Cw Bofa Merger Plan Agreement

8/8/2019 Cw Bofa Merger Plan Agreement

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COUNTRYWIDE/ BANK OF AMERICA

AGREEMENT & PLAN OF MERGER

Table Of Contents:

Pg. 2. 2nd Supp. Note Deed Poll, Dated 11/072008, To The Note Deed Poll Dated 4/29/05

Pg. 10. Bank of America Corporation on 1st July 2008 – Effective date of merger

Pg. 15. Countrywide and Bank Of America Agreement And Plan Of Merger

Pg. 116. Bank of America Corporation on 7th November 2008 – Debt Assumption

Pg. 127. 6th

Supp Trust Deed Dated 11/07/08, 11/07/08, Modifying The Prov. Of Trust Deed5/01/98

Pg. 138 3rd Supp. Trust Deed 11/07/08, To The Trust Deed Dated 8/15/05

Pg. 148 UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION

Pg. 163. Countrywide Financial Corporation on 30th June 2008 – Consolidated Balance Sheet for

Pg. 282. First Supplemental Deed Poll Guarantee and Indemnity

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EX-4.47 18 dex447.htm 2ND SUPP. NOTE DEED POLL, DATED 11/07/08, TO THE NOTE DEED POLL DATED 4/29/05

Exhibit 4.47

Second Supplemental Note Deed Poll

relating to the Note Deed Poll dated 29 April 2005 as amended and supplemented on 1 July 2008 (“NoteDeed Poll”)

Countrywide Financial Corporation (formally known as Red Oak Merger Corporation) (“CFC”)Countrywide Home Loans, Inc. (“Guarantor”)Bank of America Corporation (“Corporation”)

FOR THE PURPOSES OF UNITED STATES FEDERAL INCOME TAX LAWS, THE REGISTERED NOTES AND THE BEARER NOTES ARE BOTH “BEARER OBLIGATIONS”. ANY UNITED STATES

PERSON WHO HOLDS A NOTE WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES FEDERAL INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j)

AND 1287(a) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.

THE NOTES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES OF

AMERICA SECURITIES ACT OF 1933, AS AMENDED (“SECURITIES ACT”) OR ANY APPLICABLE STATE SECURITIES OR “BLUE SKY” LAWS AND NEITHER THE NOTES NOR ANY INTEREST

THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF TO OR FOR

THE ACCOUNT OR BENEFIT OF A US PERSON (AS DEFINED IN REGULATION S UNDER THE

SECURITIES ACT) IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION UNDER THE

SECURITIES ACT AND THE RULES AND REGULATIONS THEREUNDER OR ANY APPLICABLE STATE SECURITIES LAW. THE ISSUER HAS NOT BEEN AND WILL NOT BE REGISTERED AS AN

INVESTMENT COMPANY UNDER THE UNITED STATES INVESTMENT COMPANY ACT OF 1940, AS

AMENDED.

FOR UNITED STATES FEDERAL INCOME TAX AND SECURITIES LAWS PURPOSES, EACH TRANCHE OF REGISTERED NOTES AND, FOR THE PURPOSES OF THAT TRANCHE OF

REGISTERED NOTES ONLY, THE NOTE DEED POLL, CONSTITUTE A TEMPORARY GLOBAL NOTE

ISSUED IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT AND WILL

BECOME A PERMANENT GLOBAL NOTE ON OR AFTER THE EXCHANGE DATE UPON AND TO

THE EXTENT OF DELIVERY TO THE PAYING AGENT OF (A) A CERTIFICATE OR CERTIFICATES

FROM AUSTRACLEAR LIMITED (AS OPERATOR OF THE AUSTRACLEAR SYSTEM) BASED UPON AWRITTEN CERTIFICATION OR CERTIFICATIONS FROM THE MEMBER ORGANISATIONS SHOWN

IN THE RECORDS OF AUSTRACLEAR LIMITED AS HOLDING AN INTEREST IN THE NOTE AND

DATED NOT EARLIER THAN THE EXCHANGE DATE IN SUBSTANTIALLY THE FORM SET OUT IN APPENDICES 1 AND 2 OF THE NOTE DEED POLL RESPECTIVELY; OR (B) WHERE THE TRANCHE

OF REGISTERED NOTES IS NOT SETTLED THROUGH THE AUSTRACLEAR SYSTEM, A

CERTIFICATE OR CERTIFICATES FROM THE RELEVANT NOTEHOLDERS IN SUBSTANTIALLY THE

FORM SET OUT IN APPENDIX 2 OF THE NOTE DEED POLL.

Mallesons Stephen Jaques

Level 50Bourke Place600 Bourke StreetMelbourne Vic 3000Australiawww .S

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T +61 3 9643 4000 begin_of_the_skype_highlighting +61 3 96434000 end_of_the_skype_highlightingF +61 3 9643 5999DX 101 Melbourne

Contents Second Supplemental Note Deed Poll

1 Assumption 2

Assumption of the Notes 2 Name 3 Benefit and entitlement 3 Rights independent 3

Noteholders bound 3 Direction to hold this Second Supplemental Note Deed Poll 3

2 Miscellaneous 3

Effect of this Second Supplemental Note Deed Poll 3 Note Deed Poll Remains in Full Force and Effect 4 Note Deed Poll and Supplemental Note Deed Polls Construed Together 4 Confirmation and Preservation of Note Deed Poll. 4 Severability 4 Terms Defined in the Note Deed Poll 4 Addresses for Notices to the Corporation. 4 Headings 5 Benefits of Second Supplemental Note Deed Poll 5 Counterparts 5 Governing law. 5

(i)

Second Supplemental Note Deed Poll

Date: 7 November 2008

By: COUNTRYWIDE FINANCIAL CORPORATION, a company incorporated withlimited liability in the State of Delaware (formally known as Red Oak Merger Corporation) (“CFC”)

And: COUNTRYWIDE HOME LOANS, INC., a company incorporated with limitedliability in the State of New York (“Guarantor”) w

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And: BANK OF AMERICA CORPORATION, a company incorporated with limited

liability in the State of Delaware (“Corporation”)

In favour of: Each person who is from time to time a Noteholder (as defined in the Note Deed Poll).

Recitals:

A. CFC is the Issuer under the Note Deed Poll dated 29 April 2005 (as amended andsupplemented on 1 July 2008, the “Note Deed Poll”), which provides for the constitution of the notes issued by CFC under a A$3,500,000,000 Medium Term Note Programme (the“Programme”).

B. There is outstanding under the terms of the Note Deed Poll one or more series of notes(“Notes”).

C. The Guarantor has provided a guarantee of CFC’s obligations under the Notes pursuant to aDeed Poll Guarantee and Indemnity dated 29 April 2005 in relation to the Programme (asamended and supplemented, the “Guarantee”).

D. The Corporation and CFC entered into a Stock Purchase Agreement dated 7 November 2008, pursuant to which CFC will sell to the Corporation substantially all of CFC’s assets (the“Stock Purchase”).

E. The Stock Purchase is expected to be consummated on 7 November 2008.

F. Condition 4.4 of the Note Deed Poll provides that in the case of a transfer of CFC’s propertyand assets substantially as an entirety, the person which acquires by transfer the propertiesand assets shall expressly assume by supplemental note deed poll all the obligations andcovenants under the Notes and the Transaction Documents to be performed and observed byCFC.

G. This Second Supplemental Note Deed Poll has been duly authorized by all necessarycorporate action on the part of CFC and the Corporation.

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H. CFC and the Corporation are of the opinion that this Second Supplemental Note Deed Poll isnot materially prejudicial to the interests of the Noteholders.

I. CFC has delivered to the Programme Manager a certificate signed by two of its directors andan opinion of counsel acceptable to the Programme Manager in accordance with Condition4.4, stating that the Stock Purchase and this Second Supplemental Note Deed Poll complywith the Conditions (as defined in the Note Deed Poll) and all conditions precedent providedfor in the Conditions (as defined in the Note Deed Poll) relating to the Stock Purchase have

been complied with (as defined in the Note Deed Poll).

J. The Guarantor has delivered to the Programme Manager a certificate signed by two of itsdirectors and an opinion of counsel acceptable to the Programme Manager, stating that theGuarantor’s obligations under the Guarantee remain in full force and effect after the transfer of CFC’s properties and assets substantially as an entirety to the Corporation and theassumption by the Corporation of the due and punctual payment of the principal of (and

premium, if any) and any interest on the Notes and the due and punctual performance of allthe obligations, and the observance of every covenant, of CFC under the Note Deed Poll asset out in this Second Supplemental Note Deed Poll.w

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K. All things necessary to make this Second Supplemental Note Deed Poll a valid note deed poll

and agreement according to its terms has been done.

Operative provisions:

1 Assumption

Assumption of the obligations and covenants under the Notes and the Transaction Documents

1.1 The Corporation hereby represents and warrants that:

(a) it is a corporation organized and existing under the laws of the State of Delaware; and

(b) the execution, delivery and performance of this Second Supplemental Note Deed Pollhas been duly authorized by the board of directors of the Corporation.

1.2 The Corporation hereby expressly assumes the due and punctual payment of the principal of (and premium, if any) and any interest on all the Notes and the due and punctual performanceof all the obligations, and the observance of every covenant of CFC under the Note Deed Polland each other Transaction Document and, in accordance with Condition 4.5 of the NoteDeed Poll, the Corporation succeeds to, and is substituted for, and may exercise every right

and power of, CFC under the Transaction Documents with the same effect as if theCorporation had been named as the Issuer therein, and following such succession CFC isrelieved of all obligations and covenants under the Transaction Documents.

2

Name1.3 With effect from the Effective Time specified in clause 2.1 below, the name of the Issuer,

under the Note Deed Poll, shall be “Bank of America Corporation”.

Guarantee

1.4 The Guarantor acknowledges and agrees that the Guarantor’s obligations under the Guaranteeremain in full force and effect after the transfer of CFC’s properties and assets substantiallyas an entirety to the Corporation and the assumption by the Corporation of the due and

punctual payment of the principal of (and premium, if any) and any interest on the Notes andthe due and punctual performance of all the obligations, and the observance of everycovenant, of CFC under the Note Deed Poll and each other Transaction Document as set outin this Second Supplemental Note Deed Poll with each reference to the “Issuer” in theGuarantee being read as a reference to the Corporation.

Benefit and entitlement

1.5 This Second Supplemental Note Deed Poll is executed as a deed poll. Accordingly, each

Noteholder has the benefit of, and is entitled to enforce, this deed poll against the Corporationand the Guarantor even though it is not a party to, or is not in existence at the time of execution and delivery of, this Second Supplemental Note Deed Poll.

Rights independent

1.6 Each Noteholder may enforce its rights under this Second Supplemental Note Deed Pollindependently from each other Noteholder.

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1.7 Each Noteholder and any person claiming through or under a Noteholder is bound by thisSecond Supplemental Note Deed Poll.

Direction to hold this Second Supplemental Note Deed Poll

1.8 Each Noteholder is taken to have irrevocably nominated and authorised the Registrar to hold

this Second Supplemental Note Deed Poll in New South Wales (or such other place as theCorporation and the Registrar agree) on its behalf. The Corporation and the Guarantor acknowledge the right of every Noteholder to the production of this Second Supplemental

Note Deed Poll.

2 Miscellaneous

Effect of this Second Supplemental Note Deed Poll

2.1 Upon the execution and delivery of this Second Supplemental Note Deed Poll by CFC, theGuarantor and the Corporation (the

3

“Effective Time”) the Note Deed Poll shall be supplemented in accordance with this SecondSupplemental Note Deed Poll, and this Second Supplemental Note Deed Poll shall form a

part of the Note Deed Poll for all purposes, and every Noteholder shall be bound thereby.

Note Deed Poll Remains in Full Force and Effect

2.2 Except as supplemented hereby, all provisions in the Note Deed Poll shall remain in fullforce and effect.

Note Deed Poll and Supplemental Note Deed Polls Construed Together2.3 This Second Supplemental Note Deed Poll is supplemental to the Note Deed Poll, and the

Note Deed Poll and this Second Supplemental Note Deed Poll shall be read and construedtogether.

Confirmation and Preservation of Note Deed Poll.

2.4 The Note Deed Poll as supplemented by this Second Supplemental Note Deed Poll is in allother respects confirmed and preserved.

Severability

2.5 In case any provision in this Second Supplemental Note Deed Poll shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not

in any way be affected or impaired by this Second Supplemental Note Deed Poll.

Terms Defined in the Note Deed Poll

2.6 All capitalized terms not otherwise defined in this Second Supplemental Note Deed Poll shallhave the meanings ascribed to them in the Note Deed Poll.

Addresses for Notices to the Corporation.

2.7 Any notice or demand which by any provisions of this Second Supplemental Note Deed Poll

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or the Note Deed Poll is required or permitted to be given or served on the Corporation may be given in accordance with the Conditions (as defined in the Note Deed Poll) or served by postage prepaid first class mail addressed (until another address is notified by the Corporationin accordance with the Conditions (as defined in the Note Deed Poll)) as follows:

Bank of America CorporationBank of America Corporate Center

100 North Tryon Street NC1-007-07-13 Corporate Treasury DivisionCharlotte, North Carolina 28255Telephone: (980) 387-3776 begin_of_the_skype_highlighting (980) 387-3776 end_of_the_skype_highlightingFacsimile: (980) 387-8794Attention: B. Kenneth Burton, Jr.

4

together with a copy to:Bank of America CorporationLegal Department

NC1-002-29-01

101 South Tryon StreetCharlotte, North Carolina 28255Telephone: (704) 386-4238 begin_of_the_skype_highlighting (704) 386-4238 end_of_the_skype_highlightingFacsimile: (704) 386-1670Attention: Teresa M. Brenner, Esq.

Headings

2.8 The headings of this Second Supplemental Note Deed Poll have been inserted for convenience of reference only, are not to be considered part of this Second Supplemental

Note Deed Poll and shall in no way modify or restrict any of the terms or provisions hereof.

Benefits of Second Supplemental Note Deed Poll

2.9 Nothing in this Second Supplemental Note Deed Poll or the Notes, express or implied, shallgive to any person, other than the parties to this Second Supplemental Note Deed Poll andtheir successors and the Noteholders, any benefit of any legal or equitable right, remedy or claim under the Note Deed Poll, this Second Supplemental Note Deed Poll or the Notes.

Counterparts

2.10 The parties may sign any number of copies of this Second Supplemental Note Deed Poll.

Each signed copy shall be an original, but all of them together represent the same instrument.

Governing law.

2.11 This Second Supplemental Note Deed Poll is governed by the law in force in New SouthWales.

2.12 Clauses 4.2, 4.3 and 4.4 of the Note Deed Poll apply to this Second Supplemental Note DeedPoll in the same manner as they apply to the Note Deed Poll.w

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COUNTRYWIDE HOME LOANS, INC. actingunder the authority of that company in the presenceof:

) ) ) ) ) )

) Signature of witness )

) By executing this deed the authorised signatorystates that it has received no notice of revocationof its signing authority

)

Name of witness (block letters) )

6

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BANK OF AMERICA CORPORATION

As filed with the Securities and Exchange Commission on July 1, 2008

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):

July 1, 2008

BANK OF AMERICA CORPORATION (Exact name of registrant as specified in its charter)

Delaware (State of Incorporation)

1-6523 (Commission File Number)

56-0906609 (IRS Employer Identification

No.)

100 North Tryon Street

Charlotte, North Carolina 28255 (Address of principal executive offices)

(800) 299-2265 begin_of_the_skype_highlighting (800) 299-2265 end_of_the_skype_highlighting

(Registrant’s telephone number, including area code)

Not Applicable (Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing

obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR

240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR

240.13e-4(c))

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ITEM 8.01. OTHER EVENTS.

As previously reported, Bank of America Corporation (the “Registrant”) and Countrywide FinancialCorporation (“Countrywide”) announced that they had signed an Agreement and Plan of Merger pursuant

to which Countrywide will merge with and into a wholly owned subsidiary of the Registrant (the

“Merger”).

On July 1, 2008, the Registrant issued a press release announcing that the Merger had been completedeffective as of July 1, 2008. A copy of the press release announcing the closing of the Merger is filed as

Exhibit 99.1 to this Current Report on Form 8-K.

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.

(d) Exhibits.

The following exhibits are filed herewith:

EXHIBIT NO. DESCRIPTION OF EXHIBIT

99.1 Press release dated July 1, 2008

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SIGNATURES

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 hereunto duly authorized.

BANK OF AMERICA

CORPORATION

By: /s/ Teresa M. Brenner

Teresa M. Brenner

Dated: July 1, 2008 Associate General Counsel

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INDEX TO EXHIBITS

EXHIBIT NO. DESCRIPTION OF EXHIBIT

99.1 Press release dated July 1, 2008

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EX-2.1 2 exhibit21.htm AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

by and among

COUNTRYWIDE FINANCIAL CORPORATION,


and

RED OAK MERGER CORPORATION

_____________________

DATED AS OF JANUARY 11, 2008

TABLE OF CONTENTS

Page

Article I THE MERGER 1

1.1 The Merger 11.2 Effective Time 2

1.3 Effects of the Merger 2

1.4 Conversion of Stock and LLC Interests 2

1.5 Stock Options and Other Stock-Based Awards; ESPP 3

1.6 Certificate of Formation and Limited Liability Company Agreement of the

Surviving Company 6

1.7 Directors and Officers 6

1.8 Tax Consequences 6

Article II DELIVERY OF MERGER CONSIDERATION 6

2.1 Exchange Agent 6

2.2 Deposit of Merger Consideration 6

2.3 Delivery of Merger Consideration 7

Article III REPRESENTATIONS AND WARRANTIES OF COMPANY 9www .S

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3.1 Corporate Organization 9

3.2 Capitalization 10

3.3 Authority; No Violation 12

3.4 Consents and Approvals 13

3.5 Reports; Regulatory Matters 13

3.6 Financial Statements 15

3.7 Broker’s Fees 16

3.8 Absence of Certain Changes or Events 16

3.9 Legal Proceedings 17

3.10 Taxes and Tax Returns 18

3.11 Employee Matters 19

3.12 Compliance with Applicable Law 24

3.13 Certain Contracts 24

3.14 Risk Management Instruments 25

3.15 Investment Securities and Commodities 263.16 Warehouse Loan Portfolio 26

3.17 Property 26

3.18 Intellectual Property 27

3.19 Environmental Liability 31

3.20 Mortgage Banking Business 31

3.21 Securitization Matters 39

3.22 Insurance Matters 43

3.23 State Takeover Laws 46

3.24 Rights Agreement 46

3.25 Interested Party Transactions 46

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TABLE OF CONTENTS

(continued)

Page

3.26 Reorganization; Approvals 46

3.27 Opinion 47

3.28 Company Information 47

Article IV REPRESENTATIONS AND WARRANTIES OF PARENT 47

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4.2 Capitalization 48

4.3 Authority; No Violation 49

4.4 Consents and Approvals 49

4.5 Reports; Regulatory Matters 50

4.6 Financial Statements 51

4.7 Broker’s Fees 52

4.8 Absence of Certain Changes or Events 52

4.9 Legal Proceedings 53

4.10 Taxes and Tax Returns 53

4.11 Compliance with Applicable Law 53

4.12 Reorganization; Approvals 53

4.13 Parent Information 53

Article V COVENANTS RELATING TO CONDUCT OF BUSINESS 54

5.1 Conduct of Businesses Prior to the Effective Time 545.2 Company Forbearances 54

5.3 Parent Forbearances 57

Article VI ADDITIONAL AGREEMENTS 57

6.1 Regulatory Matters 57

6.2 Access to Information 58

6.3 Stockholder Approval 59

6.4 Affiliates 59

6.5 NYSE Listing 59

6.6 Employee Matters 59

6.7 Indemnification; Directors’ and Officers’ Insurance 61

6.8 Additional Agreements 62

6.9 Advice of Changes 62

6.10 Exemption from Liability Under Section 16(b) 63

6.11 No Solicitation 63

6.12 Restructuring Efforts 66

6.13 Dividends 66

6.14 Tax Matters 66

Article VII CONDITIONS PRECEDENT 66

7.1 Conditions to Each Party’s Obligation To Effect the Merger 66

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TABLE OF CONTENTS

(continued)

Page

7.2 Conditions to Obligations of Parent 67

7.3 Conditions to Obligations of Company 68

Article VIII TERMINATION AND AMENDMENT 68

8.1 Termination 68

8.2 Effect of Termination 69

8.3 Fees and Expenses 70

8.4 Termination Fee 70

8.5 Amendment 71

8.6 Extension; Waiver 71

Article IX GENERAL PROVISIONS 71

9.1 Closing 71

9.2 Standard 72

9.3 Nonsurvival of Representations, Warranties and Agreements 72

9.4 Notices 72

9.5 Interpretation 73

9.6 Counterparts 74

9.7 Entire Agreement 74

9.8 Governing Law; Jurisdiction 74

9.9 Publicity 74

9.10 Assignment; Third Party Beneficiaries 74

Exhibit A Form of Affiliate Letter

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INDEX OF DEFINED TERMS

Section

409A Authorities 3.11(k)

Adjusted Option 1.5(a)

Advances 3.20(a)www .S

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Agency(ies) 3.20(a)

Agreement Preamble

AJCA 3.11(k)

Alternative Proposal 6.11(a)

Alternative Transaction 6.11(a)

Applicable Requirements 3.20(a)

Bankruptcy and Equity Exception 3.3(a)

BHC Act 3.4

BHCA Application 3.4

Certificate 1.4(d)

Certificate Insurer 3.20(a)

Certificate of Merger 1.2

Change of Recommendation 6.11(d)

Change of Recommendation Notice 6.11(d)(iv)

Claim 6.7(a)Closing 9.1

Closing Date 9.1

Code Recitals

Collateral Certificate 3.20(a)

Collateral Certificate Pool 3.20(a)

Company Preamble

Company Benefit Plans 3.11(a)

Company By-laws 3.1(b)

Company Capitalization Date 3.2(a)

Company Certificate 3.1(b)

Company Common Stock 1.4(b)

Company Contract 3.13(a)

Company Disclosure Schedule Art. III

Company IP 3.18(a)

Company Options 1.5(a)

Company Preferred Stock 3.2(a)

Company Regulatory Agreement 3.5(b)

Company Requisite Regulatory Approvals 7.3(d)

Company Restricted Shares 1.5(b)Company RSUs 1.5(c)

Company SEC Reports 3.5(b)

Company Securitization Documents 3.21(m)

Company Securitization Interests 3.21(m)

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Company Securitization Trust 3.21(m)

Company Sponsored Asset Securitization Transaction 3.21(j)

Company Stock Plans 1.5(a)

Confidentiality Agreements 6.2(b)

Convertible Note Agreement 4.2(a)

Controlled Group Liability 3.11(d)

Copyrights 3.18(a)

Covered Employees 6.6(a)

Custodial Account 3.20(a)

Custodial File 3.20(a)

Customer Information 3.18(a)

Derivative Transactions 3.14(a)

DGCL 1.1(a)DLLCA 1.1(a)

DPC Common Shares 1.4(b)

Effective Time 1.2

Employees 5.3(c)

Environmental Laws 5.2(c)

Environmental Laws 3.19

ERISA 3.11(a)

ERISA Affiliate 3.11(d)

Exchange Act 3.5(c)

Exchange Agent 2.1Exchange Agent Agreement 2.1

Exchange Fund 2.2

Exchange Ratio 1.4(c)

FDIC 3.1(d)

Federal Reserve Board 3.4

FHA 3.20(a)

FHLBA 3.1(d)

FHLMC 3.20(a)

FNMA 3.20(a)

Foreclosure 3.20(a)

Form S-4 3.4

GAAP 3.1(c)

GNMA 3.20(a)

Governmental Entity 3.4

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Home Owners’ Loan Act 3.1(a)

HSR Act 3.4

Indemnified Parties 6.7(a)

Insurance Amount 6.7(c)

Insurance Contracts 3.22(d)

Insurance Department 3.5(a)

Insurance Subsidiary 3.22(a)

Insurer 3.20(a)

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Intellectual Property 3.18(a)

Investment Commitment 3.20(a)Investor 3.20(a)

IRS 3.10(a)

Leased Properties 3.16

Letter of Transmittal 2.3(a)

License Agreement 3.18(a)

Licensed Company IP 3.18(a)

Liens 3.2(b)

Loans 3.20(a)

Loans Held for Sale 3.20(a)

Master Servicing 3.20(a)Master Servicing Agreement 3.20(a)

Material Adverse Effect 3.8(a)

Materially Burdensome Regulatory Condition 6.1(b)

Merger Recitals

Merger Consideration 1.4(c)

Merger Sub Preamble

Merger Sub Preferred Stock 1.4(e)

Mortgage 3.20(a)

Mortgage Loan Documents 3.20(a)

Mortgage Note 3.20(a)

Mortgage Pool 3.20(a)

Mortgaged Property 3.20(a)

Mortgagor 3.20(a)

Nonqualified Deferred Compensation Plan 3.11(k)

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Open Source Software 3.18(a)

Owned Company IP 3.18(a)

Originator 3.20(a)

Other Regulatory Approvals 3.4

OTS 3.1(a)

Owned Properties 3.16

Paid Off Loan 3.20(a)

Permitted Encumbrances 3.17

Parent Preamble

Parent Bylaws 4.1(a)

Parent Capitalization Date 4.2(a)

Parent Certificate 4.1(a)

Parent Closing Price 1.5(a)

Parent Common Stock 1.4(c)

Parent Disclosure Schedule Art. IVParent Preferred Stock 4.2(a)

Parent Regulatory Agreement 4.5(b)

Parent Requisite Regulatory Approvals 7.2(d)

Parent Restricted Share Right 1.5(b)

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Parent RSU 1.5(c)Parent SEC Reports 4.5(c)

Parent Stock Plans 4.2(a)

Patents 3.18(a)

PBGC 3.11(d)

Pipeline Loan 3.20(a)

PMI Reinsurance Agreements 3.22(k)

Policies, Practices and Procedures 3.15(b)

Portfolio Loans 3.20(a)

Previously Disposed of Loans 3.20(a)

Prior Servicer 3.20(a)

Private Investors 3.20(a)

Producer 3.22(f)

Proxy Statement 3.4

Real Property 3.16

Recourse 3.20(a)www .S

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Regulatory Agencies 3.5(a)

Reinsurance Contracts 3.22(g)

REMIC 3.20(a)

REO 3.20(a)

Restrictive Covenant 3.18(a)

Retained Interest 3.21(m)

Rights 3.2(a)

Rights Agreement 3.2(a)

Sarbanes-Oxley Act 3.5(b)

SAP 3.22(b)

SBA 3.4

SEC 3.4

Securities Act 3.2(a)

Securitization Disclosure Documents 3.21(j)

Seller and Servicing Guides 3.20(a)Series B Preferred Stock 1.4(e)

Serviced Loan 3.20(a)

Servicer 3.20(a)

Servicer Default 3.21(m)

Servicer Default or Termination 3.21(c)

Servicing 3.20(a)

Servicing Agreements 3.20(a)

Servicing Compensation 3.20(a)

Software 3.18(a)

SRO 3.4

State Agency 3.20(a)

Statutory Statements 3.22(b)

Subsidiary 3.1(c)

Superior Proposal 6.11(d)(v)

Surviving Company Recitals

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Takeover Statutes 3.23

Tax(es) 3.10(b)

Tax Return 3.10(c)

Termination Fee 8.4(a)(i)

Trademarks 3.18(a)www .S

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NOW, THEREFORE, in consideration of the mutual covenants, representations,warranties and agreements contained in this Agreement, and other good and valuableconsideration, the receipt and sufficiency of which are hereby acknowledged, andintending to be legally bound hereby, the parties agree as follows:

ARTICLE I

THE MERGER

1.1 The Merger. (a) Subject to the terms and conditions of this Agreement, inaccordance with the Delaware General Corporation Law (the “DGCL”) and the DelawareLimited Liability Company Act (the “DLLCA”), at the Effective Time, Company shallmerge with and into Merger Sub. Merger Sub shall be the Surviving Company in theMerger and shall continue its existence as a limited liability company under the laws of the State of Delaware. As of the Effective Time, the separate corporate existence of Company shall cease.

