by the Employer to the extent reasonably necessary in order to assure that the Pooling Transaction will qualify as such, including but not limited to (a) deferring the vesting, exercise, payment, settlement or lapsing of restrictions with respect to any option or award, (b) providing that the payment or settlement in respect of any option or award be made in the form of cash, shares of common stock or securities of a successor or acquirer of the Employer, or a combination of the foregoing, (c) providing for the extension of the term of any option or award to the extent necessary to accommodate the foregoing, but not beyond the maximum term permitted for any option or award and (d) amending, deleting or making inapplicable to the Officer any provision in this Agreement or other arrangement pursuant to which he receives compensation, payments or benefits. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. COUNTRYWIDE CREDIT INDUSTRIES, INC. ATTEST: By: ------------------------------------------ - ---------------------------------------------------- Secretary Title: ------------------------------------------------- OFFICER Angelo R. Mozilo, in his individual capacity 342883.3 - - 18 - 342897.09 342897.09 APPENDIX A To Angelo R. Mozilo Employment Agreement 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, or (iii) any Person in connection with a "Non-Control Transaction" (as hereinafter defined); (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 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 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, or (iv) any Person who, immediately prior to such merger, consolidation or reorganization had Beneficial Ownership of twenty five percent (25%) or more of the then outstanding Voting Securities or common stock of Employer, has 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 (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). 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 Persons; provided, however, that if a Change in 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. EX-10.4.2 4 0004.txt EMPLOYMENT AGREEMENT FIRST RESTATED EMPLOYMENT AGREEMENT THIS FIRST RESTATED EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of September 11, 2000 by and between Countrywide Credit Industries, Inc., a Delaware corporation ("Employer"), and Stanford L. Kurland ("Officer"). W I T N E S S E T H: WHEREAS, Officer currently holds the offices of Executive Managing Director and Chief Operating Officer of Employer, and President and Chief Executive Officer of Countrywide Home Loans, Inc. ("Home Loans"), a wholly-owned subsidiary of Employer; and WHEREAS, Employer desires to obtain the benefit of continued services of Officer and Officer desires to continue to render services to Employer and its subsidiaries, including Home Loans; and WHEREAS, the Board of Directors of Employer (the "Board") has determined that it is in Employer's best interest and that of its stockholders to recognize the substantial contribution that Officer has made and is expected to continue to make to the Employer's business and to retain his services in the future; and WHEREAS, Employer and Officer set forth the terms and conditions of Officer's employment with Employer under an employment agreement entered into as of March 1, 1999; and WHEREAS, Employer and Officer desire to set forth the continued terms and conditions of Officer's employment with Employer 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, in accordance with the terms hereof, for a term beginning on the Effective Date (as defined in Section 8(c) hereof) and ending on February 28, 2003, unless earlier terminated in accordance with the provisions hereof. 2. Specific 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 Managing Director and Chief Operating Officer of Employer and as President and Chief Executive Officer of Home Loans. Except as set forth in Section 5(d)(ii) hereof, Employer agrees that Officer's duties hereunder shall be the usual and customary duties of such offices or such other duties as may be designated from time to time by the Board consistent with his status as an executive officer of Employer any such duties shall be consistent with the provisions of the charter documents of Employer or 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 subsidiaries shall be aggregated in determining whether Officer has received the benefits provided for herein. 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 subsidiaries, and matters related thereto, and shall use his best efforts and abilities to promote its interests. Officer agrees that he will diligently endeavor to promote the business, affairs and interests of Employer and its subsidiaries and perform 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 one or more (direct or indirect) subsidiaries of Employer as the Board may from time to time request, subject to appropriate authorization by the subsidiary or subsidiaries 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 businesses then conducted by Employer or any of its subsidiaries. Officer may serve as a director or in any other capacity of any business enterprise, including an enterprise whose activities may involve or relate to the business of Employer, provided that such service is expressly approved by the Board. 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 after the Effective Date at the annual rate of $744,187.50 (the "Annual Rate"). In respect of the Fiscal Years ending in 2000, 2001, 2002 and 2003 the Compensation Committee of the Board (the "Compensation Committee") shall, based upon the recommendation of Angelo R. Mozilo (or, if he is no longer an officer of Employer, the Chairman of Employer), increase the Annual Rate by no less than 5% and no greater than 10% each year. Any such increase shall be effective not later than June 1 of the fiscal year in which the increase is granted. (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 amount determined pursuant to the terms and conditions of the Countrywide Credit Industries, Inc. Annual Incentive Plan (the "Annual Incentive Plan") and set out in the Incentive Matrix attached hereto as Appendix B; provided, however, that, unless a "Change in Control" (as defined in Appendix A to this Agreement) has occurred, the effectiveness of the incentive compensation award for the final two Fiscal Years ending during the term of this Agreement is subject to the approval by Employer's stockholders of an annual incentive plan containing substantially the terms of the Annual Incentive Plan on or before the Employer's 2001 Annual Meeting of Stockholders in accordance with Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code") and the regulations promulgated thereunder. Any such incentive compensation award shall be paid to Officer no later than June 1 following the end of the fiscal year in respect of which the incentive compensation award is being paid. (c) Stock Options. Employer shall grant to Officer stock options in respect of each of the Fiscal Years ending during the term of this Agreement for such number of shares of Employer's common stock as the Compensation Committee in its sole discretion determines, taking into account Officer's and Employer's performance in each of such Fiscal Years and the competitive practices then prevailing regarding the granting of stock options; provided, however, that the number of shares in respect of each annual stock option grant shall be no less than 100,000 and no greater than 250,000. The numbers 100,000 and 250,000 in the preceding sentence shall be adjusted proportionately in the event Employer (A) declares a stock dividend on its common stock, (B) subdivides its outstanding common stock, (C) combines the outstanding shares of its capital stock into a smaller number of common stock, or (D) issues any shares of its capital stock in a reclassification of the common stock (including any such reclassification in connection with a consolidation or merger in which Employer is the continuing or surviving corporation). The stock options described in this Section 4(c) in respect of a Fiscal Year shall be granted at the same time as Employer grants stock options to its other senior executives in respect of such Fiscal Year (but in no event later than June 30 following the end of such Fiscal Year). All stock options granted in accordance with this Section 4(c): (i) shall be granted pursuant to the Countrywide Credit Industries, Inc. 2000 Stock Option Plan, as amended (the "2000 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 2000 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 and (iv) shall be subject to such other terms and conditions as may be determined by the Compensation Committee and set forth in the agreement evidencing the award. In the event of a merger, consolidation or reorganization in which Employer is not the surviving corporation or in which it survives as a subsidiary of another corporation or entity (a "Transaction"), and the shares of equity securities of the surviving corporation or entity or parent thereof are publicly traded on a recognized stock exchange or over the counter market, the stock options to be granted pursuant to this Section 4(c) after the date of the Transaction shall be granted in accordance herewith with respect to securities of the surviving corporation or entity or parent thereof, as applicable, with the number of shares subject to options to be granted to equal the product of (x) the amount of shares subject to the options set forth in this Section 4(c) and (y) a fraction the numerator of which is the per share fair market value of the Employer's securities and the denominator of which is the per share fair market value of the publicly-traded common or ordinary equity securities of the surviving corporation or entity or parent thereof, in each case as of the date of consummation of the Transaction, and to give effect to the intent of the parties as set forth in this Section 4(c). The stock options granted pursuant to this Section shall consist of incentive stock options to the extent permitted by law or regulation. From and after the Termination Date, the Officer shall no longer be entitled to receive additional options under this Section 4(c) other than those which were due for previously completed fiscal years. (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, executive medical examination program, executive long-term disability policy, financial planning services program 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. (e) Continuation of Benefits. 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 that are no less favorable in the aggregate than those 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) which were being provided to the Officer and his dependents and beneficiaries immediately prior to Officer's Termination Date, but only to the extent that Officer is not entitled to comparable benefits from other employment. For a period of two years after the Termination Date, Employer shall provide the Officer outplacement services at its cost. (f) 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 prior to the expiration of the term of this Agreement 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 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 the fifth anniversary of such notice, 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 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 Section 4(e) 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 provide during the twelve-month period following the date of the Officer's death the benefits specified in Section 4(e) hereof. If Officer's death occurs while he is receiving payments for Disability under Section 5(a)(i) above, such payments shall cease and the Beneficiary shall be entitled to the payments and benefits under this Subsection (b), which shall continue for a period of twelve months thereafter at the full rate of compensation in effect immediately prior to the Disability. This Agreement in all other respects will terminate upon the death of Officer; provided, however, that 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. (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 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 subsidiaries or permanently prohibiting him from participating in the conduct of the affairs of Employer or any of its subsidiaries. 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 subsidiaries' 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. (d) Severance. (i) Except as provided in Section 5(d)(ii), if during the term of this Agreement Officer's employment shall be terminated by Employer other than for Cause, then (A) until February 28, 2003 or the second anniversary of the Termination Date, whichever is later (the "Severance Period"), Employer shall (1) continue to pay Officer his annual base salary, at the Annual Rate in effect on the Termination Date, and (2) provide the benefits specified in Section 4(e) hereof, (B) Employer shall pay Officer, within ten (10) days after the end of each Fiscal Year ending during the Severance Period, an amount equal to the total amount of 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 Severance Period ends on a date prior to the end of a Fiscal Year, Employer shall also pay Officer an amount equal to the product of (1) the Bonus Rate and (2) the fraction obtained by dividing (x) the number of days elapsed since the end of the immediately preceding Fiscal Year through the end of the Severance Period by (y) 365, and (C) all stock options held by Officer on the Termination Date shall become immediately and fully exercisable. (ii) If after a "Change in Control" (as defined in Appendix A 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, 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 three times the sum of (1) Officer's annual base salary at the Termination Date and (2) the greater of (x) the average of the aggregate bonus and/or incentive award, if any, paid or payable to the Officer for each of the two (2) Fiscal Years preceding the Fiscal Year in which the Officer's termination of employment occurs (or such fewer number of Fiscal Years for which the Officer was eligible to receive a bonus and/or incentive award) and (y) the bonus and/or incentive award paid for the Fiscal Year immediately preceding the date of the Change in Control, (B) Employer shall continue to provide for three years from the Termination Date the benefits specified in Section 4(e) hereof, provided that the coverage and benefits provided during this period shall be no less favorable to Officer and his dependents than the most favorable of such coverages and benefits provided Officer and his dependents during the 90-day period immediately preceding the Change in Control or as of any date following the Change in Control but preceding the date of Officer's termination and (C) all stock options held by Officer on the Termination Date shall become immediately and fully exercisable. For purposes of this Agreement, "Good Reason" shall be deemed to occur if Employer (x) breaches this Agreement in any material respect, (y) requires that Officer be based anywhere more than fifty (50) miles from the office where Officer is located as of the date hereof, or (z) takes any other action which results in the diminution in Officer's status, title, position 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. Notwithstanding the foregoing, the Officer shall not have Good Reason to terminate employment with the Employer (or otherwise have the right to claim that he or she has been constructively terminated from employment) due solely to the fact that the Employer shall cease to be a public company and shall become a subsidiary of another publicly-traded corporation. (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 (the "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) Disputes. In the event of a dispute concerning the validity of a purported termination which is maintained in good faith, the Termination Date shall mean the date the dispute is finally resolved and Employer will continue to provide Officer with the compensation and benefits provided for under this Agreement, until the dispute is finally resolved without any obligation by Officer to repay any of such amounts to Employer, notwithstanding the final outcome of the dispute. Payments required to be made by this Section 5(g) are in addition to all other amounts due under Section 5 of this Agreement and shall not be offset against or reduce any other amounts due under Section 5 of this Agreement. Officer shall be required to render services to Employer during the period following his Termination Date but before the dispute concerning the termination is finally determined unless Employer fails to provide Officer with a reasonable opportunity to perform his duties under this Agreement during such period. (h) Excise Tax Gross-Up. ------------------- (A) Except as provided in subsection (B), in the event it shall be determined that any payment or distribution of any type, including accelerated vesting, to or for the benefit of the Officer, by the Employer, any "affiliate" (as defined in Rule 405 of the Securities Act of 1933, as amended) of the Employer, 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) who acquires ownership or effective control of the Employer or ownership of a substantial portion of the Employer's assets (within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder) or any "affiliate" of such "person", whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the "Payments"), is or will be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are collectively referred to as the "Excise Tax"), then the Officer shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Officer of all taxes (including any interest or penalties imposed with respect to such taxes), including any income tax, employment tax or Excise Tax imposed upon the Gross-Up Payment, the Officer retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (B) Notwithstanding subsection (A) or any other provision of this Agreement to the contrary, in the event that the Payments (excluding the payment provided for in subsection (A)) exceed by less than 10% or $100,000, the maximum amount of Payments which if made or provided to the Officer would not be subject to an Excise Tax, the Officer will not be entitled to a Gross-Up Payment and the Payments shall be reduced (but not below zero) to the extent necessary so that no Payment to be made or benefit to be provided to the Officer shall be subject to the Excise Tax; it being the intent of the parties that the Payments shall be reduced only if the economic detriment to the Officer (on a pre-tax basis) is less than the greater of $100,000 or 10% of the Payments. Unless the Officer shall have given prior written notice specifying a different order to the Employer to effectuate the foregoing, the Employer shall reduce or eliminate the Payments, by first reducing or eliminating the portion of the Payments which are not payable in cash and then by reducing or eliminating cash payments, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the "Determination" (as defined below). Any notice given by the Officer pursuant to the preceding sentence shall take precedence over the provisions of any other plan, arrangement or agreement governing the Officer's rights and entitlements to any benefits or compensation. (C) The determination of whether the Payments shall be reduced pursuant to this Agreement and the amount of such reduction, all mathematical determinations, and all determinations as to whether any of the Payments are "parachute payments" (within the meaning of Section 280G of the Code), that are required to be made under this Section, including determinations as to whether a Gross-Up Payment is required, the amount of such Gross-Up Payment and amounts relevant to the last sentence of this subsection (C), shall be made by an independent accounting firm selected by the Officer from among the five (5) largest accounting firms in the United States or any nationally recognized financial planning and benefits consulting company (the "Accounting Firm"), which shall provide its determination (the "Determination"), together with detailed supporting calculations regarding the amount of any Gross-Up Payment and any other relevant matter, both to the Employer and the Officer by no later than ten (10) days following the Termination Date, if applicable, or such earlier time as is requested by the Employer or the Officer (if the Officer reasonably believes that any of the Payments may be subject to the Excise Tax). If the Accounting Firm determines that no Excise Tax is payable by the Officer, it shall furnish the Officer and the Employer with an opinion reasonably acceptable to the Officer and the Employer that no Excise Tax is payable (including the reasons therefor) and that the Officer has substantial authority not to report any Excise Tax on his federal income tax return. If a Gross-Up Payment is determined to be payable, it shall be paid (including through withholding of taxes) to the Officer no later than the due date for payment of the Excise Tax. Any determination by the Accounting Firm shall be binding upon the Employer and the Officer, absent manifest error. As a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments not made by the Employer should have been made ("Underpayment"), or that Gross-Up Payments will have been made by the Employer which should not have been made ("Overpayment"). In either such event, the Accounting Firm shall determine the amount of the Underpayment or Overpayment that has occurred. In the case of an Underpayment, the amount of such Underpayment (together with any interest and penalties payable by the Officer as a result of such Underpayment) shall be promptly paid by the Employer to or for the benefit of the Officer. In the case of an Overpayment, the Officer shall, at the direction and expense of the Employer, take such steps as are reasonably necessary (including the filing of returns and claims for refund), follow reasonable instructions from, and procedures established by, the Employer, and otherwise reasonably cooperate with the Employer to correct such Overpayment, provided, however, that (i) the Officer shall not in any event be obligated to return to the Employer an amount greater than the net after-tax portion of the Overpayment that he has retained or has recovered as a refund from the applicable taxing authorities and (ii) if a Gross-Up Payment is determined to be payable, this provision shall be interpreted in a manner consistent with an intent to make the Officer whole, on an after-tax basis, from the application of the Excise Tax, it being understood that the correction of an Overpayment may result in the Officer repaying to the Employer an amount which is less than the Overpayment. The cost of all such determinations made pursuant to this Section shall be paid by the Employer. 6. Reimbursement of Business Expenses. During the term of this Agreement, Employer shall reimburse Officer promptly for all expenditures (including travel, entertainment, parking, business meetings, and the monthly costs (including dues) of maintaining memberships at appropriate clubs) to the extent that such expenditures 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 (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 the Employer or similar transaction. Employer shall not agree to any such transaction unless the successor to or assignee of the Company's business and/or assets in such transaction expressly assumes all obligations of the Employer hereunder. 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 4500 Park Granada, Calabasas, California 91302, Attention: General Counsel/Secretary, with a copy to the Chairman of the Compensation Committee at the same address, or to such other address as Employer may from time to time in writing designate, and to Officer at his home address as reflected in Employer's records or at such other address as he may from time to time in writing designate. 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) Effective Date. This Agreement is effective as of March 1, 1999. -------------- (d) 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. (e) 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. (f) California Law. This Agreement shall be construed and interpreted in accordance with -------------- the laws of California. (g) 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. (h) 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, (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. (i) 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, or from the performance of services to any other business entity, or both. (j) 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. (k) 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. (l) Arbitration. The parties acknowledge that they have previously entered into a Mutual Agreement to Arbitrate Claims (the "Arbitration Agreement"). The parties hereby incorporate herein by reference the terms of the Arbitration Agreement. Any dispute arising regarding this Agreement and/or any other matter covered by the Arbitration Agreement shall be subject to binding arbitration pursuant to the terms of the Arbitration Agreement, except as expressly provided herein. (m) Pooling Transactions. Notwithstanding anything contained in this Agreement to the contrary, in - -------------------------------------- the event of a Change in Control of the Employer in a transaction which is intended to be treated as a "pooling of interests" under generally accepted accounting principles (a "Pooling Transaction"), the Board shall take such actions, if any, as are specifically recommended by an independent accounting firm retained by the Employer to the extent reasonably necessary in order to assure that the Pooling Transaction will qualify as such, including but not limited to (a) deferring the vesting, exercise, payment, settlement or lapsing of restrictions with respect to any option or award, (b) providing that the payment or settlement in respect of any option or award be made in the form of cash, shares of common stock or securities of a successor or acquirer of the Employer, or a combination of the foregoing, and (c) providing for the extension of the term of any option or award to the extent necessary to accommodate the foregoing, but not beyond the maximum term permitted for any option or award and (d) amending, deleting or making inapplicable to the Officer any provision in this Agreement or other arrangement pursuant to which he receives compensation, payments or benefits. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. COUNTRYWIDE CREDIT INDUSTRIES, INC. ATTEST: By: Secretary Title: ------------------------------------- OFFICER: Stanford L. Kurland, in his individual capacity APPENDIX A To Stanford L. Kurland Employment Agreement 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, or (iii) any Person in connection with a "Non-Control Transaction" (as hereinafter defined); (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 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 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, or (iv) any Person who, immediately prior to such merger, consolidation or reorganization had Beneficial Ownership of twenty five percent (25%) or more of the then outstanding Voting Securities or common stock of Employer, has 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 (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). 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 Persons; provided, however, that if a Change in 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. - - 17 - 343010.6 343010.6 APPENDIX B The Annual Incentive Plan, approved by the Employer's stockholders at the 1996 Annual Meeting of Stockholders, grants authority to the Compensation Committee to determine Employee's incentive compensation award. The Incentive Matrix, as amended, referred to in section 4.