-----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, Fd8SdArBDdGKs99US2lNqzjdpEO8eBw3RbUqOzb8uGMnWYXZWSQmp38hGbZ18EF5 raLfM03+/FcGEmvKwzpnvQ== 0000025191-98-000008.txt : 19980716 0000025191-98-000008.hdr.sgml : 19980716 ACCESSION NUMBER: 0000025191-98-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19980531 FILED AS OF DATE: 19980715 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COUNTRYWIDE CREDIT INDUSTRIES INC CENTRAL INDEX KEY: 0000025191 STANDARD INDUSTRIAL CLASSIFICATION: MORTGAGE BANKERS & LOAN CORRESPONDENTS [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: 98666196 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 QUARTERLY FORM 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 May 31, 1998 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 issuer's classes of common stock, as of the latest practicable date. Class Outstanding at July 13, 1998 ----- ---------------------------- Common Stock $.05 par value 111,050,012 PART I FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Dollar amounts in thousands)
A S S E T S May 31, February 28, 1998 1998 ------------------ ------------------- Cash $ 24,805 $ 10,707 Mortgage loans and mortgage-backed securities held for sale 6,013,739 5,292,191 Property, equipment and leasehold improvements, at cost - net of accumulated depreciation and amortization 240,084 226,330 Mortgage servicing rights, net 3,877,680 3,612,010 Other assets 3,465,387 3,077,943 ------------------ ------------------- Total assets $13,621,695 $12,219,181 ================== =================== Borrower and investor custodial accounts (segregated in special accounts - excluded from corporate assets) $3,927,488 $3,945,606 ================== =================== LIABILITIES AND SHAREHOLDERS' EQUITY Notes payable $8,351,621 $7,475,221 Drafts payable issued in connection with mortgage loan closings 835,914 764,285 Accounts payable, accrued liabilities and other 788,419 518,648 Deferred income taxes 934,265 873,084 ------------------ ------------------- Total liabilities 10,910,219 9,631,238 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, 1,500,000 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, 110,608,792 shares at May 31, 1998 and 109,205,579 shares at February 28, 1998 5,530 5,460 Additional paid-in capital 1,082,921 1,049,365 Accumulated other comprehensive income 11,662 3,697 Retained earnings 1,111,363 1,029,421 ------------------ ------------------- Total shareholders' equity 2,211,476 2,087,943 ------------------ ------------------- Total liabilities and shareholders' equity $13,621,695 $12,219,181 ================== =================== Borrower and investor custodial accounts $3,927,488 $3,945,606 ================== =================== 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 earnings per share)
Three Months Ended May 31, 1998 1997 -------------- ------------- Revenues Loan origination fees $ 138,770 $ 53,499 Gain on sale of loans, net of commitment fees 159,027 90,235 -------------- ------------- Loan production revenue 297,797 143,734 Interest earned 179,952 82,180 Interest charges (168,420) (81,834) -------------- ------------- Net interest income 11,532 346 Loan servicing income 242,691 214,315 Amortization and impairment/recovery of mortgage servicing rights (149,342) (25,956) Servicing hedge benefit (expense) 631 (44,743) -------------- ------------- Net loan administration income 93,980 143,616 Commissions, fees and other income 46,956 30,949 -------------- ------------- Total revenues 450,265 318,645 Expenses Salaries and related expenses 146,487 88,041 Occupancy and other office expenses 62,677 38,066 Guarantee fees 44,667 42,576 Marketing expenses 14,515 10,320 Other operating expenses 33,142 24,939 -------------- ------------- Total expenses 301,488 203,942 -------------- ------------- Earnings before income taxes 148,777 114,703 Provision for income taxes 58,023 44,734 -------------- ------------- NET EARNINGS $ 90,754 $ 69,969 ============== ============= Earnings per share Basic $0.82 $0.66 Diluted $0.78 $0.64
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) Three Months Ended May 31, 1998 1997 ---------------- --------------- Cash flows from operating activities: Net earnings $ 90,754 $ 69,969 Adjustments to reconcile net earnings to net cash provided (used) by operating activities: Gain on sale of available-for-sale securities (2,387) - Amortization and impairment/recovery of mortgage servicing rights 149,342 25,956 Depreciation and other amortization 12,996 11,224 Deferred income taxes 58,023 44,734 Origination and purchase of loans held for sale (20,876,079) (9,360,306) Principal repayments and sale of loans 20,154,531 7,359,509 ---------------- --------------- Increase in mortgage loans and mortgage-backed securities held for sale (721,548) (2,000,797) Increase in other assets (385,113) (28,088) Increase in accounts payable and accrued liabilities 269,771 13,548 ---------------- --------------- Net cash used by operating activities (528,162) (1,863,454) ---------------- --------------- Cash flows from investing activities: Additions to mortgage servicing rights (415,012) (220,512) Purchase of property, equipment and leasehold improvements - net (23,022) (13,497) Proceeds from sale of available-for-sale securities 8,619 - ---------------- --------------- Net cash used by investing activities (429,415) (234,009) ---------------- --------------- Cash flows from financing activities: Net (decrease) increase in warehouse debt and other short-term borrowings 601,662 1,920,516 Issuance of long-term debt 394,315 215,000 Repayment of long-term debt (47,948) (44,665) Issuance of common stock 32,458 19,140 Cash dividends paid (8,812) (8,498) ---------------- --------------- Net cash provided by financing activities 971,675 2,101,493 ---------------- --------------- Net increase (decrease) in cash 14,098 4,030 Cash at beginning of period 10,707 18,269 ================ =============== Cash at end of period $ 24,805 $ 22,299 ================ =============== Supplemental cash flow information: Cash used to pay interest $ 145,206 $ 66,160 Cash used to pay income taxes $ 675 $ 2 Noncash financing activities: Unrealized gain (loss) on available-for-sale securities, net of tax $ 7,965 $ (9,173)
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 Ended May 31, 1998 1997 --------------- -------------- NET EARNINGS $90,754 $69,969 Other comprehensive income, net of taxes: Unrealized gains (losses) on available for sale securities: Unrealized holding gains (losses) arising during the 9,421 (9,173) period Less: reclassification adjustment for gains included in net earnings (1,456) - --------------- -------------- Other comprehensive income 7,965 (9,173) --------------- -------------- COMPREHENSIVE INCOME $98,719 $60,796 =============== ==============
The accompanying notes are an integral part of these statements. COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 quarter ended May 31, 1998 are not necessarily indicative of the results that may be expected for the fiscal year ending February 28, 1999. For further information, refer to the consolidated financial statements and footnotes thereto included in the annual report on Form 10-K for the fiscal year ended February 28, 1998 of Countrywide Credit Industries, Inc. (the "Company"). Certain amounts reflected in the consolidated financial statements for the periods ended May 31, 1997 have been reclassified to conform to the presentation for the three-month period ended May 31, 1998. NOTE B - MORTGAGE SERVICING RIGHTS
The activity in mortgage servicing rights was as follows. --------------------------------------------- ---------------------- --------------------- Quarter Ended May 31, ---------------- (Dollar amounts in thousands) 1998 --------------------------------------------- -- ---------------- -- ---------------- ---- Mortgage Servicing Rights Balance at beginning of period $3,653,318 Additions 415,012 Scheduled amortization (132,903) Hedge losses (gains) applied (15,449) ---------------- Balance before valuation reserve at end of period 3,919,978 ---------------- Reserve for Impairment of Mortgage Servicing Rights Balance at beginning of period (41,308) Reductions (additions) (990) ---------------- Balance at end of period (42,298) ================ Mortgage Servicing Rights, net $3,877,680 ================ --------------------------------------------- -- ---------------- -- ---------------- ----
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED)
NOTE C - OTHER ASSETS Other assets consisted of the following. ---------------------------------------------------------- ----------------------------------------------------- May 31, February 28, ----------------- ---------------- (Dollar amounts in thousands) 1998 1998 ------------------------------------------------------------------ -- ----------------- --- ---------------- --- Servicing hedge instruments $ 937,645 $ 801,335 Trading securities 544,967 255,216 Mortgage-backed securities retained in securitization 479,443 466,259 Rewarehoused FHA and VA loans 343,124 426,407 Servicing related advances 223,359 231,437 Receivables related to broker-dealer activities 207,036 148,976 Loans held for investment 135,845 115,713 Equity securities 93,579 96,152 Accrued interest 73,892 84,601 Other 426,497 451,847 ----------------- ---------------- $3,465,387 $3,077,943 ================= ================
NOTE D - AVAILABLE FOR SALE SECURITIES Amortized cost and fair value of available for sale securities were as follows. -------------------------------- ---------------- - ------------------------------------ -- ---------------- --- May 31, 1998 ---------------- - ------------------------------------ -- ---------------- Gross Gross Amortized Unrealized Unrealized Fair (Dollar amounts in thousands) Cost Gains Losses Value -------------------------------- ---------------- - ----------------- - ---------------- -- ---------------- --- CMOs $199,209 $16,905 ($13,686) $202,428 Equity Securities 77,680 15,899 - 93,579 ================ ================= ================ ================ $276,889 $32,804 ($13,686) $296,007 ================ ================= ================ ================ -------------------------------- ---------------- - ------------------------------------ -- ---------------- --- February 28, 1998 ---------------- - ------------------------------------ -- ---------------- Gross Gross Amortized Unrealized Unrealized Fair (Dollar amounts in thousands) Cost Gains Losses Value -------------------------------- ---------------- - ----------------- - ---------------- -- ---------------- --- CMOs $204,234 - ($12,411) $191,823 Equity Securities 7,315 18,471 - 25,786 ================ ================= ================ ================ $211,549 $18,471 ($12,411) $217,609 ================ ================= ================ ================ -------------------------------- ---------------- - ----------------- - ---------------- -- ---------------- ---
NOTE E - NOTES PAYABLE
Notes payable consisted of the following. ---------------------------------------------------------- ----------------------------------------------------- May 31, February 28, ----------------- ---------------- (Dollar amounts in thousands) 1998 1998 ------------------------------------------------------------------ -- ----------------- --- ---------------- --- Commercial paper $2,879,354 $2,119,330 Medium-term notes, Series A, B, C, D, E and F 4,484,500 4,137,185 Repurchase agreements 586,135 181,121 Subordinated notes 200,000 200,000 Unsecured notes payable 199,995 835,000 Other notes payable 1,637 2,585 ================= ================ $8,351,621 $7,475,221 ================= ================ ------------------------------------------------------------------ -- ----------------- --- ---------------- ---
Revolving Credit Facility and Commercial Paper As of May 31, 1998, Countrywide Home Loans, Inc. ("CHL"), the Company's mortgage banking subsidiary, had an unsecured credit agreement (revolving credit facility) with forty-five commercial banks permitting CHL to borrow an aggregate maximum amount of $4.0 billion. This revolving credit facility consists of a five year facility of $3.0 billion which expires on September 24, 2002 and a one year facility of $1.0 billion which expires on September 24, 1998. The purpose of the revolving credit facility is to provide liquidity back-up for CHL's $4.0 billion commercial paper program. The facility contains various financial covenants and restrictions, certain of which limit the amount of dividends that can be paid by the Company or CHL. As consideration for the facility, CHL pays annual commitment fees of $3.8 million. On April 15, 1998, CHL entered into an additional one year unsecured credit agreement (revolving credit facility) with sixteen of the forty-five banks referenced above for total commitments of $1.3 billion which expires April 14, 1999. This facility contains terms consistent with the $4.0 billion revolving credit facility and as consideration for the facility, CHL pays annual commitment fees of $1.5 million. This facility will serve as additional liquidity backup to CHL's commercial paper program. No amount was outstanding under either revolving credit facility at May 31, 1998. The interest rate on direct borrowings is based on a variety of sources, including the prime rate and the London Interbank Offered Rates ("LIBOR") for U.S. dollar deposits. This interest rate varies, depending on CHL's credit ratings. The weighted average borrowing rate on commercial paper borrowings for the quarter ended May 31, 1998 was 5.59%. The weighted average borrowing rate on commercial paper outstanding as of May 31, 1998 was 5.63%. NOTE E - NOTES PAYABLE (Continued) Medium-Term Notes As of May 31, 1998, outstanding medium-term notes issued by CHL under various shelf registrations filed with the Securities and Exchange Commission were as follows.
- ----------------------------------------------------------------------------------------------------------------- (Dollar amounts in thousands) Outstanding Balance Interest Rate Maturity Date ----------------------- ---------------------------- ------------------------------------------ Floating-Rate Fixed-Rate Total From To From To ------------------------------------------ ----------- ---------- ------------- -------------- Series A $ - $ 228,500 $ 228,500 6.86% 8.79% Jun. 1998 Mar. 2002 Series B - 351,000 351,000 6.08% 6.98% Jul. 1999 Aug. 2005 Series C 208,000 197,000 405,000 5.27% 8.43% Apr. 1999 Mar. 2004 Series D 115,000 402,000 517,000 5.88% 6.88% Aug. 1998 Oct. 2006 Series E 310,000 673,000 983,000 5.75% 7.45% Feb. 2000 Oct. 2008 Series F 656,000 1,344,000 2,000,000 5.59% 7.00% Oct. 1999 May 2013 ------------------------------------------ Total $ 1,289,000 $ 3,195,500 $ 4,484,500 ==========================================
As of May 31, 1998, 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 quarter ended May 31, 1998, including the effect of the interest rate swap agreements, was 6.07%. Repurchase Agreements As of May 31, 1998, the Company had entered into short-term financing arrangements to sell MBS under agreements to repurchase. The weighted average borrowing rate for the quarter ended May 31, 1998 was 5.61%. The weighted average borrowing rate on repurchase agreements outstanding as of May 31, 1998 was 5.65%. The repurchase agreements were collateralized by MBS. All MBS underlying repurchase agreements are held in safekeeping by broker-dealers, and all agreements are to repurchase the same or substantially identical MBS. Subordinated Notes The 8.25% subordinated notes are due July 15, 2002. Interest is payable semi-annually on each January 15 and July 15. The subordinated notes are not redeemable prior to maturity and are not subject to any sinking fund requirements. NOTE E - NOTES PAYABLE (Continued) Pre-Sale Funding Facilities As of May 31, 1998, 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 which are in the process of being pooled into MBS. Interest rates are based on LIBOR, federal funds and/or the prevailing rates for MBS repurchase agreements. The weighted average borrowing rate for all such facilities for the quarter ended May 31, 1998 was 5.71%. As of May 31, 1998, the Company had no outstanding borrowings under any of these facilities. NOTE F - FINANCIAL INSTRUMENTS
The following summarizes the notional amounts of Servicing Hedge derivative contracts. - ------------------------------------- ------------------- -------------------- ------------------- --------------------- (Dollar amounts in millions) Balance, Balance, February 28, 1998 Dispositions/ May 31, Additions Expirations 1998 - ------------------------------------- ------------------- -------------------- ------------------- --------------------- Interest Rate Floors $33,000 6,500 ( 3,000) $36,500 Long Call Options on Interest Rate Futures $79,400 7,520 (19,720) $67,200 Long Put Options on Interest Rate Futures $ 9,800 350 - $10,150 Interest Rate Futures $ 5,000 - - $ 5,000 Capped Swaps $ 1,000 - - $ 1,000 Interest Rate Swaps $ 3,900 2,000 - $ 5,900 Interest Rate Cap $ 4,500 - - $ 4,500 Swaptions $ 1,850 6,000 - $ 7,850 Options on Callable Pass-through Certificates $ 2,561 800 - $ 3,361 - ------------------------------------- ------------------- -------------------- ------------------- ---------------------
NOTE G - LEGAL PROCEEDINGS On September 29, 1997, the United States District Court adopted the recommendation of a magistrate denying class certification in a lawsuit which was filed against CHL and a mortgage broker by Jeff and Kathy Briggs as a purported class action. The effect of the ruling is that the lawsuit will not proceed as a class action and will be limited to the Briggs' own claims. The Briggs are seeking reconsideration of the Court's ruling. The suit entitled Briggs v. Countywide, et. al and filed in the Northern Division of the United States District Court for the Middle District of Alabama, alleges that in connection with residential mortgage loan closings, CHL made certain payments to mortgage brokers in violation of the Real Estate Settlement Procedures Act and induced mortgage brokers to breach their alleged fiduciary duties to their customers. The plaintiffs seek unspecified compensatory and punitive damages plus, as to certain claims, treble damages. In early 1998, two additional purported class action lawsuits were filed making essentially the same allegations about broker compensation as were made in Briggs. William C. Elliott et. al v. Countrywide Home Loans, Inc. was filed on February 18, 1998 in the United States District Court for Northern District of Mississippi and Joseph W. Gann, Sr., et. al v. America's Wholesale Lender was filed on February 14, 1998 in the United States District Court for the Middle District of Alabama. NOTE G - LEGAL PROCEEDINGS (Continued) CHL's management believes that its compensation programs to mortgage brokers comply with applicable laws and long standing industry practice, and that it has meritorious defenses to these actions. CHL intends to defend vigorously against these actions and believes that the ultimate resolution of such claims will not have a material adverse effect on the Company's financial position or results of operations. The Company and certain subsidiaries are defendants in various lawsuits involving matters generally incidental to their business. Although it is difficult to predict the ultimate outcome of these cases, 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. -- ----------------------------------------- ---- ------------------------------------------------- --------- May 31, February 28, -------------- -------------- (Dollar amounts in thousands) 1998 1998 -- ---------------------------------------------- ------- -------------- ----------- -------------- --------- Balance Sheets: Mortgage loans and mortgage-backed securities held for sale $ 6,013,739 $ 5,292,191 Other assets 7,102,704 6,216,382 ============== ============== Total assets $13,116,443 $11,508,573 ============== ============== Short- and long-term debt $ 9,703,014 $ 8,747,794 Other liabilities 1,334,158 1,027,884 Equity 2,079,271 1,732,895 ============== ============== Total liabilities and equity $13,116,443 $11,508,573 ============== ============== -- ---------------------------------------------- ------- -------------- ----------- -------------- ---------
--- ----------------------------------------- --- -------------------------------------------------- -------- (Dollar amounts in thousands) Three Months Ended May 31, --------------- ---------- --------------- 1998 1997 --- --------------------------------------------- ------- --------------- ---------- --------------- -------- Statements of Earnings: Revenues $382,167 $282,487 Expenses 261,114 184,518 Provision for income taxes 47,211 37,892 =============== =============== Net earnings $ 73,842 $ 60,077 =============== =============== --- --------------------------------------------- ------- --------------- ---------- --------------- --------
NOTE I - 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 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 becomes effective in fiscal year ended February 28, 2001. The Company has not yet determined the impact on the Consolidated Financial Statements upon adoption of this Standard. NOTE J - SUBSEQUENT EVENTS On June 3, 1998 CHL issued $400 million of Floating Rate Notes due 2003 listed on the Luxembourg Stock Exchange (the "Euro Notes"). On July 13, 1998, CHL entered into a commitment to sell to qualified purchasers an additional $10 million of Euro Notes which are Floating Rate Notes due July 1999 to be listed on the Luxembourg Stock Exchange. The Euro Notes are fully and unconditionally guaranteed by the Company and are to be issued under the Euro Medium Term Note program established by CHL. The maximum aggregate principal amount of Euro Notes outstanding at any one time under the program will not exceed $2.0 billion. The Euro Notes will not be registered under the Securities Act of 1933, as amended (the "Securities Act") and as such, they may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with an exemption from the registration requirements of the Securities Act. On June 30, 1998, the Company filed a shelf registration statement with the Securities and Exchange Commission ("SEC") which provides for the issuance of common stock, preferred stock and debt securities with an aggregate public offering price of up to $2.0 billion.. The Company intends to allocate up to $1.5 billion of the securities issued under this shelf as Series G Medium-Term Notes. The Company intends to use the proceeds from the sale of the medium-term notes for general corporate purposes, which may include retirement of indebtedness of the Company, financing mortgage loan inventory and investment in servicing rights through the current production of loans and the bulk acquisition of contracts to service loans. NOTE K - EARNINGS PER SHARE On February 28, 1998, the Company adopted Statement of Financial Accounting Standards No. 128, Earnings per Share, ("SFAS No. 128") which supersedes Accounting Principles Board Opinion No. 15, of the same name. SFAS No. 128 simplifies the standards for computing earnings per share ("EPS") and makes them comparable to international standards. SFAS No. 128 was effective for financial statements issued for periods ending after December 15, 1997, with earlier application not permitted. Upon adoption, all prior EPS data was restated. Basic EPS 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 months ended May 31, 1998 and 1997, computed under the provisions of SFAS No. 128.
- ------------------------ -- -- ----- ------------------------------------ -- ----- ---- Three Months Ended May 31, -- -- ----- ------------------------------------ -- ----- ---- 1998 1997 --------- --------- --------- ---------- --------- --------- (Dollar amounts in Per-Share Per-Share thousands, except per Net Amount Net Amount share data) Earnings Shares Earnings Shares - ------------------------ --------- --------- --------- --------- ========= ========== Net earnings $90,754 $69,969 ========= ========== Basic EPS Net earnings available to common shareholders $90,754 110,127 $0.82 $69,969 106,257 $0.66 Effect of dilutive stock options - 6,416 - 3,000 --------- --------- ---------- --------- Diluted EPS Net earnings available to common shareholders $90,754 116,543 $0.78 $69,969 109,257 $0.64 ========= ========= ========= ========== ========= --------- - ------------------------ --------- --------- --------- - ---------- --------- ---------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for certain forward-looking statements. This Quarterly Report on Form 10-Q may contain forward-looking statements which 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 banking operations; and (5) competition within the mortgage banking industry. RESULTS OF OPERATIONS Quarter Ended May 31, 1998 Compared to Quarter Ended May 31, 1997 Revenues for the quarter ended May 31, 1998 increased 41% to $450.3 million from $318.6 million for the quarter ended May 31, 1997. Net earnings increased 30% to $90.8 million for the quarter ended May 31, 1998 from $70.0 million for the quarter ended May 31, 1997. The increase in revenues and net earnings for the quarter ended May 31, 1998 compared to the quarter ended May 31, 1997 was primarily attributable to higher loan production volume and greater sales of home equity loans and sub-prime loans for the quarter ended May 31, 1998. An increase in the size of the Company's servicing portfolio and an increase in the income of the non-mortgage banking subsidiaries also contributed to the increase in revenues and net earnings for the quarter ended May 31, 1998 compared to the quarter ended May 31, 1997. These positive factors were partially offset by an increase in amortization of the servicing asset and an increase in expenses for the quarter ended May 31, 1998 over the quarter ended May 31, 1997. The total volume of loans produced increased 123% to $20.9 billion for the quarter ended May 31, 1998 from $9.4 billion for the quarter ended May 31, 1997. The increase in loan production was primarily due to generally lower interest rates that prevailed during the quarter ended May 31, 1998 compared to the quarter ended May 31, 1997, as well as to the continuing expansion of the Company's Consumer Markets and Wholesale Lending Divisions. Refinancings totaled $11.9 billion, or 57% of total fundings, for the quarter ended May 31, 1998, as compared to $2.8 billion, or 30% of total fundings, for the quarter ended May 31, 1997. Fixed-rate mortgage loan production totaled $19.4 billion, or 93% of total fundings, for the quarter ended May 31, 1998, as compared to $6.4 billion, or 68% of total fundings, for the quarter ended May 31, 1997. MANAGEMENT'S DISCUSSION AND ANLAYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Total loan volume in the Company's production Divisions is summarized below.
- ------------------------------------- --------------------------------- -------- (Dollar amounts in millions) Three Months Ended May 31, - ---------------------------------- ------------------------------------ -------- 1998 1997 ------------- ------------- Consumer Markets Division $6,001 $2,347 Wholesale Lending Division 7,462 2,662 Correspondent Lending Division 7,287 4,351 Full Spectrum Lending, Inc. 126 - ============= ============= Total Loan Volume $20,876 $9,360 ============= ============= - -------------------------------------------- ------------- -------- ------------
The factors which affect the relative volume of production among the Company's Divisions include the price competitiveness of each Division's product offerings, the level of mortgage lending activity in each Division's market and the success of each Division's sales and marketing efforts. Included in the Company's total volume of loans produced is $452 million of home equity loans funded in the quarter ended May 31, 1998 and $295 million funded in the quarter ended May 31, 1997. Sub-prime loan production, which is also included in the Company's total production volume, was $521 million in the quarter ended May 31, 1998 and $282 million in the quarter ended May 31, 1997. At May 31, 1998 and 1997, the Company's pipeline of loans in process was $14.6 billion and $5.2 billion, respectively. Historically, approximately 43% to 77% of the pipeline of loans in process has funded. In addition, at May 31, 1998, the Company had committed to make loans in the amount of $1.5 billion, subject to property identification and approval of the loans (the "LOCK 'N SHOP (R) Pipeline"). At May 31, 1997, the LOCK 'N SHOP Pipeline was $2.1 billion. For the quarters ended May 31, 1998 and 1997, the Company received 278,448 and 139,845 new loan applications, respectively, at an average daily rate of $495 million and $222 million, respectively. The factors that affect the percentage of applications received and funded during a given time period include the movement and direction of interest rates, the average length of loan commitments issued, the creditworthiness of applicants, the production Divisions' loan processing efficiency and loan pricing decisions. Loan origination fees increased during the quarter ended May 31, 1998 as compared to the quarter ended May 31, 1997 due to higher production and a change in the Divisional mix. The Consumer Markets and Wholesale Lending Divisions (which, due to their higher cost structure, charge higher origination fees per dollar loaned) comprised a greater percentage of total production in the quarter ended May 31, 1998 than in the quarter ended May 31, 1997. Gain on sale of loans improved in the quarter ended May 31, 1998 as compared to the quarter ended May 31, 1997 primarily due to higher loan production volume and increased sales during the quarter ended May 31, 1998 of higher-margin home equity and sub-prime loans. The sale of home equity loans contributed $17.5 million and $13.2 million to gain on sale of loans in the quarters ended May 31, 1998 and 1997, respectively. Sub-prime loans contributed $16.4 million and $14.8 million to the gain on sale of loans for the quarters ended May 31, 1998 and 1997, respectively. In general, loan origination fees and gain (loss) on sale of loans are affected by numerous factors including the volume and mix of loans produced and sold, loan pricing decisions, interest rate volatility and the general direction of interest rates. Net interest income (interest earned net of interest charges) increased to $11.5 million for the quarter ended May 31, 1998 from $0.3 million for the quarter ended May 31, 1997. Net interest income is principally a function of: (i) net interest income earned from the Company's mortgage loan inventory ($30.0 million and $13.8 million for the quarters ended May 31, 1998 and 1997, respectively); (ii) interest expense related to the Company's investment in servicing rights ($85.8 million and $44.7 million for the quarters ended May 31, 1998 and 1997, respectively) and (iii) interest income earned from the custodial balances associated with the Company's servicing portfolio ($64.6 million and $29.5 million for the quarters ended May 31, 1998 and 1997, respectively). The Company earns interest on, and incurs interest expense to carry, mortgage loans held in inventory. The increase in net interest income from the mortgage loan inventory was primarily attributable to higher production levels. The increase in interest expense on the investment in servicing rights resulted primarily from a larger servicing portfolio and an increase in the payments of interest to certain investors pursuant to customary servicing arrangements with regard to paid-off loans in excess of the interest earned on these loans through their respective payoff dates ("Interest Costs Incurred on Payoffs"). The increase in net interest income earned from the custodial balances was related to an increase in the average custodial balances (caused by growth of the servicing portfolio and an increase in the amount of prepayments) partially offset by a decrease in the earnings rate on custodial balances from the quarter ended May 31, 1997 to the quarter ended May 31, 1998. During the quarter ended May 31, 1998, loan administration income was positively affected by the continued growth of the loan servicing portfolio. At May 31, 1998, the Company serviced $191.6 billion of loans (including $8.3 billion of loans subserviced for others) compared to $163.5 billion (including $4.5 billion of loans subserviced for others) at May 31, 1997, a 17% increase. The growth in the Company's servicing portfolio during the quarter ended May 31, 1998 was the result of loan production volume and the acquisition of bulk servicing rights, partially offset by prepayments, partial prepayments and scheduled amortization of mortgage loans. The weighted average interest rate of the mortgage loans in the Company's servicing portfolio at May 31, 1998 and 1997 was 7.7% and 7.8%, respectively. It is the Company's strategy to build and retain its servicing portfolio because of the returns the Company can earn from such investment and because the Company believes that servicing income is counter-cyclical to loan production income. See "Prospective Trends - Market Factors." During the quarter ended May 31 1998, the prepayment rate of the Company's servicing portfolio was 28% compared to 11% for the quarter ended May 31, 1997. 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 home purchase market. The increase in the prepayment rate from the quarter ended May 31, 1997 to the quarter ended May 31, 1998 was primarily attributable to the increase in refinance activity caused by lower interest rates during the quarter ended May 31, 1998 than during the quarter ended May 31, 1997. The primary means used by the Company to reduce the sensitivity of its earnings to changes in interest rates is through a strong production capability and a growing servicing portfolio. In addition, to mitigate the effect on earnings of 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"). These financial instruments include options on interest rate futures and MBS, interest rate futures, interest rate floors, interest rate swaps (with the Company's maximum payment capped) ("Capped Swaps"), options on interest rate swaps ("Swaptions"), interest rate caps, certain tranches of collateralized mortgage obligations ("CMOs") and options on callable pass-through certificates ("options on CPC"). With the Capped Swaps, the Company receives and pays interest on a specified notional amount. The rate received is fixed; the rate paid is adjustable, is indexed to the London Interbank Offered Rates for U.S. dollar deposits ("LIBOR") and has a specified maximum or "cap". With Swaps, the Company receives and pays interest on a specified notional amount. The rate received is fixed; the rate paid is adjustable and is indexed to LIBOR. With the Swaptions, the Company has the option to enter into a receive-fixed, pay-floating interest rate swap at a future date or to settle the transaction for cash. The CMOs, which consist primarily of P/O securities, have been purchased at deep discounts to their par values. As interest rates decrease, prepayments on the collateral underlying the CMOs should increase. This should result in a decline in the average lives of the P/O securities and a corresponding increase in the present values of their cash flows. Conversely, as interest rates increase, prepayments on the collateral underlying the CMOs should decrease. These changes should result in an increase in the average lives of the P/O securities and a decrease in the present values of their cash flows. An option on CPC gives the holder the right to call a mortgage-backed security at par and receive the remaining cash flows from the particular pool. This option has a one year lockout, meaning it cannot be exercised until the end of the first year. After the lockout period, the option can be exercised at anytime. The Servicing Hedge is designed to protect the value of the investment in mortgage servicing rights ("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, caps, Swaptions, options on CPC and CMOs, the Company is not exposed to loss beyond its initial outlay to acquire the hedge instruments. The Company's exposure to loss on futures is related to changes in the Eurodollar rate over the life of the contract. The Company estimates that its maximum exposure to loss over the contractual term is $16.6 million. With respect to the Capped Swaps contracts entered into by the Company as of May 31, 1998, the Company estimates that its maximum exposure to loss over the contractual term is $23.3 million. With respect to the Swap contracts entered into by the Company as of May 31, 1998, the Company estimates that its maximum exposure to loss over the contractual term is $167.8 million. In the quarter ended May 31, 1998, the Company recognized a net benefit of $0.6 million from its Servicing Hedge. The net benefit included unrealized net gains of $4.6 million and net realized losses of $4.0 million from premium amortization and the sale of various financial instruments that comprise the Servicing Hedge. In the quarter ended May 31, 1997, the Company recognized a net expense of $44.7 million from its Servicing Hedge. The net expense included unrealized losses of $39.2 million and net realized losses of $5.5 million from the sale of various financial instruments that comprise the Servicing Hedge. There can be no assurance that the Servicing Hedge will generate gains in the future, or if gains are generated, that they will fully offset impairment of the MSRs. The Company recorded amortization and impairment of its MSRs in the quarter ended May 31, 1998 totaling $149.3 million (consisting of amortization amounting to $132.9 million and impairment of $16.4 million), compared to $26.0 million of amortization and impairment (consisting of amortization amounting to $65.8 million and recovery of previous impairment of $39.8 million) in the quarter ended May 31, 1997. The factors affecting the amount of amortization and impairment or recovery of the MSRs recorded in an accounting period include the level of prepayments during the period, the change in estimated future prepayments and the amount of Servicing Hedge gains or losses.
Salaries and related expenses are summarized below for the quarters ended May 31, 1998 and 1997. -- --------------------------- -- -- ------ ------------------------------------------------- ----- -- ---- ----- (Dollar amounts in Quarter Ended May 31, 1998 thousands) -- ------ ------------------------------------------------- ----- -- ---- ----- -- --------------------------- -- Production Loan Corporate Other Activities Administration Administration Activities Total -- --------------------------- -- ------------ -- ------------- -- ------------- -- ------------- -- ------------ Base Salaries $43,485 $11,960 $20,211 $7,806 $83,462 Incentive Bonus 33,539 329 5,122 3,640 42,630 Payroll Taxes and Benefits 12,062 2,826 4,274 1,233 20,395 ------------ ------------- ------------- ------------- ------------ Total Salaries and Related Expenses $89,086 $15,115 $29,607 $12,679 $146,487 ============ ============= ============= ============= ------------ Average Number of 4,597 1,839 1,622 641 8,699 Employees -- --------------------------- -- ------------ -- ------------- -- ------------- -- ------------- -- ------------
-- --------------------------- -- -- ------ ------------------------------------------------- ----- -- ---- ----- (Dollar amounts in Quarter Ended May 31, 1997 thousands) -- ------ ------------------------------------------------- ----- -- ---- ----- -- --------------------------- -- Production Loan Corporate Other Activities Administration Administration Activities Total -- --------------------------- -- ------------ -- ------------- -- ------------- -- ------------- -- ------------ Base Salaries $28,562 $10,754 $16,057 $5,258 $60,631 Incentive Bonus 11,692 267 4,248 2,062 18,269 Payroll Taxes and Benefits 4,945 2,115 1,558 523 9,141 ------------ ------------- ------------- ------------- ------------ Total Salaries and Related Expenses $45,199 $13,136 $21,863 $ 7,843 $88,041 ============ ============= ============= ============= ------------ Average Number of 2,851 1,622 1,291 393 6,157 Employees -- --------------------------- -- ------------ -- ------------- -- ------------- -- ------------- -- ------------
The amount of salaries increased during the quarter ended May 31, 1998 reflecting the Company's strategy of expanding and enhancing its Consumer Markets and Wholesale branch networks, including new retail sub-prime branches. In addition, a larger servicing portfolio and growth in the Company's non-mortgage banking subsidiaries also contributed to the increase. Incentive bonuses earned during the quarter ended May 31, 1998 increased primarily due to higher production and a change in production mix. Occupancy and other office expenses for the quarter ended May 31, 1998 increased to $62.7 million from $38.1 million for the quarter ended May 31, 1997 primarily due to: (i) the continued effort by the Company to expand its retail branch network, particularly outside of California; (ii) higher loan production; (iii) a larger servicing portfolio; and (iv) growth in the Company's non-mortgage banking activities. Guarantee fees represent fees paid to guarantee timely and full payment of principal and interest on MBS and whole loans sold to permanent investors and to transfer the credit risk of the loans in the servicing portfolio. For the quarter ended May 31, 1998, guarantee fees increased 5% to $44.7 million from $42.6 million for the quarter ended May 31, 1997. The increase resulted from an increase in the servicing portfolio, changes in the mix of permanent investors and terms negotiated at the time of loan sales. Marketing expenses for the quarter ended May 31, 1998 increased 41% to $14.5 million from $10.3 million for the quarter ended May 31, 1997, reflecting the Company's continued implementation of a marketing plan to increase consumer brand awareness of the Company in the residential mortgage market. Other operating expenses for the quarter ended May 31, 1998 increased from the quarter ended May 31, 1997 by $8.2 million, or 33%. This increase was due primarily to higher loan production, a larger servicing portfolio, increased systems development and growth in the Company's non-mortgage banking subsidiaries in the quarter ended May 31, 1998 as compared to the quarter ended May 31, 1997. Profitability of Loan Production and Servicing Activities In the quarter ended May 31, 1998, the Company's pre-tax earnings from its loan production activities (which include loan origination and purchases, warehousing and sales) were $136.0 million. In the quarter ended May 31, 1997, the Company's comparable pre-tax earnings were $45.7 million. The increase of $90.3 million was primarily attributable to increased production, a shift in production mix towards Consumer Markets and Wholesale Divisions and greater sales of higher-margin home equity and sub-prime loans at significantly higher margins than prime credit quality first mortgages. These positive results were partially offset by higher production costs. In the quarter ended May 31, 1998, the Company's pre-tax loss from its loan servicing activities (which include administering the loans in the servicing portfolio, selling homeowners and other insurance, acting as tax payment agent, marketing foreclosed properties and acting as reinsurer) was $0.6 million as compared to pre-tax income of $59.7 million in the quarter ended May 31, 1997. The decrease of $60.3 million was primarily attributed to the increased amortization of the servicing asset and Interest Costs Incurred on Payoffs due to declining interest rates and increase in prepayments from May 31, 1997 to May 31, 1998. These negative factors were partially offset by the increase in servicing fees, miscellaneous income and interest earned on escrow balances derived by the larger servicing portfolio. Profitability of Other Activities In addition to loan production and loan servicing, the Company offers ancillary products and services related to its mortgage banking activities. These include title insurance and escrow services, home appraisals, securities brokerage and servicing rights brokerage. For the quarter ended May 31, 1998, these activities contributed $13.4 million to the Company's pre-tax income compared to $9.4 million for the quarter ended May 31, 1997. This increase in pre-tax income primarily results from improved performance of the title insurance, escrow and capital markets businesses. QUANTITATIVE 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 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 the quarter ended May 31, 1998, the Company estimates that a permanent 0.50% reduction in interest rates, all else being constant, would result in a $16 million after-tax loss related to its trading securities and a $18 million after-tax loss related to its other financial instruments, for the fiscal year ended February 28, 1999. The Company estimates that this combined after-tax loss of $34 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 and do not incorporate other factors that would impact the Company's financial performance in such a scenario. Consequently, the preceding estimates should not be viewed as a forecast. INFLATION Inflation affects the Company in the areas of loan production and servicing. Interest rates normally increase during periods of high inflation and decrease during periods of low inflation. Historically, as interest rates increase, loan production, particularly from loan refinancings, decreases, 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, servicing-related earnings are enhanced because prepayment rates tend to slow down thereby extending the average life of the Company's servicing portfolio and reducing amortization and impairment of the MSRs, decreasing Interest Costs Incurred on Payoffs 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 then-current interest rates), thereby decreasing the average life of the Company's servicing portfolio and adversely impacting its servicing-related earnings primarily due to increased amortization and impairment of the MSRs, a decreased rate of interest earned from the custodial balances and increased Interest Costs Incurred on Payoffs. The impacts of changing interest rates on servicing-related earnings are reduced by performance of the Servicing Hedge, which is designed to mitigate the impact on earnings of impairment that may result from declining interest rates. SEASONALITY The mortgage banking industry is generally subject to seasonal trends. These trends reflect the general national pattern of sales and resales of homes, although refinancings tend to be less seasonal and more closely related to changes in interest rates. Sales and resales of homes typically peak during the spring and summer seasons and decline to lower levels from mid-November through February. 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 loan funding activities and the investment in servicing rights. To meet these needs, the Company currently utilizes commercial paper supported by the revolving credit facility, medium-term notes, MBS repurchase agreements, subordinated notes, pre-sale funding facilities, an optional cash purchase feature in the dividend reinvestment plan, redeemable capital trust pass-through securities 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 the revolving credit facility and public offerings of common and preferred stock. 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, current ratio and other financial covenants. These provisions have not had, and are not expected to have, an adverse impact on the ability of the Company and CHL to pay dividends. The Company continues to investigate and pursue alternative and supplementary methods to finance its operations through the public and private capital markets. These may include such methods as mortgage loan sale transactions designed to expand the Company's financial capacity and reduce its cost of capital and the securitization of servicing income cash flows. 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 to investors the mortgage loans it originates and purchases but generally retains the right to service the loans, thereby increasing the Company's investment in loan servicing rights. The Company views the sale of loans on a servicing-retained basis in part as an investment vehicle. 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 quarter ended May 31, 1998, the Company's operating activities used cash of approximately $0.5 billion on a short-term basis primarily to support the increase in its mortgage loans and MBS held for sale. Mortgage loans and MBS held for sale are generally financed with short-term borrowings. In the quarter ended May 31, 1997, operating activities used approximately $1.9 billion on a short-term basis primarily to support the increase in its mortgage loans and MBS held for sale. Investing Activities The primary investing activity for which cash was used by the Company was the investment in servicing. Net cash used by investing activities was $0.4 billion for the quarter ended May 31, 1998 and $0.2 billion for the quarter ended May 31, 1997. Financing Activities Net cash provided by financing activities amounted to $1.0 billion for the quarter ended May 31, 1998. Net cash provided by financing activities amounted to $2.1 billion for the quarter ended May 31, 1997. The increase in cash flow from financing activities was primarily the result of net short-term and long-term debt issuance or repayment by the Company. PROSPECTIVE TRENDS Applications and Pipeline of Loans in Process For the month ended June 30, 1998, the Company received new loan applications at an average daily rate of $505 million and at June 30, 1998, the Company's pipeline of loans in process was $14.7 billion. This compares to a daily application rate in the month end June 30, 1997 of $232 million and a pipeline of loans in process at June 30, 1997 of $5.3 billion. The size of the pipeline is generally an indication of the level of 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 at June 30, 1998 was $1.4 billion and at June 30, 1997 was $1.5 billion. Future application levels and loan fundings are dependent on numerous factors, including the level of demand for mortgage credit, the extent of price competition in the market, the direction of interest rates, seasonal factors and general economic conditions. Market Factors Loan production increased 123% from quarter ended May 31, 1997 to quarter ended May 31, 1998. This increase was primarily due to several factors. First, mortgage interest rates generally decreased in the quarter ended May 31, 1998. Second, sub-prime and home equity loan fundings, which are generally less sensitive to interest rate fluctuations than prime credit quality first mortgages, increased from the quarter ended May 31, 1997 to the quarter ended May 31, 1998. Further, home purchase market activity was stronger during the quarter ended May 31, 1998 than in the quarter ended May 31, 1997. The prepayment rate in the servicing portfolio increased from 11% for the quarter ended May 31, 1997 to 28% for the quarter ended May 31, 1998 due to lower interest rates in the quarter ended May 31, 1998 than in the quarter ended May 31, 1997. The Company's primary competitors are commercial banks, savings and loans, mortgage banking subsidiaries of diversified companies, as well as other mortgage bankers. Over the past three years, certain commercial banks have expanded their mortgage banking operations through acquisition of formerly independent mortgage banking companies or through internal growth. The Company believes that these transactions and activities have not had a material impact on the Company or on the degree of competitive pricing in the market. The Company's California mortgage loan production (measured by principal balance) constituted 26% of its total production during the quarter ended May 31, 1998 and 24% during the quarter ended May 31, 1997. The Company is continuing its efforts to expand its production capacity outside of California. Some regions in which the Company operates have experienced slower economic growth, and real estate financing activity in these regions has been negatively impacted. As a result, home lending activity for single- (one-to-four) family residences in these regions may also have experienced slower growth. To the extent that any geographic region's mortgage loan production constitutes a significant portion of the Company's production, there can be no assurance that the Company's operations will not be adversely affected if that region experiences slow or negative economic growth resulting in decreased residential real estate lending activity, or market factors further impact the Company's competitive position in that region. The delinquency rate in the Company-owned servicing portfolio decreased to 3.38% at May 31, 1998 from 3.53% at May 31, 1997. The proportion of government and high loan-to-value conventional loans, which tend to experience higher delinquency rates than low loan-to-value conventional loans, was 47% and 49% of the portfolio at May 31, 1998 and May 31, 1997, respectively. In addition, the weighted average age of the portfolio is 30 months at May 31, 1998, up from 29 months at May 31, 1997. Delinquency rates tend to increase as loans age, generally reaching a peak at three to five years of age. However, because the loans in the portfolio are generally serviced on a non-recourse basis, the Company's exposure to credit loss resulting from increased delinquency rates is substantially limited. Further, related late charge income has historically been sufficient to offset incremental servicing expenses resulting from an increased delinquency rate. The percentage of loans in the Company's owned servicing portfolio that are in foreclosure decreased to 0.39% at May 31, 1998 from 0.70% at May 31, 1997 primarily due to the sale of $644 million of defaulted mortgage loans on February 27, 1998. Generally, the Company is not exposed to credit risk. Because the Company services substantially all conventional loans on a non-recourse basis, foreclosure losses are generally the responsibility of the investor or insurer and not the Company. The Company retains credit risk on the home equity and sub-prime loans it sells in the form of pools backing securities. As such, through retention of a subordinated interest in the trust, the Company bears primary responsibility for credit losses on the loans. At May 31, 1998, the Company had investments in such subordinated interests amounting to $253 million, which represents the maximum exposure to credit losses on the securitized home equity and sub-prime loans. While the Company generally does not 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 the 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 (28% of the Company's servicing portfolio at May 31, 1998) 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. Servicing Hedge As previously discussed, the Company's Servicing Hedge is designed to protect the value of its investment in servicing rights 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. There can be no assurance that, in periods of increasing interest rates, the increase in value of the MSRs will offset the amount of Servicing Hedge expense; or in periods of declining interest rates, that the Company's Servicing Hedge will generate gains, or if gains are generated, that they will fully offset impairment of the MSRs. 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 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 is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. The Company has not yet determined the impact upon adoption of this Standard. Year 2000 Compliance The Company has made and will continue to make investments to identify, modify or replace any computer systems which are not Year 2000 compliant and to address other issues associated with the change of the millennium. These costs are being expensed by the Company during the period in which they are incurred. The financial impact to the Company of implementing the systems changes necessary to become Year 2000 compliant has not been and is not anticipated to be material to its financial position or results of operations in any given year. However, the Company's expectations about future costs associated with the Year 2000 are subject to uncertainties that could cause the actual results to differ materially from the Company's expectations. Factors that could influence the amount and timing of future costs include the success of the Company in identifying systems and programs that are not Year 2000 compliant, the nature and amount of programming required to upgrade or replace each of the affected programs, the availability, rate and magnitude of related labor and consulting costs and the success of the Company's business partners, vendors and clients in addressing the Year 2000 issue. PART II. OTHER INFORMATION Item 5. Other Information Any proposal that a stockholder wishes to present for consideration at the 1999 Annual Meeting of Stockholders must be received by the Company no later than February 9, 1999 for inclusion in the 1999 Notice of Annual Meeting, Proxy Statement and Proxy. Any other proposal that a stockholder wishes to bring before the 1999 Annual Meeting of Stockholders must also be received by the Company no later than February 9, 1999. All proposals must comply with the applicable requirements or conditions established by the Securities and Exchange Commission and Article II, Section 13 of the Company's Bylaws, which requires among other things, certain information to be provided in connection with the submission of stockholder proposals. All proposals must be directed to the Secretary of the Company at 4500 Park Granada, MSN CH-19, Calabasas, California 91302. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 4.15 Trust Deed dated 1st May, 1998 among CHL, the Company and Bankers Trustee Company Limited, as Trustee for Euro Medium Notes of CHL. 10.5.1 Supplemental Form of Countrywide Credit Industries, Inc. Deferred Compensation Agreement for Non-Employee Directors. 10.8.1 Revolving Credit Agreement dated as of the 15th day of April, 1998, by and among Countrywide Home Loans, Inc., Royal Bank of Canada, The Bank of New York, Morgan Guaranty Trust Company of New York, Credit Lyonnais, San Francisco Branch and the Lenders Party Thereto. 10.11.4 Fourth Amendment to the 1987 Stock Option Plan as Amended and Restated. 10.20.8 Eighth Amendment to the 1991 Stock Option Plan. 10.21.3 Third Amendment to the 1992 Stock Option Plan. 10.22.4 Fourth Amendment to the Amended and Restated 1993 Stock Option 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 with the electronic filing with the SEC). (b) Reports on Form 8-K. None. Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. COUNTRYWIDE CREDIT INDUSTRIES, INC. (Registrant) DATE: July 14, 1998 -------------------------------------- Stanford L. Kurland Senior Managing Director and Chief Operating Officer DATE: July 14, 1998 -------------------------------------- Carlos M. Garcia Managing Director; Chief Financial Officer and Chief Accounting Officer (Principal Financial Officer and Principal Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. COUNTRYWIDE CREDIT INDUSTRIES, INC. (Registrant) DATE: July 14, 1998 /s/ Stanford L. Kurland ------------------------------- Senior Managing Director and Chief Operating Officer DATE: July 14, 1998 /s/ Carlos M. Garcia -------------------------------- Managing Director; Chief Financial Officer and Chief Accounting Officer (Principal Financial Officer and Principal Accounting Officer) EXHIBIT INDEX Exhibit Number Document Description 4.15 Trust Deed dated 1st May, 1998 among CHL, the Company and Bankers Trustee Company Limited, as Trustee for Euro Medium Notes of CHL. 10.5.1 Supplemental Form of Countrywide Credit Industries, Inc. Deferred Compensation Agreement for Non-Employee Directors. 10.8.1 Revolving Credit Agreement dated as of the 15th day of April, 1998, by and among Countrywide Home Loans, Inc., Royal Bank of Canada, The Bank of New York, Morgan Guaranty Trust Company of New York, Credit Lyonnais, San Francisco Branch and the Lenders Party Thereto. 10.11.4 Fourth Amendment to the 1987 Stock Option Plan as Amended and Restated. 10.20.8 Eighth Amendment to the 1991 Stock Option Plan. 10.21.3 Third Amendment to the 1992 Stock Option Plan. 10.22.4 Fourth Amendment to the Amended and Restated 1993 Stock Option 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 with the electronic filing with the SEC). EX-4 2 TRUST DEED DATED MAY 1, 1998 THIS TRUST DEED is made on 1st May, 1998 BETWEEN: (1) COUNTRYWIDE HOME LOANS, INC., a company incorporated with limited liability in the State of New York, whose principal office is at 4500 Park Granada, Calabasas, California 91302, United States of America (the "Issuer"); (2) COUNTRYWIDE CREDIT INDUSTRIES, INC., a company incorporated with limited liability in the State of Delaware, whose principal office is at 4500 Park Granada aforesaid (the "Guarantor"); and (3) BANKERS TRUSTEE COMPANY LIMITED, a company incorporated with limited liability in England and Wales, whose registered office is at 1 Appold Street, Broadgate, London EC2A 2HE, England (the "Trustee", which expression shall, wherever the context so admits, include such company and all other persons or companies for the time being the trustee or trustees of these presents) as trustee for the Noteholders, the Receiptholders and the Couponholders (each as defined below). WHEREAS: (1) By a resolution of the Board of Directors of the Issuer passed on 1st April, 1998 the Issuer has resolved to establish a Euro Medium Term Note Programme pursuant to which the Issuer may from time to time issue Notes as set out herein. Notes up to a maximum nominal amount (calculated in accordance with Clause 3(5) of the Programme Agreement (as defined below)) from time to time outstanding of U.S.$2,000,000,000 (subject to increase as provided in the Programme Agreement) (the "Programme Limit") may be issued pursuant to the said Programme. (2) By a resolution of the Board of Directors of the Guarantor passed on 24th March, 1998 the Guarantor has resolved to guarantee all Notes issued under the said Programme and to enter into certain covenants as set out in this Trust Deed. (3) The Trustee has agreed to act as trustee of these presents for the benefit of the Noteholders, the Receiptholders and the Couponholders upon and subject to the terms and conditions of these presents. NOW THIS TRUST DEED WITNESSES AND IT IS AGREED AND DECLARED as follows: 1. DEFINITIONS (A) IN these presents unless there is anything in the subject or context inconsistent therewith the following expressions shall have the following meanings: "Agency Agreement" means the agreement dated 1st May, 1998, as amended and/or supplemented and/or restated from time to time, pursuant to which the Issuer and the Guarantor have appointed the Agent and the other Paying Agents in relation to all or any Series of the Notes and any other agreement for the time being in force appointing another Agent or further or other Paying Agents in relation to all or any Series of the Notes, or in connection with their duties, the terms of which have previously been approved in writing by the Trustee, together with any agreement for the time being in force amending or modifying with the prior written approval of the Trustee any of the aforesaid agreements; "Agent" means, in relation to all or any Series of the Notes, Bankers Trust Company at its office at 1 Appold Street, London EC2A 2HE, England, or, if applicable, any Successor agent in relation thereto which shall become such pursuant to the provisions of the Agency Agreement; "Appointee" means any attorney, manager, agent, delegate or other person appointed by the Trustee under these presents; "Auditors" means the auditors for the time being of the Issuer or, as the case may be, the Guarantor or, in the event of their being unable or unwilling promptly to carry out any action requested of them pursuant to the provisions of these presents, such other firm of accountants as may be nominated or approved by the Trustee for the purposes of these presents; "Calculation Agent" means, in relation to all or any Series of the Notes, the person appointed as such from time to time pursuant to the provisions of the Agency Agreement or, if applicable, any Successor calculation agent in relation thereto which shall become such pursuant to the provisions of the Agency Agreement; "Cedel Bank" means Cedel Bank, societe anonyme; "Conditions" means, in relation to the Notes of any Series, the terms and conditions endorsed on or incorporated by reference into the Note or Notes constituting such Series, such terms and conditions being in or substantially in the form set out in the First Schedule or in such other form, having regard to the terms of issue of the Notes of the relevant Series, as may be agreed between the Issuer, the Agent, the Trustee and the relevant Dealer(s) as modified and supplemented by the Pricing Supplement applicable to the Notes of the relevant Series, in each case as from time to time modified in accordance with the provisions of these presents; "Couponholders" means the several persons who are for the time being holders of the Coupons and includes, where applicable, the Talonholders; "Coupon" means an interest coupon appertaining to a Definitive Note (other than a Zero Coupon Note), such coupon being: (i) if appertaining to a Fixed Rate Note, in the form or substantially in the form set out in Part V A of the Second Schedule or in such other form, having regard to the terms of issue of the Notes of the relevant Series, as may be agreed between the Issuer, the Agent, the Trustee and the relevant Dealer(s); or (ii) if appertaining to a Floating Rate Note or an Indexed Interest Note, in the form or substantially in the form set out in Part V B of the Second Schedule or in such other form, having regard to the terms of issue of the Notes of the relevant Series, as may be agreed between the Issuer, the Agent, the Trustee and the relevant Dealer(s); or (iii) if appertaining to a Definitive Note which is neither a Fixed Rate Note nor a Floating Rate Note nor an Indexed Interest Note, in such form as may be agreed between the Issuer, the Agent, the Trustee and the relevant Dealer(s), and includes, where applicable, the Talon(s) appertaining thereto and any replacements for Coupons and Talons issued pursuant to Condition 10; "Dealers" means ABN AMRO Bank N.V., Banque Lehman Brothers, Banque Paribas, Barclays de Zoete Wedd Limited, Countrywide Securities Corporation, Deutsche Bank AG London, Goldman Sachs International, Lehman Brothers International (Europe), Merrill Lynch International, J.P. Morgan Securities Ltd., Morgan Stanley & Co. International Limited and Salomon Brothers International Limited and any other entity which the Issuer may appoint as a Dealer and notice of whose appointment has been given to the Agent and the Trustee by the Issuer in accordance with the provisions of the Programme Agreement but excluding any entity whose appointment has been terminated in accordance with the provisions of the Programme Agreement and notice of which termination has been given to the Agent and the Trustee by the Issuer in accordance with the provisions of the Programme Agreement and references to a "relevant Dealer" or "relevant Dealer(s)" mean, in relation to any Tranche or Series of Notes, the Dealer or Dealers with whom the Issuer has agreed the issue of the Notes of such Tranche or Series and "Dealer" means any one of them; "Definitive Note" means a Note in definitive form issued or, as the case may require, to be issued by the Issuer in accordance with the provisions of the Programme Agreement or any other agreement between the Issuer and the relevant Dealer(s), the Agency Agreement and these presents in exchange for either a Temporary Global Note or part thereof or a Permanent Global Note (all as indicated in the applicable Pricing Supplement), such Note in definitive form being in the form or substantially in the form set out in Part III of the Second Schedule with such modifications (if any) as may be agreed between the Issuer, the Agent, the Trustee and the relevant Dealer(s) and having the Conditions endorsed thereon or, if permitted by the relevant Stock Exchange, incorporating the Conditions by reference (where applicable to this Trust Deed) as indicated in the applicable Pricing Supplement and having the relevant information supplementing, replacing or modifying the Conditions appearing in the applicable Pricing Supplement endorsed thereon or attached thereto and (except in the case of a Zero Coupon Note in bearer form) having Coupons and, where appropriate, Receipts and/or Talons attached thereto on issue; "Dual Currency Note" means a Note in respect of which payments of principal and/or interest are made or to be made in such different currencies, and at rates of exchange calculated upon such basis or bases, as the Issuer and the relevant Dealer(s) may agree (as indicated in the applicable Pricing Supplement); "Early Redemption Amount" has the meaning ascribed thereto in Condition 6(e); "Euroclear" means Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear System; "Event of Default" means any of the conditions, events or acts provided in Condition 9 to be Events of Default (being events upon the happening of which the Notes of any Series would, subject only to notice by the Trustee as therein provided, become immediately due and repayable); "Extraordinary Resolution" has the meaning ascribed thereto in paragraph 20 of the Third Schedule; "Fixed Rate Note" means a Note on which interest is calculated at a fixed rate payable in arrear on a fixed date or fixed dates in each year and on redemption or on such other dates as may be agreed between the Issuer and the relevant Dealer(s) (as indicated in the applicable Pricing Supplement); "Floating Rate Note" means a Note on which interest is calculated at a floating rate payable one-, two-, three-, six- or twelve-monthly or in respect of such other period or on such date(s) as may be agreed between the Issuer and the relevant Dealer(s) (as indicated in the applicable Pricing Supplement); "Global Note" means a Temporary Global Note and/or a Permanent Global Note, as the context may require; "Indexed Interest Note" means a Note in respect of which the amount payable in respect of interest is calculated by reference to an index and/or a formula as the Issuer and the relevant Dealer(s) may agree (as indicated in the applicable Pricing Supplement); "Indexed Note" means an Indexed Interest Note and/or an Indexed Redemption Amount Note, as applicable; "Indexed Redemption Amount Note" means a Note in respect of which the amount payable in respect of principal is calculated by reference to an index and/or a formula as the Issuer and the relevant Dealer(s) may agree (as indicated in the applicable Pricing Supplement); "Interest Commencement Date" means, in the case of interest-bearing Notes, the date specified in the applicable Pricing Supplement from (and including) which such Notes bear interest, which may or may not be the Issue Date; "Interest Payment Date" means, in relation to any Floating Rate Note or Indexed Interest Note, either: (i) the date which falls the number of months or other period specified as the "Specified Period" in the applicable Pricing Supplement after the preceding Interest Payment Date or the Interest Commencement Date (in the case of the first Interest Payment Date); or (ii) such date or dates as are indicated in the applicable Pricing Supplement; "Issue Date" means, in respect of any Note, the date of issue and purchase of such Note pursuant to and in accordance with the Programme Agreement or any other agreement between the Issuer and the relevant Dealer(s), being in the case of any Definitive Note represented initially by a Temporary Global Note the same date as the date of issue of the Temporary Global Note which initially represented such Note; "Issue Price" means the price, generally expressed as a percentage of the nominal amount of the Notes, at which the Notes will be issued; "Liability" means any loss, damage, cost, charge, claim, demand, expense, judgment, action, proceeding or other liability whatsoever (including, without limitation, in respect of taxes, duties, levies, imposts and other charges) and including any value added tax or similar tax charged or chargeable in respect thereof and legal fees and expenses provided that such legal fees and expenses shall have been properly incurred; "London Business Day" has the meaning set out in Condition 5(c); "Maturity Date" means the date on which a Note is expressed to be redeemable; "month" means calendar month; "Note" means a note issued pursuant to the Programme and denominated in such currency or currencies as may be agreed between the Issuer and the relevant Dealer(s) which: (i) has such maturity as may be agreed between the Issuer and the relevant Dealer(s), subject to such minimum or maximum maturity as may be allowed or required from time to time by the relevant central bank (or equivalent body) or any laws or regulations applicable to the Issuer or the relevant currency; and (ii) has such denomination as may be agreed between the Issuer and the relevant Dealer(s), subject to such minimum denomination as may be allowed or required from time to time by the relevant central bank (or equivalent body) or any laws or regulations applicable to the relevant currency, issued or to be issued by the Issuer pursuant to the Programme Agreement or any other agreement between the Issuer and the relevant Dealer(s), the Agency Agreement and these presents and which shall initially be represented by, and comprised in, either a Temporary Global Note which may (in accordance with the terms of such Temporary Global Note) be exchanged for Definitive Notes or a Permanent Global Note, which Permanent Global Note may (in accordance with the terms of such Permanent Global Note) in turn be exchanged for Definitive Notes and includes any replacements for a Note issued pursuant to Condition 10; "Noteholders" means the several persons who are for the time being bearers of outstanding Notes save that, in respect of the Notes of any Series, for so long as such Notes or any part thereof are represented by a Global Note deposited with a common depositary for Euroclear and Cedel Bank, each person who is for the time being shown in the records of Euroclear or Cedel Bank (other than Cedel Bank, if Cedel Bank shall be an accountholder of Euroclear and Euroclear, if Euroclear shall be an accountholder of Cedel Bank) as the holder of a particular nominal amount of the Notes of such Series shall be deemed to be the holder of such nominal amount of such Notes (and the holder of the relevant Global Note shall be deemed not to be the holder) for all purposes of these presents other than with respect to the payment of principal or interest on such nominal amount of such Notes, the rights to which shall be vested, as against the Issuer and the Trustee, solely in such common depositary and for which purpose such common depositary shall be deemed to be the holder of such nominal amount of such Notes in accordance with and subject to its terms and the provisions of these presents and the expressions "Noteholder", "holder" and "holder of Notes" and related expressions shall be construed accordingly; "notice" means, in respect of a notice to be given to Noteholders, a notice validly given pursuant to Condition 13; "outstanding" means, in relation to the Notes of all or any Series, all the Notes of such Series issued other than: (a) those Notes which have been redeemed pursuant to these presents; (b) those Notes in respect of which the date for redemption in accordance with the Conditions has occurred and the redemption moneys (including all interest payable thereon) have been duly paid to the Trustee or to the Agent in the manner provided in the Agency Agreement (and where appropriate notice to that effect has been given to the relative Noteholders in accordance with Condition 13) and remain available for payment against presentation of the relevant Notes and/or Receipts and/or Coupons; (c) those Notes which have been purchased and cancelled in accordance with Conditions 6(h) and 6(i); (d) those Notes which have become void under Condition 8; (e) those mutilated or defaced Notes which have been surrendered and cancelled and in respect of which replacements have been issued pursuant to Condition 10; (f) (for the purpose only of ascertaining the nominal amount of the Notes outstanding and without prejudice to the status for any other purpose of the relevant Notes) those Notes which are alleged to have been lost, stolen or destroyed and in respect of which replacements have been issued pursuant to Condition 10; and (g) any Temporary Global Note to the extent that it shall have been exchanged for Definitive Notes or a Permanent Global Note and any Permanent Global Note to the extent that it shall have been exchanged for Definitive Notes in each case pursuant to its provisions, the provisions of these presents and the Agency Agreement; PROVIDED THAT for each of the following purposes, namely: (i) the right to attend and vote at any meeting of the holders of the Notes of any Series; (ii) the determination of how many and which Notes of any Series are for the time being outstanding for the purposes of Clause 9(A), Conditions 9 and 14 and paragraphs 2, 5, 6 and 9 of the Third Schedule; (iii) any discretion, power or authority (whether contained in these presents or vested by operation of law) which the Trustee is required, expressly or impliedly, to exercise in or by reference to the interests of the holders of the Notes of any Series; and (iv) the determination by the Trustee whether any event, circumstance, matter or thing is, in its opinion, materially prejudicial to the interests of the holders of the Notes of any Series, those Notes of the relevant Series (if any) which are for the time being held by or on behalf of the Issuer, the Guarantor or any of its other Subsidiaries, in each case as beneficial owner, shall (unless and until ceasing to be so held) be deemed not to remain outstanding; "Paying Agents" means, in relation to all or any Series of the Notes, the several institutions (including, where the context permits, the Agent) at their respective specified offices initially appointed as paying agents in relation to such Notes by the Issuer and the Guarantor pursuant to the Agency Agreement and/or, if applicable, any Successor paying agents at their respective specified offices for all or any Series of the Notes; "Permanent Global Note" means a global note in the form or substantially in the form set out in Part II of the Second Schedule with such modifications (if any) as may be agreed between the Issuer, the Agent, the Trustee and the relevant Dealer(s), together with the copy of the applicable Pricing Supplement annexed thereto, comprising some or all of the Notes of the same Series, issued by the Issuer pursuant to the Programme Agreement or any other agreement between the Issuer and the relevant Dealer(s), the Agency Agreement and these presents; "Potential Event of Default" means any condition, event or act which, with the lapse of time and/or the issue, making or giving of any notice, certification, declaration, demand, determination and/or request and/or the taking of any similar action and/or the fulfilment of any similar condition, would constitute an Event of Default; "Pricing Supplement" has the meaning set out in the Programme Agreement; "Programme" means the Euro Medium Term Note Programme established by, or otherwise contemplated in, the Programme Agreement; "Programme Agreement" means the agreement of even date herewith between the Issuer, the Guarantor and the Dealers named therein concerning the purchase of Notes to be issued pursuant to the Programme together with any agreement for the time being in force amending, replacing, novating or modifying such agreement; "Receipt" means a receipt attached on issue to a Definitive Note redeemable in instalments for the payment of an instalment of principal, such receipt being in the form or substantially in the form set out in Part IV of the Second Schedule or in such other form as may be agreed between the Issuer, the Agent, the Trustee and the relevant Dealer(s) and includes any replacements for Receipts issued pursuant to Condition 10; "Receiptholders" means the several persons who are for the time being holders of the Receipts; "Reference Banks" means the several banks initially appointed as reference banks in relation to the Notes of any relevant Series and/or, if applicable, any Successor reference banks in relation to such Notes; "Relevant Date" has the meaning set out in Condition 7; "repay", "redeem" and "pay" shall each include both the others and cognate expressions shall be construed accordingly; "Series" means a Tranche of Notes together with any further Tranche or Tranches of Notes which are (i) expressed to be consolidated and form a single series and (ii) identical in all respects (including as to listing) except for their respective Issue Dates, Interest Commencement Dates and/or Issue Prices and the expressions "Notes of the relevant Series", "holders of Notes of the relevant Series" and related expressions shall be construed accordingly; "Stock Exchange" means the Luxembourg Stock Exchange, or any other or further stock exchange(s) on which any Notes may from time to time be listed, and references in these presents to the "relevant Stock Exchange" shall, in relation to any Notes, be references to the Stock Exchange on which such Notes are, from time to time, or are intended to be, listed; "Subsidiary" means any company which is for the time being a subsidiary (within the meaning of Section 736 of the Companies Act 1985 of Great Britain) or a subsidiary undertaking (within the meaning of Section 258 and Schedule 10A of the Companies Act 1985 of Great Britain); "Successor" means, in relation to the Agent, the other Paying Agents, the Reference Banks and the Calculation Agent, any successor to any one or more of them in relation to the Notes which shall become such pursuant to the provisions of these presents and/or the Agency Agreement (as the case may be) and/or such other or further agent, paying agents, reference banks or calculation agent (as the case may be) in relation to the Notes as may (with the prior approval of, and on terms previously approved by, the Trustee in writing) from time to time be appointed as such, and/or, if applicable, such other or further specified offices (in the former case being within the same city as those for which they are substituted) as may from time to time be nominated, in each case by the Issuer and the Guarantor and (except in the case of the initial appointments and specified offices made under and specified in the Conditions and/or the Agency Agreement, as the case may be) notice of whose appointment or, as the case may be, nomination has been given to the Noteholders; "Talonholders" means the several persons who are for the time being holders of the Talons; "Talons" means the talons (if any) appertaining to, and exchangeable in accordance with the provisions therein contained for further Coupons appertaining to, the Definitive Notes (other than the Zero Coupon Notes), such talons being in the form or substantially in the form set out in Part VI of the Second Schedule or in such other form as may be agreed between the Issuer, the Agent, the Trustee and the relevant Dealer(s) and includes any replacements for Talons issued pursuant to Condition 10; "Temporary Global Note" means a temporary global note in the form or substantially in the form set out in Part I of the Second Schedule with such modifications (if any) as may be agreed between the Issuer, the Agent, the Trustee and the relevant Dealer(s), together with the copy of the applicable Pricing Supplement annexed thereto, comprising some or all of the Notes of the same Series, issued by the Issuer pursuant to the Programme Agreement or any other agreement between the Issuer and the relevant Dealer(s), the Agency Agreement and these presents; "these presents" means this Trust Deed and the Schedules and any trust deed supplemental hereto and the Schedules (if any) thereto and the Notes, the Receipts, the Coupons, the Talons, the Conditions and, unless the context otherwise requires, the Pricing Supplements, all as from time to time modified in accordance with the provisions herein or therein contained; "Tranche" means all Notes which are identical in all respects (including as to listing); "Trust Corporation" means a corporation entitled by rules made under the Public Trustee Act 1906 of Great Britain or entitled pursuant to any other comparable legislation applicable to a trustee in any other jurisdiction to carry out the functions of a custodian trustee; "Zero Coupon Note" means a Note on which no interest is payable; words denoting the singular shall include the plural and vice versa; words denoting one gender only shall include the other genders; and words denoting persons only shall include firms and corporations and vice versa. (B) (i) All references in these presents to principal and/or principal amount and/or interest in respect of the Notes or to any moneys payable by the Issuer and/or the Guarantor under these presents shall, unless the context otherwise requires, be construed in accordance with Condition 6(e). (ii) All references in these presents to any statute or any provision of any statute shall be deemed also to refer to any statutory modification or re-enactment thereof or any statutory instrument, order or regulation made thereunder or under any such modification or re-enactment. (iii) All references in these presents to guarantees or to an obligation being guaranteed shall be deemed to include respectively references to indemnities or to an indemnity being given in respect thereof. (iv) All references in these presents to any action, remedy or method of proceeding for the enforcement of the rights of creditors shall be deemed to include, in respect of any jurisdiction other than England, references to such action, remedy or method of proceeding for the enforcement of the rights of creditors available or appropriate in such jurisdiction as shall most nearly approximate to such action, remedy or method of proceeding described or referred to in these presents. (v) All references in these presents to Euroclear and/or Cedel Bank shall, whenever the context so permits, be deemed to include references to any additional or alternative clearing system as is approved by the Issuer, the Agent and the Trustee. (vi) Unless the context otherwise requires words or expressions used in these presents shall bear the same meanings as in the Companies Act 1985 of Great Britain. (vii) In this Trust Deed references to Schedules, Clauses, sub-clauses, paragraphs and sub-paragraphs shall be construed as references to the Schedules to this Trust Deed and to the Clauses, sub-clauses, paragraphs and sub-paragraphs of this Trust Deed respectively. (viii) In these presents tables of contents and Clause headings are included for ease of reference and shall not affect the construction of these presents. (C) Words and expressions defined in these presents or the Agency Agreement or used in the applicable Pricing Supplement shall have the same meanings where used herein unless the context otherwise requires or unless otherwise stated and provided that, in the event of inconsistency between the Agency Agreement and these presents, these presents shall prevail and, in the event of inconsistency between the Agency Agreement or these presents and the applicable Pricing Supplement, the applicable Pricing Supplement shall prevail. (D) All references in these presents to the "relevant currency" shall be construed as references to the currency in which payments in respect of the Notes and/or Receipts and/or Coupons of the relevant Series are to be made as indicated in the applicable Pricing Supplement or, where relevant in the case of Notes denominated or payable in ECU, the chosen currency (as defined in Condition 5(c)) in which payments in respect of such Notes and/or Receipts and/or Coupons are to be made, as the case may be. (E) All references in these presents to "listing" and "listed" shall include references to "quotation" and "quoted" respectively. 2. AMOUNT AND ISSUE OF THE NOTES (A) Amount of the Notes, Pricing Supplements and Legal Opinions: THE Notes will be issued in Series in an aggregate nominal amount from time to time outstanding not exceeding the Programme Limit from time to time and for the purpose of determining such aggregate nominal amount Clause 3(5) of the Programme Agreement shall apply. By not later than 3.00 p.m. (London time) on the London Business Day preceding each proposed Issue Date, the Issuer shall deliver or cause to be delivered to the Trustee a copy of the applicable Pricing Supplement and shall notify the Trustee in writing without delay of the relevant Issue Date and the nominal amount of the Notes to be issued. Upon the issue of the relevant Notes, such Notes shall become constituted by these presents without further formality. Before the first issue of Notes occurring after each anniversary of this Trust Deed and on such other occasions as the Trustee so requests (on the basis that the Trustee considers it necessary in view of a change (or proposed change) in applicable law affecting the Issuer or, as the case may be, the Guarantor, these presents, the Programme Agreement or the Agency Agreement, or the Trustee has other grounds), the Issuer or, as the case may be, the Guarantor will procure that (a) further legal opinion(s) (relating, if applicable, to any such change or proposed change) in such form and with such content as the Trustee may require from the legal advisers specified in the Programme Agreement or such other legal advisers as the Trustee may require is/are delivered to the Trustee. Whenever such a request is made with respect to any Notes to be issued, the receipt of such opinion in a form satisfactory to the Trustee shall be a further condition precedent to the issue of those Notes. (B) Covenant to repay principal and to pay interest: The Issuer covenants with the Trustee that it will, as and when the Notes of any Series or any of them or any instalment of principal in respect thereof becomes due to be redeemed in accordance with the Conditions, unconditionally pay or procure to be paid to or to the order of the Trustee in the relevant currency in immediately available funds the principal amount in respect of the Notes of such Series or the amount of such instalment becoming due for redemption on that date and (except in the case of Zero Coupon Notes) shall (subject to the provisions of the Conditions) in the meantime and until redemption in full of the Notes of such Series (both before and after any judgment or other order of a court of competent jurisdiction) unconditionally pay or procure to be paid to or to the order of the Trustee as aforesaid interest (which shall accrue from day to day) on the nominal amount of the Notes outstanding of such Series at rates and/or in amounts calculated from time to time in accordance with, or specified in, and on the dates provided for in, the Conditions (subject to Clause 2(D)) PROVIDED THAT: (i) every payment of principal or interest or other sum due in respect of the Notes made to or to the order of the Agent in the manner provided in the Agency Agreement shall be in satisfaction pro tanto of the relative covenant by the Issuer in this Clause contained in relation to the Notes of such Series except to the extent that there is a default in the subsequent payment thereof in accordance with the Conditions to the relevant Noteholders, Receiptholders or Couponholders (as the case may be); (ii) in the case of any payment of principal made to the Trustee or the Agent after the due date or on or after accelerated maturity following an Event of Default, interest shall (subject, where applicable, as provided in the Conditions) continue to accrue on the nominal amount of the relevant Notes (except in the case of Zero Coupon Notes to which the provisions of Condition 6(j) shall apply) (both before and after any judgment or other order of a court of competent jurisdiction) at the rates aforesaid (or, if higher, the rate of interest on judgment debts for the time being provided by English law) up to and including the date which the Trustee determines to be the date on and after which payment is to be made in respect thereof as stated in a notice given to the holders of such Notes (such date to be not later than seven days after the day on which the whole of such principal amount, together with an amount equal to the interest which has accrued and is to accrue pursuant to this proviso up to and including that date, has been received by the Trustee or the Agent); and (iii) in any case where payment of the whole or any part of the principal amount of any Note is improperly withheld or refused upon due presentation thereof (other than in circumstances contemplated by (ii) above) interest shall accrue on the nominal amount of such Note (except in the case of Zero Coupon Notes to which the provisions of Condition 6(j) shall apply) payment of which has been so withheld or refused (both before and after any judgment or other order of a court of competent jurisdiction) at the rates aforesaid (or, if higher, the rate of interest on judgment debts for the time being provided by English law) from the date of such withholding or refusal until the date on which, upon further presentation of the relevant Note, payment of the full amount (including interest as aforesaid) in the relevant currency payable in respect of such Note is made or (if earlier) the seventh day after notice is given to the relevant Noteholder(s) (whether individually or in accordance with Condition 13) that the full amount (including interest as aforesaid) in the relevant currency in respect of such Note is available for payment, provided that, upon further presentation thereof being duly made, such payment is made. The Trustee will hold the benefit of this covenant on trust for the Noteholders, the Receiptholders and the Couponholders and itself in accordance with these presents. (C) Trustee's requirements regarding Paying Agents: At any time after an Event of Default or a Potential Event of Default shall have occurred or the Notes of all or any Series shall otherwise have become due and repayable or the Trustee shall have received any money which it proposes to pay under Clause 10 to the relevant Noteholders, Receiptholders and/or Couponholders, the Trustee may: (i) by notice in writing to the Issuer, the Guarantor, the Agent and the other Paying Agents require the Agent and the other Paying Agents pursuant to the Agency Agreement: (a) to act thereafter as Agent and other Paying Agents respectively of the Trustee in relation to payments to be made by or on behalf of the Trustee under the terms of these presents mutatis mutandis on the terms provided in the Agency Agreement (save that the Trustee's liability under any provisions thereof for the indemnification, remuneration and payment of out-of-pocket expenses of the Agent and the other Paying Agents shall be limited to the amounts for the time being held by the Trustee on the trusts of these presents relating to the Notes of the relevant Series and available for such purpose) and thereafter to hold all Notes, Receipts and Coupons and all sums, documents and records held by them in respect of Notes, Receipts and Coupons on behalf of the Trustee; or (b) to deliver up all Notes, Receipts and Coupons and all sums, documents and records held by them in respect of Notes, Receipts and Coupons to the Trustee or as the Trustee shall direct in such notice provided that such notice shall be deemed not to apply to any documents or records which the Agent or the relevant other Paying Agent is obliged not to release by any law or regulation; and (ii) by notice in writing to the Issuer require it to make all subsequent payments in respect of the Notes, Receipts and Coupons to or to the order of the Trustee and not to the Agent and with effect from the issue of any such notice to the Issuer and until such notice is withdrawn proviso (i) to sub-clause (B) of this Clause relating to the Notes shall cease to have effect. (D) If the Floating Rate Notes or Indexed Interest Notes of any Series become immediately due and repayable under Condition 9 the rate and/or amount of interest payable in respect of them will be calculated at the same intervals as if such Notes had not become due and repayable, the first of which will commence on the expiry of the Interest Period during which the Notes of the relevant Series become so due and repayable mutatis mutandis in accordance with the provisions of Condition 4(b) except that the rates of interest need not be published. (E) Currency of payments: All payments in respect of, under and in connection with these presents and the Notes of any Series to the relevant Noteholders, Receiptholders and Couponholders shall be made in the relevant currency. (F) Further Notes: The Issuer shall be at liberty from time to time (but subject always to the provisions of these presents) without the consent of the Noteholders, Receiptholders or Couponholders to create and issue further Notes ranking pari passu in all respects (or in all respects save for the date from which interest thereon accrues and the amount of the first payment of interest on such further Notes) and so that the same shall be consolidated and form a single series with the outstanding Notes of a particular Series. (G) Separate Series: The Notes of each Series shall form a separate Series of Notes and accordingly, unless for any purpose the Trustee in its absolute discretion shall otherwise determine, the provisions of this Clause and of Clauses 3 to 21 (both inclusive), 22(B) and the Third Schedule shall apply mutatis mutandis separately and independently to the Notes of each Series and in such Clauses and Schedule the expressions "Notes", "Noteholders", "Receipts", "Receiptholders", "Coupons", "Couponholders", "Talons" and "Talonholders" shall be construed accordingly. 3. FORMs OF THE NOTES (A) Global Notes: (i) THE Notes of each Tranche will initially be represented by a Temporary Global Note which shall be exchangeable for either Definitive Notes together with, where applicable, Receipts and (except in the case of Zero Coupon Notes) Coupons and, where applicable, Talons attached or a Permanent Global Note, in each case in accordance with the provisions of such Temporary Global Note. Each Permanent Global Note shall be exchangeable for Definitive Notes together with, where applicable, Receipts and (except in the case of Zero Coupon Notes) Coupons and, where applicable, Talons attached, in accordance with the provisions of such Permanent Global Note. All Global Notes shall be prepared, completed and delivered to a common depositary for Euroclear and Cedel Bank in accordance with the provisions of the Programme Agreement or to another appropriate depositary in accordance with any other agreement between the Issuer and the relevant Dealer(s) and, in each case, the Agency Agreement and these presents. (ii) Each Temporary Global Note shall be printed or typed in the form or substantially in the form set out in Part I of the Second Schedule and may be a facsimile. Each Temporary Global Note shall have annexed thereto a copy of the applicable Pricing Supplement and shall be signed manually or in facsimile by two persons duly authorised by the Issuer on behalf of the Issuer and shall be authenticated by or on behalf of the Agent. Each Temporary Global Note so executed and authenticated shall be a binding and valid obligation of the Issuer and title thereto shall pass by delivery. (iii) Each Permanent Global Note shall be printed or typed in the form or substantially in the form set out in Part II of the Second Schedule and may be a facsimile. Each Permanent Global Note shall have annexed thereto a copy of the applicable Pricing Supplement and shall be signed manually or in facsimile by two persons duly authorised by the Issuer on behalf of the Issuer and shall be authenticated by or on behalf of the Agent. Each Permanent Global Note so executed and authenticated shall be a binding and valid obligation of the Issuer and title thereto shall pass by delivery. (B) Definitive Notes: (i) The Definitive Notes, the Receipts, the Coupons and the Talons shall be to bearer in the respective forms or substantially in the respective forms set out in Parts III, IV, V and VI, respectively, of the Second Schedule. The Definitive Notes, the Receipts, the Coupons and the Talons shall be serially numbered and, if listed or quoted, shall be security printed in accordance with the requirements (if any) from time to time of the relevant Stock Exchange and the relevant Conditions shall be incorporated by reference (where applicable to these presents) into such Definitive Notes if permitted by the relevant Stock Exchange (if any), or, if not so permitted, the Definitive Notes shall be endorsed with or have attached thereto the relevant Conditions, and, in either such case, the Definitive Notes shall have endorsed thereon or attached thereto a copy of the applicable Pricing Supplement (or the relevant provisions thereof). Title to the Definitive Notes, the Receipts, the Coupons and the Talons shall pass by delivery. (ii) The Definitive Notes shall be signed manually or in facsimile by two persons duly authorised by the Issuer on behalf of the Issuer and shall be authenticated by or on behalf of the Agent. The Definitive Notes so executed and authenticated, and the Receipts, the Coupons and Talons, upon execution and authentication of the relevant Definitive Notes, shall be binding and valid obligations of the Issuer. The Receipts, the Coupons and the Talons shall not be signed. No Definitive Note and none of the Receipts, Coupons or Talons appertaining to such Definitive Note shall be binding or valid until such Definitive Note shall have been executed and authenticated as aforesaid. (C) Facsimile Signatures: The Issuer may use the facsimile signature of any person who at the date such signature is affixed to a Note is duly authorised by the Issuer notwithstanding that at the time of issue of any of the Notes he may have ceased for any reason to be so authorised. (D) Persons to be treated as Noteholders: Except as ordered by a court of competent jurisdiction or as required by law, the Issuer, the Guarantor, the Trustee, the Agent and the other Paying Agents (notwithstanding any notice to the contrary and whether or not it is overdue and notwithstanding any notation of ownership or writing thereon or notice of any previous loss or theft thereof) may (i) for the purpose of making payment thereon or on account thereof deem and treat the bearer of any Global Note, Definitive Note, Receipt, Coupon or Talon and of all rights thereunder free from all encumbrances, and shall not be required to obtain proof of such ownership or as to the identity of the bearer and (ii) for all other purposes deem and treat: (a) the bearer of any Definitive Note, Receipt, Coupon or Talon; and (b) each person for the time being shown in the records of Euroclear or Cedel Bank or such other additional or alternative clearing system approved by the Issuer, the Agent and the Trustee, as having a particular nominal amount of Notes credited to his securities account, as the absolute owner thereof free from all encumbrances and shall not be required to obtain proof of such ownership or as to the identity of the bearer of any Global Note, Definitive Note, Receipt, Coupon or Talon. 4. Fees, Duties And Taxes THE Issuer will pay any stamp, issue, registration, documentary and other fees, duties and taxes, including interest and penalties, payable on or in connection with (i) the execution and delivery of these presents (ii) the constitution and original issue of the Notes, the Receipts and the Coupons and (iii) any action taken by or on behalf of the Trustee or (where permitted under these presents so to do) any Noteholder, Receiptholder or Couponholder to enforce, or to resolve any doubt concerning, or for any other purpose in relation to, these presents. 5. Covenant Of Compliance EACH of the Issuer and the Guarantor covenants with the Trustee that it will comply with and perform and observe all the provisions of these presents which are expressed to be binding on it. The Conditions shall be binding on the Issuer, the Guarantor, the Noteholders, the Receiptholders and the Couponholders. The Trustee shall be entitled to enforce the obligations of the Issuer and the Guarantor under the Notes, the Receipts and the Coupons as if the same were set out and contained in this Trust Deed, which shall be read and construed as one document with the Notes, the Receipts and the Coupons. The Trustee shall hold the benefit of this covenant upon trust for itself and the Noteholders, the Receiptholders and the Couponholders according to its and their respective interests. 6. Cancellation Of NOTes And Records (A) THE Issuer shall use its best endeavours to procure that all Notes (i) redeemed or (ii) purchased for cancellation by or on behalf of the Issuer, the Guarantor or any other Subsidiary of the Guarantor or (iii) which, being mutilated or defaced, have been surrendered and replaced pursuant to Condition 10 (together in each case, in the case of Definitive Notes, with all unmatured Receipts and Coupons attached thereto or delivered therewith) and, in the case of Definitive Notes all relative Receipts and Coupons paid in accordance with the relevant Conditions or which, being mutilated or defaced, have been surrendered and replaced pursuant to Condition 10 shall forthwith be cancelled by or on behalf of the Issuer and a certificate stating: (a) the aggregate nominal amount of Notes which have been redeemed and the amounts paid in respect thereof and the aggregate amounts in respect of Receipts and Coupons which have been paid; (b) the serial numbers of such Notes in definitive form and Receipts; (c) the total numbers (where applicable, of each denomination) by maturity date of such Receipts and Coupons; (d) the aggregate amount of interest paid (and the due dates of such payments) on Global Notes; (e) the aggregate nominal amount of Notes (if any) which have been purchased by or on behalf of the Issuer, the Guarantor or any other Subsidiary of the Guarantor and cancelled and the serial numbers of such Notes in definitive form and, in the case of Definitive Notes, the total number (where applicable, of each denomination) by maturity date of the Receipts, Coupons and Talons attached thereto or surrendered therewith; (f) the aggregate nominal amounts of Notes and Receipts and the aggregate amounts in respect of Coupons which have been so exchanged or surrendered and replaced and the serial numbers of such Notes in definitive form and the total number (where applicable, of each denomination) by maturity date of such Coupons and Talons; (g) the total number (where applicable, of each denomination) by maturity date of the unmatured Coupons missing from Definitive Notes bearing interest at a fixed rate which have been redeemed or exchanged or surrendered and replaced and the serial numbers of the Definitive Notes to which such missing unmatured Coupons appertained; and (h) the total number (where applicable, of each denomination) by maturity date of Talons which have been exchanged for further Coupons shall be given to the Trustee by or on behalf of the Issuer as soon as possible and in any event within four months after the date of such redemption, purchase, payment, exchange or replacement (as the case may be). The Trustee may accept such certificate as conclusive evidence of redemption, purchase, exchange or replacement pro tanto of the Notes or payment of interest thereon or exchange of the relative Talons respectively and of cancellation of the relative Notes and Coupons. (B) The Issuer shall use its best endeavours to procure (i) that the Agent shall keep a full and complete record of all Notes, Receipts, Coupons and Talons issued by it (other than serial numbers of Receipts and Coupons) and of their redemption, purchase by or on behalf of the Issuer, the Guarantor or any other Subsidiary of the Guarantor and of all replacement notes, receipts, coupons or talons issued in substitution for lost, stolen, mutilated, defaced or destroyed Notes, Receipts, Coupons or Talons and (ii) that such records shall be made available to the Trustee at all reasonable times. 7. Guarantee (A) THE Guarantor hereby irrevocably and unconditionally guarantees to the Trustee the due and punctual payment in accordance with these presents of the principal of and interest on the Notes and of all other amounts payable by the Issuer under these presents. (B) If the Issuer fails for any reason whatsoever punctually to pay any such principal, interest or other amount, the Guarantor shall cause each and every such payment to be made as if the Guarantor instead of the Issuer were expressed to be the primary obligor of the relevant Note, Receipt or Coupon and not merely as surety (but without affecting the Issuer's obligations) to the intent that the holder thereof shall receive the same amounts in respect of principal, interest or such other amount as would have been receivable had such payments been made by the Issuer. (C) If any payment received by the Trustee or any Noteholder, Receiptholder or Couponholder pursuant to the provisions of these presents in relation to the Notes, the Receipts or the Coupons shall (whether on the subsequent bankruptcy, insolvency or corporate reorganisation of the Issuer or, without limitation, on any other event) be avoided or set aside for any reason, such payment shall not be considered as discharging or diminishing the liability of the Guarantor and this guarantee shall continue to apply as if such payment had at all times remained owing by the Issuer and the Guarantor shall indemnify the Trustee and the Noteholders and/or Receiptholders and/or Couponholders (as the case may be) in respect thereof PROVIDED THAT the obligations of the Issuer and/or the Guarantor under this sub-clause shall, as regards each payment made to the Trustee or any Noteholder, Receiptholder or Couponholder which is avoided or set aside, be contingent upon such payment being reimbursed to the Issuer or other persons entitled through the Issuer. (D) The Guarantor hereby agrees that its obligations hereunder shall be unconditional and that the Guarantor shall be fully liable irrespective of the validity, regularity, legality or enforceability against the Issuer of, or of any defence or counter-claim whatsoever available to the Issuer in relation to, its obligations under these presents, whether or not any action has been taken to enforce the same or any judgment obtained against the Issuer, whether or not any of the other provisions of these presents have been modified, whether or not any time, indulgence, waiver, authorisation or consent has been granted to the Issuer by or on behalf of the Noteholders or the Receiptholders or Couponholders or the Trustee, whether or not any determination has been made by the Trustee pursuant to Clause 19(A), whether or not there have been any dealings or transactions between the Issuer, any of the Noteholders, Receiptholders or Couponholders or the Trustee, whether or not the Issuer has been dissolved, liquidated, merged, consolidated, bankrupted or has changed its status, functions, control or ownership, whether or not the Issuer has been prevented from making payment by foreign exchange provisions applicable at its place of registration or incorporation and whether or not any other circumstances have occurred which might otherwise constitute a legal or equitable discharge of or defence to a guarantor. Accordingly, the validity of this guarantee shall not be affected by reason of any invalidity, irregularity, illegality or unenforceability of all or any of the obligations of the Issuer under these presents and this guarantee shall not be discharged nor shall the liability of the Guarantor under these presents be affected by any act, thing or omission or means whatever whereby its liability would not have been discharged if it had been the principal debtor. (E) Without prejudice to the provisions of Clause 9(A), the Trustee may determine from time to time whether or not it will enforce this guarantee which it may do without making any demand of or taking any proceedings against the Issuer (as appropriate) and may from time to time make any arrangement or compromise with the Guarantor in relation to this guarantee which the Trustee may consider expedient in the interests of the Noteholders, Receiptholders or Couponholders. (F) The Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of dissolution, liquidation, merger or bankruptcy of the Issuer, any right to require a proceeding first against the Issuer, protest or notice with respect to the Notes, Receipts or Coupons or the indebtedness evidenced thereby and all demands whatsoever and hereby covenants that this guarantee shall be a continuing guarantee, shall extend to the ultimate balance of all sums payable by the Issuer under these presents in relation to the Notes, Receipts and Coupons, shall not be discharged except by complete performance of the obligations contained in these presents in relation to the Notes, Receipts and Coupons and is additional to, and not instead of, any security or other guarantee or indemnity at any time existing in favour of any person, whether from the Guarantor or otherwise. (G) If any moneys shall become payable by the Guarantor under this guarantee the Guarantor shall not, so long as the same remain unpaid, without the prior written consent of the Trustee: (i) in respect of any amounts paid by it under this guarantee, exercise any rights of subrogation or contribution or, without limitation, any other right or remedy which may accrue to it in respect of or as a result of any such payment; or (ii) in respect of any other moneys for the time being due to the Guarantor by the Issuer, claim payment thereof or exercise any other right or remedy; (including in either case claiming the benefit of any security or right of set-off or, on the liquidation of the Issuer, proving in competition with the Trustee). If, notwithstanding the foregoing, upon the bankruptcy, insolvency or liquidation of the Issuer any payment or distribution of assets of the Issuer of any kind or character, whether in cash, property or securities, shall be received by the Guarantor before payment in full of all principal of, and interest on, the Notes, Receipts and Coupons shall have been made to the Noteholders, Receiptholders and Couponholders, such payment or distribution shall be received by the Guarantor on trust to pay the same over immediately to the Trustee for application in or towards the payment of all sums due and unpaid under these presents in accordance with Clause 10 on the basis that Clause 10 does not apply separately and independently to each Series of the Notes. (H) The obligations of the Guarantor under these presents constitute direct, unconditional, unsubordinated and unsecured obligations of the Guarantor and (save for certain obligations required to be preferred by law) rank and will rank pari passu with all other unsecured obligations (other than subordinated obligations, if any) of the Guarantor, from time to time outstanding. 8. NON-PAYMENT (A) PROOF that as regards any specified Note, Receipt or Coupon the Issuer or, as the case may be, the Guarantor has made default in paying any amount due in respect of such Note, Receipt or Coupon shall (unless the contrary be proved) be sufficient evidence that the same default has been made as regards all other Notes, Receipts or Coupons (as the case may be) in respect of which the relevant amount is due and payable. (B) References in provisos (ii) and (iii) to Clause 2(B) and the provisions of any trust deed supplemental to this Trust Deed corresponding to provisos (ii) and (iii) to Clause 2(B) to "the rates aforesaid" shall, in the event of the Notes having become due and repayable, with effect from the expiry of the interest period during which such Notes become due and repayable, be construed as references to rates of interest calculated mutatis mutandis in accordance with the Conditions except that no notices need be published in respect thereof. 9. PROCEEDINGS, ACTION AND INDEMNIFICATION (A) The Trustee shall not be bound to take any proceedings mentioned in Condition 9 or any other action in relation to these presents unless respectively directed or requested to do so (i) by an Extraordinary Resolution or (ii) in writing by the holders of at least one-quarter in nominal amount of the Notes then outstanding and in either case then only if it shall be indemnified to its satisfaction against all Liabilities to which it may thereby render itself liable or which it may incur by so doing. (B) Only the Trustee may enforce the provisions of these presents. No Noteholder, Receiptholder or Couponholder shall be entitled to proceed directly against the Issuer or the Guarantor to enforce the performance of any of the provisions of these presents unless the Trustee having become bound as aforesaid to take proceedings fails to do so within a reasonable period and such failure is continuing. 