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Management Agreement - CWM Mortgage Holdings Inc. and Countrywide Asset Management Corp.

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                           1996 AMENDED AND EXTENDED
                              MANAGEMENT AGREEMENT



          THIS AGREEMENT, initially made as of September 3, 1985 and amended and
extended from time to time thereafter, is amended and extended as of June 1,
1996 by and between CWM MORTGAGE HOLDINGS, INC. (formerly known as Countrywide
Mortgage Investments, Inc.), a Delaware corporation which has elected to qualify
as a real estate investment trust (the "Company"), and COUNTRYWIDE ASSET
MANAGEMENT CORPORATION, a Delaware corporation, and its permitted successors and
assigns under this agreement (the "Manager").

                                   WITNESSETH

          WHEREAS, the Company has elected to qualify for the tax benefits
accorded by Sections 856 to 860 of the Internal Revenue Code of 1986, as
amended; and

          WHEREAS, the Company, directly or through Subsidiaries, in the conduct
of its business primarily operates a mortgage loan conduit, engages in warehouse
lending and construction lending, purchases and sells credit-impaired mortgage
loans, purchases and sells manufactured housing loans, and invests in mortgage
loans, mortgage-related securities and asset-backed securities and receivables
meeting the investment criteria established from time to time by its Board of
Directors; and

          WHEREAS, the Company desires to retain the Manager to manage the
operations and investments of the Company and its Subsidiaries and to perform
administrative services for the Company and its Subsidiaries, each in the manner
and on the terms set forth in this Agreement; and

          WHEREAS, the Company and the Manager wish to amend and extend their
agreement originally entered into as of September 3, 1985 for a one year period
through May 31, 1997;

          NOW, THEREFORE, in consideration of the mutual agreements set forth in
this Agreement, the Company and the Manager agree as follows:

          Section 1.  Definitions.  Whenever used in this Agreement, the
          ---------   -----------                                       
following terms, unless the context otherwise requires, shall have the following
meanings:

          (a) "Affiliate" of another person shall mean any person directly or
indirectly owning, controlling or holding with power to vote, more than 5% of
the outstanding voting securities of such other person; any person 5% or more of
whose outstanding voting securities are directly or indirectly owned, controlled
or held with power to vote by such other person; any person directly or
indirectly controlling, controlled by or under common control with, such other
<PAGE>
 
person; and any officer, director, partner or employee of such other person.
The term "person" includes a natural person, corporation, partnership, trust,
company or other entity.

          (b) "Agency Securities" shall mean (i) fully modified pass-through
mortgage-backed certificates guaranteed as to timely payment of principal and
interest by the Government National Mortgage Association, (ii) mortgage
participation certificates guaranteed as to payment of interest and principal by
the Federal Home Loan Mortgage Corporation and (iii) mortgage pass-through
certificates guaranteed as to payment of interest and principal by the Federal
National Mortgage Association.

          (c) "Agreement" shall mean this 1996 Amended and Extended Management
Agreement.

          (d) "Average Invested Assets" for any period shall mean the average of
the aggregate book value of the assets of the mortgage conduit operations of the
Company and its Subsidiaries invested, directly or indirectly, in loans secured
by real estate (including without limitation whole mortgage loans, retained
undivided interests in mortgage loans and Agency Securities, but not including
any whole mortgage loans, retained undivided interests in mortgage loans, or
Agency Securities pledged to secure the issuance of collateralized mortgage
obligations or other mortgage collateralized debt or sold in the form of
mortgage backed securities in transactions entered into by the Company or a
Subsidiary), computed by taking the average of such values at the end of each
calendar month during such period.

          (e) "Average Net Worth" for any period shall mean the arithmetic
average of the Net Worth of the Company at the beginning of such period and at
the end of each calendar month during such period.

          (f) "Board of Directors" shall mean the Board of Directors of the
Company.

          (g) "CCI" shall mean Countrywide Credit Industries, Inc., a Delaware
corporation.

          (h) "CHL" shall mean Countrywide Home Loans, Inc., a Subsidiary of
CCI, and a New York corporation.

          (i) "Commitment" shall mean any document containing the terms pursuant
to which the Company or any Subsidiary agrees to purchase on a forward basis any
specified mortgage loans, including purchases from Affiliates of the Manager.

          (j) "Consolidated Average Invested Assets" for any period shall mean
the Average Invested Assets for the Company and its consolidated subsidiaries
taken as a whole, computed by taking the average of such values at the end of
each calendar month during such period.

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<PAGE>
 
          (k) "Governing Instruments" shall mean the articles or certificate of
incorporation, trust agreement and bylaws of the Company or any Subsidiary, as
applicable.

          (l) "INMC" shall mean Independent National Mortgage Corporation, a
Delaware corporation.

          (m) "Internal Revenue Code" shall mean the Internal Revenue Code of
1986, as amended.

          (n) "Loan Purchase Agreement" shall mean the 1996 Amended and Extended
Loan Purchase and Administrative Services Agreement, dated as of June 1, 1996,
as thereafter amended or supplemented, between the Company and CHL.

          (o) "Mortgage Backed Securities" shall mean the collateralized
mortgage obligations, mortgage collateralized debt, mortgage pass-through
securities including real estate mortgage investment conduits or other mortgage-
related securities issued by the Company or a Subsidiary of the Company.

          (p) "Net Income" for any period shall mean total revenues applicable
to such period, less the expenses applicable to such period determined in
accordance with generally accepted accounting principles.

          (q) "Net Worth" at any time shall mean the sum of the gross proceeds
from any offerings of equity securities by the Company (before deducting any
underwriting discounts and commissions and other expenses and costs relating to
the offering), plus or minus any retained earnings or losses of the Company,
computed in accordance with generally accepted accounting principles.

          (r) "Return on Equity" for a period shall be calculated by dividing
the Company's Net Income for such period by the Company's Average Net Worth for
such period.

          (s) "Servicing Agreement" shall mean an agreement between the Company
or any Subsidiary and each seller or servicer of mortgage loans purchased by the
Company, including CHL, which agreement governs the sale and/or servicing of
such mortgage loans.

          (t) "Shareholders" shall mean the owners of the shares of the Company.