(b), was approved by the Board of Directors on September 11, 2000. EX-10.4.3 5 0005.txt EMPLOYMENT AGREEMENT FIRST RESTATED EMPLOYMENT AGREEMENT THIS FIRST RESTATED EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of September 11, 2000 by and between Countrywide Credit Industries, Inc., a Delaware corporation ("Employer"), and Kevin Bartlett ("Officer"). W I T N E S S E T H: ------------------- WHEREAS, Officer currently holds the office of Senior Managing Director of Employer, and Senior Managing Director of Countrywide Home Loans, Inc. ("Home Loans"), a wholly-owned subsidiary of Employer; and WHEREAS, Employer desires to obtain the benefit of continued services of Officer and Officer desires to continue to render services to Employer and its subsidiaries, including Home Loans; and WHEREAS, the Board of Directors of Employer (the "Board") has determined that it is in Employer's best interest and that of its stockholders to recognize the substantial contribution that Officer has made and is expected to continue to make to Employer's business and to retain his services in the future; and WHEREAS, Employer and Officer set forth the terms and conditions of Officer's employment with Employer under an employment agreement entered into as of July 1, 2000; and WHEREAS, Employer and Officer desire to set forth the continued terms and conditions of Officer's employment with Employer 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, in accordance with the terms hereof, for a term beginning on the Effective Date (as defined in Section 8(c) hereof) and ending on February 28, 2003, unless earlier terminated in accordance with the provisions hereof. 2. Specific 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 Senior Managing Director of Employer and of Home Loans. Except as set forth in Section 5(d)(ii) hereof, Employer agrees that Officer's duties hereunder shall be the usual and customary duties of such offices or such other duties as may be designated from time to time by the Chairman of the Board, President and Chief Executive Officer (the "CEO") or the Executive Managing Director and Chief Operating Officer (the "COO") of Employer consistent with his status as an executive officer of Employer; and such duties shall be consistent with the provisions of the charter documents of Employer or 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 that he may hold. All compensation paid to Officer by Employer or any of its subsidiaries shall be aggregated in determining whether Officer has received the benefits provided for herein. 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 subsidiaries, and matters related thereto, and shall use his best efforts and abilities to promote its interests. Officer agrees that he will diligently endeavor to promote the business, affairs and interests of Employer and its subsidiaries and perform 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 one or more (direct or indirect) subsidiaries of Employer as the CEO or COO may from time to time request, subject to appropriate authorization by the subsidiary or subsidiaries 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 CEO or COO, compete, directly or indirectly, with Employer in the businesses then conducted by Employer or any of its subsidiaries. Officer may serve as a director or in any other capacity of any business enterprise, including an enterprise whose activities may involve or relate to the business of Employer, provided that such service is expressly approved by the CEO or COO. 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 CEO or COO, 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 after the Effective Date at the annual rate of $425,250 (the "Annual Rate"). In respect of the Fiscal Years ending in 2002 and 2003, the Annual Rate shall be increased by no less than 5% and no more than 10% each year. Any such increase shall be effective not later than June I of the fiscal year in which the increase is granted. (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 amount determined pursuant to the terms and conditions of the Countrywide Credit Industries, Inc. Bonus Plan for Officer that is set out in Appendix B attached hereto (the "Bonus Plan"). Employer shall pay the incentive compensation award described in this Section 4(b) for each Fiscal Year or portion thereof, as applicable, to Officer as early after the end of such Fiscal Year as practicable but in no event later than 90 days after the end of such Fiscal Year. With regard to the incentive compensation award payable with respect to the last Fiscal Year during the term of this Agreement, such award shall be payable in accordance herewith notwithstanding the expiration of the term of this Agreement. (c) Stock Options. Employer shall grant to Officer stock options in respect of each of the Fiscal Years ending during the term of this Agreement for such number of shares of Employer's common stock as the Compensation Committee in its sole discretion determines, taking into account Officer's and Employer's performance in each of such Fiscal Years and the competitive practices then prevailing regarding the granting of stock options; provided, however, that the number of shares in respect of each annual stock option grant shall be no less than 20,000 and no greater than 80,000. The numbers in the preceding sentence shall be adjusted proportionately in the event Employer (A) declares a stock dividend on its common stock, (B) subdivides its outstanding common stock, (C) combines the outstanding shares of its capital stock into a smaller number of common stock, or (D) issues any shares of its capital stock in a reclassification of the common stock (including any such reclassification in connection with a consolidation or merger in which Employer is the continuing or surviving corporation). The stock options described in this Section 4(c) in respect of a Fiscal Year shall be granted at the same time as Employer grants stock options to its other senior executives in respect of such Fiscal Year (but in no event later than June 30 following the end of such Fiscal Year). All stock options granted in accordance with this Section 4(c): (i) shall be granted pursuant to the Countrywide Credit Industries, Inc. 2000 Stock Option Plan, as amended (the "2000 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 2000 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 and (iv) shall be subject to such other terms and conditions as may be determined by the Compensation Committee and set forth in the agreement evidencing the award. In the event of a merger, consolidation or reorganization in which Employer is not the surviving corporation or in which it survives as a subsidiary of another corporation or entity (a "Transaction"), and the shares of equity securities of the surviving corporation or entity or parent thereof are publicly traded on a recognized stock exchange or over the counter market, the stock options to be granted pursuant to this Section 4(c) after the date of the Transaction shall be granted in accordance herewith with respect to securities of the surviving corporation or entity or parent thereof, as applicable, with the number of shares subject to options to be granted to equal the product of (x) the amount of shares subject to the options set forth in this Section 4(c) and (y) a fraction the numerator of which is the per share fair market value of the Employer's securities and the denominator of which is the per share fair market value of the publicly-traded common or ordinary equity securities of the surviving corporation or entity or parent thereof, in each case as of the date of consummation of the Transaction, and to give effect to the intent of the parties as set forth in this Section 4(c). The stock options granted pursuant to this Section shall consist of incentive stock options to the extent permitted by law or regulation. From and after the Termination Date, the Officer shall no longer be entitled to receive additional options under this Section 4(c) other than those which were due for previously completed fiscal years. (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, executive medical examination program, executive long-term disability policy, financial planning services program 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. (e) Continuation of Benefits. 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 that are no less favorable in the aggregate than those 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) which were being provided to the Officer and his dependents and beneficiaries immediately prior to Officer's Termination Date, but only to the extent that Officer is not entitled to comparable benefits from other employment. For a period of two years after the Termination Date, Employer shall provide the Officer outplacement services at its cost. (f) 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 CEO, COO or their designee 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 prior to the expiration of the term of this Agreement 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 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 the fifth anniversary of such notice, 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 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 Section 4(e) 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 provide during the twelve-month period following the date of the Officer's death the benefits specified in Section 4(e) hereof. If Officer's death occurs while he is receiving payments for Disability under Section 5(a)(i) above, such payments shall cease and the Beneficiary shall be entitled to the payments and benefits under this Subsection (b), which shall continue for a period of twelve months thereafter at the full rate of compensation in effect immediately prior to the Disability. This Agreement in all other respects will terminate upon the death of Officer; provided, however, that 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. (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 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 subsidiaries or permanently prohibiting him from participating in the conduct of the affairs of Employer or any of its subsidiaries. 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 subsidiaries' 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. (d) Severance. (i) Except as provided in Section 5(d)(ii), if during the term of this Agreement Officer's employment shall be terminated by Employer other than for Cause, then (A) until February 28, 2003 or the second anniversary of the Termination Date, whichever is later (the "Severance Period"), Employer shall (1) continue to pay Officer his annual base salary, at the Annual Rate in effect on the Termination Date, and (2) provide the benefits specified in Section 4(e) hereof, (B) Employer shall pay Officer, within ten (10) days after the end of each Fiscal Year ending during the Severance Period, an amount equal to the greater of (x) the average of the aggregate bonus and/or incentive award, if any, paid or payable to the Officer for each of the two (2) Fiscal Years preceding the Fiscal Year in which the Officer's termination of employment occurs (or such fewer number of Fiscal Years for which the Officer was eligible to receive a bonus and/or incentive award) and (y) the bonus and/or incentive award paid for the Fiscal Year immediately preceding the date of the Change in Control (the "Bonus Rate"); provided, however, that in the event the Severance Period ends on a date prior to the end of a Fiscal Year, Employer shall also pay Officer an amount equal to the product of (1) the Bonus Rate and (2) the fraction obtained by dividing (x) the number of days elapsed since the end of the immediately preceding Fiscal Year through the end of the Severance Period by (y) 365, and (C) all stock options held by Officer on the Termination Date shall become immediately and fully exercisable. (ii) Change in Control. If after a "Change in Control" (as defined in Appendix A ----------------- 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, 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 three times the sum of (1) Officer's annual base salary at the Termination Date and (2) the total amount of incentive compensation paid or payable to Officer in respect of the Fiscal Year immediately preceding the Fiscal Year in which Officer's Termination Date occurs, (B) Employer shall continue to provide for three years from the Termination Date the benefits specified in Section 4(e) hereof, provided that the coverage and benefits provided during this period shall be no less favorable to Officer and his dependents than the most favorable of such coverages and benefits provided Officer and his dependents during the 90-day period immediately preceding the Change in Control or as of any date following the Change in Control but preceding the date of Officer's termination and (C) all stock options held by Officer on the Termination Date shall become immediately and fully exercisable. For purposes of this Agreement, "Good Reason" shall be deemed to occur if Employer (w) breaches this Agreement in any material respect, (x) requires that Officer be based anywhere more than fifty (50) miles from the office where Officer is located as of the date hereof, or (y) takes any other action which results in a material adverse change in Officer's duties and responsibilities other than (i) an action not taken in bad faith and which is remedied by Employer promptly after receipt of notice by Officer; (ii) a change in reporting relationships; or (iii) changes due solely to the fact that the Employer ceases to be a public company and becomes a subsidiary of another publicly-traded corporation. (iii) Effect of Section 280G of the Internal Revenue Code. - --------------------------------------------------- (A) Except as provided in subsection (B), in the event it shall be determined that any payment or distribution of any type, including accelerated vesting, to or for the benefit of the Officer, by the Employer, any "affiliate" (as defined in Rule 405 of the Securities Act of 1933, as amended) of the Employer, 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) who acquires ownership or effective control of the Employer or ownership of a substantial portion of the Employer's assets (within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder) or any "affiliate" of such "person", whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the "Payments"), is or will be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are collectively referred to as the "Excise Tax"), then the Officer shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Officer of all taxes (including any interest or penalties imposed with respect to such taxes), including any income tax, employment tax or Excise Tax imposed upon the Gross-Up Payment, the Officer retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (B) Notwithstanding subsection (A) or any other provision of this Agreement to the contrary, in the event that the Payments (excluding the payment provided for in subsection (A)) exceed by less than 10% or $100,000, the maximum amount of Payments which if made or provided to the Officer would not be subject to an Excise Tax, the Officer will not be entitled to a Gross-Up Payment and the Payments shall be reduced (but not below zero) to the extent necessary so that no Payment to be made or benefit to be provided to the Officer shall be subject to the Excise Tax; it being the intent of the parties that the Payments shall be reduced only if the economic detriment to the Officer (on a pre-tax basis) is less than the greater of $100,000 or 10% of the Payments. Unless the Officer shall have given prior written notice specifying a different order to the Employer to effectuate the foregoing, the Employer shall reduce or eliminate the Payments, by first reducing or eliminating the portion of the Payments which are not payable in cash and then by reducing or eliminating cash payments, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the "Determination" (as defined below). Any notice given by the Officer pursuant to the preceding sentence shall take precedence over the provisions of any other plan, arrangement or agreement governing the Officer's rights and entitlements to any benefits or compensation. (C) The determination of whether the Payments shall be reduced pursuant to this Agreement and the amount of such reduction, all mathematical determinations, and all determinations as to whether any of the Payments are "parachute payments" (within the meaning of Section 280G of the Code), that are required to be made under this Section, including determinations as to whether a Gross-Up Payment is required, the amount of such Gross-Up Payment and amounts relevant to the last sentence of this subsection (C), shall be made by an independent accounting firm selected by the Officer from among the five (5) largest accounting firms in the United States or any nationally recognized financial planning and benefits consulting company (the "Accounting Firm"), which shall provide its determination (the "Determination"), together with detailed supporting calculations regarding the amount of any Gross-Up Payment and any other relevant matter, both to the Employer and the Officer by no later than ten (10) days following the Termination Date, if applicable, or such earlier time as is requested by the Employer or the Officer (if the Officer reasonably believes that any of the Payments may be subject to the Excise Tax). If the Accounting Firm determines that no Excise Tax is payable by the Officer, it shall furnish the Officer and the Employer with an opinion reasonably acceptable to the Officer and the Employer that no Excise Tax is payable (including the reasons therefor) and that the Officer has substantial authority not to report any Excise Tax on his federal income tax return. If a Gross-Up Payment is determined to be payable, it shall be paid (including through withholding of taxes) to the Officer no later than the due date for payment of the Excise Tax. Any determination by the Accounting Firm shall be binding upon the Employer and the Officer, absent manifest error. As a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments not made by the Employer should have been made ("Underpayment"), or that Gross-Up Payments will have been made by the Employer which should not have been made ("Overpayment"). In either such event, the Accounting Firm shall determine the amount of the Underpayment or Overpayment that has occurred. In the case of an Underpayment, the amount of such Underpayment (together with any interest and penalties payable by the Officer as a result of such Underpayment) shall be promptly paid by the Employer to or for the benefit of the Officer. In the case of an Overpayment, the Officer shall, at the direction and expense of the Employer, take such steps as are reasonably necessary (including the filing of returns and claims for refund), follow reasonable instructions from, and procedures established by, the Employer, and otherwise reasonably cooperate with the Employer to correct such Overpayment, provided, however, that (i) the Officer shall not in any event be obligated to return to the Employer an amount greater than the net after-tax portion of the Overpayment that he has retained or has recovered as a refund from the applicable taxing authorities and (ii) if a Gross-Up Payment is determined to be payable, this provision shall be interpreted in a manner consistent with an intent to make the Officer whole, on an after-tax basis, from the application of the Excise Tax, it being understood that the correction of an Overpayment may result in the Officer repaying to the Employer an amount which is less than the Overpayment. The cost of all such determinations made pursuant to this Section shall be paid by the 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 (the "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) Disputes. In the event of a dispute concerning the validity of a purported termination which is maintained in good faith, the Termination Date shall mean the date the dispute is finally resolved and Employer will continue to provide Officer with the compensation and benefits provided for under this Agreement, until the dispute is finally resolved without any obligation by Officer to repay any of such amounts to Employer, notwithstanding the final outcome of the dispute. Payments required to be made by this Section 5(g) are in addition to all other amounts due under Section 5 of this Agreement and shall not be offset against or reduce any other amounts due under Section 5 of this Agreement. Officer shall be required to render services to Employer during the period following his Termination Date but before the dispute concerning the termination is finally determined unless Employer fails to provide Officer with a reasonable opportunity to perform his duties under this Agreement during such period. 6. Reimbursement of Business Expenses. During the term of this Agreement, Employer shall reimburse Officer promptly for all expenditures (including travel, entertainment, parking, business meetings, and the monthly costs (including dues) of maintaining memberships at appropriate clubs) to the extent that such expenditures 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 (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. Employer shall not agree to any such transaction unless the successor to or assignee of the Company's business and/or assets in such transaction expressly assumes all obligations of the Employer hereunder. The obligations and duties of Officer hereby shall be personal and not assignable. (b) Notice. Any notices provided for in this Agreement shall be sent to Employer at 4500 Park Granada, Calabasas, California 91302, Attention: General Counsel/Secretary, with a copy to the CEO at the same address, or to such other address as Employer may from time to time in writing designate, and to Officer at his home address as reflected in Employer's records or at such other address as he may from time to time in writing designate. 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) Effective Date. This Agreement is effective as of July 1, 2000. -------------- (d) 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. (e) 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. (f) California Law. This Agreement shall be construed and interpreted in - -------------- accordance with the laws of the State of California. (g) Attorneys' Fees in Action on Contract. If any litigation shall occur between 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. (h) 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, (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. (i) 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, or from the performance of services to any other business entity, or both. (j) 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. (k) 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. (l) Arbitration. The parties acknowledge that they have previously entered into a Mutual Agreement to Arbitrate Claims (the "Arbitration Agreement"). The parties hereby incorporate herein by reference the terms of the Arbitration Agreement. Any dispute arising regarding this Agreement and/or any other matter covered by the Arbitration Agreement shall be subject to binding arbitration pursuant to the terms of the Arbitration Agreement, except as expressly provided herein. (m) Pooling Transactions. Notwithstanding anything contained in this Agreement to the contrary, in the event of a Change in Control of the Employer in a transaction which is intended to be treated as a "pooling of interests" under generally accepted accounting principles (a "Pooling Transaction"), the Board shall take such actions, if any, as are specifically recommended by an independent accounting firm retained by the Employer to the extent reasonably necessary in order to assure that the Pooling Transaction will qualify as such, including but not limited to (a) deferring the vesting, exercise, payment, settlement or lapsing of restrictions with respect to any option or award, (b) providing that the payment or settlement in respect of any option or award be made in the form of cash, shares of common stock or securities of a successor or acquirer of the Employer, or a combination of the foregoing, and (c) providing for the extension of the term of any option or award to the extent necessary to accommodate the foregoing, but not beyond the maximum term permitted for any option or award and (d) amending, deleting or making inapplicable to the Officer any provision in this Agreement or other arrangement pursuant to which he receives compensation, payments or benefits. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. COUNTRYWIDE CREDIT INDUSTRIES, INC. By: -------------------------------------------------------- Title: ----------------------------------------------------- OFFICER: - --------------------------------- Kevin Bartlett, in his individual capacity 343010.01 - - 3 - 343010.6 - 1 - 343010.6 APPENDIX A To Employment Agreement A "Change in Control" shall mean the occurrence during the term of the Agreement, of any one of the following events: (1) 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, or (iii) any Person in connection with a "Non-Control Transaction" (as hereinafter defined); (2) 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 Board (a "Proxy Contest") including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or (3) The consummation of: (a) 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 where: (i) 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; (ii) 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 (iii) 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, or (iv) any Person who, immediately prior to such merger, consolidation or reorganization had Beneficial Ownership of twenty- five percent (25%) or more of the then outstanding Voting Securities or common stock of Employer, has 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; (b) A complete liquidation or dissolution of Employer; or (c) 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). 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 Persons; provided, however, that if a Change in 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. - - 18 - 342966.8 342966.8 APPENDIX B INCENTIVE COMPENSATION PLAN The Bonus Plan for Employee is set forth in a written memorandum from Stanford Kurland to Employee dated October 2, 2000. EX-10.4.4 6 0006.txt EMPLOYMENT AGREEMENT FIRST RESTATED EMPLOYMENT AGREEMENT THIS FIRST RESTATED EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of September 11, 2000 by and between Countrywide Credit Industries, Inc., a Delaware corporation ("Employer"), and Thomas H. Boone ("Officer"). W I T N E S S E T H: ------------------- WHEREAS, Officer currently holds the office of Senior Managing Director of Employer, and Senior Managing Director of Countrywide Home Loans, Inc. ("Home Loans"), a wholly-owned subsidiary of Employer; and WHEREAS, Employer desires to obtain the benefit of continued services of Officer and Officer desires to continue to render services to Employer and its subsidiaries, including Home Loans; and WHEREAS, the Board of Directors of Employer (the "Board") has determined that it is in Employer's best interest and that of its stockholders to recognize the substantial contribution that Officer has made and is expected to continue to make to Employer's business and to retain his services in the future; and WHEREAS, Employer and Officer set forth the terms and conditions of Officer's employment with Employer under an employment agreement entered into as of July 1, 2000; and WHEREAS, Employer and Officer desire to set forth the continued terms and conditions of Officer's employment with Employer 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, in accordance with the terms hereof, for a term beginning on the Effective Date (as defined in Section 8(c) hereof) and ending on February 28, 2003, unless earlier terminated in accordance with the provisions hereof. 