10. APPLICATION OF MONEYS ALL moneys received by the Trustee under these presents from the Issuer or, as the case may be, the Guarantor (including any moneys which represent principal or interest in respect of Notes, Receipts or Coupons which have become void under Condition 8) shall, unless and to the extent attributable, in the opinion of the Trustee, to a particular Series of the Notes, be apportioned pari passu and rateably between each Series of the Notes, and all moneys received by the Trustee under these presents from the Issuer or, as the case may be, the Guarantor to the extent attributable in the opinion of the Trustee to a particular Series of the Notes or which are apportioned to such Series as aforesaid, be held by the Trustee upon trust to apply them (subject to Clause 12): FIRST in payment or satisfaction of all amounts then due and unpaid under Clauses 15 and/or 16(J) to the Trustee and/or any Appointee; SECONDLY in or towards payment pari passu and rateably of all principal and interest then due and unpaid in respect of the Notes of that Series; THIRDLY in or towards payment pari passu and rateably of all principal and interest then due and unpaid in respect of the Notes of each other Series; and FOURTHLY in payment of the balance (if any) to the Issuer (without prejudice to, or liability in respect of, any question as to how such payment to the Issuer shall be dealt with as between the Issuer and any other person). Without prejudice to this Clause 10, if the Trustee holds any moneys which represent principal or interest in respect of Notes which have become void or in respect of which claims have been prescribed under Condition 8, the Trustee will hold such moneys on the above trusts. 11. NOTICE OF PAYMENTS THE Trustee shall give notice to the relevant Noteholders in accordance with Condition 13 of the day fixed for any payment to them under Clause 10. Such payment may be made in accordance with Condition 5 and any payment so made shall be a good discharge to the Trustee. 12. INVESTMENT BY TRUSTEE (A) IF the amount of the moneys at any time available for the payment of principal and interest in respect of the Notes issued by the Issuer under Clause 10 shall be less than 10 per cent. of the nominal amount of the Notes then outstanding the Trustee may at its discretion invest such moneys in some or one of the investments authorised below. The Trustee at its discretion may vary such investments and may accumulate such investments and the resulting income until the accumulations, together with any other funds for the time being under the control of the Trustee and available for such purpose, amount to at least 10 per cent. of the nominal amount of the Notes then outstanding and then such accumulations and funds shall be applied under Clause 10. (B) Any moneys which under the trusts of these presents ought to or may be invested by the Trustee may be invested in the name or under the control of the Trustee in any investments or other assets in any part of the world whether or not they produce income or by placing the same on deposit in the name or under the control of the Trustee at such bank or other financial institution and in such currency as the Trustee may think fit. If that bank or institution is the Trustee or a Subsidiary, holding or associated company of the Trustee, it need only account for an amount of interest equal to the amount of interest which would, at then current rates, be payable by it on such a deposit to an independent customer. The Trustee may at any time vary any such investments for or into other investments or convert any moneys so deposited into any other currency and shall not be responsible for any loss resulting from any such investments or deposits, whether due to depreciation in value, fluctuations in exchange rates or otherwise. 13. PARTIAL PAYMENTS UPON any payment under Clause 10 (other than payment in full against surrender of a Note, Receipt or Coupon) the Note, Receipt or Coupon in respect of which such payment is made shall be produced to the Trustee or the Paying Agent by or through whom such payment is made and the Trustee shall or shall cause such Paying Agent to enface thereon a memorandum of the amount and the date of payment but the Trustee may in any particular case dispense with such production and enfacement upon such indemnity being given as it shall think sufficient. 14. COVENANTS BY THE ISSUER AND THE GUARANTOR (A) THE Issuer covenants with the Trustee that, so long as any of the Notes remains outstanding (or, in the case of paragraphs (viii), (ix), (xiii), (xiv), (xvi) and (xviii), so long as any of such Notes or the relative Receipts or Coupons remains liable to prescription or, in the case of sub-paragraph (xv), until the expiry of a period of 30 days after the Relevant Date) it shall: (i) at all times carry on and conduct its affairs and procure its Subsidiaries to carry on and conduct their respective affairs in a proper and efficient manner; (ii) give or procure to be given to the Trustee such opinions, certificates and information as it shall require and in such form as it shall require (including without limitation the procurement of all such certificates called for by the Trustee pursuant to Clause 16(C)) for the purpose of the discharge or exercise of the duties, trusts, powers, authorities and discretions vested in it under these presents or by operation of law; (iii) cause to be prepared and certified by its Auditors in respect of each annual financial accounting period accounts in such form as will comply with all relevant legal and accounting requirements and all requirements for the time being of the relevant Stock Exchange; (iv) at all times keep proper books of account and allow the Trustee and any person appointed by the Trustee to whom the Issuer shall have no reasonable objection free access to such books of account at all reasonable times during normal business hours; (v) send to the Trustee (in addition to any copies to which it may be entitled as a holder of any securities of the Issuer) two copies in English of every balance sheet, profit and loss account, report, circular and notice of general meeting and every other document issued or sent to its shareholders together with any of the foregoing, and every document issued or sent to holders of securities other than its shareholders (including the Noteholders) as soon as practicable after the issue or publication thereof; (vi) forthwith give notice in writing to the Trustee of the occurrence of any Event of Default or Potential Event of Default; (vii) give to the Trustee (a) within seven days after demand by the Trustee therefor and (b) (without the necessity for any such demand) promptly after the publication of its audited accounts in respect of each financial year commencing with the financial year ending 28th February, 1999 and in any event not later than 180 days after the end of each such financial year a certificate signed by two of its Directors, to the effect that as at a date not more than seven days before delivering such certificate (the "relevant certification date") there did not exist and had not existed since the relevant certification date of the previous certificate (or in the case of the first such certificate the date hereof) any Event of Default or any Potential Event of Default (or if such exists or existed specifying the same) and that during the period from and including the relevant certification date of the last such certificate (or in the case of the first such certificate the date hereof) to and including the relevant certification date of such certificate the Issuer has complied with all its obligations contained in these presents or (if such is not the case) specifying the respects in which it has not complied; (viii) at all times execute and do all such further documents, acts and things as may be necessary at any time or times in the opinion of the Trustee for the purpose of discharging its functions under, or giving effect to, these presents; (ix) at all times maintain an Agent, other Paying Agents, a Calculation Agent and Reference Banks in accordance with the Conditions; (x) procure the Agent to notify the Trustee forthwith in the event that it does not, on or before the due date for any payment in respect of the Notes or any of them or any of the relative Receipts or Coupons, receive unconditionally pursuant to the Agency Agreement payment of the full amount in the relevant currency of the moneys payable on such due date on all such Notes, Receipts or Coupons as the case may be; (xi) in the event of the unconditional payment to the Agent or the Trustee of any sum due in respect of the Notes or any of them or any of the relative Receipts or Coupons being made after the due date for payment thereof forthwith give or procure to be given notice to the relevant Noteholders in accordance with Condition 13 that such payment has been made; (xii) use its best endeavours to maintain the quotation or listing on the relevant Stock Exchange of those of the Notes which are quoted or listed on the relevant Stock Exchange or, if it is unable to do so having used such endeavours, use its best endeavours to obtain and maintain a quotation or listing of such Notes issued by it on such other stock exchange or exchanges or securities market or markets as the Issuer may (with the prior written approval of the Trustee) decide and shall also upon obtaining a quotation or listing of such Notes issued by it on such other stock exchange or exchanges or securities market or markets enter into a trust deed supplemental to this Trust Deed to effect such consequential amendments to these presents as the Trustee may require or as shall be requisite to comply with the requirements of any such stock exchange or securities market; (xiii) give notice to the Noteholders in accordance with Condition 13 of any appointment, resignation or removal of any Agent, Calculation Agent, Reference Bank or other Paying Agent (other than the appointment of the initial Agent, Calculation Agent, Reference Banks and other Paying Agents) after having obtained the prior written approval of the Trustee thereto or any change of any Paying Agent's or Reference Bank's specified office and (except as provided by the Agency Agreement or the Conditions) at least 30 days prior to such event taking effect; PROVIDED ALWAYS THAT so long as any of the Notes, Receipts or Coupons remains liable to prescription in the case of the termination of the appointment of the Agent or the Calculation Agent no such termination shall take effect until a new Agent or Calculation Agent (as the case may be) has been appointed on terms previously approved in writing by the Trustee; (xiv) obtain the prior written approval of the Trustee to, and promptly give to the Trustee two copies of, the form of every notice given to the holders of any Notes issued by it in accordance with Condition 13 (such approval, unless so expressed, not to constitute approval for the purposes of Section 57 of the Financial Services Act 1986 of the United Kingdom of any such notice which is an investment advertisement (as therein defined)); (xv) if payments of principal or interest in respect of the Notes or relative Receipts or Coupons by the Issuer shall become subject generally to the taxing jurisdiction of any territory or any political sub-division or any authority therein or thereof having power to tax other than or in addition to the United States of America or any political sub-division or any authority therein or thereof having power to tax, immediately upon becoming aware thereof notify the Trustee in writing of such event and (unless the Trustee otherwise agrees) enter forthwith into a trust deed supplemental to this Trust Deed, giving to the Trustee an undertaking or covenant in form and manner satisfactory to the Trustee in terms corresponding to the terms of Condition 7 with the substitution for (or, as the case may be, the addition to) the references therein to the United States of America or any political sub-division thereof or any authority therein or thereof having power to tax of references to that other or additional territory or any political sub-division thereof or any authority therein or thereof having power to tax to whose taxing jurisdiction such payments shall have become subject as aforesaid such trust deed also (where applicable) to modify Condition 6(b) so that such Condition shall make reference to the other or additional territory, any political sub-division thereof and any authority therein or thereof having power to tax; (xvi) comply with and perform all its obligations under the Agency Agreement and use its best endeavours to procure that the Agent and the other Paying Agents comply with and perform all their respective obligations thereunder and any notice given by the Trustee pursuant to Clause 2(C)(i) and that the Calculation Agent complies with and performs all its obligations under the relative calculation agency agreement and not make any amendment or modification to such Agreement without the prior written approval of the Trustee; (xvii) in order to enable the Trustee to ascertain the nominal amount of the Notes of each Series for the time being outstanding for any of the purposes referred to in the proviso to the definition of "outstanding" in Clause 1, deliver to the Trustee as soon as practicable upon being so requested in writing by the Trustee a certificate in writing signed by two of its Directors, setting out the total number and aggregate nominal amount of the Notes of each Series issued which: (a) up to and including the date of such certificate have been purchased by the Issuer or any Subsidiary of the Issuer and cancelled; and (b) are at the date of such certificate held by, for the benefit of, or on behalf of, the Issuer or any Subsidiary of the Issuer; (xviii) procure its Subsidiaries to comply with all applicable provisions of Condition 6(h); (xix) use its best endeavours to procure that each of the Paying Agents makes available for inspection by Noteholders, Receiptholders and Couponholders at its specified office copies of these presents, the Agency Agreement and the then latest audited balance sheet and profit and loss account (consolidated if applicable) of the Issuer and the Guarantor; (xx) if, in accordance with the provisions of the Conditions, interest in respect of the Notes becomes payable at the specified office of any Paying Agent in the United States of America promptly give notice thereof to the relative Noteholders in accordance with Condition 13; (xxi) use all its best endeavours to procure that Euroclear and/or Cedel Bank (as the case may be) issue(s) any document requested by the Trustee under Clause 16(U) as soon as practicable after such request; (xxii) give prior written notice to the Trustee of any proposed redemption pursuant to Condition 6(b) or 6(c) and, if it shall have given notice to the Noteholders of its intention to redeem any Notes pursuant to Condition 6(c), duly proceed to draw (if appropriate) and redeem the relevant Notes accordingly; and (xxiii) promptly provide the Trustee with copies of all supplements and/or amendments and/or restatements of the Programme Agreement. (B) The Guarantor covenants with the Trustee that, so long as any of the Notes remains outstanding (or, in the case of paragraphs (viii) and (xvi), so long as any of such Notes or the relative Receipts or Coupons remains liable to prescription or, in the case of sub-paragraph (xv), until the expiry of a period of 30 days after the Relevant Date) it shall: (i) at all times carry on and conduct its affairs and procure its Subsidiaries to carry on and conduct their respective affairs in a proper and efficient manner; (ii) give or procure to be given to the Trustee such opinions, certificates and information as it shall require and in such form as it shall require (including without limitation the procurement of all such certificates called for by the Trustee pursuant to Clause 16(C)) for the purpose of the discharge or exercise of the duties, trusts, powers, authorities and discretions vested in it under these presents or by operation of law; (iii) cause to be prepared and certified by its Auditors in respect of each annual financial accounting period accounts in such form as will comply with all relevant legal and accounting requirements and all requirements for the time being of the relevant Stock Exchange; (iv) at all times keep proper books of account and allow the Trustee and any person appointed by the Trustee to whom the Guarantor shall have no reasonable objection free access to such books of account at all reasonable times during normal business hours; (v) send to the Trustee (in addition to any copies to which it may be entitled as a holder of any securities of the Guarantor) two copies in English of every balance sheet, profit and loss account, report, circular and notice of general meeting and every other document issued or sent to its shareholders together with any of the foregoing, and every document issued or sent to holders of securities other than its shareholders (including the Noteholders) as soon as practicable after the issue or publication thereof; (vi) forthwith give notice in writing to the Trustee of the occurrence of any Event of Default or Potential Event of Default; (vii) give to the Trustee (a) within seven days after demand by the Trustee therefor and (b) (without the necessity for any such demand) promptly after the publication of its audited accounts in respect of each financial year commencing with the financial year ending 28th February, 1999 and in any event not later than 180 days after the end of each such financial year a certificate signed by two of its Directors, to the effect that as at a date not more than seven days before delivering such certificate (the "relevant certification date") there did not exist and had not existed since the relevant certification date of the previous certificate (or in the case of the first such certificate the date hereof) any Event of Default or any Potential Event of Default (or if such exists or existed specifying the same) and that during the period from and including the relevant certification date of the last such certificate (or in the case of the first such certificate the date hereof) to and including the relevant certification date of such certificate the Guarantor has complied with all its obligations contained in these presents or (if such is not the case) specifying the respects in which it has not complied; (viii) at all times execute and do all such further documents, acts and things as may be necessary at any time or times in the opinion of the Trustee for the purpose of discharging its functions under, or giving effect to, these presents; (ix) if payments of principal or interest in respect of the Notes or relative Receipts or Coupons by the Guarantor shall become subject generally to the taxing jurisdiction of any territory or any political sub-division or any authority therein or thereof having power to tax other than or in addition to the United States of America or any political sub-division or any authority therein or thereof having power to tax, immediately upon becoming aware thereof notify the Trustee in writing of such event and (unless the Trustee otherwise agrees) enter forthwith into a trust deed supplemental to this Trust Deed, giving to the Trustee an undertaking or covenant in form and manner satisfactory to the Trustee in terms corresponding to the terms of Condition 7 with the substitution for (or, as the case may be, the addition to) the references therein to the United States of America or any political sub-division thereof or any authority therein or thereof having power to tax of references to that other or additional territory or any political sub-division thereof or any authority therein or thereof having power to tax to whose taxing jurisdiction such payments shall have become subject as aforesaid such trust deed also (where applicable) to modify Condition 6(b) so that such Condition shall make reference to the other or additional territory, any political sub-division thereof and any authority therein or thereof having power to tax; (x) comply with and perform all its obligations under the Agency Agreement; (xi) in order to enable the Trustee to ascertain the nominal amount of the Notes of each Series for the time being outstanding for any of the purposes referred to in the proviso to the definition of "outstanding" in Clause 1, deliver to the Trustee as soon as practicable upon being so requested in writing by the Trustee a certificate in writing signed by two of its Directors, setting out the total number and aggregate nominal amount of the Notes of each Series issued which: (a) up to and including the date of such certificate have been purchased by the Guarantor or any Subsidiary of the Guarantor and cancelled; and (b) are at the date of such certificate held by, for the benefit of, or on behalf of, the Guarantor or any Subsidiary of the Guarantor; and (xii) procure its Subsidiaries to comply with all applicable provisions of Condition 6(h). 15. REMUNERATION AND INDEMNIFICATION OF TRUSTEE (A) THE Issuer shall pay to the Trustee remuneration for its services as trustee of these presents such amount as shall be agreed from time to time by exchange of letters between the Issuer and the Trustee. Such remuneration shall accrue from day to day and be payable (in priority to payments to Noteholders, Receiptholders and Couponholders) up to and including the date when, all the Notes having become due for redemption, the redemption moneys and interest thereon to the date of redemption have been paid to the Agent or the Trustee PROVIDED THAT if upon due presentation of any Note, Receipt or Coupon or any cheque payment of the moneys due in respect thereof is improperly withheld or refused, remuneration will commence again to accrue until payment to such Noteholder, Receiptholder or Couponholder is duly made. (B) In the event of the occurrence of an Event of Default or a Potential Event of Default or the Trustee considering it expedient or necessary or being requested by the Issuer to undertake duties which the Trustee and the Issuer agree to be of an exceptional nature or otherwise outside the scope of the normal duties of the Trustee under these presents the Issuer shall pay to the Trustee such additional remuneration as shall be agreed between them. (C) The Issuer shall in addition pay to the Trustee an amount equal to the amount of any value added tax or similar tax chargeable in respect of its remuneration under these presents. (D) In the event of the Trustee and the Issuer failing to agree: (1) (in a case to which sub-clause (A) above applies) upon the amount of the remuneration; or (2) (in a case to which sub-clause (B) above applies) upon whether such duties shall be of an exceptional nature or otherwise outside the scope of the normal duties of the Trustee under these presents, or upon such additional remuneration, such matters shall be determined by a merchant or investment bank (acting as an expert and not as an arbitrator) selected by the Trustee and approved by the Issuer or, failing such approval, nominated (on the application of the Trustee) by the President for the time being of The Law Society of England and Wales (the expenses involved in such nomination and the fees of such merchant or investment bank being payable by the Issuer) and the determination of any such merchant or investment bank shall be final and binding upon the Trustee and the Issuer. (E) The Issuer shall also pay or discharge all Liabilities incurred by the Trustee in relation to the preparation and execution of, the exercise of its powers and the performance of its duties under, and in any other manner in relation to, these presents, including but not limited to travelling expenses and any stamp, issue, registration, documentary and other taxes or duties paid or payable by the Trustee in connection with any action taken by or on behalf of the Trustee for enforcing, or resolving any doubt concerning, or for any other purpose in relation to, these presents. (F) All amounts payable pursuant to sub-clause (E) above and/or Clause 16(J) shall be payable by the Issuer on the date specified in a demand by the Trustee and in the case of payments actually made by the Trustee prior to such demand shall (if not paid within seven days after such demand and the Trustee so requires) carry interest at the rate of two per cent. per annum above the Base Rate from time to time of National Westminster Bank Plc from the date specified in such demand, and in all other cases shall (if not paid on the date specified in such demand or, if later, within seven days after such demand and, in either case, the Trustee so requires) carry interest at such rate from the date specified in such demand. All remuneration payable to the Trustee shall carry interest at such rate from the due date therefor. (G) Unless otherwise specifically stated in any discharge of these presents the provisions of this Clause and Clause 16(J) shall continue in full force and effect notwithstanding such discharge. (H) The Trustee shall be entitled in its absolute discretion to determine in respect of which Series of Notes any Liabilities incurred under these presents have been incurred or to allocate any such Liabilities between the Notes of any Series. 16. SUPPLEMENT TO TRUSTEE ACT 1925 THE Trustee shall have all the powers conferred upon trustees by the Trustee Act 1925 of England and Wales and by way of supplement thereto it is expressly declared as follows: (A) The Trustee may in relation to these presents act on the advice or opinion of or any information obtained from any lawyer, valuer, accountant, surveyor, banker, broker, auctioneer or other expert whether obtained by the Issuer, the Guarantor, the Trustee or otherwise and shall not be responsible for any Liability occasioned by so acting. (B) Any such advice, opinion or information may be sent or obtained by letter, telex, telegram, facsimile transmission or cable and the Trustee shall not be liable for acting on any advice, opinion or information purporting to be conveyed by any such letter, telex, telegram, facsimile transmission or cable although the same shall contain some error or shall not be authentic. (C) The Trustee may call for and shall be at liberty to accept as sufficient evidence of any fact or matter or the expediency of any transaction or thing a certificate signed by any two Directors of the Issuer or by any two Directors of the Guarantor, and the Trustee shall not be bound in any such case to call for further evidence or be responsible for any Liability that may be occasioned by it or any other person acting on such certificate. (D) The Trustee shall be at liberty to hold these presents and any other documents relating thereto or to deposit them in any part of the world with any banker or banking company or company whose business includes undertaking the safe custody of documents or lawyer or firm of lawyers considered by the Trustee to be of good repute and the Trustee shall not be responsible for or required to insure against any Liability incurred in connection with any such holding or deposit and may pay all sums required to be paid on account of or in respect of any such deposit. (E) The Trustee shall not be responsible for the receipt or application of the proceeds of the issue of any of the Notes by the Issuer, the exchange of any Global Note for another Global Note or Definitive Notes or the delivery of any Global Note or Definitive Notes to the person(s) entitled to it or them. (F) The Trustee shall not be bound to give notice to any person of the execution of any documents comprised or referred to in these presents or to take any steps to ascertain whether any Event of Default or any Potential Event of Default has occurred and, until it shall have actual knowledge or express notice pursuant to these presents to the contrary, the Trustee shall be entitled to assume that no Event of Default or Potential Event of Default has occurred and that each of the Issuer and the Guarantor is observing and performing all its obligations under these presents. (G) Save as expressly otherwise provided in these presents, the Trustee shall have absolute and uncontrolled discretion as to the exercise or non-exercise of its trusts, powers, authorities and discretions under these presents (the exercise or non-exercise of which as between the Trustee and the Noteholders, the Receiptholders and Couponholders shall be conclusive and binding on the Noteholders, the Receiptholders and Couponholders) and shall not be responsible for any Liability which may result from their exercise or non-exercise. (H) The Trustee shall not be liable to any person by reason of having acted upon any Extraordinary Resolution in writing or any Extraordinary Resolution or other resolution purporting to have been passed at any meeting of the holders of Notes of all or any Series in respect whereof minutes have been made and signed even though subsequent to its acting it may be found that there was some defect in the constitution of the meeting or the passing of the resolution, (in the case of an Extraordinary Resolution in writing) that not all such holders had signed the Extraordinary Resolution or that for any reason the resolution was not valid or binding upon such holders and the relative Receiptholders and Couponholders. (I) The Trustee shall not be liable to any person by reason of having accepted as valid or not having rejected any Note, Receipt or Coupon purporting to be such and subsequently found to be forged or not authentic. (J) Without prejudice to the right of indemnity by law given to trustees, each of the Issuer and the Guarantor shall indemnify the Trustee and every Appointee and keep it or him indemnified against all Liabilities to which it or he may be or become subject or which may be incurred by it or him in the execution or purported execution of any of its or his trusts, powers, authorities and discretions under these presents or its or his functions under any such appointment or in respect of any other matter or thing done or omitted in any way relating to these presents or any such appointment. (K) Any consent or approval given by the Trustee for the purposes of these presents may be given on such terms and subject to such conditions (if any) as the Trustee thinks fit and notwithstanding anything to the contrary in these presents may be given retrospectively. (L) The Trustee shall not (unless and to the extent ordered so to do by a court of competent jurisdiction) be required to disclose to any Noteholder, Receiptholder or Couponholder any information (including, without limitation, information of a confidential, financial or price sensitive nature) made available to the Trustee by the Issuer, the Guarantor or any other person in connection with these presents and no Holder, Receiptholder or Couponholder shall be entitled to take any action to obtain from the Trustee any such information. (M) Where it is necessary or desirable for any purpose in connection with these presents to convert any sum from one currency to another it shall (unless otherwise provided by these presents or required by law) be converted at such rate or rates, in accordance with such method and as at such date for the determination of such rate of exchange, as may be agreed by the Trustee in consultation with the Issuer and any rate, method and date so agreed shall be binding on the Issuer, the Guarantor, the Noteholders, the Receiptholders and the Couponholders. (N) The Trustee as between itself and the Noteholders, the Receiptholders and the Couponholders may determine all questions and doubts arising in relation to any of the provisions of these presents. Every such determination, whether or not relating in whole or in part to the acts or proceedings of the Trustee, shall be conclusive and shall bind the Trustee and the Noteholders, the Receiptholders and the Couponholders. (O) In connection with the exercise by it of any of its trusts, powers, authorities or discretions under these presents (including, without limitation, any modification, waiver, authorisation or determination), the Trustee shall have regard to the general interests of the Noteholders as a class but shall not have regard to any interests arising from circumstances particular to individual Noteholders, Receiptholders or Couponholders (whatever their number) and, in particular but without limitation, shall not have regard to the consequences of such exercise for individual Noteholders, Receiptholders or Couponholders (whatever their number) resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory or any political sub-division thereof and the Trustee shall not be entitled to require, nor shall any Noteholder, Receiptholder or Couponholder be entitled to claim, from the Issuer, the Guarantor, the Trustee or any other person any indemnification or payment in respect of any tax consequence of any such exercise upon individual Noteholders, the Receiptholders or Couponholders except to the extent already provided for in Condition 7 and/or any undertaking given in addition thereto or in substitution therefor under these presents. (P) Any trustee of these presents being a lawyer, accountant, broker or other person engaged in any profession or business shall be entitled to charge and be paid all usual professional and other charges properly incurred for business transacted and acts done by him or his firm in connection with the trusts of these presents and also his reasonable charges in addition to disbursements for all other work and business done and all time spent by him or his firm in connection with matters arising in connection with these presents. (Q) The Trustee may whenever it thinks fit, subject to the consent of the Issuer (such consent not to be unreasonably withheld) except following the occurrence of an Event of Default or a Potential Event of Default or if the Trustee has reasonable grounds to believe that an Event of Default or a Potential Event of Default has occurred or is about to occur or if the Trustee has been advised by its legal advisers that such delegation is necessary in order to avoid a conflict of interest or a possible conflict of interest in each of which cases no such consent of the Issuer as aforesaid shall be required, delegate by power of attorney or otherwise to any person or persons or fluctuating body of persons (whether being a joint trustee of these presents or not) all or any of its trusts, powers, authorities and discretions under these presents. Such delegation may be made upon such terms (including power to sub-delegate) and subject to such conditions and regulations as the Trustee may in the interests of the Noteholders think fit. Provided that the Trustee shall have exercised reasonable care in the selection of such delegate the Trustee shall not be under any obligation to supervise the proceedings or acts of any such delegate or sub-delegate or be in any way responsible for any Liability incurred by reason of any misconduct or default on the part of any such delegate or sub-delegate. The Trustee shall within a reasonable time after any such delegation or any renewal, extension or termination thereof give notice thereof to the Issuer. (R) The Trustee may after consultation with the Issuer and the Guarantor unless, in the opinion of the Trustee, such consultation would be materially prejudicial to the interests of the Noteholders in the conduct of the trusts of these presents instead of acting personally employ and pay an agent (whether being a lawyer or other professional person) to transact or conduct, or concur in transacting or conducting, any business and to do, or concur in doing, all acts required to be done in connection with these presents (including the receipt and payment of money). Provided that the Trustee shall have exercised reasonable care in the selection of such agent the Trustee shall not be in any way responsible for any Liability incurred by reason of any misconduct or default on the part of any such agent or be bound to supervise the proceedings or acts of any such agent. The Trustee shall within a reasonable time after appointing such an agent or after any renewal, extension or termination of such an appointment give notice thereof to the Issuer. (S) The Trustee shall not be responsible for the execution, delivery, legality, effectiveness, adequacy, genuineness, validity, enforceability or admissibility in evidence of these presents or any other document relating or expressed to be supplemental thereto and shall not be liable for any failure to obtain any licence, consent or other authority for the execution, delivery, legality, effectiveness, adequacy, genuineness, validity, performance, enforceability or admissibility in evidence of these presents or any other document relating or expressed to be supplemental thereto. (T) The Trustee may call for any document and/or evidence and/or information and/or certification to be issued or given by Euroclear or Cedel Bank as to the nominal amount of Notes represented by a Global Note standing to the account of any person. Any such certificate or other document shall be conclusive and binding for all purposes. The Trustee shall not be liable to any person by reason of having accepted as valid or not having rejected any document and/or evidence and/or information and/or certification to such effect purporting to be issued or given by Euroclear or Cedel Bank and subsequently found to be forged or not authentic. 17. TRUSTEE'S LIABILITY NOTHING in these presents shall in any case in which the Trustee has failed to show the degree of care and diligence required of it as trustee having regard to the provisions of these presents conferring on it any trusts, powers, authorities or discretions exempt the Trustee from or indemnify it against any Liability for negligence, default, breach of duty or breach of trust of which it may be guilty in relation to its duties under these presents. 18. TRUSTEE CONTRACTING WITH the ISSUER and the guarantor NEITHER the Trustee nor any director or officer or holding company, Subsidiary or associated company of a corporation acting as a trustee under these presents shall by reason of its or his fiduciary position be in any way precluded from: (i) entering into or being interested in any contract or financial or other transaction or arrangement with the Issuer or the Guarantor or any person or body corporate associated with the Issuer or the Guarantor (including without limitation any contract, transaction or arrangement of a banking or insurance nature or any contract, transaction or arrangement in relation to the making of loans or the provision of financial facilities or financial advice to, or the purchase, placing or underwriting of or the subscribing or procuring subscriptions for or otherwise acquiring, holding or dealing with, or acting as paying agent in respect of, the Notes or any other notes, bonds, stocks, shares, debenture stock, debentures or other securities of, any Issuer or any person or body corporate associated as aforesaid); or (ii) accepting or holding the trusteeship of any other trust deed constituting or securing any other securities issued by or relating to the Issuer or the Guarantor or any such person or body corporate so associated or any other office of profit under the Issuer or the Guarantor or any such person or body corporate so associated, and shall be entitled to exercise and enforce its rights, comply with its obligations and perform its duties under or in relation to any such contract, transaction or arrangement as is referred to in (i) above or, as the case may be, any such trusteeship or office of profit as is referred to in (ii) above without regard to the interests of the Noteholders and notwithstanding that the same may be contrary or prejudicial to the interests of the Noteholders and shall not be responsible for any Liability occasioned to the Noteholders thereby and shall be entitled to retain and shall not be in any way liable to account for any profit made or share of brokerage or commission or remuneration or other amount or benefit received thereby or in connection therewith. Where any holding company, Subsidiary or associated company of the Trustee or any director or officer of the Trustee acting other than in his capacity as such a director or officer has any information, the Trustee shall not thereby be deemed also to have knowledge of such information and, unless it shall have actual knowledge of such information, shall not be responsible for any loss suffered by Noteholders resulting from the Trustee's failing to take such information into account in acting or refraining from acting under or in relation to these presents. 19. WAIVER, AUTHORISATION AND DETERMINATION (A) THE Trustee may without the consent or sanction of the Noteholders, the Receiptholders or the Couponholders and without prejudice to its rights in respect of any subsequent breach, Event of Default or Potential Event of Default from time to time and at any time but only if and in so far as in its opinion the interests of the Noteholders shall not be materially prejudiced thereby waive or authorise any breach or proposed breach by the Issuer or the Guarantor of any of the covenants or provisions contained in these presents or determine that any Event of Default or Potential Event of Default shall not be treated as such for the purposes of these presents PROVIDED ALWAYS THAT the Trustee shall not exercise any powers conferred on it by this Clause in contravention of any express direction given by Extraordinary Resolution or by a request under Condition 9 but so that no such direction or request shall affect any waiver, authorisation or determination previously given or made. Any such waiver, authorisation or determination may be given or made on such terms and subject to such conditions (if any) as the Trustee may determine, shall be binding on the Noteholders, the Receiptholders and the Couponholders and, if, but only if, the Trustee shall so require, shall be notified by the Issuer to the Noteholders in accordance with Condition 13 as soon as practicable thereafter. MODIFICATION (B) The Trustee may without the consent or sanction of the Noteholders, the Receiptholders or the Couponholders at any time and from time to time concur with the Issuer in making any modification (i) to these presents (other than the proviso to paragraph 5 of the Third Schedule or any matters referred to in that proviso) which in the opinion of the Trustee it may be proper to make PROVIDED THAT the Trustee is of the opinion that such modification will not be materially prejudicial to the interests of the Noteholders or (ii) to these presents if in the opinion of the Trustee such modification is of a formal, minor or technical nature or to correct a manifest error. Any such modification may be made on such terms and subject to such conditions (if any) as the Trustee may determine, shall be binding upon the Noteholders, the Receiptholders and the Couponholders and, unless the Trustee agrees otherwise, shall be notified by the Issuer to the Noteholders in accordance with Condition 13 as soon as practicable thereafter. BREACH (C) Any breach of or failure to comply with any such terms and conditions as are referred to in sub-clauses (A) and (B) of this Clause shall constitute a default by the Issuer or the Guarantor in the performance or observance of a covenant or provision binding on it under or pursuant to these presents. CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER (D) (1) The Issuer shall not consolidate with or merge into any other corporation or convey or transfer its properties and assets substantially as an entirety to any person, unless: (a) the corporation formed by such consolidation or into which the Issuer is merged or the person which acquires by conveyance or transfer the properties and assets of the Issuer substantially as an entirety shall be a corporation organised and existing under the laws of the United States of America, any political subdivision thereof or any State thereof and shall expressly assume, by a trust deed supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of and interest on all the Notes and the performance of every covenant of these presents on the part of the Issuer to be performed or observed; (b) immediately after giving effect to such transaction, no Event of Default or Potential Event of Default shall have occurred; (c) the Issuer has delivered to the Trustee a certificate signed by two of its Directors and an opinion of counsel acceptable to the Trustee, each stating that such consolidation, merger, conveyance or transfer and such supplemental trust deed comply with this paragraph (1) and that all conditions precedent herein provided for relating to such transaction have been complied with; and (d) the Guarantor has delivered to the Trustee a certificate signed by two of its Directors and an opinion of counsel acceptable to the Trustee, each stating that the Guarantor's obligations under these presents shall remain in full force and effect thereafter. (2) Upon any consolidation with or merger into any other corporation, or any conveyance or transfer of the properties and assets of the Issuer substantially as an entirety, in each case in accordance with paragraph (1) above, the successor corporation formed by such consolidation or into which the Issuer is merged or the successor person to which such conveyance or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Issuer under these presents with the same effect as if such successor had been named as the Issuer herein, and thereafter the predecessor corporation shall be relieved of all obligations and covenants under these presents. (3) The Guarantor shall not consolidate with or merge into any other corporation or convey or transfer its properties and assets substantially as an entirety to any person, unless: (a) the corporation formed by such consolidation or into which the Guarantor is merged or the person which acquires by conveyance or transfer the properties and assets of the Guarantor substantially as an entirety shall be a corporation organised and existing under the laws of the United States of America, any political subdivision thereof or any State thereof and shall expressly assume, by a trust deed supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the obligations of the Guarantor contained in Clause 7 and the performance of every covenant contained in these presents on the part of the Guarantor to be performed or observed; (b) immediately after giving effect to such transaction, no Event of Default or Potential Event of Default shall have occurred; and (c) the Guarantor has delivered to the Trustee a certificate signed by two of its Directors and an opinion of counsel acceptable to the Trustee, each stating that such consolidation, merger, conveyance or transfer and such supplemental trust deed comply with this paragraph (3) and that all conditions precedent herein provided for relating to such transaction have been complied with. (4) Upon any consolidation with or merger into any other corporation, or any conveyance or transfer of the properties and assets of the Guarantor substantially as an entirety, in each case in accordance with paragraph (3) above, the successor corporation formed by such consolidation or into which the Guarantor is merged or the successor person to which such conveyance or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Guarantor under these presents with the same effect as if such successor had been named as the Guarantor herein, and thereafter the predecessor corporation shall be relieved of all obligations and covenants under these presents. 20. HOLDER OF DEFINITIVE NOTE ASSUMED TO BE RECEIPTHOLDER AND COUPONHOLDER (A) WHEREVER in these presents the Trustee is required or entitled to exercise a power, trust, authority or discretion under these presents, except as ordered by a court of competent jurisdiction or as required by applicable law, the Trustee shall, notwithstanding that it may have express notice to the contrary, assume that each Noteholder is the holder of all Receipts and Coupons appertaining to each Definitive Note of which he is the holder. NO NOTICE TO RECEIPTHOLDERS OR COUPONHOLDERS (B) Neither the Trustee nor the Issuer shall be required to give any notice to the Receiptholders or Couponholders for any purpose under these presents and the Receiptholders or Couponholders shall be deemed for all purposes to have notice of the contents of any notice given to the holders of Bearer Notes in accordance with Condition 13. 21. CURRENCY INDEMNITY EACH of the Issuer and the Guarantor shall severally indemnify the Trustee, every Appointee, the Noteholders, the Receiptholders and the Couponholders and keep them indemnified against: (a) any Liability incurred by any of them arising from the non-payment by the Issuer or the Guarantor of any amount due to the Trustee or the holders of the Notes issued by the Issuer or the Guarantor and the relative Receiptholders or Couponholders under these presents by reason of any variation in the rates of exchange between those used for the purposes of calculating the amount due under a judgment or order in respect thereof and those prevailing at the date of actual payment by the Issuer or the Guarantor; and (b) any deficiency arising or resulting from any variation in rates of exchange between (i) the date as of which the local currency equivalent of the amounts due or contingently due under these presents (other than this Clause) is calculated for the purposes of any bankruptcy, insolvency or liquidation of the Issuer or the Guarantor and (ii) the final date for ascertaining the amount of claims in such bankruptcy, insolvency or liquidation. The amount of such deficiency shall be deemed not to be reduced by any variation in rates of exchange occurring between the said final date and the date of any distribution of assets in connection with any such bankruptcy, insolvency or liquidation. The above indemnities shall constitute obligations of the Issuer and the Guarantor separate and independent from their other obligations under the other provisions of these presents and shall apply irrespective of any indulgence granted by the Trustee or the Noteholders, the Receiptholders or the Couponholders from time to time and shall continue in full force and effect notwithstanding the judgment or filing of any proof or proofs in any bankruptcy, insolvency or liquidation of the Issuer or the Guarantor for a liquidated sum or sums in respect of amounts due under these presents (other than this Clause). Any such deficiency as aforesaid shall be deemed to constitute a loss suffered by the Noteholders, the Receiptholders and the Couponholders and no proof or evidence of any actual loss shall be required by the Issuer or the Guarantor or its liquidator or liquidators. 22. NEW TRUSTEE (A) THE power to appoint a new trustee of these presents shall be vested in the Issuer but no person shall be appointed who shall not previously have been approved by an Extraordinary Resolution. One or more persons may hold office as trustee or trustees of these presents but such trustee or trustees shall be or include a Trust Corporation. Whenever there shall be more than two trustees of these presents the majority of such trustees shall be competent to execute and exercise all the duties, powers, trusts, authorities and discretions vested in the Trustee by these presents provided that a Trust Corporation shall be included in such majority. Any appointment of a new trustee of these presents shall as soon as practicable thereafter be notified by the Issuer to the Agent and the Noteholders. SEPARATE AND CO-TRUSTEES (B) Notwithstanding the provisions of sub-clause (A) above, the Trustee may, upon giving prior notice to the Issuer (but without the consent of the Issuer, the Guarantor, the Noteholders, the Receiptholders or the Couponholders), appoint any person established or resident in any jurisdiction (whether a Trust Corporation or not) to act either as a separate trustee or as a co-trustee jointly with the Trustee: (i) if the Trustee considers such appointment to be in the interests of the Noteholders; (ii) for the purposes of conforming to any legal requirements, restrictions or conditions in any jurisdiction in which any particular act or acts is or are to be performed; or (iii) for the purposes of obtaining a judgment in any jurisdiction or the enforcement in any jurisdiction of either a judgment already obtained or any of the provisions of these presents against the Issuer or the Guarantor. The Issuer irrevocably appoints the Trustee to be its attorney in its name and on its behalf to execute any such instrument of appointment. Such a person shall (subject always to the provisions of these presents) have such trusts, powers, authorities and discretions (not exceeding those conferred on the Trustee by these presents) and such duties and obligations as shall be conferred or imposed by the instrument of appointment. The Trustee shall have power in like manner to remove any such person. Such reasonable remuneration as the Trustee may pay to any such person, together with any attributable Liabilities incurred by it in performing its function as such separate trustee or co-trustee, shall for the purposes of these presents be treated as Liabilities incurred by the Trustee. 23. TRUSTEE'S RETIREMENT AND REMOVAL A trustee of these presents may retire at any time on giving not less than three months' prior written notice to the Issuer without giving any reason and without being responsible for any Liabilities incurred by reason of such retirement. The Noteholders may by Extraordinary Resolution remove any trustee or trustees for the time being of these presents. The Issuer undertakes that in the event of the only trustee of these presents which is a Trust Corporation giving notice under this Clause or being removed by Extraordinary Resolution it will use its best endeavours to procure that a new trustee of these presents being a Trust Corporation is appointed as soon as reasonably practicable thereafter. The retirement or removal of any such trustee shall not become effective until a successor trustee being a Trust Corporation is appointed. 24. TRUSTEE'S POWERS TO BE ADDITIONAL THE powers conferred upon the Trustee by these presents shall be in addition to any powers which may from time to time be vested in the Trustee by the general law or as a holder of any of the Notes, Receipts or Coupons. 25. NOTICES ANY notice or demand to the Issuer, the Guarantor or the Trustee to be given, made or served for any purposes under these presents shall be given, made or served by sending the same by pre-paid post (first class if inland, first class airmail if overseas) or facsimile transmission or by delivering it by hand as follows: to the Issuer 4500 Park Granada Calabasas California 91302 U.S.A. (Attention: Jennifer Sandefur Executive Vice President and Treasurer) Facsimile No. 001 818 225 4001 to the Guarantor: 4500 Park Granada Calabasas California 91302 U.S.A. (Attention: Keith McLaughlin Managing Director and Treasurer) Facsimile No. 001 818 225 4053 to the Trustee: 1 Appold Street Broadgate London EC2A 2HE (Attention: the Managing Director) Facsimile No. 44 171 982 1149 or to such other address or facsimile number as shall have been notified (in accordance with this Clause) to the other parties hereto and any notice or demand sent by post as aforesaid shall be deemed to have been given, made or served three days in the case of inland post or seven days in the case of overseas post after despatch and any notice or demand sent by facsimile transmission as aforesaid shall be deemed to have been given, made or served 24 hours after the time of despatch provided that in the case of a notice or demand given by facsimile transmission such notice or demand shall forthwith be confirmed by post. The failure of the addressee to receive such confirmation shall not invalidate the relevant notice or demand given by facsimile transmission. 