(b) Parent may at any time change the method of effecting the combination (including by providing for the merger of Company and a wholly-owned subsidiary of Parent

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other than Merger Sub) if and to the extent requested by Parent and consented to byCompany (such consent not to be unreasonably withheld or delayed); provided, however,that no such change shall (i) alter or change the amount or kind of the Merger

Consideration provided for in this Agreement, (ii) adversely affect the Tax treatment of Company’s stockholders as a result of receiving the Merger Consideration or the Taxtreatment of either party pursuant to this Agreement or (iii) materially impede or delayconsummation of the transactions contemplated by this Agreement.

1.2 Effective Time. The Merger shall become effective as set forth in the certificate of merger (the “Certificate of Merger”) that shall be filed with the Secretary of State of theState of Delaware on the Closing Date. The term “Effective Time” shall be the date andtime when the Merger becomes effective as set forth in the Certificate of Merger.

1.3 Effects of the Merger. At and after the Effective Time, the Merger shall have the

effects set forth in the DGCL and DLLCA.

1.4 Conversion of Stock and LLC Interests. At the Effective Time, by virtue of theMerger and without any action on the part of Parent, Merger Sub, Company or the holder of any of the following securities:

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(a) All limited liability company interests of Merger Sub issued and outstandingimmediately prior to the Effective Time shall remain issued and outstanding and shall not be affected by the Merger.

(b) All shares of common stock, par value $0.05 per share, of Company issued and

outstanding immediately prior to the Effective Time (the “Company Common Stock”)that are owned by Company, Parent or any wholly-owned subsidiary of Company or Parent (other than shares of Company Common Stock held in trust accounts, managedaccounts, mutual funds and the like, or otherwise held in a fiduciary or agency capacity,that are beneficially owned by third parties (any such shares, “Trust Account CommonShares”) and other than shares of Company Common Stock held, directly or indirectly, by Company or Parent in respect of a debt previously contracted (any such shares, “DPCCommon Shares”)) shall be cancelled and shall cease to exist and no stock of Parent or other consideration shall be delivered in exchange therefor.

(c) Subject to Section 1.4(f), each share of the Company Common Stock, except for

shares of Company Common Stock owned by Company, Parent or any wholly-ownedsubsidiary of Company or Parent (other than Trust Account Common Shares and DPCCommon Shares), shall be converted, in accordance with the procedures set forth inArticle II, into the right to receive 0.1822 (the “Exchange Ratio”) of a share of commonstock, par value $0.01 per share, of Parent (“Parent Common Stock”) (the “Merger Consideration”).

(d) All of the shares of Company Common Stock converted into the right to receivethe Merger Consideration pursuant to this Article I shall no longer be outstanding andshall automatically be cancelled and shall cease to exist as of the Effective Time, andeach certificate previously representing any such shares of Company Common Stock

(each, a “Certificate”) shall thereafter represent only the right to receive the Merger Consideration and/or

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cash in lieu of fractional shares into which the shares of Company Common Stock represented by such Certificate have been converted pursuant to this Section 1.4 andSection 2.3(f), as well as any dividends to which holders of Company Common Stock become entitled in accordance with Section 2.3(c).

(e) Each share of 7.25% Series B Non-Voting Convertible Preferred Stock, par value$0.05 per share, of Company (the “Series B Preferred Stock”) issued and outstandingimmediately prior to the Effective Time shall be cancelled and shall cease to exist and nostock of Parent or other consideration shall be delivered in exchange therefor.

(f) If, between the date of this Agreement and the Effective Time, the outstandingshares of Parent Common Stock shall have been increased, decreased, changed into or www .S

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exchanged for a different number or kind of shares or securities as a result of areorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, or other similar change in capitalization, an appropriate and proportionateadjustment shall be made to the Merger Consideration.

1.5 Stock Options and Other Stock-Based Awards; ESPP.

(a) As of the Effective Time, by virtue of the Merger and without any action on the part of the holders thereof, each option to purchase shares of Company Common Stock granted under the Amended and Restated 1993 Stock Option Plan, as amended, the 2000Equity Incentive Plan and the 2006 Equity Incentive Plan (collectively, the “CompanyStock Plans”) that is outstanding immediately prior to the Effective Time (collectively,the “Company Options”) shall be converted into an option (an “Adjusted Option”) to purchase, on the same terms and conditions as applied to each such Company Optionimmediately prior to the Effective Time (taking into account any accelerated vesting or other rights, such as the right to surrender for cash, with respect to such Company

Options in accordance with the terms thereof), the number of whole shares of ParentCommon Stock that is equal to the number of shares of Company Common Stock subjectto such Company Option immediately prior to the Effective Time multiplied by theExchange Ratio (rounded down to the nearest whole share), at an exercise price per shareof Parent Common Stock (rounded up to the nearest whole penny) equal to the exercise price for each such share of Company Common Stock subject to such Company Optionimmediately prior to the Effective Time divided by the Exchange Ratio provided, further,that, in the case of any Company Option to which Section 421 of the Code applies as of the Effective Time (after taking into account the effect of any accelerated vesting thereof) by reason of its qualification under Section 422 of the Code, the exercise price, thenumber of shares of Parent Common Stock subject to such option and the terms andconditions of exercise of such option shall be determined in a manner consistent with therequirements of Section 424(a) of the Code.

(b) As of the Effective Time, by virtue of the Merger and without any action on the part of the holders thereof, each stock appreciation right with respect to shares of Company Common Stock granted under a Company Stock Plan that is outstandingimmediately prior to the Effective Time (collectively, the “Company SARs”) shall beconverted into a stock appreciation right (an “Adjusted SAR”) with respect to, on thesame terms and conditions as applied to each such Company SAR immediately prior tothe Effective Time (taking into account any

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accelerated vesting or other rights, such as the right to surrender for cash, with respect tosuch Company SARs in accordance with the terms thereof), the number of whole sharesof Parent Common Stock that is equal to the number of shares of Company CommonStock with respect to which such Company SAR is subject to immediately prior to thewww .S

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Effective Time multiplied by the Exchange Ratio (rounded down to the nearest wholeshare), at a base price per share of Parent Common Stock (rounded up to the nearestwhole penny) equal to the base price for each such share of Company Common Stock subject to such Company SAR immediately prior to the Effective Time divided by theExchange Ratio.

(c) As of the Effective Time, each restricted share of Company Common Stock granted under a Company Stock Plan that is outstanding immediately prior to theEffective Time (collectively, the “Company Restricted Shares”) shall, by virtue of theMerger and without any action on the part of the holder thereof, be converted into theright to receive (the “Parent Restricted Share Right”), on the same terms and conditionsas applied to each such Company Restricted Share immediately prior to the EffectiveTime (including the same transfer restrictions taking into account any accelerated vestingof such Company Restricted Share in accordance with the terms thereof), the Merger Consideration; provided, however, that, upon the lapsing of restrictions with respect toeach such Parent Restricted Share Right in accordance with the terms applicable to the

corresponding Company Restricted Share immediately prior to the Effective Time, Parentshall be entitled to deduct and withhold such amounts as may be required to be deductedand withheld under the Code and any applicable state or local Tax law with respect to thelapsing of such restrictions.

(d) As of the Effective Time, each restricted share unit with respect to shares of Company Common Stock granted under a Company Stock Plan that is outstandingimmediately prior to the Effective Time (collectively, the “Company RSUs”) shall, byvirtue of the Merger and without any action on the part of the holder thereof, beconverted into a restricted share unit, on the same terms and conditions as applied to eachsuch Company RSU immediately prior to the Effective Time (taking into account anyaccelerated vesting of such Company RSU in accordance with the terms thereof), withrespect to the number of shares of Parent Common Stock that is equal to the number of shares of Company Common Stock subject to the Company RSU immediately prior tothe Effective Time multiplied by the Exchange Ratio (rounded to the nearest wholeshare) (a “Parent RSU”) The obligations in respect of the Parent RSUs shall be payableor distributable in accordance with the terms of the agreement, plan or arrangementrelating to such Parent RSUs.

(e) As of the Effective Time, all amounts denominated in Company Common Stock and held in participant accounts (collectively, the “Company Deferred Equity Units”)either pursuant to Company’s 2003 Non-Employee Directors’ Fee Plan, Company’s 2004Executive Equity Deferral Program or pursuant to any other nonqualified deferredcompensation program or any individual deferred compensation agreements (collectively,the “Company Deferred Equity Unit Plans”) shall, by virtue of the Merger and withoutany action on the part of the holder thereof, be converted into deferred equity units, onthe same terms and conditions as applied to such Company Deferred Equity Unitsimmediately prior to the Effective Time (taking into account any accelerated vesting of such Company Deferred Equity Units in accordance with the terms thereof), with respect

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to the number of shares of Parent Common Stock that is equal to the number of shares of Company Common Stock in which such Company Deferred Equity

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Units are denominated immediately prior to the Effective Time multiplied by theExchange Ratio (rounded to the nearest whole share) (a “Parent Deferred Equity Unit”).The obligations in respect of the Parent Deferred Equity Units shall be payable or distributable in accordance with the terms of the Company Deferred Equity Unit Planrelating to such Parent Deferred Equity Units.

(f) As of the Effective Time, Parent shall assume the obligations and succeed to therights of Company under the Company Stock Plans with respect to the Company Options(as converted into Adjusted Options), the Company SARs (as converted into Adjusted

SARs), the Company RSUs (as converted into Parent RSUs), the Company DeferredEquity Units (as converted into Parent Deferred Equity Units) and Company RestrictedShares (as converted into Parent Restricted Share Rights). Company and Parent agree that prior to the Effective Time each of the Company Stock Plans shall be amended, to theextent possible without requiring stockholder approval of such amendments, (i) if and tothe extent necessary and practicable, to reflect the transactions contemplated by thisAgreement, including the conversion of the Company Options, Company SARs,Company Restricted Shares and Company RSUs pursuant to paragraphs (a), (b), (c), (d)and (e) above and the substitution of Parent for Company thereunder to the extentappropriate to effectuate the assumption of such Company Stock Plans by Parent, (ii) to preclude any automatic or formulaic grant of options, restricted shares or other awards

thereunder on or after the Effective Time (other than with respect to the dividendreinvestment feature of any such plan), and (iii) to the extent requested by Parent in atimely manner and subject to compliance with applicable law and the terms of the plan, toterminate any or all Company Stock Plans effective immediately prior to the EffectiveTime (other than with respect to outstanding awards thereunder). From and after theEffective Time, all references to Company (other than any references relating to a“Change in Control” of Company) in each Company Stock Plan and in each agreementevidencing any award of Company Options, Company SARs, Company RestrictedShares, Company RSUs or Company Deferred Equity Units shall be deemed to refer toParent, unless Parent determines otherwise.

(g) Parent shall take all action necessary or appropriate to have available for issuanceor transfer a sufficient number of shares of Parent Common Stock for delivery uponexercise of the Adjusted Options or the Adjusted SARs or settlement of the Parent RSUsor Parent Deferred Equity Units. All of the conversions and adjustments made pursuant tothis Section 1.5, including without limitation, the determination of the number of sharesof Parent Common Stock subject to any award and the exercise price of the AdjustedOptions or base price of the Adjusted SARs, shall be made in a manner consistent withthe requirements of Section 409A of the Code. Promptly after the Effective Time, Parentwww .S

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shall prepare and file with the SEC a post-effective amendment converting the Form S-4to a Form S-8 (or file such other appropriate form) registering a number of shares of Parent Common Stock necessary to fulfill Parent’s obligations under this paragraph (g).

(h) Company shall, prior to the Effective Time, take all actions necessary to terminate

the employee stock purchase plan portion of Company’s Global Stock Plan (such portion,the “Company ESPP”) effective as of the Effective Time and all outstanding rightsthereunder at the Effective Time. The offering period in effect as of immediately prior tothe Effective Time shall end in accordance with the terms of the Company ESPP andeach participant in the Company ESPP will be credited with the number of share(s) of Company

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Common Stock purchased for his or her account(s) under the Company ESPP in respectof the applicable offering period in accordance with the terms of the Company ESPP. Theoptions to acquire Company Common Stock under the UK ShareSave Scheme of Company’s Global Stock Plan (the “Company SAYE”) shall be treated in accordancewith Section 6 of the Company SAYE and, to the extent required thereunder to remainoutstanding following the Effective Time and converted into the right to receive shares of Parent Common Stock in the same manner as provided in Section 1.5(a) or as otherwiserequired by applicable law.

1.6 Certificate of Formation and Limited Liability Company Agreement of theSurviving Company. At the Effective Time, the certificate of formation of Merger Sub

shall, by virtue of the Merger, be amended and restated in its entirety to read as thecertificate of formation of Merger Sub in effect immediately prior to the Effective Time,except that Item 1 thereof shall read as follows: “The name of the limited liabilitycompany is Countrywide Financial LLC,” and as so amended, shall be the certificate of formation of the Surviving Company until thereafter amended in accordance withapplicable law. The limited liability company agreement of Merger Sub, as in effectimmediately prior to the Effective Time, shall be the limited liability company agreementof the Surviving Company until thereafter amended in accordance with applicable lawand the terms of such limited liability company agreement.

1.7 Directors and Officers. The directors of Company and its Subsidiaries immediately prior to the Effective Time shall submit their resignations to be effective as of theEffective Time. The directors, if any, and officers of Merger Sub shall, from and after theEffective Time, become the directors and officers, respectively, of the SurvivingCompany until their successors shall have been duly elected, appointed or qualified or until their earlier death, resignation or removal in accordance with the limited liabilitycompany agreement of the Surviving Company.

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1.8 Tax Consequences. It is intended that the Merger shall constitute a“reorganization” within the meaning of Section 368(a) of the Code, and that thisAgreement shall constitute a “plan of reorganization” for purposes of Sections 354 and361 of the Code.

ARTICLE II

DELIVERY OF MERGER CONSIDERATION

2.1 Exchange Agent. Prior to the Effective Time Parent shall appoint a bank or trustcompany Subsidiary of Parent or another bank or trust company reasonably acceptable toCompany, or Parent’s transfer agent, pursuant to an agreement (the “Exchange AgentAgreement”) to act as exchange agent (the “Exchange Agent”) hereunder.

2.2 Deposit of Merger Consideration. At or prior to the Effective Time, Parent shall (i)authorize the Exchange Agent to issue an aggregate number of shares of Parent Common

Stock equal to the aggregate Merger Consideration, and (ii) deposit, or cause to bedeposited with, the Exchange Agent, to the extent then determinable, any cash payable inlieu of fractional shares pursuant to Section 2.3(f) (the “Exchange Fund”).

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2.3 Delivery of Merger Consideration.

(a) As soon as reasonably practicable after the Effective Time, the Exchange Agent

shall mail to each holder of record of Certificate(s) which immediately prior to theEffective Time represented outstanding shares of Company Common Stock whose shareswere converted into the right to receive the Merger Consideration pursuant to Section 1.4and any cash in lieu of fractional shares of Parent Common Stock to be issued or paid inconsideration therefor (i) a letter of transmittal (which shall specify that delivery shall beeffected, and risk of loss and title to Certificate(s) shall pass, only upon delivery of Certificate(s) (or affidavits of loss in lieu of such Certificates)) to the Exchange Agentand shall be substantially in such form and have such other provisions as shall be prescribed by the Exchange Agent Agreement (the “Letter of Transmittal”) and (ii)instructions for use in surrendering Certificate(s) in exchange for the Merger Consideration, any cash in lieu of fractional shares of Parent Common Stock to be issued

or paid in consideration therefor and any dividends or distributions to which such holder is entitled pursuant to Section 2.3(c).

(b) Upon surrender to the Exchange Agent of its Certificate or Certificates,accompanied by a properly completed Letter of Transmittal, a holder of CompanyCommon Stock will be entitled to receive promptly after the Effective Time the Merger Consideration and any cash in lieu of fractional shares of Parent Common Stock to beissued or paid in consideration therefor in respect of the shares of Company Commonwww .S

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Stock represented by its Certificate or Certificates. Until so surrendered, each suchCertificate shall represent after the Effective Time, for all purposes, only the right toreceive, without interest, the Merger Consideration and any cash in lieu of fractionalshares of Parent Common Stock to be issued or paid in consideration therefor uponsurrender of such Certificate in accordance with, and any dividends or distributions to

which such holder is entitled pursuant to, this Article II.

(c) No dividends or other distributions with respect to Parent Common Stock shall be paid to the holder of any unsurrendered Certificate with respect to the shares of ParentCommon Stock represented thereby, in each case unless and until the surrender of suchCertificate in accordance with this Article II. Subject to the effect of applicableabandoned property, escheat or similar laws, following surrender of any such Certificatein accordance with this Article II, the record holder thereof shall be entitled to receive,without interest, (i) the amount of dividends or other distributions with a record date after the Effective Time theretofore payable with respect to the whole shares of ParentCommon Stock represented by such Certificate and not paid and/or (ii) at the appropriate

payment date, the amount of dividends or other distributions payable with respect toshares of Parent Common Stock represented by such Certificate with a record date after the Effective Time (but before such surrender date) and with a payment date subsequentto the issuance of the Parent Common Stock issuable with respect to such Certificate.

(d) In the event of a transfer of ownership of a Certificate representing CompanyCommon Stock that is not registered in the stock transfer records of Company, thefractional shares of Parent Common Stock and cash in lieu of fractional shares of ParentCommon Stock comprising the Merger Consideration shall be issued or paid in exchangetherefor to a person other than the person in whose name the Certificate so surrendered isregistered if the Certificate formerly representing such Company Common Stock shall be properly endorsed or otherwise be

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in proper form for transfer and the person requesting such payment or issuance shall payany transfer or other similar Taxes required by reason of the payment or issuance to a person other than the registered holder of the Certificate or establish to the satisfaction of Parent that the Tax has been paid or is not applicable. The Exchange Agent (or,subsequent to the earlier of (x) the one-year anniversary of the Effective Time and (y) theexpiration or termination of the Exchange Agent Agreement, Parent) shall be entitled todeduct and withhold from any cash in lieu of fractional shares of Parent Common Stock otherwise payable pursuant to this Agreement to any holder of Company Common Stock such amounts as the Exchange Agent or Parent, as the case may be, is required to deductand withhold under the Code, or any provision of state, local or foreign Tax law, withrespect to the making of such payment. To the extent the amounts are so withheld by theExchange Agent or Parent, as the case may be, and timely paid over to the appropriateGovernmental Entity, such withheld amounts shall be treated for all purposes of thiswww .S

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Agreement as having been paid to the holder of shares of Company Common Stock inrespect of whom such deduction and withholding was made by the Exchange Agent or Parent, as the case may be.

(e) After the Effective Time, there shall be no transfers on the stock transfer books of

Company of the shares of Company Common Stock that were issued and outstandingimmediately prior to the Effective Time other than to settle transfers of CompanyCommon Stock that occurred prior to the Effective Time. If, after the Effective Time,Certificates representing such shares are presented for transfer to the Exchange Agent,they shall be cancelled and exchanged for the Merger Consideration and any cash in lieuof fractional shares of Parent Common Stock to be issued or paid in considerationtherefor in accordance with the procedures set forth in this Article II.

(f) Notwithstanding anything to the contrary contained in this Agreement, nofractional shares of Parent Common Stock shall be issued upon the surrender of Certificates for exchange, no dividend or distribution with respect to Parent Common

Stock shall be payable on or with respect to any fractional share, and such fractionalshare interests shall not entitle the owner thereof to vote or to any other rights of astockholder of Parent. In lieu of the issuance of any such fractional share, Parent shall pay to each former stockholder of Company who otherwise would be entitled to receivesuch fractional share an amount in cash (rounded to the nearest cent) determined bymultiplying (i) the average, rounded to the nearest one ten thousandth, of the closing sale prices of Parent Common Stock on the New York Stock Exchange (the “NYSE”) asreported by The Wall Street Journal for the five trading days immediately preceding thedate of the Effective Time by (ii) the fraction of a share (after taking into account allshares of Company Common Stock held by such holder at the Effective Time androunded to the nearest thousandth when expressed in decimal form) of Parent CommonStock to which such holder would otherwise be entitled to receive pursuant to Section1.4.

(g) Any portion of the Exchange Fund that remains unclaimed by the stockholders of Company as of the first anniversary of the Effective Time may be paid to Parent. In suchevent, any former stockholders of Company who have not theretofore complied with thisArticle II shall thereafter look only to Parent with respect to the Merger Consideration,any cash in lieu of any fractional shares and any unpaid dividends and distributions onthe Parent Common Stock deliverable in respect of each share of Company CommonStock such stockholder holds as determined pursuant to this Agreement, in each case,without any interest

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thereon. Notwithstanding the foregoing, none of Parent, the Surviving Company, theExchange Agent or any other person shall be liable to any former holder of shares of

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(b) True, complete and correct copies of the Restated Certificate of Incorporation of

Company (the “Company Certificate”), and the Amended and Restated Bylaws of Company (the “Company Bylaws”), as in effect as of the date of this Agreement, have previously been made available to Parent.

(c) Each Subsidiary of Company (i) is duly incorporated or duly formed, as applicableto each such Subsidiary, and validly existing and in good standing under the laws of its jurisdiction of organization, (ii) has the requisite corporate power and authority or other power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted and (iii) is duly licensed or qualified to do businessin each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or

qualification necessary. The certificates of incorporation, by-laws and similar governingdocuments of each Subsidiary of Company, copies of which have previously been madeavailable to Parent, are true, complete and correct copies of such documents as of the dateof this Agreement. As used in this Agreement, the word “Subsidiary”, when used withrespect to either party, means any bank, corporation, partnership, limited liabilitycompany or other organization, whether incorporated or unincorporated, that isconsolidated with such party for financial reporting purposes under U.S. generallyaccepted accounting principles (“GAAP”).

(d) The deposit accounts of Countrywide Bank, fsb are insured by the Federal DepositInsurance Corporation (the “FDIC”) through the Deposit Insurance Fund to the fullest

extent permitted by law, and all premiums and assessments required to be paid inconnection therewith have been paid when due. Countrywide Bank, fsb is a member ingood standing of the Federal Home Loan Bank of Atlanta (the “FHLBA”).

(e) The minute books of Company previously made available to Parent contain true,complete and correct records of all meetings and other corporate actions held or takensince January 1, 2005 of its stockholders and Board of Directors (including committees of its Board of Directors).

3.2 Capitalization. (a) The authorized capital stock of Company consists of 1,000,000,000 shares of Company Common Stock, par value $0.05 per share, of which,as of December 31, 2007 (the “Company Capitalization Date”), 578,919,834 shares,including all Company Restricted Shares, were issued and outstanding, and 1,500,000shares of preferred stock, par value $0.05 per share (the “Company Preferred Stock”), of which, as of the Company Capitalization Date, (i) 250,000 shares were designated asSeries A Participating Preferred Stock, none of which were outstanding, and (ii) 20,000shares were designated, issued and outstanding as Series B Preferred Stock. As of theCompany Capitalization Date, no shares of Company Common Stock or CompanyPreferred Stock were reserved for issuance except for (u) 49,693,066 shares of Companywww .S

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Common Stock reserved for issuance in connection with Company Options andCompany SARs under the Company Stock Plans that are outstanding as of the CompanyCapitalization Date, (v) 1,056,172 shares of Company Common Stock reserved for issuance upon settlement of the Company RSUs and Company Deferred Equity Units thatare outstanding as of the Company Capitalization Date, (w) 111,111,111 shares of

Company Common Stock reserved for issuance upon conversion of the Series BPreferred Stock, (x) 72,300,000 shares of Company Common Stock reserved for issuanceupon conversion of

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Company’s Series A and Series B floating rate convertible debentures, (y) 26,601,024shares of Company Common Stock reserved for issuance under Company’s dividendreinvestment plan and 401(k) plan and (z) 250,000 shares of Series A Participating

Preferred Stock reserved for issuance in accordance with the Amended and RestatedRights Agreement, dated as of November 27, 2001, as amended, between Company andAmerican Stock Transfer & Trust Company, as Rights Agent (the “Rights Agreement”), pursuant to which Company has issued rights to purchase Series A Participating PreferredStock (“Rights”). All of the issued and outstanding shares of Company Common Stock have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. As of thedate of this Agreement, no bonds, debentures, notes or other indebtedness having theright to vote on any matters on which shareholders of Company may vote (“VotingDebt”) are issued or outstanding. As of the date of this Agreement, except pursuant tothis Agreement, including with respect to the Company Stock Plans as set forth herein,

the Certificate of Designation of the Series B Preferred Stock, and the Rights Agreement,Company does not have and is not bound by any outstanding subscriptions, options,warrants, calls, rights, commitments or agreements of any character calling for the purchase or issuance of, or the payment of any amount based on, any shares of CompanyCommon Stock, Company Preferred Stock, Voting Debt or any other equity securities of Company or any securities representing the right to purchase or otherwise receive anyshares of Company Common Stock, Company Preferred Stock, Voting Debt or other equity securities of Company. As of the date of this Agreement, except as provided in theCertificate of Designation of the Series B Preferred Stock, there are no contractualobligations of Company or any of its Subsidiaries (I) to repurchase, redeem or otherwiseacquire any shares of capital stock of Company or any equity security of Company or itsSubsidiaries or any securities representing the right to purchase or otherwise receive anyshares of capital stock or any other equity security of Company or its Subsidiaries or (II) pursuant to which Company or any of its Subsidiaries is or could be required to register shares of Company capital stock or other securities under the Securities Act of 1933, asamended (the “Securities Act”).