2. Specific 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 Senior Managing Director of Employer and of Home Loans. Except as set forth in Section 5(d)(ii) hereof, Employer agrees that Officer's duties hereunder shall be the usual and customary duties of such offices or such other duties as may be designated from time to time by the Chairman of the Board, President and Chief Executive Officer (the "CEO") or the Executive Managing Director and Chief Operating Officer (the "COO") of Employer consistent with his status as an executive officer of Employer; and such duties shall be consistent with the provisions of the charter documents of Employer or 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 that he may hold. All compensation paid to Officer by Employer or any of its subsidiaries shall be aggregated in determining whether Officer has received the benefits provided for herein. 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 subsidiaries, and matters related thereto, and shall use his best efforts and abilities to promote its interests. Officer agrees that he will diligently endeavor to promote the business, affairs and interests of Employer and its subsidiaries and perform 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 one or more (direct or indirect) subsidiaries of Employer as the CEO or COO may from time to time request, subject to appropriate authorization by the subsidiary or subsidiaries 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 CEO or COO, compete, directly or indirectly, with Employer in the businesses then conducted by Employer or any of its subsidiaries. Officer may serve as a director or in any other capacity of any business enterprise, including an enterprise whose activities may involve or relate to the business of Employer, provided that such service is expressly approved by the CEO or COO. 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 CEO or COO, 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 after the Effective Date at the annual rate of $425,250 (the "Annual Rate"). In respect of the Fiscal Years ending in 2002 and 2003, the Annual Rate shall be increased by no less than 5% and no more than 10% each year. Any such increase shall be effective not later than June I of the fiscal year in which the increase is granted. (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 amount determined pursuant to the terms and conditions of the Countrywide Credit Industries, Inc. Bonus Plan for Officer that is set out in Appendix B attached hereto (the "Bonus Plan"). Employer shall pay the incentive compensation award described in this Section 4(b) for each Fiscal Year or portion thereof, as applicable, to Officer as early after the end of such Fiscal Year as practicable but in no event later than 90 days after the end of such Fiscal Year. With regard to the incentive compensation award payable with respect to the last Fiscal Year during the term of this Agreement, such award shall be payable in accordance herewith notwithstanding the expiration of the term of this Agreement. (c)_______________Stock Options. Employer shall grant to Officer stock options in respect of each of the Fiscal Years ending during the term of this Agreement for such number of shares of Employer's common stock as the Compensation Committee in its sole discretion determines, taking into account Officer's and Employer's performance in each of such Fiscal Years and the competitive practices then prevailing regarding the granting of stock options; provided, however, that the number of shares in respect of each annual stock option grant shall be no less than 20,000 and no greater than 80,000. The numbers in the preceding sentence shall be adjusted proportionately in the event Employer (A) declares a stock dividend on its common stock, (B) subdivides its outstanding common stock, (C) combines the outstanding shares of its capital stock into a smaller number of common stock, or (D) issues any shares of its capital stock in a reclassification of the common stock (including any such reclassification in connection with a consolidation or merger in which Employer is the continuing or surviving corporation). The stock options described in this Section 4(c) in respect of a Fiscal Year shall be granted at the same time as Employer grants stock options to its other senior executives in respect of such Fiscal Year (but in no event later than June 30 following the end of such Fiscal Year). All stock options granted in accordance with this Section 4(c): (i) shall be granted pursuant to the Countrywide Credit Industries, Inc. 2000 Stock Option Plan, as amended (the "2000 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 2000 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 and (iv) shall be subject to such other terms and conditions as may be determined by the Compensation Committee and set forth in the agreement evidencing the award. In the event of a merger, consolidation or reorganization in which Employer is not the surviving corporation or in which it survives as a subsidiary of another corporation or entity (a "Transaction"), and the shares of equity securities of the surviving corporation or entity or parent thereof are publicly traded on a recognized stock exchange or over the counter market, the stock options to be granted pursuant to this Section 4(c) after the date of the Transaction shall be granted in accordance herewith with respect to securities of the surviving corporation or entity or parent thereof, as applicable, with the number of shares subject to options to be granted to equal the product of (x) the amount of shares subject to the options set forth in this Section 4(c) and (y) a fraction the numerator of which is the per share fair market value of the Employer's securities and the denominator of which is the per share fair market value of the publicly-traded common or ordinary equity securities of the surviving corporation or entity or parent thereof, in each case as of the date of consummation of the Transaction, and to give effect to the intent of the parties as set forth in this Section 4(c). The stock options granted pursuant to this Section shall consist of incentive stock options to the extent permitted by law or regulation. From and after the Termination Date, the Officer shall no longer be entitled to receive additional options under this Section 4(c) other than those which were due for previously completed fiscal years. (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, executive medical examination program, executive long-term disability policy, financial planning services program 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. (e)_______________Continuation of Benefits. 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 that are no less favorable in the aggregate than those 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) which are being provided to the Officer and his dependents and beneficiaries immediately prior to Officer's Termination Date, but only to the extent that Officer is not entitled to comparable benefits from other employment. For a period of two years after the Termination Date, Employer shall provide the Officer outplacement services at its cost. (f)_______________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 CEO, COO or their designee 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 prior to the expiration of the term of this Agreement 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 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 the fifth anniversary of such notice, 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 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 Section 4(e) 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 provide during the twelve-month period following the date of the Officer's death the benefits specified in Section 4(e) hereof. If Officer's death occurs while he is receiving payments for Disability under Section 5(a)(i) above, such payments shall cease and the Beneficiary shall be entitled to the payments and benefits under this Subsection (b), which shall continue for a period of twelve months thereafter at the full rate of compensation in effect immediately prior to the Disability. This Agreement in all other respects will terminate upon the death of Officer; provided, however, that 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. (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 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 subsidiaries or permanently prohibiting him from participating in the conduct of the affairs of Employer or any of its subsidiaries. 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 subsidiaries' 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. (d)_______________Severance. (i) Except as provided in Section 5(d)(ii), if during the term of this Agreement Officer's employment shall be terminated by Employer other than for Cause, then (A) until February 28, 2003 or the second anniversary of the Termination Date, whichever is later (the "Severance Period"), Employer shall (1) continue to pay Officer his annual base salary, at the Annual Rate in effect on the Termination Date, and (2) provide the benefits specified in Section 4(e) hereof, (B) Employer shall pay Officer, within ten (10) days after the end of each Fiscal Year ending during the Severance Period, an amount equal to the greater of (x) the average of the aggregate bonus and/or incentive award, if any, paid or payable to the Officer for each of the two (2) Fiscal Years preceding the Fiscal Year in which the Officer's termination of employment occurs (or such fewer number of Fiscal Years for which the Officer was eligible to receive a bonus and/or incentive award) and (y) the bonus and/or incentive award paid for the Fiscal Year immediately preceding the date of the Change in Control (the "Bonus Rate"); provided, however, that in the event the Severance Period ends on a date prior to the end of a Fiscal Year, Employer shall also pay Officer an amount equal to the product of (1) the Bonus Rate and (2) the fraction obtained by dividing (x) the number of days elapsed since the end of the immediately preceding Fiscal Year through the end of the Severance Period by (y) 365, and (C) all stock options held by Officer on the Termination Date shall become immediately and fully exercisable, (ii)_____Change in Control. If after a "Change in Control" (as defined in Appendix A ----------------- 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, 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 three times the sum of (1) Officer's annual base salary at the Termination Date and (2) the total amount of incentive compensation paid or payable to Officer in respect of the Fiscal Year immediately preceding the Fiscal Year in which Officer's Termination Date occurs, (B) Employer shall continue to provide for three years from the Termination Date the benefits specified in Section 4(e) hereof, provided that the coverage and benefits provided during this period shall be no less favorable to Officer and his dependents than the most favorable of such coverages and benefits provided Officer and his dependents during the 90-day period immediately preceding the Change in Control or as of any date following the Change in Control but preceding the date of Officer's termination and (C) all stock options held by Officer on the Termination Date shall become immediately and fully exercisable. For purposes of this Agreement, "Good Reason" shall be deemed to occur if Employer (w) breaches this Agreement in any material respect, (x) requires that Officer be based anywhere more than fifty (50) miles from the office where Officer is located as of the date hereof, or (y) takes any other action which results in a material adverse change in Officer's duties and responsibilities other than (i) an action not taken in bad faith and which is remedied by Employer promptly after receipt of notice by Officer; (ii) a change in reporting relationships; or (iii) changes due solely to the fact that the Employer ceases to be a public company and becomes a subsidiary of another publicly-traded corporation. (iii)____Effect of Section 280G of the Internal Revenue Code. (A)______________Except as provided in subsection (B), in the event it shall be determined that any payment or distribution of any type, including accelerated vesting, to or for the benefit of the Officer, by the Employer, any "affiliate" (as defined in Rule 405 of the Securities Act of 1933, as amended) of the Employer, 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) who acquires ownership or effective control of the Employer or ownership of a substantial portion of the Employer's assets (within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder) or any "affiliate" of such "person", whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the "Payments"), is or will be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are collectively referred to as the "Excise Tax"), then the Officer shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Officer of all taxes (including any interest or penalties imposed with respect to such taxes), including any income tax, employment tax or Excise Tax imposed upon the Gross-Up Payment, the Officer retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (B)______________Notwithstanding subsection (A) or any other provision of this Agreement to the contrary, in the event that the Payments (excluding the payment provided for in subsection (A)) exceed by less than 10% or $100,000, the maximum amount of Payments which if made or provided to the Officer would not be subject to an Excise Tax, the Officer will not be entitled to a Gross-Up Payment and the Payments shall be reduced (but not below zero) to the extent necessary so that no Payment to be made or benefit to be provided to the Officer shall be subject to the Excise Tax; it being the intent of the parties that the Payments shall be reduced only if the economic detriment to the Officer (on a pre-tax basis) is less than the greater of $100,000 or 10% of the Payments. Unless the Officer shall have given prior written notice specifying a different order to the Employer to effectuate the foregoing, the Employer shall reduce or eliminate the Payments, by first reducing or eliminating the portion of the Payments which are not payable in cash and then by reducing or eliminating cash payments, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the "Determination" (as defined below). Any notice given by the Officer pursuant to the preceding sentence shall take precedence over the provisions of any other plan, arrangement or agreement governing the Officer's rights and entitlements to any benefits or compensation. (C)______________The determination of whether the Payments shall be reduced pursuant to this Agreement and the amount of such reduction, all mathematical determinations, and all determinations as to whether any of the Payments are "parachute payments" (within the meaning of Section 280G of the Code), that are required to be made under this Section, including determinations as to whether a Gross-Up Payment is required, the amount of such Gross-Up Payment and amounts relevant to the last sentence of this subsection (C), shall be made by an independent accounting firm selected by the Officer from among the five (5) largest accounting firms in the United States or any nationally recognized financial planning and benefits consulting company (the "Accounting Firm"), which shall provide its determination (the "Determination"), together with detailed supporting calculations regarding the amount of any Gross-Up Payment and any other relevant matter, both to the Employer and the Officer by no later than ten (10) days following the Termination Date, if applicable, or such earlier time as is requested by the Employer or the Officer (if the Officer reasonably believes that any of the Payments may be subject to the Excise Tax). If the Accounting Firm determines that no Excise Tax is payable by the Officer, it shall furnish the Officer and the Employer with an opinion reasonably acceptable to the Officer and the Employer that no Excise Tax is payable (including the reasons therefor) and that the Officer has substantial authority not to report any Excise Tax on his federal income tax return. If a Gross-Up Payment is determined to be payable, it shall be paid (including through withholding of taxes) to the Officer no later than the due date for payment of the Excise Tax. Any determination by the Accounting Firm shall be binding upon the Employer and the Officer, absent manifest error. As a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments not made by the Employer should have been made ("Underpayment"), or that Gross-Up Payments will have been made by the Employer which should not have been made ("Overpayment"). In either such event, the Accounting Firm shall determine the amount of the Underpayment or Overpayment that has occurred. In the case of an Underpayment, the amount of such Underpayment (together with any interest and penalties payable by the Officer as a result of such Underpayment) shall be promptly paid by the Employer to or for the benefit of the Officer. In the case of an Overpayment, the Officer shall, at the direction and expense of the Employer, take such steps as are reasonably necessary (including the filing of returns and claims for refund), follow reasonable instructions from, and procedures established by, the Employer, and otherwise reasonably cooperate with the Employer to correct such Overpayment, provided, however, that (i) the Officer shall not in any event be obligated to return to the Employer an amount greater than the net after-tax portion of the Overpayment that he has retained or has recovered as a refund from the applicable taxing authorities and (ii) if a Gross-Up Payment is determined to be payable, this provision shall be interpreted in a manner consistent with an intent to make the Officer whole, on an after-tax basis, from the application of the Excise Tax, it being understood that the correction of an Overpayment may result in the Officer repaying to the Employer an amount which is less than the Overpayment. The cost of all such determinations made pursuant to this Section shall be paid by the 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 (the "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)_______________Disputes. In the event of a dispute concerning the validity of a purported termination which is maintained in good faith, the Termination Date shall mean the date the dispute is finally resolved and Employer will continue to provide Officer with the compensation and benefits provided for under this Agreement, until the dispute is finally resolved without any obligation by Officer to repay any of such amounts to Employer, notwithstanding the final outcome of the dispute. Payments required to be made by this Section 5(g) are in addition to all other amounts due under Section 5 of this Agreement and shall not be offset against or reduce any other amounts due under Section 5 of this Agreement. Officer shall be required to render services to Employer during the period following his Termination Date but before the dispute concerning the termination is finally determined unless Employer fails to provide Officer with a reasonable opportunity to perform his duties under this Agreement during such period. 6. Reimbursement of Business Expenses. During the term of this Agreement, Employer shall reimburse Officer promptly for all expenditures (including travel, entertainment, parking, business meetings, and the monthly costs (including dues) of maintaining memberships at appropriate clubs) to the extent that such expenditures 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 (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. Employer shall not agree to any such transaction unless the successor to or assignee of the Company's business and/or assets in such transaction expressly assumes all obligations of the Employer hereunder. The obligations and duties of Officer hereby shall be personal and not assignable. (b)_______________Notice. Any notices provided for in this Agreement shall be sent to Employer at 4500 Park Granada, Calabasas, California 91302, Attention: General Counsel/Secretary, with a copy to the CEO at the same address, or to such other address as Employer may from time to time in writing designate, and to Officer at his home address as reflected in Employer's records or at such other address as he may from time to time in writing designate. 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)_______________Effective Date. This Agreement is effective as of July 1, 2000. (d)_______________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. (e)_______________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. (f)_______________California Law. This Agreement shall be construed and interpreted in accordance with the laws of the State of California. (g)_______________Attorneys' Fees in Action on Contract. If any litigation shall occur between 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. (h)_______________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, (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. (i)_______________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, or from the performance of services to any other business entity, or both. (j)_______________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. (k)_______________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. (l)_______________Arbitration. The parties acknowledge that they have previously entered into a Mutual Agreement to Arbitrate Claims (the "Arbitration Agreement"). The parties hereby incorporate herein by reference the terms of the Arbitration Agreement. Any dispute arising regarding this Agreement and/or any other matter covered by the Arbitration Agreement shall be subject to binding arbitration pursuant to the terms of the Arbitration Agreement, except as expressly provided herein. (m) Pooling Transactions. Notwithstanding anything contained in this Agreement to the contrary, in the event of a Change in Control of the Employer in a transaction which is intended to be treated as a "pooling of interests" under generally accepted accounting principles (a "Pooling Transaction"), the Board shall take such actions, if any, as are specifically recommended by an independent accounting firm retained by the Employer to the extent reasonably necessary in order to assure that the Pooling Transaction will qualify as such, including but not limited to (a) deferring the vesting, exercise, payment, settlement or lapsing of restrictions with respect to any option or award, (b) providing that the payment or settlement in respect of any option or award be made in the form of cash, shares of common stock or securities of a successor or acquirer of the Employer, or a combination of the foregoing, and (c) providing for the extension of the term of any option or award to the extent necessary to accommodate the foregoing, but not beyond the maximum term permitted for any option or award and (d) amending, deleting or making inapplicable to the Officer any provision in this Agreement or other arrangement pursuant to which he receives compensation, payments or benefits. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. COUNTRYWIDE CREDIT INDUSTRIES, INC. By: -------------------------------------------------------- Title: ----------------------------------------------------- OFFICER: - ------------------------------------ Thomas H. Boone, in his individual capacity 342966.01 - - 3 - 342966.8 - 1 - 342966.8 APPENDIX A To Employment Agreement A "Change in Control" shall mean the occurrence during the term of the Agreement, of any one of the following events: (1) 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, or (iii) any Person in connection with a "Non-Control Transaction" (as hereinafter defined); (2) 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 Board (a "Proxy Contest") including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or (3) The consummation of: (a) 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 where: (i) 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; (ii) 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 (iii) 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, or (iv) any Person who, immediately prior to such merger, consolidation or reorganization had Beneficial Ownership of twenty- five percent (25%) or more of the then outstanding Voting Securities or common stock of Employer, has 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; (b) A complete liquidation or dissolution of Employer; or (c) 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). 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 Persons; provided, however, that if a Change in 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. - - 18 - 343009.6 343009.6 APPENDIX B INCENTIVE COMPENSATION PLAN The Bonus Plan for Employee is set forth in a written memorandum from Stanford Kurland to Employee dated October 2, 2000. EX-10.4.5 7 0007.txt EMPLOYMENT AGREEMENT FIRST RESTATED EMPLOYMENT AGREEMENT THIS FIRST RESTATED EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of September 11, 2000 by and between Countrywide Credit Industries, Inc., a Delaware corporation ("Employer"), and Carlos M. Garcia ("Officer"). W I T N E S S E T H: ------------------- WHEREAS, Officer currently holds the office of Senior Managing Director of Employer, and Senior Managing Director of Countrywide Home Loans, Inc. ("Home Loans"), a wholly-owned subsidiary of Employer; and WHEREAS, Employer desires to obtain the benefit of continued services of Officer and Officer desires to continue to render services to Employer and its subsidiaries, including Home Loans; and WHEREAS, the Board of Directors of Employer (the "Board") has determined that it is in Employer's best interest and that of its stockholders to recognize the substantial contribution that Officer has made and is expected to continue to make to Employer's business and to retain his services in the future; and WHEREAS, Employer and Officer set forth the terms and conditions of Officer's employment with Employer under an employment agreement entered into as of July 1, 2000; and WHEREAS, Employer and Officer desire to set forth the continued terms and conditions of Officer's employment with Employer 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, in accordance with the terms hereof, for a term beginning on the Effective Date (as defined in Section 8(c) hereof) and ending on February 28, 2003, unless earlier terminated in accordance with the provisions hereof. 2. Specific 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 Senior Managing Director of Employer and of Home Loans. Except as set forth in Section 5(d)(ii) hereof, Employer agrees that Officer's duties hereunder shall be the usual and customary duties of such offices or such other duties as may be designated from time to time by the Chairman of the Board, President and Chief Executive Officer (the "CEO") or the Executive Managing Director and Chief Operating Officer (the "COO") of Employer consistent with his status as an executive officer of Employer; and such duties shall be consistent with the provisions of the charter documents of Employer or 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 that he may hold. All compensation paid to Officer by Employer or any of its subsidiaries shall be aggregated in determining whether Officer has received the benefits provided for herein. 