26. GOVERNING LAW THESE presents are governed by, and shall be construed in accordance with, English law. 27. SUBMISSION TO JURISDICTION (A) EACH of the Issuer and the Guarantor irrevocably agrees for the benefit of the Trustee, the Noteholders, the Receiptholders and the Couponholders that the courts of England are to have jurisdiction to settle any disputes which may arise out of or in connection with these presents and that accordingly any suit, action or proceedings arising out of or in connection with these presents (together referred to as "Proceedings") may be brought in the courts of England. Each of the Issuer and the Guarantor irrevocably and unconditionally waives and agrees not to raise any objection which it may have now or subsequently to the laying of the venue of any Proceedings in the courts of England and any claim that any Proceedings have been brought in an inconvenient forum and further irrevocably and unconditionally agrees that a judgment in any Proceedings brought in the courts of England shall be conclusive and binding upon it and may be enforced in the courts of any other jurisdiction. Nothing in this Clause shall limit any right to take Proceedings against the Issuer or the Guarantor in any other court of competent jurisdiction, nor shall the taking of Proceedings in one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction, whether concurrently or not. (B) Each of the Issuer and the Guarantor irrevocably and unconditionally appoints Clifford Chance Secretaries Limited at its registered office for the time being (being at the date hereof at 200 Aldersgate Street, London EC1A 4JJ) and in the event of its ceasing so to act will appoint such other person as the Trustee may approve and as the Issuer or the Guarantor may nominate in writing to the Trustee for the purpose to accept service of process on its behalf in England in respect of any Proceedings. Each of the Issuer and the Guarantor: (i) agrees to procure that, so long as any of the Notes issued by it remains liable to prescription, there shall be in force an appointment of such a person approved by the Trustee with an office in London with authority to accept service as aforesaid; (ii) agrees that failure by any such person to give notice of such service of process to the Issuer or the Guarantor shall not impair the validity of such service or of any judgment based thereon; and (iii) agrees that nothing in these presents shall affect the right to serve process in any other manner permitted by law. 28. COUNTERPARTS THIS Trust Deed and any trust deed supplemental hereto may be executed and delivered in any number of counterparts, all of which, taken together, shall constitute one and the same deed and any party to this Trust Deed or any trust deed supplemental hereto may enter into the same by executing and delivering a counterpart. IN WITNESS whereof this Trust Deed has been executed as a deed by the Issuer, the Guarantor and the Trustee and delivered on the date stated on page 1. TERMS AND CONDITIONS OF THE NOTES The following are the Terms and Conditions of the Notes which will be incorporated by reference into each global Note and each definitive Note, in the latter case only if permitted by all legal and other relevant regulatory requirements and agreed by the Issuer and the relevant Dealer at the time of issue but, if not so permitted and agreed, such definitive Note will have endorsed thereon or attached thereto such Terms and Conditions. The applicable Pricing Supplement in relation to any Tranche of Notes may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with the following Terms and Conditions, replace or modify the following Terms and Conditions for the purpose of such Notes. The applicable Pricing Supplement (or the relevant provisions thereof) will be endorsed upon, or attached to, each temporary global Note, permanent global Note and definitive Note. Reference should be made to "Form of the Notes" above for a description of the content of Pricing Supplements which will include the definitions of certain terms used in the following Terms and Conditions or specify which of such terms are to apply in relation to the relevant Notes. This Note is one of a Series (as defined below) of Notes issued by Countrywide Home Loans, Inc. (the "Issuer") constituted by a Trust Deed dated 1st May, 1998 (such Trust Deed as modified and/or supplemented and/or restated from time to time, the "Trust Deed") made between the Issuer, Countrywide Credit Industries, Inc. as guarantor (the "Guarantor") and Bankers Trustee Company Limited (the "Trustee", which expression shall include any successor as trustee). References herein to the "Notes" shall be references to the Notes of this Series and shall mean: (i) in relation to any Notes represented by a global Note, units of the lowest Specified Denomination in the Specified Currency; (ii) definitive Notes issued in exchange for a global Note; and (iii) any global Note. The Notes, the Receipts (as defined below) and the Coupons (as defined below) have the benefit of an Agency Agreement also dated 1st May, 1998 (such Agency Agreement as amended and/or supplemented and/or restated from time to time, the "Agency Agreement") and made between the Issuer, the Guarantor, Bankers Trust Company as issuing and principal paying agent and agent bank (the "Agent", which expression shall include any successor agent specified in the applicable Pricing Supplement), the other paying agents named therein (together, where the context so permits, with the Agent, the "Paying Agents", which expression shall include any additional or successor paying agents) and the Trustee. Interest bearing definitive Notes (unless otherwise indicated in the applicable Pricing Supplement) have interest coupons ("Coupons") and, if indicated in the applicable Pricing Supplement, talons for further Coupons ("Talons") attached on issue. Any reference herein to Coupons or coupons shall, unless the context otherwise requires, be deemed to include a reference to Talons or talons. Definitive Notes repayable in instalments have receipts ("Receipts") for the payment of the instalments of principal (other than the final instalment) attached on issue. The Pricing Supplement for this Note (or the relevant provisions thereof) is attached to or endorsed on this Note and supplements these Terms and Conditions and may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with these Terms and Conditions, replace or modify these Terms and Conditions for the purposes of this Note. References to the "applicable Pricing Supplement" are to the Pricing Supplement (or the relevant provisions thereof) attached to or endorsed on this Note. The Trustee acts for the benefit of the holders for the time being of the Notes (the "Noteholders", which expression shall, in relation to any Notes represented by a global Note, be construed as provided below), the holders of the Receipts (the "Receiptholders") and the holders of the Coupons (the "Couponholders", which expression shall, unless the context otherwise requires, include the holders of the Talons), in accordance with the provisions of the Trust Deed. As used herein, "Tranche" means Notes which are identical in all respects (including as to listing) and "Series" means a Tranche of Notes together with any further Tranche or Tranches of Notes which are (i)(129) expressed to be consolidated and form a single series and (ii)(129) identical in all respects (including as to listing) except fortheir respective Issue Dates, Interest Commencement Dates and/or Issue Prices. Copies of the Trust Deed, the Agency Agreement and the applicable Pricing Supplement are available for inspection during normal business hours at the registered office for the time being of the Trustee (being at 1stMay, 1998 at 1 Appold Street, Broadgate, London EC2A 2HE, England) and at the specified office of each of the Agent and the other Paying Agents (and, if this Note is a listed Note of any Series, a copy of the applicable Pricing Supplement is available, free of charge, from the specified office of the Paying Agent in Luxembourg) save that, if this Note is an unlisted Note of any Series, the applicable Pricing Supplement will only be available for inspection by a Noteholder holding one or more unlisted Notes of that Series and such Noteholder must produce evidence satisfactory to the Trustee or, as the case may be, the relevant Paying Agent as to its holding of Notes and as to identity. The Noteholders, the Receiptholders and the Couponholders are deemed to have notice of, and are entitled to the benefit of, all the provisions of the Trust Deed, the Agency Agreement and the applicable Pricing Supplement which are applicable to them. These Terms and Conditions include summaries of, and are subject to the detailed provisions of, the Trust Deed. Words and expressions defined in the Trust Deed or the Agency Agreement or used in the applicable Pricing Supplement shall have the same meanings where used in these Terms and Conditions unless the context otherwise requires or unless otherwise stated and provided that, in the event of inconsistency between the Agency Agreement and the Trust Deed, the Trust Deed will prevail and, in the event of inconsistency between the Agency Agreement or the Trust Deed and the applicable Pricing Supplement, the applicable Pricing Supplement will prevail. 1. Form, Denomination and Title The Notes are in bearer form and, in the case of definitive Notes, serially numbered, in the Specified Currency and the Specified Denomination(s). Notes of one Specified Denomination may not be exchanged for Notes of another Specified Denomination. This Note is a Fixed Rate Note, a Floating Rate Note, a Zero Coupon Note, an Indexed Interest Note, an Indexed Redemption Amount Note, an Instalment Note, a Dual Currency Note or a Partly Paid Note or a combination of any of the foregoing or any other type of Note, depending upon the Interest Basis and Redemption/Payment Basis shown in the applicable Pricing Supplement. Definitive Notes are issued with Coupons attached, unless they are Zero Coupon Notes in which case references to Coupons and Couponholders in these Terms and Conditions are not applicable. Subject as set out below, title to the Notes, Receipts and Coupons will pass by delivery. The Issuer, the Guarantor, the Replacement Agent (as defined in the Agency Agreement) and any Paying Agent may deem and treat the bearer of any Note, Receipt or Coupon as the absolute owner thereof (whether or not overdue and notwithstanding any notice of ownership or writing thereon or notice of any previous loss or theft thereof) for all purposes but, in the case of any global Note, without prejudice to the provisions set out in the next succeeding paragraph. For so long as any of the Notes is represented by a global Note held on behalf of Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear System ("Euroclear") and/or Cedel Bank,(129)sociAtA anonyme ("Cedel Bank") each person (other than Euroclear or Cedel Bank or, in the case of Notes listed on the Paris Bourse, Sicovam (as defined below)) who is for the time being shown in the records of Euroclear or of Cedel Bank as the holder of a particular nominal amount of such Notes (in which regard any certificate or other document issued by Euroclear or Cedel Bank as to the nominal amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes save in the case of manifest error) shall be treated by the Issuer, the Guarantor, the Agent and any other Paying Agent as the holder of such nominal amount of such Notes for all purposes other than with respect to the payment of principal or interest on the Notes, for which purpose the bearer of the relevant global Note shall be treated by the Issuer, the Guarantor, the Agent and any other Paying Agent as the holder of such nominal amount of such Notes in accordance with and subject to the terms of the relevant global Note and the expressions "Noteholder" and "holder of Notes" and related expressions shall be construed accordingly. Notes which are represented by a global Note will be transferable only in accordance with the rules and procedures for the time being of Euroclear or of Cedel Bank, as the case may be. References to Euroclear and/or Cedel Bank shall, whenever the context so permits, be deemed to include a reference to any additional or alternative clearing system including, in the case of Notes listed on the Paris Bourse, Sicovam SA and the IntermAdiaires financiers habilitAs authorised to maintain accounts therein (together "Sicovam") approved by the Issuer, the Agent and the Trustee. 2. Status of the Notes and the Guarantee (a)The Notes and the relative Receipts and Coupons are direct, unconditional, unsubordinated and unsecured obligations of the Issuer and rank pari passu among themselves and (save for certain debts required to be preferred by law) equally with all other unsecured obligations (other than subordinated obligations, if any) of the Issuer, from time to time outstanding. (b)The payment of the principal and interest in respect of the Notes and all other moneys payable by the Issuer under or pursuant to the Trust Deed has been unconditionally and irrevocably guaranteed by the Guarantor under the Trust Deed. The obligations of the Guarantor under the Guarantee are direct, unconditional, unsubordinated and unsecured obligations of the Guarantor and rank pari passu and (save for certain debts required to be preferred by law) equally with all other unsecured obligations (other than subordinated obligations, if any) of the Guarantor, from time to time outstanding. 3. ECU Notes (a) Application of this Condition This Condition only applies if the Notes are denominated or payable in ECU. (b) Value and composition of the ECU Subject to Condition 5 (c), the ECU in which the Notes are denominated or payable ("ECU") will be the same as the ECU, as referred to in Article 109g of the Treaty establishing the European Communities, as amended by the Treaty on European Union (the "Treaty") and as defined in Council Regulation (EC) No 3320/94, that is from time to time used as the unit of account of the European Communities (the "EC"). Changes to the ECU may be made by the EC in which event the ECU will change accordingly. References to the ECU shall be deemed to be references to the ECU as so changed from time to time. (c) Provisions applicable from the start of the third stage of European economic and monetary union Notwithstanding the other provisions of these Terms and Conditions, on and after the Commencement Date: (i) all payments in respect of the Notes, the Receipts and the Coupons will be made solely in euro, including payments of interest in respect of periods commencing before the Commencement Date, as though references in the Notes to ECU were to euro; (ii) payments will be made in euro by credit or transfer to a euro account (or any other account to which euro may be credited or transferred) specified by the payee or, at the option of the payee, by a euro cheque; (iii) references in these Terms and Conditions to "ECU Settlement Day" shall be read as references to any day on which the TARGET System (as defined in Condition 17) is operating; (iv) if the Notes are Fixed Rate Notes and interest for any period ending on or after the Commencement Date is required to be calculated for a period of less than one year, it will be calculated on the basis of the actual number of days elapsed divided by 365 (or, if any of the days elapsed fall in a leap year, the sum of (i) the number of those days falling in a leap year divided by 366 and (ii) the number of those days falling in a non-leap year divided by 365); (v) if the Notes are Floating Rate Notes the applicable Pricing Supplement specifies any relevant changes to the provisions relating to interest; and (vi) such other changes (whether or not relating to any of the above matters) shall be made to these Terms and Conditions as the Issuer may decide, with the prior written approval of the Agent and Trustee, to conform them to conventions then applicable to instruments denominated in euro or to enable the Notes to be consolidated with one or more issues of other notes, whether or not originally denominated in ECU or euro. Any such other changes will not take effect until after they have been notified to the Noteholders in accordance with Condition 13. (c) Definition In this Condition, "Commencement Date" means the start of the third stage of economic and monetary union pursuant to the Treaty (as defined above). 4. Interest (a) Interest on Fixed Rate Notes Each Fixed Rate Note bears interest on its nominal amount (or, if it is a Partly Paid Note, the amount paid up) from (and including) the Interest Commencement Date at the rate(s) per annum equal to the Rate(s) of Interest payable in arrear on the Interest Payment Date(s) in each year and on the Maturity Date if that does not fall on an Interest Payment Date. The first payment of interest will be made on the Interest Payment Date next following the Interest Commencement Date. Except as provided above or in the applicable Pricing Supplement, the amount of interest payable on each Interest Payment Date in respect of the Fixed Interest Period ending on such date will amount to the Fixed Coupon Amount. As used herein, "Fixed Interest Period" means the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date. If interest is required to be calculated for a period of other than a Fixed Interest Period, such interest shall be calculated on the basis of a 360-day year consisting of 12 months of 30 days each. (b) Interest on Floating Rate Notes and Indexed Interest Notes (i) Interest Payment Dates Each Floating Rate Note and Indexed Interest Note bears interest on its nominal amount (or, if it is a Partly Paid Note, the amount paid up) from (and including) the Interest Commencement Date and such interest will be payable in arrear on either: (A) the Interest Payment Date(s) in each year specified in the applicable Pricing Supplement; or (B) if no express Interest Payment Date(s) is/are specified in the applicable Pricing Supplement, each date (each an "Interest Payment Date") which falls the number of months or other period specified as the Specified Period in the applicable Pricing Supplement after the preceding Interest Payment Date or, in the case of the first Interest Payment Date, after the Interest Commencement Date. Such interest will be payable in respect of each Interest Period (which expression shall, in these Terms and Conditions, mean the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date). If a business day convention is specified in the applicable Pricing Supplement and (x) if there is no numerically corresponding day in the calendar month in which an Interest Payment Date should occur or (y) if any Interest Payment Date would otherwise fall on a day which is not a Business Day, then, if the business day convention specified is: (1) in any case where Specified Periods are specified in accordance with Condition 4(b)(i)(B) above, the Floating Rate Convention, such Interest Payment Date (i) in the case of (x) above, shall be the last day that is a Business Day in the relevant month and the provisions of (B) below shall apply mutatis mutandis or (ii) in the case of (y) above, shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event (A) such Interest Payment Date shall be brought forward to the immediately preceding Business Day and (B) each subsequent Interest Payment Date shall be the last Business Day in the month which falls the Specified Period after the preceding applicable Interest Payment Date; or (2) the Following Business Day Convention, such Interest Payment Date shall be postponed to the next day which is a Business Day; or (3) the Modified Following Business Day Convention, such Interest Payment Date shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event such Interest Payment Date shall be brought forward to the immediately preceding Business Day; or (4) the Preceding Business Day Convention, such Interest Payment Date shall be brought forward to the immediately preceding Business Day. In this Condition, "Business Day" means a day which is both: (A) a day on which commercial banks and foreign exchange markets settle payments in London and any Additional Business Centre specified in the applicable Pricing Supplement; and (B) either (1) in relation to any sum payable in a Specified Currency other than ECU, a day on which commercial banks and foreign exchange markets settle payments in the principal financial centre of the country of the relevant Specified Currency (if other than London and any Additional Business Centre and which, if the Specified Currency is New Zealand dollars, shall be Auckland) or (2) in relation to any sum payable in ECU, an ECU Settlement Day (as defined in the 1991 ISDA Definitions, as amended and updated as at the Issue Date of the first Tranche of the Notes, published by the International Swaps and Derivatives Association, Inc. (the "ISDA Definitions") but not including part (b) of such definition). (ii) Rate of Interest The Rate of Interest payable from time to time in respect of Floating Rate Notes and Indexed Interest Notes will be determined in the manner specified in the applicable Pricing Supplement. (A) ISDA Determination for Floating Rate Notes Where ISDA Determination is specified in the applicable Pricing Supplement as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will be the relevant ISDA Rate plus or minus (as indicated in the applicable Pricing Supplement) the Margin (if any). For the purposes of this sub-paragraph (A), "ISDA Rate" for an Interest Period means a rate equal to the Floating Rate that would be determined by the Agent under an interest rate swap transaction if the Agent were acting as Calculation Agent for that swap transaction under the terms of an agreement incorporating the ISDA Definitions and under which: (1) the Floating Rate Option is as specified in the applicable Pricing Supplement; (2) the Designated Maturity is a period specified in the applicable Pricing Supplement; and (3) the relevant Reset Date is either (i) if the applicable Floating Rate Option is based on the London inter-bank offered rate (LIBOR) for a currency, the first day of that Interest Period or (ii) in any other case, as specified in the applicable Pricing Supplement. For the purposes of this sub-paragraph (A), "Floating Rate", "Calculation Agent", "Floating Rate Option", "Designated Maturity" and "Reset Date" have the meanings given to those terms in the ISDA Definitions. (B) Screen Rate Determination for Floating Rate Notes Where Screen Rate Determination is specified in the applicable Pricing Supplement as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will, subject as provided below, be either: (1) the offered quotation; or (2) the arithmetic mean (rounded if necessary to the fifth decimal place, with 0.000005 being rounded upwards) of the offered quotations, (expressed as a percentage rate per annum) for the Reference Rate which appears or appear, as the case may be, on the Relevant Screen Page as at 11.00 a.m. (London time) on the Interest Determination Date in question plus or minus (as indicated in the applicable Pricing Supplement) the Margin (if any), all as determined by the Agent. If five or more of such offered quotations are available on the Relevant Screen Page, the highest (or, if there is more than one such highest quotation, one only of such quotations) and the lowest (or, if there is more than one such lowest quotation, one only of such quotations) shall be disregarded by the Agent for the purpose of determining the arithmetic mean (rounded as provided above) of such offered quotations. The Agency Agreement contains provisions for determining the Rate of Interest in the event that the Relevant Screen Page is not available or if, in the case of (1) above, no such quotation appears or, in the case of (2) above, fewer than three such offered quotations appear, in each case as at the time specified in the preceding paragraph. If the Reference Rate from time to time in respect of Floating Rate Notes is specified in the applicable Pricing Supplement as being other than the London inter-bank offered rate, the Rate of Interest in respect of such Notes will be determined as provided in the applicable Pricing Supplement. (iii) Minimum and/or Maximum Rate of Interest If the applicable Pricing Supplement specifies a Minimum Rate of Interest for any Interest Period, then, in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of paragraph (ii) above is less than such Minimum Rate of Interest, the Rate of Interest for such Interest Period shall be such Minimum Rate of Interest. If the applicable Pricing Supplement specifies a Maximum Rate of Interest for any Interest Period, then, in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of paragraph (ii) above is greater than such Maximum Rate of Interest, the Rate of Interest for such Interest Period shall be such Maximum Rate of Interest. (iv) Determination of Rate of Interest and Calculation of Interest Amounts The Agent, in the case of Floating Rate Notes, and the Calculation Agent, in the case of Indexed Interest Notes, will at or as soon as practicable after each time at which the Rate of Interest is to be determined, determine the Rate of Interest for the relevant Interest Period. In the case of Indexed Interest Notes, the Calculation Agent will notify the Agent of the Rate of Interest for the relevant Interest Period as soon as practicable after calculating the same. The Agent will calculate the amount of interest (the "Interest Amount") payable on the Floating Rate Notes or Indexed Interest Notes in respect of each Specified Denomination for the relevant Interest Period. Each Interest Amount shall be calculated by applying the Rate of Interest to each Specified Denomination, multiplying such sum by the applicable Day Count Fraction, and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention. "Day Count Fraction" means, in respect of the calculation of an amount of interest for any Interest Period: (i) if "Actual/365" or "Actual/Actual" is specified in the applicable Pricing Supplement, the actual number of days in the Interest Period divided by 365 (or, if any portion of that Interest Period falls in a leap year, the sum of (A) the actual number of days in that portion of the Interest Period falling in a leap year divided by 366 and (B) the actual number of days in that portion of the Interest Period falling in a non-leap year divided by 365); (ii) if "Actual/365 (Fixed)" is specified in the applicable Pricing Supplement, the actual number of days in the Interest Period divided by 365; (iii) if "Actual/360" is specified in the applicable Pricing Supplement, the actual number of days in the Interest Period divided by 360; (iv) if "30/360", "360/360" or "Bond Basis" is specified in the applicable Pricing Supplement, the number of days in the Interest Period divided by 360 (the number of days to be calculated on the basis of a year of 360 days with 12 30-day months (unless (a) the last day of the Interest Period is the 31st day of a month but the first day of the Interest Period is a day other than the 30th or 31st day of a month, in which case the month that includes that last day shall not be considered to be shortened to a 30-day month, or (b) the last day of the Interest Period is the last day of the month of February, in which case the month of February shall not be considered to be lengthened to a 30-day month)); and (v) if "30E/360" or "Eurobond Basis" is specified in the applicable Pricing Supplement, the number of days in the Interest Period divided by 360 (the number of days to be calculated on the basis of a year of 360 days with 12 30-day months, without regard to the date of the first day or last day of the Interest Period unless, in the case of an Interest Period ending on the Maturity Date, the Maturity Date is the last day of the month of February, in which case the month of February shall not be considered to be lengthened to a 30-day month). (v) Notification of Rate of Interest and Interest Amounts The Agent will cause the Rate of Interest and each Interest Amount for each Interest Period and the relevant Interest Payment Date to be notified to the Issuer and any stock exchange on which the relevant Floating Rate Notes or Indexed Interest Notes are for the time being listed and notice thereof to be published in accordance with Condition(129)13 as soon as possible after their determination but in no event later than the fourth London Business Day (as defined in Condition(129)6(c)) thereafter. Each Interest Amount and Interest Payment Date so notified may subsequently be amended (or appropriate alternative arrangements made by way of adjustment) without prior notice in the event of an extension or shortening of the Interest Period. Any such amendment will be promptly notified to each stock exchange on which the relevant Floating Rate Notes or Indexed Interest Notes are for the time being listed and to the Noteholders in accordance with Condition(129)13. (vi) Determination or calculation by Trustee If for any reason at any relevant time the Agent or, as the case may be, the Calculation Agent defaults in its obligation to determine the Rate of Interest or the Agent defaults in its obligation to calculate any Interest Amount in accordance with sub-paragraph (ii)(A) or (B) above or as otherwise specified in the applicable Pricing Supplement, as the case may be, and, in each case (iv) above, the Trustee shall determine the Rate of Interest at such rate as, in its absolute discretion (having such regard as it shall think fit to the foregoing provisions of this Condition, but subject always to any minimum or maximum Rate of Interest specified in the applicable Pricing Supplement), it shall deem fair and reasonable in all the circumstances or, as the case may be, the Trustee shall calculate the Interest Amount(s) in such manner as it shall deem fair and reasonable in all the circumstances and each such determination or calculation shall be deemed to have been made by the Agent or the Calculation Agent, as applicable. (vii) Certificates to be final All certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions of this Condition 4(b), whether by the Agent or, if applicable, the Calculation Agent or the Trustee, shall (in the absence of wilful default, bad faith or manifest error) be binding on the Issuer, the Guarantor, the Agent, the Calculation Agent (if applicable), the other Paying Agents, the Trustee and all Noteholders, Receiptholders and Couponholders and (in the absence as aforesaid) no liability to the Issuer, the Guarantor, the Noteholders, the Receiptholders or the Couponholders shall attach to the Agent or (if applicable) the Calculation Agent or the Trustee in connection with the exercise or non-exercise by it of its powers, duties and discretions pursuant to such provisions. (c) Dual Currency Notes In the case of Dual Currency Notes, if the rate or amount of interest falls to be determined by reference to an exchange rate, the rate or amount of interest payable shall be determined in the manner specified in the applicable Pricing Supplement. (d) Partly Paid Notes In the case of Partly Paid Notes (other than Partly Paid Notes which are Zero Coupon Notes), interest will accrue as aforesaid on the paid-up nominal amount of such Notes and otherwise as specified in the applicable Pricing Supplement. (e) Accrual of Interest Each Note (or in the case of the redemption of part only of a Note, that part only of such Note) will cease to bear interest (if any) from the date for its redemption unless, upon due presentation thereof, payment of principal is improperly withheld or refused. In such event, interest will continue to accrue as provided in the Trust Deed. 5. Payments (a) Method of Payment Subject as provided below: (i) payments in a Specified Currency other than ECU or U.S. dollars will be made by transfer to an account in the relevant Specified Currency (which, in the case of a payment in Japanese Yen to a non-resident of Japan, shall be a non-resident account) maintained by the payee with, or by a cheque in such Specified Currency drawn on, a bank in the principal financial centre of the country of such Specified Currency (which, if the Specified Currency is New Zealand dollars, shall be Auckland); (ii) payments in ECU will be made by credit or transfer to an ECU account specified by the payee; and (iii) payments in U.S. dollars will be made by transfer to a U.S. dollar account maintained by the payee with a bank outside the United States (which expression, as used in this Condition 5, means the United States of America, including the States and the District of Columbia, its territories, its possessions and other areas subject to its jurisdiction), or by cheque drawn on a United States bank. In no event will payment be made by a cheque mailed to an address in the United States or by transfer to an account maintained by the payee with a bank located in the United States. Payments will be subject in all cases to any fiscal or other laws and regulations applicable thereto in the place of payment, but without prejudice to the provisions of Condition(129)7. References to "Specified Currency" will include any successor currency under applicable law. (b) Presentation of Notes, Receipts and Coupons Payments of principal in respect of definitive Notes will (subject as provided below) be made in the manner provided in paragraph (a) above only against surrender of definitive Notes, and payments of interest in respect of definitive Notes will (subject as provided below) be made as aforesaid only against surrender of Coupons, in each case at the specified office of any Paying Agent outside the United States (which expression, as used herein, means the United States of America (including the States and the District of Columbia, its territories, its possessions and other areas subject to its jurisdiction)). Payments of instalments of principal (if any), other than the final instalment, will (subject as provided below) be made in the manner provided in paragraph (a) above against surrender of the relevant Receipt. Payment of the final instalment will be made in the manner provided in paragraph (a) above only against surrender of the relevant Note. Each Receipt must be presented for payment of the relevant instalment together with the definitive Note to which it appertains. Receipts presented without the definitive Note to which they appertain do not constitute valid obligations of the Issuer. Upon the date on which any definitive Note becomes due and repayable, unmatured Receipts (if any) relating thereto (whether or not attached) shall become void and no payment shall be made in respect thereof. Fixed Rate Notes in definitive form (other than Dual Currency Notes or Indexed Notes) should be presented for payment together with all unmatured Coupons appertaining thereto (which expression shall for this purpose include Coupons falling to be issued on exchange of matured Talons), failing which the amount of any missing unmatured Coupon (or, in the case of payment not being made in full, the same proportion of the amount of such missing unmatured Coupon as the sum so paid bears to the sum due) will be deducted from the sum due for payment. Each amount of principal so deducted will be paid in the manner mentioned above against surrender of the relative missing Coupon at any time before the expiry of 10(129)years after the Relevant Date (as defined in Condition(129)7) in respect of such principal (whether or not such Coupon would otherwise have become void under Condition(129)8) or, if later, five years from the date on which such Coupon would otherwise have become due, but in no event thereafter. Notwithstanding the provisions of this paragraph, if any such Fixed Rate Notes in definitive form should be issued on terms such that, on the presentation for payment of any such Note without any unmatured Coupons attached thereto or surrendered therewith, the amount required by this paragraph to be deducted would be greater than the Early Redemption Amount otherwise due for payment, then, upon the due date for redemption of any such Note, such unmatured Coupons (whether or not attached) shall become void (and no payment shall be made in respect thereof) as shall be required so that, upon application of the provisions of this paragraph in respect of such Coupons as have not so become void, the amount required by this paragraph to be deducted would not be greater than the Early Redemption Amount otherwise due for payment. Where the application of the foregoing sentence requires some but not all of the unmatured Coupons relating to a Note to become void, the relevant Paying Agent shall determine which unmatured Coupons are to become void, and shall select for such purpose Coupons maturing on later dates in preference to Coupons maturing on earlier dates. Upon any Fixed Rate Note becoming due and repayable prior to its Maturity Date, all unmatured Talons (if any) appertaining thereto will become void and no further Coupons will be issued in respect thereof. Upon the date on which any Floating Rate Note, Dual Currency Note or Indexed Note in definitive form becomes due and repayable, unmatured Coupons and Talons (if any) relating thereto (whether or not attached) shall become void and no payment or, as the case may be, exchange for further Coupons shall be made in respect thereof. If the due date for redemption of any definitive Note is not an Interest Payment Date, interest (if any) accrued in respect of such Note from (and including) the preceding Interest Payment Date or, as the case may be, the Interest Commencement Date shall be payable only against surrender of the relevant definitive Note. Payments of principal and interest (if any) in respect of Notes represented by any global Note will (subject as provided below) be made in the manner specified above in relation to definitive Notes and otherwise in the manner specified in the relevant global Note against presentation or surrender, as the case may be, of such global Note at the specified office of any Paying Agent. A record of each payment made against presentation or surrender of such global Note, distinguishing between any payment of principal and any payment of interest, will be made on such global Note by such Paying Agent and such record shall be prima facie evidence that the payment in question has been made. The holder of a global Note shall be the only person entitled to receive payments in respect of Notes represented by such global Note and the Issuer or, as the case may be, the Guarantor will be discharged by payment to, or to the order of, the holder of such global Note in respect of each amount so paid. Each of the persons shown in the records of Euroclear or Cedel Bank as the beneficial holder of a particular nominal amount of Notes represented by such global Note must look solely to Euroclear or Cedel Bank, as the case may be, for his share of each payment so made by the Issuer or, as the case may be, the Guarantor to, or to the order of, the holder of such global Note. Notwithstanding the foregoing, if any amount of principal and/or interest in respect of this Note is payable in U.S. dollars, such U.S. dollar payments of principal and/or interest in respect of this Note will be made at the specified office of a Paying Agent in the United States if: (i) the Issuer has appointed Paying Agents with specified offices outside the United States with the reasonable expectation that such Paying Agents would be able to make payment in U.S. dollars at such specified offices outside the United States of the full amount of principal and interest on the Notes in the manner provided above when due; (ii) payment of the full amount of such principal and interest at all such specified offices outside the United States is illegal or effectively precluded by exchange controls or other similar restrictions on the full payment or receipt of principal and interest in U.S. dollars; and (iii) such payment is then permitted under United States law without involving, in the opinion of the Issuer and the Guarantor, adverse tax consequences to the Issuer or the Guarantor. (c) Payment in a Component Currency If any payment of principal or interest in respect of a Note, Receipt or Coupon is to be made in ECU and, on the relevant due date, the ECU is used neither as the unit of account of the EC nor as the currency of the European Union, the Trustee shall, without liability on its part and without having regard to the interests of individual Noteholders, Receiptholders or Couponholders and after consultation, if practicable, with the Issuer, choose a currency which was a component of the ECU when the ECU was most recently used as the unit of account of the EC (the "chosen currency") in which all payments due on that due date with respect to such Notes, Receipts and Coupons shall be made. Notice of the chosen currency selected by the Trustee shall, where practicable, be published in accordance with Condition 13. The amount of each payment in such chosen currency shall be computed on the basis of the equivalent of the ECU in that currency, determined as set out in this paragraph (c), as of the fourth London Business Day prior to the date on which such payment is due. For the purposes of this paragraph (c), the expression "London Business Day" means a day (other than a Saturday or a Sunday) on which banks and foreign exchange markets are open for business in London. Without prejudice to the preceding paragraph, on the first London Business Day from which the ECU is used neither as the unit of account of the EC nor as the currency of the European Union, the Trustee shall, without liability on its part and without having regard to the interests of individual Noteholders, Receiptholders or Couponholders and after consultation, if practicable, with the Issuer, choose a currency which was a component of the ECU when the ECU was most recently used as the unit of account of the EC (also the "chosen currency") in which all payments with respect to Notes, Receipts and Coupons having a due date prior thereto but not yet presented for payment are to be made. The amount of each payment in such chosen currency shall be computed on the basis of the equivalent of the ECU in that currency, determined as set out in this paragraph (c), as of such first London Business Day. The equivalent of the ECU in the relevant chosen currency as of any date (the "Day of Valuation") shall be determined on the following basis by the Agent. The component currencies of the ECU for this purpose (the "Components") shall be the currency amounts which were components of the ECU as of the last date on which the ECU was used as the unit of account of the EC. The equivalent of the ECU in the chosen currency shall be calculated by first aggregating the U.S. dollar equivalents of the Components, and then, using the rate used for determining the U.S. dollar equivalent of the Component in the chosen currency as set forth below, calculating the equivalent in the chosen currency of such aggregate amount in U.S. dollars. The U.S. dollar equivalent of each of the Components shall be determined by the Agent on the basis of the middle spot delivery quotations prevailing at 11.00 a.m. (London time) on the Day of Valuation, as obtained by the Agent from one or more leading banks as selected by the Agent in the country of issue of the Component in question. If the official unit of any Component is altered by way of combination or subdivision, the number of units of that Component shall be divided or multiplied in the same proportion. If two or more Components are consolidated into a single currency, the amounts of those Components shall be replaced by an amount in such single currency equal to the sum of the amounts of the consolidated Components expressed in such single currency. If any Component is divided into two or more currencies, the amount of that Component shall be replaced by amounts of such two or more currencies each of which shall be equal to the amount of the former Component divided by the number of currencies into which that Component was divided. If no direct quotations are available for a Component as of a Day of Valuation from any of the banks selected by the Agent for this purpose because foreign exchange markets are closed in the country of issue of that Component or for any other reason, the most recent direct quotations for that Component obtainable by the Agent shall be used in computing the U.S. dollar equivalent of the ECU on such Day of Valuation, provided, however, that such most recent quotations may be used only if they were prevailing in the country of issue of each Component not more than two London Business Days before such Day of Valuation. If the most recent quotations obtained by the Agent are those which were so prevailing more than two London Business Days before such Day of Valuation, the Agent shall determine the U.S. dollar equivalent of such Component on the basis of cross rates derived from the middle spot delivery quotations for such Component and for the U.S. dollar prevailing at 11.00 a.m. (London time) on such Day of Valuation, as obtained by the Agent from one or more leading banks, as selected by the Agent, in a country other than the country of issue of such Component. If such most recent quotations obtained by the Agent are those which were so prevailing not more than two London Business Days before such Day of Valuation, the Agent shall determine the U.S. dollar equivalent of such Component on the basis of such cross rates if it judges that the U.S. dollar equivalent so calculated is more representative than the U.S. dollar equivalent calculated on the basis of such most recent direct quotations. If there is more than one market for dealing in any Component by reason of foreign exchange regulations or for any other reason, the market to be referred to in respect of such Component shall be that upon which a non-resident issuer of securities denominated in such Component would ordinarily purchase such Component in order to make payments in respect of such securities. All choices and determinations made by the Agent or the Trustee for the purposes of this paragraph (c) shall be at its sole discretion and shall, in the absence of manifest error, be conclusive for all purposes and binding on the Issuer, the Guarantor, all Noteholders, Receiptholders and Couponholders. Whenever a payment is to be made in a chosen currency as provided in this paragraph (c), such chosen currency shall be deemed to be the Specified Currency for the purposes of the other provisions of this Condition. From the start of the third stage of European economic and monetary union, all amounts or payments in respect of Notes denominated or payable in ECU will be payable in euro at the rate of one euro for one ECU. This paragraph (c) will not result in a payment in a Component in such circumstances. (d) Payment Day If the date for payment of any amount in respect of any Note, Receipt or Coupon is not a Payment Day, the holder thereof shall not be entitled to payment until the next following Payment Day in the relevant place and shall not be entitled to further interest or other payment in respect of such delay. For these purposes, "Payment Day" means any day which is: (i) a day on which commercial banks and foreign exchange markets settle payments in the relevant place of presentation; (ii) a Business Day (as defined in Condition 4(b)(i)); and (iii) in relation to Notes denominated or payable in ECU, a day on which payments in ECU can be settled by commercial banks and in foreign exchange markets in the place in which the relevant account for payment is located. (e) Interpretation of Principal and Interest Any reference in these Terms and Conditions to principal in respect of the Notes shall be deemed to include, as applicable: (i) any additional amounts which may be payable with respect to principal under Condition 7; (ii) the Final Redemption Amount of the Notes; (iii) the Early Redemption Amount of the Notes; (iv) the Optional Redemption Amount(s) (if any) of the Notes; (v) in relation to Notes redeemable in instalments, the Instalment Amounts; (vi) in relation to Zero Coupon Notes, the Amortised Face Amount; and (vii) any premium and any other amounts which may be payable by the Issuer under or in respect of the Notes. Any reference in these Terms and Conditions to interest in respect of the Notes shall be deemed to include, as applicable, any additional amounts (other than interest) which may be payable with respect to interest under Condition 7. 6. Redemption and Purchase (a) At Maturity Unless previously redeemed or purchased and cancelled as specified below, each Note will be redeemed by the Issuer at its Final Redemption Amount specified in, or determined in the manner specified in, the applicable Pricing Supplement in the relevant Specified Currency on the Maturity Date. (b) Redemption for Tax Reasons The Notes may be redeemed at the option of the Issuer in whole, but not in part, at any time (if this Note is neither a Floating Rate Note nor an Indexed Interest Note) or on any Interest Payment Date (if this Note is either a Floating Rate Note or an Indexed Interest Note), on giving not less than 30 nor more than 60 days' notice to the Agent and, in accordance with Condition 13, the Noteholders (which notice shall be irrevocable), if: (i) on the occasion of the next payment due under the Notes, the Issuer has or will become obliged to pay additional amounts as provided or referred to in Condition 7 or the Guarantor would be unable for reasons outside its control to procure payment by the Issuer and in making payment itself would be required to pay such additional amounts in each case as a result of any change in, or amendment to, the laws or regulations of the United States of America or any political subdivision or any authority thereof or therein having power to tax, or any change in the application or official interpretation of such laws or regulations, which change or amendment becomes effective on or after the Issue Date of the first Tranche of the Notes; and (ii) such obligation cannot be avoided by the Issuer or, as the case may be, the Guarantor taking reasonable measures available to it, provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer or, as the case may be, the Guarantor would be obliged to pay such additional amounts were a payment in respect of the Notes then due. Prior to the publication of any notice of redemption pursuant to this Condition, the Issuer shall deliver to the Agent a certificate signed by two Directors of the Issuer or, as the case may be, two Directors of the Guarantor stating that the Issuer is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of the Issuer so to redeem have occurred, and an opinion of independent legal advisers of recognised standing to the effect that the Issuer or, as the case may be, the Guarantor has or will become obliged to pay such additional amounts as a result of such change or amendment. In addition if the Issuer or, if applicable, the Guarantor determines, based upon a written opinion of independent United States legal counsel, that any payment made outside the United States by the Issuer, the Guarantor or any Paying Agent of principal or interest due in respect of any Note, Receipt or Coupon would, under any present or future laws or regulations of the United States of America, be subject to any certification, identification or other information reporting requirement of any kind, the effect of which is the disclosure to the Issuer, the Guarantor, any Paying Agent or any governmental authority of the nationality, residence or identity (as distinguished from, for example, status as a United States Alien (as defined in Condition 7)) of a beneficial owner of such Note, Receipt or Coupon who is a United States Alien the Issuer, at its option, will either (x) redeem the Notes, in whole but not in part, or (y) if and so long as the conditions of Condition 7 are satisfied, pay the additional amounts specified in Condition 7. The right of the Issuer to exercise such option will not apply where the requirement otherwise giving rise to such option (1) would not be applicable to a payment made by the Issuer, the Guarantor or any Paying Agent (i) directly to the beneficial owner or (ii) to a custodian, nominee or other agent of the beneficial owner, (2) can be satisfied by such custodian, nominee or other agent certifying that such beneficial owner is a United States Alien, provided that in each case referred to in sub-paragraphs (1)(ii) and (2) payment by such custodian, nominee or agent of such beneficial owner is not otherwise subject to any such requirement (other than a requirement which is imposed on a custodian, nominee or other agent described in (4) of this sentence) or (3) would not be applicable to payment made by at least one other Paying Agent or (4) is applicable to a payment to a custodian, nominee or other agent of the beneficial owner who is a United States person, a controlled foreign corporation for United States tax purposes, a foreign person 50 per cent. or more of whose gross income for the 3-year period ending with the close of its taxable year preceding the year of payment is effectively connected with a United States trade or business, or is otherwise related to the United States. Such determination and election will be made as soon as practicable, and the Issuer will promptly publish notice thereof (the "Determination Notice") stating the effective date of such certification, identification or other information or reporting requirement, whether the Notes shall be redeemed or that the additional amounts specified in Condition 7 should be paid and (if applicable) the last date by which the redemption of the Notes must take place. If an election has been made that the Notes shall be redeemed, such redemption will take place on such date (being an Interest Payment Date if this Note is either a Floating Rate Note or an Indexed Interest Note), not later than one year after the publication of the Determination Notice, as the Issuer elects by notice to the Noteholders in accordance with Condition 13 at least 60 days before the date fixed for redemption. Notwithstanding the foregoing, the Notes will not be so redeemed if the Issuer subsequently determines, based on an opinion of independent United States legal counsel, no less than 30 days prior to the redemption date, that subsequent payments would not be subject to any such requirement, in which case the Issuer will promptly publish notice of such determination and any earlier redemption notice will be revoked and of no further effect. Notes redeemed pursuant to this Condition 6(b) will be redeemed at their Early Redemption Amount referred to in paragraph (e) below together (if appropriate) with interest accrued to (but excluding) the date of redemption. (c) Redemption at the Option of the Issuer If the Issuer is specified in the applicable Pricing Supplement as having an option to redeem, the Issuer shall, having given: (i) not less than 30 nor more than 60 days' notice to the Noteholders in accordance with Condition 13; and (ii) not less than 30 days before the giving of the notice referred to in (i), notice to the Agent; (which notices shall be irrevocable), redeem all or some only of the Notes then outstanding on any Optional Redemption Date and at the Optional Redemption Amount(s) specified in, or determined in the manner specified in, the applicable Pricing Supplement together, if appropriate, with interest accrued to (but excluding) the relevant Optional Redemption Date. Any such redemption must be of a nominal amount equal to the Minimum Redemption Amount or a Higher Redemption Amount. In the case of a partial redemption of Notes, the Notes to be redeemed ("Redeemed Notes") will be selected individually by lot, in the case of Redeemed Notes represented by definitive Notes, and in accordance with the rules of Euroclear and/or Cedel Bank, in the case of Redeemed Notes represented by a global Note, not more than 60 days prior to the date fixed for redemption (such date of selection being hereinafter called the "Selection Date"). In the case of Redeemed Notes represented by definitive Notes, a list of the serial numbers of such Redeemed Notes will be published in accordance with Condition 13 not less than 30 days prior to the date fixed for redemption. The aggregate nominal amount of Redeemed Notes represented by definitive Notes shall bear the same proportion to the aggregate nominal amount of all Redeemed Notes as the aggregate nominal amount of definitive Notes outstanding bears to the aggregate nominal amount of the Notes outstanding, in each case on the Selection Date, provided that such first mentioned nominal amount shall, if necessary, be rounded downwards to the nearest integral multiple of the Specified Denomination, and the aggregate nominal amount of Redeemed Notes represented by a global Note shall be equal to the balance of the Redeemed Notes. No exchange of the relevant global Note will be permitted during the period from and including the Selection Date to and including the date fixed for redemption pursuant to this paragraph (c) and notice to that effect shall be given by the Issuer to the Noteholders in accordance with Condition 13 at least 5 days prior to the Selection Date. (d) Redemption at the Option of the Noteholders If the Noteholders are specified in the applicable Pricing Supplement as having an option to redeem, upon the holder of any Note giving to the Issuer in accordance with Condition 13 not less than 30 nor more than 60 days' notice (which shall be irrevocable) the Issuer will, upon the expiry of such notice, redeem, subject to, and in accordance with, the terms specified in the applicable Pricing Supplement, in whole (but not in part), such Note on the Optional Redemption Date and at the Optional Redemption Amount together, if appropriate, with interest accrued to (but excluding) the Optional Redemption Date. If this Note is in definitive form, to exercise the right to require redemption of this Note the holder of this Note must deliver such Note at the specified office of any Paying Agent at any time during normal business hours of such Paying Agent falling within the notice period, accompanied by a duly completed and signed notice of exercise in the form (for the time being current) obtainable from any specified office of any Paying Agent (a "Put Notice") and in which the holder must specify a bank account (or, if payment is by cheque, an address) to which payment is to be made under this Condition. (e) Early Redemption Amounts For the purpose of paragraph (b) above and Condition 9, the Notes will be redeemed at the Early Redemption Amount calculated as follows: (i) in the case of Notes with a Final Redemption Amount equal to the Issue Price, at the Final Redemption Amount thereof; (ii) in the case of Notes (other than Zero Coupon Notes but including Instalment Notes and Partly Paid Notes) with a Final Redemption Amount which is or may be less or greater than the Issue Price or which is payable in a Specified Currency other than that in which the Notes are denominated, at the amount specified in, or determined in the manner specified in, the applicable Pricing Supplement or, if no such amount or manner is so specified in the Pricing Supplement, at their nominal amount; or (iii) in the case of Zero Coupon Notes, at an amount (the "Amortised Face Amount") equal to the sum of: (A) the Reference Price; and (B) the product of the Accrual Yield (compounded annually) being applied to the Reference Price from (and including) the Issue Date to (but excluding) the date fixed for redemption or (as the case may be) the date upon which such Note becomes due and repayable. Where such calculation is to be made for a period which is not a whole number of years, it shall be made on the basis of a 360-day year consisting of 12 months of 30 days each or such other calculation basis as may be specified in the applicable Pricing Supplement. (f) Instalments Instalment Notes will be redeemed in the Instalment Amounts and on the Instalment Dates. In the case of early redemption, the Early Redemption Amount will be determined pursuant to paragraph (e) above. (g) Partly Paid Notes Partly Paid Notes will be redeemed, whether at maturity, early redemption or otherwise, in accordance with the provisions of this Condition and the applicable Pricing Supplement. (h) Purchases The Issuer, the Guarantor or any of its other Subsidiaries (as defined in the Trust Deed) may at any time purchase Notes (provided that, in the case of definitive Notes, all unmatured Receipts, Coupons and Talons appertaining thereto are purchased therewith) at any price in the open market or otherwise. Such Notes may be held, reissued, resold or, at the option of the Issuer or the Guarantor, surrendered to any Paying Agent for cancellation. (i) Cancellation All Notes which are redeemed will forthwith be cancelled (together with all unmatured Receipts and Coupons attached thereto or surrendered therewith at the time of redemption). All Notes so cancelled and the Notes purchased and cancelled pursuant to paragraph (h) above (together with all unmatured Receipts and Coupons cancelled therewith) shall be forwarded to the Agent and cannot be reissued or resold. (j) Late payment on Zero Coupon Notes If the amount payable in respect of any Zero Coupon Note upon redemption of such Zero Coupon Note pursuant to paragraph (a), (b), (c) or (d) above or upon its becoming due and repayable as provided in Condition 9 is improperly withheld or refused, the amount due and repayable in respect of such Zero Coupon Note shall be the amount calculated as provided in paragraph (e)(iii) above as though the references therein to the date fixed for the redemption or the date upon which such Zero Coupon Note becomes due and payable were replaced by references to the date which is the earlier of: (i) the date on which all amounts due in respect of such Zero Coupon Note have been paid; and (ii) five days after the date on which the full amount of the moneys payable has been received by the Agent or the Trustee and notice to that effect has been given to the Noteholders in accordance with Condition 13. 