(b) Company has provided Parent with a true, complete and correct list of theaggregate number of shares of Company Common Stock issuable upon the exercise of www .S

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each Company Option and Company SAR and settlement of each Company RSU andCompany Deferred Equity Unit granted under the Company Stock Plans that wereoutstanding as of the Company Capitalization Date and the exercise price for each suchCompany Option and Company SAR. Other than the Company Options, Company SARs,Company Restricted Shares, Company RSUs and Company Deferred Equity Units that

are outstanding as of the Company Capitalization Date, no other equity-based awards areoutstanding as of the Company Capitalization Date. Since the Company CapitalizationDate through the date hereof, Company has not (A) issued or repurchased any shares of Company Common Stock, Company Preferred Stock, Voting Debt or other equitysecurities of Company, other than the issuance of shares of Company Common Stock inconnection with the exercise of Company Options or Company SARs or settlement of theCompany RSUs or Company Deferred Equity Units granted under the Company Stock Plans or Company Deferred Equity Unit Plans that were outstanding on the CompanyCapitalization Date or (B) issued or awarded any options, stock appreciation rights,restricted shares, restricted stock units, deferred equity units, awards based on the valueof Company capital stock or any other equity-based awards under any of the Company

Stock Plans.

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(c) Except for any director qualifying shares, all of the issued and outstanding sharesof capital stock or other equity ownership interests of each Subsidiary of Company areowned by Company, directly or indirectly, free and clear of any liens, pledges, charges,claims and security interests and similar encumbrances (“Liens”), and all of such sharesor equity ownership interests are duly authorized and validly issued and are fully paid,

nonassessable and free of preemptive rights. No Subsidiary of Company has or is bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any shares of capital stock or anyother equity security of such Subsidiary or any securities representing the right to purchase or otherwise receive any shares of capital stock or any other equity security of such Subsidiary.

3.3 Authority; No Violation. (a) Company has full corporate power and authority toexecute and deliver this Agreement and to consummate the transactions contemplatedhereby. The execution and delivery of this Agreement and the consummation of thetransactions contemplated hereby have been duly, validly and unanimously approved bythe Board of Directors of Company. The Board of Directors of Company has determinedunanimously that this Agreement is advisable and in the best interests of Company and itsstockholders and has directed that this Agreement be submitted to Company’sstockholders for approval and adoption at a duly held meeting of such stockholders andhas adopted a resolution to the foregoing effect. Except for the approval and adoption of this Agreement by the affirmative vote of the holders of a majority of the outstandingshares of Company Common Stock entitled to vote at such meeting, no other corporate proceedings on the part of Company are necessary to approve this Agreement or towww .S

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consummate the transactions contemplated hereby. This Agreement has been duly andvalidly executed and delivered by Company and (assuming due authorization, executionand delivery by Parent and Merger Sub) constitutes the valid and binding obligation of Company, enforceable against Company in accordance with its terms (except as may belimited by bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or

similar laws of general applicability relating to or affecting the rights of creditorsgenerally and subject to general principles of equity (the “Bankruptcy and EquityException”)).

(b) Neither the execution and delivery of this Agreement by Company nor theconsummation by Company of the transactions contemplated hereby, nor compliance byCompany with any of the terms or provisions of this Agreement, will (i) violate any provision of the Company Certificate or Company Bylaws or (ii) assuming that theconsents, approvals and filings referred to in Section 3.4 are duly obtained and/or made,(A) violate any law, judgment, order, injunction or decree applicable to Company, any of its Subsidiaries or any of their respective properties or assets or (B) violate, conflict with,

result in a breach of any provision of or the loss of any benefit under, constitute a default(or an event which, with notice or lapse of time, or both, would constitute a default)under, result in the termination of or a right of termination or cancellation under,accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of Company or any of its Subsidiaries under, any of theterms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust,license, lease, franchise, permit, Company Securitization Document, agreement, by-lawor other instrument or obligation to which Company or any of its Subsidiaries is a partyor by which any of them or any of their respective properties or assets is bound.

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3.4 Consents and Approvals. Except for (i) the filing of an application (the “BHCAApplication”) with the Board of Governors of the Federal Reserve System (the “FederalReserve Board”) under Section 4 of the Bank Holding Company Act of 1956, asamended (the “BHC Act”) and approval of such application, (ii) the filing of any requiredapplications, filings or notices with any foreign, federal or state banking, consumer finance, mortgage banking, insurance or other regulatory, self-regulatory or enforcementauthorities or any courts, administrative agencies or commissions or other governmentalauthorities or instrumentalities (each a “Governmental Entity”) and approval of or non-objection to such applications, filings and notices (the “Other Regulatory Approvals”),(iii) the filing with the Securities and Exchange Commission (the “SEC”) of a ProxyStatement in definitive form relating to the meeting of Company’s stockholders to beheld in connection with this Agreement and the transactions contemplated by thisAgreement (the “Proxy Statement”) and of a registration statement on Form S-4 (the“Form S-4”) in which the Proxy Statement will be included as a prospectus, anddeclaration of effectiveness of the Form S-4 and the filing and effectiveness of theregistration statement contemplated by Section 1.5(e), (iv) the filing of the Certificate of www .S

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Agency or other Governmental Entity with respect to any report or statement relating toany examinations or inspections of Company or any of its Subsidiaries. Since January 1,2005, there have been no formal or informal inquiries by, or disagreements or disputeswith, any Regulatory Agency or other Governmental Entity with respect to the business,operations, policies or procedures of Company or any of its Subsidiaries (other than

normal examinations conducted by a Regulatory Agency or other Governmental Entity inCompany’s ordinary course of business).

(b) Neither Company nor any of its Subsidiaries is subject to any cease-and-desist or other order or enforcement action issued by, or is a party to any written agreement,consent agreement or memorandum of understanding with, or is a party to anycommitment letter or similar undertaking to, or is subject to any order or directive by, or has been ordered to pay any civil money penalty by, or has been since January 1, 2005 arecipient of any supervisory letter from, or since January 1, 2005 has adopted any policies, procedures or board resolutions at the request or suggestion of, any RegulatoryAgency or other Governmental Entity that currently restricts in any material respect the

conduct of its business (or to Company’s knowledge that, upon consummation of theMerger, would restrict in any material respect the conduct of the business of Parent or any of its Subsidiaries), or that in any material manner relates to its capital adequacy, itsability to pay dividends, its credit, risk management or compliance policies, its internalcontrols, its management or its business, other than those of general application thatapply to similarly situated savings and loan holding companies or their Subsidiaries (eachitem in this sentence, a “Company Regulatory Agreement”), nor has Company or any of its Subsidiaries been advised since January 1, 2005 by any Regulatory Agency or other Governmental Entity that it is considering issuing, initiating, ordering, or requesting anysuch Company Regulatory Agreement. To the knowledge of Company, there has not been any event or occurrence since January 1, 2005 that would result in a determinationthat Countrywide Bank, fsb is not “well capitalized” as a matter of U.S. federal bankinglaw.

(c) Company has previously made available to Parent an accurate and complete copyof each (i) final registration statement, prospectus, report, schedule and definitive proxystatement filed with or furnished to the SEC by Company or any of its Subsidiaries pursuant to the Securities Act or the Securities Exchange Act of 1934, as amended (the“Exchange Act”) since January 1, 2005 (the “Company SEC Reports”) and prior to thedate of this Agreement and (ii) communication mailed by Company to its stockholderssince January 1, 2005 and prior to the date of this Agreement. No such Company SECReport or communication, at the time filed, furnished or communicated (and, in the caseof registration statements and proxy statements, on the dates of effectiveness and thedates of the relevant meetings, respectively), contained any untrue statement of a materialfact or omitted to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances in which they weremade, not misleading, except that information as of a later date (but before the date of this Agreement) shall be deemed to modify information as of an earlier date. As of their respective dates, all Company SEC Reports complied as to form in all material respects

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with the published rules and regulations of the SEC with respect thereto. Each current

Subsidiary of Company that has filed since January 1, 2005 a Form S-3 registrationstatement with the SEC meets the requirements for the use of Form S-3, and no event hasoccurred that would reasonably be expected to result in Form S-3 eligibility requirementsno longer being satisfied by any such Subsidiary. No executive officer of Company hasfailed in any respect to make the certifications required of him or her under Section 302or 906 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”).

3.6 Financial Statements.

(a) The financial statements of Company and its Subsidiaries included (or incorporated by reference) in the Company SEC Reports (including the related notes,

where applicable) (i) have been prepared from, and are in accordance with, the books andrecords of Company and its Subsidiaries, (ii) fairly present in all material respects theconsolidated results of operations, cash flows, changes in stockholders’ equity andconsolidated financial position of Company and its Subsidiaries for the respective fiscal periods or as of the respective dates therein set forth (subject in the case of unauditedstatements to recurring year-end audit adjustments normal in nature and amount), (iii)complied as to form, as of their respective dates of filing with the SEC, in all materialrespects with applicable accounting requirements and with the published rules andregulations of the SEC with respect thereto, and (iv) have been prepared in accordancewith GAAP consistently applied during the periods involved, except, in each case, asindicated in such statements or in the notes thereto. The books and records of Company

and its Subsidiaries have been, and are being, maintained in all material respects inaccordance with GAAP and any other applicable legal and accounting requirements andreflect only actual transactions. KPMG LLP has not resigned or been dismissed asindependent public accountants of Company as a result of or in connection with anydisagreements with Company on a matter of accounting principles or practices, financialstatement disclosure or auditing scope or procedure.

(b) Neither Company nor any of its Subsidiaries has any material liability or obligation of any nature whatsoever (whether absolute, accrued, contingent, determined,determinable or otherwise and whether due or to become due), except for (i) thoseliabilities that are reflected or reserved against on the consolidated balance sheet of Company included in its Quarterly Report on Form 10-Q for the fiscal quarter endedSeptember 30, 2007 (including any notes thereto) and (ii) liabilities incurred in theordinary course of business consistent with past practice since September 30, 2007 or inconnection with this Agreement and the transactions contemplated hereby.

(c) The records, systems, controls, data and information of Company and itsSubsidiaries are recorded, stored, maintained and operated under means (including anyelectronic, mechanical or photographic process, whether computerized or not) that arewww .S

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Agreement, other than as set forth on Section 3.7 of the Company Disclosure Scheduleand pursuant to letter agreements, true, complete and correct copies of which have been previously delivered to Parent.

3.8 Absence of Certain Changes or Events. (a) Since September 30, 2007, no event or

events have occurred that have had or would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on Company. As used in thisAgreement, the term “Material Adverse Effect” means, with respect to Parent or Company, as the case may be, a material adverse effect on (i) the financial condition,results of operations or business of such party and its Subsidiaries taken as a whole(provided, however, that, with respect to this clause (i), a “Material Adverse Effect” shallnot be deemed to include effects to the extent resulting from (A) changes, after the datehereof, in GAAP or regulatory accounting requirements applicable generally tocompanies in the industries in which such party and its Subsidiaries operate, (B) changes,after the date hereof, in laws, rules or regulations of general applicability to companies inthe industries in which such party and its Subsidiaries operate, (C) actions or omissions

taken with the prior written consent of the other party, (D) changes, after the

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date hereof, in global or national political conditions or general economic or marketconditions generally affecting other companies in the industries in which such party andits Subsidiaries operate or (E) the public disclosure of this Agreement or the transactionscontemplated hereby, except, with respect to clauses (A) and (B), to the extent that theeffects of such change are disproportionately adverse to the financial condition, results of

operations or business of such party and its Subsidiaries, taken as a whole, as comparedto other companies in the industry in which such party and its Subsidiaries operate) or (ii)the ability of such party to timely consummate the transactions contemplated by thisAgreement.

(b) Since September 30, 2007 through and including the date of this Agreement,Company and its Subsidiaries have carried on their respective businesses in all materialrespects in the ordinary course of business consistent with their past practice.

(c) Since September 30, 2007, neither Company nor any of its Subsidiaries has (i)except for (A) normal increases for or payments to employees (other than officers subjectto the reporting requirements of Section 16(a) of the Exchange Act (the “ExecutiveOfficers”)) made in the ordinary course of business consistent with past practice or (B) asrequired by applicable law or contractual obligations existing as of the date hereof,increased the wages, salaries, compensation, pension, or other fringe benefits or perquisites payable to any Executive Officer or other employee or director from theamount thereof in effect as of September 30, 2007, granted any severance or termination pay, entered into any contract to make or grant any severance or termination pay (in eachcase, except as required under the terms of agreements or severance plans listed onwww .S

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Section 3.11 of the Company Disclosure Schedule, as in effect as of the date hereof ), or paid any bonus other than the customary year-end bonuses in amounts consistent with past practice, (ii) granted any options to purchase shares of Company Common Stock,any restricted shares of Company Common Stock or any right to acquire any shares of itscapital stock, or any right to payment based on the value of Company’s capital stock, to

any Executive Officer or other employee or director other than grants to employees (other than Executive Officers) made in the ordinary course of business consistent with past practice under the Company Stock Plans, (iii) changed any financial accounting methods, principles or practices of Company or its Subsidiaries affecting its assets, liabilities or businesses, including any reserving, renewal or residual method, practice or policy, (iv)suffered any strike, work stoppage, slowdown, or other labor disturbance, or (v) exceptfor publicly disclosed ordinary dividends on the Company Common Stock or Series BPreferred Stock and except for distributions by wholly-owned Subsidiaries of Companyto Company or another wholly-owned Subsidiary of Company, made or declared anydistribution in cash or kind to its stockholder or repurchased any shares of its capitalstock or other equity interests.

3.9 Legal Proceedings. (a) Neither Company nor any of its Subsidiaries is a party toany, and there are no pending or, to the best of Company’s knowledge, threatened, legal,administrative, arbitral or other proceedings, claims, actions, suits or governmental or regulatory investigations of any nature against Company or any of its Subsidiaries or towhich any of their assets are subject.

(b) There is no judgment, settlement agreement, order, injunction, decree or regulatoryrestriction (other than those of general application that apply to similarly situated savingsand loan holding companies or their Subsidiaries) imposed upon Company, any of its

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Subsidiaries or the assets of Company or any of its Subsidiaries (or that, uponconsummation of the Merger, would apply to Parent or any of its Subsidiaries).

3.10 Taxes and Tax Returns.

(a) Each of Company and its Subsidiaries has duly and timely filed (including allapplicable extensions) all material Tax Returns required to be filed by it on or prior to thedate of this Agreement (all such Tax Returns being accurate and complete in all materialrespects), has paid all Taxes shown thereon as arising and has duly paid or made provision for the payment of all material Taxes that have been incurred or are due or claimed to be due from it by federal, state, foreign or local taxing authorities other thanTaxes that are not yet delinquent or are being contested in good faith, have not beenfinally determined and have been adequately reserved against under GAAP. The federal,California and New York state income Tax returns of Company and its Subsidiaries have been examined by the Internal Revenue Service (the “IRS”) or other relevant taxingwww .S

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authority for all years to and including the years ending December 2004, December 2001and February 2001, respectively, and any liability with respect thereto has been satisfiedor any liability with respect to deficiencies asserted as a result of such examination iscovered by reserves that are adequate under GAAP. There are no material disputes pending, or written claims asserted, for Taxes or assessments upon Company or any of its

Subsidiaries for which Company does not have reserves that are adequate under GAAP. Neither Company nor any of its Subsidiaries is a party to or is bound by any Tax sharing,allocation or indemnification agreement or arrangement (other than such an agreement or arrangement exclusively between or among Company and its Subsidiaries). Within the past five years (or otherwise as part of a “plan (or series of related transactions)” withinthe meaning of Section 355(e) of the Code of which the Merger is also a part), neither Company nor any of its Subsidiaries has been a “distributing corporation” or a“controlled corporation” in a distribution intended to qualify under Section 355(a) of theCode. Neither Company nor any of its Subsidiaries is required to include in income anyadjustment pursuant to Section 481(a) of the Code, no such adjustment has been proposed by the IRS and no pending request for permission to change any accounting method has

been submitted by Company or any of its Subsidiaries. The aggregate balance of thereserve for bad debts described in any provision under state or local laws and regulationssimilar to Section 593(g)(2)(A)(ii) of the Code of Company and its Subsidiaries is notgreater than $1,000,000. Neither Company nor any of its Subsidiaries has participated ina “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4(b)(2).

(b) As used in this Agreement, the term “Tax” or “Taxes” means (i) all federal, state,local, and foreign income, excise, gross receipts, gross income, ad valorem, profits, gains, property, capital, sales, transfer, use, payroll, employment, severance, withholding,duties, intangibles, franchise, backup withholding, value added and other taxes, charges,levies or like assessments together with all penalties and additions to tax and interestthereon and (ii) any liability for Taxes described in clause (i) above under TreasuryRegulation Section 1.1502-6 (or any similar provision of state, local or foreign law).

(c) As used in this Agreement, the term “Tax Return” means a report, return or other information (including any amendments) required to be supplied to a governmental entitywith respect to Taxes including, where permitted or required, combined or consolidatedreturns for any group of entities that includes Company or any of its Subsidiaries.

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(d) Company and its Subsidiaries have complied in all material respects with allapplicable laws relating to the payment and withholding of Taxes (including withholdingof Taxes pursuant to Sections 1441, 1442 and 3402 of the Code or any comparable provision of any state, local or foreign laws) and have, within the time and in the manner prescribed by applicable law, withheld from and paid over all amounts required to be sowithheld and paid over under applicable laws.

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with all applicable laws and the terms of each such plan. The terms of each CompanyBenefit Plan are in compliance with all applicable laws. Each Company Benefit Plan thatis intended to be “qualified” under Section 401 and/or 409 of the Code has received a

favorable determination letter from the IRS to such effect and, to the knowledge of Company, no fact, circumstance or event has occurred or exists since the date of suchdetermination letter that would reasonably be expected to adversely affect the qualifiedstatus of any such Company Benefit Plan. There are no pending or, to the knowledge of Company, threatened or anticipated claims by, on behalf of or against any of theCompany Benefit Plans, any fiduciaries of such Company Benefit Plan (with respect towhom Company has an indemnification obligation) with respect to their duties to anyCompany Benefit Plan, or against the assets of such Company Benefit Plan or any trustmaintained in connection with such Company Benefit Plan (other than routine claims for benefits). All contributions, premiums and other payments required to be made withrespect to any Company Benefit Plan have been made on or before their due dates under

applicable law and the terms of such Company Benefit Plan, and with respect to any suchcontributions, premiums or other payments required to be made with respect to anyCompany Benefit Plan that are not yet due, to the extent required by GAAP, adequatereserves are reflected on the consolidated balance sheet of Company included in theQuarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2007(including any notes thereto) or liability therefor was incurred in the ordinary course of business consistent with past practice since September 30, 2007. There is not now, and tothe knowledge of Company there are no existing circumstances that would reasonably beexpected to give rise to, any requirement for the posting of security with respect to aCompany Benefit Plan or the imposition of any pledge, lien, security interest or encumbrance on the assets of Company or any of its Subsidiaries or any of their respective ERISA Affiliates (as defined below) under ERISA or the Code, or similar lawsof foreign jurisdictions. No “excess contributions” have been made that would be non-deductible or that would subject Company or any of its Subsidiaries to the excise taximposed under Section 4972 of the Code. To the extent any Company Benefit Plan provides benefits in the form of, or permits investment in, securities of Company or anyof its Subsidiaries, the interests in such Company Benefit Plan are subject to a current,effective registration statement under the Securities Act, or are subject to an exemptionfrom registration and the requirements of such exemption have been satisfied, and the participants in such plan have been provided a current prospectus to the extent required by applicable law.

(d) Neither Company nor any of its Subsidiaries nor any trade or business, whether or not incorporated, that, together with Company or any of its Subsidiaries would bedeemed to be a “single employer” within the meaning of Section 4001(b) of ERISA (an“ERISA Affiliate”), maintains or contributes to, or during the five-year period prior to thedate hereof has maintained or contributed to, (x) any “employee benefit plan” within themeaning of Section 3(3) of ERISA that is subject to Section 412 of the Code or Section302 or Title IV of ERISA or (y) a “multiemployer plan” within the meaning of Section3(37) and 4001(a)(3) of ERISA or a “multiple employer plan” within the meaning of www .S

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Sections 4063/4064 of ERISA or Section 413(c) of the Code. Neither Company nor anyof its Subsidiaries has incurred, either directly or indirectly (including as a result of anyindemnification or joint and several liability obligation), any liability pursuant to Title Ior IV of ERISA other than plan funding obligations in the ordinary course and PensionBenefit Guaranty Corporation (“PBGC”) premiums (including any Controlled Group

Liability as a result of its relationship with an ERISA Affiliate) or the penalty Tax, exciseTax or joint and several liability provisions of the Code relating to employee benefit

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plans, whether contingent or otherwise, including pursuant to any non-exempt“prohibited transactions” as such term is defined in Section 406 of ERISA or Section4975 of the Code, and no event, transaction, fact or condition exists that presents a risk toCompany or any ERISA Affiliate of Company of incurring any such liability, or after the

Effective Time, to Parent or any of its Affiliates, in each case, with respect to theCompany Benefit Plans. No Company Benefit Plan has an “accumulated fundingdeficiency” (whether or not waived) within the meaning of Section 412 of the Code or Section 302 of ERISA. With respect to each Company Benefit Plan that is a“multiemployer plan,” no complete or partial withdrawal from such plan has been made by Company or any of its Subsidiaries, or by any other person, that would reasonably beexpected to result in any material liability to Company or any of its Subsidiaries, whether such liability is contingent or otherwise, and if Company or any of its Subsidiaries wereto withdraw from any such Company Benefit Plan, such withdrawal would not result inany material liability to Company or any of its Subsidiaries. During the five-year period prior to the date hereof, with respect to any Company Benefit Plan subject to Title IV or

Section 302 of ERISA or Section 412 or 4971 of the Code (i) there has not been a partialtermination, and (ii) none of the following events has occurred: (x) the filing of a noticeof intent to terminate, (y) the treatment of an amendment to such a Company Benefit Planas a termination under Section 4041 of ERISA or (z) the commencement of proceedings by the PBGC to terminate such a Company Benefit Plan and (iii) there has been no“reportable event” within the meaning of Section 4043 of ERISA and the regulations andinterpretations thereunder which required a notice to the PBGC which has not been fullyand accurately reported in a timely fashion, as required, or which, whether or notreported, would constitute grounds for the PBGC to institute involuntary termination proceedings with respect to any Company Benefit Plan that is subject to Title IV of ERISA. “Controlled Group Liability” means any and all liabilities (i) under Title IV of ERISA, (ii) under Section 302 of ERISA, (iii) under Sections 412 and 4971 of the Code,(iv) resulting from a violation of the continuation coverage requirements of Section 601et seq. of ERISA and Section 4980B of the Code or the group health plan requirements of Sections 601 et seq. of the Code and Section 601 et seq. of ERISA and (v) under corresponding or similar provisions of foreign laws or regulations.

(e) With respect to each Company Benefit Plan that is subject to Title IV or Section302 of ERISA or Section 412 or 4971 of the Code, as of the last day of the most recentwww .S

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plan year ended prior to the date hereof, the actuarially determined present value of all“benefit liabilities” within the meaning of Section 4001(a)(16) of ERISA did not exceedthe then current value of assets of such Company Benefit Plan or, if such liabilities didexceed such assets, the amount thereof was properly reflected on the financial statementsof Company or its applicable Subsidiary previously filed with the SEC. With respect to

each Company Benefit Plan for which financial statements are required there has been nomaterial adverse change in the financial status of such Company Benefit Plan since thedate of the most recent financial statements provided to Parent by Company.

(f) No Company Benefit Plan is under audit or is the subject of an investigation by theIRS, the Department of Labor, the PBGC, the SEC or any other Governmental Entity, nor is any such audit or investigation pending or, to Company’s knowledge, threatened.

(g) Neither the execution or delivery of this Agreement nor the consummation of thetransactions contemplated by this Agreement will, either alone or in conjunction with any

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other event, (i) result in any payment or benefit becoming due or payable, or required to be provided, to any director, employee or independent contractor of Company or any of its Subsidiaries, (ii) increase the amount or value of any benefit or compensationotherwise payable or required to be provided to any such director, employee or independent contractor, (iii) result in the acceleration of the time of payment, vesting or funding of any such benefit or compensation, (iv) result in any amount failing to bedeductible by reason of Section 280G of the Code or (v) result in any limitation on the

right of Company or any of its Subsidiaries to amend, merge, terminate or receive areversion of assets from any Company Benefit Plan or related trust. No Company BenefitPlan provides for the reimbursement of excise Taxes under Section 4999 of the Code or any income Taxes under the Code.

(h) No payment made or to be made in respect of any employee or former employeeof Company or any of its Subsidiaries is reasonably expected to be nondeductible byreason of Section 162(m) of the Code.

(i) Neither Company nor any of its Subsidiaries has any liability with respect to anobligation to provide post-employment welfare benefits (whether or not insured) withrespect to any person beyond their retirement or other termination of service, other thancoverage mandated by Section 4980B of the Code or applicable state or local law.

(j) With respect to the employees of Company and its Subsidiaries, all social security payments, including payments to any public pension scheme, compulsory retirementinsurance, unemployment insurance, compulsory long term care insurance, compulsoryoccupational disability insurance, and compulsory health and safety insurance required to be made have been timely and properly made.www .S

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(k) Each Company Benefit Plan that is a “nonqualified deferred compensation plan”within the meaning of Section 409A(d)(1) of the Code (a “Nonqualified DeferredCompensation Plan”) and any award thereunder, in each case that is subject to Section409A of the Code has been operated in compliance in all material respects with Section409A of the Code since January 1, 2005, based upon a good faith, reasonable

interpretation of (A) Section 409A of the Code and (B)(1) the proposed and finalTreasury Regulations issued thereunder and (2) Internal Revenue Service Notice 2005-1,all subsequent Internal Revenue Service Notices and other interim guidance on Section409A of the Code and (clauses (A) and (B), together, the “409A Authorities”). NoCompany Benefit Plan that would be a Nonqualified Deferred Compensation Plan subjectto Section 409A of the Code but for the effective date provisions that are applicable toSection 409A of the Code, as set forth in Section 885(d) of the American Jobs CreationAct of 2004, as amended (the “AJCA”), has been “materially modified” within themeaning of Section 885(d)(2)(B) of the AJCA after October 3, 2004, based upon a goodfaith reasonable interpretation of the AJCA and the 409A Authorities. No assets set asidefor the payment of benefits under any Nonqualified Deferred Compensation Plan are held

outside of the United States, except to the extent that substantially all of the services towhich such benefits are attributable have been performed in the jurisdiction in whichsuch assets are held. To the extent any Nonqualified Deferred Compensation Plan provides for earnings with respect to deferred amounts that are measured other than byreference to a fixed rate of return, the interests in such Nonqualified DeferredCompensation Plan are subject to a current, effective registration

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statement under the Securities Act or are subject to an exemption from registration andthe requirements of such exemption have been satisfied.

(l) All Company Options have been granted in compliance with the terms of theapplicable Company Benefit Plans, with applicable law, and with the applicable provisions of the Company Certificate and Company Bylaws as in effect at the applicabletime, and all such Company Options are accurately disclosed as required under applicablelaw in the Company SEC Reports, including the financial statements contained therein or attached thereto (if amended or superseded by a filing with the SEC made prior to thedate of this Agreement, as so amended or superseded). In addition, Company has notissued any Company Options or Company SARs pertaining to shares of CompanyCommon Stock under any Company Benefit Plan with an exercise price that is less thanthe “fair market value” of the underlying shares on the date of grant, as determined for financial accounting purposes under GAAP.