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 subsidiaries, and matters related thereto, and shall use his best efforts and abilities to promote its interests. Officer agrees that he will diligently endeavor to promote the business, affairs and interests of Employer and its subsidiaries and perform 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 one or more (direct or indirect) subsidiaries of Employer as the CEO or COO may from time to time request, subject to appropriate authorization by the subsidiary or subsidiaries 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 CEO or COO, compete, directly or indirectly, with Employer in the businesses then conducted by Employer or any of its subsidiaries. Officer may serve as a director or in any other capacity of any business enterprise, including an enterprise whose activities may involve or relate to the business of Employer, provided that such service is expressly approved by the CEO or COO. 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 CEO or COO, 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 after the Effective Date at the annual rate of $436,000 (the "Annual Rate"). In respect of the Fiscal Years ending in 2002 and 2003, the Annual Rate shall be increased by no less than 5% and no more than 10% each year. Any such increase shall be effective not later than June I of the fiscal year in which the increase is granted. (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 amount determined pursuant to the terms and conditions of the Countrywide Credit Industries, Inc. Bonus Plan for Officer that is set out in Appendix B attached hereto (the "Bonus Plan"). Employer shall pay the incentive compensation award described in this Section 4(b) for each Fiscal Year or portion thereof, as applicable, to Officer as early after the end of such Fiscal Year as practicable but in no event later than 90 days after the end of such Fiscal Year. With regard to the incentive compensation award payable with respect to the last Fiscal Year during the term of this Agreement, such award shall be payable in accordance herewith notwithstanding the expiration of the term of this Agreement. (c)_______________Stock Options. Employer shall grant to Officer stock options in respect of each of the Fiscal Years ending during the term of this Agreement for such number of shares of Employer's common stock as the Compensation Committee in its sole discretion determines, taking into account Officer's and Employer's performance in each of such Fiscal Years and the competitive practices then prevailing regarding the granting of stock options; provided, however, that the number of shares in respect of each annual stock option grant shall be no less than 20,000 and no greater than 80,000. The numbers in the preceding sentence shall be adjusted proportionately in the event Employer (A) declares a stock dividend on its common stock, (B) subdivides its outstanding common stock, (C) combines the outstanding shares of its capital stock into a smaller number of common stock, or (D) issues any shares of its capital stock in a reclassification of the common stock (including any such reclassification in connection with a consolidation or merger in which Employer is the continuing or surviving corporation). The stock options described in this Section 4(c) in respect of a Fiscal Year shall be granted at the same time as Employer grants stock options to its other senior executives in respect of such Fiscal Year (but in no event later than June 30 following the end of such Fiscal Year). All stock options granted in accordance with this Section 4(c): (i) shall be granted pursuant to the Countrywide Credit Industries, Inc. 2000 Stock Option Plan, as amended (the "2000 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 2000 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 and (iv) shall be subject to such other terms and conditions as may be determined by the Compensation Committee and set forth in the agreement evidencing the award. In the event of a merger, consolidation or reorganization in which Employer is not the surviving corporation or in which it survives as a subsidiary of another corporation or entity (a "Transaction"), and the shares of equity securities of the surviving corporation or entity or parent thereof are publicly traded on a recognized stock exchange or over the counter market, the stock options to be granted pursuant to this Section 4(c) after the date of the Transaction shall be granted in accordance herewith with respect to securities of the surviving corporation or entity or parent thereof, as applicable, with the number of shares subject to options to be granted to equal the product of (x) the amount of shares subject to the options set forth in this Section 4(c) and (y) a fraction the numerator of which is the per share fair market value of the Employer's securities and the denominator of which is the per share fair market value of the publicly-traded common or ordinary equity securities of the surviving corporation or entity or parent thereof, in each case as of the date of consummation of the Transaction, and to give effect to the intent of the parties as set forth in this Section 4(c). The stock options granted pursuant to this Section shall consist of incentive stock options to the extent permitted by law or regulation. From and after the Termination Date, the Officer shall no longer be entitled to receive additional options under this Section 4(c) other than those which were due for previously completed fiscal years. (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, executive medical examination program, executive long-term disability policy, financial planning services program 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. (e)_______________Continuation of Benefits. 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 that are no less favorable in the aggregate than those 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) which were being provided to the Officer and his dependents and beneficiaries immediately prior to Officer's Termination Date, but only to the extent that Officer is not entitled to comparable benefits from other employment. For a period of two years after the Termination Date, Employer shall provide the Officer outplacement services at its cost. (f)_______________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 CEO, COO or their designee 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 prior to the expiration of the term of this Agreement 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 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 the fifth anniversary of such notice, 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 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 Section 4(e) 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 provide during the twelve-month period following the date of the Officer's death the benefits specified in Section 4(e) hereof. If Officer's death occurs while he is receiving payments for Disability under Section 5(a)(i) above, such payments shall cease and the Beneficiary shall be entitled to the payments and benefits under this Subsection (b), which shall continue for a period of twelve months thereafter at the full rate of compensation in effect immediately prior to the Disability. This Agreement in all other respects will terminate upon the death of Officer; provided, however, that 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. (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 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 subsidiaries or permanently prohibiting him from participating in the conduct of the affairs of Employer or any of its subsidiaries. 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 subsidiaries' 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. (d)_______________Severance. (i) Except as provided in Section 5(d)(ii), if during the term of this Agreement Officer's employment shall be terminated by Employer other than for Cause, then (A) until February 28, 2003 or the second anniversary of the Termination Date, whichever is later (the "Severance Period"), Employer shall (1) continue to pay Officer his annual base salary, at the Annual Rate in effect on the Termination Date, and (2) provide the benefits specified in Section 4(e) hereof, (B) Employer shall pay Officer, within ten (10) days after the end of each Fiscal Year ending during the Severance Period, an amount equal to the greater of (x) the average of the aggregate bonus and/or incentive award, if any, paid or payable to the Officer for each of the two (2) Fiscal Years preceding the Fiscal Year in which the Officer's termination of employment occurs (or such fewer number of Fiscal Years for which the Officer was eligible to receive a bonus and/or incentive award) and (y) the bonus and/or incentive award paid for the Fiscal Year immediately preceding the date of the Change in Control (the "Bonus Rate"); provided, however, that in the event the Severance Period ends on a date prior to the end of a Fiscal Year, Employer shall also pay Officer an amount equal to the product of (1) the Bonus Rate and (2) the fraction obtained by dividing (x) the number of days elapsed since the end of the immediately preceding Fiscal Year through the end of the Severance Period by (y) 365, and (C) all stock options held by Officer on the Termination Date shall become immediately and fully exercisable, (ii)_____Change in Control. If after a "Change in Control" (as defined in Appendix A ----------------- 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, 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 three times the sum of (1) Officer's annual base salary at the Termination Date and (2) the total amount of incentive compensation paid or payable to Officer in respect of the Fiscal Year immediately preceding the Fiscal Year in which Officer's Termination Date occurs, (B) Employer shall continue to provide for three years from the Termination Date the benefits specified in Section 4(e) hereof, provided that the coverage and benefits provided during this period shall be no less favorable to Officer and his dependents than the most favorable of such coverages and benefits provided Officer and his dependents during the 90-day period immediately preceding the Change in Control or as of any date following the Change in Control but preceding the date of Officer's termination and (C) all stock options held by Officer on the Termination Date shall become immediately and fully exercisable. For purposes of this Agreement, "Good Reason" shall be deemed to occur if Employer (w) breaches this Agreement in any material respect, (x) requires that Officer be based anywhere more than fifty (50) miles from the office where Officer is located as of the date hereof, or (y) takes any other action which results in a material adverse change in Officer's duties and responsibilities other than (i) an action not taken in bad faith and which is remedied by Employer promptly after receipt of notice by Officer; (ii) a change in reporting relationships; or (iii) changes due solely to the fact that the Employer ceases to be a public company and becomes a subsidiary of another publicly-traded corporation. (iii)____Effect of Section 280G of the Internal Revenue Code. (A)______________Except as provided in subsection (B), in the event it shall be determined that any payment or distribution of any type, including accelerated vesting, to or for the benefit of the Officer, by the Employer, any "affiliate" (as defined in Rule 405 of the Securities Act of 1933, as amended) of the Employer, 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) who acquires ownership or effective control of the Employer or ownership of a substantial portion of the Employer's assets (within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder) or any "affiliate" of such "person", whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the "Payments"), is or will be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are collectively referred to as the "Excise Tax"), then the Officer shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Officer of all taxes (including any interest or penalties imposed with respect to such taxes), including any income tax, employment tax or Excise Tax imposed upon the Gross-Up Payment, the Officer retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (B)______________Notwithstanding subsection (A) or any other provision of this Agreement to the contrary, in the event that the Payments (excluding the payment provided for in subsection (A)) exceed by less than 10% or $100,000, the maximum amount of Payments which if made or provided to the Officer would not be subject to an Excise Tax, the Officer will not be entitled to a Gross-Up Payment and the Payments shall be reduced (but not below zero) to the extent necessary so that no Payment to be made or benefit to be provided to the Officer shall be subject to the Excise Tax; it being the intent of the parties that the Payments shall be reduced only if the economic detriment to the Officer (on a pre-tax basis) is less than the greater of $100,000 or 10% of the Payments. Unless the Officer shall have given prior written notice specifying a different order to the Employer to effectuate the foregoing, the Employer shall reduce or eliminate the Payments, by first reducing or eliminating the portion of the Payments which are not payable in cash and then by reducing or eliminating cash payments, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the "Determination" (as defined below). Any notice given by the Officer pursuant to the preceding sentence shall take precedence over the provisions of any other plan, arrangement or agreement governing the Officer's rights and entitlements to any benefits or compensation. (C)______________The determination of whether the Payments shall be reduced pursuant to this Agreement and the amount of such reduction, all mathematical determinations, and all determinations as to whether any of the Payments are "parachute payments" (within the meaning of Section 280G of the Code), that are required to be made under this Section, including determinations as to whether a Gross-Up Payment is required, the amount of such Gross-Up Payment and amounts relevant to the last sentence of this subsection (C), shall be made by an independent accounting firm selected by the Officer from among the five (5) largest accounting firms in the United States or any nationally recognized financial planning and benefits consulting company (the "Accounting Firm"), which shall provide its determination (the "Determination"), together with detailed supporting calculations regarding the amount of any Gross-Up Payment and any other relevant matter, both to the Employer and the Officer by no later than ten (10) days following the Termination Date, if applicable, or such earlier time as is requested by the Employer or the Officer (if the Officer reasonably believes that any of the Payments may be subject to the Excise Tax). If the Accounting Firm determines that no Excise Tax is payable by the Officer, it shall furnish the Officer and the Employer with an opinion reasonably acceptable to the Officer and the Employer that no Excise Tax is payable (including the reasons therefor) and that the Officer has substantial authority not to report any Excise Tax on his federal income tax return. If a Gross-Up Payment is determined to be payable, it shall be paid (including through withholding of taxes) to the Officer no later than the due date for payment of the Excise Tax. Any determination by the Accounting Firm shall be binding upon the Employer and the Officer, absent manifest error. As a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments not made by the Employer should have been made ("Underpayment"), or that Gross-Up Payments will have been made by the Employer which should not have been made ("Overpayment"). In either such event, the Accounting Firm shall determine the amount of the Underpayment or Overpayment that has occurred. In the case of an Underpayment, the amount of such Underpayment (together with any interest and penalties payable by the Officer as a result of such Underpayment) shall be promptly paid by the Employer to or for the benefit of the Officer. In the case of an Overpayment, the Officer shall, at the direction and expense of the Employer, take such steps as are reasonably necessary (including the filing of returns and claims for refund), follow reasonable instructions from, and procedures established by, the Employer, and otherwise reasonably cooperate with the Employer to correct such Overpayment, provided, however, that (i) the Officer shall not in any event be obligated to return to the Employer an amount greater than the net after-tax portion of the Overpayment that he has retained or has recovered as a refund from the applicable taxing authorities and (ii) if a Gross-Up Payment is determined to be payable, this provision shall be interpreted in a manner consistent with an intent to make the Officer whole, on an after-tax basis, from the application of the Excise Tax, it being understood that the correction of an Overpayment may result in the Officer repaying to the Employer an amount which is less than the Overpayment. The cost of all such determinations made pursuant to this Section shall be paid by the 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 (the "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)_______________Disputes. In the event of a dispute concerning the validity of a purported termination which is maintained in good faith, the Termination Date shall mean the date the dispute is finally resolved and Employer will continue to provide Officer with the compensation and benefits provided for under this Agreement, until the dispute is finally resolved without any obligation by Officer to repay any of such amounts to Employer, notwithstanding the final outcome of the dispute. Payments required to be made by this Section 5(g) are in addition to all other amounts due under Section 5 of this Agreement and shall not be offset against or reduce any other amounts due under Section 5 of this Agreement. Officer shall be required to render services to Employer during the period following his Termination Date but before the dispute concerning the termination is finally determined unless Employer fails to provide Officer with a reasonable opportunity to perform his duties under this Agreement during such period. 6. Reimbursement of Business Expenses. During the term of this Agreement, Employer shall reimburse Officer promptly for all expenditures (including travel, entertainment, parking, business meetings, and the monthly costs (including dues) of maintaining memberships at appropriate clubs) to the extent that such expenditures 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 (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. Employer shall not agree to any such transaction unless the successor to or assignee of the Company's business and/or assets in such transaction expressly assumes all obligations of the Employer hereunder. The obligations and duties of Officer hereby shall be personal and not assignable. (b)_______________Notice. Any notices provided for in this Agreement shall be sent to Employer at 4500 Park Granada, Calabasas, California 91302, Attention: General Counsel/Secretary, with a copy to the CEO at the same address, or to such other address as Employer may from time to time in writing designate, and to Officer at his home address as reflected in Employer's records or at such other address as he may from time to time in writing designate. 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)_______________Effective Date. This Agreement is effective as of July 1, 2000. (d)_______________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. (e)_______________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. (f)_______________California Law. This Agreement shall be construed and interpreted in accordance with the laws of the State of California. (g)_______________Attorneys' Fees in Action on Contract. If any litigation shall occur between 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. (h)_______________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, (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. (i)_______________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, or from the performance of services to any other business entity, or both. (j)_______________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. (k)_______________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. (l)_______________Arbitration. The parties acknowledge that they have previously entered into a Mutual Agreement to Arbitrate Claims (the "Arbitration Agreement"). The parties hereby incorporate herein by reference the terms of the Arbitration Agreement. Any dispute arising regarding this Agreement and/or any other matter covered by the Arbitration Agreement shall be subject to binding arbitration pursuant to the terms of the Arbitration Agreement, except as expressly provided herein. (m)_______________Pooling Transactions. Notwithstanding anything contained in this Agreement to the contrary, in the event of a Change in Control of the Employer in a transaction which is intended to be treated as a "pooling of interests" under generally accepted accounting principles (a "Pooling Transaction"), the Board shall take such actions, if any, as are specifically recommended by an independent accounting firm retained by the Employer to the extent reasonably necessary in order to assure that the Pooling Transaction will qualify as such, including but not limited to (a) deferring the vesting, exercise, payment, settlement or lapsing of restrictions with respect to any option or award, (b) providing that the payment or settlement in respect of any option or award be made in the form of cash, shares of common stock or securities of a successor or acquirer of the Employer, or a combination of the foregoing, and (c) providing for the extension of the term of any option or award to the extent necessary to accommodate the foregoing, but not beyond the maximum term permitted for any option or award and (d) amending, deleting or making inapplicable to the Officer any provision in this Agreement or other arrangement pursuant to which he receives compensation, payments or benefits. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. COUNTRYWIDE CREDIT INDUSTRIES, INC. By: -------------------------------------------------------- Title: ----------------------------------------------------- OFFICER: - --------------------------------------------------------------------------- Carlos M. Garcia, in his individual capacity 343009.01 APPENDIX A To Employment Agreement A "Change in Control" shall mean the occurrence during the term of the Agreement, of any one of the following events: (1) 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, or (iii) any Person in connection with a "Non-Control Transaction" (as hereinafter defined); (2) 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 Board (a "Proxy Contest") including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or (3) The consummation of: (a) 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 where: (i) 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; (ii) 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 (iii) 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, or (iv) any Person who, immediately prior to such merger, consolidation or reorganization had Beneficial Ownership of twenty- five percent (25%) or more of the then outstanding Voting Securities or common stock of Employer, has 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; (b) A complete liquidation or dissolution of Employer; or (c) 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). 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 Persons; provided, however, that if a Change in 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. APPENDIX B INCENTIVE COMPENSATION PLAN The Bonus Plan for Employee is set forth in a written memorandum from Stanford Kurland to Employee dated October 2, 2000. EX-10.4.6 8 0008.txt EMPLOYMENT AGREEMENT FIRST RESTATED EMPLOYMENT AGREEMENT THIS FIRST RESTATED EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of September 11, 2000 by and between Countrywide Credit Industries, Inc., a Delaware corporation ("Employer"), and David Sambol ("Officer"). W I T N E S S E T H: ------------------- WHEREAS, Officer currently holds the office of Senior Managing Director of Employer, and Senior Managing Director of Countrywide Home Loans, Inc. ("Home Loans"), a wholly-owned subsidiary of Employer; and WHEREAS, Employer desires to obtain the benefit of continued services of Officer and Officer desires to continue to render services to Employer and its subsidiaries, including Home Loans; and WHEREAS, the Board of Directors of Employer (the "Board") has determined that it is in Employer's best interest and that of its stockholders to recognize the substantial contribution that Officer has made and is expected to continue to make to Employer's business and to retain his services in the future; and WHEREAS, Employer and Officer set forth the terms and conditions of Officer's employment with Employer under an employment agreement entered into as of July 1, 2000; and WHEREAS, Employer and Officer desire to set forth the continued terms and conditions of Officer's employment with Employer 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, in accordance with the terms hereof, for a term beginning on the Effective Date (as defined in Section 8(c) hereof) and ending on February 28, 2003, unless earlier terminated in accordance with the provisions hereof. 2. Specific 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 Senior Managing Director of Employer and of Home Loans. Except as set forth in Section 5(d)(ii) hereof, Employer agrees that Officer's duties hereunder shall be the usual and customary duties of such offices or such other duties as may be designated from time to time by the Chairman of the Board, President and Chief Executive Officer (the "CEO") or the Executive Managing Director and Chief Operating Officer (the "COO") of Employer consistent with his status as an executive officer of Employer; and such duties shall be consistent with the provisions of the charter documents of Employer or 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 that he may hold. All compensation paid to Officer by Employer or any of its subsidiaries shall be aggregated in determining whether Officer has received the benefits provided for herein. 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 subsidiaries, and matters related thereto, and shall use his best efforts and abilities to promote its interests. Officer agrees that he will diligently endeavor to promote the business, affairs and interests of Employer and its subsidiaries and perform 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 one or more (direct or indirect) subsidiaries of Employer as the CEO or COO may from time to time request, subject to appropriate authorization by the subsidiary or subsidiaries 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 CEO or COO, compete, directly or indirectly, with Employer in the businesses then conducted by Employer or any of its subsidiaries. Officer may serve as a director or in any other capacity of any business enterprise, including an enterprise whose activities may involve or relate to the business of Employer, provided that such service is expressly approved by the CEO or COO. 