7. Taxation Subject to certain exceptions and limitations set forth below, all payments of principal and interest in respect of the Notes, Receipts and Coupons by the Issuer or the Guarantor will be made without withholding or deduction for or on account of any present or future taxes or duties of whatever nature imposed or levied by or on behalf of the United States of America or any political subdivision or any authority thereof or therein having power to tax unless such withholding or deduction is required by law. In such event, the Issuer or, as the case may be, the Guarantor will pay such additional amounts as shall be necessary in order that the net amounts received by the holders of the Notes, Receipts or Coupons after such withholding or deduction shall equal the respective amounts of principal and interest which would otherwise have been receivable in respect of the Notes, Receipts or Coupons, as the case may be, in the absence of such withholding or deduction; except that no such additional amounts shall be payable with respect to any Note, Receipt or Coupon as a result of withholding or deduction on account of any one or more of the following: (i) any tax or duty which would not have been so imposed but for (A) the existence of any present or former connection between such holder (or between a fiduciary, settlor, or beneficiary of, or a person holding a power over, such holder, if such holder is an estate or a trust, or a member or shareholder of such holder, if such holder is a partnership or a corporation) and the United States of America including, without limitation, such holder (or such fiduciary, settlor, beneficiary, person holding a power, member or shareholder) being or having been a citizen or resident or treated as a resident thereof or being or having been engaged in a trade or business therein or having had a permanent establishment therein, or (B) such holder's present or former status as a personal holding company, foreign personal holding company or passive foreign investment company with respect to the United States of America or a controlled foreign corporation or a foreign tax exempt organisation for United States tax purposes or as a corporation which accumulates earnings to avoid United States Federal income tax; (ii) any tax or duty which would not have been so imposed but for the presentation or surrender by the holder of such Note, Receipt or Coupon for payment on a date more than 30 days after the Relevant Date except to the extent that the holder thereof would have been entitled to an additional amount on presenting the same for payment on such thirtieth day; (iii) any estate, inheritance, gift, sales, transfer or personal property tax or any similar tax or duty; (iv) any tax or duty which would not have been so imposed but for the failure to comply with certification, identification or other information reporting requirements concerning the nationality, residence, identity or connection with the United States of America of the holder or beneficial owner of such Note, Receipt or Coupon, if such compliance is required by statute or by regulation of the United States of America as a precondition of relief or exemption from such tax or duty; (v) any tax or duty which is payable otherwise than by withholding from a payment on a Note, Receipt or Coupon; (vi) any tax or duty imposed on a Noteholder, Receiptholder or Couponholder that actually or constructively owns 10 per cent. or more of the total combined voting power of all classes of stock of the Issuer or, as the case may be, the Guarantor entitled to vote within the meaning of Section 871(h)(3) of the United States Internal Revenue Code of 1986, as amended, and any regulations thereunder (the "Code"); or (vii) any combination of items (i), (ii), (iii), (iv), (v) and (vi), nor will additional amounts be paid with respect to any payment of principal of or interest on any such Note, Receipt or Coupon to any United States Alien which is a fiduciary or partnership or other than the sole beneficial owner of such payment, to the extent that a beneficiary or settlor with respect to such fiduciary or a member of such partnership or the beneficial owner would not have been entitled to the additional amounts had such beneficiary, settlor, member or beneficial owner been the holder of such Note, Receipt or Coupon. As used herein, "United States Alien" means any corporation, partnership, individual or fiduciary that is, for United States Federal tax purposes, a foreign corporation, a non-resident alien individual, a non-resident fiduciary of a foreign estate or trust, or a foreign partnership one or more of the members of which is, for United States Federal tax purposes, a foreign corporation, a non-resident alien individual or a non-resident fiduciary of a foreign estate or trust. Notwithstanding the above, if and so long as a certification, identification or other information reporting requirement referred to in the third paragraph of Condition 6(b) would be fully satisfied by payment of a backup withholding tax or similar charge, the Issuer may elect, by so stating in the Determination Notice, to have the following provisions of this Condition 7 apply in lieu of the provisions of the third paragraph of Condition 6(b). In such event, the Issuer, failing which, if applicable, the Guarantor, will pay as additional amounts such amounts as may be necessary so that every net payment made following the effective date of such requirements outside the United States of America by it, the Guarantor (if applicable) or any of the Paying Agents of principal or interest due in respect of any Note, Receipt or Coupon of which the beneficial owner is a United States Alien (but without any requirement that the nationality, residence or identity of such beneficial owner be disclosed to the Issuer, any Paying Agent or any governmental authority), after withholding or deduction for or on account of such backup withholding tax or similar charge (other than a backup withholding tax or similar charge which (1) is the result of a certification, identification or other information reporting requirement which would not be applicable in the circumstances described in the fourth paragraph of Condition 6(b) or (2) is imposed as a result of any of the circumstances described in paragraph (i), (ii) or (vi) above or any combination thereof), will not be less than the amount provided for in such Note, Receipt or Coupon to be then due and payable. If the Issuer or, if applicable, the Guarantor elects to pay such additional amounts and so long as they are obligated to pay the same, the Issuer may subsequently redeem the Notes in accordance with Condition 6(b). As used in these Terms and Conditions, the "Relevant Date" means the date on which a payment in respect of a Note, Receipt or Coupon first becomes due, except that, if the full amount of the moneys payable has not been duly received by the Agent or the Trustee on or prior to such due date, it means the date on which, the full amount of such moneys having been so received, notice to that effect is duly given to the Noteholders in accordance with Condition 13. 8. Prescription The Notes, Receipts and Coupons will become void unless presented for payment within a period of 10(129)years (in the case of principal) and five years (in the case of interest) after the Relevant Date (as defined in Condition 7) therefor. There shall not be included in any Coupon sheet issued on exchange of a Talon any Coupon the claim for payment in respect of which would be void pursuant to this Condition or Condition 5(b) or any Talon which would be void pursuant to Condition 5(b). 9. Events of Default (A)If any one or more of the following events (each an "Event of Default") shall occur and is continuing, the Trustee at its discretion may, and if so requested in writing by the holders of at least one quarter in nominal amount of the Notes then outstanding or if so directed by an Extraordinary Resolution (as defined in the Trust Deed) of the Noteholders shall (subject to being indemnified to its satisfaction), give notice to the Issuer that the Notes are, and they shall thereupon immediately become, due and repayable at their Early Redemption Amount, together with accrued interest as provided in the Trust Deed: (a) if default is made in the payment of any principal or interest due in respect of the Notes or any of them and the default continues for a period of 30(129)days in the case of interest; or (b) if the Issuer or the Guarantor fails to perform or observe any of its other obligations under these Terms and Conditions or the Trust Deed and (except in any case where, in the opinion of the Trustee, the failure is incapable of remedy when no such continuation or notice as is hereinafter mentioned will be required) the failure continues for the period of 60(129)days next following the service by the Trustee on the Issuer or the Guarantor (as the case may be) of notice requiring the same to be remedied; or (c) if any Indebtedness for Borrowed Money of the Issuer or the Guarantor becomes due and repayable prematurely by reason of an event of default (however described) or the Issuer or the Guarantor fails to make any payment in respect of any Indebtedness for Borrowed Money on the due date for payment or any security given by the Issuer or the Guarantor for any Indebtedness for Borrowed Money becomes enforceable or if default is made by the Issuer or the Guarantor in making any payment due under any guarantee and/or indemnity given by it in relation to any Indebtedness for Borrowed Money of any other person provided that no such event shall constitute an Event of Default unless the relative Indebtedness for Borrowed Money either alone or when aggregated with other Indebtedness for Borrowed Money relative to all (if any) other such events which shall have occurred shall amount to at least U.S.$10,000,000 (or its equivalent in any other currency); or (d) the entry of a decree or order for relief in respect of the Issuer or the Guarantor by a court having jurisdiction in the premises in an involuntary case under the Federal bankruptcy laws of the United States of America, as now or hereafter constituted, or any other Federal or State bankruptcy, insolvency or other similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Issuer or the Guarantor or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 90 consecutive days; or (e) the commencement by the Issuer or the Guarantor of a voluntary case under the Federal bankruptcy laws of the United States of America, as now or hereafter constituted, or any other applicable Federal or State bankruptcy, insolvency or other similar law, or the consent by it to the entry of an order for relief in an involuntary case under any such law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Issuer or the Guarantor or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of any corporate action in furtherance of any of the foregoing. (B) The Trustee may at any time, at its discretion and without notice, take such proceedings against the Issuer and/or the Guarantor as it may think fit to enforce the provisions of the Trust Deed, the Notes, the Receipts and the Coupons, but it shall not be bound to take any such proceedings or any other action in relation to the Trust Deed, the Notes, the Receipts or the Coupons unless (a) it shall have been so directed by an Extraordinary Resolution of the Noteholders or so requested in writing by the holders of at least one-quarter in nominal amount of the Notes then outstanding, and (b) it shall have been indemnified to its satisfaction; (2) No Noteholder, Receiptholder or Couponholder shall be entitled to proceed directly against the Issuer or the Guarantor unless the Trustee, having become bound so to proceed, fails so to do within a reasonable period and the failure shall be continuing. For the purposes of this Condition, "Indebtedness for Borrowed Money" means any present or future indebtedness (whether being principal, premium, interest or other amounts) for or in respect of (i)(129)money borrowed, (ii)(129)liabilities under or in respect of any acceptance or acceptance credit or (iii)(129)any notes, bonds, debentures, debenture stock, loan stock or other securities offered, issued or distributed whether by way of public offer, private placing, acquisition consideration or otherwise and whether issued for cash or in whole or in part for a consideration other than cash. 10. Replacement of Notes, Receipts, Coupons and Talons Should any Note, Receipt, Coupon or Talon be lost, stolen, mutilated, defaced or destroyed, it may be replaced at the specified office of the Replacement Agent upon payment by the claimant of such costs and expenses as may be incurred in connection therewith and on such terms as to evidence and indemnity as the Issuer and the Replacement Agent may reasonably require. Mutilated or defaced Notes, Receipts, Coupons or Talons must be surrendered before replacements will be issued. 11. Agent and Paying Agents The names of the initial Agent and the other initial Paying Agents and their initial specified offices are set out below. The Issuer and the Guarantor are entitled, with the prior written approval of the Trustee, to vary or terminate the appointment of any Paying Agent and/or appoint additional or other Paying Agents and/or approve any change in the specified office through which any Paying Agent acts, provided that: (i) so long as the Notes are listed on any stock exchange, there will at all times be a Paying Agent with a specified office in such place as may be required by the rules and regulations of the relevant stock exchange; (ii) there will at all times be a Paying Agent with a specified office in a city approved by the Trustee in continental Europe; and (iii) there will at all times be an Agent. In addition, the Issuer and the Guarantor shall forthwith appoint a Paying Agent having a specified office in New York City in the circumstances described in the final paragraph of Condition 5(b). Any variation, termination, appointment or change shall only take effect (other than in the case of insolvency, when it shall be of immediate effect) after not less than 30 nor more than 45 days' prior notice thereof shall have been given to the Noteholders in accordance with Condition 13. 12. Exchange of Talons On and after the Interest Payment Date on which the final Coupon comprised in any Coupon sheet matures, the Talon (if any) forming part of such Coupon sheet may be surrendered at the specified office of the Agent or any other Paying Agent in exchange for a further Coupon sheet including (if such further Coupon sheet does not include Coupons to (and including) the final date for the payment of interest due in respect of the Note to which it appertains) a further Talon, subject to the provisions of Condition 8. 13. Notices All notices regarding the Notes shall be published (i) in a leading English language daily newspaper of general circulation in London and, (ii) if and for so long as the Notes are listed on the Luxembourg Stock Exchange, a daily newspaper of general circulation in Luxembourg and (in respect of any Notes listed on the Paris Bourse (so long as that exchange requires)) in a French language daily newspaper of general circulation in Paris. It is expected that such publication will be made in the Financial(129)Times in London, the Luxemburger Wort in Luxembourg and Les Echos in Paris. The Issuer shall also ensure that notices are duly published in a manner which complies with the rules and regulations of any other stock exchange on which the Notes are for the time being listed. Any such notice will be deemed to have been given on the date of the first publication or, where required to be published in more than one newspaper, on the date of the first publication in each such newspaper or, where published in such newspapers on different dates, the last date of such first publication. If publication as provided above is not practicable, notice will be given in such other manner and shall be deemed to have been given on such date, as the Trustee may approve. Receiptholders and Couponholders shall be deemed for all purposes to have notice of the contents of any notice given to Noteholders in accordance with this Condition. Except in the case of Notes listed on the Luxembourg Stock Exchange, until such time as any definitive Notes are issued, there may (provided that, in the case of Notes listed on any stock exchange other than the Luxembourg Stock Exchange, the rules of such stock exchange so permit), so long as the global Note(s) is or are held in its/their entirety on behalf of Euroclear and Cedel Bank, be substituted for such publication in such newspaper(s) the delivery of the relevant notice to Euroclear and Cedel Bank for communication by them to the Noteholders. Any such notice shall be deemed to have been given to the Noteholders on the seventh day after the day on which the said notice was given to Euroclear and Cedel Bank. Notices to be given by any Noteholder shall be in writing and given by lodging the same, together with the relative Note or Notes, with the Agent. Whilst any of the Notes is represented by a global Note, such notice may be given by any Noteholder to the Agent via Euroclear and/or Cedel Bank, as the case may be, in such manner as the Agent and Euroclear and/or Cedel Bank, as the case may be, may approve for this purpose. 14. Meetings of Noteholders, Modification and Waiver The Trust Deed contains provisions for convening meetings of the Noteholders to consider any matter affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of the Notes, the Receipts, the Coupons or any of the provisions of the Trust Deed. Such a meeting may be convened by the Issuer or the Guarantor or by Noteholders holding not less than five per cent. in nominal amount of the Notes for the time being remaining outstanding. The quorum at any such meeting for passing an Extraordinary Resolution is one or more persons holding or representing not less than a clear majority in nominal amount of the Notes for the time being outstanding, or at any adjourned meeting one or more persons being or representing Noteholders whatever the nominal amount of the Notes so held or represented, except that at any meeting the business of which includes the modification of certain provisions of the Notes, Receipts or Coupons or the Trust Deed (including modifying the date of maturity of the Notes or any date for payment of interest thereon, reducing or cancelling the amount of principal or the rate of interest payable in respect of the Notes or altering the currency of payment of the Notes, Receipts or Coupons), the quorum shall be one or more persons holding or representing not less than two-thirds in nominal amount of the Notes for the time being outstanding, or at any adjourned such meeting one or more persons holding or representing not less than one-third in nominal amount of the Notes for the time being outstanding. An Extraordinary Resolution passed at any meeting of the Noteholders shall be binding on all the Noteholders, whether or not they are present at the meeting, and on all Receiptholders and Couponholders. The Trustee may agree, without the consent of the Noteholders, Receiptholders or Couponholders, to any modification (subject to certain exceptions) of, or to the waiver or authorisation of any breach or proposed breach of, any of these Terms and Conditions or any of the provisions of the Trust Deed, or determine, without any such consent as aforesaid, that any Event of Default or Potential Event of Default (as defined in the Trust Deed) shall not be treated as such, which in any such case is not, in the opinion of the Trustee, materially prejudicial to the interests of the Noteholders or may agree, without any such consent as aforesaid, to any modification which is of a formal, minor or technical nature or to correct a manifest error. Any such modification shall be binding on the Noteholders, the Receiptholders and the Couponholders and, unless the Trustee otherwise agrees, any such modification shall be notified to the Noteholders in accordance with Condition 13 as soon as practicable thereafter. In connection with the exercise by it of any of its trusts, powers, authorities and discretions (including, without limitation, any modification, waiver, authorisation or determination), the Trustee shall have regard to the general interests of the Noteholders as a class but shall not have regard to any interests arising from circumstances particular to individual Noteholders, Receiptholders or Couponholders (whatever their number) and, in particular but without limitation, shall not have regard to the consequences of any such exercise for individual Noteholders, Receiptholders or Couponholders (whatever their number) resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory or any political sub-division thereof and the Trustee shall not be entitled to require, nor shall any Noteholder, Receiptholder or Couponholder be entitled to claim, from the Issuer, the Guarantor, the Trustee or any other person any indemnification or payment in respect of any tax consequence of any such exercise upon individual Noteholders or Couponholders except to the extent already provided for in Condition 7 and/or any undertaking given in addition to, or in substitution for, Condition 7 pursuant to the Trust Deed. 15. Further Issues The Issuer shall be at liberty from time to time without the consent of the Noteholders, Receiptholders or Couponholders to create and issue further notes having terms and conditions the same as the Notes or the same in all respects save for the amount and date of the first payment of interest thereon and so that the same shall be consolidated and form a single Series with the outstanding Notes. The Trust Deed contains provisions for convening a single meeting of the Noteholders and the holders of Notes of other Series where the Trustee so decides. 16. Consolidation, Merger and Transfer of Assets The Trust Deed provides that neither the Issuer nor the Guarantor may consolidate with, or merge into, any corporation, or transfer its assets substantially as an entirety to any person, unless (a)(129)the successor corporation or transferee assumes the Issuer's or, as the case may be, the Guarantor's obligations in respect of the Notes, the Receipts and the Coupons and under the Trust Deed, (b) after giving effect to the relevant transaction, no Event of Default or Potential Event of Default (as defined in the Trust Deed) shall have occurred and be continuing and (c)(129)certain other conditions set out in the Trust Deed are complied with. 17. Redenomination and Exchange (a) Redenomination Where redenomination is specified in the applicable Pricing Supplement as being applicable, the Issuer may, without the consent of the Noteholders, the Receiptholders and the Couponholders, on giving prior notice to the Trustee, the Agent, Euroclear and Cedel Bank and at least 30 days' prior notice to the Noteholders in accordance with Condition 13, elect that, with effect from the Redenomination Date specified in the notice, the Notes shall be redenominated in euro. The election will have effect as follows: (i) each Specified Denomination and, in the case of Fixed Rate Notes, each amount of interest specified on the Coupons will be deemed to be such amount of euro as is equivalent to its denomination or the amount so specified in the Specified Currency at the Established Rate, rounded down to the nearest euro 0.01; (ii) after the Redenomination Date, all payments in respect of the Notes, the Receipts and the Coupons other than payments of interest in respect of periods commencing before the Redenomination Date, will be made solely in euro as though references in the Notes to the Specified Currency were to euro. Payments will be made in euro by credit or transfer to a euro account (or any other account to which euro may be credited or transferred) specified by the payee or, at the option of the payee, by a euro cheque; (iii) paragraph (B) of the definition of Business Day in Condition 4(b)(i) shall read as follows: "either (1) in relation to any sum payable in a Specified Currency other than euro, a day on which commercial banks and foreign exchange markets settle payments in the principal financial centre of the country of the relevant Specified Currency (if other than London and any Additional Business Centre and which, if the Specified Currency is New Zealand dollars, shall be Auckland) or (2) in relation to any sum payable in euro, a day on which the TARGET System is open."; (iv) if the Notes are Fixed Rate Notes and interest for any period ending on or after the Redenomination Date is required to be calculated for a period of less than one year, it will be calculated on the basis of the actual number of days elapsed divided by 365 (or, if any of the days elapsed fall in a leap year, the sum of (i) the number of those days falling in a leap year divided by 366 and (ii) the number of those days falling in a non-leap year divided by 365); (v) if the Notes are Floating Rate Notes the applicable Pricing Supplement specifies any relevant changes to the provisions relating to interest; and (vi) such other changes shall be made to these Terms and Conditions as the Issuer may decide, with the prior written approval of the Trustee and the Agent, and as may be specified in the notice, to conform them to conventions then applicable to instruments denominated in euro or to enable the Notes to be consolidated with one or more issues of other notes, whether or not originally denominated in the Specified Currency or euro. Any such other changes will not take effect until after they have been notified to the Noteholders in accordance with Condition 13. (b) Exchange Where exchange is specified in the applicable Pricing Supplement as being applicable, the Issuer may, without the consent of the Noteholders, the Receiptholders and the Couponholders, on giving prior notice to the Trustee, the Agent, and if applicable, Euroclear and Cedel Bank and not less than 30 days' prior notice to the Noteholders in accordance with Condition 13, elect that, with effect from the Redenomination Date specified in the notice, the Notes shall be exchangeable for Notes expressed to be denominated in euro in accordance with such arrangements as the Issuer may decide, with the prior written approval of the Trustee, and as may be specified in the notice, including arrangements under which Receipts and Coupons unmatured at the date so specified become void. (c) Definitions In this Condition, the following expressions have the following meanings: "Established Rate" means the rate for the conversion of the Specified Currency (including compliance with rules relating to roundings in accordance with applicable European Community regulations) into euro established by the Council of the European Union pursuant to Article 109l(4) of the Treaty; "euro" means the currency to be introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty; "Redenomination Date" means a date (which, in the case of interest-bearing Notes, shall be a date for payment of interest under the Notes) specified by the Issuer in the notice given to the Noteholders pursuant to paragraph (a) or, as the case may be, (b) above which falls on or after the start of the third stage of European economic and monetary union pursuant to the Treaty or, if the country of the Specified Currency is not one of the countries then participating in such third stage, which falls on or after such later date as it does so participate; and "TARGET system" means the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET) System. 18. Indemnification of(129)the Trustee and its contracting with the Issuer and the Guarantor The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility, including provisions relieving it from taking action unless indemnified to its satisfaction. The Trust Deed also contains provisions pursuant to which the Trustee is entitled, inter alia, (i)(129)to enter into business transactions with the Issuer and/or the Guarantor and/or any of the Guarantor's other Subsidiaries and to act as trustee for the holders of any other securities issued or guaranteed by, or relating to, the Issuer and/or the Guarantor and/or any of the Guarantor's other Subsidiaries, (ii)(129)to exercise and enforce its rights, comply with its obligations and perform its duties under or in relation to any such transactions or, as the case may be, any such trusteeship without regard to the interests of, or consequences for, the Noteholders, Receiptholders or Couponholders, and (iii) to retain and not be liable to account for any profit made or any other amount or benefit received thereby or in connection therewith. 19. Governing law and submission to jurisdiction (a)The Trust Deed, the Notes, the Receipts and the Coupons are governed by, and shall be construed in accordance with, English law. (b)Each of the Issuer and the Guarantor has in the Trust Deed agreed, for the exclusive benefit of the Trustee, the Noteholders, the Receiptholders and the Couponholders that the courts of England are to have jurisdiction to settle any disputes which may arise out of or in connection with the Trust Deed, the Notes, the Receipts and/or the Coupons and that accordingly any suit, action or proceedings (together referred to as "Proceedings") arising out of or in connection with the Trust Deed, the Notes, the Receipts and/or the Coupons may be brought in such courts. Each of the Issuer and the Guarantor has in the Trust Deed irrevocably waived any objection which it may have now or hereafter to the laying of the venue of any such Proceedings in any such court and any claim that any such Proceedings have been brought in an inconvenient forum and has in the Trust Deed further irrevocably agreed that a judgment in any such Proceedings brought in the English courts shall be conclusive and binding upon it and may be enforced in the courts of any other jurisdiction. Nothing contained in this Condition shall limit any right to take Proceedings against the Issuer or the Guarantor in any other court of competent jurisdiction, nor shall the taking of Proceedings in one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction, whether concurrently or not. Each of the Issuer and the Guarantor has in the Trust Deed appointed Clifford Chance Secretaries Limited at its registered office (being at 1st May, 1998 at 200 Aldersgate Street, London EC1A 4JJ) as its agent for service of process, and undertaken that, in the event of Clifford Chance Secretaries Limited ceasing so to act or ceasing to be registered in England, it will appoint another person as its agent for service of process in England in respect of any Proceedings. Nothing herein shall affect the right to serve proceedings in any other manner permitted by law. USE OF PROCEEDS The net proceeds from each issue of Notes will be applied by the Issuer for its general corporate purposes. AGENT Bankers Trust Company 1 Appold Street Broadgate London EC2A 2HE OTHER PAYING AGENTS Bankers Trust Luxembourg S.A. Swiss Bank Corporation 14 boulevard F.D. Roosevelt Paradeplatz 6 L-2450 Luxembourg CH-8010 Zurich THE SECOND SCHEDULE FORMS OF GLOBAL AND DEFINITIVE NOTES, RECEIPTS, COUPONS AND TALONS PART I FORM OF TEMPORARY GLOBAL NOTE [ANY UNITED STATES PERSON (AS DEFINED IN THE INTERNAL REVENUE CODE OF THE UNITED STATES) WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.]1 [BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE OF THE UNITED STATES AND THE REGULATIONS THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER).]2 [THIS NOTE CONSTITUTES [COMMERCIAL PAPER/[A SHORTER/LONGER] TERM DEBT SECURITY]3 ISSUED IN ACCORDANCE WITH REGULATIONS MADE UNDER SECTION 4 OF THE BANKING ACT 1987. THE ISSUER OF THIS NOTE IS NOT AN AUTHORISED INSTITUTION OR A EUROPEAN AUTHORISED INSTITUTION (AS SUCH TERMS ARE DEFINED IN THE BANKING ACT 1987 (EXEMPT TRANSACTIONS) REGULATIONS 1997). REPAYMENT OF THE PRINCIPAL AND PAYMENT OF ANY INTEREST OR PREMIUM IN CONNECTION WITH THIS NOTE HAS BEEN GUARANTEED BY COUNTRYWIDE CREDIT INDUSTRIES, INC. WHICH IS NOT AN AUTHORISED INSTITUTION OR A EUROPEAN AUTHORISED INSTITUTION.]4 COUNTRYWIDE HOME LOANS INC. (the "Issuer") (incorporated with limited liability in the State of New York) Unconditionally and irrevocably guaranteed by COUNTRYWIDE CREDIT INDUSTRIES, INC. (incorporated with limited liability in the State of Delaware) TEMPORARY GLOBAL NOTE This Note is a Temporary Global Note in respect of a duly authorised issue of Notes of the Issuer (the "Notes") of the Nominal Amount, Specified Currency(ies) and Specified Denomination(s) as are specified in the Pricing Supplement applicable to the Notes (the "Pricing Supplement"), a copy of which is annexed hereto. References herein to the Conditions shall be to the Terms and Conditions of the Notes as set out in the First Schedule to the Trust Deed (as defined below) as supplemented, replaced and modified by the Pricing Supplement but, in the event of any conflict between the provisions of the said Conditions and the information in the Pricing Supplement, the Pricing Supplement will prevail. Words and expressions defined in the Conditions shall bear the same meanings when used in this Global Note. This Global Note is issued subject to, and with the benefit of, the Conditions and a Trust Deed (such Trust Deed as modified and/or supplemented and/or restated from time to time, the "Trust Deed") dated 1st May, 1998 and made between the Issuer, Countrywide Credit Industries, Inc. as guarantor and Bankers Trustee Company Limited as trustee for the holders of the Notes. The Issuer, subject as hereinafter provided and subject to and in accordance with the Conditions and the Trust Deed, promises to pay to the bearer hereof on each Instalment Date (if the Notes are repayable in instalments) and on the Maturity Date and/or on such earlier date(s) as all or any of the Notes represented by this Global Note may become due and repayable in accordance with the Conditions and the Trust Deed, the amount payable under the Conditions in respect of such Notes on each such date and to pay interest (if any) on the nominal amount of the Notes from time to time represented by this Global Note calculated and payable as provided in the Conditions and the Trust Deed together with any other sums payable under the Conditions and the Trust Deed, upon presentation and, at maturity, surrender of this Global Note at the specified office of the Agent at 1 Appold Street, Broadgate, London EC2A 2HE, England or such other specified office as may be specified for this purpose in accordance with the Conditions or at the specified office of any of the other Paying Agents located outside the United States, its territories and possessions (except as provided in the Conditions) from time to time appointed by the Issuer in respect of the Notes. On any redemption or payment of an instalment or interest being made in respect of, or purchase and cancellation of, any of the Notes represented by this Global Note details of such redemption, payment, purchase and cancellation (as the case may be) shall be entered by or on behalf of the Issuer in Schedule One hereto and the relevant space in Schedule One hereto recording any such redemption, payment, purchase and cancellation (as the case may be) shall be signed by or on behalf of the Issuer. Upon any such redemption, payment of an instalment, purchase and cancellation the nominal amount of this Global Note and the Notes represented by this Global Note shall be reduced by the nominal amount of such Notes so redeemed or purchased and cancelled or the amount of such instalment. The nominal amount from time to time of this Global Note and of the Notes represented by this Global Note following any such redemption, payment of an instalment, purchase and cancellation as aforesaid or any exchange as referred to below shall be the nominal amount most recently entered in the relevant column in Part II, III or IV of Schedule One hereto or in Schedule Two hereto. Payments of principal and interest (if any) due prior to the Exchange Date (as defined below) will only be made to the bearer hereof to the extent that there is presented to the Agent by Cedel Bank, societe anonyme ("Cedel Bank") or Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear System ("Euroclear") a certificate in or substantially in the form set out in Part VII of the Second Schedule to the Trust Deed to the effect that it has received from or in respect of a person entitled to a particular nominal amount of the Notes represented by this Global Note (as shown by its records) a certificate in or substantially in the form of Certificate "A" as set out in Part VII of the Second Schedule to the Trust Deed. The bearer of this Global Note will not (unless upon due presentation of this Global Note for exchange, delivery of the appropriate number of Definitive Notes (together, if applicable, with the Receipts, Coupons and Talons appertaining thereto in or substantially in the forms set out in Parts III, IV, V and VI of the Second Schedule to the Trust Deed) or, as the case may be, issue and delivery (or, as the case may be, endorsement) of the Permanent Global Note is improperly withheld or refused and such withholding or refusal is continuing at the relevant payment date) be entitled to receive any payment hereon due on or after the Exchange Date. On or after the date (the "Exchange Date") which is 40 days after the Issue Date, this Global Note may be exchanged (free of charge) in whole or in part for, as specified in the Pricing Supplement, either Definitive Notes and (if applicable) Receipts, Coupons and/or Talons (on the basis that all the appropriate details have been included on the face of such Definitive Notes and (if applicable) Receipts, Coupons and/or Talons and the relevant information supplementing, replacing or modifying the Conditions appearing in the Pricing Supplement has been endorsed on or attached to such Definitive Notes) or a Permanent Global Note in or substantially in the form set out in Part II of the Second Schedule to the Trust Deed (together with the Pricing Supplement attached thereto) upon notice being given by Euroclear and/or Cedel Bank acting on the instructions of any holder of an interest in this Global Note and subject, in the case of Definitive Notes, to such notice period as is specified in the Pricing Supplement. If Definitive Notes and (if applicable) Receipts, Coupons and/or Talons have already been issued in exchange for all the Notes represented for the time being by the Permanent Global Note, then this Global Note may only thereafter be exchanged for Definitive Notes and (if applicable) Receipts, Coupons and/or Talons pursuant to the terms hereof. Presentation of this Global Note for exchange shall be made by the bearer hereof on any day (other than a Saturday or Sunday) on which banks are open for business in London at the office of the Agent specified above. The Issuer shall procure that Definitive Notes or (as the case may be) the Permanent Global Note shall be so issued and delivered in exchange for only that portion of this Global Note in respect of which there shall have been presented to the Agent by Euroclear or Cedel Bank a certificate in or substantially in the form set out in Part VII of the Second Schedule to the Trust Deed to the effect that it has received from or in respect of a person entitled to a particular nominal amount of the Notes represented by this Global Note (as shown by its records) a certificate in or substantially in the form of Certificate "A" as set out in Part VII of the Second Schedule to the Trust Deed. On an exchange of the whole of this Global Note, this Global Note shall be surrendered to the Agent. On an exchange of part only of this Global Note, details of such exchange shall be entered by or on behalf of the Issuer in Schedule Two hereto and the relevant space in Schedule Two hereto recording such exchange shall be signed by or on behalf of the Issuer, whereupon the nominal amount of this Global Note and the Notes represented by this Global Note shall be reduced by the nominal amount of this Global Note so exchanged. On any exchange of this Global Note for a Permanent Global Note, details of such exchange shall be entered by or on behalf of the Issuer in Schedule Two to the Permanent Global Note and the relevant space in Schedule Two thereto recording such exchange shall be signed by or on behalf of the Issuer. Until the exchange of the whole of this Global Note as aforesaid, the bearer hereof shall (subject as provided in the next paragraph) in all respects (except as otherwise provided herein) be entitled to the same benefits as if he were the bearer of Definitive Notes and the relative Receipts, Coupons and/or Talons (if any) in the form(s) set out in Parts III, IV, V and VI (as applicable) of the Second Schedule to the Trust Deed. Each person (other than Euroclear or Cedel Bank) who is for the time being shown in the records of Euroclear or Cedel Bank as the holder of a particular nominal amount of the Notes represented by this Global Note (in which regard any certificate or other document issued by Euroclear or Cedel Bank as to the nominal amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes save in the case of manifest error) shall be treated by the Issuer, the Trustee, the Agent and any other Paying Agent as the holder of such nominal amount of such Notes for all purposes other than with respect to the payment of principal and interest on such nominal amount of such Notes, the right to which shall be vested, as against the Issuer, solely in the bearer of this Global Note in accordance with and subject to the terms of this Global Note and the Trust Deed. This Global Note is governed by, and shall be construed in accordance with, English law. This Global Note shall not be valid unless authenticated by Bankers Trust Company as Agent. IN WITNESS whereof the Issuer has caused this Global Note to be signed manually or in facsimile by two persons duly authorised on its behalf. COUNTRYWIDE HOME LOANS, INC. By: ..................................................... By: ..................................................... Duly Authorised Duly Authorised Authenticated by Bankers Trust Company as Agent. By: ..................................................... Authorised Officer Schedule One PART I INTEREST PAYMENTS
Confirmation of payment by or on Interest Payment Total amount of Amount of interest behalf of the Issuer Date made Date interest payable paid
PART II PAYMENT OF INSTALMENT AMOUNTS Remaining nominal amount of this Global Total amount of Amount of Instalment Note following such Confirmation of Instalment Amounts Amounts paid payment * payment by or on Date made payable behalf of the Issuer ======== ============== ============== ============== ============== ======== ============== ============== ============== ============== ======== ============== ============== ============== ============== ======== ============== ============== ============== ============== ======== ============== ============== ============== ============== ======== ============== ============== ============== ============== ======== ============== ============== ============== ============== ======== ============== ============== ============== ============== ======== ============== ============== ============== ============== ======== ============== ============== ============== ============== ======== ============== ============== ============== ============== ======== ============== ============== ============== ============== ======== ============== ============== ============== ============== ======== ============== ============== ============== ============== ======== ============== ============== ============== ============== ======== ============== ============== ============== ============== ======== ============== ============== ============== ==============
* See most recent entry in Part II, III or IV or Schedule Two in order to determine this amount.
PART III REDEMPTIONS Remaining nominal Total amount amount of this Global Confirmation of redemption Date of principal Amount of Note following such by or on behalf of the Issuer made payable principal paid redemption* ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== - --------- ----------- ------------- ----------------- -------------------
* See most recent entry in Part II, III or IV or Schedule Two in order to determine this amount.
PART IV PURCHASES AND CANCELLATIONS Remaining nominal amount of Part of nominal amount of this Global Note following Confirmation of purchase and Date this Global Note purchased such purchase and cancellation by or on behalf made and cancelled cancellation* of the Issuer ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ====================
* See most recent entry in Part II, III or IV or Schedule Two in order to determine this amount. Schedule Two EXCHANGES FOR DEFINITIVE NOTES OR PERMANENT GLOBAL NOTE
The following exchanges of a part of this Global Note for Definitive Notes or a part of a Permanent Global Note have been made: Nominal amount of this Global Note exchanged for Definitive Remaining nominal amount of Date Notes or a part of a this Global Note following Notation made by or on behalf made Permanent Global Note such exchange* of the Issuer ======== ===================== ===================== ==================== ======== ===================== ===================== ==================== ======== ===================== ===================== ==================== ======== ===================== ===================== ==================== ======== ===================== ===================== ==================== ======== ===================== ===================== ==================== ======== ===================== ===================== ==================== ======== ===================== ===================== ==================== ======== ===================== ===================== ==================== ======== ===================== ===================== ==================== ======== ===================== ===================== ==================== ======== ===================== ===================== ==================== ======== ===================== ===================== ==================== ======== ===================== ===================== ==================== - -------- --------------------- --------------------- --------------------
* See most recent entry in Part II, III or IV of Schedule One or in this Schedule Two in order to determine this amount. PART II FORM OF PERMANENT GLOBAL NOTE [ANY UNITED STATES PERSON (AS DEFINED IN THE INTERNAL REVENUE CODE OF THE UNITED STATES) WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.]1 [BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE OF THE UNITED STATES AND THE REGULATIONS THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER).]2 [THIS NOTE CONSTITUTES [COMMERCIAL PAPER/[A SHORTER/LONGER] TERM DEBT SECURITY]3 ISSUED IN ACCORDANCE WITH REGULATIONS MADE UNDER SECTION 4 OF THE BANKING ACT 1987. THE ISSUER OF THIS NOTE IS NOT AN AUTHORISED INSTITUTION OR A EUROPEAN AUTHORISED INSTITUTION (AS SUCH TERMS ARE DEFINED IN THE BANKING ACT 1987 (EXEMPT TRANSACTIONS) REGULATIONS 1997). REPAYMENT OF THE PRINCIPAL AND PAYMENT OF ANY INTEREST OR PREMIUM IN CONNECTION WITH THIS NOTE HAS BEEN GUARANTEED BY COUNTRYWIDE CREDIT INDUSTRIES, INC. WHICH IS NOT AN AUTHORISED INSTITUTION OR A EUROPEAN AUTHORISED INSTITUTION.]4 COUNTRYWIDE HOME LOANS, INC. (the "Issuer") (incorporated with limited liability in the State of New York) Unconditionally and irrevocably guaranteed by COUNTRYWIDE CREDIT INDUSTRIES, INC. (incorporated with limited liability in the State of Delaware) PERMANENT GLOBAL NOTE This Note is a Permanent Global Note in respect of a duly authorised issue of Notes of the Issuer (the "Notes") of the Nominal Amount, Specified Currency(ies) and Specified Denomination(s) as are specified in the Pricing Supplement applicable to the Notes (the "Pricing Supplement"), a copy of which is annexed hereto. References herein to the Conditions shall be to the Terms and Conditions of the Notes as set out in the First Schedule to the Trust Deed (as defined below) as supplemented, replaced and modified by the Pricing Supplement but, in the event of any conflict between the provisions of the said Conditions and the information in the Pricing Supplement, the Pricing Supplement will prevail. Words and expressions defined in the Conditions shall bear the same meanings when used in this Global Note. This Global Note is issued subject to, and with the benefit of, the Conditions and a Trust Deed (such Trust Deed as modified and/or supplemented and/or restated from time to time, the "Trust Deed") dated 1st May, 1998 and made between the Issuer, Countrywide Credit Industries, Inc. as guarantor and Bankers Trustee Company Limited as trustee for the holders of the Notes. The Issuer, subject to and in accordance with the Conditions and the Trust Deed, promises to pay to the bearer hereof on each Instalment Date (if the Notes are repayable in instalments) and on the Maturity Date and/or on such earlier date(s) as all or any of the Notes represented by this Global Note may become due and repayable in accordance with the Conditions and the Trust Deed, the amount payable under the Conditions in respect of such Notes on each such date and to pay interest (if any) on the nominal amount of the Notes from time to time represented by this Global Note calculated and payable as provided in the Conditions and the Trust Deed together with any other sums payable under the Conditions and the Trust Deed, upon presentation and, at maturity, surrender of this Global Note at the specified office of the Agent at 1 Appold Street, Broadgate, London EC2A 2HE, England or such other specified office as may be specified for this purpose in accordance with the Conditions or at the specified office of any of the other Paying Agents located outside the United States, its territories and possessions (except as provided in the Conditions) from time to time appointed by the Issuer in respect of the Notes. On any redemption or payment of an instalment or interest being made in respect of, or purchase and cancellation of, any of the Notes represented by this Global Note details of such redemption, payment, purchase and cancellation (as the case may be) shall be entered by or on behalf of the Issuer in Schedule One hereto and the relevant space in Schedule One hereto recording any such redemption, payment, purchase and cancellation (as the case may be) shall be signed by or on behalf of the Issuer. Upon any such redemption, payment of an instalment, purchase and cancellation the nominal amount of this Global Note and the Notes represented by this Global Note shall be reduced by the nominal amount of such Notes so redeemed or purchased and cancelled or the amount of such instalment. The nominal amount from time to time of this Global Note and of the Notes represented by this Global Note following any such redemption, payment of an instalment, purchase and cancellation as aforesaid or any exchange as referred to below shall be the nominal amount most recently entered in the relevant column in Part II, III or IV of Schedule One hereto or in Schedule Two hereto. If the Notes represented by this Global Note were, on issue, represented by a Temporary Global Note then on any exchange of such Temporary Global Note for this Global Note or any part hereof, details of such exchange shall be entered by or on behalf of the Issuer in Schedule Two hereto and the relevant space in Schedule Two hereto recording such exchange shall be signed by or on behalf of the Issuer, whereupon the nominal amount of this Global Note and the Notes represented by this Global Note shall be increased by the nominal amount of the Temporary Global Note so exchanged. This Global Note may be exchanged (free of charge) in whole, but not in part, for Definitive Notes and (if applicable) Receipts, Coupons and/or Talons in or substantially in the forms set out in Parts III, IV, V and VI of the Second Schedule to the Trust Deed (on the basis that all the appropriate details have been included on the face of such Definitive Notes and (if applicable) Receipts, Coupons and/or Talons and the relevant information supplementing, replacing or modifying the Conditions appearing in the Pricing Supplement has been endorsed on or attached to such Definitive Notes) either, as specified in the applicable Pricing Supplement: (i) upon not less than 60 days' written notice being given to the Agent by Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear System ("Euroclear") and/or Cedel Bank, societe anonyme ("Cedel Bank") (acting on the instructions of any holder of an interest in this Global Note) or the Trustee; or (ii) in the case of Notes with a maturity of 183 days or less only upon the occurrence of an Exchange Event. An "Exchange Event" means: (1) an Event of Default has occurred and is continuing; (2) the Issuer has been notified that both Euroclear and Cedel Bank have been closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or have announced an intention permanently to cease business or have in fact done so and no alternative clearing system satisfactory to the Trustee is available; or (3) the Issuer has or will become obliged to pay additional amounts as provided for or referred to in Condition 7 which would not be required were the Notes in definitive form. Upon the occurrence of an Exchange Event: (i) the Issuer will promptly give notice to Noteholders in accordance with Condition 13 upon the occurrence of such Exchange Event; and (ii) Euroclear and/or Cedel Bank (acting on the instructions of any holder of an interest in this Global Note) or the Trustee may give notice to the Agent requesting exchange and, in the event of the occurrence of an Exchange Event as described in (3) above, the Issuer may also give notice to the Agent requesting exchange. Any such exchange shall occur on a date specified in the notice not later than 60 days after the date of receipt of the first relevant notice by the Agent. The first notice requesting exchange in accordance with the above provisions shall give rise to the issue of Definitive Notes for the total nominal amount of Notes represented by this Global Note. Any such exchange as aforesaid will be made upon presentation of this Global Note by the bearer hereof on any day (other than a Saturday or Sunday) on which banks are open for business in London at the office of the Agent specified above. The aggregate nominal amount of Definitive Notes issued upon an exchange of this Global Note will be equal to the aggregate nominal amount of this Global Note. Upon exchange of this Global Note for Definitive Notes, the Agent shall cancel it or procure that it is cancelled. Until the exchange of the whole of this Global Note as aforesaid, the bearer hereof shall (subject as provided in the next paragraph) in all respects be entitled to the same benefits as if he were the bearer of Definitive Notes and the relative Receipts, Coupons and/or Talons (if any) in the form(s) set out in Parts III, IV, V and VI (as applicable) of the Second Schedule to the Trust Deed. Each person (other than Euroclear or Cedel Bank) who is for the time being shown in the records of Euroclear or Cedel Bank as the holder of a particular nominal amount of the Notes represented by this Global Note (in which regard any certificate or other document issued by Euroclear or Cedel Bank as to the nominal amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes save in the case of manifest error) shall be treated by the Issuer, the Trustee, the Agent and any other Paying Agent as the holder of such nominal amount of such Notes for all purposes other than with respect to the payment of principal and interest on such nominal amount of such Notes, the right to which shall be vested, as against the Issuer, solely in the bearer of this Global Note in accordance with and subject to the terms of this Global Note and the Trust Deed. This Global Note is governed by, and shall be construed in accordance with, English law. This Global Note shall not be valid unless authenticated by Bankers Trust Company as Agent. IN WITNESS whereof the Issuer has caused this Global Note to be signed manually or in facsimile by two persons duly authorised on its behalf. COUNTRYWIDE HOME LOANS, INC. By: ..................................................... By: ..................................................... Duly Authorised Duly Authorised Authenticated by Bankers Trust Company as Agent. By: ..................................................... Authorised Officer Schedule One PART I INTEREST PAYMENTS
Confirmation of payment by or on Date made Interest Payment Total amount of Amount of interest behalf of the Issuer Date interest payable paid - ------------------
PART II PAYMENT OF INSTALMENT AMOUNTS
Remaining nominal amount of this Global Total amount Amount of Note following such Confirmation of payment by Date of Instalment Amounts Instalment payment * or on behalf of the Issuer made payable Amounts paid ====== ============== ============ =============== ================== ====== ============== ============ =============== ================== ====== ============== ============ =============== ================== ====== ============== ============ =============== ================== ====== ============== ============ =============== ================== ====== ============== ============ =============== ================== ====== ============== ============ =============== ================== ====== ============== ============ =============== ================== ====== ============== ============ =============== ================== ====== ============== ============ =============== ================== ====== ============== ============ =============== ================== ====== ============== ============ =============== ================== ====== ============== ============ =============== ================== ====== ============== ============ =============== ================== ====== ============== ============ =============== ================== ====== ============== ============ =============== ================== ====== ============== ============ =============== ================== ====== ============== ============ =============== ================== * See most recent entry in Part II, III or IV or Schedule Two in order to determine this amount.
PART III REDEMPTIONS Remaining nominal Total amount amount of this Global Confirmation of redemption Date of principal Amount of Note following such by or on behalf of the Issuer made payable principal paid redemption* ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== ========= =========== ============= ================= =================== - --------- ----------- ------------- ----------------- ------------------- * See most recent entry in Part II, III or IV or Schedule Two in order to determine this amount.
PART IV PURCHASES AND CANCELLATIONS Remaining nominal amount of Part of nominal amount of this Global Note following Confirmation of purchase and Date this Global Note purchased such purchase and cancellation by or on behalf made and cancelled cancellation* of the Issuer
========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== ========= ==================== ==================== ==================== - --------- -------------------- -------------------- -------------------- * See most recent entry in Part II, III or IV or Schedule Two in order to determine this amount.