(m) Neither Company nor any of its Subsidiaries is a party to or bound by any labor or collective bargaining agreement and there are no organizational campaigns, petitions or other activities or proceedings of any labor union, workers’ council or labor organizationseeking recognition of a collective bargaining unit with respect to, or otherwisewww .S

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attempting to represent, any of the employees of Company or any of its Subsidiaries or compel Company or any of its Subsidiaries to bargain with any such labor union, workscouncil or labor organization. There are no labor related controversies, strikes,slowdowns, walkouts or other work stoppages pending or, to the knowledge of Company,threatened and neither Company nor any of its Subsidiaries has experienced any such

labor related controversy, strike, slowdown, walkout or other work stoppage within the past three years. Neither Company nor any of its Subsidiaries is a party to, or otherwise bound by, any consent decree with, or citation by, any Governmental Entity relating toemployees or employment practices. Each of Company and its Subsidiaries are incompliance with all applicable laws relating to labor, employment, termination of employment or similar matters, including but not limited to laws relating todiscrimination, disability, labor relations, hours of work, payment of wages and overtimewages, pay equity, immigration, workers compensation, working conditions, employeescheduling, occupational safety and health, family and medical leave, and employeeterminations, and have not engaged in any unfair labor practices or similar prohibited practices. Except as would not result in any material liability to Company or any of its

Subsidiaries, there are no complaints, lawsuits, arbitrations, administrative proceedings,or other proceedings of any nature pending or, to the knowledge of Company, threatenedagainst Company or any of its Subsidiaries brought by or on behalf of any applicant for employment, any current or former employee, any person alleging to be a current or former employee, any class of the foregoing, or any Governmental Entity, relating to anysuch law or regulation, or alleging breach of any express or implied contract of employment, wrongful termination of employment, or alleging any other discriminatory,wrongful or tortious conduct in connection with the employment relationship. Companyhas made available to Parent a copy of all written policies and procedures related toCompany’s and its Subsidiaries’ employees and a written description of all materialunwritten policies and procedures related to Company’s and its Subsidiaries’ employees.

(n) Within the last six months, neither Company nor any of its Subsidiaries hasincurred any liability or obligation which remains unsatisfied under the Worker Adjustment and

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Retraining Notification Act (“WARN”) or any similar state or local laws regarding thetermination or layoff of employees.

(o) No material penalties have been imposed on Company, any Subsidiary, anyCompany Benefit Plan, or any employee, officer, director, administrator or agent thereof under Sections 1176 or 1177 of the Health Insurance Portability and Accountability Actof 1996, as amended.

(p) Neither Company nor any of its Subsidiaries has taken any action to takecorrective action or make a filing under any voluntary correction program of the IRS,www .S

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Department of Labor or any other Governmental Entity with respect to any CompanyBenefit Plan, and neither Company nor any of its Subsidiaries has any knowledge of anymaterial plan defect that would qualify for correction under any such program.

3.12 Compliance with Applicable Law. (a) Company and each of its Subsidiaries hold

all licenses, franchises, permits and authorizations necessary for the lawful conduct of their respective businesses under and pursuant to each, and have complied in all respectswith and are not in default in any respect under any, law applicable to Company or any of its Subsidiaries.

(b) Company and each of its Subsidiaries has properly administered all accounts for which it acts as a fiduciary, including accounts for which it serves as a trustee, agent,custodian, personal representative, guardian, conservator or investment advisor, inaccordance with the terms of the governing documents and applicable law. None of Company, any of its Subsidiaries, or any director, officer or employee of Company or of any of its Subsidiaries has committed any breach of trust or fiduciary duty with respect to

any such fiduciary account and the accountings for each such fiduciary account are trueand correct and accurately reflect the assets of such fiduciary account.

3.13 Certain Contracts. (a) Neither Company nor any of its Subsidiaries is a party to or bound by any contract, arrangement, commitment or understanding (whether written or oral) (i) with respect to the employment of any directors, Executive Officers, employeesor consultants, other than in the ordinary course of business consistent with past practice,(ii) which, upon execution of this Agreement or consummation or stockholder approvalof the transactions contemplated by this Agreement will (either alone or upon theoccurrence of any additional acts or events) result in any payment or benefits (whether of severance pay or otherwise) becoming due from Parent, Company, the Surviving

Company, or any of their respective Subsidiaries to any Executive Officer or employee of Company or any of its Subsidiaries, (iii) that is a “material contract” (as such term isdefined in Item 601(b)(10) of Regulation S-K of the SEC) to be performed after the dateof this Agreement that has not been filed or incorporated by reference in the CompanySEC Reports filed prior to the date hereof, (iv) that materially restricts the conduct of anyline of business by Company or any of its Subsidiaries or, to the knowledge of Company,upon consummation of the Merger will materially restrict the ability of Parent, theSurviving Company or any of their respective Subsidiaries to engage in any line of business, (v) that obligates Company or any of its Subsidiaries to conduct business on anexclusive or preferential basis with any third party or upon consummation of the Merger will obligate Parent, the Surviving Company or any of their respective Subsidiaries toconduct business with any third

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party on an exclusive or preferential basis, (vi) that requires Company or any of itsSubsidiaries to repurchase or indemnify with respect to a material portion of Previouslywww .S

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Disposed of Loans, (vii) with or to a labor union or guild (including any collective bargaining agreement) or (viii) including any stock option plan, stock appreciation rights plan, restricted stock plan or stock purchase plan, any of the benefits of which will beincreased, or the vesting of the benefits of which will be accelerated, by the execution of this Agreement, the occurrence of any stockholder approval or the consummation of any

of the transactions contemplated by this Agreement, or the value of any of the benefits of which will be calculated on the basis of or affected by any of the transactionscontemplated by this Agreement. Each contract, arrangement, commitment or understanding of the type described in this Section 3.13(a), whether or not set forth in theCompany Disclosure Schedule, is referred to as an “Company Contract.”

(b) (i) Each Company Contract is valid and binding on Company or its applicableSubsidiary, enforceable against it in accordance with its terms (subject to the Bankruptcyand Equity Exception), and is in full force and effect, (ii) Company and each of itsSubsidiaries and, to Company’s knowledge, each other party thereto has duly performedall obligations required to be performed by it to date under each Company Contract and

(iii) no event or condition exists that constitutes or, after notice or lapse of time or both,will constitute, a breach, violation or default on the part of Company or any of itsSubsidiaries or, to Company’s knowledge, any other party thereto under any suchCompany Contract. There are no disputes pending or, to Company’s knowledge,threatened with respect to any Company Contract.

3.14 Risk Management Instruments. (a) “Derivative Transactions” means any swaptransaction, option, warrant, forward purchase or sale transaction, futures transaction, captransaction, floor transaction or collar transaction relating to one or more currencies,commodities, bonds, equity securities, loans, servicing rights, interest rates, prices,values, or other financial or non-financial assets, credit-related events or conditions or any indexes, or any other similar transaction or combination of any of these transactions,including collateralized mortgage obligations or other similar instruments or any debt or equity instruments evidencing or embedding any such types of transactions, and anyrelated credit support, collateral or other similar arrangements related to suchtransactions; provided that, for the avoidance of doubt, the term “DerivativeTransactions” shall not include any Company Option.

(b) All Derivative Transactions, whether entered into for the account of Company or any of its Subsidiaries or for the account of a customer of Company or any of itsSubsidiaries, were entered into in the ordinary course of business consistent with past practice and in accordance with prudent banking practice and applicable laws, rules,regulations and policies of any Regulatory Authority and in accordance with theinvestment, securities, commodities, risk management and other policies, practices and procedures employed by Company and its Subsidiaries, and with counterparties believedat the time to be financially responsible and able to understand (either alone or inconsultation with their advisers) and to bear the risks of such Derivative Transactions. Allof such Derivative Transactions are valid and binding obligations of Company or one of its Subsidiaries enforceable against it in accordance with their terms (subject to theBankruptcy and Equity Exception), and are in full force and effect. Company and itswww .S

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Subsidiaries and, to Company’s knowledge, all other parties thereto have duly performedtheir obligations under the Derivative Transactions to the extent that such obligations to perform have

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accrued and, to Company’s knowledge, there are no breaches, violations or defaults or allegations or assertions of such by any party thereunder.

3.15 Investment Securities and Commodities. (a) Except as would not reasonably beexpected to have a Material Adverse Effect on Company, each of Company and itsSubsidiaries has good title to all securities and commodities owned by it (except thosesold under repurchase agreements or held in any fiduciary or agency capacity), free andclear of any Liens, except to the extent such securities or commodities are pledged in the

ordinary course of business to secure obligations of Company or its Subsidiaries. Suchsecurities and commodities are valued on the books of Company in accordance withGAAP in all material respects.

(b) Company and its Subsidiaries and their respective businesses employ investment,securities, commodities, risk management and other policies, practices and procedures(the “Policies, Practices and Procedures”) which Company believes are prudent andreasonable in the context of such businesses. Prior to the date hereof, Company has madeavailable to Parent in writing the material Policies, Practices and Procedures.

3.16 Warehouse Loan Portfolio.

(a) Section 3.16(a) of the Company Disclosure Schedule sets forth the aggregateoutstanding principal amount, as of December 31, 2007, of all loan agreements, notes or borrowing arrangements payable to Company or its Subsidiaries other than Loans (asdefined in Section 3.20) (collectively, “Warehouse Loans”).

(b) Section 3.16(b) of the Company Disclosure Schedule sets forth all WarehouseLoans outstanding as of December 31, 2007 that were designated as of such date byCompany as “Special Mention”, “Substandard”, “Doubtful”, “Loss”, or words of similar import, together with the principal amount of each such Warehouse Loan and the amountof specific reserves with respect to each such Warehouse Loan.

3.17 Property. Company or one of its Subsidiaries (a) has good and marketable title toall the properties and assets reflected in the latest audited balance sheet included in suchCompany SEC Reports as being owned by Company or one of its Subsidiaries or acquired after the date thereof (except properties sold or otherwise disposed of since thedate thereof in the ordinary course of business) (the “Owned Properties”), free and clear of all Liens of any nature whatsoever, except (i) statutory Liens securing payments notyet due, (ii) Liens for real property Taxes not yet due and payable, (iii) easements, rightswww .S

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of way, and other similar encumbrances that do not materially affect the use of the properties or assets subject thereto or affected thereby or otherwise materially impair business operations at such properties and (iv) such imperfections or irregularities of titleor Liens as do not materially affect the use of the properties or assets subject thereto or affected thereby or otherwise materially impair business operations at such properties

(collectively, “Permitted Encumbrances”), and (b) is the lessee of all leasehold estatesreflected in the latest audited financial statements included in such Company SECReports or acquired after the date thereof (except for leases that have expired by their terms since the date thereof) (the “Leased Properties” and, collectively with the OwnedProperties, the “Real Property”), free and clear of all Liens of any nature whatsoever,except for Permitted Encumbrances, and is in possession of the properties purported to beleased thereunder, and each

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such lease is valid without default thereunder by the lessee or, to Company’s knowledge,the lessor. The Real Property is in material compliance with all applicable zoning lawsand building codes, and the buildings and improvements located on the Real Property arein good operating condition and in a state of good working order, ordinary wear and tear excepted. There are no pending or, to the knowledge of Company, threatenedcondemnation proceedings against the Real Property. Company and its Subsidiaries are incompliance with all applicable health and safety related requirements for the RealProperty, including those under the Americans with Disabilities Act of 1990 and theOccupational Health and Safety Act of 1970. Company and its Subsidiaries own and havegood and valid title to, or have valid rights to use, all material tangible personal property

used by them in connection with the conduct of their businesses, in each case, free andclear of all Liens, other than Permitted Encumbrances.

3.18 Intellectual Property.

(a) Definitions. For purposes of this Agreement, the following terms shall have themeanings assigned below:

“Company IP” means all Intellectual Property owned, used, held for use or exploited by Company or any of its Subsidiaries.

“Customer Information” means information and data, whether proprietary or not,relating to customers, clients of customers or end-users.

“Intellectual Property” means collectively, all intellectual property and other similar proprietary rights in any jurisdiction throughout the world, whether owned, used or heldfor use under license, whether registered or unregistered, including such rights in and to:(i) trademarks, service marks, brand names, certification marks, trade dress, logos, tradenames and corporate names and other indications of origin, and the goodwill associatedwww .S

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with any of the foregoing (collectively, “Trademarks”); (ii) patents and patentapplications, and any and all divisions, continuations, continuations-in-part, reissues,continuing patent applications, provisional patent applications, re-examinations, andextensions thereof, any counterparts claiming priority therefrom, utility models, patentsof importation/confirmation, certificates of invention, certificates of registration and like

rights (collectively, “Patents”), and inventions, invention disclosures, discoveries andimprovements, whether or not patentable; (iii) trade secrets (including, those trade secretsdefined in the Uniform Trade Secrets Act and under corresponding foreign statutory lawand common law), business, technical and know-how information, non-publicinformation, and confidential information and rights to limit the use or disclosure thereof by any person (collectively, “Trade Secrets”); (iv) all works of authorship (whether copyrightable or not), copyrights and proprietary rights in copyrighted works includingwritings, other works of authorship, and databases (or other collections of information,data, works or other materials) (collectively, “Copyrights”); (v) software, including datafiles, source code, object code, firmware, mask works, application programminginterfaces, computerized databases and other software-related specifications and

documentation (collectively, “Software”); (vi) designs and industrial designs; (vii)Internet domain names; (viii) rights of publicity and other rights to use the names andlikeness of individuals; (ix) moral rights; and (x) claims, causes of action and defensesrelating to the past, present and future enforcement of any of the foregoing; in each caseof (i) to (ix) above, including any registrations of, applications to

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register, and renewals and extensions of, any of the foregoing with or by any

Governmental Entity in any jurisdiction.

“License Agreement” means any legally binding contract, whether written or oral, andany amendments thereto (including license agreements, sub-license agreements, researchagreements, development agreements, distribution agreements, consent to useagreements, customer or client contracts, coexistence, non assertion or settlementagreements), pursuant to which any interest in, or any right to use or exploit anyIntellectual Property has been granted.

“Licensed Company IP” means the Intellectual Property owned by a third party thatCompany or any of its Subsidiaries has a right to use or exploit by virtue of a LicenseAgreement.

“Open Source Software” means any Software that is subject to the terms of anylicense agreement in a manner that requires that such Software, or other Softwareincorporated into, derived from or distributed with such Software, be (i) disclosed or distributed in source code form; (ii) licensed for the purpose of making derivative works;or (iii) redistributable at no charge. Without limiting the foregoing, any Software that is

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subject to the terms of any of the licenses certified by the Open Source Initiative andlisted on its website (www.opensource.org) is Open Source Software.

“Owned Company IP” means the Intellectual Property that is owned by Company or any of its Subsidiaries.

(b) Company and its Subsidiaries collectively own all right, title and interest in, or have the valid right to use, all of the Company IP, free and clear of any Liens, and thereare no obligations to, covenants to or restrictions from third parties affecting Company’sor its applicable Subsidiary’s use, enforcement, transfer or licensing of the OwnedCompany IP.

(c) The Owned Company IP and Licensed Company IP constitute all the IntellectualProperty necessary and sufficient to conduct the businesses of Company and itsSubsidiaries as they are currently conducted, as they have been conducted sinceDecember 31, 2006.

(d) The Owned Company IP and, to the knowledge of Company, Licensed CompanyIP, are valid, subsisting and enforceable. Company and each of its Subsidiaries havecomplied with and are in compliance with all laws (including marking requirements and payment of all applicable fees) with respect to any such Intellectual Property that isissued, granted or registered by or with any Governmental Entity or for which anapplication therefor has been filed with any Governmental Entity, and all registrations of Owned Company IP are currently in good standing and subsisting.

(e) Neither Company nor any of its Subsidiaries has infringed, misappropriated or otherwise violated any Intellectual Property of any third party. There is no action, suit,

claim, investigation, arbitration or any other proceeding pending or, to the knowledge of Company, threatened, (i) asserting that (A) any use or exploitation of any of theCompany IP by Company or any of its Subsidiaries, or (B) the conduct of the businessesof Company and its Subsidiaries as they are currently conducted or have been conductedsince December 31, 2001; in each case,

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infringes upon, misappropriates or otherwise violates the Intellectual Property of any

third party; or (ii) asserting the invalidity, misuse or unenforceability of any item of Owned Company IP, or challenging the right to use or ownership by Company or itsapplicable Subsidiary of such item, and there are no grounds for any such claim or challenge. There is no outstanding order, judgment, writ, stipulation, award, injunction,decree, arbitration award or finding of any Governmental Entity by or with anyGovernmental Entity relating to Intellectual Property by which Company or any of itsSubsidiaries is bound.

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(f) No Owned Company IP or Licensed Company IP is being used or enforced in amanner that would result in the abandonment, cancellation or unenforceability of suchIntellectual Property. To the knowledge of Company, no third party has infringed,misappropriated or otherwise violated any Owned Company IP, and there are no factsthat would reasonably be expected to result in any such infringement, misappropriation or

other violation. Neither Company nor any of its Subsidiaries has given any warranty or indemnification in connection with any Company IP to any third party, except for warranties or indemnities given in the ordinary course of business.

(g) Company and each of its Subsidiaries have taken all reasonable actions to maintainand protect each item of Owned Company IP and no loss of Owned Company IP is pending, reasonably foreseeable or threatened. Without limiting the foregoing, Companyand each of its Subsidiaries have taken all reasonable security measures to protect thesecrecy, confidentiality and value of all Company IP. The Trade Secrets of Company andits Subsidiaries have not been disclosed to any third party other than under suchconfidentiality agreements or other confidentiality obligations. All former and current

employees, consultants and contractors of Company or any of its Subsidiaries whocontribute or have contributed to the creation or development of any Company IP haveexecuted written instruments with Company or such Subsidiary that assign to Companyor such Subsidiary all rights, title and interest in and to any such contributions thatCompany or such Subsidiary does not already own by operation of law. No current or former employee, officer, director, stockholder, consultant or independent contractor hasany valid right, claim or interest in or with respect to any Owned Company IP. Noinventor listed on Company’s or its Subsidiaries’ Patents is under any obligation to assignits rights in such Patents to a former employer, person, or entity, nor is the validity of anyof Company’s or its Subsidiaries’ Patents affected by the prior employment of any suchinventor. Neither Company nor any of its Subsidiaries has developed jointly with anythird party any Intellectual Property with respect to which such third party has any rights,and all Owned Company IP is solely owned by Company or one of its Subsidiaries.

(h) No material License Agreement pursuant to which Company or any of itsSubsidiaries is entitled to use any Licensed Company IP may be unilaterally terminated by any third party which is a party to such License Agreements as a result of theconsummation of the transactions provided for herein. Neither Company, nor itsSubsidiaries, nor, to the knowledge of Company, any third party, is in default under anymaterial License Agreement to which Company or any of its Subsidiaries is a party.

(i) Company’s and its Subsidiaries’ collection, storage, use and dissemination of Customer Information and any personally identifiable information are and have been inmaterial compliance with all applicable laws relating to privacy, data security and data protection, and all

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date. Except as disclosed on Section 3.18(m)(iii) of the Company Disclosure Schedule,neither Company nor any of its Subsidiaries has granted exclusively to any third partyany rights under any Company IP.

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3.19 Environmental Liability. There are no legal, administrative, arbitral or other proceedings, claims, actions, causes of action or notices with respect to anyenvironmental, health or safety matters or any private or governmental environmental,health or safety investigations or remediation activities of any nature, whether relating tothe Real Property, the Mortgaged Property or otherwise, seeking to impose, or that arereasonably likely to result in, any liability or obligation of Company or any of itsSubsidiaries arising under common law or under any local, state or federalenvironmental, health or safety statute, regulation, ordinance, or other requirement of any

Governmental Entity, including the Comprehensive Environmental Response,Compensation and Liability Act of 1980, as amended, and any similar state laws(“Environmental Laws”), pending or threatened against Company or any of itsSubsidiaries. To the knowledge of Company, there is no reasonable basis for, or circumstances that are reasonably likely to give rise to, any such proceeding, claim,action, cause of action, notice, investigation, or remediation activities that would result inany such liability or obligation of Company or any of its Subsidiaries. Neither Companynor any of its Subsidiaries is subject to any agreement, order, judgment, decree, letter or memorandum by or with any Governmental Entity or third party imposing any liability or obligation with respect to any of the foregoing. Company, its Subsidiaries, and theactivities, operations and conditions on the Real Property have complied with all

applicable Environmental Laws.

3.20 Mortgage Banking Business.

(a) Definitions. For purposes of this Section 3.20, the following terms shall have thefollowing meanings:

“Advances” means, with respect to Company, any of its Subsidiaries or the ServicingAgreements, the moneys that have been advanced by Company or any of its Subsidiarieson or before the Closing Date from its funds in connection with its servicing of the Loansin accordance with Applicable Requirements.

“Agency or Agencies” means FHA, VA, HUD, a State Agency, FNMA, FHLMC,FHLBA or GNMA, as applicable.

“Applicable Requirements” means and includes, as of the time of reference, withrespect to the origination of the Pipeline Loans, or the origination, purchase, sale andservicing of the Loans, or handling of REO, or the Servicing Agreements, all of thefollowing (in each case to the extent applicable to any particular Pipeline Loan, Loan,www .S

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REO or Servicing Agreement): (i) all contractual obligations of Company and itsSubsidiaries, including with respect to any Servicing under any Servicing Agreement,Master Servicing Agreement, Mortgage Note, Mortgage and other Mortgage LoanDocument or any commitment or other contractual obligation relating to a Pipeline Loan,(ii) all applicable underwriting, servicing and other guidelines of Company or any of its

Subsidiaries as incorporated in the Seller and Servicing Guides, (iii) all laws applicable toCompany or any of its Subsidiaries, (iv) all other applicable requirements and guidelinesof each governmental agency, board, commission, instrumentality and other governmental or quasi-governmental body or office having jurisdiction, including thoseof any applicable Agency, Investor or Insurer and (v) all other applicable judicial andadministrative judgments, orders, stipulations, awards, writs and injunctions.

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“Certificate Insurer” means a provider of an insurance policy insuring against certainspecified losses or shortfalls with respect to Collateral Certificates or CollateralCertificate Pools.

“Collateral Certificate” means a security directly or indirectly based on and backed bya Mortgage Pool, which security has been pledged, granted or sold to secure or support payments on specific asset-backed securities that are administered pursuant to a ServicingAgreement, including any Company Securitization Interests.

“Collateral Certificate Pool” means a group of Collateral Certificates that have been pledged, granted or sold to secure or support payments on specific asset-backed securities

that are administered pursuant to a specific Servicing Agreement.

“Custodial Account” means all funds held or directly controlled by Company or anyof its Subsidiaries with respect to any Loan or any Collateral Certificate or any CollateralCertificate Pool, including all principal and interest funds and any other funds dueInvestors, buydown funds, suspense funds, funds for the payment of taxes, assessments,insurance premiums, ground rents and similar charges, funds from hazard insurance lossdrafts and other mortgage escrow and impound amounts (including interest thereon for the benefit of Mortgagors, if applicable).

“Custodial File” means, with respect to a Loan, all of the documents that must bemaintained on file with a document custodian, Investor, trustee or other designated agentunder Applicable Requirements.

“FHA” means the Federal Housing Administration of HUD or any successor thereto.

“FHLMC” means the Federal Home Loan Mortgage Corporation or any successor thereto.

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“FNMA” means the Federal National Mortgage Association or any successor thereto.

“Foreclosure” means the process culminating in the acquisition of title to a mortgaged property in a foreclosure sale or by a deed in lieu of foreclosure or pursuant to any other comparable procedure allowed under Applicable Requirements.

“GNMA” means the Government National Mortgage Association or any successor thereto.

“HUD” means the Department of Housing and Urban Development.

“Insurer” means a person who (i) insures or guarantees all or any portion of the risk of loss on any Loan, including, without limitation, any Agency and any provider of privatemortgage insurance, standard hazard insurance, flood insurance, earthquake insurance or title insurance with respect to any Loan or related Mortgaged Property, (ii) provides anyfidelity

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bond, direct surety bond, letter of credit, other credit enhancement instrument or errorsand omissions policy or (iii) is a Certificate Insurer.

“Investment Commitment” means the optional or mandatory commitment of Company or any of its Subsidiaries to sell to any person, and a person to purchase fromCompany or any of its Subsidiaries, a Loan Held for Sale or an interest in a Loan Held

for Sale owned or to be acquired by Company or any of its Subsidiaries.

“Investor” means, with respect to the Mortgage Servicing Portfolio, any Agency or Private Investor who owns or holds Loans, Collateral Certificates or Collateral CertificatePools master serviced, serviced or subserviced by Company or any of its Subsidiaries, pursuant to a Servicing Agreement including a holder of mortgage-backed securities,mortgage pass-through certificates, participation certificates or similar securities,including any securitization trustee acting on behalf of such holder.

“Loans” means Loans Held for Sale, Serviced Loans, Previously Disposed of Loans,Paid-Off Loans and Portfolio Loans.

“Loans Held for Sale” means a mortgage loan owned by Company or any of itsSubsidiaries, including a mortgage loan that has closed but not funded, and that isintended to be sold to an Investor in the ordinary course.

“Master Servicing” means master servicing services in respect of CollateralCertificates, Collateral Certificate Pools or Loans, consisting principally of one or moreof the following functions (or a portion thereof): (i) the supervision and oversight of thewww .S

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performance by servicers of their obligations under servicing agreements, but nototherwise having the contractual responsibility to the Investor to collect payments fromor enforce the Mortgage Loan Documents against individual Mortgagors, except perhapsin the event the servicer is terminated; (ii) causing Loans to be serviced in the event aservicer is terminated until a replacement servicer is retained; (iii) the calculation of

payments due to owners of mortgage-backed securities, asset-backed securities, participation certificates or other similar securities or Loans; (iv) the transmittal of payments related to Loans, Collateral Certificates or Collateral Certificate Pools to theInvestor; (v) the transmittal or payment of Advances; (vi) the preparation of reports toInvestors, Tax authorities and the SEC; and (vii) if applicable, the compliance withREMIC or other relevant Tax requirements. For purposes of this Agreement, Master Servicing does not include Servicing where the master servicer either delegates its dutiesto a subservicer or servicer and has responsibility to the Investor for the acts, errors or omissions of such subservicer or servicer or otherwise has responsibility to the Investor for the primary servicing of the Loans with respect to the Mortgagors.

“Master Servicing Agreement” means an agreement pursuant to which Company or any of its Subsidiaries provides Master Servicing (including any rights to master servicing fees).