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 CEO or COO, 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 after the Effective Date at the annual rate of $550,000 (the "Annual Rate"). In respect of the Fiscal Years ending in 2002 and 2003, the Annual Rate shall be increased by no less than 5% and no more than 10% each year. Any such increase shall be effective not later than June I of the fiscal year in which the increase is granted. (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 amount determined pursuant to the terms and conditions of the Countrywide Credit Industries, Inc. Bonus Plan for Officer that is set out in Appendix B attached hereto (the "Bonus Plan"). Employer shall pay the incentive compensation award described in this Section 4(b) for each Fiscal Year or portion thereof, as applicable, to Officer as early after the end of such Fiscal Year as practicable but in no event later than 90 days after the end of such Fiscal Year. With regard to the incentive compensation award payable with respect to the last Fiscal Year during the term of this Agreement, such award shall be payable in accordance herewith notwithstanding the expiration of the term of this Agreement. (c)_______________Stock Options. Employer shall grant to Officer stock options in respect of each of the Fiscal Years ending during the term of this Agreement for such number of shares of Employer's common stock as the Compensation Committee in its sole discretion determines, taking into account Officer's and Employer's performance in each of such Fiscal Years and the competitive practices then prevailing regarding the granting of stock options; provided, however, that the number of shares in respect of each annual stock option grant shall be no less than 50,000 and no greater than 125,000. The numbers in the preceding sentence shall be adjusted proportionately in the event Employer (A) declares a stock dividend on its common stock, (B) subdivides its outstanding common stock, (C) combines the outstanding shares of its capital stock into a smaller number of common stock, or (D) issues any shares of its capital stock in a reclassification of the common stock (including any such reclassification in connection with a consolidation or merger in which Employer is the continuing or surviving corporation). The stock options described in this Section 4(c) in respect of a Fiscal Year shall be granted at the same time as Employer grants stock options to its other senior executives in respect of such Fiscal Year (but in no event later than June 30 following the end of such Fiscal Year). All stock options granted in accordance with this Section 4(c): (i) shall be granted pursuant to the Countrywide Credit Industries, Inc. 2000 Stock Option Plan, as amended (the "2000 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 2000 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 and (iv) shall be subject to such other terms and conditions as may be determined by the Compensation Committee and set forth in the agreement evidencing the award. In the event of a merger, consolidation or reorganization in which Employer is not the surviving corporation or in which it survives as a subsidiary of another corporation or entity (a "Transaction"), and the shares of equity securities of the surviving corporation or entity or parent thereof are publicly traded on a recognized stock exchange or over the counter market, the stock options to be granted pursuant to this Section 4(c) after the date of the Transaction shall be granted in accordance herewith with respect to securities of the surviving corporation or entity or parent thereof, as applicable, with the number of shares subject to options to be granted to equal the product of (x) the amount of shares subject to the options set forth in this Section 4(c) and (y) a fraction the numerator of which is the per share fair market value of the Employer's securities and the denominator of which is the per share fair market value of the publicly-traded common or ordinary equity securities of the surviving corporation or entity or parent thereof, in each case as of the date of consummation of the Transaction, and to give effect to the intent of the parties as set forth in this Section 4(c). The stock options granted pursuant to this Section shall consist of incentive stock options to the extent permitted by law or regulation. From and after the Termination Date, the Officer shall no longer be entitled to receive additional options under this Section 4(c) other than those which were due for previously completed fiscal years. (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, executive medical examination program, executive long-term disability policy, financial planning services program 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. (e)_______________Continuation of Benefits. 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 that are no less favorable in the aggregate than those 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) which were being provided to the Officer and his dependents and beneficiaries immediately prior to Officer's Termination Date, but only to the extent that Officer is not entitled to comparable benefits from other employment. For a period of two years after the Termination Date, Employer shall provide the Officer outplacement services at its cost. (f)_______________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 CEO, COO or their designee 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 prior to the expiration of the term of this Agreement 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 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 the fifth anniversary of such notice, 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 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 Section 4(e) 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 provide during the twelve-month period following the date of the Officer's death the benefits specified in Section 4(e) hereof. If Officer's death occurs while he is receiving payments for Disability under Section 5(a)(i) above, such payments shall cease and the Beneficiary shall be entitled to the payments and benefits under this Subsection (b), which shall continue for a period of twelve months thereafter at the full rate of compensation in effect immediately prior to the Disability. This Agreement in all other respects will terminate upon the death of Officer; provided, however, that 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. (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 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 subsidiaries or permanently prohibiting him from participating in the conduct of the affairs of Employer or any of its subsidiaries. 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 subsidiaries' 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. (d)_______________Severance. (i) Except as provided in Section 5(d)(ii), if during the term of this Agreement Officer's employment shall be terminated by Employer other than for Cause, then (A) until February 28, 2003 or the second anniversary of the Termination Date, whichever is later (the "Severance Period"), Employer shall (1) continue to pay Officer his annual base salary, at the Annual Rate in effect on the Termination Date, and (2) provide the benefits specified in Section 4(e) hereof, (B) Employer shall pay Officer, within ten (10) days after the end of each Fiscal Year ending during the Severance Period, an amount equal to the greater of (x) the average of the aggregate bonus and/or incentive compensation award, if any, paid or payable to the Officer in respect for each of the two (2) Fiscal Years immediately preceding the Fiscal Year in which the Officer's termination of employment occurs (or such fewer number of Fiscal Years for which the Officer was eligible to receive a bonus and/ or incentive award) and (y) the bonus and/or incentive award paid for the Fiscal Year immediately proceeding the date of the Change in Control (the "Bonus Rate"); provided, however, that in the event the Severance Period ends on a date prior to the end of a Fiscal Year, Employer shall also pay Officer an amount equal to the product of (1) the Bonus Rate and (2) the fraction obtained by dividing (x) the number of days elapsed since the end of the immediately preceding Fiscal Year through the end of the Severance Period by (y) 365, and (C) all stock options held by Officer on the Termination Date shall become immediately and fully exercisable, (ii)_____Change in Control. If after a "Change in Control" (as defined in Appendix A ----------------- 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, 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 three times the sum of (1) Officer's annual base salary at the Termination Date and (2) the total amount of incentive compensation paid or payable to Officer in respect of the Fiscal Year immediately preceding the Fiscal Year in which Officer's Termination Date occurs, (B) Employer shall continue to provide for three years from the Termination Date the benefits specified in Section 4(e) hereof, provided that the coverage and benefits provided during this period shall be no less favorable to Officer and his dependents than the most favorable of such coverages and benefits provided Officer and his dependents during the 90-day period immediately preceding the Change in Control or as of any date following the Change in Control but preceding the date of Officer's termination and (C) all stock options held by Officer on the Termination Date shall become immediately and fully exercisable. For purposes of this Agreement, "Good Reason" shall be deemed to occur if Employer (w) breaches this Agreement in any material respect, (x) requires that Officer be based anywhere more than fifty (50) miles from the office where Officer is located as of the date hereof, or (y) takes any other action which results in a material adverse change in Officer's duties and responsibilities other than (i) an action not taken in bad faith and which is remedied by Employer promptly after receipt of notice by Officer; (ii) a change in reporting relationships; or (iii) changes due solely to the fact that the Employer ceases to be a public company and becomes a subsidiary of another publicly-traded corporation. (iii)____Effect of Section 280G of the Internal Revenue Code. (A)______________Except as provided in subsection (B), in the event it shall be determined that any payment or distribution of any type, including accelerated vesting, to or for the benefit of the Officer, by the Employer, any "affiliate" (as defined in Rule 405 of the Securities Act of 1933, as amended) of the Employer, 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) who acquires ownership or effective control of the Employer or ownership of a substantial portion of the Employer's assets (within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder) or any "affiliate" of such "person", whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the "Payments"), is or will be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are collectively referred to as the "Excise Tax"), then the Officer shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Officer of all taxes (including any interest or penalties imposed with respect to such taxes), including any income tax, employment tax or Excise Tax imposed upon the Gross-Up Payment, the Officer retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (B)______________Notwithstanding subsection (A) or any other provision of this Agreement to the contrary, in the event that the Payments (excluding the payment provided for in subsection (A)) exceed by less than 10% or $100,000, the maximum amount of Payments which if made or provided to the Officer would not be subject to an Excise Tax, the Officer will not be entitled to a Gross-Up Payment and the Payments shall be reduced (but not below zero) to the extent necessary so that no Payment to be made or benefit to be provided to the Officer shall be subject to the Excise Tax; it being the intent of the parties that the Payments shall be reduced only if the economic detriment to the Officer (on a pre-tax basis) is less than the greater of $100,000 or 10% of the Payments. Unless the Officer shall have given prior written notice specifying a different order to the Employer to effectuate the foregoing, the Employer shall reduce or eliminate the Payments, by first reducing or eliminating the portion of the Payments which are not payable in cash and then by reducing or eliminating cash payments, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the "Determination" (as defined below). Any notice given by the Officer pursuant to the preceding sentence shall take precedence over the provisions of any other plan, arrangement or agreement governing the Officer's rights and entitlements to any benefits or compensation. (C)______________The determination of whether the Payments shall be reduced pursuant to this Agreement and the amount of such reduction, all mathematical determinations, and all determinations as to whether any of the Payments are "parachute payments" (within the meaning of Section 280G of the Code), that are required to be made under this Section, including determinations as to whether a Gross-Up Payment is required, the amount of such Gross-Up Payment and amounts relevant to the last sentence of this subsection (C), shall be made by an independent accounting firm selected by the Officer from among the five (5) largest accounting firms in the United States or any nationally recognized financial planning and benefits consulting company (the "Accounting Firm"), which shall provide its determination (the "Determination"), together with detailed supporting calculations regarding the amount of any Gross-Up Payment and any other relevant matter, both to the Employer and the Officer by no later than ten (10) days following the Termination Date, if applicable, or such earlier time as is requested by the Employer or the Officer (if the Officer reasonably believes that any of the Payments may be subject to the Excise Tax). If the Accounting Firm determines that no Excise Tax is payable by the Officer, it shall furnish the Officer and the Employer with an opinion reasonably acceptable to the Officer and the Employer that no Excise Tax is payable (including the reasons therefor) and that the Officer has substantial authority not to report any Excise Tax on his federal income tax return. If a Gross-Up Payment is determined to be payable, it shall be paid (including through withholding of taxes) to the Officer no later than the due date for payment of the Excise Tax. Any determination by the Accounting Firm shall be binding upon the Employer and the Officer, absent manifest error. As a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments not made by the Employer should have been made ("Underpayment"), or that Gross-Up Payments will have been made by the Employer which should not have been made ("Overpayment"). In either such event, the Accounting Firm shall determine the amount of the Underpayment or Overpayment that has occurred. In the case of an Underpayment, the amount of such Underpayment (together with any interest and penalties payable by the Officer as a result of such Underpayment) shall be promptly paid by the Employer to or for the benefit of the Officer. In the case of an Overpayment, the Officer shall, at the direction and expense of the Employer, take such steps as are reasonably necessary (including the filing of returns and claims for refund), follow reasonable instructions from, and procedures established by, the Employer, and otherwise reasonably cooperate with the Employer to correct such Overpayment, provided, however, that (i) the Officer shall not in any event be obligated to return to the Employer an amount greater than the net after-tax portion of the Overpayment that he has retained or has recovered as a refund from the applicable taxing authorities and (ii) if a Gross-Up Payment is determined to be payable, this provision shall be interpreted in a manner consistent with an intent to make the Officer whole, on an after-tax basis, from the application of the Excise Tax, it being understood that the correction of an Overpayment may result in the Officer repaying to the Employer an amount which is less than the Overpayment. The cost of all such determinations made pursuant to this Section shall be paid by the 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 (the "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)_______________Disputes. In the event of a dispute concerning the validity of a purported termination which is maintained in good faith, the Termination Date shall mean the date the dispute is finally resolved and Employer will continue to provide Officer with the compensation and benefits provided for under this Agreement, until the dispute is finally resolved without any obligation by Officer to repay any of such amounts to Employer, notwithstanding the final outcome of the dispute. Payments required to be made by this Section 5(g) are in addition to all other amounts due under Section 5 of this Agreement and shall not be offset against or reduce any other amounts due under Section 5 of this Agreement. Officer shall be required to render services to Employer during the period following his Termination Date but before the dispute concerning the termination is finally determined unless Employer fails to provide Officer with a reasonable opportunity to perform his duties under this Agreement during such period. 6. Reimbursement of Business Expenses. During the term of this Agreement, Employer shall reimburse Officer promptly for all expenditures (including travel, entertainment, parking, business meetings, and the monthly costs (including dues) of maintaining memberships at appropriate clubs) to the extent that such expenditures 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 (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. Employer shall not agree to any such transaction unless the successor to or assignee of the Company's business and/or assets in such transaction expressly assumes all obligations of the Employer hereunder. The obligations and duties of Officer hereby shall be personal and not assignable. (b)_______________Notice. Any notices provided for in this Agreement shall be sent to Employer at 4500 Park Granada, Calabasas, California 91302, Attention: General Counsel/Secretary, with a copy to the CEO at the same address, or to such other address as Employer may from time to time in writing designate, and to Officer at his home address as reflected in Employer's records or at such other address as he may from time to time in writing designate. 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)_______________Effective Date. This Agreement is effective as of July 1, 2000. (d)_______________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. (e)_______________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. (f)_______________California Law. This Agreement shall be construed and interpreted in accordance with the laws of the State of California. (g)_______________Attorneys' Fees in Action on Contract. If any litigation shall occur between 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. (h)_______________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, (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. (i)_______________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, or from the performance of services to any other business entity, or both. (j)_______________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. (k)_______________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. (l)_______________Arbitration. The parties acknowledge that they have previously entered into a Mutual Agreement to Arbitrate Claims (the "Arbitration Agreement"). The parties hereby incorporate herein by reference the terms of the Arbitration Agreement. Any dispute arising regarding this Agreement and/or any other matter covered by the Arbitration Agreement shall be subject to binding arbitration pursuant to the terms of the Arbitration Agreement, except as expressly provided herein. (m)_______________Pooling Transactions. Notwithstanding anything contained in this Agreement to the contrary, in the event of a Change in Control of the Employer in a transaction which is intended to be treated as a "pooling of interests" under generally accepted accounting principles (a "Pooling Transaction"), the Board shall take such actions, if any, as are specifically recommended by an independent accounting firm retained by the Employer to the extent reasonably necessary in order to assure that the Pooling Transaction will qualify as such, including but not limited to (a) deferring the vesting, exercise, payment, settlement or lapsing of restrictions with respect to any option or award, (b) providing that the payment or settlement in respect of any option or award be made in the form of cash, shares of common stock or securities of a successor or acquirer of the Employer, or a combination of the foregoing, and (c) providing for the extension of the term of any option or award to the extent necessary to accommodate the foregoing, but not beyond the maximum term permitted for any option or award and (d) amending, deleting or making inapplicable to the Officer any provision in this Agreement or other arrangement pursuant to which he receives compensation, payments or benefits. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. COUNTRYWIDE CREDIT INDUSTRIES, INC. By: -------------------------------------------------------- Title: ----------------------------------------------------- OFFICER: --------------------------------- David Sambol, in his individual capacity 343008.03 APPENDIX A To Employment Agreement A "Change in Control" shall mean the occurrence during the term of the Agreement, of any one of the following events: (1) 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, or (iii) any Person in connection with a "Non-Control Transaction" (as hereinafter defined); (2) 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 Board (a "Proxy Contest") including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or (3) The consummation of: (a) 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 where: (i) 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; (ii) 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 (iii) 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, or (iv) any Person who, immediately prior to such merger, consolidation or reorganization had Beneficial Ownership of twenty- five percent (25%) or more of the then outstanding Voting Securities or common stock of Employer, has 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; (b) A complete liquidation or dissolution of Employer; or (c) 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). 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 Persons; provided, however, that if a Change in 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. APPENDIX B INCENTIVE COMPENSATION PLAN The Bonus Plan for Employee is set forth in a written memorandum from Stanford Kurland to Employee dated October 2, 2000. EX-10.4.7 9 0009.txt EMPLOYMENT AGREEMENT FIRST RESTATED EMPLOYMENT AGREEMENT THIS FIRST RESTATED EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of September 11, 2000 by and between Countrywide Credit Industries, Inc., a Delaware corporation ("Employer"), and Sandor E. Samuels ("Officer"). WITNESSETH: WHEREAS, Officer currently holds the office of Managing Director of Employer, and Managing Director of Countrywide Home Loans, Inc. ("Home Loans"), a wholly-owned subsidiary of Employer; and WHEREAS, Employer desires to obtain the benefit of continued services of Officer and Officer desires to continue to render services to Employer and its subsidiaries, including Home Loans; and WHEREAS, the Board of Directors of Employer (the "Board") has determined that it is in Employer's best interest and that of its stockholders to recognize the substantial contribution that Officer has made and is expected to continue to make to the Employer's business and to retain his services in the future; and WHEREAS, Employer and Officer set forth the terms and conditions of Officer's employment with Employer under an employment agreement entered into as of July 1, 2000; and WHEREAS, Employer and Officer desire to set forth the continued terms and conditions of Officer's employment with Employer 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, in accordance with ---- the terms hereof, for a term beginning on the Effective Date (as defined in Section 8(c) hereof) and ending on February 28, 2003, unless earlier terminated in accordance with the provisions hereof 2. Specific 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 Managing Director and General Counsel of Employer and of Home Loans. Except as set forth in Section 5(d)(ii) hereof, Employer agrees that Officer's duties hereunder shall be the usual and customary duties of such offices or such other duties as may be designated from time to time by the Chairman of the Board, President and Chief Executive Officer (the "CEO") or the Executive Managing Director and Chief Operating Officer (the "COO") of Employer consistent with his status as an executive officer of Employer; and such duties shall be consistent with the provisions of the charter documents of Employer or 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 that he may hold. All compensation paid to Officer by Employer or any of its subsidiaries shall be aggregated in determining whether Officer has received the benefits provided for herein. 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 subsidiaries, and matters related thereto, and shall use his best efforts and abilities to promote its interests. Officer agrees that he will diligently endeavor to promote the business, affairs and interests of Employer and its subsidiaries and perform 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 one or more (direct or indirect) subsidiaries of Employer as the CEO or COO may from time to time request, subject to appropriate authorization by the subsidiary or subsidiaries 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 CEO or COO, compete, directly or indirectly, with Employer in the businesses then conducted by Employer or any of its subsidiaries. Officer may serve as a director or in any other capacity of any business enterprise, including an enterprise whose activities may involve or relate to the business of Employer, provided that such service is expressly approved by the CEO or COO. 