          (u) "Subsidiary" shall mean any corporation, whether now existing or
in the future established, of which the Company, directly or indirectly, owns
more than 50% of the outstanding voting securities of any class or classes, any
business trust, partnership or similar non-corporate form in which the Company,
directly or indirectly, owns more than 50% of the beneficial interests, and
INMC.

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<PAGE>
 
          (v) "Ten Year Average Yield" shall mean the average yield to maturity
for actively traded marketable U.S. Treasury fixed interest rate securities
(adjusted to constant maturities of 10 years).

          (w) "Ten Year U.S. Treasury Rate" for a quarterly period shall mean
the arithmetic average of the weekly per annum Ten Year Average Yields published
by the Federal Reserve Board during such quarter.  In the event that the Federal
Reserve Board does not publish a weekly per annum Ten Year Average Yield during
any week in a quarter, then the Ten Year U.S. Treasury Rate for such week shall
be the weekly per annum Ten Year Average Yields published by any Federal Reserve
Bank or by any U.S. Government department or agency selected by the Company for
such week.  In the event that the Company determines in good faith that for any
reason the Company cannot determine the Ten Year U.S. Treasury Rate for any
quarter as provided above, then the Ten Year U.S. Treasury Rate for such quarter
shall be the arithmetic average of the per annum average yields to maturity
based upon the daily closing bids during such quarter for each of the issues of
actively traded marketable U.S. Treasury fixed interest rate securities (other
than securities which can, at the option of the holder, be surrendered at face
value in payment of any federal estate tax) with a final maturity date not less
than eight nor more than twelve years from the date of each such quotation, as
chosen and quoted for each business day (or less frequently if daily quotations
shall not be generally available) in each such quarterly period in New York City
to the Company by at least three recognized dealers in U.S. Government
securities selected by the Company.

          (x) "Unaffiliated Directors" shall mean those members of the Board of
Directors of the Company who are not Affiliates of the Manager.

          Section 2.  General Duties of the Manager.  Subject to the supervision
          ---------   -----------------------------                             
of the Board of Directors and in accordance with the Governing Instruments, the
Manager shall provide services to the Company and INMC, and to the extent
directed by the Board of Directors, shall provide similar services to any other
Subsidiary of the Company, as follows:

          (a) conduct the day-to-day mortgage loan conduit, warehouse lending,
construction lending, manufactured housing and other operations of the Company
and INMC, as approved by the Board of Directors, including without limitation,
the purchase, accumulation, financing and securitization of mortgage loans and
manufactured housing loans, the establishment and financing of warehouse lending
and construction lending facilities, the management of assets and investments
and the administration thereof; and

          (b) provide such reports and analysis to the Board of Directors
regarding the operating strategies and results of the Company and its
Subsidiaries as the Board may reasonably request.

          The Manager shall perform its duties and shall take actions on behalf
of the Company and its Subsidiaries consistent with (i) the operating policies
and criteria established from time to time by the Board of Directors or any
authorized officer with respect thereto, and (ii) the obligations of the Company
and its Subsidiaries under the various agreements to which

                                       4
<PAGE>
 
each is a party. So long as the Manager is serving as the Manager under this
Agreement, it shall be and remain a Subsidiary of and wholly owned, directly or
indirectly, by CCI.

          Section 3.  Additional Activities of Manager.  Except as provided in
          ---------   --------------------------------                        
the Letter Agreement between CCI and the Company attached hereto as Exhibit A,
nothing herein shall prevent the Manager or its Affiliates from engaging in
other businesses or from rendering services of any kind to any other person or
entity, including investment in or advisory service to others investing in any
type of real estate investment, including investments which meet the principal
investment objectives of the Company or any Subsidiary of the Company.
Directors, officers, employees and agents of the Manager or Affiliates of the
Manager may serve as directors, officers, employees, agents, nominees or
signatories for the Company or any Subsidiary of the Company, to the extent
permitted by its Governing Instruments, as from time to time amended, or by any
resolutions duly adopted by the Board of Directors pursuant to its Governing
Instruments.  When executing documents or otherwise acting in such capacities
for the Company or any Subsidiary of the Company, such persons shall use their
respective titles in the Company or such Subsidiary.

          Section 4.  Purchases and Sales of Investments and Loans from the
          ---------   -----------------------------------------------------
Manager and its Affiliates.  The Manager agrees that sales of investments to and
--------------------------                                                      
purchases of investments from the Manager and its Affiliates, including without
limitation purchases and sales of mortgage loans, Agency Securities and
Commitments, shall only be made as stated in an agreement therefor setting forth
in general the operating policies and guidelines within which such sales or
purchases may be made, which agreement has been approved by the Board of
Directors, including a majority of the Unaffiliated Directors.  Notwithstanding
the terms of any other agreements between the Manager or its Affiliates and the
Company, the Manager further agrees that all such sales and purchases will be
made upon terms no less favorable to the Company than are generally available to
other third parties.  The Manager shall purchase or exercise the Company's
option to purchase mortgage loans from CHL in accordance with the Company's
rights and obligations under the Loan Purchase Agreement or any other applicable
agreement between the Company and CHL which is approved by the Board of
Directors, including a majority of the Unaffiliated Directors.

          Section 5.  Repurchase Obligation.
          ---------   --------------------- 

          (a) The Manager agrees that if the Company purchases any mortgage
loan, Agency Security or other investment which does not meet the investment
and/or purchase criteria and policies of the Company and/or INMC as applicable
at the time of purchase, the Manager will repurchase or will cause the
repurchase of such mortgage loan, manufactured housing loan, Agency Security or
other investment from the Company for an amount not less than the unpaid
principal balance of the mortgage loan, manufactured housing loan, Agency
Security or other investment as of the date of repurchase, less any amounts
received by the Company representing prepaid interest not accrued as of the date
of repurchase, plus any amounts representing accrued and unpaid interest to the
date of repurchase and any amounts incurred by the Company, including, but not
limited to reasonable fees and out-of-pocket expenses of counsel, in enforcing
the obligation of the Manager to repurchase or cause the repurchase of such
mortgage loan, 

                                       5
<PAGE>
 
manufactured housing loan, Agency Security or other investment. In lieu of
repurchasing or causing the repurchase of any mortgage loan, manufactured
housing loan, Agency Security or other investment, the Manager may, in its
discretion, substitute or cause the substitution, respectively, of a mortgage
loan, manufactured housing loan, Agency Security or other investment having an
unpaid principal amount and yield at least equivalent to and a maturity not
later than the defective mortgage loan, manufactured housing loan, Agency
Security or other investment and otherwise meeting the investment and/or
purchase criteria and policies of the Company and/or INMC as applicable and the
terms of the agreement, if any, pursuant to which the mortgage loan,
manufactured housing loan, Agency Security or other investment has been
securitized.