“Mortgage” means with respect to a Loan, a mortgage, deed of trust or other securityinstrument creating a lien upon real property and any other property described therein

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which secures a Mortgage Note, together with any assignment, reinstatement, extension,endorsement or modification thereof.

“Mortgage Loan Documents” means the Custodial File and all other documentsrelating to Loans required to document and service the Loans in accordance withApplicable Requirements, whether on hard copy, microfiche or its equivalent or inelectronic format and, to the extent required by Applicable Requirements, credit andclosing packages and disclosures.

“Mortgage Note” means, with respect to a Loan, a promissory note or notes, or other evidence of indebtedness, with respect to such Loan secured by a mortgage or mortgages,together with any assignment, reinstatement, extension, endorsement or modificationthereof.

“Mortgage Pool” means a group of mortgage loans that have been pledged, granted or sold to secure or support payments on specific mortgage-backed securities or specific participation certificates, including Collateral Certificates and Collateral CertificatePools.

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“Mortgage Servicing Portfolio” means the portfolio of Loans, Collateral Certificatesand the Collateral Certificate Pools serviced or to be serviced by Company or any of itsSubsidiaries pursuant to Servicing Agreements.

“Mortgaged Property” means the real property and improvements that secure a

Mortgage Note and that are subject to a Mortgage.

“Mortgagor” means the obligor(s) on a Mortgage Note.

“Originator” means, with respect to any Loan, the person or persons that (i) took therelevant Mortgagor’s loan application, (ii) processed the relevant Mortgagor’s loanapplication or (iii) closed and/or funded such Loan.

“Paid Off Loan” means a mortgage loan or any other type of loan that, at any time, has been owned and/or serviced (including, without limitation, master servicing andsubservicing) by Company or any of its Subsidiaries (including any predecessor in

interest) and has been paid off, foreclosed, or otherwise liquidated.

“Pipeline Loans” means applications in process for mortgage loans to be made byCompany or any of its Subsidiaries, whether or not registered or designated as price protected on Company’s mortgage loan origination system and, in either case, that havenot closed or been funded.

“Portfolio Loan” means a residential mortgage loan owned by Company or anySubsidiary or REO owned by Company or any Subsidiary which is not a Loan Held for Sale.

“Previously Disposed of Loans” means mortgage loans or any other type of loans or loan servicing rights that, as of any time, Company or any of its Subsidiaries or any predecessor in interest of Company or any of its Subsidiaries owned and subsequentlysold, transferred, conveyed or assigned and for which Company or any of its Subsidiariesretains a contingent liability to third parties for failure to originate, service, sell,securitize, or otherwise handle such loans or servicing rights in accordance with the thencurrent Applicable

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Requirements, including, without limitation, the obligation to repurchase or indemnifythe purchaser pursuant to the applicable loan or servicing purchase agreement.

“Prior Servicer” means any person that was a master servicer, servicer or subservicer of any Loan before Company, any Subsidiary or the current Servicer, as applicable, became the master servicer, servicer or subservicer of such Loan.

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“Private Investors” means Company, any of its Subsidiaries or any person other thanthe Agencies who owns Loans master serviced, serviced or subserviced by Company of any of its Subsidiaries pursuant to a Master Servicing Agreement or ServicingAgreement.

“Recourse” means any arrangement pursuant to which Company or any of itsSubsidiaries bears the risk to (i) an Investor or (i) a purchaser of Previously Disposed of Loans of any part of the ultimate credit losses incurred in connection with a default under or Foreclosure of a Loan, except insofar as such risk of loss is based upon (A) a breach by Company or any of its Subsidiaries of any of their contractual representations,warranties or covenants or (B) expenses, such as legal fees, in excess of thereimbursement limits, if any, set forth in the Applicable Requirements. The partiesacknowledge that no Recourse results from or arises under (x) the ApplicableRequirements pertaining to GNMA or (y) with respect to any Master ServicingAgreement, losses as to which the responsibility or liability of Company or any of itsSubsidiaries is limited to customary special hazard, bankruptcy and fraud coverages, the

amount of which coverages is established by nationally recognized rating agencies inconnection with rated series of mortgage pass-through certificates, participationcertificates, mortgage backed securities or other similar securities.

“REMIC” means a “real estate mortgage investment conduit” within the meaning of Section 860D of the Code.

“REO” means any property acquired in the conduct of Company’s or any of itsSubsidiaries’ mortgage servicing business as a result of any Foreclosure or any other method in satisfaction of indebtedness (whether for Company’s or any of its Subsidiaries’own account or on behalf of an Investor or Insurer).

“Seller and Servicing Guides” means the (i) seller and servicer guides utilized by theAgencies and other Investors to which Company or any of its Subsidiaries have soldresidential mortgage loans and/or for which Company or any of its Subsidiaries servicesresidential mortgage loans and (ii) the manuals, guidelines and related employeereference materials utilized by Company or any of its Subsidiaries to govern itsrelationships with mortgage brokers, correspondent and wholesale sellers of loans or under which loans originated directly by Company or any of its Subsidiaries is made.

“Serviced Loan” means any mortgage loan with respect to which Company or any of its Subsidiaries owns or provides the Servicing.

“Servicer” means the person responsible for performing the master servicing,servicing or subservicing functions in connection with a Serviced Loan.

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“Servicing” means mortgage loan servicing and subservicing rights and obligationsincluding one or more of the following functions (or a portion thereof): (i) theadministration and collection of payments for the reduction of principal and/or theapplication of interest on a mortgage loan; (ii) the collection of payments on account of taxes and insurance; (iii) the remittance of appropriate portions of collected payments;

(iv) the provision of full escrow administration; (v) the pursuit of Foreclosure andalternate remedies against a related Mortgaged Property; (vi) the administration andliquidation of REO; (vii) the right to receive the Servicing Compensation and anyancillary fees arising from or connected to the Serviced Loans, earnings on and other benefits of the related Custodial Accounts and any other related accounts maintained byCompany or any of its Subsidiaries pursuant to Applicable Requirements; (viii) any other obligation relating to servicing of mortgage loans, Collateral Certificates or CollateralCertificate Pools required under any Servicing Agreement not otherwise described in theforegoing clauses; (ix) the right to exercise any clean up calls; (x) the performance of administrative functions relating to any of the foregoing; and (xi) the provision of Master Servicing and, in each case, all rights, powers and privileges incident to any of the

foregoing, and expressly includes the related Custodial Accounts, the Mortgage LoanDocuments and the right to enter into arrangements with third parties that generateancillary fees and benefits with respect to the Serviced Loans.

“Servicing Agreements” mean agreements, including Master Servicing Agreements, pursuant to which Company or any of its Subsidiaries provides Servicing in connectionwith Serviced Loans.

“Servicing Compensation” means any servicing fees and any excess servicingcompensation which Company or any of its Subsidiaries is entitled to receive pursuant toany Servicing Agreement.

“State Agency” means any state agency or other state entity with authority to regulatethe mortgage-related activities of Company or any of its Subsidiaries or to determine theinvestment or servicing requirements with regard to mortgage loan origination, purchasing, servicing, master servicing or certificate administration performed byCompany or any of its Subsidiaries.

“VA” means the Department of Veterans Affairs or any successor thereto.

“VA Loans” means mortgage loans that are guaranteed or are eligible to be guaranteed by the VA.

(b) Without limiting the generality of Section 3.12(a), one or more of Company and itsSubsidiaries is approved by and is in good standing: (i) as a non-supervised mortgagee byHUD to originate and service Title II FHA mortgage loans; (ii) as a GNMA I and IIIssuer by GNMA; (iii) by the VA to originate VA Loans; and (iv) as a seller/servicer byFNMA, FHLMC and FHLBA to originate and service residential mortgage loans.

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(c) The Advances are valid and subsisting amounts owing to Company and itsapplicable Subsidiary, were made in accordance with Applicable Requirements and arecarried on the books of Company or the applicable Subsidiary at values determined inaccordance with

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GAAP, and are not subject to setoffs or claims arising from acts or omissions of Company or any of its Subsidiaries. No Investor has claimed any defense, offset or counterclaim to repayment of any Advance that is pending.

(d) None of the Loans, Collateral Certificates, Collateral Certificate Pools, or Servicing Agreements provides for Recourse to Company or any of its Subsidiaries.

(e) With respect to each Loan and, if and to the extent specified, each Pipeline Loan(provided, for purposes of this Section 3.20(e), notwithstanding anything else to thecontrary in this Agreement, the Investor, if any, for any Loans Held for Sale shall be theInvestor that is party to the applicable Investment Commitment and the representationsand warranties pertaining to Previously Disposed of Loans and Paid Off Loans shall belimited to Sections 3.20(e)(i) -(iv):

(i) Each Loan was originated in accordance with Applicable Requirements. EachLoan (other than a Portfolio Loan), Collateral Certificate or Collateral Certificate Pool inthe Mortgage Servicing Portfolio was eligible in all material respects for sale to,insurance by, or pooling to back securities issued or guaranteed by, the applicable

Investor or Insurer upon such sale, issuance of insurance or pooling, except for ServicedLoans, Collateral Certificates or Collateral Certificate Pools as to which the ineligibilityfor such sale, issuance of insurance or pooling would not be the contractual or legalresponsibility of Company or any of its Subsidiaries under Applicable Requirements.Each Loan Held for Sale allocated to a particular Investor in accordance with the standardsecondary market practices of Company is eligible in all material respects for sale under an Investment Commitment. Each Loan Held for Sale not allocated to a particular Investor in accordance with the foregoing sentence would be otherwise eligible for sale inall material respects under an Investment Commitment upon allocation to an Investor.There exists no fact or circumstance that would entitle the applicable Insurer or Investor to (A) demand from Company or any of its Subsidiaries either repurchase of any ServicedLoan or Previously Disposed of Loan or any Collateral Certificate or CollateralCertificate Pool or indemnification for losses or refuse to purchase a Loan Held for Sale,(B) impose on Company or any of its Subsidiaries sanctions, penalties or specialrequirements in respect of any Loan or (C) rescind any insurance policy or reduceinsurance benefits in respect of any Loan which would result in a breach of anyobligation of Company or any of its Subsidiaries under any agreement. Each PipelineLoan complies in all material respects with Applicable Requirements for the stage of

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processing that it has achieved based on the Investor or Insurer program, if applicable,under which Company or its applicable Subsidiary originated the Pipeline Loan.

(ii) Each Loan is evidenced by a Mortgage Note and is duly secured by a valid firstlien or subordinated lien on the related Mortgaged Property, in each case, on such forms

and with such terms as comply with all Applicable Requirements. Each Mortgage Noteand the related Mortgage is genuine and each is the legal, valid and binding obligation of the maker thereof, enforceable in accordance with its terms, subject to bankruptcy,insolvency and similar laws affecting generally the enforcement of creditors’ rights andthe discretion of a court to grant specific performance. No Loan

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(including Paid Off Loans and Previously Disposed of Loans) is subject to any rights of

rescission, set-off, counterclaim or defense, including the defense of usury, nor will theoperation of any of the terms of the Mortgage Note or the Mortgage, or the exercise of any right thereunder, render either the Mortgage Note or the Mortgage unenforceable byCompany or any of its Subsidiaries, in whole or in part, or subject to any right of rescission (except any Loans Held for Sale which are closed but not funded), set-off,counterclaim or defense, including the defense of usury, and no such right of rescission,set-off, counterclaim, or defense has been asserted with respect thereto. For purposes of this Section 3.20(e)(ii), references to Mortgage Notes shall be deemed to includemortgage notes in respect of REO and Paid-Off Loans.

(iii) Company and each of its Subsidiaries (in their respective capacities as Servicer

or otherwise) and, to the knowledge of Company, each Originator and Prior Servicer have complied, and each Loan complied and comply, in all material respects with theApplicable Requirements including the federal Fair Housing Act, federal Equal CreditOpportunity Act and Regulation B, federal Fair Credit Reporting Act, federal Truth inLending Act and Regulation Z, National Flood Insurance Act of 1968, federal FloodDisaster Protection Act of 1973, federal Real Estate Settlement Procedures Act andRegulation X, federal Fair Debt Collection Practices Act, federal Home MortgageDisclosure Act and applicable state consumer credit and usury laws.

(iv) There has been no material fraudulent action on the part of the Originator or parties acting on behalf of the Originator in connection with the origination of any Loanor Pipeline Loan or the application of any insurance proceeds with respect to a Loan or the Mortgaged Property for which Company or any of its Subsidiaries is responsible tothe applicable Investor or Insurer or otherwise bears the risk of loss.

(v) Each material Servicing Agreement is valid and binding on Company or itsapplicable Subsidiary, enforceable against it in accordance with its terms (subject to theBankruptcy and Equity Exception), and is in full force and effect without notice by theapplicable Investor of termination thereof. Company and each of its Subsidiaries and, towww .S

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Company’s knowledge, each other party thereto has duly performed all obligationsrequired to be performed by it to date under each material Servicing Agreement. Noevent or condition exists that constitutes or, after notice or lapse of time or both, willconstitute, a breach, violation or default on the part of Company or any of its Subsidiariesor, to Company’s knowledge, any other party thereto under any such material Servicing

Agreement. There are no disputes pending or, to Company’s knowledge, threatened withrespect to any material Servicing Agreement. The Servicing of the Loans, CollateralCertificates and Collateral Certificate Pools complies in all material respects with allApplicable Requirements.

(vi) The custodial files relating to all Mortgage Pools have been initially certified,finally certified and/or recertified if required by the applicable Servicing Agreement andotherwise in accordance in all material respects with Applicable Requirements.

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(vii) All Custodial Accounts required to be maintained by Company or any of itsSubsidiaries have been established and continuously maintained in accordance withApplicable Requirements in all material respects. Subject to and in accordance with theApplicable Requirements pertaining generally to the type, size, rating or capitalization of depository institutions qualified to hold such balances, Company has the right and power to determine the financial institution in which the Custodial Accounts are held. AllMortgage Loan Documents required to be obtained and maintained by Company or anyof its Subsidiaries have been obtained and continuously maintained in accordance withApplicable Requirements in all material respects.

(viii) Except for customary industry standards for indemnification and repurchaseremedies in connection with agreements for the sale or servicing of mortgage loans, noneof Company or any of its Subsidiaries is now nor has been, since January 1, 2005, subjectto any material fine, suspension, settlement or other agreement or administrativeagreement or sanction by, or any obligation to indemnify, an Agency, an Insurer or anInvestor, relating to the origination, sale or servicing of mortgage loans.

(ix) No Loan is a “High Cost Loan” or “Covered Loan”, as applicable, under either the Home Ownership Equity Protection Act or a similar state or local anti-predatorylending Law, including, without limitation, as such terms are defined in the then currentStandard & Poor’s LEVELS® Glossary of Terms which is now Version 5.7 Revised,Appendix E, and no mortgage Loan originated on or after October 1, 2002 through March6, 2003 is governed by the Georgia Fair Lending Act.

(f) Company or one of its Subsidiaries is the sole owner of the Loans Held for Sale,Portfolio Loans, and Servicing, free and clear of any Liens, other than Liens in favor of Company’s or its Subsidiaries’ lenders pursuant to financing arrangements, except to theextent any Loan Held for Sale or Portfolio Loan is prepaid in full or subject to awww .S

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completed Foreclosure action (or non judicial proceeding or deed in lieu of Foreclosure)in which case Company or one of its Subsidiaries shall be the sole owner of the real property securing such foreclosed loan or shall have received the proceeds of such actionto which Company or its Subsidiaries was entitled, in each case free and clear of anyLiens.

3.21 Securitization Matters.

(a) Each of Company and its applicable Subsidiaries and, to the knowledge of Company, each other party thereto has performed in all material respects the obligationsto be performed by it under each of the Company Securitization Documents, includingany required filing of any financing statements, continuation statements or amendmentsunder the Uniform Commercial Code of each applicable jurisdiction with the appropriatefiling offices.

(b) Each of the Company Securitization Interests, each series of certificates or other

securities issued by any Company Securitization Trust and each of the CompanySecuritization Documents to which Company, any of its Subsidiaries, or any CompanySecuritization Trust, as the case may be, is a party, is in full force and effect and is avalid, binding and enforceable obligation of Company, such Subsidiary or any CompanySecuritization Trust, as the case may be, and, to the knowledge of Company, of the other parties thereto, subject

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to the Bankruptcy and Equity Exception. Each Company Securitization Interest(including, without limitation, each Retained Interest) is fully paid and subject to nofurther assessment or obligation, other than required servicing or master servicingadvances in transactions for which Company or any of its Subsidiaries serves as servicer or master servicer.

(c) All Company Securitization Documents required to be qualified under the TrustIndenture Act of 1939, as amended, have been so qualified and no CompanySecuritization Trust is required to be registered under the Investment Company Act of 1940, as amended. The sale of all securities issued by any Company Securitization Trustwas either duly registered under, or exempt from the registration requirements of, theSecurities Act.

(d) Since January 1, 2005, on a consolidated basis, Company has properly accountedfor the sale of all Loans under GAAP, including Statement of Financial AccountingStandards No. 140, and including in respect of the reporting of income arising from thesale of such Loans.

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(e) On a consolidated basis, Company is not required to consolidate any variableinterest entity under GAAP, including FIN 46 and FIN 46R, as in effect as of the datehereof in connection with any transaction related to a Company Securitization Trust.

(f) Since January 1, 2005, neither Company nor any of its Subsidiaries has owned any

security issued by a Company Securitization Trust that includes an embedded derivativeunder GAAP.

(g) Company or its applicable Subsidiary has made all reasonably necessary plans and preparations in order to comply in a timely manner with all requirements of RegulationAB promulgated by the SEC.

(h) All reports required to be filed since January 1, 2005 with the SEC or any other Governmental Entity in connection with any Company Sponsored Asset SecuritizationTransaction complied as to form in all material respects with the published rules andregulations of the SEC or such other Governmental Entity with respect thereto. No person

has failed in any respect to make the certifications required of him or her under Section302 of the Sarbanes-Oxley Act with respect to such reports. All assessments andattestations regarding servicing compliance required to be delivered or filed by Companyor any of its Subsidiaries have been timely and accurately filed, and no material instancesof noncompliance have been identified in such assessments or attestations. SinceDecember 31, 2006, neither Company nor any of its Subsidiaries nor, to the knowledgeof Company, any director, officer, employee, auditor, accountant or representative of Company or any of its Subsidiaries has received or otherwise had or obtained knowledgeof any material complaint, allegation, assertion or claim, whether written or oral,regarding the accounting or auditing practices, procedures, methodologies or methods of any Company Securitization Trust or their respective internal accounting controls,

including any material complaint, allegation, assertion or claim that any CompanySecuritization Trust has engaged in questionable accounting or auditing practices, and noattorney representing Company, any of its Subsidiaries, or any Company SecuritizationTrust, whether or not employed by Company or any of its Subsidiaries, has reportedevidence of a material violation of securities laws, breach of fiduciary duty or similar violation by Company, any of its Subsidiaries,

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or any Company Securitization Trust or any of their respective officers, directors,employees, or agents to the Board of Directors of Company or any committee thereof or to any director or officer of Company or any other authorized person.

(i) No event or condition exists which does now or with either notice or the passage of time would constitute a default, event of default, early redemption event, payout event,early amortization event or other similar event under any Company SecuritizationDocument. No Adverse Development has occurred and is continuing in connection withwww .S

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any Company Sponsored Asset Securitization Transaction. No event or condition existswhich constitutes a Servicer Default or other similar event permitting the termination of the servicer under any of the Company Securitization Documents (a “Servicer Default or Termination”). The consummation of the transactions contemplated hereby (including theMerger) shall not cause the occurrence of any Adverse Development or Servicer Default

or Termination. Each Subsidiary of Company which acts as a servicer, master servicer or trustee and, to the knowledge of Company, each other party which acts as servicer,master servicer or trustee under the Company Securitization Documents has properlyadministered all accounts in accordance with the terms of the governing documents, prudent banking practices and applicable law and the accountings for each such accountare true and correct and accurately reflect the assets of such account. Company and eachapplicable Subsidiary has timely made all required advances in all transactions for whichit serves as servicer or master servicer or is otherwise required to make advances.

(j) No registration statement, prospectus, preliminary prospectus, free writing prospectus, term sheet, computational materials, preliminary private placement

memorandum, private placement memorandum or other offering document, or any reportor schedule filed with or furnished to the SEC or any other Governmental Entity, or anyamendments or supplements to any of the foregoing (collectively, “SecuritizationDisclosure Documents”), utilized in connection with the offering of securities in any loanor other asset securitization transaction in which Company or any of its Subsidiaries wasan issuer, sponsor or depositor (each, a “Company Sponsored Asset SecuritizationTransaction”), and no disclosure concerning Company, any of its Subsidiaries, or anyassets or business operations of either provided to any other party in connection with theoffering of securities in any loan or other asset securitization transaction in whichCompany, any of its Subsidiaries or any such other party was a servicer or seller or otherwise had disclosure obligations, as of its effective date (in the case of a registrationstatement) or its issue date (in the case of any other such document) and as of the date onwhich Company or any of its Subsidiaries agreed to sell any such security, contained anyuntrue statement of any material fact or omitted to state any material fact required to bestated therein or necessary to make the statements therein, in light of the circumstances inwhich they were made, not misleading.

(k) Section 3.21(k) of the Company Disclosure Schedule sets forth a true and correctlist as of the date hereof of all outstanding Company Sponsored Asset SecuritizationTransactions, and for each such transaction, any associated retained instruments and anyother forms of recourse or other direct or indirect exposures retained by Company and itsSubsidiaries, and includes the principal amount as of the most current reporting date prior to the date hereof for each security listed thereon. No Company Sponsored AssetSecuritization Transaction has a

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clean up call feature that is triggered at a level greater than 10% of the remainingcollateral balance.

(l) To the knowledge of Company, the issuer of any security issued in any CompanySponsored Asset Securitization Transaction, and all such securities, meet the

requirements for, and are entitled to, the Tax characterization or Tax treatment for federal, state or local income or franchise Tax purposes described in the relatedSecuritization Disclosure Documents. Neither Company nor any of its Subsidiaries nor,to the knowledge of Company, any trustee, master servicer, servicer or issuer with respectto any Company Sponsored Asset Securitization Transaction, has taken or failed to takeany action which action or failure to act might adversely affect the intended Taxcharacterization or Tax treatment for federal, state or local income or franchise Tax purposes of the issuer or any securities issued in any such Company Sponsored AssetSecuritization Transaction. All federal, state and local income or franchise Tax andinformation returns and reports required to be filed by the issuer, master servicer, servicer or trustee relating to any Company Sponsored Asset Securitization Transactions, and all

Tax elections required to be made in connection therewith, have been properly and timelyfiled or made and are correct in all material respects.

(m) For purposes of this Agreement, the following terms shall have the meaningsassigned below:

“Adverse Development” means any event or condition which is or with either noticeor the passage of time would (i) constitute a breach, default, event of default, earlyredemption event, payout event, early amortization event or other similar event under anyCompany Securitization Document or (ii) trigger any requirement under any CompanySecuritization Document to (x) fund an increase in any form of internal credit

enhancement, external credit enhancement, spread account or similar account (other thanwith respect to spread accounts that have already been funded), (y) draw on any suchinternal or external credit enhancement or account under the terms of any CompanySecuritization Document or (z) otherwise increase any otherwise required creditenhancement required under the Company Securitization Documents.

“Company Securitization Documents” includes each security issued by any CompanySecuritization Trust, and each loan sale agreement, pooling and servicing agreement,indenture, bond insurance agreement (and related policy), pool insurance agreement (andrelated policy), guarantee, swap or derivative contract, prospectus, offering circular,underwriting agreement, purchase agreement and each other material agreement relatedto any such security and each supplement, terms or pricing agreement or other agreementrelating to the foregoing and each document required to be delivered in connectiontherewith.

“Company Securitization Interests” means any securities, any Retained Interest, anyreserve account, cash collateral account, other residual or servicing interest or other ongoing obligations (in each case whether or not certificated) owned by Company or any

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of its Subsidiaries created pursuant to or associated with any Company SecuritizationDocument.

“Company Securitization Trust” means any trust or other special purpose vehiclecreated by Company.

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“Retained Interest” means any interest retained by Company or any of its Subsidiaries pursuant to the Company Securitization Documents.

“Servicer Default” means a servicer or master servicer default or similar event, asspecified in the relevant pooling and servicing agreement, indenture or other CompanySecuritization Document, as the case may be.

(n) For purposes of this Section 3.21 and Section 3.5(c), “Subsidiary” shall includeany Subsidiary of Company and, if and to the extent not otherwise included, also includeeach issuer, sponsor and/or depositor in each Company Sponsored Assed SecuritizationTransaction.

3.22 Insurance Matters.

(a) Each Subsidiary of Company that conducts the business of insurance or reinsurance (each, an “Insurance Subsidiary”) is (i) duly licensed or authorized as aninsurance company in its jurisdiction of incorporation; (ii) duly licensed, authorized or

otherwise eligible to transact the business of insurance in each other jurisdiction where itis required to be so licensed, authorized or eligible; and (iii) duly licensed, authorized or eligible in its jurisdiction of incorporation and each other applicable jurisdiction to writeeach line of insurance reported as being written in the Statutory Statements. Each jurisdiction in which any Insurance Subsidiary is licensed, authorized or eligible is setforth in Section 3.22(a) of the Company Disclosure Schedule. There is no proceeding or investigation pending or, to the knowledge of Company, threatened which wouldreasonably be expected to lead to the revocation, amendment, failure to renew, limitation,suspension or restriction of any license, authorization or eligibility of any InsuranceSubsidiary to transact the business of insurance.

(b) Each statement, together with all exhibits and schedules thereto, and all actuarialopinions, affirmations and certifications required in connection therewith, and allrequired supplemental materials, filed by each Insurance Subsidiary with any InsuranceDepartment since January 1, 2005 (the “Statutory Statements”) was prepared inconformity with the statutory accounting practices prescribed or permitted by theInsurance Department of the applicable state of domicile and applied on a consistent basis (“SAP”). Each such Statutory Statement presents fairly, in all material respects andin conformity with SAP, the statutory financial condition of such Insurance Subsidiary onwww .S

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the respective date of the Statutory Statement, the results of operations, changes in capitaland surplus and cash flow of such Insurance Subsidiary for each of the applicablereporting periods, and was correct and complete when filed. No deficiencies or violationshave been asserted in writing (or, to the knowledge of Company, orally) by any InsuranceDepartment with respect to any such Statutory Statement which have not been cured or

otherwise resolved to the satisfaction of such Insurance Department. Section 3.22(b) of the Company Disclosure Schedule sets forth a complete list of permitted practices under SAP that are used in any of the Statutory Statements of any Insurance Subsidiary.

(c) The aggregate reserves for claims, losses (including incurred but not reportedlosses), loss adjustment expenses (whether allocated or unallocated) and unearned premium, as reflected in each of the Statutory Statements, (A) were determined inaccordance with presently

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accepted actuarial standards consistently applied (except as otherwise noted in thefinancial statements and notes thereto included in such financial statements); (B) arefairly stated in accordance with sound actuarial principles; (C) were computed on the basis of methodologies consistent in all material respects with those used in computingthe corresponding reserves in the prior fiscal years (except as otherwise noted in thefinancial statements and notes thereto included in such financial statements) and (D)include provisions for all actuarial reserves and related items reasonably required to beestablished in accordance with applicable laws.