Schedule Two EXCHANGES Nominal amount of Temporary Global Note exchanged for Increased nominal amount of this Global Note this Global Note following Notation made by or on Date made such exchange* behalf of the Issuer ========= =============== =============== ================== ========= =============== =============== ================== ========= =============== =============== ================== ========= =============== =============== ================== ========= =============== =============== ================== ========= =============== =============== ================== ========= =============== =============== ================== ========= =============== =============== ================== ========= =============== =============== ================== ========= =============== =============== ================== ========= =============== =============== ================== ========= =============== =============== ================== ========= =============== =============== ================== ========= =============== =============== ================== ========= =============== =============== ================== ========= =============== =============== ================== - --------- --------------- --------------- ------------------
* See most recent entry in Part II, III or IV of Schedule One or in this Schedule Two in order to determine this amount. PART III FORM OF DEFINITIVE NOTE [ANY UNITED STATES PERSON (AS DEFINED IN THE INTERNAL REVENUE CODE OF THE UNITED STATES) WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.]1 [BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE OF THE UNITED STATES AND THE REGULATIONS THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER).]2 [THIS NOTE CONSTITUTES [COMMERCIAL PAPER/[A SHORTER/LONGER] TERM DEBT SECURITY]3 ISSUED IN ACCORDANCE WITH REGULATIONS MADE UNDER SECTION 4 OF THE BANKING ACT 1987. THE ISSUER OF THIS NOTE IS NOT AN AUTHORISED INSTITUTION OR A EUROPEAN AUTHORISED INSTITUTION (AS SUCH TERMS ARE DEFINED IN THE BANKING ACT 1987 (EXEMPT TRANSACTIONS) REGULATIONS 1997). REPAYMENT OF THE PRINCIPAL AND PAYMENT OF ANY INTEREST OR PREMIUM IN CONNECTION WITH THIS NOTE HAS BEEN GUARANTEED BY COUNTRYWIDE CREDIT INDUSTRIES, INC. WHICH IS NOT AN AUTHORISED INSTITUTION OR A EUROPEAN AUTHORISED INSTITUTION.]4 COUNTRYWIDE HOME LOANS, INC. (the "Issuer") (incorporated with limited liability in the State of New York) Unconditionally and irrevocably guaranteed by COUNTRYWIDE CREDIT INDUSTRIES, INC. (incorporated with limited liability in the State of Delaware) [Specified Currency and Nominal Amount of Tranche] NOTES DUE [Year of Maturity] This Note is one of a Series of Notes of [Specified Currency(ies) and Specified Denomination(s)] each of the Issuer ("Notes"). References herein to the Conditions shall be to the Terms and Conditions [endorsed hereon/set out in the First Schedule to the Trust Deed (as defined below) which shall be incorporated by reference herein and have effect as if set out herein] as supplemented, replaced and modified by the relevant information (appearing in the Pricing Supplement (the "Pricing Supplement")) endorsed hereon but, in the event of any conflict between the provisions of the said Conditions and such information in the Pricing Supplement, such information will prevail. Words and expressions defined in the Conditions shall bear the same meanings when used in this Note. This Note is issued subject to, and with the benefit of, the Conditions and a Trust Deed (such Trust Deed as modified and/or supplemented and/or restated from time to time, the "Trust Deed") dated 1st May, 1998 and made between the Issuer, Countrywide Credit Industries, Inc. as guarantor and Bankers Trustee Company Limited as trustee for the holders of the Notes. The Issuer, subject to and in accordance with the Conditions and the Trust Deed, promises to pay to the bearer hereof on [each Instalment Date and] the Maturity Date or on such earlier date as this Note may become due and repayable in accordance with the Conditions and the Trust Deed, the amount payable on redemption of this Note and to pay interest (if any) on the nominal amount of this Note calculated and payable as provided in the Conditions and the Trust Deed together with any other sums payable under the Conditions and the Trust Deed. This Note shall not be valid unless authenticated by Bankers Trust Company as Agent. IN WITNESS whereof this Note has been executed on behalf of the Issuer. COUNTRYWIDE HOME LOANS, INC. By: ..................................................... By: ..................................................... Duly Authorised Duly Authorised Authenticated by Bankers Trust Company as Agent. By: ..................................................... Authorised Officer [Conditions] [Conditions to be as set out in the First Schedule to this Trust Deed or such other form as may be agreed between the Issuer, the Agent, the Trustee and the relevant Dealer(s), but shall not be endorsed if not required by the relevant Stock Exchange] Pricing Supplement [Here to be set out the text of the relevant information supplementing, replacing or modifying the Conditions which appears in the Pricing Supplement relating to the Notes] PART IV FORM OF RECEIPT COUNTRYWIDE HOME LOANS, INC. [Specified Currency and Nominal Amount of Tranche] NOTES DUE [Year of Maturity] Series No. [ ] Receipt for the sum of [ ] being the instalment of principal payable in accordance with the Terms and Conditions applicable to the Note to which this Receipt appertains (the "Conditions") on [ ]. This Receipt is issued subject to and in accordance with the Conditions which shall be binding upon the holder of this Receipt (whether or not it is for the time being attached to such Note) and is payable at the specified office of any of the Paying Agents set out on the reverse of the Note to which this Receipt appertains (and/or any other or further Paying Agents and/or specified offices as may from time to time be duly appointed and notified to the Noteholders). This Receipt must be presented for payment together with the Note to which it appertains. The Issuer shall have no obligation in respect of any Receipt presented without the Note to which it appertains or any unmatured Receipts. [ANY UNITED STATES PERSON (AS DEFINED IN THE INTERNAL REVENUE CODE OF THE UNITED STATES) WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.]1 [BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE OF THE UNITED STATES AND THE REGULATIONS THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER).]2 PART V FORM OF COUPON On the front: COUNTRYWIDE HOME LOANS, INC. [Specified Currency and Nominal Amount of Tranche] NOTES DUE [Year of Maturity] Series No. [ ] [Coupon appertaining to a Note in the denomination of [Specified Currency and Specified Denomination]].1 Part A [For Fixed Rate Notes: This Coupon is payable to bearer, separately Coupon for negotiable and subject to the Terms and [ ] Conditions of the said Notes. due on [ ], [ ]] Part B [For Floating Rate Notes or Indexed Interest Notes: Coupon for the amount due in accordance with the Terms and Conditions endorsed on, attached to or incorporated by reference into the said Notes on [the Interest Payment Date falling in [ ] [ ]/[ ]]. This Coupon is payable to bearer, separately negotiable and subject to such Terms and Conditions, under which it may become void before its due date.] [ANY UNITED STATES PERSON (AS DEFINED IN THE INTERNAL REVENUE CODE OF THE UNITED STATES) WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.]2 [BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE OF THE UNITED STATES AND THE REGULATIONS THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER).]1 PART VI FORM OF TALON On the front: COUNTRYWIDE HOME LOANS, INC. [Specified Currency and Nominal Amount of Tranche] NOTES DUE [Year of Maturity] Series No. [ ] [Talon appertaining to a Note in the denomination of [Specified Currency and Specified Denomination]] 1 . On and after [ ] further Coupons [and a further Talon]2 appertaining to the Note to which this Talon appertains will be issued at the specified office of any of the Paying Agents set out on the reverse hereof (and/or any other or further Paying Agents and/or specified offices as may from time to time be duly appointed and notified to the Noteholders) upon production and surrender of this Talon. This Talon may, in certain circumstances, become void under the Terms and Conditions endorsed on the Note to which this Talon appertains. [ANY UNITED STATES PERSON (AS DEFINED IN THE INTERNAL REVENUE CODE OF THE UNITED STATES) WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.]3 [BY ACCEPTING THIS OBLIGATION, THE HOLDER REPRESENTS AND WARRANTS THAT IT IS NOT A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE OF THE UNITED STATES AND THE REGULATIONS THEREUNDER) AND THAT IT IS NOT ACTING FOR OR ON BEHALF OF A UNITED STATES PERSON (OTHER THAN AN EXEMPT RECIPIENT DESCRIBED IN SECTION 6049(b)(4) OF THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER).]4 On the back of Receipts, Coupons and Talons: AGENT Bankers Trust Company 1 Appold Street Broadgate London EC2A 2HE OTHER PAYING AGENTS Bankers Trust Luxembourg S.A. Swiss Bank Corporation 14 boulevard F.D. Roosevelt Paradeplatz 6 L-2450 Luxembourg CH-8010 Zurich PART VII FORM OF CERTIFICATE TO BE PRESENTED BY EUROCLEAR OR CEDEL BANK COUNTRYWIDE HOME LOANS, INC. [Title of Notes] (the "Securities") This is to certify that, based solely on certifications we have received in writing, by tested telex or by electronic transmission from member organisations appearing in our records as persons being entitled to a portion of the nominal amount set forth below (our "Member Organisations") substantially to the effect set forth in the temporary Global Note representing the Securities, as of the date hereof, [ ] nominal amount of the above-captioned Securities (i) is owned by persons that are not citizens or residents of the United States, domestic partnerships, domestic corporations or any estate or trust the income of which is subject to United States Federal income taxation regardless of its source ("United States persons"), (ii) is owned by United States persons that (a) are foreign branches of United States financial institutions (as defined in U.S. Treasury Regulations Sections 1.165-12(c)(1)(v) ("financial institutions") purchasing for their own account or for resale, or (b) acquired the Securities through foreign branches of United States financial institutions and who hold the Securities through such United States financial institutions on the date hereof (and in either case (a) or (b), each such United States financial institution has agreed, on its own behalf or through its agent, that we may advise the Issuer or the Issuer's agent that it will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) is owned by United States or foreign financial institutions for purposes of resale during the restricted period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and to the further effect that United States or foreign financial institutions described in Clause (iii) above (whether or not also described in Clause (i) or (ii)) have certified that they have not acquired the Securities for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions. If the Securities are of the category contemplated in Section 230.903(c)(3) of Regulation S under the Securities Act of 1933, as amended, then this is also to certify with respect to such principal amount of Securities set forth above that, except as set forth below, we have received in writing, by tested telex or by electronic transmission, from our Member Organisations entitled to a portion of such principal amount, certifications with respect to such portion, substantially to the effect set forth in the temporary Global Note representing the Securities. We further certify (i) that we are not making available herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) any portion of the temporary Global Note excepted in such certifications and (ii) that as of the date hereof we have not received any notification from any of our Member Organisations to the effect that the statements made by such Member Organisations with respect to any portion of the part submitted herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) are no longer true and cannot be relied upon as of the date hereof. We understand that this certification is required in connection with certain tax laws and, if applicable, certain securities laws of the United States. In connection therewith, if administrative or legal proceedings or official enquiries are commenced or threatened in connection with which this certification is or would be relevant, we irrevocably authorise you to produce this certification to any interested party in such proceedings or enquiries. Dated: , 199 1 Yours faithfully, [Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear System] or [Cedel Bank, societe anonyme] By:............................... CERTIFICATE "A" COUNTRYWIDE HOME LOANS, INC. [Title of Notes] (the "Securities") This is to certify that as of the date hereof, and except as set forth below, the above-captioned Securities held by you for our account (i) are owned by person(s) that are not citizens or residents of the United States, domestic partnerships, domestic corporations or any estate or trust the income of which is subject to United States Federal income taxation regardless of its source ("United States person(s)"), (ii) are owned by United States person(s) that (a) are foreign branches of United States financial institutions (as defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(v)) ("financial institutions") purchasing for their own account or for resale, or (b) acquired the Securities through foreign branches of United States financial institutions and who hold the Securities through such United States financial institutions on the date hereof (and in either case (a) or (b), each such United States financial institution hereby agrees, on its own behalf or through its agent, that you may advise the Issuer or the Issuer's agent that it will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) are owned by United States or foreign financial institution(s) for purposes of resale during the restricted period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and in addition if the owner of the Securities is a United States or foreign financial institution described in Clause (iii) above (whether or not also described in Clause (i) or (ii)) this is to further certify that such financial institution has not acquired the Securities for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions. If the Securities are of the category contemplated in Section 230.903(c)(2) of Regulation S under the Securities Act of 1933, as amended, (the "Act") then this is also to certify that, except as set forth below, the Securities are beneficially owned by (a) non-U.S. person(s) or (b) U.S. person(s) who purchased the Securities in transactions which did not require registration under the Act. As used in this paragraph, the term "U.S. person" has the meaning given to it by Regulation S under the Act. As used herein, "United States" means the United States of America (including the States and the District of Columbia); and its "possessions" include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands. We undertake to advise you promptly by tested telex on or prior to the date on which you intend to submit your certification relating to the Securities held by you for our account in accordance with your operating procedures if any applicable statement herein is not correct on such date, and in the absence of any such notification it may be assumed that this certification applies as of such date. This certification excepts and does not relate to [ ] of such interest in the above Securities in respect of which we are not able to certify and as to which we understand exchange and delivery of definitive Securities (or, if relevant, exercise of any right or collection of any interest) cannot be made until we do so certify. We understand that this certification is required in connection with certain tax laws and, if applicable, certain securities laws of the United States. In connection therewith, if administrative or legal proceedings or official enquiries are commenced or threatened in connection with which this certification is or would be relevant, we irrevocably authorise you to produce this certification to any interested party in such proceedings or enquiries. Dated: , 199 1 Name of person making certification By: ................................................. THE THIRD SCHEDULE PROVISIONS FOR MEETINGS OF NOTEHOLDERS 1. (A) As used in this Schedule the following expressions shall have the following meanings unless the context otherwise requires: (i) "voting certificate" shall mean an English language certificate issued by a Paying Agent and dated in which it is stated: (a) that on the date thereof Notes (whether in definitive form or represented by a Global Note and not being Notes in respect of which a block voting instruction has been issued and is outstanding in respect of the meeting specified in such voting certificate or any adjourned such meeting) were deposited with such Paying Agent or (to the satisfaction of such Paying Agent) were held to its order or under its control or blocked in an account with a clearing system and that no such Notes will cease to be so deposited or held or blocked until the first to occur of: (1) the conclusion of the meeting specified in such certificate or, if later, of any adjourned such meeting; and (2) the surrender of the certificate to the Paying Agent who issued the same; and (b) that the bearer thereof is entitled to attend and vote at such meeting and any adjourned such meeting in respect of the Notes represented by such certificate; (ii) "block voting instruction" shall mean an English language document issued by a Paying Agent and dated in which: (a) it is certified that Notes (whether in definitive form or represented by a Global Note and not being Notes in respect of which a voting certificate has been issued and is outstanding in respect of the meeting specified in such block voting instruction and any adjourned such meeting) have been deposited with such Paying Agent or (to the satisfaction of such Paying Agent) were held to its order or under its control or blocked in an account with a clearing system and that no such Notes will cease to be so deposited or held or blocked until the first to occur of: (1) the conclusion of the meeting specified in such document or, if later, of any adjourned such meeting; and (2) the surrender to the Paying Agent not less than 48 hours before the time for which such meeting or any adjourned such meeting is convened of the receipt issued by such Paying Agent in respect of each such deposited Note which is to be released or (as the case may require) the Note or Notes ceasing with the agreement of the Paying Agent to be held to its order or under its control or so blocked and the giving of notice by the Paying Agent to the Issuer in accordance with paragraph 17 hereof of the necessary amendment to the block voting instruction; (b) it is certified that each holder of such Notes has instructed such Paying Agent that the vote(s) attributable to the Note or Notes so deposited or held or blocked should be cast in a particular way in relation to the resolution or resolutions to be put to such meeting or any adjourned such meeting and that all such instructions are during the period commencing 48 hours prior to the time for which such meeting or any adjourned such meeting is convened and ending at the conclusion or adjournment thereof neither revocable nor capable of amendment; (c) the aggregate principal amount of the Notes so deposited or held or blocked are listed distinguishing with regard to each such resolution between those in respect of which instructions have been given as aforesaid that the votes attributable thereto should be cast in favour of the resolution and those in respect of which instructions have been so given that the votes attributable thereto should be cast against the resolution; and (d) one or more persons named in such document (each hereinafter called a "proxy") is or are authorised and instructed by such Paying Agent to cast the votes attributable to the Notes so listed in accordance with the instructions referred to in (c) above as set out in such document; (iii) "24 hours" shall mean a period of 24 hours including all or part of a day upon which banks are open for business in both the place where the relevant meeting is to be held and in each of the places where the Paying Agents have their specified offices (disregarding for this purpose the day upon which such meeting is to be held) and such period shall be extended by one period or, to the extent necessary, more periods of 24 hours until there is included as aforesaid all or part of a day upon which banks are open for business in all of the places as aforesaid; and (iv) "48 hours" shall mean a period of 48 hours including all or part of two days upon which banks are open for business both in the place where the relevant meeting is to be held and in each of the places where the Paying Agents have their specified offices (disregarding for this purpose the day upon which such meeting is to be held) and such period shall be extended by one period or, to the extent necessary, more periods of 24 hours until there is included as aforesaid all or part of two days upon which banks are open for business in all of the places as aforesaid. (B) A holder of a Note (whether in definitive form or represented by a Global Note) may obtain a voting certificate in respect of such Note from a Paying Agent or require a Paying Agent to issue a block voting instruction in respect of such Note by depositing such Note with such Paying Agent or (to the satisfaction of such Paying Agent) by such Note being held to its order or under its control or being blocked in an account with a clearing system, in each case not less than 48 hours before the time fixed for the relevant meeting and on the terms set out in sub-paragraph (A)(i)(a) or (A)(ii)(a) above (as the case may be), and (in the case of a block voting instruction) instructing such Paying Agent to the effect set out in sub-paragraph (A)(ii)(b) above. The holder of any voting certificate or the proxies named in any block voting instruction shall for all purposes in connection with the relevant meeting or adjourned meeting of Noteholders be deemed to be the holder of the Notes to which such voting certificate or block voting instruction relates and the Paying Agent with which such Notes have been deposited or the person holding the same to the order or under the control of such Paying Agent or the clearing system in which such Notes have been blocked shall be deemed for such purposes not to be the holder of those Notes. 2. The Issuer, the Guarantor or the Trustee may at any time and the Issuer shall upon a requisition in writing in the English language signed by the holders of not less than five per cent. in nominal amount of the Notes for the time being outstanding convene a meeting of the Noteholders and if the Issuer makes default for a period of seven days in convening such a meeting the same may be convened by the Trustee or the requisitionists. Every such meeting shall be held at such time and place as the Trustee may appoint or approve. 3. At least 21 days' notice (exclusive of the day on which the notice is given and the day on which the meeting is to be held) specifying the place, day and hour of meeting shall be given to the holders of the relevant Notes prior to any meeting of such holders in the manner provided by Condition 13. Such notice, which shall be in the English language, shall state generally the nature of the business to be transacted at the meeting thereby convened but (except for an Extraordinary Resolution) it shall not be necessary to specify in such notice the terms of any resolution to be proposed. Such notice shall include statements, if applicable, to the effect that Notes may, not less than 48 hours before the time fixed for the meeting, be deposited with Paying Agents or (to their satisfaction) held to their order or under their control or blocked in an account with a clearing system for the purpose of obtaining voting certificates or appointing proxies. A copy of the notice shall be sent by post to the Trustee (unless the meeting is convened by the Trustee), to the Issuer (unless the meeting is convened by the Issuer) and to the Guarantor (unless the meeting is convened by the Guarantor). 4. A person (who may but need not be a Noteholder) nominated in writing by the Trustee shall be entitled to take the chair at the relevant meeting or adjourned meeting but if no such nomination is made or if at any meeting or adjourned meeting the person nominated shall not be present within 15 minutes after the time appointed for holding the meeting or adjourned meeting the Noteholders present shall choose one of their number to be Chairman, failing which the Issuer may appoint a Chairman. The Chairman of an adjourned meeting need not be the same person as was Chairman of the meeting from which the adjournment took place. 5. At any such meeting one or more persons present holding Definitive Notes or voting certificates or being proxies and holding or representing in the aggregate not less than one-twentieth of the nominal amount of the Notes for the time being outstanding shall (except for the purpose of passing an Extraordinary Resolution) form a quorum for the transaction of business and no business (other than the choosing of a Chairman) shall be transacted at any meeting unless the requisite quorum be present at the commencement of the relevant business. The quorum at any such meeting for passing an Extraordinary Resolution shall (subject as provided below) be one or more persons present holding Definitive Notes or voting certificates or being proxies and holding or representing in the aggregate a clear majority in nominal amount of the Notes for the time being outstanding PROVIDED THAT at any meeting the business of which includes any of the following matters (each of which shall, subject only to Clause 19(B)(ii), only be capable of being effected after having been approved by Extraordinary Resolution) namely: (i) reduction or cancellation of the amount payable or, where applicable, modification, except where such modification is in the opinion of the Trustee bound to result in an increase, of the method of calculating the amount payable or modification of the date of payment or, where applicable, of the method of calculating the date of payment in respect of any principal or interest in respect of the Notes; (ii) alteration of the currency in which payments under the Notes, Receipts and Coupons are to be made; (iii) alteration of the majority required to pass an Extraordinary Resolution; (iv) the sanctioning of any such scheme or proposal as is described in paragraph 18(I) below; and (v) alteration of this proviso or the proviso to paragraph 6 below; the quorum shall be one or more persons present holding Definitive Notes or voting certificates or being proxies and holding or representing in the aggregate not less than two-thirds of the nominal amount of the Notes for the time being outstanding. 6. If within 15 minutes (or such longer period not exceeding 30 minutes as the Chairman may decide) after the time appointed for any such meeting a quorum is not present for the transaction of any particular business, then, subject and without prejudice to the transaction of the business (if any) for which a quorum is present, the meeting shall if convened upon the requisition of Noteholders be dissolved. In any other case it shall stand adjourned to the same day in the next week (or if such day is a public holiday the next succeeding business day) at the same time and place (except in the case of a meeting at which an Extraordinary Resolution is to be proposed in which case it shall stand adjourned for such period, being not less than 13 clear days nor more than 42 clear days, and to such place as may be appointed by the Chairman either at or subsequent to such meeting and approved by the Trustee). If within 15 minutes (or such longer period not exceeding 30 minutes as the Chairman may decide) after the time appointed for any adjourned meeting a quorum is not present for the transaction of any particular business, then, subject and without prejudice to the transaction of the business (if any) for which a quorum is present, the Chairman may either (with the approval of the Trustee) dissolve such meeting or adjourn the same for such period, being not less than 13 clear days (but without any maximum number of clear days), and to such place as may be appointed by the Chairman either at or subsequent to such adjourned meeting and approved by the Trustee, and the provisions of this sentence shall apply to all further adjourned such meetings. At any adjourned meeting one or more persons present holding Definitive Notes of the relevant one or more Series or voting certificates or being proxies (whatever the nominal amount of the Notes so held or represented by them) shall (subject as provided below) form a quorum and shall have power to pass any Extraordinary Resolution or other resolution and to decide upon all matters which could properly have been dealt with at the meeting from which the adjournment took place had the requisite quorum been present PROVIDED THAT at any adjourned meeting the quorum for the transaction of business comprising any of the matters specified in the proviso to paragraph 5 above shall be one or more persons present holding Definitive Notes or voting certificates or being proxies and holding or representing in the aggregate not less than one-third of the nominal amount of the Notes for the time being outstanding. 7. Notice of any adjourned meeting at which an Extraordinary Resolution is to be submitted shall be given in the same manner as notice of an original meeting but as if 10 were substituted for 21 in paragraph 3 above and such notice shall state the relevant quorum. Subject as aforesaid it shall not be necessary to give any notice of an adjourned meeting. 8. Every question submitted to a meeting shall be decided in the first instance by a show of hands and in case of equality of votes the Chairman shall both on a show of hands and on a poll have a casting vote in addition to the vote or votes (if any) to which he may be entitled as a Noteholder or as a holder of a voting certificate or as a proxy. 9. At any meeting unless a poll is (before or on the declaration of the result of the show of hands) demanded by the Chairman, the Issuer, the Guarantor, the Trustee or any person present holding a Definitive Note of the relevant Series or a voting certificate or being a proxy (whatever the nominal amount of the Notes so held or represented by him) a declaration by the Chairman that a resolution has been carried or carried by a particular majority or lost or not carried by a particular majority shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against such resolution. 10. Subject to paragraph 12 below, if at any such meeting a poll is so demanded it shall be taken in such manner and subject as hereinafter provided either at once or after an adjournment as the Chairman directs and the result of such poll shall be deemed to be the resolution of the meeting at which the poll was demanded as at the date of the taking of the poll. The demand for a poll shall not prevent the continuance of the meeting for the transaction of any business other than the motion on which the poll has been demanded. 11. The Chairman may with the consent of (and shall if directed by) any such meeting adjourn the same from time to time and from place to place but no business shall be transacted at any adjourned meeting except business which might lawfully (but for lack of required quorum) have been transacted at the meeting from which the adjournment took place. 12. Any poll demanded at any such meeting on the election of a Chairman or on any question of adjournment shall be taken at the meeting without adjournment. 13. The Trustee and its lawyers and any director, officer or employee of a corporation being a trustee of these presents and any director or officer of the Issuer or, as the case may be, the Guarantor and its or their lawyers and any other person authorised so to do by the Trustee may attend and speak at any meeting. Save as aforesaid, but without prejudice to the proviso to the definition of "outstanding" in Clause 1, no person shall be entitled to attend and speak nor shall any person be entitled to vote at any meeting of Noteholders or join with others in requesting the convening of such a meeting or to exercise the rights conferred on Noteholders by Condition 9 unless he either produces the Definitive Note or Definitive Notes of which he is the holder or a voting certificate or is a proxy. No person shall be entitled to vote at any meeting in respect of Notes held by, for the benefit of, or on behalf of, the Issuer, the Guarantor or any other Subsidiary of the Guarantor. Nothing herein shall prevent any of the proxies named in any block voting instruction from being a director, officer or representative of or otherwise connected with the Issuer or the Guarantor. 14. Subject as provided in paragraph 13 hereof at any meeting: (A) on a show of hands every person who is present in person and produces a Definitive Note or voting certificate or is a proxy shall have one vote; and (B) on a poll every person who is so present shall have one vote in respect of each U.S.$1 or such other amount as the Trustee may in its absolute discretion stipulate (or, in the case of meetings of holders of Notes denominated in another currency, such amount in such other currency as the Trustee in its absolute discretion may stipulate) in nominal amount of the Definitive Notes so produced or represented by the voting certificate so produced or in respect of which he is a proxy. Without prejudice to the obligations of the proxies named in any block voting instruction any person entitled to more than one vote need not use all his votes or cast all the votes to which he is entitled in the same way. 15. The proxies named in any block voting instruction need not be Noteholders. 16. Each block voting instruction together (if so requested by the Trustee) with proof satisfactory to the Trustee of its due execution on behalf of the relevant Paying Agent shall be deposited by the relevant Paying Agent at such place as the Trustee shall approve not less than 24 hours before the time appointed for holding the meeting or adjourned meeting at which the proxies named in the block voting instruction propose to vote and in default the block voting instruction shall not be treated as valid unless the Chairman of the meeting decides otherwise before such meeting or adjourned meeting proceeds to business. A notarially certified copy of each block voting instruction shall be deposited with the Trustee before the commencement of the meeting or adjourned meeting but the Trustee shall not thereby be obliged to investigate or be concerned with the validity of or the authority of the proxies named in any such block voting instruction. 17. Any vote given in accordance with the terms of a block voting instruction shall be valid notwithstanding the previous revocation or amendment of the block voting instruction or of any of the relevant Noteholders' instructions pursuant to which it was executed provided that no intimation in writing of such revocation or amendment shall have been received from the relevant Paying Agent by the Issuer at its principal office (or such other place as may have been required or approved by the Trustee for the purpose) by the time being 24 hours and 48 hours respectively before the time appointed for holding the meeting or adjourned meeting at which the block voting instruction is to be used. 18. A meeting of the Noteholders shall in addition to the powers hereinbefore given have the following powers exercisable only by Extraordinary Resolution (subject to the provisions relating to quorum contained in paragraphs 5 and 6 above) namely: (A) Power to sanction any compromise or arrangement proposed to be made between the Issuer, the Guarantor, the Trustee, any Appointee and the Noteholders, Receiptholders and Couponholders or any of them. (B) Power to sanction any abrogation, modification, compromise or arrangement in respect of the rights of the Trustee, any Appointee, the Noteholders, the Receiptholders, Couponholders, the Issuer, the Guarantor or against any other or others of them or against any of their property whether such rights shall arise under these presents or otherwise. (C) Power to assent to any modification of the provisions of these presents which shall be proposed by the Issuer, the Guarantor, the Trustee or any Noteholder. (D) Power to give any authority or sanction which under the provisions of these presents is required to be given by Extraordinary Resolution. (E) Power to appoint any persons (whether Noteholders or not) as a committee or committees to represent the interests of the Noteholders and to confer upon such committee or committees any powers or discretions which the Noteholders could themselves exercise by Extraordinary Resolution. (F) Power to approve of a person to be appointed a trustee and power to remove any trustee or trustees for the time being of these presents. (G) Power to discharge or exonerate the Trustee and/or any Appointee from all liability in respect of any act or omission for which the Trustee and/or such Appointee may have become responsible under these presents. (H) Power to authorise the Trustee and/or any Appointee to concur in and execute and do all such deeds, instruments, acts and things as may be necessary to carry out and give effect to any Extraordinary Resolution. (I) Power to sanction any scheme or proposal for the exchange or sale of the Notes for or the conversion of the Notes into or the cancellation of the Notes in consideration of shares, stock, notes, bonds, debentures, debenture stock and/or other obligations and/or securities of the Issuer or any other company formed or to be formed, or for or into or in consideration of cash, or partly for or into or in consideration of such shares, stock, notes, bonds, debentures, debenture stock and/or other obligations and/or securities as aforesaid and partly for or into or in consideration of cash and for the appointment of some person with power on behalf of the Noteholders to execute an instrument of transfer of the Registered Notes held by them in favour of the persons with or to whom the Notes are to be exchanged or sold respectively. 19. Any resolution passed at a meeting of the Noteholders duly convened and held in accordance with these presents shall be binding upon all the Noteholders whether present or not present at such meeting and whether or not voting and upon all Receiptholders and Couponholders and each of them shall be bound to give effect thereto accordingly and the passing of any such resolution shall be conclusive evidence that the circumstances justify the passing thereof. Notice of the result of the voting on any resolution duly considered by the Noteholders shall be published in accordance with Condition 13 by the Issuer within 14 days of such result being known PROVIDED THAT the non-publication of such notice shall not invalidate such result. 20. The expression "Extraordinary Resolution" when used in these presents means (a) a resolution passed at a meeting of the Noteholders duly convened and held in accordance with these presents by a majority consisting of not less than three-fourths of the persons voting thereat upon a show of hands or if a poll is duly demanded by a majority consisting of not less than three-fourths of the votes cast on such poll; or (b) a resolution in writing signed by or on behalf of all the Noteholders, which resolution in writing may be contained in one document or in several documents in like form each signed by or on behalf of one or more of the Noteholders. 21. Minutes of all resolutions and proceedings at every meeting of the Noteholders shall be made and entered in books to be from time to time provided for that purpose by the Issuer and any such minutes as aforesaid if purporting to be signed by the Chairman of the meeting at which such resolutions were passed or proceedings transacted shall be conclusive evidence of the matters therein contained and until the contrary is proved every such meeting in respect of the proceedings of which minutes have been made shall be deemed to have been duly held and convened and all resolutions passed or proceedings transacted thereat to have been duly passed or transacted. 22. (A) If and whenever the Issuer shall have issued and have outstanding Notes of more than one Series the foregoing provisions of this Schedule shall have effect subject to the following modifications: (i) a resolution which in the opinion of the Trustee affects the Notes of only one Series shall be deemed to have been duly passed if passed at a separate meeting of the holders of the Notes of that Series; (ii) a resolution which in the opinion of the Trustee affects the Notes of more than one Series but does not give rise to a conflict of interest between the holders of Notes of any of the Series so affected shall be deemed to have been duly passed if passed at a single meeting of the holders of the Notes of all the Series so affected; (iii) a resolution which in the opinion of the Trustee affects the Notes of more than one Series and gives or may give rise to a conflict of interest between the holders of the Notes of one Series or group of Series so affected and the holders of the Notes of another Series or group of Series so affected shall be deemed to have been duly passed only if passed at separate meetings of the holders of the Notes of each Series or group of Series so affected; and (iv) to all such meetings all the preceding provisions of this Schedule shall mutatis mutandis apply as though references therein to Notes and Noteholders were references to the Notes of the Series or group of Series in question or to the holders of such Notes, as the case may be. (B) If the Issuer shall have issued and have outstanding Notes which are not denominated in U.S. dollars in the case of any meeting of holders of Notes of more than one currency the principal amount of such Notes shall (i) for the purposes of paragraph 2 above be the equivalent in U.S. dollars at the spot rate of a bank nominated by the Trustee for the conversion of the relevant currency or currencies into U.S. dollars on the seventh dealing day prior to the day on which the requisition in writing is received by the Issuer and (ii) for the purposes of paragraphs 5, 6 and 14 above (whether in respect of the meeting or any adjourned such meeting or any poll resulting therefrom) be the equivalent at such spot rate on the seventh dealing day prior to the day of such meeting. In such circumstances, on any poll each person present shall have one vote for each U.S.$1 (or such other U.S. dollar amount as the Trustee may in its absolute discretion stipulate) in principal amount of the Notes (converted as above) which he holds or represents. 23. Subject to all other provisions of these presents the Trustee may without the consent of any of the Issuer, the Guarantor, the Noteholders, the Receiptholders or the Couponholders prescribe such further regulations regarding the requisitioning and/or the holding of meetings of Noteholders and attendance and voting thereat as the Trustee may in its sole discretion think fit. EXECUTED as a deed by COUNTRYWIDE HOME LOANS, INC. by JENNIFER SANDEFUR JENNIFER SANDEFUR acting under the authority of that Executive Vice President and Treasurer company in the presence of: Witness's Signature: JANET HARRIGAN Name: JANET HARRIGAN Address: 4500 Park Granada, CH-43, Calabas, CS 91302 Occupation: Executive Secretary EXECUTED as a deed by COUNTRYWIDE CREDIT INDUSTRIES, INC. acting by THOMAS K. McLAUGHLIN THOMAS K. McLAUGHLIN Managing Director and Treasurer acting under the authority of that company in the presence of: Witness's Signature: KATHY COLOMA Name: KATHY COLOMA Address: 4500 Park Grarnada, CH-78, Calabasas, CA 91302 Occupation: Executive Administrative Assistant THE COMMON SEAL of BANKERS TRUSTEE COMPANY LIMITED was affixed to this deed in SEAL ---- the presence of: A. G. BUCKLAND Director MARK JONES Director ICM2:327045.3 DATED 1ST MAY, 1998 COUNTRYWIDE HOME LOANS, INC. - and - COUNTRYWIDE CREDIT INDUSTRIES, INC. - and - BANKERS TRUSTEE COMPANY LIMITED ------------------------------------- TRUST DEED relating to a U.S.$2,000,000,000 Euro Medium Term Note Programme ------------------------------------- For Bankers Trustee Company Limited as to English law: ALLEN & OVERY One New Change London EC4M 9QQ CONFORMED COPY DATED 1ST MAY, 1998 COUNTRYWIDE HOME LOANS, INC. - and - COUNTRYWIDE CREDIT INDUSTRIES, INC. - and - BANKERS TRUSTEE COMPANY LIMITED ------------------------------------- TRUST DEED relating to a U.S.$2,000,000,000 Euro Medium Term Note Programme ------------------------------------- For Bankers Trustee Company Limited as to English law: ALLEN & OVERY One New Change London EC4M 9QQ la-195654v.4 la-195654v.4 TABLE OF CONTENTS CLAUSE PAGE 1. DEFINITIONS...........................................................1 2. AMOUNT AND ISSUE OF THE NOTES.........................................1 3. FORMS OF THE NOTES....................................................1 4. FEES, DUTIES AND TAXES................................................1 5. COVENANT OF COMPLIANCE................................................1 6. CANCELLATION OF NOTES AND RECORDS.....................................1 7. GUARANTEE.............................................................1 8. NON-PAYMENT...........................................................1 9. PROCEEDINGS, ACTION AND INDEMNIFICATION...............................1 10. APPLICATION OF MONEYS.................................................1 11. NOTICE OF PAYMENTS....................................................1 12. INVESTMENT BY TRUSTEE.................................................1 13. PARTIAL PAYMENTS......................................................1 14. COVENANTS BY THE ISSUER AND THE GUARANTOR.............................1 15. REMUNERATION AND INDEMNIFICATION OF TRUSTEE..........................25 16. SUPPLEMENT TO TRUSTEE ACT 1925........................................1 17. TRUSTEE'S LIABILITY...................................................1 18. TRUSTEE CONTRACTING WITH THE ISSUER AND THE GUARANTOR.................1 19. WAIVER, AUTHORISATION AND DETERMINATION...............................1 MODIFICATION..........................................................1 BREACH................................................................1 CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER.........................1 20. HOLDER OF DEFINITIVE NOTE ASSUMED TO BE RECEIPTHOLDER AND COUPONHOLDER1 21. CURRENCY INDEMNITY....................................................1 22. NEW TRUSTEE...........................................................1 23. TRUSTEE'S RETIREMENT AND REMOVAL......................................1 24. TRUSTEE'S POWERS TO BE ADDITIONAL.....................................1 25. NOTICES...............................................................1 26. GOVERNING LAW.........................................................1 27. SUBMISSION TO JURISDICTION............................................1 28. COUNTERPARTS..........................................................1 SCHEDULES THE FIRST SCHEDULE .............- TERMS AND CONDITIONS OF THE NOTES.........37 THE SECOND SCHEDULE - FORM OF TEMPORARY GLOBAL NOTE..............1 - FORM OF PERMANENT GLOBAL NOTE..............1 - FORM OF DEFINITIVE NOTE....................1 - FORM OF RECEIPT............................1 - FORM OF COUPON.............................1 - FORM OF TALON..............................1 THE THIRD SCHEDULE - PROVISIONS FOR MEETINGS OF NOTEHOLDERS.....1 COUNTRYWIDE CREDIT INDUSTRIES, INC. DEFERRED COMPENSATION AGREEMENT FOR NON-EMPLOYEE DIRECTORS THIS AGREEMENT is made and entered into as of the ___ day of _____, 1998, by and between Countrywide Credit Industries, Inc., a Delaware corporation (hereinafter "CCI"), and _________________ ((hereinafter, the "Director"), a non-employee member of the Board of Directors of CCI (hereinafter the "Board"). WITNESSETH: WHEREAS, fees are currently paid monthly to the Director as a retainer for serving on the Board; and WHEREAS, the Director and CCI desire that the payment of all or a portion of said fees to the Director be deferred, pursuant to the terms and provisions of this Agreement; NOW, THEREFORE, the parties hereto hereby agree as follows: 1. This Agreement shall be effective as of the date specified above, and shall continue in effect until this Agreement is terminated as provided herein. 2. CCI shall credit to an account on CCI's books and records, in the Director's name (the "Director Deferral Account"), all or a portion of such Director's fees otherwise payable to Director as may be specified by the Director on an Election Form (the "Election Form") substantially in the form attached hereto as Exhibit A. The Election Form shall be submitted to CCI simultaneously with the execution of this Agreement with regard to the deferral of fees during the 1998 calendar year and on or before each December 31 thereafter, with respect to amounts to be deferred in the next calendar year. 3. Each January, there shall be credited to the Director Deferral Account interest in an amount equal to the "Applicable Interest Rate" for the immediately preceding twelve months beginning on January 1 and ending on December 31 (or relevant portion thereof) during the term of this Agreement. (Each twelve month period or relevant portion thereof being a "Deferral Year."). Such interest shall be credited against the balance in the Director Deferral Account as of the first day of each month during the Deferral Year. All amounts otherwise due and payable to the Director shall be deemed received and credited to the Director Deferral Account as of the first day of the month in which the amount was due and payable by CCI to the Director. 4. Unless otherwise agreed to by CCI and the Director, the Applicable Interest Rate shall be as set forth in Section B of the Election Form. 5. CCI shall pay the Director an amount equal to the amount credited to the Director Deferral Account pursuant to paragraphs 2 and 3 hereof in the manner and on the date specified by the Director on the Director's Election Form. In the event the Director has specified a payout over a period of years, the Director Deferral Account shall be reduced by the amount of the payment at the time the payment is made. In the event of the Director's death before any payment due under this Paragraph 5 has been paid, such payment due shall be paid either over the time period previously elected by the Director, but commencing the first month following the Director's death, or in a lump sum to Director's beneficiary, as specified by the Director on the Election Form. 6. Once, but not more than once, in a Deferral Year, the Director may submit a new Election Form to CCI changing, or continuing in effect, the portion of fees payable that are subject to deferral hereunder and/or the time within which the amount credited to the Director Deferral Account shall be paid. Each such election shall apply only with respect to fees payable on or after the first day of the calendar year following the date such election is made. 7. In the event the Director undergoes what CCI considers to be a severe financial hardship, upon the Director's written request therefor, the entire amount due the Director as of the date of such written request shall be immediately payable in a single lump sum. 8. The Director shall have no ownership rights in the amounts credited to the Director Deferral Account by CCI other than as set forth in this Agreement. CCI will not set aside, earmark or entrust any fund or money with which to pay its obligations under this Agreement. The Director and any successor in interest shall be and remain simply an unsecured creditor of CCI in the same manner as any other creditor having a general claim for unpaid compensation if and when the Director had the right to receive payment of deferred compensation hereunder. To the extent permitted by law, the rights of the Director or any successor in interest in any benefit or to any payment pursuant to this Agreement shall not be subject in any manner to attachment or any other legal process for the debts of the Director or any successor in interest. Any such benefit or payment shall not be subject to anticipation, alienation, sale, transfer, assignment or encumbrance. 9. Nothing contained in this Agreement and no action taken pursuant to the provisions of this Agreement shall create or be construed to create a trust of any kind, or a fiduciary relationship between CCI and the Director or any other person. 10. The existence of this Agreement shall not confer upon the Director any right to continue to serve as a director of CCI for any period of time. 11. This Agreement shall be binding upon and inure to the benefit of CCI, its successors and assigns, and the Director and his heirs, executors, administrators and legal representatives. 12. This Agreement may be terminated by CCI upon 30 days' written notice to the Director. Except as provided in Paragraph 13, such termination shall be applicable only with respect to fees payable to the Director on and after the first day of the calendar year following the date of termination. 13. This Agreement may be amended at any time with the written consent of both parties. Any amounts deferred hereunder may continue to be deferred under any successor agreement executed by the parties hereto which by its terms provides for an arrangement similar to that provided hereunder, except that any successor agreement shall only be effective for the period commencing with the date of its execution. IN WITNESS WHEREOF, this Agreement has been executed as of the day and year first written above. ATTEST: COUNTRYWIDE CREDIT INDUSTRIES, INC. By: ________________ By: ___/s/_________________________ Secretary Title: ___________________________ DIRECTOR By: ___/s/________________________ EX-10 3 DEFERRED COMP AGREEMENT EXHIBIT A COUNTRYWIDE CREDIT INDUSTRIES, INC. DEFERRED COMPENSATION AGREEMENT FOR NON-EMPLOYEE DIRECTORS ELECTION FORM TO: Countrywide Credit Industries, Inc. In accordance with the provisions of the above-named Agreement, I hereby elect to defer the cash compensation otherwise to become payable to me for services to be rendered by me as a non-employee member of the Board of Directors, and committees thereof, of Countrywide Credit Industries, Inc. during the period commencing [insert date] and ending on [insert date], as follows: A. Amount of Deferral: _______% of annual retainer and fees. B. The Director Deferral Account shall be credited with interest as described in The Agreement. C. The cash compensation deferral is to be paid to me as follows (check one, either number 1 or 2): 1. _______ In a single lump payment by January 31 of the first full calendar year following (check one, either a, b or c): a. ______ The termination of my services as a director. b. ______ The completion of _____ (insert a whole number not less than 3) calendar years following the year of deferral. c. ______ The first to occur of either a or b. 2. _______ In equal monthly payments calculated to exhaust the amount of the deferral and credit interest to the Director Deferral Account within ________ (insert a whole number between 2 and 15) years. The first such monthly payment will be made on the first of the month following the termination of my services as a director. D. In the event that my death occurs before I have received all of the deferred payments, a lump sum payment shall be made to (insert name and address of beneficiary): --------------------------------------------- --------------------------------------------- --------------------------------------------- The death benefit shall be paid to the beneficiary specified above as follows (check one, either number 1 or 2): 1. ______ over the period of years specified above, with the first payment to be made on the first of the month following my death. 2. ______ in a single lump sum to be payable (check one, either a or b) a) _____ in the month following my death. b) _____ in the first month of the year following my death. I hereby agree to be bound by the terms of the Agreement, including any amendments thereof, and recognize that the foregoing election, with the exception of the above-designated beneficiary, is irrevocable and may not be altered by me. __/s/_______________________________________ Received on behalf of Countrywide Credit Industries, Inc. By: _/s/___________________ Sandor E. Samuels Secretary EX-10 4 REVOLVING CREDIT AGREEMENT REVOLVING CREDIT AGREEMENT THIS REVOLVING CREDIT AGREEMENT (the "Agreement") is made and dated as of the 15th day of April, 1998, by and among the lenders signatory hereto (collectively, the "Lenders"); ROYAL BANK OF CANADA ("RBC"), as lead administrative agent for the Lenders (in such capacity, the "Lead Administrative Agent"); THE BANK OF NEW YORK ("BNY"), as co-administrative agent (in such capacity, the "Co-Administrative Agent"); MORGAN GUARANTY TRUST COMPANY OF NEW YORK ("MGTC"), as syndication agent (in such capacity, the "Syndication Agent"); CREDIT LYONNAIS, SAN FRANCISCO BRANCH ("CL"), as documentation agent (in such capacity, the "Documentation Agent"); RBC, as arranger (in such capacity, the "Arranger"), BNY, MGTC and CL, as co-arrangers (in such capacity, the "Co-Arrangers"); the Lenders acting as co-agents, as indicated on the signature pages hereof (in such capacity, the "Co-Agents"); and COUNTRYWIDE HOME LOANS, INC., a New York corporation (the "Company"). RECITALS A. The Company has requested that the Lenders extend credit to the Company in the form of a short term, unsecured revolving credit facility and that the Lead Administrative Agent, the Co-Administrative Agent, the Syndication Agent, the Documentation Agent, the Arranger, the Co-Arrangers and the Co-Agents agree to act in such capacities with respect thereto. B. The Lenders and such other Persons have agreed to do so on the terms and subject to the conditions set forth more particularly 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. Credit Facilities. 1(a) Primary Facility. On the terms and subject to the conditions set forth herein, each of the Lenders severally agrees that it shall, from time to time to but not including the Maturity Date, advance its respective Primary Percentage Share of loans (the "Primary Loans" or a "Primary Loan") to the Company in amounts not to exceed in the aggregate at any date outstanding the Aggregate Credit Limit minus the aggregate dollar amount of Swing Loans outstanding on such date (including Swing Loans to be funded on such date but excluding Swing Loans to be repaid on such date). 1(b) Swing Loan Facility. On the terms and subject to the conditions set forth herein, each of the Swing Line Lenders severally agrees that it shall, from time to time to but not including the Maturity Date, advance its respective Swing Line Percentage Share of loans (the "Swing Loans" or a "Swing Loan") to the Company in amounts such that the aggregate amount of Swing Loans outstanding does not exceed at any date the lesser of: (1) The Aggregate Swing Line Commitment; and (2) The Aggregate Credit Limit minus the aggregate dollar amount of Primary Loans outstanding on such date (including Primary Loans to be funded on such date and excluding Primary Loans to be repaid on such date). At the request of any Swing Line Lender, made through the Lead Administrative Agent at any time and from time to time, including, without limitation, following the occurrence of an Event of Default, each Lender (including each of the Swing Line Lenders) absolutely and unconditionally agrees to refund Swing Loans held by the Swing Line Lenders by advancing its Primary Percentage Share thereof to the Lead Administrative Agent for disbursement to the Swing Line Lenders pro rata, in accordance with their respective Swing Line Percentage Shares. Such fundings shall be made no later than 12:00 noon (Los Angeles time) on the date request therefor is made if such request is made on or before 11:00 a.m. (Los Angeles time) on such date, and no later than 12:00 noon (Los Angeles time) on the next succeeding Business Day if request therefor is made after 11:00 a.m. (Los Angeles time). Advances made by the Lenders hereunder for the purpose of refunding Swing Loans shall, for all purposes of the Credit Documents: (i) constitute Primary Loans to the extent of such Lender's Primary Percentage Share thereof, and (ii) be advanced as Alternate Base Rate Loans. In the event, for whatever reason, the Lenders are not able to advance their respective Primary Percentage Shares for the purpose of refunding Swing Loans as required hereunder, then each of the Lenders (including each of the Swing Line Lenders) absolutely and unconditionally agrees to purchase and take from the Swing Line Lenders on demand an undivided participation interest in Swing Loans outstanding in an amount equal to their respective Primary Percentage Shares of such Swing Loans. Notwithstanding anything contained herein, in no event shall any Lender be required to advance its Primary Percentage Share of any Swing Loan or to purchase any undivided participation interest in any Swing Loan: a. unless such Swing Loan was initially made in accordance with the requirements of this Agreement (as such requirements may be amended or waived from time to time as permitted hereunder) or b. if upon such advance or purchase the aggregate dollar amount of Primary Loans and Swing Loans held by such Lender would exceed such Lender's Maximum Commitment. 2. Requests for Loans; Funding. 2(a) Requests for Loans. Subject to the advance notice required with respect to Eurodollar Loans pursuant to Paragraph 4(a) below, on any Business Day that the Company desires to borrow Loans, it shall deliver a Loan Request, Interest Rate Election and Payoff Notice to the Lead Administrative Agent no later than: (1) in the case of Primary Loans, 10:00 a.m. (Los Angeles time) on such date, and (2) in the case of Swing Loans, 11:00 a.m. (Los Angeles time) on such date; provided, however, that in the event the Lead Administrative Agent receives a request for a Swing Loan after 11:00 a.m. (Los Angeles time) on a Business Day, the Lead Administrative Agent shall work with the Swing Line Lenders on a best efforts basis with a view toward funding the requested Swing Loans no later than 1:00 p.m. (Los Angeles time) on such date, the Company expressly acknowledging and agreeing that there is no assurance that any such funding can be provided. Only one Loan Request, Interest Rate Election and Payoff Notice requesting Primary Loans and only one Loan Request, Interest Rate Election and Payoff Notice requesting Swing Loans shall be submitted to the Lead Administrative Agent on any date. Any request for Primary Loans shall be in such amount that the aggregate dollar amount of Primary Loans which the Lenders are required to actually newly fund with respect thereto is not less than $5,000,000.00, and any request for Swing Loans shall be in an amount not less than $1,000,000.00. On each Business Day on which a Loan Request, Interest Rate Election and Payoff Notice is delivered to the Lead Administrative Agent, the Lead Administrative Agent shall notify the applicable Lenders (which notification may be telephonic and, if telephonic, shall be promptly confirmed in writing) no later than 11:00 a.m. (Los Angeles time) or in the case of a Swing Loan, 11:30 a.m. (Los Angeles time)) of the aggregate amount of Loans which will be funded on such date. 2(b) Funding of Loans. Loans requested pursuant to any Loan Request, Interest Rate Election and Payoff Notice shall be funded as follows: (1) Each Lender shall make its Primary Percentage Share of Primary Loans available by wiring the amount thereof in immediately available same day (including Federal) funds, to the Funding Account no later than 12:30 p.m. (Los Angeles time) on the proposed funding date; and (2) Each Swing Line Lender shall make its Swing Line Percentage Share of each Swing Loan available by wiring the amount thereof in immediately available same day (including Federal) funds to the Funding Account no later than 2:00 p.m. (Los Angeles time) on the proposed funding date. 2(c) Funding Method. Each Lender shall be entitled to fund all or any portion of its Primary Percentage Share of Primary Loans and refund its Primary Percentage Share of Swing Loans, and each Swing Lender shall be entitled to fund all or any portion of its Swing Line Percentage Share of Swing Loans in any manner it may determine in its sole discretion, including, without limitation, in the Grand Cayman inter-bank market, the eurocurrency inter-bank market and within the United States, but all calculations and transactions hereunder shall be conducted as though all Lenders actually fund Eurodollar Loans funded by them hereunder through the purchase of offshore dollar deposits in such amounts with maturities corresponding to the applicable Interest Periods. 3. Payment of Principal; Prepayments. 3(a) Required Principal Payments. Subject to the provisions of Paragraph 3(b) below, the Company shall pay to the Lead Administrative Agent for the account of the Lenders, the unpaid principal balance of each Eurodollar Loan on the last day of the applicable Interest Period and the unpaid principal balance of each Primary Loan which is an Alternate Base Rate Loan and each Swing Loan on the Maturity Date. 3(b) Prepayments. The Company: (1) May voluntarily prepay Loans in whole or in part at any time; provided, however, that any prepayment shall be accompanied by accrued but unpaid interest on the Loan or portion thereof being prepaid. (2) Shall pay in connection with any prepayment hereunder any amount payable on account thereof pursuant to Paragraph 4(e) below concurrently with such prepayment. 4. Calculation and Payment of Interest; Related Provisions. 