          (b) The Manager shall be subrogated to any and all rights of the
Company or any Subsidiary, and the Company agrees to assign to the Manager or
direct its Subsidiary to assign to the Manager its rights, under any Servicing
Agreement with any third party with respect to any mortgage loan or manufactured
housing loan repurchased or substituted for, by or on behalf of the Manager
under Subsection (a).

          Section 6.  Bank Accounts.  The Manager may establish and maintain one
          ---------   -------------                                             
or more bank accounts in the name of the Company or any Subsidiary, at the
direction of the Board of Directors, and may collect and deposit into any such
account or accounts, and disburse from any such account or accounts, any money
on behalf of the Company or any Subsidiary, under such terms and conditions as
the Board of Directors may approve; and the Manager shall from time to time
render appropriate accountings of such collections and payment to the Board of
Directors and, when requested, to the auditors of the Company or any Subsidiary.
 
          Section 7.  Records; Confidentiality.  The Manager shall maintain
          ---------   ------------------------                          
appropriate books of account and records relating to services performed
hereunder, which books of account and records shall be accessible for inspection
by the Company or any Subsidiary at any time during normal business hours. The
Manager agrees to keep confidential any and all information it obtains from time
to time in connection with the services it renders under this Agreement and
shall not disclose any portion thereof to non-affiliated third parties except
with the prior written consent of the Company.

          Section 8.  Obligations of Manager.
          ---------   ---------------------- 

          (a) The Manager shall use its best efforts to provide that each
mortgage loan or manufactured housing loan conforms to the purchase criteria of
the Company or INMC as applicable and shall require each seller or transferor of
mortgage loans or manufactured housing loans to the Company or INMC in
connection with such purchase or transfer to make all applicable representations
and warranties contained in the Servicing Agreement for such loans. The Manager
shall take such other action as the Manager deems necessary or appropriate with
regard to the protection of the Company's or INMC's investments.

          (b) Anything else in this Agreement to the contrary notwithstanding,
the Manager shall refrain from any action which in its sole judgment made
in good faith would

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<PAGE>
 
adversely affect the status of the Company, or any Subsidiary which elects to so
qualify, as a real estate investment trust as defined and limited in Section 856
through 860 of the Internal Revenue Code or which in its sole judgment made in
good faith would violate any law, rule or regulation of any governmental body or
agency having jurisdiction over the Company or any Subsidiary or which would
otherwise not be permitted by the Company's or its Subsidiary's Governing
Instruments except if such action shall be ordered by the Board of Directors, in
which event the Manager shall promptly notify the Board of Directors of the
Manager's judgment that such action would adversely affect such status or
violate any such law, rule or regulation or the Governing Instruments and shall
refrain from taking such action pending further clarification or instructions
from the Board of Directors. If the Board of Directors thereafter instructs the
Manager, despite the Manager's notification as provided herein, to take any such
action and the Manager so acts upon the instructions given, the Manager shall
not be responsible for any loss of the Company's or Subsidiary's status as a
real estate investment trust or violation of any law, rule or regulation or the
Governing Instruments caused thereby.

          Section 9.  Fidelity Bond. The Manager shall maintain a fidelity bond
          ---------   -------------
with a responsible surety company in an amount approved by the Board of
Directors covering all officers and employees of the Manager handling funds of
the Company or any Subsidiary and any documents or papers, which bond shall
protect the Company or any Subsidiary against all losses of any such property
from acts of such officers and employees through theft, embezzlement, fraud,
negligent acts, errors and omissions or otherwise. The premium for said bond
shall be paid by the Manager.

          Section 10.  Compensation.
          ----------   ------------

          (a) Manager will receive a base management fee equal to the Average
Invested Assets multiplied by 1/8 of 1%.

          (b) The Manager shall be paid for services rendered with respect to
warehouse lending and construction lending activities a management fee in an
amount equal to two tenths of 1% of the average daily balance of the amounts
outstanding under warehouse lines of credit extended by the Company or its
Subsidiaries to originators of mortgage loans.

          (c) If the Company's annualized Return on Equity during any fiscal
quarter (computed by multiplying the Return on Equity for such fiscal quarter by
four) is in excess of the Ten Year U.S. Treasury Rate, plus 2% after taking into
account any recovery of the Manager's fees under Subsection (d), the Company
will pay the Manager as incentive compensation for such quarter an amount equal
to 25% of the amount by which the annualized Return on Equity of the Company for
such fiscal quarter exceeds the Ten Year U.S. Treasury Rate plus 2%, but in no
event shall any payment of incentive compensation under this Subsection reduce
the Company's annualized Return on Equity for such quarter to less than the Ten
Year U.S. Treasury Rate plus 2%. For purposes of the calculation contained in
this Subsection, all Net Income of the Company and any Subsidiaries shall be
deemed to have been distributed on the last day of each quarter. The incentive
compensation shall be paid to the Manager within 60 days after the end of each
fiscal quarter on an interim basis, subject to adjustment under Subsection (d).

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<PAGE>
 
          (d) The Manager shall compute the compensation payable under
Subsections (a), (b) and (c) within 45 days after the end of each fiscal
quarter. A copy of the computations made by the Manager to calculate its
compensation shall thereafter be promptly delivered to the Company and, upon
such delivery, payment of the interim compensation earned under Subsections (a),
(b) and (c) shown therein shall be due and payable within 60 days after the end
of such fiscal quarter. The aggregate amount of the Manager's compensation for
each fiscal year shall be adjusted within 120 days after the end of such fiscal
year so as to provide compensation for such year in the annual amounts stated in
Subsections (a), (b) and (c) and any excess owed to, or shortfall owed by, the
Manager with respect to such compensation, collectively, shall be promptly
remitted by, or paid to, the Company.