(d) All policies, binders, slips, certificates, and other agreements of insurance issuedor distributed by any Insurance Subsidiary in any jurisdiction (“Insurance Contracts”)have been issued or distributed, to the extent required by law, on forms filed with andapproved by all applicable Insurance Departments, or not objected to by any suchInsurance Department within any period provided for objection, and all such formscomply with applicable laws. All premium rates with respect to the Insurance Contracts,to the extent required by law, have been filed with and approved by all applicableInsurance Departments or were not objected to by any such Insurance Department withinany period provided for objection. All such premium rates comply with applicable lawsand are within the amount permitted by such laws.

(e) All underwriting, management and administration agreements entered into by anyInsurance Subsidiary are, to the extent required by law, in forms acceptable to allapplicable Insurance Departments or have been filed with and approved by all applicableInsurance Departments or were not objected to by any such Insurance Department withinany period provided for objection.

(f) All advertising, promotional, sales and solicitation materials and all productillustrations used by any Insurance Subsidiary or any agent, broker, intermediary,www .S

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manager or producer employed or engaged by any Insurance Subsidiary (each, a“Producer”) of any Insurance Subsidiary are in compliance with applicable laws.

(g) Each reinsurance contract, treaty or arrangement (including any facultativeagreements, indemnity agreements, or other agreements involving cession or assumption

of reinsurance, coinsurance, excess insurance, or retrocessions and any terminated or expired reinsurance contract, treaty or agreement under which there remains anyoutstanding material liability) (“Reinsurance Contracts”) to which any InsuranceSubsidiary is a party or by which any Insurance Subsidiary is bound or subject is a validand binding obligation of the parties thereto, is in full force and effect, and is enforceablein accordance with its terms. Neither any Insurance Subsidiary nor, to the knowledge of Company, any other party thereto is in default with regard to any such ReinsuranceContract. There are no disputes pending or, to the knowledge of Company, threatenedwith respect to any such Reinsurance Contract.

(h) Each Insurance Subsidiary is entitled under applicable law to take full credit in its

Statutory Statements for all amounts recoverable by it pursuant to any ReinsuranceContract, and all such amounts recoverable have been properly recorded in the books andrecords of account of Company and its Insurance Subsidiaries and are properly reflectedin the Statutory Statements. To Company’s knowledge, all such amounts recoverable byCompany or any of its Insurance Subsidiaries are fully collectible in due course. Neither Company nor any of its Insurance Subsidiaries has received notice that any other party toany Reinsurance Contract

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intends not to perform fully under any such Reinsurance Contract, and, to Company’sknowledge, the financial condition of each party to each Reinsurance Contract pursuantto which any Insurance Subsidiary has ceded any premiums is not impaired to the extentthat a default thereunder could reasonably be anticipated.

(i) Since January 1, 2005, no rating agency has imposed conditions (financial or otherwise) on retaining any currently held rating assigned to any Insurance Subsidiary or stated to Company that it is considering lowering any rating assigned to any InsuranceSubsidiary or placing any Insurance Subsidiary on an “under review” status. As of thedate of this Agreement, each Insurance Subsidiary has the A.M. Best rating set forth inSection 3.22(i) of the Company Disclosure Schedule.

(j) No single Producer generated more than ten percent (10%) of the aggregate grosswritten premium of any Insurance Subsidiary during the year ended December 31, 2007.To Company’s knowledge, no Producer is engaged in, or has been engaged in, any pattern or practice of noncompliance with applicable laws regarding such Producer'sauthority to engage in the type of insurance activities in which such Producer is engaged,including laws requiring such Producer to be duly licensed. To Company’s knowledge,www .S

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there is no dispute pending or threatened against Company or any Insurance Subsidiary by any Producer who individually accounted for more than five percent (5%) of theaggregate gross written premiums of any Insurance Subsidiary during the year endedDecember 31, 2007.

(k) “PMI Reinsurance Agreements” means all reinsurance agreements, treaties, trustagreements and other agreements, and all amendments to any of the foregoing, relating toany reinsurance assumed by any Insurance Subsidiary (on an indemnity reinsurance basisor otherwise) of private mortgage insurance written directly by any insurance company.Each PMI Reinsurance Agreement is a valid and binding obligation of the parties thereto,is in full force and effect, and is enforceable in accordance with its terms. Neither anyInsurance Subsidiary nor, to the knowledge of Company, any other party thereto is indefault with regard to any PMI Reinsurance Agreement. There are no material disputes pending or, to the knowledge of Company, threatened with respect to any PMIReinsurance Agreement.

(l) The maximum liability of Company and any Insurance Subsidiary under any PMIReinsurance Agreement is limited to the amount of funds held in trust under such PMIReinsurance Agreement at such time as Company or such Insurance Subsidiary may electnot to deposit additional funds in such trust. Each Insurance Subsidiary has an absolute,unrestricted right to elect not to deposit additional funds in any trust established pursuantto any PMI Reinsurance Agreement, which election may be exercised at any time at thesole discretion of such Insurance Subsidiary.

(m) As of the date of this Agreement, each trust established pursuant to any PMIReinsurance Agreement is fully funded as required by such PMI Reinsurance Agreement. Neither Company nor any Insurance Subsidiary has received any written or oral notice,

statement or other communication from any person alleging or referencing anyinsufficiency in any such trust, demanding further deposit in any such trust, or demanding payment of any benefits under any PMI Reinsurance Agreement, and none of Company,the Insurance Subsidiaries or the cedents under any Reinsurance Agreement haswithdrawn at any time any funds from any trust

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related to any of the PMI Reinsurance Agreements. Each Insurance Subsidiary that is a party to any PMI Reinsurance Agreement has performed or received, on no less than anannual basis, reconciliations of each trust account established pursuant such PMIReinsurance Agreement. Each Insurance Subsidiary that is a party to any PMIReinsurance Agreement has received all reports and other information requested or duefrom the trustee(s) of each trust established pursuant to such PMI Reinsurance Agreementand from the cedents under any such PMI Reinsurance Agreement. Each InsuranceSubsidiary that is a party to any PMI Reinsurance Agreement has performed at leastannual audits of the reinsurance programs established in connection with such PMIwww .S

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Reinsurance Agreements and of the cedents under such PMI Reinsurance Agreements. No Insurance Subsidiary that is a party to any PMI Reinsurance Agreement hastransferred or ceded, in whole or in part, to any person any insurance risk assumed bysuch Insurance Subsidiary under such PMI Reinsurance Agreement. The reinsurance programs established in connection with the PMI Reinsurance Agreements are not, and

have not been, in violation of applicable laws and such reinsurance programs have not been the subject of sanctions, fines or penalties of any kind imposed by anyGovernmental Entity. To the knowledge of Company, since January 1, 2005, thereinsurance programs established in connection with the PMI Reinsurance Agreementsare not, and have not been, the subject of any charges or allegations of any kind of anyviolation of applicable laws.

3.23 State Takeover Laws. The Board of Directors of Company has unanimouslyapproved this Agreement and the transactions contemplated hereby as required to render inapplicable to this Agreement and such transactions the restrictions on “businesscombinations” set forth in Section 203 of the DGCL or any other “moratorium,” “control

share,” “fair price,” “takeover” or “interested stockholder” law (any such laws,“Takeover Statutes”).

3.24 Rights Agreement. Company or the Board of Directors of Company, as the casemay be, has (a) taken all necessary actions so that the execution and delivery of thisAgreement and the consummation of the transactions contemplated hereby will not resultin a “Distribution Date” (as defined in the Rights Agreement) or result in Parent being an“Acquiring Person” (as defined in the Rights Agreement) and (b) amended the RightsAgreement to (i) render it inapplicable to this Agreement and the transactionscontemplated hereby and (ii) provide that the “Final Expiration Date” (as defined in theRights Agreement) shall occur immediately prior to the Closing.

3.25 Interested Party Transactions. Except as set forth in the Company SECDocuments or Section 3.25 of the Company Disclosure Schedule, no event has occurredsince December 31, 2006 that would be required to be reported by Company pursuant toItem 404(a) of Regulation S-K promulgated by the SEC.

3.26 Reorganization; Approvals. As of the date of this Agreement, Company (a) is notaware of any fact or circumstance that could reasonably be expected to prevent theMerger from qualifying as a “reorganization” within the meaning of Section 368(a) of theCode, and (b) knows of no reason why all regulatory approvals from any GovernmentalEntity required for the consummation of the transactions contemplated by this Agreementshould not be obtained on a timely basis.

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3.27 Opinion. The Board of Directors of Company has received the opinions of eachof Goldman, Sachs & Co. and Sandler O'Neill & Partners, L.P., respectively, to the effectwww .S

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makes such licensing or qualification necessary. Parent is duly registered as a bank

holding company under the BHC Act and is a financial holding company pursuant toSection 4(1) of the BHC Act and meets the applicable requirements for qualification assuch. True, complete and correct copies of the Amended and Restated Certificate of Incorporation, as amended (the “Parent Certificate”), and Bylaws of Parent (the “ParentBylaws”), as in effect as of the date of this Agreement, have previously been madeavailable to Company.

(b) Each Subsidiary of Parent (i) is duly incorporated or duly formed, as applicable toeach such Subsidiary, and validly existing and in good standing under the laws of its jurisdiction of organization, (ii) has the requisite corporate power and authority or other power and authority to own or lease all of its properties and assets and to carry on its

business as it is now being conducted and (iii) is duly qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary.

4.2 Capitalization. The authorized capital stock of Parent consists of 7,500,000,000shares of Parent Common Stock, of which, as of December 31, 2007 (the “ParentCapitalization Date”), 4,437,885,419 shares were issued and outstanding, and100,000,000 shares of preferred stock, $0.01 par value (the “Parent Preferred Stock”), of which, as of the Parent Capitalization Date, (i) 3,000,000 shares were authorized asESOP Convertible Preferred Stock, Series C, none of which were issued and outstanding,

(ii) 35,045 shares were authorized as Cumulative Redeemable Preferred Stock, Series B,7,667 of which were issued and outstanding, (iii) 20,000,000 shares were authorized as$2.50 Cumulative Convertible Preferred Stock, Series BB, none of which were issuedand outstanding, (iv) 85,100 shares were authorized as Floating Rate Non-CumulativePreferred Stock, Series E, of which and issued 81,000 shares were issued andoutstanding, (v) 34,500 shares were authorized as 6.204% Non-Cumulative Series DPreferred Stock, of which 33,000 were issued and outstanding, (vi) 7,001 were authorizedas Floating Rate Non-Cumulative Preferred Stock, Series F, none of which were issuedand outstanding, (vii) 8,501 were authorized as Adjustable Rate Non-CumulativePreferred Stock, Series G, none of which were issued and outstanding, (viii) 25,300 wereauthorized as 6.625% Non-Cumulative Preferred Stock, Series I, 22,000 of which wereissued and outstanding, and (ix) 41,400 were authorized as 7.25% Non-CumulativePreferred Stock, Series J, 41,400 of which were issued and outstanding. As of the ParentCapitalization Date, no shares of Parent Common Stock were held in Parent’s treasury.As of the Parent Capitalization Date, no shares of Parent Common Stock or ParentPreferred Stock were reserved for issuance, except for (i) 383,878,759 shares of ParentCommon Stock reserved for issuance upon exercise of options issued pursuant toemployee and director stock plans of Parent or a Subsidiary of Parent in effect as of thedate of this Agreement (the “Parent Stock Plans”) and (ii) 159,954 shares of Parentwww .S

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Common Stock reserved for issuance pursuant to a convertible note agreement (the“Convertible Note Agreement”). All of the issued and outstanding shares of ParentCommon Stock have been duly authorized and validly issued and are fully paid,nonassessable and free of preemptive rights, with no personal liability attaching to theownership thereof. As of the date of this Agreement, no Voting Debt of Parent is issued

or outstanding. As of the Parent Capitalization Date, except pursuant to this Agreement,the Parent Stock Plans, the Convertible Note Agreement, Parent’s dividend reinvestment plan and stock repurchase plans entered into by Parent from time to time, Parent does nothave and is not bound by any outstanding subscriptions, options, warrants, calls, rights,commitments or agreements of any character

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calling for the purchase or issuance of any shares of Parent Common Stock, Parent

Preferred Stock, Voting Debt of Parent or any other equity securities of Parent or anysecurities representing the right to purchase or otherwise receive any shares of ParentCommon Stock, Parent Preferred Stock, Voting Debt of Parent or other equity securitiesof Parent. The shares of Parent Common Stock to be issued pursuant to the Merger will be duly authorized and validly issued and, at the Effective Time, all such shares will befully paid, nonassessable and free of preemptive rights, with no personal liabilityattaching to the ownership thereof.

4.3 Authority; No Violation. (a) Each of Parent and Merger Sub has full corporate power and authority to execute and deliver this Agreement and to consummate thetransactions contemplated hereby. The execution and delivery of this Agreement and the

consummation of the transactions contemplated hereby have been duly and validlyapproved by the Boards of Directors of Parent and Merger Sub (by the unanimous vote of all directors present) and no other corporate proceedings on the part of Parent or Merger Sub are necessary to approve this Agreement or to consummate the transactionscontemplated hereby. This Agreement has been duly and validly executed and delivered by each of Parent and Merger Sub and (assuming due authorization, execution anddelivery by Company) constitutes the valid and binding obligation of each of Parent andMerger Sub, enforceable against each of Parent and Merger Sub in accordance with itsterms (subject to the Bankruptcy and Equity Exception).

(b) Neither the execution and delivery of this Agreement by Parent or Merger Sub, nor the consummation by Parent or Merger Sub of the transactions contemplated hereby, nor compliance by Parent or Merger Sub with any of the terms or provisions of thisAgreement, will (i) violate any provision of the Parent Certificate or the Parent Bylaws or the certificate of incorporation or bylaws of Merger Sub, or (ii) assuming that theconsents, approvals and filings referred to in Section 4.4 are duly obtained and/or made,(A) violate any law, judgment, order, injunction or decree applicable to Parent, any of itsSubsidiaries or any of their respective properties or assets or (B) violate, conflict with,result in a breach of any provision of or the loss of any benefit under, constitute a defaultwww .S

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January 1, 2005 or has pending any proceeding, enforcement action or, to the knowledgeof Parent, investigation into the business, disclosures or operations of Parent or any of itsSubsidiaries. Since January 1, 2005, no Regulatory Agency or other Governmental Entityhas resolved any proceeding, enforcement action or, to the knowledge of Parent,investigation into the business, disclosures or operations of Parent or any of its

Subsidiaries. There is no unresolved violation, criticism, comment or exception by anyRegulatory Agency or other Governmental Entity with respect to any report or statementrelating to any examinations or inspections of Parent or any of its Subsidiaries. SinceJanuary 1, 2005 there has been no formal or informal inquiries by, or disagreements or disputes with, any Regulatory Agency or other Governmental Entity with respect to the business, operations, policies or procedures of Parent or any of its Subsidiaries (other than normal examinations conducted by a Regulatory Agency or other GovernmentalEntity in Parent’s ordinary course of business).

(b) Neither Parent nor any of its Subsidiaries is subject to any cease-and-desist or other order or enforcement action issued by, or is a party to any written agreement,

consent agreement or memorandum of understanding with, or is a party to anycommitment letter or similar undertaking to, or is subject to any order or directive by, or has been since January 1, 2005 a recipient of any supervisory letter from, or has beenordered to pay any civil money penalty by, or since January 1, 2005 has adopted any policies, procedures or board resolutions at the request or suggestion of, any RegulatoryAgency or other Governmental Entity that currently restricts in any material respect theconduct of its business or that in any material manner relates to its capital adequacy, itsability to pay dividends, its credit, risk management or compliance policies, its internalcontrols, its management or its business, other than those of general application thatapply to bank holding companies or their Subsidiaries (each, a “Parent RegulatoryAgreement”), nor has Parent or any of its Subsidiaries been advised since January 1, 2005 by any Regulatory Agency or other Governmental Entity that it is considering issuing,initiating, ordering or requesting any such Parent Regulatory Agreement.

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(c) Parent has previously made available to Company an accurate and complete copyof each (i) final registration statement, prospectus, report, schedule and definitive proxystatement filed with or furnished to the SEC by Parent pursuant to the Securities Act or the Exchange Act since January 1, 2005 (the “Parent SEC Reports”) and prior to the dateof this Agreement and (ii) communication mailed by Parent to its stockholders sinceJanuary 1, 2005 and prior to the date of this Agreement. No such Parent SEC Report or communication, at the time filed, furnished or communicated (and, in the case of registration statements and proxy statements, on the dates of effectiveness and the datesof the relevant meetings, respectively), contained any untrue statement of a material factor omitted to state any material fact required to be stated therein or necessary in order tomake the statements made therein, in light of the circumstances in which they were made,not misleading, except that information as of a later date (but before the date of thiswww .S

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Agreement) shall be deemed to modify information as of an earlier date. As of their respective dates, all Parent SEC Reports complied as to form in all material respects withthe published rules and regulations of the SEC with respect thereto. No executive officer of Parent has failed in any respect to make the certifications required of him or her under Section 302 or 906 of the Sarbanes-Oxley Act.

4.6 Financial Statements.

(a) The financial statements of Parent and its Subsidiaries included (or incorporated byreference) in the Parent SEC Reports (including the related notes, where applicable) (i)have been prepared from, and are in accordance with, the books and records of Parentand its Subsidiaries; (ii) fairly present in all material respects the consolidated results of operations, cash flows, changes in stockholders’ equity and consolidated financial position of Parent and its Subsidiaries for the respective fiscal periods or as of therespective dates therein set forth (subject in the case of unaudited statements to recurringyear-end audit adjustments normal in nature and amount); (iii) complied as to form, as of

their respective dates of filing with the SEC, in all material respects with applicableaccounting requirements and with the published rules and regulations of the SEC withrespect thereto; and (iv) have been prepared in accordance with GAAP consistentlyapplied during the periods involved, except, in each case, as indicated in such statementsor in the notes thereto. The books and records of Parent and its Subsidiaries have been,and are being, maintained in all material respects in accordance with GAAP and anyother applicable legal and accounting requirements and reflect only actual transactions.PricewaterhouseCoopers LLP has not resigned or been dismissed as independent publicaccountants of Parent as a result of or in connection with any disagreements with Parenton a matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.

(b) Neither Parent nor any of its Subsidiaries has any material liability or obligation of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether due or to become due), except for those liabilities that are reflected or reserved against onthe consolidated balance sheet of Parent included in its Quarterly Report on Form 10-Qfor the quarterly period ended September 30, 2007 (including any notes thereto) and for liabilities incurred in the ordinary course of business consistent with past practice sinceSeptember 30, 2007 or in connection with this Agreement and the transactionscontemplated hereby.

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(c) The records, systems, controls, data and information of Parent and its Subsidiariesare recorded, stored, maintained and operated under means (including any electronic,mechanical or photographic process, whether computerized or not) that are under theexclusive ownership and direct control of Parent or its Subsidiaries or accountants(including all means of access thereto and therefrom), except for any non-exclusivewww .S

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ownership and non-direct control that would not reasonably be expected to have amaterial adverse effect on the system of internal accounting controls described below inthis Section 4.6(c) . Parent (x) has implemented and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) to ensure that materialinformation relating to Parent, including its consolidated Subsidiaries, is made known to

the chief executive officer and the chief financial officer of Parent by others within thoseentities, and (y) has disclosed, based on its most recent evaluation prior to the date hereof,to Parent’s outside auditors and the audit committee of Parent’s Board of Directors (i)any significant deficiencies and material weaknesses in the design or operation of internalcontrols over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act)which are reasonably likely to adversely affect Parent’s ability to record, process,summarize and report financial information and (ii) any fraud, whether or not material,that involves management or other employees who have a significant role in Parent’sinternal controls over financial reporting. These disclosures were made in writing bymanagement to Parent’s auditors and audit committee, a copy of which has previously been made available to Company. As of the date hereof, there is no reason to believe that

Parent’s outside auditors, chief executive officer and chief financial officer will not beable to give the certifications and attestations required pursuant to the rules andregulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act, withoutqualification, when next due.

(d) Since December 31, 2006, (x) neither Parent nor any of its Subsidiaries nor, to theknowledge of the officers of Parent, any director, officer, employee, auditor, accountantor representative of Parent or any of its Subsidiaries has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologiesor methods of Parent or any of its Subsidiaries or their respective internal accountingcontrols, including any material complaint, allegation, assertion or claim that Parent or any of its Subsidiaries has engaged in questionable accounting or auditing practices, and(y) no attorney representing Parent or any of its Subsidiaries, whether or not employed byParent or any of its Subsidiaries, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by Parent or any of itsofficers, directors, employees or agents to the Board of Directors of Parent or anycommittee thereof or to any director or officer of Parent.

4.7 Broker’s Fees. Neither Parent nor any of its Subsidiaries nor any of their respective officers or directors has employed any broker or finder or incurred any liabilityfor any broker’s fees, commissions or finder’s fees in connection with the Merger or related transactions contemplated by this Agreement, other than as set forth on Section4.7 of the Parent Disclosure Schedule.

4.8 Absence of Certain Changes or Events. Since September 30, 2007, no event or events have occurred that have had or would reasonably be expected to have a MaterialAdverse Effect on Parent.

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or omit to state a material fact necessary to make the statements therein, in light of thecircumstances in which they are made, not misleading. The portions of the ProxyStatement relating to Parent and its Subsidiaries and other portions within the reasonablecontrol of Parent and its Subsidiaries will comply in all material respects with the provisions of the Exchange Act and the rules and

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regulations thereunder. The Form S-4 will comply in all material respects with the provisions of the Securities Act and the rules and regulations thereunder.

ARTICLE V

COVENANTS RELATING TO CONDUCT OF BUSINESS

5.1 Conduct of Businesses Prior to the Effective Time. Except as expresslycontemplated by or permitted by this Agreement or with the prior written consent of theother party, during the period from the date of this Agreement to the Effective Time, eachof Company and Parent shall, and shall cause each of its respective Subsidiaries to, (a)conduct its business in the ordinary course in all material respects, (b) use reasonable bestefforts to maintain and preserve intact its business organization and advantageous business relationships and retain the services of its key officers and key employees and(c) take no action that is intended to or would reasonably be expected to adversely affector materially delay the ability of Company, Parent or Merger Sub to obtain any necessaryapprovals of any Regulatory Agency or other Governmental Entity required for the

transactions contemplated hereby or to perform its covenants and agreements under thisAgreement or to consummate the transactions contemplated hereby or thereby.

5.2 Company Forbearances. During the period from the date of this Agreement to theEffective Time, except as set forth in Section 5.2 of the Company Disclosure Scheduleand except as expressly contemplated or permitted by this Agreement, Company shallnot, and shall not permit any of its Subsidiaries to, without the prior written consent of Parent:

(a) other than in the ordinary course of business consistent with past practice, incur any indebtedness for borrowed money, assume, guarantee, endorse or otherwise as an

accommodation become responsible for the obligations of any other individual,corporation or other entity, or make any loan or advance or capital contribution to, or investment in, any person (it being understood and agreed that incurrence of indebtednessin the ordinary course of business consistent with past practice shall include the creationof deposit liabilities, purchases of Federal funds, FHLBA advances, securitizations, salesof certificates of deposit and entering into repurchase agreements, in each case in theordinary course of business consistent with past practice);

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(b) (i) adjust, split, combine or reclassify any of its capital stock;

(ii) make, declare or pay any dividend, or make any other distribution on, or directly or indirectly redeem, purchase or otherwise acquire, any shares of its capitalstock or any securities or obligations convertible (whether currently convertible or

convertible only after the passage of time or the occurrence of certain events) into or exchangeable for any shares of its capital stock (except (A) for regular quarterly cashdividends on the Company Common Stock at a rate not in excess of $0.15 per share withrecord dates and payment dates consistent with the prior year, (B) dividends on the SeriesB Preferred Stock, (C) dividends paid by any of the Subsidiaries of Company toCompany or to any of its wholly-owned Subsidiaries, and (D) the acceptance of shares of Company Common Stock in payment of the exercise price or withholding Taxes incurred

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by any employee or director in connection with the exercise of stock options or stock appreciation rights or the vesting of restricted shares of (or settlement of other equity- based awards in respect of) Company Common Stock granted under a Company Stock Plan or Company Deferred Equity Unit Plan, in each case in accordance with past practice and the terms of the applicable Company Stock Plan and related awardagreements or Company Deferred Equity Unit Plan);

(iii) grant any stock options, stock appreciation rights, restricted shares, restrictedstock units, deferred equity units, awards based on the value of Company’s capital stock or other equity-based award with respect to shares of Company Common Stock under

any of the Company Stock Plans or otherwise, or grant any individual, corporation or other entity any right to acquire any shares of its capital stock; or

(iv) issue any additional shares of capital stock or other securities, except pursuantto the exercise of stock options or stock appreciation rights or the settlement of other equity-based awards granted under a Company Stock Plan or Company Deferred EquityUnit Plan that are outstanding as of the date of this Agreement;

(c) except (A) as required under applicable law or the terms of any Company BenefitPlan existing as of the date hereof, (B) for increases in annual base salary at times and inamounts in the ordinary course of business consistent with past practice, which shall notexceed 4% in the aggregate (on an annualized basis) and (C) for promotions (other than promotions to senior managing director or above) at times in the ordinary course of business consistent with past practice, (i) increase in any manner the compensation or benefits of any of the current or former directors, officers or employees of Company or its Subsidiaries (collectively, “Employees”), (ii) pay any amounts to Employees notrequired by any current plan or agreement (other than base salary in the ordinary courseof business) to any Employee, (iii) become a party to, establish, amend, commence participation in, terminate or commit itself to the adoption of any stock option plan or www .S

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other stock-based compensation plan, compensation (including any employee co-investment fund), severance, pension, retirement, profit-sharing, welfare benefit, or other employee benefit plan or agreement or employment agreement with or for the benefit of any Employee (or newly hired employees), (iv) accelerate the vesting of any stock-basedcompensation or other long-term incentive compensation under any Company Benefit

Plans, or (v) (x) hire employees in the position of senior vice president or above (or withrespect to the retail products divisions in the position of regional vice president or above)or (y) terminate the employment of any employee in the position of executive vice president or above (other than due to terminations for cause);

(d) sell, transfer, pledge, lease, license, mortgage, encumber or otherwise dispose of any material amount of its properties or assets (including pursuant to securitizations) toany individual, corporation or other entity other than a Subsidiary or cancel, release or assign any material amount of indebtedness to any such person or any claims held by anysuch person, in each case other than in the ordinary course of business consistent with past practice or pursuant to contracts in force at the date of this Agreement;

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(e) enter into any new line of business or change in any material respect its lending,investment, underwriting, risk and asset liability management and other banking,operating, securitization and servicing policies, except as required by applicable law,regulation or policies imposed by any Governmental Entity;

(f) transfer ownership, or grant any license or other rights, to any person or entity of or

in respect of any material Company IP, other than grants of non-exclusive licenses pursuant to License Agreements entered into in the ordinary course of business consistentwith past practice;

(g) make any material investment either by purchase of stock or securities,contributions to capital, property transfers, or purchase of any property or assets of anyother individual, corporation or other entity;

(h) take any action, or knowingly fail to take any action, which action or failure to actis reasonably likely to prevent the Merger from qualifying as a reorganization within themeaning of Section 368(a) of the Code;

(i) amend its charter or bylaws, or otherwise take any action to exempt any person or entity (other than Parent or its Subsidiaries) or any action taken by any person or entityfrom any Takeover Statute or similarly restrictive provisions of its organizationaldocuments or terminate, amend or waive any provisions of any confidentiality or standstill agreements in place with any third parties;

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(j) other than in prior consultation with Parent, restructure or materially change itsinvestment securities portfolio or its gap position, through purchases, sales or otherwise,or the manner in which the portfolio is classified or reported;

(k) change in any material respect the policies, practices and procedures governing

Mortgage Loan operations of Company and its Subsidiaries, including the policies, practices and procedures governing credit and collection matters, related to thesolicitation, origination, maintenance and servicing of Mortgage Loans;

(l) (i) amend or otherwise modify, except in the ordinary course of business, or knowingly violate in any material respect the terms of, any Company Contract, or (ii)create, renew or amend any agreement or contract or, except as may be required byapplicable law, other binding obligation of Company or its Subsidiaries containing (A)any material restriction on the ability of Company or its Subsidiaries to conduct its business as it is presently being conducted or (B) any material restriction on the ability of Company or its affiliates to engage in any type of activity or business;

(m) commence or settle any material claim, action or proceeding;

(n) take any action or willfully fail to take any action that is intended or mayreasonably be expected to result in any of the conditions to the Merger set forth in ArticleVII not being satisfied;

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(o) implement or adopt any change in its Tax accounting or financial accounting principles, practices or methods, other than as may be required by applicable law, GAAPor regulatory guidelines;

(p) file or amend any Tax Return other than in the ordinary course of business, makeor change any material Tax election, or settle or compromise any material Tax liability;or

(q) agree to take, make any commitment to take, or adopt any resolutions of its boardof directors in support of, any of the actions prohibited by this Section 5.2.