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 CEO or COO, 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 after the Effective Date at the annual rate of $350,000 (the "Annual Rate"). In respect of the Fiscal Years ending in 2002 and 2003, the Annual Rate shall be increased by no less than 5% and no more than 10% each year. Any such increase shall be effective not later than June 1 of the fiscal year in which the increase is granted. (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 amount determined pursuant to the terms and conditions of the Countrywide Credit Industries, Inc. Plan for Officer that is set out in Appendix B attached hereto (the "Bonus Plan"). Employer shall pay the incentive compensation award described in this Section 4(b) for each Fiscal Year or portion thereof, as applicable, to Officer as early after the end of such Fiscal Year as practicable but in no event later than 90 days after the end of such Fiscal Year. With regard to the incentive compensation award payable with respect to the last Fiscal Year during the term of this Agreement, such award shall be payable in accordance herewith notwithstanding the expiration of the term of this Agreement. (c) Stock Options. Employer shall grant to Officer stock options in respect of each of the Fiscal Years ending during the term of this Agreement for such number of shares of Employer's common stock as the Compensation Committee in its sole discretion determines, taking into account Officer's and Employer's performance in each of such Fiscal Years and the competitive practices then prevailing regarding the granting of stock options; provided, however, that the number of shares in respect of each annual stock option grant shall be no less than 20,000 and no greater than 80,000. The numbers in the preceding sentence shall be adjusted proportionately in the event Employer (A) declares a stock dividend on its common stock, (B) subdivides its outstanding common stock, (C) combines the outstanding shares of its capital stock into a smaller number of common stock, or (D) issues any shares of its capital stock in a reclassification of the common stock (including any such reclassification in connection with a consolidation or merger in which Employer is the continuing or surviving corporation). The stock options described in this Section 4(c) in respect of a Fiscal Year shall be granted at the same time as Employer grants stock options to its other senior executives in respect of such Fiscal Year (but in no event later than June 30 following the end of such Fiscal Year). All stock options granted in accordance with this Section 4(c): (i) shall be granted pursuant to the Countrywide Credit Industries, Inc. 2000 Stock Option Plan, as amended (the "2000 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 2000 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 and (iv) shall be subject to such other terms and conditions as may be determined by the Compensation Committee and set forth in the agreement evidencing the award. In the event of a merger, consolidation or reorganization in which Employer is not the surviving corporation or in which it survives as a subsidiary of another corporation or entity (a "Transaction"), and the shares of equity securities of the surviving corporation or entity or parent thereof are publicly traded on a recognized stock exchange or over the counter market, the stock options to be granted pursuant to this Section 4(c) after the date of the Transaction shall be granted in accordance herewith with respect to securities of the surviving corporation or entity or parent thereof, as applicable, with the number of shares subject to options to be granted to equal the product of (x) the amount of shares subject to the options set forth in this Section 4(c) and (y) a fraction the numerator of which is the per share fair market value of the Employer's securities and the denominator of which is the per share fair market value of the publicly-traded common or ordinary equity securities of the surviving corporation or entity or parent thereof, in each case as of the date of consummation of the Transaction, and to give effect to the intent of the parties as set forth in this Section 4(c). The stock options granted pursuant to this Section shall consist of incentive stock options to the extent permitted by law or regulation. From and after the Termination Date, the Officer shall no longer be entitled to receive additional options under this Section 4(c) other than those which were due for previously completed fiscal years. (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, executive medical examination program, executive long-term disability policy, financial planning services program 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. (e) Continuation of Benefits. 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 that are no less favorable in the aggregate than those 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) which were being provided to the Officer and his dependents and beneficiaries immediately prior to Officer's Termination Date, but only to the extent that Officer is not entitled to comparable benefits from other employment. For a period of two years after the Termination Date, Employer shall provide the Officer outplacement services at its cost. (f) 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 CEO, COO or their designee 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 prior to the expiration of the term of this Agreement 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 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 the fifth anniversary of such notice, whichever first occurs (the "Disability Payment Period"), (1) 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 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 (h) to provide during the Disability Payment Period the benefits specified in Section 4(e) 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 provide during the twelve-month period following the date of the Officer's death the benefits specified in Section 4(e) hereof. If Officer's death occurs while he is receiving payments for Disability under Section 5(a)(1) above, such payments shall cease and the Beneficiary shall be entitled to the payments and benefits under this Subsection (b), which shall continue for a period of twelve months thereafter at the full rate of compensation in effect immediately prior to the Disability. This Agreement in all other respects will terminate upon the death of Officer; provided, however, that 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. (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 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 subsidiaries or permanently prohibiting him from participating in the conduct of the affairs of Employer or any of its subsidiaries. If Officer shall be convicted of a felony or shall be removed from office and/or temporarily prohibited from participating in the conduct of Employees or any of its subsidiaries' 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. (d) Severance. (i) Except as provided in Section 5(d)(ii), if during the term of this Agreement Officer's employment shall be terminated by Employer other than for Cause, then (A) until February 28, 2003 or the second anniversary of the Termination Date, whichever is later (the "Severance Period"), Employer shall (1) continue to pay Officer his annual base salary, at the Annual Rate in effect on the Termination Date, and (2) provide the benefits specified in Section 4(e) hereof, (B) Employer shall pay Officer within ten (10) days after the end of each Fiscal Year ending during the Severance Period, an amount equal to the greater of (x) the average of the aggregate bonus and/or incentive award, if any, paid or payable to the Officer for each of the for each of the two (2) Fiscal Years preceding the Fiscal Year in which the Officer's termination of employment occurs (or such fewer number of Fiscal Years for which the Officer was eligible to receive bonus and/or incentive award) and (y) the bonus and/or incentive award paid for the Fiscal Year immediately preceding the date of the Change in Control (the "Bonus Rate"); provided, however, that in the event the Severance Period ends on a date prior to the end of a Fiscal Year, Employer shall also pay Officer an amount equal to the product of (1) the Bonus Rate and (2) the fraction obtained by dividing (x) the number of days elapsed since the end of the immediately preceding Fiscal Year through the end of the Severance Period by (y) 365, and (C) all stock options held by Officer on the Termination Date shall become immediately and fully exercisable. (ii) Change in Control. If after a "Change in Control" (as defined in Appendix A 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, 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 three times the sum of (1) Officer's annual base salary at the Termination Date and (2) the total amount of incentive compensation paid or payable to Officer in respect of the Fiscal Year immediately preceding the Fiscal Year in which Officer's Termination Date occurs, (B) Employer shall continue to provide for three years from the Termination Date the benefits specified in Section 4(e) hereof, provided that the coverage and benefits provided during this period shall be no less favorable to Officer and his dependents than the most favorable of such coverages and benefits provided Officer and his dependents during the 90-day period immediately preceding the Change in Control or as of any date following the Change in Control but preceding the date of Officer's termination and (C) all stock options held by Officer on the Termination Date shall become immediately and fully exercisable, For purposes of this Agreement, "Good Reason" shall be deemed to occur if Employer (w) breaches this Agreement in any material respect, (x) requires that Officer be based anywhere more than fifty (50) miles from the office where Officer is located as of the date hereof, or (y) takes any other action which results in a material adverse change in Officer's duties and responsibilities other than (i) an action not taken in bad faith and which is remedied by Employer promptly after receipt of notice by Officer, (ii) a change in reporting relationships; or (iii) changes due solely to the fact that the Employer ceases to be a public company and becomes a subsidiary of another publicly-traded corporation. (iii) Effect of Section 280G of the Internal Revenue Code. --------------------------------------------------- (A) Except as provided in subsection (B), in the event it shall be determined that any payment or distribution of any type, including accelerated vesting, to or for the benefit of the Officer, by the Employer, any "affiliate" (as defined in Rule 405 of the Securities Act of 1933, as amended) of the Employer, 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) who acquires ownership or effective control of the Employer or ownership of a substantial portion of the Employer's assets (within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder) or any "affiliate" of such "person", whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the "Payments"), is or will be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are collectively referred to as the "Excise Tax"), then the Officer shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Officer of all taxes (including any interest or penalties imposed with respect to such taxes), including any income tax, employment tax or Excise Tax imposed upon the Gross-Up Payment, the Officer retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (B)______________Notwithstanding subsection (A) or any other provision of this Agreement to the contrary, in the event that the Payments (excluding the payment provided for in subsection (A)) exceed by less than 10% or $100,000, the maximum amount of Payments which if made or provided to the Officer would not be subject to an Excise Tax, the Officer will not be entitled to a Gross-Up Payment and the Payments shall be reduced (but not below zero) to the extent necessary so that no Payment to be made or benefit to be provided to the Officer shall be subject to the Excise Tax; it being the intent of the parties that the Payments shall be reduced only if the economic detriment to the Officer (on a pre-tax basis) is less than the greater of $100,000 or 10% of the Payments. Unless the Officer shall have given prior written notice specifying a different order to the Employer to effectuate the foregoing, the Employer shall reduce or eliminate the Payments, by first reducing or eliminating the portion of the Payments which are not payable in cash and then by reducing or eliminating cash payments, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the "Determination" (as defined below). Any notice given by the Officer pursuant to the preceding sentence shall take precedence over the provisions of any other plan, arrangement or agreement governing the Officer's rights and entitlements to any benefits or compensation. (C)______________The determination of whether the Payments shall be reduced pursuant to this Agreement and the amount of such reduction, all mathematical determinations, and all determinations as to whether any of the Payments are "parachute payments" (within the meaning of Section 280G of the Code), that are required to be made under this Section, including determinations as to whether a Gross-Up Payment is required, the amount of such Gross-Up Payment and amounts relevant to the last sentence of this subsection (C), shall be made by an independent accounting firm selected by the Officer from among the five (5) largest accounting firms in the United States or any nationally recognized financial planning and benefits consulting company (the "Accounting Firm"), which shall provide its determination (the "Determination"), together with detailed supporting calculations regarding the amount of any Gross-Up Payment and any other relevant matter, both to the Employer and the Officer by no later than ten (10) days following the Termination Date, if applicable, or such earlier time as is requested by the Employer or the Officer (if the Officer reasonably believes that any of the Payments may be subject to the Excise Tax). If the Accounting Firm determines that no Excise Tax is payable by the Officer, it shall furnish the Officer and the Employer with an opinion reasonably acceptable to the Officer and the Employer that no Excise Tax is payable (including the reasons therefor) and that the Officer has substantial authority not to report any Excise Tax on his federal income tax return. If a Gross-Up Payment is determined to be payable, it shall be paid (including through withholding of taxes) to the Officer no later than the due date for payment of the Excise Tax. Any determination by the Accounting Firm shall be binding upon the Employer and the Officer, absent manifest error. As a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments not made by the Employer should have been made ("Underpayment"), or that Gross-Up Payments will have been made by the Employer which should not have been made ("Overpayment"). In either such event, the Accounting Firm shall determine the amount of the Underpayment or Overpayment that has occurred. In the case of an Underpayment, the amount of such Underpayment (together with any interest and penalties payable by the Officer as a result of such Underpayment) shall be promptly paid by the Employer to or for the benefit of the Officer. In the case of an Overpayment, the Officer shall, at the direction and expense of the Employer, take such steps as are reasonably necessary (including the filing of returns and claims for refund), follow reasonable instructions from, and procedures established by, the Employer, and otherwise reasonably cooperate with the Employer to correct such Overpayment, provided, however, that (i) the Officer shall not in any event be obligated to return to the Employer an amount greater than the net after-tax portion of the Overpayment that he has retained or has recovered as a refund from the applicable taxing authorities and (ii) if a Gross-Up Payment is determined to be payable, this provision shall be interpreted in a manner consistent with an intent to make the Officer whole, on an after-tax basis, from the application of the Excise Tax, it being understood that the correction of an Overpayment may result in the Officer repaying to the Employer an amount which is less than the Overpayment. The cost of all such determinations made pursuant to this Section shall be paid by the 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 (the "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) Disputes. In the event of a dispute concerning the validity of a purported termination which is maintained in good faith, the Termination Date shall mean the date the dispute is finally resolved and Employer will continue to provide Officer with the compensation and benefits provided for under this Agreement, until the dispute is finally resolved without any obligation by Officer to repay any of such amounts to Employer, notwithstanding the final outcome of the dispute. Payments required to be made by this Section 5(g) are in addition to all other amounts due under Section 5 of this Agreement and shall not be offset against or reduce any other amounts due under Section 5 of this Agreement. Officer shall be required to render services to Employer during the period following his Termination Date but before the dispute concerning the termination is finally determined unless Employer fails to provide Officer with a reasonable opportunity to perform his duties under this Agreement during such period. 6. Reimbursement. of Business Expenses. During the term of this Agreement, Employer shall reimburse ----------------------------------- Officer promptly for all expenditures (including travel, entertainment, parking, business meetings, and the monthly costs (including dues) of maintaining memberships at appropriate clubs) to the extent that such expenditures 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 (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 the Employer or similar transaction. Employer shall not agree to any such transaction unless the successor to or assignee of the Company's business and/or assets in such transaction expressly assumes all obligations of the Employer hereunder. 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 4500 Park Granada, Calabasas, California 91302, Attention: General Counsel/Secretary, with a copy to the CEO at the same address, or to such other address as Employer may from time to time in writing designate, and to Officer at his home address as reflected in Employer's records or at such other address as he may from time to time in writing designate, 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) Effective Date. This Agreement is effective as of July 1, 2000. -------------- (d) 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. (e) 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. (f) California Law. This Agreement shall be construed and interpreted in accordance with the -------------- laws of the State of California. (g) 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. (h) 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, (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. (i) 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, or from the performance of services to any other business entity, or both. (j) 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. (k) 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. (1) Arbitration. The parties acknowledge that they have previously entered into a Mutual Agreement to Arbitrate Claims (the "Arbitration Agreement"). The parties hereby incorporate herein by reference the terms of the Arbitration Agreement. Any dispute arising regarding this Agreement and/or any other matter covered by the Arbitration Agreement shall be subject to binding arbitration pursuant to the terms of the Arbitration Agreement, except as expressly provided herein. (m) Pooling Transactions. Notwithstanding anything contained in this Agreement to the contrary, in the event of a Change in Control of the Employer in a transaction which is intended to be treated as a "pooling of interests" under generally accepted accounting principles (a "Pooling Transaction"), the Board shall take such actions, if any, as are specifically recommended by an independent accounting firm retained by the Employer to the extent reasonably necessary in order to assure that the Pooling Transaction will qualify as such, including but not limited to (a) deferring the vesting, exercise, payment, settlement or lapsing of restrictions with respect to any option or award, (b) providing that the payment or settlement in respect of any option or award be made in the form of cash, shares of common stock or securities of a successor or acquirer of the Employer, or a combination of the foregoing, and (c) providing for the extension of the term of any option or award to the extent necessary to accommodate the foregoing, but not beyond the maximum term permitted for any option or award and (d) amending, deleting or making inapplicable to the Officer any provision in this Agreement or other arrangement pursuant to which he receives compensation, payments or benefits. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. COUNTRYWIDE CREDIT INDUSTRIES, INC. By: ------------------------------------------------------------ Title: --------------------------------------------------------- OFFICER: Sandor E. Samuels, in his individual capacity APPENDIX A To Employment Agreement A "Change in Control" shall mean the occurrence during the term of the Agreement, of any one of the following events: (1) 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 l3d-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, or (iii) any Person in connection with a "Non-Control Transaction" (as hereinafter defined); (2) 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 Board (a "Proxy Contest") including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or (3) The consummation of: (a) 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 where: (i) 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; (ii) 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 (iii) 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, or (iv) any Person who, immediately prior to such merger, consolidation or reorganization had Beneficial Ownership of twenty five percent (25%) or more of the then outstanding Voting Securities or common stock of Employer, has 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; (b) A complete liquidation or dissolution of Employer; or (c) 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). 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 Persons; provided, however, that if a Change in 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. APPENDIX B INCENTIVE COMPENSATION PLAN The Bonus Plan for Employee is set forth in a written memorandum from Stanford Kurland to Employee dated October 2, 2000. EX-10.4.8 10 0010.txt BONUS PLAN FISCAL YEAR 2001 BONUS PLAN FOR CERTAIN EXECUTIVE OFFICERS Messrs. Gregory Lumsden and Marshall Gates participate in a bonus plan which is set forth in a written memorandum from Stanford Kurland to each of Messrs. Lumsden and Gates dated October 2, 2000. EX-10.8.8 11 0011.txt REVOLVING CREDIT AGREEMENT SHORT TERM FACILITY EXTENSION AMENDMENT (September, 2000) THIS SHORT TERM FACILITY EXTENSION AMENDMENT (the "Amendment") is made and dated as of the 20th day of September, 2000 by and among COUNTRYWIDE HOME LOANS, INC. (the "Company"), COUNTRYWIDE CREDIT INDUSTRIES, INC. (the "Parent"), the undersigned financial institutions constituting the Short Term Lenders under (and as that term and capitalized terms not otherwise defined herein are defined in) the Revolving Credit Agreement described below, and BANKERS TRUST COMPANY, as Credit Agent (in such capacity, the "Credit Agent"). RECITALS A. Pursuant to that certain Revolving Credit Agreement dated as of September 24, 1997 by and among the Company, the Lenders party thereto, including, without limitation, the Short Term Lenders, the Credit Agent and others (as amended, extended and replaced from time to time, the "Revolving Credit Agreement"), the Short Term Lenders agreed to extend credit to the Company in the form of a 364-day revolving credit facility. B. The Company has requested that the Short Term Lenders currently party to the Revolving Credit Agreement agree to extend the Short Term Facility Maturity Date and certain of such Short Term Lenders have agreed to do so on the terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the above Recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows: AGREEMENT 1. Extension of Current Short Term Facility Maturity Date. To reflect the agreement of the Short Term Lenders to extend the current Short Term Facility Maturity Date, effective as of the Amendment Effective Date (as defined in Paragraph 9 below), the definition of "Short Term Facility Maturity Date" set forth in the Glossary attached to the Revolving Credit Agreement is hereby amended to delete the date "September 20, 2000" appearing therein and to replace the same with the date "September 19, 2001". 2. Permitted Conversion of Short Term Facility. To reflect the agreement of the parties to permit the Company to convert amounts outstanding under the revolving credit facility made available by the Short Term Lender under Paragraph 1(b) of the Revolving Credit Agreement to a term loan on the Short Term Facility Maturity Date, effective as of Amendment Effective Date: (a) Paragraph 3(a) of the Revolving Credit Agreement is hereby amended to insert the phrase "and, in the case of the Short Term Loans, the provisions of Paragraph 3(c) below" immediately following the phrase "Subject to the provisions Paragraph 3(b) below" in the first and second lines thereof. (b) A new Paragraph 3(c) is hereby added to the Revolving Credit Agreement to read in its entirety as follows: "3(c) Short Term Facility Term-Out Provisions. --------------------------------------- (1) Notwithstanding anything contained in Paragraph 3(a) above, upon written request for such final extension given by the Company to the Credit Agent no later than thirty (30) days prior to the then current Short Term Facility Maturity Date, the Short Term Lenders shall, subject to the conditions precedent set forth below, agree to extend the then current Short Term Facility Maturity Date for one final time to the date which is the 364th day following the then current Short Term Facility Maturity Date (the "Final Short Term Facility Maturity Date") and to permit the Company to convert the aggregate principal amount of Short Term Loans outstanding on the then current Short Term Facility Maturity Date (or such portion thereof as the Company may designate) into a non-revolving, non-amortizing term loan (the "Short Term Facility Term-Out Loan"). (2) As conditions precedent to the right of the Company to convert Short Term Loans outstanding into the Short Term Facility Term-Out Loan on the then current Short Term Facility Maturity Date, on and as of the then current Short Term Facility Maturity Date: (i) The representations and warranties of the Company and the Parent contained in the Credit Documents shall be accurate and complete in all respects; (ii) There shall not have occurred and be continuing a Potential Default or an Event of Default; and (iii) Following the conversion of outstanding Short Term Loans into the Short Term Facility Term-Out Loan, the aggregate amount of Loans outstanding shall not exceed the applicable limitations of Paragraphs 1(a), 1(c), 1(d) and 1(e) above. (3) The Short Term Facility Term-Out Loan (and portions thereof outstanding) shall be considered "Direct Loans" for all purposes of this Agreement, including, without limitation, for purposes of computation of interest on the outstanding principal balance thereof as provided in Paragraph 4(a) below. (4) The outstanding principal balance of the Short Term Facility Term-Out Loan shall be payable in full on the Final Short Term Facility Maturity Date." (c) The definition of the term "Loan" set forth in the Glossary is hereby amended to insert the phrase "the Short Term Facility Term-Out Loan," immediately following the phrase "a Short Term Loan," in line 1 thereof. (d) New definitions of "Final Short Term Facility Maturity Date" and "Short Term Facility Term-Out Loan" are hereby added to the Glossary in correct alphabetical order to read in their entirety as follows: "'Final Short Term Facility Maturity Date' shall have the meaning given such term in Paragraph 3(c) of the Agreement." "'Short Term Facility Term-Out Loan' shall have the meaning given such term in Paragraph 3(c) of the Agreement." 