          (e) Notwithstanding the definition of Average Invested Assets, in the
event the Company implements a strategy of investing directly or indirectly in
loans secured by real estate which are not intended to be securitized, the base
management fee in Subsection (a) shall be paid with respect to these assets.

          Section 11. Operating Expenses. The Manager shall be reimbursed by the
          ----------  ------------------
Company for its operating expenses on a monthly basis. Any allocation of general
administrative costs and overhead by the Manager to the Company shall be
supported by documentation establishing that each other applicable affiliate of
the Manager is also charged a pro rata share of such expenses. Promptly
following the end of each month for which reimbursement is due, the Manager
shall submit an itemized accounting of its expenses to the Company, and the
Company shall pay within 30 days of the receipt of the accounting. The Board of
Directors shall have the authority to approve the incurrence of any expenses by
the Manager for the account of the Company, either prior to or after such
expenses have been incurred. The Manager shall be required to request and
receive the approval of the Board of Directors with respect to the compensation
and expense reimbursement provided to the executive officers of the Company. In
the event the Company determines that any expenses, costs or overhead charged by
the Manager can be reduced by the Company's utilizing another provider or
source, the Company shall so notify the Manager, and thirty (30) days after the
delivery of such notice (the "Notice Effective Date"), the Company shall have
the right to utilize any other such provider or source pursuant to such
arrangements as the Company may from time to time make; provided that any
expenses, costs or overhead allocable by the Manager to the Company in
accordance with the terms of this section shall be reimbursed by the Company for
the period up to and including the Notice Effective Date.

          Section 12. Limits of Manager Responsibility. The Manager assumes no
          ----------  --------------------------------
responsibility under this Agreement other than to render the services called for
hereunder in good faith and shall not be responsible for any action of the Board
of Directors in following or declining to follow any advice or recommendations
of the Manager, including as set forth in Subsection 8(b) above.  The Manager,
its directors, officers, shareholders and employees will not be liable to the
Company, any Subsidiary, the Unaffiliated Directors of the Company or the
Company's or any Subsidiary's shareholders for any acts performed by the
Manager, its directors, officers, shareholders or employees in accordance with
this Agreement, except by reason of acts

                                       8
<PAGE>
 
constituting bad faith, willful misconduct, gross negligence or reckless
disregard of their duties. The Company or any Subsidiaries, as applicable, shall
reimburse, indemnify and hold harmless the Manager, its shareholders, directors,
officers or employees for and from any and all expenses, losses, damages,
liabilities, demands, charges and claims of any nature whatsoever in respect of
or arising from any acts or omissions of the Manager, its shareholders,
directors, officers and employees made in good faith in the performance of the
Manager's duties under this Agreement and not constituting bad faith, willful
misconduct, gross negligence or reckless disregard of duties.

          Section 13. No Joint Venture.  The Company and the Manager are not
          ----------  ----------------
partners or joint venturers with each other and nothing herein shall be
construed to make them such partners or joint venturers or impose any liability
as such on either of them.

          Section 14. Term; Termination. This Agreement shall continue in force
          ----------  -----------------
through May 31, 1997, and thereafter it may be extended only with the consent of
the Manager and by the affirmative vote of a majority of the Unaffiliated
Directors.

          Each extension shall be executed in writing by all parties hereto
before the expiration of this Agreement or of any extension thereof. Each such
extension shall be effective for a period in no case exceeding twelve months.

          Notwithstanding any other provision to the contrary, this Agreement,
or any extension hereof, may be terminated by any party, upon sixty (60) days'
written notice, by majority vote of the Unaffiliated Directors or by majority
vote of the Shareholders, in the case of termination by the Company, or, in the
case of termination by the Manager, by majority vote of the directors of the
Manager.

          If this Agreement is terminated pursuant to this Section, such
termination shall be without any further liability or obligation of either party
to the other, except as provided in Section 17.

          Section 15. Assignment; Subcontract.
          ----------  -----------------------
          (a) This Agreement may not be assigned, in whole or in part, by the
Manager, unless such assignment is to a corporation, association, trust or other
organization which shall acquire the property and carry on the business of the
Manager, if at the time of such assignment a majority of the voting stock of
such assignee organization shall be owned, directly or indirectly, by CCI or any
of its Affiliates or unless such assignment is consented to in writing by the
Company with the consent of a majority of the Unaffiliated Directors. Such a
permitted assignment shall bind the assignee hereunder in the same manner as the
Manager is bound under this Agreement and, to further evidence its obligations,
under this Agreement, the assignee shall execute and deliver to the Company a
counterpart of this Agreement. This Agreement shall not be assignable by the
Company without the consent of the Manager, except in the case of assignment by
the Company to a real estate investment trust or other organization which is a
successor (by merger, consolidation, or otherwise purchase of assets) to the
Company, in which

                                       9
<PAGE>
 
case such successor organization shall be bound hereunder and by the terms of
said assignment in the same manner as the Company is bound hereunder.

          (b) Notwithstanding the foregoing, the Company and the Manager agree
that the Manager may enter into a subcontract with CHL or any of its Affiliates
pursuant to which CHL or such Affiliate will provide such of the management
services required under this Agreement as the Manager deems necessary, and the
Company hereby consents to the entering into and performance of such
subcontract; provided, however, that no such arrangement between the Manager and
CHL or any of its Affiliates shall relieve the Manager of any of its duties or
obligations under this Agreement; and, provided further, that if any subcontract
results in operating expenses to be paid by the Company to the Manager, such
expenses shall be in the amount actually incurred by the Manager. In the event
the Company determines that any expenses, costs or overhead charged by such
subcontractor can be reduced by the Company's utilizing another provider or
source, the Company shall so notify the Manager, and thirty (30) days after the
delivery of such notice (the "Notice Effective Date"), the Company shall have
the right to utilize any other such provider or source pursuant to such
arrangements as the Company may from time to time make; provided that any
expenses, costs or overhead allocable by the Manager to the Company in
accordance with the terms of this section shall be reimbursed by the Company for
the period up to and including the Notice Effective Date.