4(a) Interest on Primary Loans. (1) The Company shall pay interest to each Lender on such Lender's Primary Percentage Share of Primary Loans outstanding calculated, at the election of the Company made from time to time as permitted herein and set forth on a duly executed Loan Request, Interest Rate Election and Payoff Notice, at either: (i) the Alternate Base Rate, and/or (ii) the Applicable Eurodollar Rate. Primary Loans bearing interest at the Alternate Base Rate shall be referred to herein as "Alternate Base Rate Loans"; and Primary Loans bearing interest at the Applicable Eurodollar Rate shall be referred to herein as "Eurodollar Loans". (2) The Company may elect from time to time to convert Primary Loans from Eurodollar Loans to Alternate Base Rate Loans or to have Primary Loans funded as Alternate Base Rate Loans by giving the Lead Administrative Agent irrevocable notice of such election as set forth on a duly executed Loan Request, Interest Rate Election and Payoff Notice delivered on the proposed conversion or funding date; provided, however, that any conversion of Eurodollar Loans may only be made on the last day of the applicable Eurodollar Interest Period. The Company may elect from time to time to convert Primary Loans from Alternate Base Rate Loans to Eurodollar Loans or to have Primary Loans funded as Eurodollar Loans by giving the Lead Administrative Agent at least three Eurodollar Business Days' prior irrevocable notice of such election by delivery of a duly executed Loan Request, Interest Rate Election and Payoff Notice. Upon receipt of any such notice, the Lead Administrative Agent shall promptly notify each of the Lenders thereof. No Primary Loan shall be funded as or converted into a Eurodollar Loan if an Event of Default or Potential Default has occurred and is continuing on the day occurring two Business Days prior to the date of the funding or conversion requested by the Company. (3) Any Eurodollar Loan may be continued as such upon the expiration of the Interest Period applicable thereto by giving the Lead Administrative Agent (which shall notify the Lenders) at least three Eurodollar Business Days' prior irrevocable notice of such election as set forth on a duly executed Loan Request, Interest Rate Election and Payoff Notice; provided, however, that no Eurodollar Loan may be continued as such when any Event of Default or Potential Default has occurred and is continuing, but shall be automatically converted to an Alternate Base Rate Loan on the last day of the then current Interest Period applicable thereto. The Lead Administrative Agent shall notify the Lenders and the Company promptly that such automatic conversion will occur. If the Company shall fail to give notice as provided above, the Company shall be deemed to have elected to convert the affected Eurodollar Loan to an Alternate Base Rate Loan on the last day of the Interest Period applicable thereto. (4) The Lead Administrative Agent shall give prompt written notice (or notice by telephone immediately confirmed in writing) to the Company and the Lenders of the applicable interest rate determined by the Lead Administrative Agent. (5) Under no circumstances shall the Lenders be required to make or maintain Eurodollar Loans under this Agreement with more than an aggregate number of eight (8) different Interest Periods. 4(b) Interest on Swing Loans. The Company shall pay interest to each Swing Line Lender on such Swing Line Lender's Swing Line Percentage Share of Swing Loans outstanding from the date advanced to but not including the date of payment thereof at the Applicable Fed Funds Rate. 4(c) Payment of Interest. The Company shall pay interest, in each case as more specifically provided in Paragraph 5(d) below: (1) On Alternate Base Rate Loans and Swing Loans, monthly, in arrears, on the fifth day of each month for the period from and including the first day of the immediately preceding month to and including the last day of such month; and (2) On Eurodollar Loans on the last day of the applicable Eurodollar Interest Period relating thereto. 4(d) Inability to Determine Rate. In the event that the Lead Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Company) that by reason of circumstances affecting the interbank eurodollar market adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for any given Eurodollar Interest Period, the Lead Administrative Agent shall forthwith give notice (which may be telephonic and promptly confirmed in writing or by facsimile transmission) of such determination to each Lender and to the Company at least two Eurodollar Business Days prior to, as the case may be, the conversion date of an Alternate Base Rate Loan to a Eurodollar Loan or the proposed funding or continuation date of a Primary Loan as a Eurodollar Loan. If such notice is given: (1) any Primary Loan that was to have been converted to or funded as a Eurodollar Loan shall, subject to the provisions hereof, be continued or funded as an Alternate Base Rate Loan, and (2) any outstanding Eurodollar Loan shall be converted, on the last day of the then current Interest Period with respect thereto, to an Alternate Base Rate Loan. Until such notice has been withdrawn by the Lead Administrative Agent, the Company shall not have the right to convert a Primary Loan to or fund or continue a Primary Loan as a Eurodollar Loan. 4(e) Funding Indemnification. In addition to all other payment obligations hereunder, in the event: (1) any Eurodollar Loan is prepaid prior to the last day of the applicable Eurodollar Interest Period, whether following acceleration upon the occurrence of an Event of Default or otherwise, including, without limitation, pursuant to Paragraphs 14(a), 14(b) and 14(c) below, or (2) the Company shall fail to make a conversion into or a borrowing as a Eurodollar Loan after the Company has given notice thereof as provided in Paragraph 4(a)(2) above, or (3) the Company shall fail to continue any Eurodollar Loan which it has elected to have continued as a Eurodollar Loan, or (4) the Company shall fail to make any payment of principal or interest on any Loan when due, then the Company shall immediately pay to each of the affected Lenders, through the Lead Administrative Agent, an additional amount compensating such Lender for all losses, costs and expenses incurred by such Lender in connection therewith, including, without limitation, such as may arise out of the re-employment of funds obtained by such Lender or from fees payable to terminate the deposits from which such funds were obtained, such losses, costs and expenses and the method of calculation thereof being set forth in reasonable detail in a statement delivered to the Company by such Lender, such statement to be conclusive in the absence of manifest error. Under no circumstances shall any Lender have any obligation to remit monies to the Company upon prepayment of any Eurodollar Loan, even under circumstances which do not result in the necessity for the payment by the Company of any amount hereunder. The provisions hereof shall survive termination of this Agreement and payment of the outstanding Loans and all other Obligations. 4(f) Illegality; Impracticality. Notwithstanding any other provisions herein, if any law, regulation, treaty or directive or any change therein or in the interpretation or application thereof shall or may in the opinion of any Lender make it unlawful or impractical for such Lender to make or maintain Eurodollar Loans: (1) the commitment of such Lender hereunder to make, continue or convert into Eurodollar Loans shall forthwith be cancelled and (2) such Lender's Primary Percentage Share of Loans outstanding as Eurodollar Loans, if any, shall be converted automatically to Alternate Base Rate Loans at the end of their respective Eurodollar Interest Periods or within such earlier period as required by law. In the event of a conversion of any Eurodollar Loan prior to the end of its applicable Eurodollar Interest Period the Company hereby agrees promptly to pay each Lender, upon its written demand, the amounts required pursuant to Paragraph 4(e) above, it being agreed and understood that such conversion shall constitute a prepayment for all purposes hereof. The provisions hereof shall survive the termination of this Agreement and payment of the outstanding Loans and all other Obligations. 4(g) Requirements of Law; Increased Costs. In the event that a change subsequent to the date hereof in any applicable law, regulation, treaty or directive or in the governmental or judicial interpretation or application thereof, or compliance by any Lender with any request or directive (whether or not having the force of law) issued subsequent to the date hereof by any central bank or other governmental authority, agency or instrumentality: (1) Does or shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement or any Loans purchased or made hereunder, or changes the basis of taxation of payments to such Lender of principal, fees, interest or any other amount payable hereunder (except for changes in the rate of tax on the overall net income of such Lender); (2) Does or shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, or deposits or other liabilities in or for the account of, advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Lender which are not otherwise included in the determination of the Alternate Base Rate or the Applicable Eurodollar Rate; or (3) Does or shall impose on such Lender any other condition; and the result of any of the foregoing is to increase the cost to such Lender of purchasing, making, agreeing to make, renewing or maintaining or issuing any Loan or to reduce any amount receivable in respect thereof then, in any such case, the Company shall promptly pay to such Lender, upon its written demand, any additional amounts necessary to compensate such Lender for such additional cost or reduced amounts receivable as determined by such Lender with respect to this Agreement or such credit extensions. If a Lender becomes entitled to claim any additional amounts pursuant to this Paragraph 4(g), it shall promptly notify the Company of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to the foregoing sentence submitted by a Lender to the Company shall be conclusive in the absence of manifest error. The obligations of the Company under this Paragraph 4(g) shall survive the termination of this Agreement and the payment of all other Obligations. 4(h) Taxes. (1) All payments made by the Company, the Lead Administrative Agent and the Lenders on account of the Obligations shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding, in the case of the Lenders, net income taxes and franchise taxes (imposed in lieu of net income taxes), imposed on the Lenders, as the case may be, as a result of a present or former connection between the jurisdiction of the government or taxing authority imposing such tax, or any political subdivision or taxing authority thereof or therein, and such Lender (other than a connection arising solely from such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, the Credit Documents) (all such non-excluded taxes, levies, imposts, duties, charges, fees, deductions and withholdings being hereinafter called "Taxes"). If any Taxes are required to be withheld from any amounts payable to any Lender under the Credit Documents, the amounts so payable by the Company to the Lead Administrative Agent for the benefit of such Lender shall be increased to the extent necessary to yield to such Lender (after payment of all Taxes) interest or any such other amounts payable thereunder at the rates or in the amounts specified in the Credit Documents. Whenever any Taxes are payable by the Company or on behalf of the Company, as promptly as possible thereafter the Company shall send to the Lead Administrative Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt received by the Company showing payment thereof. If the Company fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Lead Administrative Agent the required receipts or other required documentary evidence, the Company shall indemnify the Lead Administrative Agent and such Lender for any incremental taxes, interest or penalties that may become payable by the Lead Administrative Agent and the Lenders as a result of any such failure. The agreements in this subsection shall survive the termination of this Agreement and the payment of all other Obligations. Each Lender by executing this Agreement represents and warrants to the Company and the Lead Administrative Agent that at the date of this Agreement no Taxes are imposed upon such Lender which would result in increased liability of the Company to such Lender pursuant to this Paragraph 4(h)(1). (2) Each Lender that is not incorporated under the laws of the United States of America or a state thereof agrees that it will deliver to the Company and the Lead Administrative Agent (i) two duly completed copies of United States Internal Revenue Service Form 1001 or 4224 or successor applicable form, as the case may be, and (ii) an Internal Revenue Service Form W-8 or W-9 or successor applicable form. Each such Lender also agrees to deliver to the Company and the Lead Administrative Agent two further copies of the said Form 1001 or 4224 and Form W-8 or W-9, or successor applicable forms or other manner of certification, as the case may be, on or before the date that any such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Company, and such extensions or renewals thereof as may reasonably be requested by the Company or the Lead Administrative Agent, unless in any such case an event (including, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender so advises the Company and the Lead Administrative Agent. Such Lender shall certify (y) in the case of a Form 1001 or 4224, that it is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes and (z) in the case of a Form W-8 or W-9, that it is entitled to an exemption from United States backup withholding tax. 4(i) Buy-Down Provisions. Notwithstanding anything contained in this Agreement, the Company and any individual Lender (as used in this Paragraph 4(i), a "Buy-Down Lender") may notify the Lead Administrative Agent in writing that the Company and such Buy-Down Lender have entered into a Buy-Down Agreement with respect to all or a portion of the Loans from time to time outstanding held by such Buy-Down Lender (the Loans held by such Buy-Down Lender which are subject to a Buy-Down Agreement being referred to herein as "Buy-Down Rate Loans"), and that, pursuant to said Buy-Down Agreement, the interest rate otherwise applicable to the Buy-Down Rate Loans during any interest calculation period shall be reduced to the Buy-Down Rate and the interest otherwise payable by the Company to such Buy-Down Lender during such interest calculation period shall be reduced accordingly. Interest payable to such Buy-Down Lender with respect to Buy-Down Rate Loans shall be billed as provided in Paragraph 5(d) below. In no event shall the Lead Administrative Agent have any obligation or duty to verify the amount of any Buy-Down Deposits supporting the pricing of Buy-Down Rate Loans held by any Buy-Down Lender or the amount of any interest billing with respect thereto. Any deficiency fees payable to such Buy-Down Lender by the Company under the applicable Buy-Down Agreement shall be billed by such Buy-Down Lender to the Company directly. Any Buy-Down Lender may elect not to make demand for the payment of deficiency fees accruing in respect of Buy-Down Deposits from time to time and it is expressly agreed and understood that: (1) any such deficiency fee shall not, by reason of such failure of such Buy-Down Lender or otherwise, be deemed to have been waived by such Buy-Down Lender (except as such waiver is expressly acknowledged in writing by such Buy-Down Lender from time to time), and (2) all deficiency fees accrued and unpaid hereunder and not so expressly waived, whether or not previously declared due and owing by any such Buy-Down Lender, shall automatically be due and payable in full upon the Maturity Date. 4(j) Obligation of Lenders to Mitigate; Replacement of Lenders. Each Lender agrees that: (1) As promptly as practicable after the officer of such Lender responsible for administering the Loans of such Lender becomes aware of any event or condition that would entitle such Lender to receive payments under Paragraph 4(g) above or to cease making Eurodollar Loans pursuant to Paragraph 4(f) above, such Lender will use reasonable efforts (i) to make, issue, fund or maintain the affected Loans of such Lender through another lending office of such Lender or (ii) take such other measures as such Lender may deem reasonable, if as a result thereof the additional amounts which would otherwise be required to be paid to such Lender pursuant to Paragraph 4(g) above would be materially reduced or eliminated or the conditions rendering such Lender incapable of making Eurodollar Loans under Paragraph 4(f) above no longer would be applicable, and if, as determined by such Lender in its sole discretion, the making, issuing, funding or maintaining such Loans through such other lending office or in accordance with such other measures, as the case may be, would not otherwise materially adversely affect such Loans or the interests of such Lender. (2) If the Company receives a notice pursuant to Paragraph 4(g) above or a notice pursuant to Paragraph 4(f) above stating that a Lender is unable to extend Eurodollar Loans (for reasons not generally applicable to the Majority Lenders), so long as (i) no Potential Default or Event of Default shall have occurred and be continuing, (ii) the Company has obtained a commitment from another Lender or another financial institution reasonably acceptable to the Lead Administrative Agent to purchase at par such Lender's Loans, Maximum Commitment and accrued interest and fees and to assume all obligations of the Lender to be replaced under the Credit Documents, and (iii) such Lender to be replaced is unwilling to withdraw the notice delivered to the Company, upon thirty (30) days' prior written notice to such Lender and the Lead Administrative Agent and payment of any amounts due under Paragraph 4(g) above, the Company may require, at the Company's expense and subject to Paragraph 4(e) above, the Lender giving such notice to assign, without recourse, all of its Loans, Maximum Commitment and accrued interest and fees to such other Lender or financial institution pursuant to the provisions of Paragraph 14 below. 5. Miscellaneous Lending Provisions. 5(a) Use of Proceeds. The proceeds of Loans shall be utilized by the Company for general corporate purposes, including, without limitation, repayment of Indebtedness of the Company to the Parent permitted to be repaid by the Company to the Parent pursuant to the terms of the Credit Documents and including CPNs. 5(b) Assumption of Funding/Purchase. The Lead Administrative Agent may (but shall not be obligated to) assume that each Lender has advanced its Primary Percentage Share of Primary Loans and that each Swing Line Lender has advanced its Swing Line Percentage Share of Swing Loans required to be funded by such Lender hereunder on the funding date therefor and may, in reliance upon such assumption, make available to the Company on such date a corresponding amount. If and to the extent any Lender shall not have so made such amounts available, such Lender and the Company jointly and severally agree to repay to the Lead Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Company until the date such amount is repaid to the Lead Administrative Agent, at, in the case of the Company, the interest rate applicable at the time to the subject Loan and, in the case of the Lenders, the Federal Funds Effective Rate. If such Lender shall repay to the Lead Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender's Primary Percentage Share or Swing Line Percentage Share, as applicable, of the subject Loan, as applicable for all purposes of the Credit Documents. Nothing contained herein shall affect the liability of any Lender for its failure to make its Primary Percentage Share of Primary Loans or its Swing Line Percentage Share of Swing Loans available to the Company as required pursuant to this Agreement and the other Credit Documents. 5(c) Evidence of Indebtedness. The obligation of the Company to repay Loans shall be evidenced by notations on the books and records of the Lead Administrative Agent and the Lenders. Such accounts shall be conclusive absent manifest error. Any failure to record the advance of any Loan, the interest rate applicable thereto or any other information regarding the Obligations, or any error in doing so, shall not limit or otherwise affect the obligation of the Company with respect to any of the Obligations. Upon the request of any Lender, the Company shall promptly execute a promissory note or promissory notes in favor of such Lender evidencing the Obligations held by such Lender hereunder. 5(d) Interest and Fee Billing and Payment. The Lead Administrative Agent shall: (1) On or before the first Business Day of each month notify the Company (which notification may be telephonic) of the estimated amount of interest payable with respect to Alternate Base Rate Loans and Swing Loans as of the fifth day of the current month for the period from and including the first day of the immediately preceding month to and including the last day of such month, with the actual amount confirmed by notification by the Lead Administrative Agent to the Company (which notification may be telephonic and which, if telephonic, shall be promptly confirmed in writing) given no later than 9:00 a.m. (Los Angeles time) on the due date of payment thereof; (2) On the last day of the Interest Period for each Eurodollar Loan notify the Company (which notification may be telephonic and which, if telephonic, shall be promptly confirmed in writing) of the amount of interest payable on such date on account thereof; (3) On or before the first Business Day of the first month of each calendar quarter notify the Company (which notification may be telephonic) of the amount of facility fees payable pursuant to the Fee Letter on the fifth day of such month for the period from and including the first day of the first month of the immediately preceding calendar quarter to and including the last day of such calendar quarter, with the actual amount confirmed by notification by the Lead Administrative Agent to the Company (which notification may be telephonic and which, if telephonic, shall be promptly confirmed in writing) given no later than 9:00 a.m. (Los Angeles time) on the due date of payment thereof; and (4) From time to time upon the request of any Lender, deliver to the Company a funding indemnification billing for amounts payable to such Lender pursuant to Paragraph 4(e) above or a billing for amounts payable to such Lender pursuant to Paragraphs 4(g), 4(h) and 4(i) above and Paragraph 5(l) below. The Company shall pay the full amount of interest and fees of which it has been notified pursuant to subparagraphs (1) and (3) above on the fifth day of each month, shall pay the full amount of interest of which it has been notified pursuant to subparagraph (2) above on the date such notification is given and shall pay the full amount of each billing delivered to it pursuant to subparagraph (4) above within five Business Days thereafter. Interest payable with respect to Buy-Down Loans prior to the occurrence of an Event of Default and acceleration of the Obligations shall be billed to the Company directly by each Buy-Down Lender in accordance with the timeframes set forth in subparagraph (1) above, and the Company shall pay the full amount of interest due on Buy-Down Loans directly to such Buy-Down Lender on the fifth day of each month. Following the occurrence of an Event of Default and acceleration of the Obligations, interest payable on all Loans shall be billed through the Lead Administrative Agent. 5(e) Nature and Place of Payments. Except as otherwise expressly provided in the Credit Documents, all payments made on account of the Obligations shall be made to the Lead Administrative Agent at the Contact Office for distribution to the Lenders, as the Company shall, subject to Paragraph 5(h) below, direct pursuant to a Loan Request, Interest Rate Election and Payoff Notice, without set-off or counterclaim in lawful money of the United States of America in immediately available same day funds, and must be received by the Lead Administrative Agent accompanied by a Loan Request, Interest Rate Election and Payoff Notice at the Contact Office by 11:30 a.m. (Los Angeles time) on the day of payment, it being expressly agreed and understood that if a payment is received after 11:30 a.m. (Los Angeles time) by the Lead Administrative Agent or the Lead Administrative Agent does not receive a Loan Request, Interest Rate Election and Payoff Notice therefor, such payment will be considered to have been made on the next succeeding Business Day or such later date as the Lead Administrative Agent receives the Loan Request, Interest Rate Election and Payoff Notice therefor and interest thereon shall be payable by the Company at the then applicable rate during such extension. If any payment required to be made by the Company hereunder becomes due and payable on a day other than a Business Day, the due date thereof shall be extended to the next succeeding Business Day and interest thereon shall be payable at the then applicable rate during such extension. The Lead Administrative Agent is hereby authorized to debit accounts of the Company maintained with the Lead Administrative Agent for amounts payable by the Company under this Agreement through the Lead Administrative Agent and the Lead Administrative Agent will promptly notify the Company of any such debit. 5(f) Post-Default Interest. Following the occurrence of an Event of Default and until such Event of Default is cured or waived as provided herein, Obligations shall bear interest at a per annum rate equal to the Alternate Base Rate plus three percent (3%). 5(g) Computations. All computations of interest and fees payable hereunder and under the Fee Letter shall be based upon a year of 360 days for the actual number of days elapsed. The determination by the Lead Administrative Agent of any interest rate hereunder shall be conclusive and binding on the Company and the Lenders absent manifest error. 5(h) Disbursement of Payments Received. (1) All amounts received by the Lead Administrative Agent on account of the Obligations shall be disbursed by the Lead Administrative Agent to the Lenders by wire transfer prior to the cut-off deadline of the Federal Reserve Wire System on the date of receipt if received by the Lead Administrative Agent before 11:30 a.m. (Los Angeles time) and accompanied by a Loan Request, Interest Rate Election and Payoff Notice (or disbursed on the day of receipt although received later than 11:30 a.m. (Los Angeles time) with the agreement of the Lead Administrative Agent and any Lender) or if received later or if the Lead Administrative Agent has not received a Loan Request, Interest Rate Election and Payoff Notice therefor, on the next succeeding Business Day or such later date as the Lead Administrative Agent receives the Loan Request, Interest Rate Election and Payoff Notice relating thereto, without interest payable by the Lead Administrative Agent. (2) Prior to the occurrence of an Event of Default and acceleration of the Obligations, amounts received by the Lead Administrative Agent on account of the Obligations shall be disbursed in accordance with the written direction of the Company, subject only to the requirements that amounts disbursed to the Lenders on account of Primary Loans be disbursed pro rata in accordance with the Lenders' respective Primary Percentage Shares and that amounts disbursed to the Swing Line Lenders on account of Swing Loans be disbursed pro rata in accordance with the Swing Line Lenders' respective Swing Line Percentage Shares. (3) Following the occurrence of an Event of Default and acceleration of the Obligations, amounts received by the Lead Administrative Agent on account of the Obligations shall be disbursed as follows: (i) first among the Lenders, pro rata in accordance with their respective Primary Percentage Shares, on account of the Obligations until the Obligations have been paid in full, and (ii) then, to the Lead Administrative Agent with respect to the remaining Obligations held by it in its capacity as Lead Administrative Agent until such Obligations have been paid in full. 5(i) Fees. The Company shall pay: (1) To the Lead Administrative Agent, such fees as may from time to time be agreed upon in writing by the Lead Administrative Agent and the Company; and (2) To each of the Lenders, the facility fees described in the Fee Letter. 5(j) Wire Transfers of Funds. Notwithstanding anything to the contrary contained herein and in the other Credit Documents, funds which the Lead Administrative Agent and the Lenders are transmitting by wire transfer shall be deemed to have been sent and received upon release by the transmitting party of such funds into the Federal Reserve Wire System. 5(k) Reduction in Aggregate Credit Limit. Upon not less than thirty (30) days' prior written notice to the Lead Administrative Agent, which shall promptly transmit such notice to each of the Lenders, the Company may permanently reduce the Aggregate Credit Limit in full or in increments of $5,000,000.00; provided, however, that any such reduction shall be in a minimum amount of $25,000,000.00; and, provided, further, that upon the effective date of any such reduction, the aggregate amount of Loans outstanding shall not exceed the Aggregate Credit Limit as so reduced. 5(l) Capital Requirements. The Company shall pay from time to time upon demand such amounts as any Lender may determine to be necessary to compensate such Lender for all reasonable costs which such Lender determines are attributable to its making, agreeing to make, purchasing or maintaining its Primary Percentage Share of any Primary Loan or its Swing Line Percentage Share of any Swing Loan under this Agreement, including, without limitation, reserve requirements attributed to the unused portion of the Aggregate Credit Limit, in respect of any amount of capital required to be maintained by such Lender pursuant to any law or regulation of any jurisdiction or any interpretation, directive or request affecting banks, savings and loan institutions and/or financial institutions generally notwithstanding the creditworthiness of any particular bank, savings and loan institution or other financial institution (whether or not having the force of law) of any court or governmental or monetary authority, whether in effect on the date of this Agreement or thereafter. The obligations of the Company under this Paragraph 5(l) shall survive the termination of this Agreement and the payment of all Loans and all other Obligations. 6. Guaranty; Subordination; Additional Documents. 6(a) Guaranty and Subordination Agreement. As support for the Obligations, the Company shall execute and deliver and shall cause to be executed and delivered to the Lead Administrative Agent on behalf of the Lenders: (1) the Guaranty and (2) the Subordination Agreement. 6(b) Further Documents. The Company agrees to execute and deliver and to cause to be executed and delivered to the Lead Administrative Agent or such Persons as the Lead Administrative Agent may direct from time to time such documents, instruments and agreements as the Lead Administrative Agent on behalf of the Lenders may reasonably request, which are in any of the Lenders' judgment necessary or desirable to obtain for the Lead Administrative Agent, the Co-Administrative Agent, the Documentation Agent, the Syndication Agent, the Arranger, the Co-Arrangers, the Co-Agents and the Lenders the benefit of the Credit Documents. 7. Conditions Precedent. 7(a) First Loan. As conditions precedent to the Effective Date and the funding of the first Loan hereunder: (1) There shall have been delivered to the Lead Administrative Agent, in form and substance and in quantities reasonably satisfactory to the Lenders and their counsel, each of the following: (i) A duly executed copy of this Agreement; (ii) A duly executed copy of each of the Guaranty and the Subordination Agreement; (iii) A duly executed copy of the Fee Letter; (iv) Such credit applications, financial statements, pro forma financial statements, authorizations and information concerning the Company and its business, operations and condition (financial and otherwise) as the Lead Administrative Agent or any Lender may reasonably request; (v) Certified copies of resolutions of the Boards of Directors of the Company and the Parent approving the execution and delivery of all documents required to be delivered by the Company and the Parent hereunder; (vi) Certificates of the Secretary or an Assistant Secretary of each of the Company and the Parent certifying the names, incumbency and true signatures of the officers of the Company and the Parent authorized to sign the documents required to be executed and delivered by the Company and the Parent hereunder; (vii) An opinion of counsel for the Company and the Parent (which counsel may be in-house counsel) in form and substance satisfactory to the Lenders and covering such matters as the Lenders may reasonably request; (viii) A certificate of an executive officer of each of the Company and the Parent in the form of that attached hereto as Exhibit A dated as of the date of this Agreement; and (ix) A Covenant Compliance Certificate, dated as of February 28, 1998, for each of the Company and the Parent demonstrating in detail satisfactory to the Lenders the Company's compliance with the covenants set forth in Paragraphs 10(g), 10(i) and 10(j) below, and the Parent's compliance with the financial covenants set forth in Paragraphs 11(d) and 11(e) of the Guaranty. (2) All acts and conditions (including, without limitation, the obtaining of all necessary regulatory approvals and the making of all required filings, recordings and registrations) required to be done and performed and to have happened precedent to the execution, delivery and performance of the Credit Documents and to constitute the same legal, valid and binding obligations, enforceable in accordance with their respective terms, shall have been done and performed and shall have happened in due and strict compliance with all applicable laws. (3) All documentation, including, without limitation, documentation for corporate and legal proceedings in connection with the transactions contemplated by the Credit Documents, shall be satisfactory in form and substance to the Lenders and their counsel. (4) The Company shall have delivered to the Arranger a letter acceptable to the Arranger regarding the payment by the Company to the Arranger of fees, and the Company shall have paid all fees required under such letter to have been paid prior to the funding of the first Loan hereunder. (5) No material adverse change in the business, operations, assets or financial or other condition of the Company or the Company and its consolidated Subsidiaries taken as a whole shall have occurred since the Statement Date and the Company by presenting the initial Loan Request, Interest Rate Election and Payoff Notice shall be deemed to have so represented and warranted hereunder. 7(b) All Loans. As conditions precedent to the funding of each Loan hereunder, including the first Loan, at and as of the date of, and after giving effect to, the funding of such Loan: (1) The representations and warranties of the Company and the Parent contained in the Credit Documents shall be accurate and complete in all respects as of such date; (2) If there has occurred a Potential Default or an Event of Default (other than under Paragraph 11(a) below or under Paragraph 11(e) below resulting from a breach or potential breach of Paragraph 10(i) or 10(j) below), the Majority Lenders have not elected in writing to cease funding Loans hereunder; (3) If there has occurred an Event of Default under Paragraph 11(a) below, one hundred percent (100%) of the Lenders have elected in writing to waive such Event of Default; (4) If there has occurred an Event of Default or Potential Default under Paragraph 11(e) below resulting from a breach or potential breach of Paragraph 10(i) or 10(j) below, the Majority Lenders have elected in writing to waive such Event of Default or Potential Default; (5) Following such Credit Event, the aggregate principal amount of Loans outstanding shall not exceed the applicable limitations of Paragraphs 1(a) and 1(b) above nor shall the aggregate principal amount of Primary Loans held by any Lender plus such Lender's Percentage Share of Swing Loans outstanding exceed such Lender's Maximum Commitment; and (6) The Company shall have delivered to the Lead Administrative Agent a duly executed Loan Request, Interest Rate Election and Payoff Notice requesting such Credit Event. By delivering a Loan Request, Interest Rate Election and Payoff Notice to the Lead Administrative Agent, the Company shall be deemed to have represented and warranted the accuracy and completeness of the statements set forth in subparagraphs (b)(1) through (b)(6) above and all information set forth in such Loan Request, Interest Rate Election and Payoff Notice. 8. Representations and Warranties of the Company. As an inducement to the Lead Administrative Agent, the Co-Administrative Agent, the Documentation Agent, the Syndication Agent, the Arranger, the Co-Arrangers, the Co-Agents and each Lender to enter into this Agreement, the Company represents and warrants to the Lead Administrative Agent, the Co-Administrative Agent, the Documentation Agent, the Syndication Agent, the Arranger, the Co-Arrangers, the Co-Agents and each Lender that: 8(a) Financial Condition. The financial statements dated the Statement Date, copies of which have heretofore been furnished to each Lender, are complete and correct and present fairly in accordance with GAAP the consolidated and consolidating financial condition of the Company and its consolidated Subsidiaries at such date and the consolidated and consolidating results of their operations and changes in financial position for the fiscal period then ended. 8(b) Corporate Existence; Compliance with Law. Each of the Company and its Subsidiaries: (1) is duly organized, validly existing and in good standing as a corporation under the laws of the state of its incorporation, and is in good standing as a foreign corporation in each jurisdiction where its ownership of property or conduct of business requires such qualification and where failure to be in good standing could have a material adverse effect on the Company, any of its Subsidiaries, or their respective property and/or business or on the ability of the Company or the Parent to pay or perform the Credit Documents; (2) has the corporate power and authority and the legal right to own and operate its property and to conduct business in the manner in which it does and proposes so to do; and (3) is in compliance with all Requirements of Law and Contractual Obligations except to the extent that failure to comply could not have a material adverse effect on the Company, any of its Subsidiaries, or their respective property and/or business or on the ability of the Company or the Parent to pay or perform the Credit Documents. 8(c) Corporate Power; Authorization; Enforceable Obligations. Each of the Company and the Parent has the corporate power and authority and the legal right to execute, deliver and perform the Credit Documents to which it is a party and has taken all necessary corporate action to authorize the execution, delivery and performance of the Credit Documents. The Credit Documents have been duly executed and delivered on behalf of each of the Company and the Parent and constitute legal, valid and binding obligations of such party enforceable against such party in accordance with their respective terms. 8(d) No Legal Bar. The execution, delivery and performance of the Credit Documents, the borrowing thereunder and the use of the proceeds thereof, will not violate any Requirement of Law or any Contractual Obligation of the Company or the Parent to the extent that failure to comply therewith could have a material adverse effect on the Company or its property and/or business or on the ability of the Company or the Parent to pay or perform the Credit Documents. 8(e) No Material Litigation. Except as disclosed on Exhibit B attached hereto, no litigation, investigation or proceeding of or before any court, arbitrator or Governmental Authority is pending or, to the knowledge of the Company, threatened by or against the Company or any of its Subsidiaries or against any of such parties' properties or revenues involving amounts, in the case of any such individual litigation, investigation or proceeding, in excess of $10,000,000.00 or which, regardless of the amount in controversy, is likely to be adversely determined and which, if adversely determined, could have a material adverse effect on the business, operations, property or financial or other condition of the Company or any of its Subsidiaries. 8(f) Taxes. The Company and each of its Subsidiaries have filed or caused to be filed all tax returns that are required to be filed and have paid all taxes (other than incidental local business and other municipal taxes which are not material to the operation of the Company and its Subsidiaries) shown to be due and payable on said returns or on any assessments made against them or any of their property other than taxes which are being contested in good faith by appropriate proceedings and as to which the Company or the applicable Subsidiary has established adequate reserves in conformity with GAAP. 8(g) Investment Company Act. The Company is not an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 8(h) Subsidiaries. Exhibit C attached hereto sets forth an accurate and complete list of all presently existing Subsidiaries of the Company, their respective jurisdictions of incorporation and the percentage of their capital stock owned by the Company or other Subsidiaries of the Company. All of the issued and outstanding shares of capital stock of the Subsidiaries of the Company have been duly authorized and issued and are fully paid and non-assessable. 8(i) Federal Reserve Board Regulations. Neither the Company nor any of its Subsidiaries is engaged or will engage, principally or as one of its important activities, in the business of extending credit for the purpose of "purchasing" or "carrying" any "margin stock" within the respective meanings of such terms under Regulation U. No part of the proceeds of any Loan made hereunder will be used for "purchasing" or "carrying" "margin stock" as so defined or for any purpose which violates, or which would be inconsistent with, the provisions of the Regulations of the Board of Governors of the Federal Reserve System. 8(j) ERISA. The Company and each of its Subsidiaries are in compliance in all material respects with the requirements of ERISA and no Reportable Event has occurred under any Plan maintained by the Parent, the Company or any of its or their Subsidiaries which is likely to result in the termination of such Plan for purposes of Title IV of ERISA. 8(k) Assets. The Company and each of its Subsidiaries have good and marketable title to all property and assets reflected in the financial statements referred to in Paragraph 8(a) above, except property and assets sold or otherwise disposed of in the ordinary course of business subsequent to that date. Neither the Company nor any of its Subsidiaries has outstanding Liens on any of its properties or assets nor are there any security agreements to which the Company or any of its Subsidiaries is a party, or title retention agreements, whether in the form of leases or otherwise, of any personal property except as reflected in said financial statements referred to in Paragraph 8(a) above or as permitted under Paragraph 10(a) below. 9. Affirmative Covenants. The Company hereby covenants and agrees with the Lead Administrative Agent and each Lender that, as long as any Obligations remain unpaid or any Lender has any obligation to make all or any portion of any Loans, the Company shall: 9(a) Financial Statements. Furnish or cause to be furnished directly to the Lead Administrative Agent and each Lender: (1) Within ninety (90) days after the last day of each fiscal year of the Parent, consolidated statements of income and statements of changes in cash flow of the Parent and its Subsidiaries for such year and a balance sheet as of the end of such year (including therein as supplemental information, consolidating statements of income and statements of changes in cash flow and balance sheets as of the end of such year) in each case presented fairly in accordance with GAAP and, in the case of the Company, the requirements of HUD Handbook IG 4000.3 REV and accompanied, in all cases, by an unqualified report of a firm of independent certified public accountants acceptable to the Majority Lenders; (2) Within forty-five (45) days after the last day of each fiscal quarter, consolidated and consolidating statements of income and statements of changes in cash flow of the Parent and its Subsidiaries for such fiscal quarter or calendar month, as applicable, and balance sheets of the Parent and its Subsidiaries as of the last day of such fiscal quarter, presented fairly in accordance with GAAP, in each case certified in writing as to fairness of presentation by the chief financial officer or treasurer of the Company and the Parent; (3) Within forty-five (45) days following each Applicable Financial Test Date, a Covenant Compliance Certificate from the chief financial officer or treasurer of each of the Company and the Parent, certifying that there does not exist an Event of Default or Potential Default and, in addition, demonstrating in detail satisfactory to the Majority Lenders the Company's compliance with the covenants set forth in Paragraphs 10(g), 10(i) and 10(j) below as of and at such Applicable Financial Test Date, and the Parent's compliance with the covenants set forth in Paragraphs 11(d) and 11(e) of the Guaranty, as of and at such Applicable Financial Test Date; (4) As soon as is available any written report pertaining to material items in respect of the internal control matters of the Parent or the Company submitted to any of such Persons by their respective independent accountants in connection with each annual or interim special audit of the financial condition of such Persons made by such independent public accountants; and (5) Copies of all proxy statements, financial statements, and reports which the Parent sends to its stockholders, and copies of all regular, periodic and special reports, and all registration statements under the Securities Act of 1933, as amended (the "Act"), which the Parent or the Company files with the Securities and Exchange Commission or any governmental authority which may be substituted therefor, or with any national securities exchange; provided, however, that there shall not be required to be delivered hereunder to the Lead Administrative Agent such copies for any Lender of prospectuses relating to future series of offerings under registration statements filed under Rule 415 of the Act or other items which such Lender has indicated in writing to the Parent or the Company from time to time need not be delivered to such Lender. 9(b) Certificates; Reports; Other Information. Furnish or cause to be furnished directly to the Lead Administrative Agent and each Lender: (1) Within forty-five (45) days following each Applicable Financial Test Date, prepared as of such Applicable Financial Test Date and certified by an appropriate officer of the Company, a report covering the servicing portfolio of the Company covering such matters as the Majority Lenders, through the Lead Administrative Agent, may reasonably request (but which shall in any event list the aggregate principal amount of mortgage notes serviced and the number and types of loans evidenced by such notes, and show all loans in the servicing portfolio more than thirty (30) days past due the due dates set forth in such notes). (2) Promptly, such additional financial and other information, including, without limitation, financial statements of the Company, the Parent, any Affiliate of the Company or the Parent, as any Lender, through the Lead Administrative Agent, may from time to time reasonably request, including, without limitation, such information as is necessary for any Lender to participate out any of its interests in Loans hereunder or to enable another financial institution to become a signatory hereto. (3) Promptly upon receipt thereof by the Company, copies of all audit reports prepared by or on behalf of FNMA, FHLMC and GNMA. 9(c) Payment of Indebtedness. Pay, discharge or otherwise satisfy at or before maturity or before it becomes delinquent, defaulted or accelerated, as the case may be, all its Indebtedness, except: (1) Indebtedness (other than Indebtedness with respect to CPNs) being contested in good faith and for which provision is made to the satisfaction of the Majority Lenders for the payment thereof in the event the Company is found to be obligated to pay such Indebtedness and which Indebtedness is thereupon promptly paid by the Company, and (2) additional Indebtedness (other than Indebtedness with respect to CPNs) in the aggregate not to exceed $100,000.00. 9(d) Maintenance of Existence and Properties. Maintain all rights, privileges, licenses, approvals, franchises, properties and assets necessary in the normal conduct of its business, and comply with all Contractual Obligations and Requirements of Law. The Company will at all times be a FNMA, FHLMC and GNMA-approved Seller/ Servicer and a wholly-owned Subsidiary of the Parent. 9(e) Inspection of Property; Books and Records; Discussions. Keep proper books of record and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities, and permit representatives of each Lender (at no cost or expense to the Company unless there shall have occurred and be continuing an Event of Default) to visit and inspect those of its properties and examine and make abstracts from those of its books and records as are reasonably necessary to enable such Lender to conduct appropriate credit due diligence in connection with customary credit approval practices for credit facilities of this type, at any reasonable time and as often as may reasonably be desired by any of the Lenders, and to discuss the business, operations, properties and financial and other condition of the Company and any of its Subsidiaries with officers and employees of such parties, and with their independent certified public accountants. 9(f) Notices. Promptly give written notice to the Lead Administrative Agent (who shall promptly notify each of the Lenders thereof) of: (1) The occurrence of any Potential Default or Event of Default; (2) Any litigation or proceeding affecting the Company or any of its Subsidiaries involving amounts, in the case of any such individual litigation, investigation or proceeding, in excess of $10,000,000.00 or which, regardless of the amount in controversy, is likely to be adversely determined and which, if adversely determined, could have a material adverse effect on the business, operations, property, or financial or other condition of the Company or the ability of the Company to pay and perform the Obligations; (3) Receipt by the Company or the Parent of notice from any rating agency concerning a potential change in any credit rating previously accorded the Company or the Parent by such rating agency; and (4) A material adverse change in the business, operations, property or financial or other condition of the Parent, the Company or any of their Subsidiaries. 9(g) Expenses. Pay all reasonable out-of-pocket expenses (including fees and disbursements of counsel) of the Lead Administrative Agent, the Arranger and the Co-Arrangers incident to the preparation, negotiation, administration and amendment of the Credit Documents and, following the occurrence of an Event of Default, of the Lead Administrative Agent and each of the Lenders incident to the protection of the rights of the Lenders, the Arranger, the Co-Arrangers and the Lead Administrative Agent under the Credit Documents, and incident to the enforcement of payment of the Obligations, whether by judicial proceedings or otherwise, including, without limitation, in connection with bankruptcy, insolvency, liquidation, reorganization, moratorium or other similar proceedings involving the Parent or the Company or a "workout" of the Obligations. The obligations of the Company under this Paragraph 9(g) shall be effective and enforceable whether or not any Loan is advanced by any Lender hereunder and shall survive payment of all other Obligations. 9(h) Credit Documents. Comply with and observe all terms and conditions of the Credit Documents. 9(i) Insurance. Obtain and maintain insurance with responsible companies in such amounts and against such risks as are usually carried by corporations engaged in similar businesses similarly situated, including, without limitation, errors and omissions coverage and fidelity coverage in form and substance acceptable under FNMA or FHLMC guidelines, and furnish the Lenders on request full information as to all such insurance. 9(j) CPN Program. Obtain the written approval of the Majority Lenders to any modification of the documentation relating to the issuance of CPNs of the Company as in effect on the date of this Agreement. 9(k) Hedging Program. Maintain at all times a Hedging Program consistent with the Hedging Program in effect at and as of the Effective Date. 10. Negative Covenants. The Company hereby agrees that, as long as any Obligations remain unpaid or any Lender has any obligation to make all or any portion of any Loans, the Company shall not, directly or indirectly: 10(a)Liens. Create, incur, assume or suffer to exist any Lien upon any of its property and assets (including servicing rights) other than: (1) Liens or charges for current taxes, assessments or other governmental charges which are not delinquent or which remain payable without penalty, or the validity of which are contested in good faith by appropriate proceedings upon stay of execution of the enforcement thereof, provided the Company shall have set aside on its books and shall maintain adequate reserves for the payment of same in conformity with GAAP; (2) Liens, deposits or pledges made to secure statutory obligations, surety or appeal bonds, or bonds for the release of attachments or for stay of execution, or to secure the performance of bids, tenders, contracts (other than for the payment of borrowed money), leases or margin call requirements or for purposes of like general nature in the ordinary course of the Company's business; (3) Liens on Mortgage Loans and Mortgage-Backed Securities which are the subject of repurchase agreements; (4) Liens on real property (including fixtures and improvements thereon) securing Indebtedness in an amount not to exceed $50,000,000.00 in the aggregate at any time outstanding; (5) Liens on property and assets of the Company securing short term Indebtedness of the Company (Indebtedness with a maturity of one year or less and not automatically renewable by the Company at its sole option) in an amount not to exceed at any date twenty five percent (25%) of Mortgage Loans and MBS Held for Sale; and (6) Liens on servicing rights of the Company securing Indebtedness in an amount not to exceed at any date ten percent (10%) of Mortgage Servicing Rights. 10(b)Indebtedness. Create, incur, assume or suffer to exist, or otherwise become or be liable in respect of any Indebtedness if upon such creation, incurrence or assumption there would exist an Event of Default or the Company would fail to be in compliance with the requirements of Paragraphs 10(i) or 10(j) below (assuming such compliance were tested at such date immediately following such creation, incurrence or assumption). 10(c)Consolidation and Merger. Liquidate or dissolve or enter into any consolidation, merger, partnership, joint venture, syndicate or other combination, except that the Company may be consolidated with or merged with any corporation provided that (1) in any such merger or consolidation the Company shall be the surviving or resulting corporation and (2) at the time of and immediately after the effectiveness of such merger or consolidation there shall not have occurred and be continuing an Event of Default or Potential Default. 10(d)Acquisitions. Purchase or acquire or incur liability for the purchase or acquisition of any or all of the assets or business of any Person other than in the normal course of a mortgage banking-related business (it being expressly agreed and understood that the acquisition of servicing is a normal course of business activity); provided, however, that the Company may acquire all or a portion of the stock or assets of another mortgage company or companies so long as no Event of Default or Potential Default shall exist immediately following the consummation of such acquisition, and, provided, further, that the Company shall be in compliance with the financial covenants set forth in Paragraphs 10(i) and 10(j) below, assuming for purposes of this Paragraph 10(d) that the "Applicable Financial Test Date" referenced in such covenants is the day immediately following the consummation of such acquisition. 10(e)Payment of Dividends. Declare or pay any dividends upon any shares of the Company's stock now or hereafter outstanding, except dividends payable in the capital stock of the Company, or make any distribution of assets to its stockholders as such, whether in cash, property or securities, if at the date of payment or distribution (either before or after giving effect thereto) there should exist an Event of Default or Potential Default. 10(f)Purchase or Retirement of Stock. Acquire, purchase, redeem or retire any shares of its capital stock now or hereafter outstanding for value. 10(g)Investments; Advances; Receivables. Make or commit to make any advance, loan or extension of credit ("Advances") to, or hold any receivable ("Receivable") of, or make or commit to make any capital contribution to, or purchase any stock, bonds, notes, debentures or other securities ("Investments") of, or make any other investment in, any Person, except: (1) Advances constituting Mortgage Loans made in the ordinary course of the Company's business and (2) Investments in, unsecured and secured Advances to, and Receivables of, any Affiliate (and Servicing Pass-Through Ventures which are not otherwise Affiliates) in an aggregate amount not to exceed ten percent (10%) of the net worth of the Company determined in accordance with GAAP, it being agreed and understood that any unsecured Advances made by the Company to any Affiliate must be funded with equity of the Company and that any secured Advances made by the Company to any Affiliate must be fully secured on a first priority, perfected basis, by readily marketable securities pledged by such Affiliate. 10(h)Sale of Assets. Sell, lease, assign, transfer or otherwise dispose of any of its assets (other than obsolete or worn out property), whether now owned or hereafter acquired, other than in the ordinary course of business as presently conducted and at fair market value (it being expressly agreed and understood that the sale or other disposition of Mortgage Loans with or without servicing released and the sale or other disposition of servicing rights are in the ordinary course of business); provided, however, that in no event shall the Company enter into any sale and leaseback transaction involving any of its assets without the prior written consent of the Majority Lenders; and, provided further, that the Company may sell, lease, assign, transfer or otherwise dispose of any of its assets to a Subsidiary of the Company (which, for the purpose of this proviso shall include any limited partnership the general and limited partners of which are Subsidiaries of the Company) so long as: (1) all classes of stock of, or partnership interests in, such Subsidiary are owned, directly or indirectly, by the Company, (2) such Subsidiary incurs no obligations for third party indebtedness except such obligations to employees and vendors as are necessary or desirable in the normal conduct of the business of servicing 1-4 unit single family mortgage loans and in managing an office building owned by such Subsidiary, and (3) any such unpaid obligations as are described in subsection (2) above (other than payroll and benefits obligations to employees) shall not exceed at any time $50,000,000.00 in the aggregate. 10(i)Minimum Net Worth. Permit its net worth determined in accordance with GAAP on and as of each Applicable Financial Test Date to be less than $1,200,000,000.00. 10(j)Maximum Total Debt. Permit Total Debt on and as of each Applicable Financial Test Date to exceed the sum of: (1) One hundred percent (100%) of Cash, plus (2) Ninety percent (90%) of Margins, plus (3) Ninety-seven percent (97%) of the amount of Mortgage Loans and MBS Held for Sale (including Mortgage Loans and Mortgage-Backed Securities subject to a Lien under a repurchase agreement but excluding all other Mortgage Loans and Mortgage-Backed Securities which are excluded from "Eligible Mortgage Assets" pursuant to subparagraphs (a), (b) and (c) of the definition of such term), plus (4) Ninety percent (90%) of Pool Loan Purchases and Mortgage Claims Receivable to the extent such assets represent VA and FHA Mortgage Loans repurchased by the Company from pools supporting GNMA Mortgage-Backed Securities, plus (5) Fifty percent (50%) of Deferred Commitment Fees, plus (6) Fifty percent (50%) of Property and Equipment, plus (7) Seventy-five percent (75%) of Mortgage Servicing Rights, plus (8) Fifty percent (50%) of Other Assets, excluding any unsecured Advances made to Affiliates permitted under Paragraph 10(g)(2) above. 11. Events of Default. Upon the occurrence of any of the following events (an "Event of Default"): 11(a)The Company shall fail to make any payment on account of that portion of the Obligations consisting of principal or interest on Loans on the date when due; or 11(b)Any representation or warranty made or deemed made by the Company or the Parent in any Credit Document or in connection with any Credit Document shall be materially inaccurate or incomplete in any respect on or as of the date made or deemed made; or 11(c)The Company shall default in the observance or performance of any covenant or agreement contained in Paragraph 10 above (other than those contained in Paragraphs 10(i) and 10(j) above); or 11(d)The Parent shall fail to observe or comply with any term or provision contained in the Guaranty (other than those contained in Paragraph 11(d) thereof); or 11(e)The Company or the Parent shall fail to observe or perform any other term or provision contained in the Credit Documents and such failure shall continue for thirty (30) days; or 11(f)The Company, any of its Subsidiaries or the Parent shall default in any payment of any Indebtedness (other than the Obligations or as permitted under Paragraph 9(c) above) in an aggregate amount of more than $10,000,000.00 or any other event shall occur and, as a result, the holder or holders thereof, or any trustee or agent for such holders, either: (1) cause such Indebtedness to become due and payable prior to its stated maturity, or (2) elect not to cause such Indebtedness to become so due and payable, but such event continues for a period of thirty (30) days and is not cured or waived; or 11(g)(1) The Parent, the Company or any of its Subsidiaries shall commence any case, proceeding or other action (i) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (ii) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its assets, or the Parent, the Company or any of its Subsidiaries shall make a general assignment for the benefit of its creditors; or (2) there shall be commenced against the Parent, the Company or any of its Subsidiaries any case, proceeding or other action of a nature referred to in clause (1) above which (i) results in the entry of an order for relief or any such adjudication or appointment, or (ii) remains undismissed, undischarged or unbonded for a period of sixty (60) days; or (3) there shall be commenced against the Parent, the Company or any of its Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within sixty (60) days from the entry thereof; or (4) the Parent, the Company or any of its Subsidiaries shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (1), (2) or (3) above; or (5) the Parent, the Company or any of its Subsidiaries shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or 11(h)(1) Any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (2) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or nor waived, shall exist with respect to any Plan, (3) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or institution of proceedings is, in the reasonable opinion of the Lead Administrative Agent, likely to result in the termination of such Plan for purposes of Title IV of ERISA, and, in the case of a Reportable Event, the continuance of such Reportable Event unremedied for ten days after notice of such Reportable Event pursuant to Section 4043(a), (c) or (d) of ERISA is given or the continuance of such proceedings for ten days after commencement thereof, as the case may be, (4) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (5) any withdrawal liability to a Multiemployer Plan shall be incurred by the Company or the Parent or any Commonly Controlled Entity, or (6) any other event or condition shall occur or exist; and in each case in clauses (1) through (6) above, such event or condition, together with all other such events or conditions, if any, could subject the Parent, the Company or any of its Subsidiaries to any tax, penalty or other liabilities in the aggregate material in relation to the business, operations, property or financial or other condition of the Parent, the Company or any of its Subsidiaries; or 11(i)One or more judgments or decrees in amounts aggregating $1,000,000.00 or more not fully covered by insurance (exclusive of self-insurance (not to exceed $5,000,000.00) and deductibles) during any consecutive twelve (12) month period shall be entered against the Company or any of its Subsidiaries and all such judgments or decrees shall not have been vacated, discharged or satisfied, or stayed or bonded pending appeal, within sixty (60) days from the entry thereof unless counsel to the Company reasonably acceptable to the Majority Lenders has delivered to the Lenders within such sixty (60) day period an opinion that the Company has the legal right to have such judgment or decree vacated without the expenditure of funds (other than for costs of proceedings) and the Company is diligently proceeding to accomplish such vacation; or 11(j)The Parent shall notify the Lead Administrative Agent or any Lender of its intention to rescind or revoke the Guaranty or the Subordination Agreement, in whole or in part, with respect to future transactions or otherwise; or 11(k)The Parent shall cease to own one hundred percent (100%) of the outstanding capital stock of the Company; THEN: (1) Automatically upon the occurrence of an Event of Default under Paragraph 11(g) above, (2) At the option of any Lender upon the occurrence of an Event of Default under Paragraph 11(a) above unless such Event of Default is expressly waived in writing by one hundred percent (100%) of the Lenders, and (3) In all other cases, at the option of the Majority Lenders, each Lender's obligation to make Loans shall terminate and the principal balance of outstanding Loans and interest accrued but unpaid thereon and all other Obligations shall become immediately due and payable, without demand upon or notice or presentment to the Company, all of which are hereby waived. 