3. Extension of Short Term Facility Fee Letter. To reflect the agreement of the Company to continue to pay to the Short Term Lenders a facility fee during the period from the current Short Term Facility Maturity Date to the Short Term Facility Maturity Date as extended hereunder, the Company hereby reaffirms the Short Term Facility Fee Letter dated as of September 24, 1997 and agrees that the "Short Term Facility Maturity Date" referred to therein shall mean the Short Term Facility Maturity Date as extended hereunder. 4. Revised Commitment Schedule. To reflect certain changes in the financial institutions which will be participating in the Short Term Facility as extended hereby and other modifications in the Short Term Facility Credit Limit, the Short Term Facility Percentage Shares and the Maximum Short Term Facility Commitments of the Short Term Lenders participating in the Short Term Facility as extended hereby, the Commitment Schedule is hereby revised as of the Amendment Effective Date consistent with Amendment Schedule I attached hereto (the "Revised Commitment Schedule"). 5. Front-End Fee. As an inducement to the financial institutions agreeing to act as Short Term Lenders from the current Short Term Facility Maturity Date to the Short Term Facility Maturity Date as extended hereby and as the same may be extended to the Final Short Term Facility Maturity Date as provided in Paragraph 2 above, the Company hereby agrees to pay to each Short Term Lender executing this Amendment a one time, non-refundable fee (the "Front-End Fee") as agreed among the Company and the Short Term Lenders. 6. Pricing Modification. To reflect the agreement of the Company to increase the -------------------- pricing applicable to Short Term Loans: (a) Subparagraph (b) of the definition of "Pricing Spread" appearing in the Glossary is hereby amended to read in its entirety as follows: "(b) With respect to each Eurodollar Loan which is a Short Term Loan and each Short Term Swing Loan, the Pricing Spread shall be: (1) on each day on which the aggregate dollar amount of Short Term Loans and Short Term Swing Loans outstanding does not exceed twenty five percent (25%) of the Short Term Facility Credit Limit on such day, 0.295%. and (2) on each day on which the aggregate dollar amount of Short Term Loans and Short Term Swing Loans outstanding exceeds twenty five percent (25%) of the Short Term Facility Credit Limit on such day, 0.42%." (b) The definition of "Alternate Base Rate" appearing in the Glossary is hereby amended to read in its entirety as follows: "'Alternate Base Rate' shall mean on any date the greater of: (a) the Federal Funds Effective Rate plus one half of one percent (0.50%), and (b) the Corporate Base Rate; provided, however, that with respect to each Alternate Base Rate Loan which is a Short Term Loan and each Short Term Swing Loan, the `Alternate Base Rate' in effect on each day on which the aggregate dollar amount of Short Term Loans and Short Term Swing Loans outstanding exceeds twenty five percent (25%) of the Aggregate Credit Limit on such date shall be increased by one eighth of one percent (0.125%)." 7. Reaffirmation of Loan Documents. The Company hereby affirms and agrees that (a) the execution and delivery by the Company of and the performance of its obligations under this Amendment shall not in any way amend, impair, invalidate or otherwise affect any of the obligations of the Company or the rights of the Credit Agent, the Lenders or any other Person under the Revolving Credit Agreement or any other Credit Document, (b) the term "Obligations" as used in the Credit Documents includes, without limitation, the Obligations of the Company under the Revolving Credit Agreement as amended hereby, and (c) the Revolving Credit Agreement as amended hereby and the other Credit Documents remain in full force and effect. 8. Reaffirmation of Guaranty and Subordination Agreement. The Parent hereby and affirms and agrees that (a) the execution and delivery by the Company and the performance of its obligations under this Amendment shall not in any manner or to any extent affect any of the obligations of the Parent or the rights of the Credit Agent, the Lenders or any other Person under the Guaranty, the Subordination Agreement or any other document or instrument made or given by the Parent in connection therewith, (b) the term "Obligations" as used in the Guaranty and the Subordination Agreement includes, without limitation, the Obligations of the Company under the Revolving Credit Agreement as amended hereby, and (c) the Guaranty and the Subordination Agreement remain in full force and effect. 9. Amendment Effective Date. This Amendment shall be effective as of the day and ------------------------ year first above written upon the date (the "Amendment Effective Date") that there has been delivered to the Credit Agent: (a) A copy of this Amendment, duly executed by each party hereto; (b) From the Company and the Parent, such corporate resolutions, incumbency certificates and other authorizing documentation as the Credit Agent may request; and (c) For distribution to the Short Term Lenders, each of such Short Term Lender's respective Front-End Fee. As required pursuant to Paragraph 13(b) of the Revolving Credit Agreement, following the Amendment Effective Date the Credit Agent shall provide a copy of this Amendment, including the Revised Commitment Schedule, to all parties to the Credit Documents. 10. Representations and Warranties. The Company and the Parent hereby represent ------------------------------ and warrant to the Credit Agent and each of the Short Term Lenders that at the date hereof and at and as of the Amendment Effective Date: (a) Each of the Company and the Parent has the corporate power and authority and the legal right to execute, deliver and perform this Amendment and has taken all necessary corporate action to authorize the execution, delivery and performance of this Amendment. This Amendment has been duly executed and delivered on behalf of the Company and the Parent and constitutes the legal, valid and binding obligation of such Person, enforceable against such Person in accordance with its terms. (b) Both prior to and after giving effect hereto: (1) the representations and warranties of the Company and the Parent contained in the Credit Documents are accurate and complete in all respects, and (2) there has not occurred an Event of Default or Potential Default. 11. No Other Amendment. Except as expressly amended hereby, the Credit Documents ------------------ shall remain in full force and effect as written and amended to date. 12. Counterparts. This Amendment may be executed in any number of counterparts, ------------ each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the day and year first above written. COUNTRYWIDE HOME LOANS, INC., a New York corporation By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- COUNTRYWIDE CREDIT INDUSTRIES, INC., a Delaware corporation By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- BANKERS TRUST COMPANY, as Credit Agent By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- BANCO DI NAPOLI S.p.A., NEW YORK BRANCH, as a Short Term Lender By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- By ---------------------------------------------------------- Name -------------------------------------------------------- Title _____________________________________________________ BANCA DI ROMA, SAN FRANCISCO BRANCH, as a Short Term Lender By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- By ---------------------------------------------------------- Name -------------------------------------------------------- Title _____________________________________________________ BANK OF AMERICA, N.A., as a Short Term Lender By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- BANK OF HAWAII, as a Short Term Lender By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- THE BANK OF NEW YORK, as a Short Term Lender By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- BANK ONE, NA, as a Short Term Lender By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- BANKERS TRUST COMPANY, as a Short Term Lender By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- BANQUE NATIONALE DE PARIS, as a Short Term Lender By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- PARIBAS, as a Short Term Lender By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- BARCLAYS BANK PLC, as a Short Term Lender By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- BAYERISCHE LANDESBANK GIROZENTRALE, CAYMAN ISLANDS BRANCH, as a Short Term Lender By ________________________________________________________ Name ______________________________________________________ Title _____________________________________________________ By ________________________________________________________ Name ______________________________________________________ Title _____________________________________________________ CANADIAN IMPERIAL BANK OF COMMERCE, as a Short Term Lender By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- THE CHASE MANHATTAN BANK, as a Short Term Lender By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- CREDIT LYONNAIS, NEW YORK BRANCH, as a Short Term Lender By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- THE FIFTH THIRD BANK, as a Short Term Lender By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- FIRST UNION NATIONAL BANK, as a Short Term Lender By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- THE FUJI BANK, LIMITED, as a Short Term Lender By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- THE INDUSTRIAL BANK OF JAPAN, LIMITED, LOS ANGELES AGENCY, as a Short Term Lender By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- LASALLE BANK, NATIONAL ASSOCIATION, as a Short Term Lender By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- MELLON BANK, N.A., as a Short Term Lender By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as a Short Term Lender By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- NORDDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH, as a Short Term Lender By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- ROYAL BANK OF CANADA, as a Short Term Lender By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- FIRSTAR, NATIONAL ASSOCIATION, as a Short Term Lender By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- THE SUMITOMO BANK, LIMITED, LOS ANGELES BRANCH, as a Short Term Lender By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- UNION BANK OF CALIFORNIA, N.A., as a Short Term Lender By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH/CAYMAN ISLANDS BRANCH, as a Short Term Lender By ---------------------------------------------------------- Name -------------------------------------------------------- Title ------------------------------------------------------- AMENDMENT SCHEDULE I COUNTRYWIDE HOME LOANS, INC. Revolving Credit Facilities Commitment Schedule as of September 20, 2000 [TO BE PROVIDED BY THE CREDIT AGENT] EX-10.27.2 12 0012.txt SEVERANCE PLAN COUNTRYWIDE CREDIT INDUSTRIES, INC. CHANGE IN CONTROL SEVERANCE PLAN (As Amended and Restated September 11, 2000) WHEREAS, the Board of Directors (the "Board") of Countrywide Credit Industries, Inc., a Delaware corporation (the "Company"), originally adopted this Plan on September 12, 1996, recognizing that the threat of an unsolicited takeover or other change in control of the Company may occur which can result in significant distractions of its personnel and disrupt the business of the Company with respect to attracting and retaining employees of every level because of the uncertainties inherent in such a situation; and WHEREAS, the Board has determined that it is essential and in the best interests of the Company and its shareholders to be able to retain the services of its personnel at a time when the Company is considering its strategic alternatives, including possible change in control transactions, in order to ensure their continued dedication and efforts without undue concern for their personal financial and employment security. NOW, THEREFORE, in order to fulfill the above objectives, the following plan has been developed and is hereby adopted. 1. Purpose It is the purpose of the Company, through this Plan, to provide a salary continuation payment and certain other benefits for each of its employees who is a Participant in the Plan and (a) who separates from service with the Company for Good Reason or (b) whose employment with the Company is involuntarily terminated (other than for Cause, death or an Excluded Termination), in either case, on or after the date on which a Change in Control occurs and within the time limits specified in Section 5.1. 2. Contractual Right Upon and after a Change in Control, each Participant shall have a fully vested, nonforfeitable contractual right, enforceable against the Company, to the benefits provided for under Section 6 of this Plan upon the conditions specified in Section 5.1. Such contractual right to receive such benefits if the conditions specified in Section 5.1 are fulfilled shall arise on the date on which the Change in Control occurs. 3. Duration This Plan shall be effective as of the date the Plan is approved by the Board or such other date as the Board shall designate in its resolution approving the Plan. The Plan shall continue in effect until terminated in accordance with Section 9. 4. Definitions. For purposes of this Plan, the following definitions shall apply: ----------- 4.1 Affiliate: "Affiliate" shall mean with respect to any person or entity, any entity, directly or indirectly, controlled by, controlling or under common control with such person or entity. 4.2 Board: "Board" shall mean the Board of Directors of Countrywide Credit Industries, Inc. ----- 4.3 Cause: "Cause" shall exist where the Participant (a) intentionally and continually failed to perform reasonably assigned duties, (b) willfully engaged in misconduct which is demonstrably and materially injurious to the Company, monetarily or otherwise , (c) engaged in a transaction in connection with the performance of his or her duties to the Company for personal profit to himself or herself or (d) willfully violated any law, rule or regulation in connection with the performance of his or her duties (other than traffic violations or similar offenses). Failure by a Participant to perform the Participant's duties during any period of disability shall not constitute Cause. 4.4 Change in Control: A "Change in Control" shall mean the occurrence during the term of this ----------------- Plan, of any one of the following events: (a) An acquisition (other than directly from Company) of any common stock or other "Voting Securities" (as hereinafter defined) of Company 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 Company's common stock or the combined voting power of Company'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 Plan, (1) "Voting Securities" shall mean Company'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) the Company 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 the Company (for purposes of this definition, a "Subsidiary"), (ii) the Company or any of its Subsidiaries, or (iii) any Person in connection with a "Non-Control Transaction" (as hereinafter defined); (b) The individuals who, as of May 6, 1996 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 the Company'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 Plan, 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 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 the Company, unless such merger, consolidation or reorganization is a "Non-Control Transaction." A "Non-Control Transaction" shall mean a merger, consolidation or reorganization of the Company where: (A) the Company's stockholders, 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) the Company, (ii) any Subsidiary, (iii) any employee benefit plan (or any trust forming a part thereof) maintained by the Company, the Surviving Corporation, or any Subsidiary, or (iv) any Person who, immediately prior to such merger, consolidation or reorganization had Beneficial Ownership of twenty five percent (25%) or more of the then outstanding Voting Securities or common stock of the Company, has 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 the Company; or (iii) The sale or other disposition of all or substantially all of the assets of the Company to any Person (other than a transfer to a Subsidiary). 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 the Company 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 in Control would occur (but for the operation of this sentence) as a result of the acquisition of common stock or Voting Securities by the Company, and after such share acquisition by the Company, 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. Notwithstanding anything to the contrary contained herein, if the employment of a Participant is terminated (i) at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a Change in Control and who effectuates a Change in Control or (ii) otherwise in connection with, or in anticipation of, a Change in Control which actually occurs, then for purposes of this Plan the date of a Change in Control with respect to that Participant shall be deemed to be the date immediately prior to the date of the Participant's termination. 4.5 Company: "Company" shall mean Countrywide Credit Industries, Inc. and any successor thereto, including, without limitation, any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended), partnership(s) or corporation(s) acquiring directly or indirectly all or substantially all of the business or assets of the Company. 4.6 Excluded Termination: "Excluded Termination" shall have the meaning as set forth in Section -------------------- 5.2 of this Plan. 4.7 Good Reason: A Participant shall have "Good Reason" for terminating employment with the Company only if one or more of the following occurs, within one year after a Change in Control, without the Participant's express written consent: (a) a reduction by the Company in the Participant's base salary or the termination or reduction of award opportunities (other than equity-based opportunities) under any bonus or commission in which the Participant participates unless a comparable arrangement (embodied in an ongoing substitute or alternative plan, practice or formula) has been made with respect to the Participant's participation in such bonus or commission; or (b) for any Participant who immediately prior to the Change in Control is a member of employee classification A or B (as set forth in Appendix A), a change in the Participant's title, position, duties or responsibilities which represents an adverse change from his or her title, position, duties or responsibilities as in effect immediately prior to such change; or (c) the relocation of the office at which the Participant is principally employed immediately prior to the Change in Control to a location more than fifty (50) miles from the location of such office, or the Participant being required to be based anywhere other than such office, except to the extent the Participant was not previously assigned to a principal location and except for required travel on the Company's business to an extent substantially consistent with the Participant's business travel obligations at the time of the Change in Control. (d) notwithstanding the foregoing, the Participant shall not have Good Reason to terminate employment with the Company (or otherwise have the right to claim that he or she has been constructively terminated from employment) due solely to the fact that the Company shall cease to be a public company and shall become a subsidiary of another publicly-traded corporation. Any event described in Section 4.7(a), (b) or (c) which occurs prior to a Change in Control but which the Executive reasonably demonstrates to the Senior Human Resources Manager (1) was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a Change in Control or (2) otherwise arose in connection with, or in anticipation of, a Change in Control, shall constitute Good Reason for purposes of this Plan notwithstanding that it occurred prior to a Change in Control. Notwithstanding the foregoing, no action by the Company shall give rise to Good Reason if it results from the Participant's termination for Cause, death or an Excluded Termination. 4.8 Operating Unit: "Operating Unit" shall mean any subsidiary, division or other business unit of -------------- Company or any Affiliate. 4.9 Participant: "Participant" shall mean a full-time regular employee of the Company or any of its subsidiaries who is either active or on a legally protected leave of absence who, on the date immediately preceding the date of a Change in Control, is employed in one of the employee classifications set forth in Appendix A. Employees of the Company who are Managing Directors and above who are covered under individual employment agreements shall not be Participants in this Plan. 4.10 Plan: "Plan" shall mean the Countrywide Credit Industries, Inc. Change in Control Severance ---- Plan (As Amended and Restated September 11, 2000). 4.11 "Post-Transaction Good Reason" means with respect to offered employment or the continued employment, as the case may be, with a Post-Transaction Employer (as defined in Section 5.2) following a Transaction (as defined in Section 5.2): (a) a reduction in the Participant's annual base salary or the termination or reduction of award opportunities (other than equity-based opportunities) under any bonus or commission plan in which the Participant participates unless a comparable arrangement (embodied in an ongoing substitute or alternative plan, practice or formula) has been made with respect to the Participant's participation in such bonus or commission in either case below the greater of the rate in effect (i) as of the date of the Transaction or (ii) on any date following the Transaction; (b) for any Participant who immediately prior to the Change in Control is a member of employee classification A or B (as set forth in Appendix A), a change in the Participant's title, position, duties or responsibilities which represents an adverse change from his or her title, position, duties or responsibilities as in effect immediately prior to such change, in any case as determined by the Participant in Good Faith; or (c) the relocation of the office at which the Participant is principally employed immediately prior to the Transaction to a location more than fifty (50) miles from the location of such office, or the Participant being required to be based anywhere other than such office, except to the extent the Participant was not previously assigned to a principal location and except for required travel on the Company's business to an extent substantially consistent with the Participant's business travel obligations at the time of the Transaction; 4.12 Senior Human Resources Manager: "Senior Human Resources Manager" shall mean the Chief ------------------------------ Administrative Officer of the Company prior to a Change in Control or such person's designee. 4.13 Severance Benefit: "Severance Benefit" shall mean the benefits payable in accordance with ----------------- Section 6 of this Plan. 5. When Provisions Apply 5.1 The benefits provided for under Section 6 shall be provided to each Participant who incurs a "Qualifying Termination." For purposes of this Plan, a "Qualifying Termination" shall occur only if a Change in Control occurs and (a) within one year after the Change in Control occurs, the Company terminates the Participant's employment other than for Cause; or (b) (i) within one year after the Change in Control occurs, Good Reason occurs, and (ii) the Participant terminates employment with the Company within six months after the Good Reason occurs; provided, however, that for any Participant who is a member of employee classification A, the period of time described in subparagraphs 5.1(a) and (b)(i) shall be twenty-four (24) months; provided, further, however, notwithstanding any provision in this Plan to the contrary, the period of time described in subparagraphs 5.1 (a) and (b)(i) above shall be extended an additional six months for Participants who are members of employee classification B, C, D and E in the event the Participant's employment is terminated in connection with a consolidation of the facility (branch, etc.) employing the Participant with another or a closing or shutdown of such facility (branch, etc.); provided, further, however, that a Qualifying Termination shall not occur if the Participant's employment with the Company terminates by reason of Cause, the Participant's death, or an Excluded Termination (as defined in Section 5.2). 5.2 Sale of Business or Assets. If, following a Change in Control, a Participant's employment with the Company and its Affiliates terminates in connection with the sale, divestiture or other disposition of any Operating Unit (or part thereof) (a "Transaction"), such termination shall not be a termination of employment of the Participant for purposes of the Plan, and (notwithstanding the rights provided to the Participant by Section 5.1) the Participant shall not be entitled to a Severance Benefit as a result of such termination of employment if (i) the Participant is offered continued employment, or continues in employment, with the divested Operating Unit or the purchaser of the assets of the Operating Unit, as the case may be, (the "Post-Transaction Employer") or their respective Affiliates on terms and conditions that would not constitute Post-Transaction Good Reason and (ii) the Company obtains an agreement from the acquiror of the stock or assets of the divested Operating Unit, enforceable by the Participant, to provide or cause the Post-Transaction Employer to provide severance pay and benefits, if the Participant accepts the offered employment or continues in employment with the Post-Transaction Employer or its Affiliates following the Transaction, (A) at least equal to the Severance Benefit and (B) payable upon a termination of the Participant's employment with the Post-Transaction Employer and its Affiliates within the period described in Section 5.1 (or such part of it as is then remaining) for any reason other than Cause, the Participant's death or a termination by the Participant without Post-Transaction Good Reason. For purposes of this Section 5.2, the term Cause shall have the meaning ascribed to it in Section 4.3, but the term Company as it is used in Section 4.3 shall be deemed to refer to the entity employing the Participant after the Transaction. A termination of employment described in this Section 5.2 is herein referred to as an "Excluded Termination." In the circumstances described in this Section 5.2, the Participant shall not be entitled to receive any Severance Benefit under this Plan whether or not the Participant accepts the offered employment or continues in employment. The provisions of this Section 5.2 do not create any entitlement to any Severance Benefit from the Company and its Affiliates in any circumstances whatsoever and are to be construed solely as a limitation on such entitlement in the circumstances herein set forth. 