          Section 16. Termination by Company for Cause. At the option solely of
          ----------  --------------------------------
the Company, this Agreement shall be and become terminated upon thirty days'
written notice of termination from the Board of Directors to the Manager if any
of the following events shall occur:

          (a) If the Manager shall violate any provision of this Agreement and,
after notice of such violation, shall not cure such default within 30 days; or

          (b) There is entered an order for relief or similar decree or order
with respect to the Manager by a court having jurisdiction in the premises in an
involuntary case under the federal bankruptcy laws as now or hereafter
constituted or under any applicable federal or state bankruptcy, insolvency or
other similar laws; or the Manager (i) ceases or admits in writing its inability
to pay debts as they become due and payable, or makes a general assignment for
the benefit of, or enters into any composition or arrangement with, creditors;
(ii) applies for, or consents (by admission of material allegations of a
petition or otherwise) to the appointment of a receiver, trustee, assignee,
custodian, liquidator or sequestrator (or other similar official) of the Manager
or of any substantial part of its properties or assets, or authorizes such an
application or consent, or proceedings seeking such appointment are commenced
without such authorization, consent or application against the Manager and
continue undismissed for 30 days; (iii) authorizes or files a voluntary petition
in bankruptcy, or applies for or consents (by admission of material allegations
of a petition or otherwise) to the application of any bankruptcy,
reorganization, arrangement, readjustment of debt, insolvency, dissolution,
liquidation or other similar law of any jurisdiction, or authorizes such
application or consent, or proceedings to such end are instituted against the
Manager without such authorization, application or consent and remain
undismissed for 30 days or result in adjudication of bankruptcy or insolvency;
or (iv) permits or

                                       10
<PAGE>
 
suffers all or any substantial part of its properties or assets to be
sequestered or attached by court order and the order remains undismissed for 30
days.

          (c)  The Manager agrees that if any of the events specified in
paragraph (b) of this Section 16 shall occur, it will give prompt written notice
thereof to the Board of Directors after the happening of such event.

          Section 17. Action Upon Termination. From and after the effective date
          ----------  -----------------------
of termination of this Agreement, pursuant to Sections 14, 15, or 16 hereof, the
Manager shall not be entitled to compensation for further services hereunder,
but shall be paid all compensation accruing to the date of termination, subject
to adjustment on an annualized basis in accordance with Section 10(d). The
Manager shall forthwith upon such termination:

          (a) Pay over to the Company or any Subsidiary, as applicable, all
money collected and held for the account of the Company or any Subsidiary
pursuant to this Agreement, after deducting any accrued compensation and
reimbursement for its expenses to which it is then entitled;

          (b) Deliver to the Board of Directors a full accounting, including a
statement showing all payments collected by it and a statement of all money held
by it, covering the period following the date of the last accounting furnished
to the Board of Directors with respect to the Company or any Subsidiary; and

          (c) Deliver to the Board of Directors all property and documents of
the Company or any Subsidiary then in the custody of the Manager.

          Section 18. Release of Money or Other Property Upon Written Request.
          ----------  -------------------------------------------------------
The Manager agrees that any money or other property of the Company or any
Subsidiary held by the Manager under this Agreement shall be held for the
Company or such Subsidiary in a custodial capacity, and the Manager's records
shall be appropriately marked to reflect clearly the ownership of such money or
other property by the Company or such Subsidiary. Upon the receipt by the
Manager of a written request signed by a duly authorized officer of the Company
requesting the Manager to release to the Company or any Subsidiary any money or
other property then held by the Manager for the account of the Company or any
Subsidiary under this Agreement, the Manager shall release such money or other
property to the Company or any Subsidiary within a reasonable period of time,
but in no event later than 60 days following such request. The Manager shall not
be liable to the Company, any Subsidiary, the Unaffiliated Directors, or the
Company's Shareholders for any acts thereafter performed or omissions thereafter
to act by the Company or any Subsidiary of the Company in connection with the
money or other property released to the Company or any Subsidiary in accordance
with this Section. The Company and any Subsidiary receiving released money or
other property hereby agree to indemnify the Manager, its directors, officers,
shareholders and employees against any and all expenses, losses, damages,
liabilities, demands, charges and claims of any nature whatsoever, which arise
in connection with the Manager's release of such money or other property to the
Company or such Subsidiary in accordance with the terms of this Section unless

                                       11
<PAGE>
 
the Manager's release of such money constitutes bad faith, willful misconduct,
gross negligence or reckless disregard of duties. This provision shall be in
addition to any right of the Manager to indemnification under Section 12.

          Section 19. Representations and Warranties.
          ----------  ------------------------------

          (a) The Company hereby represents and warrants to the Manager as
follows:

              (i)  Corporate Existence. The Company is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power to own its assets and to transact the
business in which it is now engaged and is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership or lease of property or the conduct of its business requires such
qualification, except for failures to be so qualified, authorized or licensed
that could not in the aggregate have a material adverse effect on the business
operations, assets or financial condition of the Company and its Subsidiaries,
taken as a whole. The Company does not do business under any fictitious business
name.

              (ii) Corporate Power; Authorization; Enforceable Obligations. The
Company has the corporate power, authority and legal right to execute, deliver
and perform this Agreement and all obligations required hereunder and has taken
all necessary corporate action to authorize this Agreement on the terms and
conditions hereof and its execution, delivery and performance of this Agreement
and all obligations required hereunder. Except such as have been obtained, no
consent of any other person including, without limitation, shareholders and
creditors of the Company, and no license, permit, approval or authorization of,
exemption by, notice or report to, or registration, filing or declaration with,
any governmental authority is required by the Company in connection with this
Agreement or the execution, delivery, performance, validity or enforceability of
this Agreement and all obligations required hereunder. This Agreement has been,
and each instrument or document required hereunder will be, executed and
delivered by a duly authorized officer of the Company, and this Agreement
constitutes, and each instrument or document required hereunder when executed
and delivered hereunder will constitute, the legally valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms.