12. Agency Provisions. 12(a)Appointment. Each Lender hereby irrevocably designates and appoints each Agent as the agent of such Lender under the Credit Documents and each Lender hereby irrevocably authorizes each Agent, as the agent for such Lender, to take such action on its behalf under the provisions of the Credit Documents and to exercise such powers and perform such duties as are expressly delegated to such Agent by the terms of the Credit Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in the Credit Documents, no Agent shall have any duties or responsibilities, except those expressly set forth herein or therein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into the Credit Documents or otherwise exist against any Agent. 12(b)Delegation of Duties. The Lead Administrative Agent may execute any of its duties under the Credit Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Lead Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. 12(c)Exculpatory Provisions. No Agent nor any of its respective officers, directors, employees, agents, counsel, attorneys-in-fact or Affiliates shall be (1) liable to any Lender, any other Agent, the holder of any CPN or the Company for any action taken or omitted to be taken by it or such Person under or in connection with the Credit Documents (except for its or such Person's own gross negligence or willful misconduct), or (2) responsible in any manner to any of the Lenders, any other Agent, the holder of any CPN or the Company for: (i) any recitals, statements, representations or warranties made by the Company or any officer thereof contained in the Credit Documents or in any certificate, report, statement or other document referred to or provided for in, or received by such Agent under or in connection with, the Credit Documents (except such as are prepared by such Agent and, then, only to the extent such Agent is responsible for verification of the accuracy and completeness of the information contained therein or the facts upon which such information is based as expressly provided herein) or for the value, validity, effectiveness, genuineness, enforceability, collectability or sufficiency of the Credit Documents or for any failure of the Company to perform its obligations thereunder or (ii) assuring compliance of the Credit Documents and/or the transactions contemplated by the Credit Documents with any law or regulation binding upon such Person, it being expressly acknowledged, agreed and understood that each such Person has obtained independent advice satisfactory to it in all such regards. No Agent shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, the Credit Documents (other than agreements required to be complied with by such Agent thereunder and subject to the standards of care set forth herein with respect thereto) or to inspect the properties, books or records of the Company. Each Agent shall be entitled to refrain from exercising any discretionary powers or actions under this Agreement or any other Credit Document until it shall have received the prior written consent of one hundred percent (100%) of the Lenders to such action. 12(d)Reliance by Agent. Each Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certification, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation reasonably believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Company), independent accountants and other experts selected by such Agent. The Lead Administrative Agent may deem and treat each Lender designated on the current Commitment Schedule as a Lender hereunder for all purposes of the Credit Documents unless a written notice of assignment, negotiation or transfer of such Lender's interests hereunder and thereunder as permitted pursuant to Paragraph 14 below shall have been filed with the Lead Administrative Agent. Each Agent shall be fully justified in failing or refusing to take any action under the Credit Documents unless it shall first receive such advice or concurrence of the Majority Lenders (or all Lenders, as required under the Credit Documents) or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any action (other than liability and/or expense arising out of such Agent's gross negligence or willful misconduct). Each Agent shall in all cases be fully protected in acting, or in refraining from acting, under the Credit Documents in accordance with a request of the Majority Lenders (or all Lenders, if applicable) absent gross negligence and willful misconduct on the part of such Agent in the method in which it acts or refrains from acting in accordance therewith, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders. 12(e)Notice of Default; Agreement to Advance. No Agent shall be deemed to have knowledge or notice of the occurrence of any Event of Default or Potential Default unless such Agent has received notice from a Lender or the Company referring to the Credit Documents, describing such Event of Default or Potential Default and stating that such notice is a "notice of default". In the event that any Agent receives such a notice, such Agent shall give notice thereof to the Lenders and the other Agents. 12(f)Non-Reliance on Agent and Other Lenders. Each Lender expressly acknowledges that no Agent nor any of its respective officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by such Agent hereafter taken, including any review of the affairs of the Company, shall be deemed to constitute any representation or warranty by such Agent to any Lender. Each Lender represents to each Agent that it has, independently and without reliance upon such Agent or any other Lender or their respective counsel, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Company and made its own decision to extend credit hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon any Agent or any other Lender or their respective counsel, and based on such documents, information and legal advice (including, without limitation, advice of regulatory counsel to it) as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in entering into the Credit Documents and taking or not taking action thereunder, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Company. Except for notices, reports and other documents expressly required to be furnished to the Lenders by an Agent hereunder, such Agent shall not have any duty or responsibility to provide any Lender with any legal advice or credit or other information concerning the business, operations, property, financial and other condition or creditworthiness of the Company which may come into the possession of such Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. 12(g)Indemnification. The Company agrees to indemnify, defend and hold harmless each Agent in its capacity as such from and against any and all claims, obligations, penalties, actions, suits, judgments, costs, disbursements, losses, liabilities and/or damages (including, without limitation, attorneys' fees) of any kind whatsoever which may at any time be imposed on, assessed against or incurred by such Agent in any way (1) relating to or arising out of the Credit Documents or any documents contemplated by or referred to therein or the transactions contemplated thereby or any action taken or omitted to be taken by such Agent in connection with the foregoing; provided, the Company shall not be liable for any portion of any such claims, obligations, etc., arising out of or resulting from the gross negligence or willful misconduct of such Agent or (2) resulting from any action taken or omitted to be taken by such Agent in accordance with written instructions given as provided in the Credit Documents or (3) relating to any one or more of the matters covered by Paragraph 12(c) above. The Lenders agree to indemnify and hold harmless each Agent in its capacity as such ratably in accordance with their Primary Percentage Shares to the extent required by the Company hereunder if any Agent is not reimbursed by the Company hereunder and without limiting the obligation of the Company to do so. To the extent indemnification payments made by the Lenders pursuant to this Paragraph 12(g) are subsequently recovered by any Agent from, or for the account of, the Company, such Agent will promptly refund such previously paid indemnity payments to the Lenders. The indemnification obligations of the Company and Lenders under this Paragraph 12(g) shall survive termination of this Agreement and payment in full of the Obligations. 12(h)Agent in Its Individual Capacity. Any Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Company as though such Agent were not an Agent hereunder. With respect to such loans made or renewed by them and any note issued to them hereunder, each Agent shall have the same rights and powers under the Credit Documents as any Lender thereunder and may exercise the same as though it were not an Agent, and the terms "Lender" and "Lenders" shall include Agents in their individual capacities. 12(i)Successor Agents. Any Agent may resign as such under the Credit Documents upon ninety (90) days' prior written notice to the Lenders and the Company and the Lead Administrative Agent shall resign in the event its Maximum Commitment shall be less than $25,000,000.00. In addition, in the event any Agent fails to perform its obligations under the Credit Documents in any material manner and fails to correct its performance within thirty (30) days of written notice of such failure of performance given by not less than the Majority Lenders, then such Agent may be removed upon thirty (30) days notice given by not less than the Majority Lenders. If an Agent shall resign or be so removed, then, on or before the effective date of such resignation or removal, the Majority Lenders shall appoint a successor agent reasonably acceptable to the Company or, if the Majority Lenders are unable to agree on the appointment of a successor agent, such Agent shall appoint a successor agent for the Lenders, which successor agent shall be reasonably acceptable to the Company, whereupon such successor agent shall succeed to the rights, powers and duties of such Agent, and the term "Documentation Agent," "Syndication Agent," "Lead Administrative Agent," "Co-Administrative Agent," "Arranger", "Co-Arranger" or "Co-Agents," as applicable, shall mean such successor agent effective upon its appointment, and the former Agent's rights, powers and duties shall be terminated without any other or further act or deed on the part of such former Agent or any of the parties to this Agreement or any of the other Credit Documents or successors thereto. After any Agent's resignation or removal hereunder, the provisions of this Paragraph 12 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under the Credit Documents. 12(j)Sharing of Set-Offs. If following the occurrence and during the continuance of an Event of Default any Lender (a "benefitted Lender") shall at any time receive any payment of all or part of the Obligations held by it or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off or otherwise) in a greater proportion than any such payment to and collateral received by any other Lender, if any, in respect of such other Lender's portion of the Obligations, or interest thereon, such benefitted Lender shall purchase for cash from the other Lenders such portion of each such other Lender's Obligations, or shall provide such other Lenders with the benefits of such collateral, or the proceeds thereof, as shall be necessary to cause such benefitted Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery but without interest. The Company agrees that each Lender so purchasing a portion of another Lender's Obligations may exercise all rights of payment (including, without limitation, rights of set-off) with respect to such portion as fully as if such Lender were the direct holder of such portion. 13. Miscellaneous Provisions. 13(a)No Assignment. The Company may not assign its rights or obligations under the Credit Documents without the prior written consent of one hundred percent (100%) of the Lenders. Subject to the foregoing, all provisions contained in this Agreement or any document or agreement referred to herein or relating hereto shall inure to the benefit of each Lender, its successors and assigns, and shall be binding upon the Company, its successors and assigns. 13(b)Amendment. The Credit Documents may not be amended or terms or provisions hereof waived unless such amendment or waiver is in writing and signed by the Majority Lenders and the Company; provided, however, that without the prior written consent of one hundred percent (100%) of the Lenders, no amendment or waiver shall: (1) Waive or amend any term or provision of Paragraph 4(e), 4(f) or 4(g) above, or this Paragraph 13(b); (2) Reduce the principal of, or interest on, the Obligations or any amount of fees payable under this Agreement (other than fees payable pursuant to the Fee Letter), or extend the required payment date of principal or interest on the Obligations or any fees; (3) Increase the Aggregate Credit Limit above $2,000,000,000.00; (4) Modify any Lender's Primary Percentage Share or Swing Line Percentage Share except modifications resulting from an increase, permanent or temporary, in a Lender's Maximum Commitment or Swing Line Commitment made as permitted under this Agreement; (5) Modify the definition of "Majority Lenders"; (6) Include any Person other than the Lenders signatory hereto as a "Lender" hereunder except as expressly permitted pursuant to Paragraph 14(a) below; (7) Cancel or terminate the Guaranty or permit the revocation of the Subordination Agreement; or (8) Extend the Maturity Date; provided, however, that nothing contained herein shall in any manner or to any extent be deemed to supersede any provision of the Credit Documents which expressly designates which Lenders are empowered to modify such provision, including, without limitation, any provision of the Credit Documents which expressly requires the consent of one hundred percent (100%) of the Lenders to any modification thereof. No amendment or waiver shall, unless agreed to in writing by the affected Agent, modify the rights or duties of such Agent. The Lead Administrative Agent shall provide notice and a copy of all amendments to the Credit Documents to all parties to the Credit Documents. 13(c)Cumulative Rights; No Waiver. The rights, powers and remedies of the Lenders hereunder are cumulative and in addition to all rights, powers and remedies provided under any and all agreements between the Company and the Lenders relating hereto, at law, in equity or otherwise. Any delay or failure by the Lenders to exercise any right, power or remedy shall not constitute a waiver thereof by the Lenders, and no single or partial exercise by the Lenders of any right, power or remedy shall preclude any other or further exercise thereof or any exercise of any other rights, powers or remedies. 13(d)Entire Agreement; Severability. This Agreement and the documents and agreements referred to herein embody the entire agreement and understanding between the parties hereto and supersede all prior agreements and understandings relating to the subject matter hereof and thereof. All waivers by the Company provided for in the Credit Documents have been specifically negotiated by the parties with full cognizance and understanding of their rights. If any of the provisions of the Credit Documents shall be held invalid or unenforceable, the Credit Documents shall be construed as if not containing such provisions, and the rights and obligations of the parties hereto shall be construed and enforced accordingly. 13(e)Survival. All representations, warranties, covenants and agreements herein contained on the part of the Company shall survive the termination of this Agreement and shall be effective until the Obligations are paid and performed in full or longer as expressly provided herein. 13(f)Notices. All notices given by any party to any of the others shall be in writing (which may be by facsimile transmission), delivered personally, by commercial courier service or by depositing the same in the United States mail, registered, with postage prepaid, addressed to such party at the address set forth on Annex II attached hereto. Any party may change the address to which notices are to be sent by notice of such change to the other party or parties given as provided herein. 13(g)Governing Law. This Agreement shall be deemed to be a contract made under the laws of the State of California, and for all purposes shall be construed in accordance with the laws of said State, without regard to principles of conflicts of law. 13(h)Counterparts. This Agreement may be executed in 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. 14. Additional Lenders; Assignments and Participations; Increases in Availability. 14(a)Addition of New Lender. (1) Subject to the limitation on the Aggregate Credit Limit set forth in the definition of such term, the Company or any Lender may at any time propose that one or more financial institutions (each, an "Applicant Financial Institution") become an additional Lender hereunder. At such time, the Company or such Lender, as applicable, shall notify the other parties hereto, including the Lead Administrative Agent, of the identity of such Applicant Financial Institution and such Applicant Financial Institution's proposed Maximum Commitment and, as applicable, Swing Line Commitment. The addition of any Applicant Financial Institution shall be subject to: (i) If such Applicant Financial Institution is proposed for inclusion as a Lender hereunder by a Lender, the prior written consent of the Company and the Lead Administrative Agent, and if such Applicant Financial Institution is proposed for inclusion as a Lender hereunder by the Company, the prior written consent of the Lead Administrative Agent, none of which consents shall be unreasonably withheld and which, if given, shall be given in writing to the other parties hereto no later than the tenth day following receipt by the Company of a written request for the inclusion of such Applicant Financial Institution as a Lender hereunder; and (ii) Delivery of each of the items and the occurrence of each of the events described in subparagraph (2) below. (2) Assuming delivery of the consent of the Company and/or Lead Administrative Agent as required pursuant to subparagraph (1)(i) above, the Lead Administrative Agent, the Company and, if such Applicant Financial Institution will be acquiring a portion of an existing Lender's Maximum Commitment by way of assignment from such existing Lender, such existing Lender, shall mutually agree on the Adjustment Date on which such Applicant Financial Institution shall become a party hereto and a Lender hereunder. On such Adjustment Date: (i) The Lead Administrative Agent shall deliver to the Company and each of the Lenders a Commitment Schedule to be effective as of such Adjustment Date, reflecting the inclusion of such Applicant Financial Institution as a party hereto and a Lender hereunder. (ii) No later than 12:30 p.m. (Los Angeles time) on such Adjustment Date, such Applicant Financial Institution shall pay to the Lead Administrative Agent an amount equal to such Applicant Financial Institution's Primary Percentage Share of Primary Loans outstanding and, as applicable, Swing Line Percentage Share of Swing Loans outstanding. If such Applicant Financial Institution is becoming a Lender hereunder as a result of an increase in the Aggregate Credit Limit, the Lead Administrative Agent shall thereupon remit to the Lenders, as applicable, their shares of such funds. If such Applicant Financial Institution is acquiring a portion of an existing Lender's outstanding Primary Loans, the Lead Administrative Agent shall thereupon remit such funds to the assigning Lender. Following such Adjustment Date, fees and interest accrued on the Obligations to but not including such Adjustment Date shall be payable to the Lenders in accordance with their respective Primary Percentage Shares and Swing Line Percentage Shares prior to such Adjustment Date before giving effect to the readjustment thereof pursuant to the Commitment Schedule provided by the Company on such Adjustment Date. (iii) If such Applicant Financial Institution is acquiring a portion of an existing Lender's Maximum Commitment by way of assignment from such existing Lender, the Lead Administrative Agent, the Company, the assigning Lender and the Applicant Financial Institution shall execute and deliver an Assignment Agreement, or if such Applicant Financial Institution is becoming a Lender hereunder as a result of an increase in the Aggregate Credit Limit, the Lead Administrative Agent, the Company and the Applicant Financial Institution shall execute and deliver an Additional Lender Agreement, either of which Assignment Agreement or Additional Lender Agreement shall constitute an amendment to this Agreement to the extent necessary to reflect the inclusion of the Applicant Financial Institution as a Lender hereunder. (iv) The Applicant Financial Institution shall pay to the Lead Administrative Agent a registration fee of $3,500.00. Subject to the requirements described above, the Applicant Financial Institution shall become a party hereto and a Lender hereunder and shall be entitled to all rights, benefits and privileges accorded a Lender under the Credit Documents and shall be subject to all obligations of a Lender under the Credit Documents. 14(b)Assignments Among Existing Lenders. Any Lender may at any time agree to assign a portion of such Lender's Maximum Commitment to a Transferee Lender. In such event the Lender and the Transferee Lender shall so notify the Lead Administrative Agent and the Company of the Adjustment Date on which such assignment is to be effective. On such Adjustment Date: (1) The Company shall deliver to the Lead Administrative Agent and each of the Lenders a Commitment Schedule to be effective as of such Adjustment Date reflecting the assignment. (2) The Lead Administrative Agent, the Company, the assigning Lender and the Transferee Lender shall execute and deliver an Assignment Agreement, which shall constitute an amendment to this Agreement to the extent necessary to reflect such transfer. (3) No later than 12:30 p.m. (Los Angeles time) on such Adjustment Date, the Transferee Lender shall pay to the Lead Administrative Agent an amount equal to, as applicable, such Transferee Lender's Primary Percentage Share of Primary Loans and Swing Line Percentage Share of Swing Loans outstanding in excess of such Transferee Lender's previous Primary Percentage Share and, as applicable, Swing Line Percentage Share thereof. The Lead Administrative Agent shall thereupon remit to the transferring Lender the amount thereof. 14(c)Minimum Loan Commitment. Notwithstanding anything to the contrary contained herein, the inclusion of any Applicant Financial Institution as a Lender hereunder pursuant to Paragraph 14(a) above and the assignment by a Lender of a portion of such Lender's Maximum Commitment to a Transferee Lender pursuant to Paragraph 14(b) above shall be subject to the following restrictions: (1) If an Applicant Financial Institution is acquiring a portion of an existing Lender's Maximum Commitment by way of an assignment from such existing Lender, then: (i) such assignment of Maximum Commitment must be in the minimum amount of $5,000,000.00 (or if in a higher amount, in integral multiples of $5,000,000.00 in excess thereof), and (ii) following the consummation of the contemplated assignment and after giving effect to any other assignments occurring on the related Adjustment Date, such existing Lender must continue to hold an Maximum Commitment of not less than $25,000,000.00 and such Applicant Financial Institution must hold a Maximum Commitment of not less than $25,000,000.00; (2) If an existing Lender is assigning a portion of its Maximum Commitment to a Transferee Lender, such assignment of Maximum Commitment is in the minimum amount of $5,000,000.00 (or if in a higher amount, in integral multiples of $5,000,000.00 in excess thereof) and such existing Lender shall continue to hold an Maximum Commitment of not less than $25,000,000.00 following the consummation of the contemplated assignment. There shall be no minimum hold requirement in the event that an existing Lender is assigning one hundred percent (100%) of its Maximum Commitment. 14(d)Sub-Participations by Lenders. Any Lender may at any time sell participating interests in any of the Obligations held by such Lender and its commitments hereunder; provided, however, that: (1) No participation contemplated by this Paragraph 14(d) shall relieve such Lender from its obligations hereunder or under any other Credit Document; (2) Such Lender shall remain solely responsible for the performance of such obligations; (3) The Company, the Lead Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under the Credit Documents; (4) The participation agreement between such Lender and the Person purchasing such participation interest (a "Participant") shall provide that: (i) the participation interest of the Participant is an undivided interest in such Lender's Maximum Commitment, and (ii) the sole voting rights of the Participant are with respect to those items on which such Lender is entitled to vote pursuant to Paragraphs 13(b)(2) and 13(b)(7) above; and (5) Such Lender shall not enter into participation agreements with more than two Participants for each $25,000,000.00 of Maximum Commitment held by such Lender. The Company acknowledges and agrees that each Participant shall be considered a Lender for purposes of Paragraphs 4(e), 4(f), 4(g) and 5(l) above; provided, however, that in no event shall any Participant be entitled to receive any payment or compensation in excess of that to which such Participant's selling Lender would be entitled with respect to the participation interest held by such Participant if such Lender had not sold any participation interest to such Participant. 14(e)Federal Reserve Bank. Notwithstanding the provisions of Paragraphs 14(a) and 14(b) above, any Lender may at any time pledge or assign all or any portion of such Lender's rights under this Agreement and the other Credit Documents to a Federal Reserve Bank. 14(f)Increases in Availability. From time to time the Company and any Lender (an "Increasing Lender") may agree, with the prior written consent of the Lead Administrative Agent, to permanently or temporarily increase such Lender's Maximum Commitment and Primary Percentage Share, the dollar amount of any such increase to be, subject to the Aggregate Credit Limit limitation, in the minimum dollar amount of $5,000,000.00 and integral multiples of $5,000,000.00 in excess thereof. The Company and the Increasing Lender shall agree on the Adjustment Date for said increase and, if the increase is a temporary rather than permanent increase, the date on which said increase shall terminate (the "Temporary Increase Termination Date"). The Lead Administrative Agent shall deliver to the Company and each of the Lenders a Commitment Schedule to be effective as of such Adjustment Date. On the Temporary Increase Termination Date the aggregate amount of such Increasing Lender's Primary Percentage Share of outstanding Primary Loans in excess of its Maximum Commitment after giving effect to the termination of the subject increase shall, if but only if at such Temporary Increase Termination Date there does not exist an Event of Default, be payable in full. If at the Temporary Increase Termination Date there exists an Event of Default, the temporary increase of the Increasing Lender shall continue in effect and, unless otherwise agreed by one hundred percent (100%) of the Lenders, shall be treated thereafter as a permanent increase in said Increasing Lender's Maximum Commitment. 14(g)Provision of Information; Confidentiality. The Company hereby acknowledges and agrees that in connection with the proposed assignment or subparticipation by a Lender of its interest in the Obligations, such Lender may disclose to prospective assignees and Participants any and all information provided to such Lender hereunder; provided, however, that such information shall be furnished to such prospective assignees and Participants on a confidential basis. 14(h)Waiver of Jury Trial. EACH OF THE PARTIES HERETO WAIVES ITS RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER CREDTI DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH OF THE PARTIES HERETO AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS PARAGRAPH 14(h) AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written. COUNTRYWIDE HOME LOANS, INC., a New York corporation By Name Title ROYAL BANK OF CANADA, as Lead Administrative Agent, Arranger and a Lender By Name Title THE BANK OF NEW YORK, as Co-Administrative Agent, a Co-Arranger, a Co-Agent and a Lender By Name Title MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Syndication Agent, a Co-Arranger, a Co-Agent and a Lender By Name Title CREDIT LYONNAIS, SAN FRANCISCO BRANCH, as Documentation Agent, a Co-Arranger, a Co-Agent and a Lender By Name Title ABN AMRO BANK, N.V., as a Co-Agent and a Lender By Name Title By Name Title BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Co-Agent and a Lender Agent By Name Title BARCLAYS BANK PLC, as a Co-Agent and a Lender By Name Title THE CHASE MANHATTAN BANK, as a Co-Agent and a Lender By Name Title DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLANDS BRANCHES, as a Co-Agent and a Lender By Name Title By Name Title NATIONSBANK OF TEXAS, N.A., as a Co-Agent and a Lender By ________________________________________________________ Name ______________________________________________________ Title _____________________________________________________ BANQUE NATIONALE DE PARIS, as a Lender By Name Title By Name Title CANADIAN IMPERIAL BANK OF COMMERCE, as a Lender By Name Title THE SUMITOMO BANK, LIMITED, LOS ANGELES BRANCH, as a Lender By Name Title BANQUE PARIBAS, as a Lender By Name Title By Name Title BANK ONE, TEXAS, N.A., as a Lender By Name Title BANK OF HAWAII, as a Lender By Name Title ACKNOWLEDGED AND AGREED TO as of the day and year first above written: COUNTRYWIDE CREDIT INDUSTRIES, INC. By ___________________________________ Name ________________________________ Title _________________________________ SCHEDULE OF EXHIBITS TO CREDIT AGREEMENT EXHIBIT DOCUMENT A Form of Officer's Certificate B Litigation Schedule C Schedule of Existing Subsidiaries Annex I: Glossary Annex II: Schedule of Notice Addresses la-195654 REVOLVING CREDIT AGREEMENT By and Among COUNTRYWIDE HOME LOANS, INC. and ROYAL BANK OF CANADA as Lead Administrative Agent and Arranger THE BANK OF NEW YORK ("BNY") as Co-Administrative Agent MORGAN GUARANTY AND TRUST COMPANY OF NEW YORK ("MGTC") as Syndication Agent CREDIT LYONNAIS, SAN FRANCISCO BRANCH ("CL") as Documentation Agent BNY, MGTC and CL as Co-Arrangers and THE LENDERS PARTY THERETO April 15, 1998 TABLE OF CONTENTS Page RECITALS 1 AGREEMENT......................................................................1 1. Credit Facilities............................................1 1(a) Primary Facility...............................................1 1(b) Swing Loan Facility...........................................1 2. Requests for Loans; Funding..................................1 2(a) Requests for Loans.............................................1 2(b) Funding of Loans..............................................1 2(c) Funding Method.................................................1 3. Payment of Principal; Prepayments............................1 3(a) Required Principal Payments....................................1 3(b) Prepayments....................................................1 4. Calculation and Payment of Interest; Related Provisions......1 4(a) Interest on Primary Loans......................................1 4(b) Interest on Swing Loans........................................1 4(c) Payment of Interest............................................1 4(d) Inability to Determine Rate....................................1 4(e) Funding Indemnification........................................1 4(f) Illegality; Impracticality....................................1 4(g) Requirements of Law; Increased Costs...........................1 4(h) Taxes..........................................................7 4(i) Buy-Down Provisions............................................8 4(j) Obligation of Lenders to Mitigate; Replacement of Lenders......1 5. Miscellaneous Lending Provisions.............................1 5(a) Use of Proceeds.....................................................1 5(b) Assumption of Funding/Purchase.................................1 5(c) Evidence of Indebtedness.......................................1 5(d) Interest and Fee Billing and Payment...........................1 5(e) Nature and Place of Payments...................................1 5(f) Post-Default Interest..........................................1 5(g) Computations.................................................1 5(h) Disbursement of Payments Received..............................1 5(i) Fees...........................................................1 5(j) Wire Transfers of Funds........................................1 5(k) Reduction in Aggregate Credit Limit............................1 5(l) Capital Requirements...........................................1 6. Security Agreement; Guaranty; Subordination; Additional Documents..1 6(a) Guaranty and Subordination Agreement...........................1 6(b) Further Documents..............................................1 7. Conditions Precedent.........................................1 7(a) First Loan.....................................................1 7(b) All Loans......................................................1 8. Representations and Warranties of the Company................1 8(a) Financial Condition............................................1 8(b) Corporate Existence; Compliance with Law.......................1 8(c) Corporate Power; Authorization; Enforceable....................1 8(d) No Legal Bar...................................................1 8(e) No Material Litigation.........................................1 8(f) Taxes..........................................................1 8(g) Investment Company Act.........................................1 8(h) Subsidiaries...................................................1 8(i) Federal Reserve Board Regulations..............................1 8(j) ERISA..........................................................1 8(k) Assets.........................................................1 9. Affirmative Covenants........................................1 9(a) Financial Statements...........................................1 9(b) Certificates; Reports; Other Information.......................1 9(c) Payment of Indebtedness........................................1 9(d) Maintenance of Existence and Properties........................1 9(e) Inspection of Property; Books and Records;....................1 9(f) Notices........................................................1 9(g) Expenses.......................................................1 9(h) Credit Documents...............................................1 9(i) Insurance......................................................1 9(j) CPN Program....................................................1 9(k) Hedging Program................................................1 10. Negative Covenants...........................................1 10(a) Liens........................................................1 10(b) Indebtedness.................................................1 10(c) Consolidation and Merger.....................................1 10(d) Acquisitions.................................................1 10(e) Payment of Dividends.........................................1 10(f) Purchase or Retirement of Stock..............................1 10(g) Investments; Advances; Receivables...........................1 10(h) Sale of Assets...............................................1 10(i) Minimum Net Worth...........................................1 10(j) Maximum Total Debt...........................................1 11. Events of Default............................................1 12. Agency Provisions............................................1 12(a) Appointment.................................................1 12(b) Delegation of Duties........................................1 12(c) Exculpatory Provisions.................................1 12(d) Reliance by Agent......................................1 12(e) Notice of Default; Agreement to Advance.....................1 12(f) Non-Reliance on Agent and Other Lenders.....................1 12(g) Indemnification.............................................1 12(h) Agent in Its Individual Capacity............................1 12(i) Successor Agents............................................1 12(j) Sharing of Set-Offs.........................................1 13. Miscellaneous Provisions.....................................1 13(a) No Assignment................................................1 13(b) Amendment....................................................1 13(c) Cumulative Rights; No Waiver.................................1 13(d) Entire Agreement; Severability...............................1 13(e) Survival.....................................................1 13(f) Notices......................................................1 13(g) Governing Law................................................1 13(h) Counterparts.................................................1 14. Additional Lenders; Assignments and Participations; Increases in Availability;..............1 14(a) Addition of New Lender.....................................1 14(b) Assignments Among Existing Lenders........................1 14(c) Minimum Loan Commitment...................................1 14(d) Sub-Participations by Lenders.............................1 14(e) Federal Reserve Bank......................................1 14(f) Increases in Availability.................................1 14(g) Provision of Information; Confidentiality.................1 14(h) Waiver of Jury Trial......................................36 EX-10 5 FOURTH AMENDMENT TO 1987 STOCK OPTION PLAN AMENDMENT NUMBER FOUR COUNTRYWIDE CREDIT INDUSTRIES, INC. 1987 STOCK OPTION PLAN (AMENDED AND RESTATED AS OF JULY 12, 1989) WHEREAS, Countrywide Credit Industries, Inc. (the "Company") desires to amend its 1987 Stock Option Plan, amended and restated as of July 12, 1989, and as further amended (the "Plan"), to allow for the transfer of options to immediate family members and related entities; NOW, THEREFORE, the Plan shall be amended as follows effective March 23, 1998. 1. Section 8(a) shall be amended in its entirety to read as follows: "(a) If an option holder's employment or service as a director terminates for any reason other than death, permanent disability, retirement or Cause (as hereinafter defined), the option holder may at any time within three (3) months after his or her termination as an employee or director of the Company, exercise an option to the extent, and only to the extent, that the option or portion thereof was exercisable on the date of termination." 2. Section 8(c) shall be amended in its entirety to read as follows: "(c) If an option holder dies while a director or an employee of the Company or any Subsidiary or within three (3) months after termination as described in clause (a) of this Section 8 or within one (1) year after termination as a result of Disability as described in clause (b) of this Section 8, the Option may be exercised at any time within one (1) year after the Optionee's death by the person or persons to whom the Optionee's rights pass by transfer or designation, as the case may be, pursuant to Section 9 or 21, or, absent such a transfer or designation, as the case may be, by the person or persons to whom such rights under the Option shall pass by will or by the laws of descent and distribution; provided, however, that an Option may be exercised to the extent, and only to the extent, that the Option or portion thereof was exercisable on the date of death or earlier termination. 3. New Section 8(d) shall be added to read as follows: "(d) If an option holder's employment terminates as a result of Retirement, the option holder may at any time within one (1) year after termination of service for Retirement, exercise such option to the extent, and only to the extent, the option or portion thereof was exercisable at the date of such termination. For purpose of this Section 8(d) "Retirement" shall mean the attainment of "Early Retirement Age" or "Normal Retirement Age" as these terms are defined in the Countrywide Credit Industries, Inc. Defined Benefit Pension Plan. 4. Section 9 shall be amended in its entirety to read as follows: 9. "Options not Transferable. Options granted under the Plan shall, by their terms, ------------------------ be nontransferable except pursuant to a beneficiary designation made under Section 21 hereof or by will or by the laws of descent and distribution and, during the lifetime of the person to whom an Option is granted, only the grantee or the duly appointed guardian or personal representative of the grantee may exercise it. Notwithstanding the foregoing, in the case of Options not intended to constitute Incentive Stock Options under Internal Revenue Code Section 422, the Committee may, in its discretion, authorize all or a portion of the Options granted to an Optionee to be on terms which permit transfer by such Optionee to (i) the spouse, children (including step-children) or grandchildren of the Optionee (each such individual and the Optionee shall be referred to as an "Eligible Group Member"), (ii) a trust or trusts for the exclusive benefit of one or more Eligible Group Members or for the benefit of one or more Eligible Group Members and one or more organizations exempt from income tax and described in Code Section 501(c)(3), (iii) a partnership or similar vehicle in which such Eligible Group Members are the only partners or participants, or (iv) an organization exempt from income tax and described in Code Section 501(c)(3) in which an Eligible Group Member is involved in either participation and/or management; provided that (x) there may be no consideration for any such transfer, (y) the instrument of transfer must be approved by the Company's Administrative Committee of Employee Benefits, and (z) transferred Options shall not again be transferable other than by will or by the laws of descent and distribution. Following transfer, any such Options shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer. The events of termination in Section 8 hereof shall continue to be applied with respect to the original Optionee, following which the Options shall be exercisable by the transferee or beneficiary only to the extent, and for the periods, specified by such Section 8." 5. The first sentence of Section 10 shall be amended by inserting ", beneficiary, transferee," after "legatee" in the second line thereof. 6. A new section 21 shall be added to read as follows: "21. Designation of Beneficiaries. The person granted an Option hereunder may file ---------------------------- with the Company a written designation of a beneficiary or beneficiaries under this Plan on a form and in such manner as the Committee prescribes and may from time to time revoke or change any such designation of beneficiary. Any designation of beneficiary under the Plan shall be controlling over any other disposition, testamentary or otherwise; provided, however, that if the Committee is in doubt as to the entitlement of any such beneficiary to any Option, the Committee may determine to recognize only the legal representative of the Option grantee in which case the Company, the Committee and the members thereof shall not be under any further liability to anyone." IN WITNESS WHEREOF, the Company has caused this amendment number three to be executed by its duly authorized officer this 23rd day of March, 1998. Countrywide Credit Industries, Inc. By:_/s/_____________________ Sandor E. Samuels Managing Director Attest: __/s/__________________________ Susan Bow Assistant Secretary EX-10 6 EIGTH AMENDMENT TO 1991 STOCK OPTION PLAN DOCUMENT.04/0+ AMENDMENT NUMBER EIGHT COUNTRYWIDE CREDIT INDUSTRIES, INC. 1991 STOCK OPTION PLAN WHEREAS, Countrywide Credit Industries, Inc. (the "Company") desires to amend its 1991 Stock Option Plan, as amended (the "Plan"), to allow for the transfer of options to immediate family members and related entities; NOW, THEREFORE, the Plan shall be amended as follows, effective March 23, 1998: 1. The first sentence of Section 7(a) shall be amended to read as follows: "(a) Non-transferability. No Option granted hereunder shall be transferable by the - ------------------- Optionee to whom granted otherwise than pursuant to a beneficiary designation made under Section 14(d) hereof or by will or the laws of descent and distribution, and an Option may be exercised during the lifetime of such Optionee only by the Optionee or his or her guardian or legal representative. Notwithstanding the foregoing, in the case of Options not intended to constitute Incentive Stock Options under Internal Revenue Code Section 422, the Committee may, in its discretion, authorize all or a portion of the Options to be granted to an Optionee to be on terms which permit transfer by such Optionee to (i) the spouse, children (including step-children) or grandchildren of the Optionee (each such individual and the Optionee shall be referred to as an "Eligible Group Member"), (ii) a trust or trusts for the exclusive benefit of one or more Eligible Group Members or for the benefit of one or more Eligible Group Members and one or more organizations exempt from income tax and described in Code Section 501(c)(3), (iii) a partnership or similar vehicle in which such Eligible Group Members are the only partners or participants, or (iv) an organization exempt from income tax and described in Code Section 501(c)(3) in which an Eligible Group Member is involved in either participation and/or management, provided that (x) there may be no consideration for any such transfer, (y) the instrument of transfer must be approved by the Company's Administrative Committee of Employee Benefits, and (z) transferred Options shall not again be transferable other than by will or by the laws of descent and distribution. Following transfer, any such Options shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer. The events of termination of employment in Section 7(d) hereof shall continue to be applied with respect to the original Optionee, following which the Options shall be exercisable by the transferee or beneficiary only to the extent, and for the periods, specified by such Section 7(d)." 2. Section 7(d)(1) shall be amended in its entirety to read as follows: "(1) If an Optionee's employment or service as a director terminates for any reason other than death, Disability, Retirement or Cause (as hereinafter defined), the Optionee may at any time within three (3) months after his or her termination of employment or service as a director, exercise an Option to the extent, and only to the extent, the Option or portion thereof was exercisable at the date of such termination." 3. Section 7(d)(4) shall be amended in its entirety to read as follows: "(4) If an Optionee dies while a director or an employee of the Company or any Subsidiary or within three (3) months after termination as described in clause (1) of this Section 7(d) or within one (1) year after termination as a result of Disability as described in clause (2) of this Section 7(d), the Option may be exercised at any time within one (1) year after the Optionee's death by the person or persons to whom the Optionee's rights pass by transfer or designation, as the case may be, pursuant to Section 7(a) or 14(d), or, absent such a transfer or designation, as the case may be, by the person or persons to whom such rights under the Option shall pass by will or by the laws of descent and distribution; provided, however, that an Option may be exercised to the extent, and only to the extent, that the Option or portion thereof was exercisable on the date of death or earlier termination." 4. New Section 7(d)(5) shall be added to read as follows: "(5) If an option holder's employment terminates as a result of Retirement, the option holder may at any time within one (1) year after termination of service for Retirement, exercise such option to the extent, and only to the extent, the option or portion thereof was exercisable at the date of such termination. For purposes of this Section 7(d)(5) "Retirement" shall mean the attainment of "Early Retirement Age" or "Normal Retirement Age" as these terms are defined in the Countrywide Credit Industries, Inc., Defined Benefit Pension Plan." 5. New Sections 14(c) and (d) shall be added to read as follows: "(c) Effect of Death. In the event of the death of any Optionee hereunder, the term "Optionee" as used hereunder shall thereafter be deemed to refer to the transferee or transferees under Section 7(a) or beneficiary or beneficiaries designated pursuant to Section 14(d) hereof or if no such transfer or designation is in effect, the person to whom the Optionee's rights pass by will or applicable law, or, if no such person has such right, the executor or administrator of the estate of such Optionee." "(d) Designation of Beneficiaries. An Optionee hereunder may file with the Company a - ---------------------------- written designation of a beneficiary or beneficiaries under this Plan on a form and in such manner as the Committee prescribes and may from time to time revoke or amend any such designation. Any designation of beneficiary under the Plan shall be controlling over any other disposition, testamentary or otherwise; provided, however that if the Committee is in doubt as to the entitlement of any such beneficiary to any Option, the Committee may determine to recognize only the legal representative of the Optionee in which case the Company, the Committee and the members thereof shall not be under any further liability to anyone." IN WITNESS WHEREOF, the Company has caused this amendment number seven to be executed by its duly authorized officer this _______ day of March, 1998. Countrywide Credit Industries, Inc. By:____________________________ Sandor E. Samuels Managing Director Attest: - ------------------------------- Susan Bow Assistant Secretary EX-10 7 THIRD AMENDMENT TO THE 1992 STOCK OPTION PLAN DOCUMENT.03/0+ AMENDMENT NUMBER THREE COUNTRYWIDE CREDIT INDUSTRIES, INC. 1992 STOCK OPTION PLAN WHEREAS, Countrywide Credit Industries, Inc. (the "Company") desires to amend its 1992 Stock Option Plan, as amended (the "Plan"), to add further provisions to clarify the procedure in the Plan allowing for the transfer of options to immediate family members and related entities; NOW, THEREFORE, the Plan shall be amended as follows effective March 23, 1998: 1. The first sentence of Section 5(f) shall be amended in its entirety to read as follows: "(f) Non-transferability. No Option granted hereunder shall be transferable by the Optionee to whom granted otherwise then pursuant to a beneficiary designation made under Section 12(c) hereof or by will or the laws of descent and distribution, and an Option may be exercised during the lifetime of such Optionee only by the Optionee or his or her guardian or legal representative. Notwithstanding the foregoing, in the case of Options not intended to constitute Incentive Stock Options under Internal Revenue Code Section 422, the Committee may, in its discretion, authorize all or a portion of the Options to be granted to an Optionee to be on terms which permit transfer by such Optionee to (i) the spouse, children (including step-children) or grandchildren of the Optionee (each such individual and the Optionee shall be referred to as an "Eligible Group Member"), (ii) a trust or trusts for the exclusive benefit of one or more Eligible Group Members or for the benefit of one or more Eligible Group Members and one or more organizations exempt from income tax and described in Code Section 501(c)(3), (iii) a partnership or similar vehicle in which such Eligible Group Members are the only partners or participants, or (iv) an organization exempt from income tax and described in Code Section 501(c)(3) in which an Eligible Group Member is involved in either participation and/or management; provided that (x) there may be no consideration for any such transfer, (y) the instrument of transfer must be approved by the Company's Administrative Committee of Employee Benefits, and (z) transferred Options shall not again be transferable other than by will or by the laws of descent and distribution. Following transfer, any such Options shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer. The events of termination of employment in Section 5(i) hereof shall continue to be applied with respect to the original Optionee, following which the Options shall be exercisable by the transferee only to the extent, and for the periods, specified by such Section 5(i)." 2. Section 5(i)(1) shall be amended in its entirety to read as follows: "(1) If an Optionee's employment or service as a director terminates for any reason other than death, Disability, Retirement or Cause (as hereinafter defined), the Optionee may at any time within three (3) months after his or her termination of employment or service as a director, exercise an Option to the extent, and only to the extent, the Option or portion thereof was exercisable at the date of such termination." 3. Section 5(i)(4) shall be amended in its entirety to read as follows: "(4) If an Optionee dies while an employee of the Company or any Subsidiary or within three (3) months after termination as described in clause (1) of this Section 5(i) or within one (1) year after termination as a result of Disability as described in clause (2) of this Section 5(i), the Option may be exercised at any time within one (1) year after the Optionee's death by the person or persons to whom the Optionee's rights pass by transfer or designation, as the case may be, pursuant to Section 5(f) or 12(c), or, absent such a transfer or designation, as the case may be, by the person or persons to whom such rights under the Option shall pass by will or by the laws of descent and distribution; provided, however, that an Option ----------------- may be exercised to the extent, and only to the extent, that the Option or portion thereof was exercisable on the date of death or earlier termination." 4. New Section 5 (i)(5) shall be added to read as follows: "(5) If an Optionee's employment terminates as a result of Retirement, the Optionee may at any time within one (1) year after termination of service for Retirement, exercise such option to the extent, and only to the extent, the option or portion thereof was exercisable at the date of such termination. For purposes of this Section 5(i)(5) "Retirement" shall mean the attainment of "Early Retirement" Age" or "Normal Retirement Age" or these terms are defined in the Countrywide Credit Industries, Inc. Defined Benefit Pension Plan." 5. A new Section 12(d) shall be added to read as follows: "(d) Effect of Death. In the event of the death of any Optionee hereunder, the term "Optionee" as used hereunder shall thereafter be deemed to refer to the transferee or transferees under Section 5(i) or the beneficiary or beneficiaries designated pursuant to Section 12(c) hereof, or if no such transfer or designation is in effect, the person to whom the Optionee's rights pass by will or applicable law, or, if no such person has such right, the executor or administrator of the estate of such Optionee." IN WITNESS WHEREOF, the Company has caused this first amendment to be executed by its duly authorized officer this ____ day of March, 1998. Countrywide Credit Industries, Inc. By:___/s/_________________________ Sandor E. Samuels Managing Director Attest: __/s/_____________________________ Susan Bow Assistant Secretary DOCUMENT.02/0+ EX-10 8 FOUTH AMENDMENT TO THE 1993 STOCK OPTION PLAN AMENDMENT NUMBER FOUR COUNTRYWIDE CREDIT INDUSTRIES, INC. 1993 STOCK OPTION PLAN (AMENDED AND RESTATED AS OF MARCH 27, 1996) WHEREAS, Countrywide Credit Industries, Inc. (the "Company") desires to amend its 1993 Stock Option Plan, amended and restated as of March 27, 1996 (the "Plan"), to allow for the transfer of options to immediate family members and related entities; NOW, THEREFORE, the Plan shall be amended as follows effective March 23, 1998: 1. The first sentence of Section 7(a) shall be amended to read as follows: "(a) Non-transferability. No Option granted hereunder shall be transferred by the ------------------- Optionee to whom granted otherwise then pursuant to a beneficiary designation made under Section 14(d) hereof or by will or the laws of descent and distribution, and an Option may be exercised during the lifetime of such Optionee only by the Optionee or his or her guardian or legal representative. Notwithstanding the foregoing, in the case of Options not intended to constitute Incentive Stock Options under Internal Revenue Code Section 422, the Committee may, in its discretion, authorize all or a portion of the Options to be granted to an Optionee to be on terms which permit transfer by such Optionee to (i) the spouse, children (including step-children) or grandchildren of the Optionee (each such individual and the Optionee shall be referred to as an "Eligible Group Member"), (ii) a trust or trusts for the exclusive benefit of one or more Eligible Group Members or for the benefit of one or more Eligible Group Members and one or more organizations exempt from income tax and described in Code Section 501(c)(3), (iii) a partnership or similar vehicle in which such Eligible Group Members are the only partners or participants, or (iv) an organization exempt from income tax and described in Code Section 501(c)(3) in which an Eligible Group Member is involved in either participation and/or management, provided that (x) there may be no consideration for any such transfer, (y) the instrument of transfer must be approved by the Company's Administrative Committee of Employee Benefits, and (z) transferred Options shall not again be transferable other than by will or by the laws of descent and distribution. Following transfer, any such Options shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer. The events of termination of employment of Section 7(d) hereof shall continue to be applied with respect to the original Optionee, following which the Options shall be exercisable by the transferee only to the extent, and for the periods, specified by such Section 7(d)." 2. Section 7(d)(1) shall be added to read as follows: "(1) If an Optionee's employment or service as a director terminates for any reason other than death, Disability, Retirement or Cause (as hereinafter defined), the Optionee may at any time within three (3) months after his or her termination of employment or service as a director, exercise an Option to the extent, and only to the extent, and only to the extent, the Option or portion thereof was exercisable at the date of such termination." 3. Section 7(d)(4) shall be amended in its entirety to read as follows: "(4) If an Optionee dies while a director or an employee of the Company or any Subsidiary or within three (3) months after termination as described in clause (1) of this Section 7(d) or within one (1) year after termination as a result of Disability as described in clause (2) of this Section 7(d), the Option may be exercised at any time within one (1) year after the Optionee's death by the person or persons to whom the Optionee's rights pass by transfer or designation, as the case may be, pursuant to Section 7(a) or 14(d), or, absent such a transfer or designation, as the case may be, by the person or persons to whom such rights under the Option shall pass by will or by the laws of descent and distribution; provided, however, that an Option may be exercised to the extent, and only to the extent, that the Option or portion thereof was exercisable on the date of death or earlier termination." 4. New Section 7(d)(5) shall be added to read as follows: "(5) If an option holder's employment terminates as a result of Retirement, the option holder may at any time within one (1) year after termination of service for Retirement, exercise such option to the extent, and only to the extent, the option or portion thereof was exercisable at the date of such termination. For purpose of this Section 7(d)(5) "Retirement" shall mean the attainment of "Early Retirement Age" or "Normal Retirement Age" as these terms are defined in the Countrywide Credit Industries, Inc. Defined Benefit Pension Plan. 5. New Sections 14(c) and (d) shall be added to read as follows: "(c) Effect of Death. In the event of the death of any Optionee hereunder, the term "Optionee" as used hereunder shall thereafter be deemed to refer to the transferee or transferees under Section 7(a) or the beneficiary or beneficiaries designated pursuant to Section 14(d) hereof or if no such transfer or designation is in effect, the person to whom the Optionee's rights pass by will or applicable law, or, if no such person has such right, the executor or administrator of the estate of such Optionee." "(d) Designation of Beneficiaries. An Optionee hereunder may file with the Company a ---------------------------- written designation of a beneficiary or beneficiaries under this Plan and may from time to time revoke or amend any such designation. Any designation of beneficiary under the Plan shall be controlling over any other disposition, testamentary or otherwise; provided, however that if the Committee is in doubt as to the entitlement of any such beneficiary to any Option, the Committee may determine to recognize only the legal representative of the Optionee in which case the Company, the Committee and the members thereof shall not be under any further liability to anyone." IN WITNESS WHEREOF, the Company has caused this fourth amendment to be executed by its duly authorized officer this 23rd day of March, 1998. Countrywide Credit Industries, Inc. By:_/s/________________________ Sandor E. Samuels Managing Director Attest: __/s/__________________________ Susan Bow Assistant Secretary EX-11 9 STATEMENT REGARDING COMP. OF EPS Exhibit 11.1 COUNTRYWIDE CREDIT INDUSTRIES, INC. STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Three Months Ended May 31, 1998 1997 ---------------- ----------------- (Dollar amounts in thousands, except per share data) Basic Net earnings applicable to common stock $90,754 $69,969 ================ ================= Average shares outstanding 110,127 106,257 ================ ================= Per share amount $0.64 $0.66 ================ ================= Diluted Net earnings applicable to common stock $90,754 $69,969 ================ ================= Average shares outstanding 110,127 106,257 Net effect of dilutive stock options -- based on the treasury stock method using the closing market price, if higher than average market price. 6,416 3,000 ---------------- ----------------- Total average shares 116,543 109,257 ================ ================= Per share amount $0.78 $0.64 ================ =================
EX-12 10 COMPUTATION 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 three months ended May 31, 1998 and 1997 and for the five fiscal years ended February 28, 1998 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). Three Months Ended May 31, Fiscal Years Ended February 29(28), ------------------------- ------------------------------------------------------------------ 1998 1997 1998 1997 1996 1995 1994 ------------ ------------ ------------- ------------ ------------- ------------ ------------ Net earnings $90,754 $69,969 $257,358 $257,358 $195,720 $ 88,407 $179,460 Income tax expense 58,023 44,734 164,540 164,540 130,480 58,938 119,640 Interest charges 168,420 81,834 316,705 316,705 281,573 205,464 219,898 Interest portion of rental expense 3,107 2,161 7,420 7,420 6,803 7,379 6,372 ------------ ------------ ------------- ------------ ------------- ------------ ------------ Earnings available to cover fixed charges $320,304 $198,698 $746,023 $746,023 $614,576 $360,188 $525,370 ============ ============ ============= ============ ============= ============ ============ Fixed charges Interest charges $168,420 $81,834 $316,705 $316,705 $281,573 $205,464 $219,898 Interest portion of rental expense 3,107 2,161 7,420 7,420 6,803 7,379 6,372 ------------ ------------ ------------- ------------ ------------- ------------ ------------ Total fixed charges $171,527 $83,995 $324,125 $324,125 $288,376 $212,843 $226,270 ============ ============ ============= ============ ============= ============ ============ Ratio of earnings to fixed charges 1.87 2.37 2.30 2.13 1.69 2.32 2.76 ============ ============ ============= ============ ============= ============ ============
EX-27 11 ART.5 FDS FOR 1ST QUARTER 10-Q
5 1,000 3-MOS FEB-28-1999 May-31-1998 24,805 0 0 0 0 0 382,706 142,622 13,621,695 0 4,684,500 0 0 5,530 2,205,946 13,621,695 0 450,265 0 301,488 0 0 0 148,777 58,023 90,754 0 0 0 90,754 0.82 0.78
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