5.3 The fact that a Participant is eligible to immediately receive retirement benefits under the Countrywide Credit Industries, Inc. Defined Benefit Pension Plan or any other Company employee benefit plan, practice or policy shall not render him or her ineligible for the benefits under this Plan. 6. Severance Benefits 6.1 Severance Payment (a) Each Participant entitled to benefits under this Plan shall receive as continuation of salary and bonus and/or commission an amount as determined in accordance with Appendix A reduced (but not below zero) by the payments and benefits paid or payable under an employment agreement or letter offering employment as a result of or in connection with the Qualifying Termination (the "Salary Separation Payment"). For purposes of calculating the Salary Separation Payment, (1) the Participant's "Base Pay" shall be the Participant's base annual salary as of the date of his or her termination of employment or, if greater, as of the date on which the Change in Control occurs and (2) the Participant's " Bonus" shall be the greater of (x) the average of the aggregate bonus and/or commission, if any, paid or payable to the Participant for each of the two (2) fiscal years preceding the fiscal year in which the Participant's termination of employment occurs (or such fewer number of fiscal years for which the Participant was eligible to receive a bonus and/or commission and (y) the bonus and/or commission paid for the fiscal year immediately preceding the date of the Change in Control. (b) Except as required by Section 7, the Salary Separation Payment provided for in Section 6.1(a) shall be payable in addition to, and not in lieu of, all other accrued, vested, earned, or deferred compensation rights, options, or other benefits (other than severance pay or similar benefits) which may be payable or owing to a Participant following termination of his or her employment under any plan, including but not limited to retirement and supplemental retirement benefits, bonus, accrued vacation or sick pay, compensation, or benefits payable under any of the Company's employee benefit plans, practices or policies. (c) The Salary Separation Payment shall not be offset or reduced by any unemployment insurance benefit, payment in lieu of notice required under any law or act, or income from subsequent employment that the Participant may receive. 6.2 The period used in computing the Salary Separation Payment pursuant to Section 6.1(a)(the "Salary Separation Pay Period") shall be included as accredited service for the purpose of receiving or accruing benefits under all employee benefit plans of the Company, including, but not limited to, group health and life insurance, long-term disability, the Countrywide Credit Industries, Inc. Defined Benefit Pension Plan, the Countrywide Credit Industries, Inc. Tax Deferred Savings and Investment Plan, the Countrywide Credit Industries, Inc. Supplemental Executive Retirement Plan and the Countrywide Credit Industries, Inc. Deferred Compensation Plan. 6.3 For the period equal to the Salary Separation Pay Period and commencing on the date of Participant's termination of employment (the "Continuation Period"), the Company shall at its expense (and without contribution by the Participant) continue on behalf of the Participant and his or her dependents and beneficiaries (a) medical, health, dental and prescription drug benefits, (b) short and long-term disability coverage, (c) life insurance and other death benefits coverage and (d) individual outplacement services for members of employee classification A and B (as set forth in Appendix A) and outplacement services at a level to be determined by the Senior Human Resources Manager for employee classification C, D and E. For a period of thirty-six (36) months for members of employee classification A, and commencing on the date of Participant's Qualifying Termination, the Company shall at its expense (and without contribution by the Participant) continue, on behalf of the Participant, financial planning, executive medical examination program and executive long term disability. The coverages and benefits (including deductibles, if any) provided under this Section 6.3 during the Continuation Period shall be no less favorable in the aggregate to the Participant and his or her beneficiaries than the most favorable of such coverages and benefits provided the Participant and his or her dependents during the 90-day period immediately preceding the Change in Control or as of any date following the Change in Control but preceding the date of Participant's termination. The obligation under this Section 6.3 with respect to the foregoing benefits shall be limited if the Participant obtains any such benefits pursuant to a subsequent employer's benefit plans, in which case the Company may reduce or eliminate the coverage and benefits it is required to provide the Participant hereunder as long as the aggregate coverages and benefits of the combined benefit plans are no less favorable to the Participant than the coverages and benefits required to be provided hereunder. Any period during which benefits are continued pursuant to this Section 6.3 shall be considered to be in satisfaction of the Company's obligation to provide "continuation coverage" pursuant to Section 4980B of the Internal Revenue Code of 1986, as amended, and the period of coverage required under said Section 4980B shall be reduced by the period during which benefits were provided pursuant to this Section 6.3. 6.4 Notwithstanding Section 6.1, a Participant may elect to receive the Salary Separation Payment in a lump sum. Benefits otherwise receivable by the Participant pursuant to clause (a), (b) and (c) of Section 6.3 shall be discontinued if the Participant accepts alternative employment with the Company or any of its Affiliates, or requests and receives a lump sum payment. Payments under Section 6.1 shall also cease upon a Participant accepting alternative employment with the Company or any of its Affiliates. If the Participant elects to receive the Salary Separation Payment as a lump sum, and the Participant accepts alternative employment with the Company, such Participant shall owe the Company the portion of the Salary Separation Payment which exceeds the amount of Base Salary the Participant would have earned had the Participant been actively employed by the Company from the date his or her termination of employment commenced to the new employment commencement date. 6.5 Any termination of employment following a Change in Control by the Company or by the Participant shall be communicated by a Notice of Termination to the other party herein in accordance with Section 11. For purposes of this Plan, a "Notice of Termination" shall mean a written notice which shall indicate the specific Qualifying Termination provision in this Plan, if any, relied upon and shall set forth in reasonable detail the facts and circumstances that provide a basis for termination of the Participant's employment under the provision so indicated and shall specify the effective date of the Qualifying Termination which shall not be less than thirty (30) days nor more than sixty (60) days from the date such Notice of Termination is given or such shorter or longer period as may be mutually agreed between the Company and the Participant. For purposes of this Plan, no such purported Qualifying Termination shall be effective without such Notice of Termination. 6.6 If a Participant who is entitled to Severance Benefits under this Plan dies before receiving the Salary Separation Payment, such Payment shall be made to the Participant's surviving spouse, or, if there is no surviving spouse, to the Participant's estate. If a Participant who is entitled to Severance Benefits under this Plan dies before the end of the Continuation Period, then for the balance of the Continuation Period, the Company shall be required to continue the benefits provided for under Section 6.3 to the Participant's spouse and dependents. 6.7 A Participant who is entitled to benefits under this Plan shall not be required to accept or to seek other employment as a condition of receiving such benefits, and a Participant's benefits provided under this Plan shall not be offset by any future compensation received by the Participant. 7. Excise Tax 7.1 Excise Tax Limitation. ------------------------ (a) With respect to any Participant who immediately prior to the Change in Control is a member of employee classification A (as set forth in Appendix A), except as provided in subsection (b), in the event it shall be determined that any payment or distribution of any type to a Participant, including accelerated vesting, to or for the benefit of the Participant, by the Company, any Affiliate of the Company, 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) who acquires ownership or effective control of the Company or ownership of a substantial portion of the Company's assets (within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder) or any Affiliate of such Person, whether paid or payable or distributed or distributable pursuant to the terms of this Plan or otherwise (the "Payments"), is or will be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are collectively referred to as the "Excise Tax"), then the Participant shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Participant of all taxes (including any interest or penalties imposed with respect to such taxes), including any income tax, employment tax or Excise Tax imposed upon the Gross-Up Payment, the Participant retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) With respect to any Participant who immediately prior to the Change in Control is a member of employee classification A, notwithstanding Section (a) or any other provision of this Plan to the contrary, in the event that the Payments (excluding the payment provided for in subsection 7.1(a)) exceed by less than 10% or $100,000 the maximum amount of Payments which if made or provided to the Participant would not be subject to an Excise Tax, the Participant will not be entitled to a Gross-Up Payment and the Payments shall be reduced (but not below zero) to the extent necessary so that no Payment to be made or benefit to be provided to the Participant shall be subject to the Excise Tax; it being the intent of the parties that the Payments shall be reduced only if the economic detriment to the Participant (on a pre-tax basis) is less than the greater of $100,000 or 10% of the Payments. Unless the Participant shall have given prior written notice specifying a different order to the Company to effectuate the foregoing, the Company shall reduce or eliminate the Payments, by first reducing or eliminating the portion of the Payments which are not payable in cash and then by reducing or eliminating cash payments, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the "Determination" (as defined below). Any notice given by the Participant pursuant to the preceding sentence shall take precedence over the provisions of any other plan, arrangement or agreement governing the Participant's rights and entitlements to any benefits or compensation. (c) With respect to any Participant who immediately prior to the Change in Control is a member of employee classification A, the determination of whether the Payments shall be reduced pursuant to this Plan and the amount of such reduction, all mathematical determinations, and all determinations as to whether any of the Payments are "parachute payments" (within the meaning of Section 280G of the Code), that are required to be made under this Section, including determinations as to whether a Gross-Up Payment is required, the amount of such Gross-Up Payment and amounts relevant to the last sentence of this subsection (c), shall be made by an independent accounting firm selected by the Company from among the five (5) largest accounting firms in the United States or any nationally recognized financial planning and benefits consulting company (the "Accounting Firm"), which shall provide its determination (the "Determination"), together with detailed supporting calculations regarding the amount of any Gross-Up Payment and any other relevant matter, both to the Company and the Participant by no later than ten (10) days following the Termination Date, if applicable, or such earlier time as is requested by the Company or the Participant (if the Participant reasonably believes that any of the Payments may be subject to the Excise Tax). If the Accounting Firm determines that no Excise Tax is payable by the Participant, it shall furnish the Participant and the Company with an opinion reasonably acceptable to the Participant and the Company that no Excise Tax is payable (including the reasons therefor) and that the Participant has substantial authority not to report any Excise Tax on his federal income tax return. If a Gross-Up Payment is determined to be payable, it shall be paid (including through withholding of taxes) to the Participant no later than the due date for payment of the Excise Tax. Any determination by the Accounting Firm shall be binding upon the Company and the Participant, absent manifest error. As a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments not made by the Company should have been made ("Underpayment"), or that Gross-Up Payments will have been made by the Company which should not have been made ("Overpayment"). In either such event, the Accounting Firm shall determine the amount of the Underpayment or Overpayment that has occurred. In the case of an Underpayment, the amount of such Underpayment (together with any interest and penalties payable by the Participant as a result of such Underpayment) shall be promptly paid by the Company to or for the benefit of the Participant. In the case of an Overpayment, the Participant shall, at the direction and expense of the Company, take such steps as are reasonably necessary (including the filing of returns and claims for refund), follow reasonable instructions from, and procedures established by, the Company, and otherwise reasonably cooperate with the Company to correct such Overpayment, provided, however, that (i) the Participant shall not in any event be obligated to return to the Company an amount greater than the net after-tax portion of the Overpayment that he has retained or has recovered as a refund from the applicable taxing authorities and (ii) if a Gross-Up Payment is determined to be payable, this provision shall be interpreted in a manner consistent with an intent to make the Participant whole, on an after-tax basis, from the application of the Excise Tax, it being understood that the correction of an Overpayment may result in the Participant repaying to the Company an amount which is less than the Overpayment. The cost of all such determinations made pursuant to this Section shall be paid by the Company. (d) With respect to any Participant who immediately prior to the Change in Control is a member of employee classification B, C, D or E (as set forth in Appendix A), notwithstanding anything in this Plan to the contrary, in the event it shall be determined that any Payment to or for the benefit of a Participant would be subject to the Excise Tax, the Payments shall be reduced (but not below zero) if and to the extent that such reduction would result in Participant retaining a larger amount, on an after-tax basis (taking into account federal, state and local income taxes and the imposition of the Excise Tax), than if Participant received all of the Payments. Unless the Participant shall have given prior written notice specifying a different order to the Company to effectuate the foregoing, the Company shall reduce or eliminate the Payments, by first reducing or eliminating the portion of the Payments which are not payable in cash and then by reducing or eliminating cash payments, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the determination. Any notice given by the Participant pursuant to the preceding sentence shall take precedence over the provisions of any other plan, arrangement or agreement governing the Participant's rights and entitlements to any benefits or compensation. All determinations concerning the application of this paragraph shall be made by a nationally recognized firm of independent accountants or any nationally recognized financial planning and benefits consulting company, selected by Participant 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 Participant. The Company shall hold in confidence and not disclose, without the Participant's prior written consent, any information with regard to the Participant's tax position which the Company obtains pursuant to this Section. 7.2 Pooling Transactions. Notwithstanding anything contained in this Plan to the contrary, in the event of a Change in Control which is also intended to be treated as a "pooling of interests" under generally accepted accounting principles (a "Pooling Transaction"), the Board shall take such actions, if any, as are specifically recommended by an independent accounting firm retained by the Company to the extent reasonably necessary in order to assure that the Pooling Transaction will qualify as such, including but not limited to (a) deferring the vesting, exercise, payment, settlement or lapsing of restrictions with respect to any option or award, (b) providing that the payment or settlement in respect of any option or award be made in the form of cash, shares of common stock or securities of a successor or acquirer of the Company, or a combination of the foregoing, (c) providing for the extension of the term of any option or award to the extent necessary to accommodate the foregoing, but not beyond the maximum term permitted for any option or award and (d) amending, deleting or making inapplicable to the Participant any provision in this Plan or other arrangement pursuant to which he or she receives compensation, payments or benefits. 8. Successor to Company This Plan shall bind any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, in the same manner and to the same extent that the Company would be obligated under this Plan if no succession had taken place. In the case of any transaction in which a successor would not by the foregoing provision or by operation of law be bound by this Plan, the Company shall require such successor expressly and unconditionally to assume and agree to perform the Company's obligations under this Plan, in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. 9. Amendment and Plan Termination 9.1 Amendment and Termination. Prior to a Change in Control, the Plan may be amended or modified in any respect, and may be terminated, by resolution adopted by two-thirds of the Board; provided, however, that no such amendment, modification or termination, which would adversely affect the benefits or protections hereunder of any individual who is a Participant as of the date such amendment, modification or termination is adopted shall be effective as it relates to such individual unless no Change in Control occurs within six (6) months after such adoption, any such attempted amendment, modification or termination adopted within six (6) months prior to a Change in Control being null and void ab initio as it relates to all individuals who were Participants as of the date of such adoption; provided, further, however, that the Plan may not be amended, modified or terminated, (a) at the request of a third party who has indicated an intention or taken steps to effect a Change in Control and who effectuates a Change in Control or (b) otherwise in connection with, or in anticipation of, a Change in Control which actually occurs, if the amendment, modification or termination adversely affects the rights of any Participant under the Plan, any such attempted amendment, modification or termination being null and void ab initio. From and after the occurrence of a Change in Control, the Plan (x) may not be amended or modified in any manner that would in any way adversely affect the benefits or protections provided to any individual hereunder and (y) may not be terminated until the later of (i) twenty-four (24) months after the date of the Change in Control or (ii) the date that all Participants who have become entitled to a Severance Benefit hereunder shall have received such payments in full. 9.2 Form of Amendment. Any amendment or termination of the Plan shall be effected by a written instrument signed by a duly authorized officer or officers of the Company, certifying that the amendment or termination has been approved by the Board. 10. Employment Status/Waiver of Rights This Plan does not constitute a contract of employment or impose on the Company any obligation to retain the Participant as an employee, to change the status of the Participant's employment, or to change the Company's policies regarding termination of employment. Following a Change in Control, no waiver of rights by the Participant in return for continued employment shall be effective with respect to the rights and benefits provided under this Plan. 11. Notices Any notice provided for in this Plan shall be sent to the Company at 4500 Park Granada, Calabasas, California 91302, Attention: Senior Human Resources Manager or to such other address as the Company may from time to time in writing designate, and to a Participant at such address as he or she may from time to time in writing designate (or his or her business address of record in the absence of such designation). Such notice shall be deemed to have been given two (2) business days after it has been deposited as certified mail, return receipt requested, postage paid and properly addressed to the designated address of the party to receive the notice. 12. Severability If any provision of this Plan is held invalid or unenforceable, the remainder of this Plan 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. 13. Governing Law The interpretation, construction and performance of this Plan shall in all respects be governed by the laws of the State of California. IN WITNESS WHEREOF, this Amendment and Restatement has been approved by the Board of Directors of the Company at its meeting on September 11, 2000. Countrywide Credit Industries, Inc. By: ---------------------------------------- Anne D. McCallion Managing Director, Chief Administrative Officer Attest: ---------------------------------------- Susan Bow Assistant Secretary Page 38 APPENDIX A Eligible Employee Classifications Members A Managing Directors B Executive Vice Presidents, Senior Vice Presidents, Presidents C First Vice Presidents, Vice Presidents, Regional Vice Presidents D Branch Managers and all other Exempt Employees E All Non-Exempt Employees Salary Separation Payment The Salary Separation Payment to which a Participant is entitled shall be based on the Participant's employee classification as of the date immediately preceding the date of the Participant's Qualifying Termination or, if greater, as of the date on which the Change in Control occurs, and shall equal the amount described in the table below; provided, however, that the Salary Separation Payment for each Participant shall not exceed twenty-four months Base Pay plus Bonus for Employee Classification B and twelve (12) months Base Pay plus Bonus for Employee Classification C, D and E. The Salary Separation Payment (without regard to any payments described in Section 7.2) for Employee Classification A shall not exceed the sum of (I) thirty (30) months Base Pay and (II) 200% Bonus. Employee Classification Salary Separation Payment A Two (2) years Base Pay (as defined in Section 6.1(a)) plus 200% Bonus (as defined in Section 6.1(a)) plus two (2) weeks Base Pay for each full year of service from first hire date. B One (1) year Base Pay plus 100% Bonus plus two (2) weeks Base Pay for each full year of service from first hire date. C Six (6) months Base Pay plus 75% Bonus plus one and one-half (1.5) weeks Base Pay for each full year of service from first hire date. D Four (4) months Base Pay plus 33% Bonus plus one (1) week Base Pay for each full year of service from first hire date. E Two (2) months Base Pay plus 15% Bonus plus one (1) week Base Pay for each full year of service from first hire date. EX-10.28 13 0013.txt DIRECTOR TERMINATION PLAN TERMINATION OF DIRECTOR EMERITUS PLAN On August 10, 2000, the Board of Directors of Countrywide Credit Industries, Inc. (the "Company") adopted a resolution terminating the Company's Director Emeritus Plan (the "Plan"). The Plan is described on pages 5 and 6 of the Company's most recent Proxy Statement for the Annual Meeting of Stockholders held on July 12, 2000. In connection with the Plan termination, each current non-employee director received a cash payment related to the present value of his benefits under the Plan. The cash payments were as follows: Jeffrey Cunningham $ 27,174 Ben M. Enis $ 394,857 Edwin Heller $ 281,742 Robert J. Donato $ 235,908 Michael Dougherty $ 60,068 Harley Snyder $ 366,633 Oscar Robertson $ 0 As part of their consideration of this proposal, the Board received an opinion from a nationally recognized employee benefits consulting firm that the termination of the Plan and providing the payments to the current, non-employee directors as set forth above is fair, meaning that the approach used in terminating the Plan (including the actuarial and other assumptions) is within the range of competitive practice, and considers the best interests of shareholders. EX-11.1 14 0014.txt COMPUTATION OF EPS Exhibit 11.1 COUNTRYWIDE CREDIT INDUSTRIES, INC. STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS Six Months Ended August 31, 2000 1999 ----------------- -- ---------------- (Amounts in thousands, except per share data) Basic Net earnings applicable to common stock $174,494 $209,882 ================ ================= Average shares outstanding 114,047 112,871 ================ ================= Per share amount $1.53 $1.86 ================ ================= Diluted Net earnings applicable to common stock $174,494 $209,882 ================ ================= Average shares outstanding 114,047 112,871 Net effect of dilutive stock options -- based on the treasury stock method using the average market price. 3,180 4,568 ---------------- ----------------- Total average shares 117,227 117,439 ================ ================= Per share amount $1.49 $1.79 ================ =================
EX-12.1 15 0015.txt RATIO OF EARNINGS TO FIXED CHARGES COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES EXHIBIT 12.1 - COMPUTATION OF THE RATIO OF EARNINGS TO FIXED CHARGES (Dollar amounts in thousands) The following table sets forth the ratio of earnings to fixed charges of the Company for the six months ended August 31, 2000 and for the five fiscal years ended February 29, 2000 computed by dividing net fixed charges (interest expense on all debt plus the interest element (one-third) of operating leases) into earnings (income before income taxes and fixed charges). Six months ended August 31, Fiscal Years Ended February 29(28), -------------------------- ------------------------------------------------------------------ 2000 1999 2000 1999 1998 1997 1996 ------------ ------------- ------------ ------------- ------------ ------------ ------------- Net earnings $174,494 $209,882 $410,243 $385,401 $344,983 $257,358 $195,720 Income tax expense 98,646 134,187 220,955 246,404 220,563 164,540 130,480 Interest charges 597,975 477,842 922,225 977,326 564,640 418,682 333,140 Interest portion of rental Expense 8,806 4,488 19,080 14,898 10,055 7,420 6,803 ------------ ------------- ------------ ------------- ------------ ------------ ------------- Earnings available to cover fixed charges $879,921 $826,399 $1,572,503 $1,624,029 $1,140,241 $848,000 $666,143 ============ ============= ============ ============= ============ ============ ============= Fixed charges Interest charges $597,975 $477,842 $922,225 $977,326 $564,640 $418,682 $333,140 Interest portion of rental Expense 8,806 4,488 19,080 14,898 10,055 7,420 6,803 ------------ ------------- ------------ ------------- ------------ ------------ ------------- Total fixed charges $606,781 $482,330 $941,305 $992,224 $574,695 $426,102 $339,943 ============ ============= ============ ============= ============ ============ ============= Ratio of earnings to fixed Charges 1.45 1.71 1.67 1.64 1.98 1.99 1.96 ============ ============= ============ ============= ============ ============ =============
EX-27 16 0016.txt FINANCIAL DATA SCHEDULE
5 0000025191 Countrywide Credit Industries 1,000 1.00 6-MOS FEB-29-2000 MAR-01-2000 Aug-31-2000 1.00 85,255 0 0 0 0 0 651,228 241,940 18,254,258 14,625,561 0 0 0 5,731 3,122,966 18,254,258 0 986,867 0 713,727 0 0 0 273,140 98,646 174,494 0 0 0 174,494 1.53 1.49
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