              (iii) No Legal Bar to This Agreement. The execution, delivery and
performance of this Agreement and the documents or instruments required
hereunder, will not violate any provision of any existing law or regulation
binding on the Company, or any order, judgment, award or decree of any court,
arbitrator or governmental authority binding on the Company, or the certificate
of incorporation or by-laws of, or any securities issued by the Company or of
any mortgage, indenture, lease, contract or other agreement, instrument or
undertaking to which the Company is a party or by which the Company or any of
its assets may be bound, the violation of which would have a material adverse
effect on the business, operations, assets or financial condition of the Company
and its Subsidiaries, taken as a whole, and will not result in, or require, the
creation or imposition of any lien on any of its property,

                                       12
<PAGE>
 
assets or revenues pursuant to the provisions of any such mortgage, indenture,
lease, contract or other agreement, instrument or undertaking.

          (b) The Manager hereby represents and warrants to the Company as
follows:

              (i)  Corporate Existence. The Manager is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power to own its assets and to transact the
business in which it is now engaged and is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership or lease of property or the conduct of its business requires such
qualification, except for failures to be so qualified, authorized or licensed
that could not in the aggregate have a material adverse effect on the business
operations, assets or financial condition of the Manager and its Subsidiaries,
taken as a whole. The Manager does not do business under any fictitious business
name.

              (ii) Corporate Power; Authorization; Enforceable Obligations. The
Manager has the corporate power, authority and legal right to execute, deliver
and perform this Agreement and all obligations required hereunder and has taken
all necessary corporate action to authorize this Agreement on the terms and
conditions hereof and its execution, delivery and performance of this Agreement
and all obligations required hereunder. Except such as have been obtained, no
consent of any other person including, without limitation, stockholders and
creditors of the Manager, and no license, permit, approval or authorization of,
exemption by, notice or report to, or registration, filing or declaration with,
any governmental authority is required by the Manager in connection with this
Agreement or the execution, delivery, performance, validity or enforceability of
this Agreement and all obligations required hereunder. This Agreement has been,
and each instrument or document required hereunder will be, executed and
delivered by a duly authorized officer of the Manager, and this Agreement
constitutes, and each instrument or document required hereunder when executed
and delivered hereunder will constitute, the legally valid and binding
obligation of the Manager enforceable against the Manager in accordance with its
terms.

              (iii) No Legal Bar to This Agreement. The execution, delivery and
performance of this Agreement and the documents or instruments required
hereunder, will not violate any provision of any existing law or regulation
binding on the Manager, or any order, judgment, award or decree of any court,
arbitrator or governmental authority binding on the Manager, or the certificate
of incorporation or by-laws of, or any securities issued by the Manager or of
any mortgage, indenture, lease, contract or other agreement, instrument or
undertaking to which the Manager is a party or by which the Manager or any of
its assets may be bound, the violation of which would have a material adverse
effect on the business, operations, assets or financial condition of the Manager
and its Subsidiaries, taken as a whole, and will not result in, or require, the
creation or imposition of any lien on any of its property, assets or revenues
pursuant to the provisions of any such mortgage, indenture, lease, contract or
other agreement, instrument or undertaking.

                                       13
<PAGE>
 
          Section 20. Notices. Any notice, report, or other communication
          ----------  -------
required or permitted to be given hereunder shall be in writing unless some
other method of giving such notice, report, or other communication is accepted
by the party to whom it is given, and shall be given by being delivered at the
following addresses of the parties hereto:

     The Company:      CWM Mortgage Holdings, Inc. 
                       35 North Lake Avenue
                       P.O. Box 7211 Pasadena, California 91109-7311
                       Attention:  General Counsel

     The Manager:      Countrywide Asset Management Corporation
                       155 North Lake Avenue
                       P.O. Box 7137
                       Pasadena, California 91109-7137
                       Attention:  General Counsel

          Either party may at any time give notice in writing to the other party
of a change of its address for the purpose of this Section 20.

          Section 21. Name Change Upon Termination of Management Agreement.  The
          ----------  ----------------------------------------------------
Company agrees that, if at any time the Manager or any Affiliate of CCI shall
cease to serve generally as manager of the Company or any Subsidiary, upon
receipt of a written request from the Manager, the Company and such Subsidiary
will cause their Governing Instruments to be amended so as to change their names
to a name that does not include "Countrywide" or any approximation thereof;
provided, however, that such requirement shall not apply to any trust in which
the Company or any of its Subsidiaries has sold a majority of the beneficial
interest, and which has issued Mortgage Backed Securities that remain
outstanding in whole or in part.

          Section 22. Amendments.  This Agreement shall not be amended, changed,
          ----------  ----------
modified, terminated or discharged in whole or in part except by an instrument
in writing signed by all parties hereto, or their respective successors or
assigns, or otherwise as provided herein.

          Section 23. Successors and Assigns.  This Agreement shall bind any
          ----------  ----------------------
successors or assigns of the parties hereto as herein provided.

          Section 24. Governing Law. This Agreement shall be governed, construed
          ----------  -------------
and interpreted in accordance with the laws of the State of California.

          Section 25. Headlines and Cross References. The section headings
          ----------  ------------------------------
hereof have been inserted for convenience of reference only and shall not be
construed to affect the meaning, construction or effect of this Agreement. Any
reference in this Agreement to a "Section" or "subsection" shall be construed,
respectively, as referring to a section of this Agreement or a subsection of a
section of this Agreement in which the reference appears.

                                       14
<PAGE>
 
          Section 26. Severability.  The invalidity or unenforceability of any
          ----------  ------------
provision of this Agreement shall not affect the validity of any other
provision, and all other provisions shall remain in full force and effect.

          Section 27. Entire Agreement.  This instrument contains the entire
          ----------  ----------------
agreement between the parties as to the rights granted and the obligations
assumed in this instrument.

          Section 28. Waiver.  Any forbearance by a party to this Agreement in
          ----------  ------
exercising any right or remedy under this Agreement or otherwise afforded by
applicable law shall not be a waiver of or preclude the exercise of that or any
other right or remedy.

          Section 29. Execution in Counterparts. This Agreement may be executed
          ----------  -------------------------
in one or more counterparts, any of which shall constitute an original as
against any party whose signature appears on it, and all of which shall together
constitute a single instrument. This Agreement shall become binding when one or
more counterparts, individually or taken together, bear the signatures of both
parties.