5.3 Parent Forbearances. Except as expressly permitted by this Agreement or with the prior written consent of Company, during the period from the date of this Agreement tothe Effective Time, Parent shall not, and shall not permit any of its Subsidiaries to, (a)amend, repeal or otherwise modify any provision of the Parent Certificate or the ParentBylaws in a manner that would adversely affect Company, the stockholders of Companyor the transactions contemplated by this Agreement; (b) take any action, or knowinglyfail to take any action, which action or failure to act is reasonably likely to prevent theMerger from qualifying as a “reorganization” within the meaning of Section 368(a) of thewww .S

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contemplated by this Agreement and each party will keep the other apprised of the statusof matters relating to completion of the transactions contemplated by this Agreement. Notwithstanding the foregoing, nothing contained herein shall be deemed to requireParent to take any action, or commit to take any action, or agree to any condition or restriction, in connection with obtaining the foregoing permits, consents, approvals and

authorizations of third parties or Governmental Entities, that would reasonably beexpected to have a material adverse effect (measured on a scale relative to Company) oneither Parent or Company (a “Materially Burdensome Regulatory Condition”).

(c) Each of Parent and Company shall, upon request, furnish to the other allinformation concerning itself, its Subsidiaries, directors, officers and stockholders andsuch other matters as may be reasonably necessary or advisable in connection with theProxy Statement, the Form S-4 or any other statement, filing, notice or application made by or on behalf of Parent, Company or any of their respective Subsidiaries to anyGovernmental Entity in connection with the Merger and the other transactionscontemplated by this Agreement.

(d) Each of Parent and Company shall promptly advise the other upon receiving anycommunication from any Governmental Entity the consent or approval of which isrequired for consummation of the transactions contemplated by this Agreement thatcauses such party to believe that there is a reasonable likelihood that any Parent RequisiteRegulatory Approval or Company Requisite Regulatory Approval, respectively, will not be obtained or that the receipt of any such approval may be materially delayed.

6.2 Access to Information. (a) Upon reasonable notice and subject to applicable lawsrelating to the confidentiality of information, each of Company and Parent shall, and shallcause each of its Subsidiaries to, afford to the officers, employees, accountants, counsel,

advisors, agents and other representatives of the other party, reasonable access, duringnormal business hours during the period prior to the Effective Time, to all its properties, books, contracts, commitments and records, and, during such period, such party shall, andshall cause its Subsidiaries to, make available to the other party (i) a copy of each report,schedule, registration statement and other document filed or received by it during such period pursuant to the requirements of federal securities laws or federal or state bankingor insurance laws (other than reports or documents that such party is not permitted todisclose under applicable law) and (ii) all other information concerning its business, properties and personnel as the other party may reasonably request (in the case of arequest by Company, information concerning Parent that is reasonably related to the prospective value of Parent Common Stock or to Parent’s ability to consummate thetransactions contemplated hereby). Neither Company nor Parent, nor any of their Subsidiaries, shall be required to provide access to or to disclose information where suchaccess or disclosure would jeopardize the attorney-client privilege of such party or its

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Subsidiaries or contravene any law, rule, regulation, order, judgment, decree, fiduciaryduty or binding agreement entered into prior to the date of this Agreement. The partiesshall make appropriate substitute disclosure arrangements under circumstances in whichthe restrictions of the preceding sentence apply.

(b) All information and materials provided pursuant to this Agreement shall be subjectto the provisions of the Confidentiality Agreements entered into between the parties as of November 12, 2007 and as of January 10, 2008 (the “Confidentiality Agreements”).

(c) No investigation by a party hereto or its representatives shall affect therepresentations and warranties of the other party set forth in this Agreement.

6.3 Stockholder Approval. Company shall call a meeting of its stockholders to be heldas soon as reasonably practicable for the purpose of obtaining the requisite stockholder approval required in connection with the Merger, on substantially the terms andconditions set forth in this Agreement, and shall use its reasonable best efforts to cause

such meeting to occur as soon as reasonably practicable. The Board of Directors of Company shall use its reasonable best efforts to obtain from its stockholders thestockholder vote approving the Merger, on substantially the terms and conditions setforth in this Agreement, required to consummate the transactions contemplated by thisAgreement. Company shall submit this Agreement to its stockholders at the stockholder meeting even if its Board of Directors shall have withdrawn, modified or qualified itsrecommendation. The Board of Directors of Company has adopted resolutions approvingthe Merger, on substantially the terms and conditions set forth in this Agreement, anddirecting that the Merger, on such terms and conditions, be submitted to Company’sstockholders for their consideration.

6.4 Affiliates. Company shall use its reasonable best efforts to cause each director,executive officer and other person who is an “affiliate” (for purposes of Rule 145 under the Securities Act) of Company to deliver to Parent, as soon as practicable after the dateof this Agreement, and prior to the date of the meeting of Company stockholders to beheld pursuant to Section 6.3, a written agreement, in the form of Exhibit A.

6.5 NYSE Listing. Parent shall cause the shares of Parent Common Stock to be issuedin the Merger to be approved for listing on the NYSE, subject to official notice of issuance, prior to the Effective Time.

6.6 Employee Matters. (a) Following the Closing Date, Parent shall maintain or causeto be maintained employee benefit plans and compensation opportunities for the benefitof employees (as a group) who are actively employed by Company and its Subsidiarieson the Closing Date (“Covered Employees”) that provide employee benefits andcompensation opportunities which, in the aggregate, are substantially comparable to theemployee benefits and compensation opportunities that are generally made available tosimilarly situated employees of Parent or its Subsidiaries (other than Company and itsSubsidiaries), as applicable; provided, that in no event shall any Covered Employee beeligible to participate in any closed or frozen plan of Parent or its Subsidiaries; provided,www .S

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further, that until such time as Parent shall cause Covered Employees to participate in the benefit plans and compensation opportunities that are made available to similarly situatedemployees of Parent or its Subsidiaries (other than Company and

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its Subsidiaries), a Covered Employee’s continued participation in employee benefit plans and compensation opportunities of Company and its Subsidiaries shall be deemedto satisfy the foregoing provisions of this sentence (it being understood that participationin the Parent plans may commence at different times with respect to each Parent plan). Notwithstanding anything contained herein to the contrary, from and after the EffectiveTime, a Covered Employee who is eligible to participate in the Company Change inControl Severance Plan (the “Company Severance Plan”) and who is terminated duringthe period commencing at the Effective Time and ending on the second anniversary

thereof shall be entitled to receive the severance payments and benefits under theCompany Severance Plan (without amendment to the Company Severance Plan duringsuch two year period following the Effective Time).

(b) To the extent that a Covered Employee becomes eligible to participate in anemployee benefit plan maintained by Parent or any of its Subsidiaries (other thanCompany or its Subsidiaries), Parent shall cause such employee benefit plan to (i)recognize the service of such Covered Employee with Company or its Subsidiaries (or their predecessor entities) for purposes of eligibility, participation, vesting and, exceptunder defined benefit pension plans (other than as provided in the last sentence of thisSection 6.6(b)), benefit accrual under such employee benefit plan of Parent or any of its

Subsidiaries, to the same extent such service was recognized immediately prior to theEffective Time under a comparable Company Benefit Plan in which such CoveredEmployee was eligible to participate immediately prior to the Effective Time or, if thereis no such comparable benefit plan, to the same extent such service was recognized under the Company 401(k) Savings and Investment Plan immediately prior to the EffectiveTime; provided that such recognition of service shall not operate to duplicate any benefitsof a Covered Employee with respect to the same period of service, and (ii) with respect toany health, dental, vision plan or other welfare of Parent or any of its Subsidiaries (other than Company and its Subsidiaries) in which any Covered Employee is eligible to participate for the plan year in which such Covered Employee is first eligible to participate, use its reasonable best efforts to (x) cause any pre-existing conditionlimitations or eligibility waiting periods under such Parent or Subsidiary plan to bewaived with respect to such Covered Employee to the extent such limitation would have been waived or satisfied under the Company Benefit Plan in which such CoveredEmployee participated immediately prior to the Effective Time, and (y) recognize anyhealth, dental or vision expenses incurred by such Covered Employee in the year thatincludes the Closing Date (or, if later, the year in which such Covered Employee is firsteligible to participate) for purposes of any applicable deductible and annual out-of-pocketexpense requirements under any such health, dental or vision plan of Parent or any of itswww .S

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Subsidiaries. For purposes of any cash balance pension plan maintained or contributed to by Parent or any of its Subsidiaries in which Covered Employees become eligible to participate following the Effective Time, the Covered Employees’ level of benefitaccruals under any such plans (for periods of service following the date on which theCovered Employees commence participation in such plans) shall be determined based on

the Covered Employees’ credited service prior to the Effective Time (as determinedunder Company’s tax qualified retirement plans immediately prior to the Effective Time)and with the Surviving Company following the Effective Time.

(c) From and after the Effective Time, Parent shall, or shall cause its Subsidiaries to,honor, in accordance with the terms thereof as in effect as of the date hereof or as may beamended after the date hereof with the prior written consent of Parent, each employmentagreement and change in control agreement listed on Section 3.11 of the CompanyDisclosure

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Schedule and the obligations of Company and its Subsidiaries as of the Effective Timeunder each deferred compensation plan or agreement listed on Section 3.11 of theCompany Disclosure Schedule.

(d) Nothing in this Section 6.6 shall be construed to limit the right of Parent or any of its Subsidiaries (including, following the Closing Date, Company and its Subsidiaries) toamend or terminate any Company Benefit Plan or other employee benefit plan, to theextent such amendment or termination is permitted by the terms of the applicable plan,

nor shall anything in this Section 6.6 be construed to require the Parent or any of itsSubsidiaries (including, following the Closing Date, Company and its Subsidiaries) toretain the employment of any particular Covered Employee for any fixed period of timefollowing the Closing Date.

(e) Without limiting the generality of Section 9.10, the provisions of this Section 6.6are solely for the benefit of the parties to this Agreement, and no current or former employee, director or independent contractor or any other individual associated therewithshall be regarded for any purpose as a third-party beneficiary of the Agreement, andnothing herein shall be construed as an amendment to any Company Benefit Plan or other employee benefit plan for any purpose.

6.7 Indemnification; Directors’ and Officers’ Insurance.

(a) In the event of any threatened or actual claim, action, suit, proceeding or investigation, whether civil, criminal or administrative (a “Claim”), including any suchClaim in which any individual who is now, or has been at any time prior to the date of this Agreement, or who becomes prior to the Effective Time, a director or officer of Company or any of its Subsidiaries or who is or was serving at the request of Companywww .S

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or any of its Subsidiaries as a director or officer of another person (the “IndemnifiedParties”), is, or is threatened to be, made a party based in whole or in part on, or arising inwhole or in part out of, or pertaining to (i) the fact that he or she is or was a director or officer of Company or any of its Subsidiaries prior to the Effective Time or (ii) thisAgreement or any of the transactions contemplated by this Agreement, whether asserted

or arising before or after the Effective Time, the parties shall cooperate and use their bestefforts to defend against and respond thereto. All rights to indemnification andexculpation from liabilities for acts or omissions occurring at or prior to the EffectiveTime now existing in favor of any Indemnified Party as provided in their respectivecertificates or articles of incorporation or by-laws (or comparable organizationaldocuments), and any existing indemnification agreements set forth in Section 6.7 of theCompany Disclosure Schedule, shall survive the Merger and shall continue in full forceand effect in accordance with their terms, and shall not be amended, repealed or otherwise modified for a period of six years after the Effective Time in any manner thatwould adversely affect the rights thereunder of such individuals for acts or omissionsoccurring at or prior to the Effective Time or taken at the request of Parent pursuant to

Section 6.8 hereof, it being understood that nothing in this sentence shall require anyamendment to the certificate of incorporation or by-laws of the Surviving Company.

(b) From and after the Effective Time, Parent shall cause the Surviving Company to,to the fullest extent permitted by applicable law, indemnify, defend and hold harmless,and provide advancement of expenses to, each Indemnified Party against all losses,claims, damages,

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costs, expenses, liabilities or judgments or amounts that are paid in settlement of or inconnection with any Claim based in whole or in part on or arising in whole or in part outof the fact that such person is or was a director or officer of Company or any of itsSubsidiaries, and pertaining to any matter existing or occurring, or any acts or omissionsoccurring, at or prior to the Effective Time, whether asserted or claimed prior to, or at or after, the Effective Time (including matters, acts or omissions occurring in connectionwith the approval of this Agreement and the consummation of the transactionscontemplated hereby) or taken at the request of Parent pursuant to Section 6.8 hereof.

(c) Parent shall cause the individuals serving as officers and directors of Company or any of its Subsidiaries immediately prior to the Effective Time to be covered for a periodof six years from the Effective Time by the directors’ and officers’ liability insurance policy maintained by Company (provided that Parent may substitute therefor policies of at least the same coverage and amounts containing terms and conditions that are not lessadvantageous than such policy) with respect to acts or omissions occurring prior to theEffective Time that were committed by such officers and directors in their capacity assuch; provided that in no event shall Parent be required to expend annually in theaggregate an amount in excess of 250% of the annual premiums currently paid bywww .S

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Company (which current amount is set forth in Section 6.7 of the Company DisclosureSchedule) for such insurance (the “Insurance Amount”), and provided further that if Parent is unable to maintain such policy (or such substitute policy) as a result of the preceding proviso, Parent shall obtain as much comparable insurance as is available for the Insurance Amount.

(d) The provisions of this Section 6.7 shall survive the Effective Time and areintended to be for the benefit of, and shall be enforceable by, each Indemnified Party andhis or her heirs and representatives.

6.8 Additional Agreements. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement (includingany merger between a Subsidiary of Parent, on the one hand, and a Subsidiary of Company, on the other) or to vest the Surviving Company with full title to all properties,assets, rights, approvals, immunities and franchises of either party to the Merger, the proper officers and directors of each party and their respective Subsidiaries shall, at

Parent’s sole expense, take all such necessary action as may be reasonably requested byParent.

6.9 Advice of Changes. Each of Parent and Company shall promptly advise the other of any change or event (i) having or reasonably likely to have a Material Adverse Effecton it or (ii) that it believes would or would be reasonably likely to cause or constitute amaterial breach of any of its representations, warranties or covenants contained in thisAgreement; provided, however, that no such notification shall affect the representations,warranties, covenants or agreements of the parties (or remedies with respect thereto) or the conditions to the obligations of the parties under this Agreement; and provided further that a failure to comply with this Section 6.9 shall not constitute a breach of this

Agreement or the failure of any condition set forth in Article VII to be satisfied unless theunderlying Material Adverse Effect or material breach would independently result in thefailure of a condition set forth in Article VII to be satisfied.

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6.10 Exemption from Liability Under Section 16(b). Prior to the Effective Time,Parent and Company shall each take all such steps as may be necessary or appropriate tocause any disposition of shares of Company Common Stock or conversion of anyderivative securities in respect of such shares of Company Common Stock in connectionwith the consummation of the transactions contemplated by this Agreement to be exemptunder Rule 16b-3 promulgated under the Exchange Act, including any such actionsspecified in the No-Action Letter dated January 12, 1999, issued by the SEC to Skadden,Arps, Slate, Meagher & Flom, LLP.

6.11 No Solicitation.

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(a) None of Company, its Subsidiaries or any officer, director, employee, agent or representative (including any investment banker, financial advisor, attorney, accountantor other representative) of Company or any of its Subsidiaries shall directly or indirectly(i) solicit, initiate, encourage, facilitate (including by way of furnishing information) or take any other action designed to facilitate any inquiries or proposals regarding any

merger, share exchange, consolidation, sale of assets, sale of shares of capital stock (including by way of a tender offer) or similar transactions involving Company or any of its Subsidiaries that, if consummated, would constitute an Alternative Transaction (any of the foregoing inquiries or proposals, including the indication of any intention to proposeany of the foregoing, being referred to herein as an “Alternative Proposal”), (ii) participate in any discussions or negotiations regarding an Alternative Transaction or (iii)enter into any agreement regarding any Alternative Transaction. Notwithstanding theforegoing, the Board of Directors of Company shall be permitted, prior to the meeting of Company stockholders to be held pursuant to Section 6.3, and subject to compliance withthe other terms of this Section 6.11 and to first entering into a confidentiality agreementwith the person proposing such Alternative Proposal on terms substantially similar to,

and no less favorable to Company than, those contained in the Confidentiality Agreementdated November 12, 2007, to consider and participate in discussions and negotiationswith respect to a bona fide Alternative Proposal received by Company, if and only to theextent that and so long as the Board of Directors of Company reasonably determines ingood faith (after consultation with outside legal counsel) that failure to do so would causeit to violate its fiduciary duties to Company stockholders under applicable law.

As used in this Agreement, “Alternative Transaction” means any of (i) a transaction pursuant to which any person (or group of persons) (other than Parent or its affiliates),directly or indirectly, acquires or would acquire more than 15% of the outstanding sharesof Company or any of its Subsidiaries or outstanding voting power or of any new seriesor new class of preferred stock that would be entitled to a class or series vote with respectto a merger with Company or any of its Subsidiaries, whether from Company or pursuantto a tender offer or exchange offer or otherwise, (ii) a merger, share exchange,consolidation or other business combination involving Company or any of itsSubsidiaries (other than the Merger), (iii) any transaction pursuant to which any person(or group of persons) (other than Parent or its affiliates) acquires or would acquire controlof assets (including for this purpose the outstanding equity securities of subsidiaries of Company and securities of the entity surviving any merger or business combinationincluding any of Company’s Subsidiaries) of Company or any of its Subsidiariesrepresenting more than 15% of the fair market value of all the assets, net revenues or netincome of Company and its Subsidiaries, taken as a whole, immediately prior to such

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transaction, or (iv) any other consolidation, business combination, recapitalization or similar transaction involving Company or any of its Subsidiaries other than thetransactions contemplated by this Agreement; provided that, for purposes of Section 8.4,www .S

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recommend, or fail to recommend against, any Alternative Proposal (any of the actionsdescribed in clauses (i), (ii) or (iii), a

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“Change of Recommendation”). Notwithstanding the foregoing, the Board of Directors of Company may make a Change of Recommendation, if, and only if, each of the followingconditions is satisfied:

(i) it receives a Alternative Proposal not solicited in breach of this Section 6.11 thatconstitutes a Superior Proposal and such Superior Proposal has not been withdrawn;

(ii) Company has not breached in any material respect any of the provisions setforth in Section 6.3 or this Section 6.11;

(iii) it reasonably determines in good faith (after consultation with outside legalcounsel), that in light of a Superior Proposal the failure to effect such Change of Recommendation would cause it to violate its fiduciary duties to Company stockholdersunder applicable law;

(iv) Parent has received written notice from Company (a “Change of Recommendation Notice”) at least five business days prior to such Change of Recommendation, which notice shall (1) state expressly that Company has received aAlternative Proposal which the Board of Directors of Company has determined is aSuperior Proposal and that Company intends to effect a Change of Recommendation and

the manner in which it intends or may intend to do so and (2) include the identity of the person making such Alternative Proposal and a copy (if in writing) and summary of material terms of such Alternative Proposal; providedthat any material amendment to theterms of such Alternative Proposal shall require a Change of Recommendation Noticeand at least two business days prior to such Change of Recommendation; and

(v) during any such notice period, Company and its advisors has negotiated in goodfaith with Parent to make adjustments in the terms and conditions of this Agreement suchthat such Alternative Proposal would no longer constitute a Superior Proposal.

As used in this Agreement, “Superior Proposal” means any proposal made by a third

party (A) to acquire, directly or indirectly, for consideration consisting of cash and/or securities, 100% of the outstanding shares of Company Common Stock or 100% of theassets, net revenues or net income of Company and its Subsidiaries, taken as a whole and(B) which is otherwise on terms which the Board of Directors of Company determines inits reasonable good faith judgment (after consultation with its financial advisor andoutside legal counsel), taking into account, among other things, all legal, financial,regulatory and other aspects of the proposal and the person making the proposal, that the proposal, (i) if consummated would result in a transaction that is more favorable, from awww .S

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financial point of view, to Company’s stockholders than the Merger and the other transactions contemplated hereby and (ii) is reasonably capable of being completed,including to the extent required, financing which is then committed or which, in the goodfaith judgment of the Board of Directors of Company, is reasonably capable of beingobtained by such third party.

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(e) Company shall ensure that the officers, directors and all employees, agents andrepresentatives (including any investment bankers, financial advisors, attorneys,accountants or other representatives) of Company or its Subsidiaries are aware of therestrictions described in this Section 6.11 as reasonably necessary to avoid violationsthereof. It is understood that any violation of the restrictions set forth in this Section 6.11 by any officer, director, employee, agent or representative (including any investment

banker, financial advisor, attorney, accountant or other representative) of Company or itsSubsidiaries shall be deemed to be a breach of this Section 6.11 by Company.

(f) Nothing contained in this Section 6.11 shall prohibit Company or its Subsidiariesfrom taking and disclosing to its stockholders a position required by Rule 14e-2(a) or Rule 14d-9 promulgated under the Exchange Act.

6.12 Restructuring Efforts. If Company shall have failed to obtain the requisite vote or votes of its stockholders for the consummation of the transactions contemplated by thisAgreement at a duly held meeting of its stockholders or at any adjournment or postponement thereof, then, unless this Agreement shall have been terminated pursuant to

its terms, each of the parties shall in good faith use its reasonable best efforts to negotiatea restructuring of the transaction provided for herein (it being understood that neither party shall have any obligation to alter or change the amount or kind of the Merger Consideration, or the Tax treatment of the Merger, in a manner adverse to such party or its stockholders) and to resubmit the transaction to Company’s stockholders for approval,with the timing of such resubmission to be determined at the reasonable request of Parent.

6.13 Dividends. After the date of this Agreement, each of Parent and Company shallcoordinate with the other regarding the declaration of any dividends in respect of ParentCommon Stock and Company Common Stock and the record dates and payment datesrelating thereto, it being the intention of the parties that holders of Company CommonStock shall not receive two dividends, or fail to receive one dividend, for any quarter withrespect to their shares of Company Common Stock and any shares of Parent CommonStock any such holder receives in exchange therefor in the Merger.

6.14 Tax Matters. Company shall consult with Parent (including in connection withthe preparation of Company’s 2007 federal income Tax return) regarding Company’sutilization of Tax losses and any issues that could reasonably be expected to give rise towww .S

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creation of or increase in “net operating loss” carryforwards, and shall, in Company’sreasonable discretion, take account of Parent’s views on such matters to the extentreasonably feasible.

ARTICLE VII

CONDITIONS PRECEDENT

7.1 Conditions to Each Party’s Obligation To Effect the Merger. The respectiveobligations of the parties to effect the Merger shall be subject to the satisfaction at or prior to the Effective Time of the following conditions:

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(a) Stockholder Approval. This Agreement, on substantially the terms and conditionsset forth in this Agreement, shall have been approved and adopted by the requisiteaffirmative vote of the holders of Company Common Stock entitled to vote thereon.

(b) NYSE Listing. The shares of Parent Common Stock to be issued to the holders of Company Common Stock upon consummation of the Merger shall have been authorizedfor listing on the NYSE, subject to official notice of issuance.

(c) Form S-4. The Form S-4 shall have become effective under the Securities Act andno stop order suspending the effectiveness of the Form S-4 shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC.

(d) No Injunctions or Restraints; Illegality. No order, injunction or decree issued byany court or agency of competent jurisdiction or other law preventing or making illegalthe consummation of the Merger or any of the other transactions contemplated by thisAgreement shall be in effect.

7.2 Conditions to Obligations of Parent. The obligation of Parent and Merger Sub toeffect the Merger is also subject to the satisfaction, or waiver by Parent, at or prior to theEffective Time, of the following conditions:

(a) Representations and Warranties. Subject to the standard set forth in Section 9.2,

the representations and warranties of Company set forth in this Agreement shall be trueand correct as of the date of this Agreement and as of the Effective Time as though madeon and as of the Effective Time (except that representations and warranties that by their terms speak specifically as of the date of this Agreement or another date shall be true andcorrect as of such date); and Parent shall have received a certificate signed on behalf of Company by the Chief Executive Officer or the Chief Financial Officer of Company tothe foregoing effect.

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(b) Performance of Obligations of Company. Company shall have performed in allmaterial respects all obligations required to be performed by it under this Agreement at or prior to the Effective Time; and Parent shall have received a certificate signed on behalf of Company by the Chief Executive Officer or the Chief Financial Officer of Company tosuch effect.