          Section 30. Guaranty of Manager's Obligations. The Manager agrees that
          ----------  ---------------------------------
in order to insure the performance of its duties under this Agreement, it will
be necessary for CHL to guarantee the full performance of the Manager, and this
Agreement is conditioned upon the execution and delivery to the Company of a
Guaranty Agreement in the form attached to this Agreement as Exhibit B. Such
Guaranty Agreement shall remain in effect through the term of this Agreement,
including any renewals or extensions; provided, however, that the Guaranty
Agreement may be terminated by the Guarantor as provided therein at such time as
the Manager and the Guarantor are no longer Affiliates.

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers thereunto duly authorized as of the day and year
first above written.

                                       CWM MORTGAGE HOLDINGS, INC.


                                       By: /s/ Michael W. Perry
                                           ------------------------
                                           Michael W. Perry
                                           Executive Vice President


                                       COUNTRYWIDE ASSET MANAGEMENT CORPORATION

                                       
                                       By: /s/ Angelo R. Mozilo
                                           ----------------------------
                                           Name:  Angelo R. Mozilo
                                                 ---------------------- 
                                           Title: Chairman of the Board
                                                 ----------------------

                                       15
<PAGE>
 
                                                                       EXHIBIT A
                                                                       ---------



August 29, 1985

Countrywide Mortgage Investments, Inc.
155 North Lake Avenue
P.O. Box 7137
Pasadena, California 91109-7137

Gentlemen:

In order to induce Countrywide Mortgage Investments, Inc. (the "Company") to
enter into a Management Agreement with Countywide Asset Management Corporation
(the "Manager"), the Manager's parent corporation, Countrywide Credit
Industries, Inc. ("CCI") agrees that so long as the Manager or any affiliated
company of CCI is serving as the Manager of the Company pursuant to a management
agreement neither CCI nor any of its affiliated companies will either sponsor
another real estate investment trust or elect, or cause the election by any such
affiliate, to be taxed as a real estate investment trust without the prior
approval of a majority of the members of the Board of Directors of the Company
who are not affiliated with CCI or any of its affiliates.

                              COUNTRYWIDE CREDIT INDUSTRIES, INC.



     (SEAL)                    By:  /s/ Angelo R. Mozilo
                                    --------------------------
                               Title:  Executive Vice President



ATTEST:

By: /s/ Wayne Turkheimer
    ------------------------
Title:  Secretary
      ----------------------
<PAGE>
 
                                   EXHIBIT B
                                   ---------

                                    GUARANTY
                                    --------
                                        


     THIS GUARANTY (the "Guaranty"), dated as of September 3, 1985, is made by
Countrywide Funding Corporation (the "Guarantor") to Countrywide Asset
Management Corporation (the "Manager") and Countrywide Mortgage Investments,
Inc. (the "Company").

                                R E C I T A L S

     A.   Pursuant to the Management Agreement, dated as of September 3, 1985,
(the "Agreement"), entered into between the Manager and the Company concurrently
with the execution of this Guaranty, the Manager has agreed to manage the
investments and the day-to-day operations of the Company, including the issuance
of commitments on behalf of the Company to acquire mortgage loans meeting the
investment criteria set from time to time by the Company's Board of Directors;

     B.   The Manager is a newly organized corporation which is a wholly-owned
subsidiary of Countrywide Credit Industries, Inc.;

     C.   The Guarantor is an experienced originator and servicer of mortgage
loans which is also a wholly-owned subsidiary of Countrywide Credit Industries,
Inc., and in order to induce the parties thereto to enter into the Agreement,
has agreed to guarantee the full performance of the Manager of its obligations
under the Agreement; and

     D.   The Guarantor will benefit from the relationship embodied in the
Agreement between the Company and the Manager.

     NOW THEREFORE, for the consideration recited above and other good and
valuable consideration, the Guarantor agrees as follows:

     1.   The Guarantor hereby unconditionally guarantees to the Company the due
and punctual payment, performance and discharge of all duties, obligations,
debts and liabilities of the Manager to the Company under the Agreement (the
"Obligations"), together with any and all expenses of, for and incidental to
collection of the Obligations, including attorneys' fees and court costs.
Nothing shall discharge or satisfy the liability of the Guarantor hereunder
except the full performance and payment of the Obligations to the Company.

     2.   The Guarantor hereby waives notice of acceptance hereof, notice of the
amount of the Obligations of the Manager to the Company from time to time,
notice of any adverse change in the Manager's financial condition or any other
fact which might increase the Guarantor's risk.  The Guarantor waives all (x)
set-offs, counterclaims, presentments and (y) protests, notices of protest,
notices of dishonor and notices of any action or non-action, including
acceptance of this

                                      -1-
<PAGE>
 
Guaranty, notices of default under the Agreement or any agreement related
thereto and notice of any other extension of credit to the Manager. The
Guarantor further waives any rights granted by statute or otherwise to require
the Company to institute suit against the Manager or to exhaust its rights and
remedies against the Manager, it being acknowledged that the Guarantor is bound
for the payment of all Obligations of the Manager to the Company now existing or
hereafter occurring as fully as if such Obligations were owing directly to the
Company by the Guarantor. The Guarantor waives all rights of exoneration granted
by statute or otherwise in the event this Agreement is altered in any respect by
or with the consent of the Manager without the consent of the Guarantor. The
Guarantor shall not be released from any liability by reason of the Manager's
personal disability.

     3.   The Guarantor consents and agrees that without notice to the Guarantor
and without affecting or impairing the obligations of the Guarantor hereunder,
the Company may compromise or settle, extend the period or duration of time for
payment or discharge of performance of, or may refuse to enforce or may release
all or any parties to any and all of the Obligations, or may grant other
indulgences to the Manager with respect thereof, or may amend or modify in any
manner any documents or agreements relating to such obligations.

     4.   The Guarantor agrees to pay any and all expenses incurred by the
Company in connection with the enforcement of its obligations under this
Guaranty, as well as court costs, collections charges and attorneys' fees and
disbursements.

     5.   This Guaranty is a primary, original obligations of the Guarantor and
is an absolute, unconditional, continuing and irrevocable guaranty of payment
and performance and, except as provided in Section 10, shall remain in full
force and effect throughout the term of the Agreement without respect to future
changes in conditions, including any change of law or any invalidity or
irregularity with respect to the issuance of any Obligations of the Manager to
the Company. This is a continuing Guaranty relating to the Obligations,
including that arising under successive transactions under the Agreement which
shall either continue the Obligations or from time to time renew any or all of
them. The obligations hereunder are independent of the Obligations of the
Manager and the obligations of any other guarantor of the Obligations of the
Manager under the Agreement, and a separate action or actions may be brought and
prosecuted against the Guarantor whether any action is brought against the
Manager or any of such other guarantors or whether the Manager be joined any
such action or actions; and the Guarantor waives all principles or provisions of
law, statutory or otherwise, which are or might be in conflict with the terms of
this Guaranty. However, this Guaranty shall not limit the effect of any
provisions in the Agreement or any principles or provisions of law, statutory or
otherwise, which provide legal rights to the Manager, and to the extent the
Guarantor is required to perform any of the Obligations under this Guaranty, it
shall be entitled to seek enforcement of such principles or provisions of law to
the same extent as the Manager.

     6.   The Company shall have the right to seek recourse against the
Guarantor to the full extent provided for herein and in any other document or
instrument evidencing the Obligations and against the Manager to the full extent
provided for in the Agreement. No election to proceed in one form of action or
proceeding, or against any party, or on any

                                      -2-
<PAGE>
 
Obligations, shall constitute a waiver of the Company's right to proceed in any
other form of action or proceeding or against other parties.

     7.   The Guarantor agrees that all the rights, benefits and privileges
herein shall vest in, and be enforceable by, the Company and its successors and
assigns.

     8.   So long as any Obligations shall be owing to the company, the
Guarantor shall not, without the prior consent of the Company, commence or join
with any other person in commencing any bankruptcy, reorganization or insolvency
proceedings of or against the Manager. The obligations of the Guarantor under
this Guaranty shall not be altered, limited or affected by any proceeding,
voluntary or involuntary, involving the bankruptcy, insolvency, receivership,
reorganization, liquidation or arrangement of the Manager or by any defense
which the Manager may have by reason of the order, decree or decision of any
court or administrative body resulting from any such proceeding. The Company
shall have the sole right to accept or reject any plan proposed in such
proceeding and to take any other action which a party filing a claim is entitled
to take. In the event that all or any portion of the Obligations is paid or
performed by the Manager, the obligations of Guarantor hereunder shall continue
and remain in full force and effect in the event that all or any part of such
payment(s) or performance(s) is avoided or recovered directly or indirectly from
the Company as a preference, fraudulent transfer or otherwise in such
proceeding.

     9.   In order to induce the Company to accept this Guaranty and to make the
Agreement, Guarantor hereby represents the warrants to the Company that the
following statements are true and correct:

          (i) Corporate Existence. Guarantor is duly organized, validly existing
              ------------------- 
and in good standing under the laws of the jurisdiction of its incorporation,
has the corporate power to own its assets and to transact the business in which
it is now engaged and is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where its ownership or lease of
property or the conduct of its business requires such qualification, except for
failures to be so qualified, authorized or licensed that could not in the
aggregate have a material adverse effect on the business operations, assets or
financial condition of Guarantor and its subsidiaries, taken as a whole.
Guarantor does not do business under any fictitious business name.

          (ii) Corporate Power; Authorization; Enforceable Obligations.
               ------------------------------------------------------- 
Guarantor has the corporate power, authority and legal right to execute, deliver
and perform the Guaranty and all obligations required hereunder and has taken
all necessary corporate action to authorize its Guaranty hereunder on the terms
and conditions hereof and its execution, delivery and performance of this
Guaranty and all obligations required hereunder. No consent of any other person
including, without limitation, stockholders and creditors of Guarantor, and no
license, permit, approval or authorization of, exemption by, notice or report
to, or registration, filing or declaration with, any governmental authority is
required by Guarantor in connection with this Guaranty or the execution,
delivery, performance, validity or enforceability of this Guaranty and all
obligations required hereunder. This Guaranty has been, and each instrument or
document required hereunder will be, executed and delivered by a duly authorized
officer of Guarantor, and

                                      -3-
<PAGE>
 
this Guaranty constitutes, and each instrument of document required hereunder
when executed and delivered hereunder will constitute, the legally valid and
binding obligation of Guarantor enforceable against Guarantor in accordance with
its terms.

          (iii)  No Legal Bar to This Guaranty.  The execution, delivery and
                 -----------------------------                              
performance of this Guaranty and the documents or instruments required hereunder
will not violate any provision of any existing law or regulation binding on
Guarantor, or any order, judgment, award or decree of any court, arbitrator or
governmental authority binding on Guarantor, or the certificate of incorporation
or by-laws of, or any securities issued by Guarantor, or of any mortgage,
indenture, lease, contract or other agreement, instrument or undertaking to
which Guarantor is a party or by which Guarantor or any of its assets may be
bound, the violation of which would have a material adverse effect on the
business operation, assets or financial condition of Guarantor and its
subsidiaries, taken as a whole, and will not result in, or require, the creation
or imposition of any lien on any of its property, assets or revenues pursuant to
the provisions of any such mortgage, indenture, lease, contract or other
agreement, instrument or undertaking.

     10.  This Guaranty shall remain in effect through the term of the
Agreement, including any renewals or extensions thereof; provided however, that
this Guaranty may be terminated by the Guarantor at such time as the Manager and
the Guarantor are not longer "Affiliates" as such term is defined in the
Agreement.

     11.  This Guaranty, all acts and transactions hereunder, and the rights and
obligations of the parties hereto shall be governed by, construed under and
interpreted in accordance with the laws of the State of California.

     IN WITNESS WHEREOF, the Guarantor executed this Guaranty as of the 3rd day
of September, 1985.

                              COUNTRYWIDE FUNDING CORPORATION

                              By:   /s/ Angelo R. Mozilo
                                 ---------------------------------------

                              Title:  President, Chief Executive Officer
                                      ----------------------------------

                              Attest: /s/ Wayne Turkheimer
                                      ----------------------------------

                              Title:  Secretary
                                      ----------------------------------

                                           (CORPORATE SEAL)

                                      -4-