(c) Federal Tax Opinion. Parent shall have received the opinion of its counsel, ClearyGottlieb Steen & Hamilton LLP, in form and substance reasonably satisfactory to Parent,dated the Closing Date, substantially to the effect that, on the basis of facts,representations and assumptions set forth in such opinion that are consistent with the stateof facts existing at the Effective Time, the Merger will be treated as a reorganizationwithin the meaning of Section 368(a) of the Code. In rendering such opinion, counselmay require and rely upon customary representations contained in certificates of officersof Company and Parent.

(d) Regulatory Approvals. All regulatory approvals set forth in Section 4.4 required to

consummate the transactions contemplated by this Agreement, including the Merger,shall have been obtained and shall remain in full force and effect and all statutory waiting periods in respect thereof shall have expired (all such approvals and the expiration of allsuch waiting periods being referred as the “Parent Requisite Regulatory Approvals”), andno such

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regulatory approval shall have resulted in the imposition of any Materially Burdensome

Regulatory Condition.

(e) Annual Report; Audit Opinion. Company shall have filed with the SEC its AnnualReport on Form 10-K for the year ended December 31, 2007, which Annual Report shallhave included an unqualified opinion of KPMG LLP (or another independent registeredaccounting firm reasonably acceptable to Parent) regarding the consolidated financialstatements of Company contained in such Annual Report, and KPMG LLP (or such other accounting firm) shall not have subsequently withdrawn or qualified such opinion.

7.3 Conditions to Obligations of Company. The obligation of Company to effect theMerger is also subject to the satisfaction or waiver by Company at or prior to theEffective Time of the following conditions:

(a) Representations and Warranties. Subject to the standard set forth in Section 9.2,the representations and warranties of Parent set forth in this Agreement shall be true andcorrect as of the date of this Agreement and as of the Effective Time as though made onand as of the Effective Time (except that representations and warranties that by their terms speak specifically as of the date of this Agreement or another date shall be true andcorrect as of such date); and Company shall have received a certificate signed on behalf www .S

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(c) by either Company or Parent, if the Merger shall not have been consummated onor before the first anniversary of the date of this Agreement unless the failure of theClosing to occur by such date shall be due to the failure of the party seeking to terminatethis Agreement to perform or observe the covenants and agreements of such party setforth in this Agreement;

(d) by either Company or Parent (provided that the terminating party is not then inmaterial breach of any representation, warranty, covenant or other agreement containedherein), if there shall have been a breach of any of the covenants or agreements or any of the representations or warranties set forth in this Agreement on the part of Company, inthe case of a termination by Parent, or Parent or Merger Sub, in the case of a termination by Company, which breach, either individually or in the aggregate, would result in, if occurring or continuing on the Closing Date, the failure of the conditions set forth inSection 7.2 or 7.3, as the case may be, and which is not cured within 30 days followingwritten notice to the party committing such breach or by its nature or timing cannot becured within such time period;

(e) by Parent, if (i) the Board of Directors of Company shall have (A) failed torecommend in the Proxy Statement the approval and adoption of this Agreement, (B)made any Change of Recommendation, (C) approved or recommended, or publicly proposed to approve or recommend, any Alternative Proposal, whether or not permitted by the terms hereof or (D) failed to recommend to Company’s stockholders that theyreject any tender offer or exchange offer that constitutes an Alternative Transactionwithin the ten business day period specified in Rule 14e-2(a) of the Exchange Act, (ii)Company shall have breached its obligations under Section 6.11 in any material respectadverse to Parent or (iii) Company shall have breached its obligations under Section 6.3in any material respect by failing to call, convene and hold a meeting of its stockholdersin accordance with Section 6.3; or

(f) by either Company or Parent, if its Board of Directors determines in good faith thatthe other party has substantially engaged in bad faith in breach of its obligations under Section 6.12.

The party desiring to terminate this Agreement pursuant to clause (b), (c), (d), (e) or (f) of this Section 8.1 shall give written notice of such termination to the other party inaccordance with Section 9.4, specifying the provision or provisions hereof pursuant towhich such termination is effected.

8.2 Effect of Termination. In the event of termination of this Agreement by either Company or Parent as provided in Section 8.1, this Agreement shall forthwith becomevoid and

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have no effect, and none of Company, Parent, any of their respective Subsidiaries or anyof the officers or directors of any of them shall have any liability of any naturewhatsoever under this Agreement, or in connection with the transactions contemplated bythis Agreement, except that (i) Sections 6.2(b), 8.2, 8.3, 8.4, 9.3, 9.4, 9.5, 9.6, 9.7, 9.8, 9.9and 9.10 shall survive any termination of this Agreement, and (ii) neither Company nor

Parent shall be relieved or released from any liabilities or damages arising out of itsknowing breach of any provision of this Agreement.

8.3 Fees and Expenses. Except with respect to costs and expenses of printing andmailing the Proxy Statement and all filing and other fees paid to the SEC in connectionwith the Merger, which shall be borne equally by Company and Parent, all fees andexpenses incurred in connection with the Merger, this Agreement, and the transactionscontemplated by this Agreement shall be paid by the party incurring such fees or expenses, whether or not the Merger is consummated.

8.4 Termination Fee.

(a) If:

(i) this Agreement is terminated by Parent pursuant to Section 8.1(e), thenCompany shall pay Parent, by wire transfer of immediately available funds, an amountequal to $160 million (the “Termination Fee”) on the second Business Day followingsuch termination; or

(ii) (A) this Agreement is terminated by

(1) Parent pursuant to Section 8.1(d) if the breach giving rise to such

termination was knowing or intentional,

(2) Parent pursuant to Section 8.1(f), or

(3) either Parent or Company pursuant to Section 8.1(c) and prior to the dateof termination this Agreement shall not have been adopted and approved by the requisiteaffirmative vote of the holders of Company Common Stock, and

(B) in any such case, an Alternative Proposal shall have been publicly announcedor otherwise communicated or made known to the senior management or Board of Directors of Company (or any person shall have publicly announced, communicated or

made known an intention, whether or not conditional, to make an Alternative Proposal) atany time after the date of this Agreement and prior to the date of the termination and shallnot have been irrevocably withdrawn prior to the date of such termination, then if within12 months after such termination, Company or any of its Subsidiaries enters into adefinitive agreement with respect to, or consummates, an Alternative Transaction, thenCompany shall pay

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conditions set forth in Article VII (other than those conditions that by their nature are to be satisfied or waived at the Closing), unless extended by mutual agreement of the parties(the “Closing Date”). If the conditions set forth in Article VII are satisfied or waivedduring the two weeks immediately prior

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to the end of a fiscal quarter of Parent, then Parent may postpone the Closing until thefirst full week after the end of that fiscal quarter.

9.2 Standard. No representation or warranty of Company contained in Article III or of Parent contained in Article IV shall be deemed untrue, inaccurate or incorrect for any purpose under this Agreement, and no party hereto shall be deemed to have breached arepresentation or warranty for any purpose under this Agreement, in any case as a

consequence of the existence or absence of any fact, circumstance or event unless suchfact, circumstance or event, individually or when taken together with all other facts,circumstances or events inconsistent with any representations or warranties contained inArticle III, in the case of Company, or Article IV, in the case of Parent, has had or wouldreasonably be expected to have a Material Adverse Effect with respect to Company or Parent, respectively (disregarding for purposes of this Section 9.2 all qualifications or limitations set forth in any representations or warranties as to “materiality,” “MaterialAdverse Effect” and words of similar import). Notwithstanding the immediately preceding sentence, the representations and warranties contained in (x) Section 3.2(a)shall be deemed untrue and incorrect if not true and correct except to a de minimis extent(relative to Section 3.2(a) taken as a whole), (y) Sections 3.2(b), 3.3(a), 3.3(b)(i), 3.7 and

3.27, in the case of Company, and Sections 4.2, 4.3(a), 4.3(b)(i) and 4.7, in the case of Parent, shall be deemed untrue and incorrect if not true and correct in all material respectsand (z) Section 3.8(a), in the case of Company, and Section 4.8(a), in the case of Parent,shall be deemed untrue and incorrect if not true and correct in all respects.

9.3 Nonsurvival of Representations, Warranties and Agreements. None of therepresentations, warranties, covenants and agreements set forth in this Agreement or inany instrument delivered pursuant to this Agreement shall survive the Effective Time,except for Section 6.7 and for those other covenants and agreements contained in thisAgreement that by their terms apply or are to be performed in whole or in part after theEffective Time.

9.4 Notices. All notices and other communications in connection with this Agreementshall be in writing and shall be deemed given if delivered personally, sent via facsimile(with confirmation), mailed by registered or certified mail (return receipt requested) or delivered by an express courier (with confirmation) to the parties at the followingaddresses (or at such other address for a party as shall be specified by like notice):

(a) if to Company, to:www .S

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Countrywide Financial Corporation4500 Park GranadaCalabasas, CA 91302

Attention: Sandor E. Samuels

Fax: (818) 225-4055with a copy to:

Wachtell, Lipton, Rosen & Katz

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51 West 52nd Street New York, NY 10019

Attention: Edward D. HerlihyCraig M. Wasserman Nicholas G. Demmo

Fax: (212) 403-2000

and

(b) if to Parent, to:

Bank of America CorporationBank of America Corporate Center 100 North Tryon StreetCharlotte, NC 28255

Attention: Timothy J. Mayopoulos,Executive Vice President and General Counsel

Facsimile: (704) 370-3515

with a copy to:

Cleary Gottlieb Steen & Hamilton LLP2000 Pennsylvania Avenue, NWWashington, DC 20006

Attention: John C. Murphy, Jr.Derek M. Bush

Fax: (202) 974-1999

and

Cleary Gottlieb Steen & Hamilton LLPOne Liberty Plaza New York NY 10006w

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Attention: Paul J. Shim

Benet J. O’ReillyFax: (212) 225-3999

9.5 Interpretation. When a reference is made in this Agreement to Articles, Sections,Exhibits or Schedules, such reference shall be to a Article or Section of or Exhibit or Schedule to this Agreement unless otherwise indicated. The table of contents andheadings contained in this Agreement are for reference purposes only and shall not affectin any way the meaning or interpretation of this Agreement. Whenever the words“include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words

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“without limitation.” The Company Disclosure Schedule and the Parent DisclosureSchedule, as well as all other schedules and all exhibits hereto, shall be deemed part of this Agreement and included in any reference to this Agreement. This Agreement shallnot be interpreted or construed to require any person to take any action, or fail to take anyaction, if to do so would violate any applicable law.

9.6 Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective whencounterparts have been signed by each of the parties and delivered to the other party, it being understood that each party need not sign the same counterpart.

9.7 Entire Agreement. This Agreement (including the documents and the instrumentsreferred to in this Agreement), together with the Confidentiality Agreements, constitutesthe entire agreement and supersedes all prior agreements and understandings, bothwritten and oral, between the parties with respect to the subject matter of this Agreement,other than the Confidentiality Agreements.

9.8 Governing Law; Jurisdiction. This Agreement shall be governed and construed inaccordance with the internal laws of the State of Delaware applicable to contracts madeand wholly-performed within such state, without regard to any applicable conflicts of law principles. The parties hereto agree that any suit, action or proceeding brought by either

party to enforce any provision of, or based on any matter arising out of or in connectionwith, this Agreement or the transactions contemplated hereby shall be brought in anyfederal or state court located in the State of Delaware. Each of the parties hereto submitsto the jurisdiction of any such court in any suit, action or proceeding seeking to enforceany provision of, or based on any matter arising out of, or in connection with, thisAgreement or the transactions contemplated hereby and hereby irrevocably waives the benefit of jurisdiction derived from present or future domicile or otherwise in such actionor proceeding. Each party hereto irrevocably waives, to the fullest extent permitted bywww .S

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law, any objection that it may now or hereafter have to the laying of the venue of anysuch suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

9.9 Publicity. Neither Company nor Parent shall, and neither Company nor Parent

shall permit any of its Subsidiaries to, issue or cause the publication of any press releaseor other public announcement with respect to, or otherwise make any public statementconcerning, the transactions contemplated by this Agreement without the prior consent(which consent shall not be unreasonably withheld) of Parent, in the case of a proposedannouncement or statement by Company, or Company, in the case of a proposedannouncement or statement by Parent; provided, however, that either party may, withoutthe prior consent of the other party (but after prior consultation with the other party to theextent practicable under the circumstances) issue or cause the publication of any pressrelease or other public announcement to the extent required by law or by the rules andregulations of the NYSE.

9.10 Assignment; Third Party Beneficiaries. Neither this Agreement nor any of therights, interests or obligations under this Agreement shall be assigned by either of the parties (whether by operation of law or otherwise) without the prior written consent of theother party. Subject to the preceding sentence, this Agreement shall be binding upon,inure to the benefit of

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and be enforceable by each of the parties and their respective successors and assigns.

Except as otherwise specifically provided in Section 6.7, this Agreement (including thedocuments and instruments referred to in this Agreement) is not intended to and does notconfer upon any person other than the parties hereto any rights or remedies under thisAgreement.

Remainder of Page Intentionally Left Blank

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IN WITNESS WHEREOF, Company, Parent and Merger Sub have caused thisAgreement to be executed by their respective officers thereunto duly authorized as of thedate first above written.

COUNTRYWIDE FINANCIAL CORPORATION

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By: /s/ Angelo R. Mozilo

Name: Angelo R. Mozilo

Title: Chairman and Chief Executive Officer


By: /s/ Joe L. Price

Name: Joe L. Price

Title: Chief Financial Officer

RED OAK MERGER CORPORATION

By: /s/ Joe L. Price

Name: Joe L. Price

Title: Officer

Signature Page to Agreement and Plan of Merger

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Exhibit A

Form of Affiliate Letter

Bank of America Corporation100 South Tryon StreetCharlotte, North Carolina 28255

Ladies and Gentlemen:

I have been advised that as of the date hereof I may be deemed to be an “affiliate” of

Countrywide Financial Corporation, a Delaware corporation (“Company”), as the term“affiliate” is defined for purposes of paragraphs (c) and (d) of Rule 145 of the Rules andRegulations (the “Rules and Regulations”) of the Securities and Exchange Commission(the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”). I have been further advised that pursuant to the terms of the Agreement and Plan of Merger dated as of January 10, 2008 (the “Merger Agreement”), among Bank of AmericaCorporation, a Delaware corporation (“Parent”), Red Oak Merger Corporation, aDelaware corporation and wholly owned subsidiary of Parent (“Merger Sub”) andwww .S

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(f) I also understand that unless the transfer by me of my Parent Common Stock has been registered under the Securities Act or is a sale made in conformity with the provisions of Rule 145, Parent reserves the right to put the following legend on thecertificates issued to my transferee:

“The shares represented by this certificate have not been registered under the SecuritiesAct of 1933 and were acquired from a person who received such shares in a transaction towhich Rule 145 promulgated under the Securities Act of 1933 applies. The shares have been acquired by the holder not with a view to, or for resale in connection with, anydistribution thereof within the meaning of the Securities Act of 1933 and may not be sold, pledged or otherwise transferred except in accordance with an exemption from theregistration requirements of the Securities Act of 1933.”

It is understood and agreed that the legends set forth above shall be removed bydelivery of substitute certificates without such legend, and/or the issuance of a letter toParent’s transfer agent removing such stop transfer instructions, and the above

restrictions on sale will cease to apply, if (A) one year (or such other period as may berequired by Rule 145(d)(2) under the Securities Act or any successor thereto) shall haveelapsed from the Closing Date and the provisions of such Rule are then available to me;or (B) if two years (or such other period as may be required by Rule 145(d)(3) under theSecurities Act or any successor thereto) shall have elapsed from the Closing Date and the provisions of such Rule are then available to me; or (C) I shall have delivered to Parent(i) a copy of a letter from the staff of the SEC, or an opinion of counsel in form andsubstance reasonably satisfactory to Parent, or other evidence reasonably satisfactory toParent, to the effect that such legend and/or stop transfer instructions are not required for purposes of the Securities Act or (ii) reasonably satisfactory evidence or representationsthat the securities represented by such certificates are being or have been

A-2

transferred in a transaction made in conformity with the provisions of Rule 145 under theSecurities Act or pursuant to an effective registration under the Securities Act.

I recognize and agree that the foregoing provisions also apply to (i) my spouse, (ii)any relative of mine or my spouse occupying my home, (iii) any trust or estate in which I,my spouse or any such relative owns at least 10% beneficial interest or of which any of us serves as trustee, executor or in any similar capacity and (iv) any corporate or other organization in which I, my spouse or any such relative owns at least 10% of any class of equity securities or of the equity interest.

It is understood and agreed that this letter agreement shall terminate and be of nofurther force and effect if the Merger Agreement is terminated in accordance with itsterms.

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Execution of this letter agreement should not be construed as an admission on my partthat I am an “affiliate” of Company as described in the first paragraph of this letter or as awaiver of any rights I may have to object to any claim that I am such an affiliate on or after the date of this letter.

Very truly yours,By: _________________________

Name:

Accepted this [___] day of [__________], 2008


By: ________________________ Name:Title:

A-3

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8-K 1 d8k.htm FORM 8-K As filed with the Securities and Exchange Commission on November 10, 2008

SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):

November 7, 2008

BANK OF AMERICA CORPORATION(Exact name of registrant as specified in its charter)

Delaware 1-6523 56-0906609 (State of Incorporation) (Commission File Number) (IRS Employer

Identification No.)


Charlotte, North Carolina 28255(Address of principal executive offices)

704.386.5681

begin_of_the_skype_highlighting 704.386.5681 end_of_the_skype_highlighting(Registrant’s telephone number, including area code)

Not Applicable(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filingobligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)www .S

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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act(17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act(17 CFR 240.13e-4(c))

ITEM 8.01.OTHER EVENTS.

On November 7, 2008, in connection with the integration of Countrywide Financial Corporation(“Countrywide”) with the Registrant’s other businesses and operations, Countrywide and its subsidiaryCountrywide Home Loans, Inc. (“CHL”) transferred substantially all of their assets and operations to theRegistrant, and as part of the consideration for such transfer, the Registrant assumed debt securities andrelated guarantees of Countrywide in an aggregate amount of approximately $16.6 billion. The indentures

for all such assumed debt securities and related guarantees are attached as exhibits to this Current Report onForm 8-K.

ITEM 9.01.FINANCIAL STATEMENTS AND EXHIBITS.

(d) Exhibits.

The following exhibits are filed herewith:

EXHIBIT NO. DESCRIPTION OF EXHIBIT 4.1 Indenture dated as of February 1, 2005 among Countrywide, CHL and The Bank of New

York, as Trustee, incorporated herein by reference to Exhibit 4.58 of Countrywide’sQuarterly Report on Form 10-Q (File No. 1-8422) for the quarter ended March 31, 2006

4.2 First Supplemental Indenture dated July 1, 2008, among Red Oak Merger Corporation,Countrywide, CHL and The Bank of New York Mellon (formerly The Bank of New York),as Trustee, to the Indenture dated as of February 1, 2005, incorporated herein by reference toExhibit 4.2 of Countrywide’s Current Report on Form 8-K (File No. 1-8422) filed July 8,2008

4.3 Second Supplemental Indenture dated as of November 7, 2008 among the Registrant,Countrywide, CHL and The Bank of New York Mellon (formerly The Bank of New York),as Trustee, to the Indenture dated as of February 1, 2005

4.4 Third Supplemental Indenture dated as of November 7, 2008 among the Registrant, CHL and

The Bank of New York Mellon (formerly The Bank of New York), as Trustee, to theIndenture dated as of February 1, 2005

4.5 Indenture dated May 16, 2006 between Countrywide and The Bank of New York, as Trustee,relating to 6.25% Subordinated Notes due May 15, 2016, incorporated herein by reference toExhibit 4.27 to Countrywide’s Current Report on Form 8-K (File No. 1-8422) filed onMay 16, 2006

4.6 First Supplemental Indenture dated July 1, 2008, among Red Oak Merger Corporation,Countrywide and The Bank of New York Mellon (formerly The Bank of New York), asw

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Trustee, to the Indenture dated as of May 16, 2006, incorporated herein by reference toExhibit 4.1 of Countrywide’s Current Report on Form 8-K (File No. 1-8422) filed July 8,2008

4.7 Second Supplemental Indenture dated as of November 7, 2008 among the Registrant,

Countrywide and The Bank of New York Mellon (formerly The Bank of New York), asTrustee, to the Indenture dated as of May 16, 2006

4.8 Indenture dated as of January 1, 1992 among CHL, Countrywide and The Bank of New York,as Trustee, incorporated herein by reference to Exhibit 4.1 to the Registration Statement onForm S-3 (File No. 33-50661) of CHL and Countrywide

4.9 Supplemental Indenture No. 1 dated as of June 15, 1995 among CHL, Countrywide and TheBank of New York, as Trustee, to the Indenture dated as of January 1, 1992, incorporatedherein by reference to Exhibit 4.9 to Amendment No. 2 to the Registration Statement on FormS-3 (File No. 33-59559) of Countrywide and CHL

4.10 Second Supplemental Indenture dated July 1, 2008, among Red Oak Merger Corporation, CHL,Countrywide and The Bank of New York Mellon (formerly The Bank of New York), asTrustee, to the Indenture dated as of January 1, 1992, incorporated herein by reference toExhibit 4.3 of Countrywide’s Current Report on Form 8-K (File No. 1-8422) filed July 8, 2008

4.11 Third Supplemental Indenture dated as of November 7, 2008 among the Registrant, CHL,Countrywide and The Bank of New York Mellon (formerly The Bank of New York), asTrustee, to the Indenture dated as of January 1, 1992

4.12 Fourth Supplemental Indenture dated as of November 7, 2008 among the Registrant,Countrywide and The Bank of New York Mellon (formerly The Bank of New York), asTrustee, to the Indenture dated as of January 1, 1992

4.13 Indenture dated as of December 1, 2001 among CHL, Countrywide and The Bank of NewYork, as Trustee, incorporated herein by reference to Exhibit 4.25 to Countrywide’s Annual

Report on Form 10-K (File No. 1-8422) for the year ended December 31, 2003 4.14 First Supplemental Indenture dated July 1, 2008, among Red Oak Merger Corporation, CHL,

Countrywide and The Bank of New York Mellon (formerly The Bank of New York), asTrustee, to the Indenture dated as of December 1, 2001, incorporated herein by reference toExhibit 4.4 of Countrywide’s Current Report on Form 8-K (File No. 1-8422) filed July 8, 2008

4.15 Second Supplemental Indenture dated as of November 7, 2008 among the Registrant, CHL,Countrywide and The Bank of New York Mellon (formerly The Bank of New York), asTrustee, to the Indenture dated as of December 1, 2001

4.16 Third Supplemental Indenture dated as of November 7, 2008 among the Registrant,

Countrywide and The Bank of New York Mellon (formerly The Bank of New York), asTrustee, to the Indenture dated as of December 1, 2001

4.17 Indenture dated as of May 22, 2007, among Countrywide, CHL and The Bank of New York, asTrustee, incorporated herein by reference to Exhibit 4.1 to Countrywide’s Current Report onForm 8-K (File No. 1-8422) filed May 29, 2007

4.18 First Supplemental Indenture dated July 1, 2008, among Red Oak Merger Corporation, CHL,Countrywide, the Registrant and The Bank of New York Mellon (formerly The Bank of NewYork), as Trustee, to the Indenture dated as of May 22, 2007, incorporated herein by referencew

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4.42 First Supplemental Trust Deed between Countrywide, CHL and Deutsche Trustee CompanyLimited, as Trustee, dated August 31, 2006, to the Trust Deed dated August 15, 2005,incorporated herein by reference to Exhibit 4.63 to Countrywide’s Quarterly Report on Form10-Q (File No. 1-8422) for the quarter ended September 30, 2006

4.43 Second Supplemental Trust Deed, dated July 1, 2008, among Red Oak Merger Corporation,Countrywide, CHL and Deutsche Trustee Company Limited, as Trustee, to the Trust Deeddated August 15, 2005, incorporated herein by reference to Exhibit 4.9 to Countrywide’sCurrent Report on Form 8-K (File No. 1-8422) filed July 8, 2008

4.44 Form of Third Supplemental Trust Deed, dated November 7, 2008, between the Registrant,Countrywide, CHL and Deutsche Trustee Company Limited, as Trustee, to the Trust Deeddated August 15, 2005

4.45 Note Deed Poll, dated as of April 29, 2005, by Countrywide in favor of each person who isfrom time to time an Australian dollar denominated Noteholder, incorporated herein byreference to Exhibit 10.103 to Countrywide’s Quarterly Report on Form 10-Q (File No. 1-8422) for the quarter ended June 30, 2005

4.46 First Supplemental Note Deed Poll, dated July 1, 2008, between Red Oak Merger Corporation

and Countrywide to the Note Deed Poll dated April 29, 2005, incorporated herein by referenceto Exhibit 4.11 of Countrywide’s Current Report on Form 8-K (File No. 1-8422) filed July 8,2008

4.47 Form of Second Supplemental Note Deed Poll, dated November 7, 2008, between theRegistrant, Countrywide and CHL, to the Note Deed Poll dated April 29, 2005

4.48 Deed Poll Guaranty and Indemnity, dated as of April 29, 2005, by Countrywide in favor of each person who is from time to time an Australian dollar denominated noteholder,incorporated herein by reference to Exhibit 10.104 to Countrywide’s Quarterly Report on Form10-Q (File No. 1-8422) for the quarter ended June 30, 2005

4.49 Form of First Supplemental Note Deed Poll Guarantee and Indemnity, dated as of November 7,2008, by the Registrant and CHL, to the Deed Poll Guaranty and Indemnity dated April 29,

2005

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly causedthis report to be signed on its behalf by the undersigned hereunto duly authorized.

BANK OF AMERICA

CORPORATION

By: /s/ Teresa M. Brenner

Teresa M. Brenner

Associate General Counsel

Dated: November 7, 2008

INDEX TO EXHIBITS

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EXHIBIT NO. DESCRIPTION OF EXHIBIT 4.1 Indenture dated as of February 1, 2005 among Countrywide, CHL and The Bank of New

York, as Trustee, incorporated herein by reference to Exhibit 4.58 of Countrywide’sQuarterly Report on Form 10-Q (File No. 1-8422) for the quarter ended March 31, 2006

4.2 First Supplemental Indenture dated July 1, 2008, among Red Oak Merger Corporation,Countrywide, CHL and The Bank of New York Mellon (formerly The Bank of New York),as Trustee, to the Indenture dated as of February 1, 2005, incorporated herein by reference toExhibit 4.2 of Countrywide’s Current Report on Form 8-K (File No. 1-8422) filed July 8,2008

4.3 Second Supplemental Indenture dated as of November 7, 2008 among the Registrant,Countrywide, CHL and The Bank of New York Mellon (formerly The Bank of New York),as Trustee, to the Indenture dated as of February 1, 2005

4.4 Third Supplemental Indenture dated as of November 7, 2008 among the Registrant, CHL andThe Bank of New York Mellon (formerly The Bank of New York), as Trustee, to theIndenture dated as of February 1, 2005

4.5 Indenture dated May 16, 2006 between Countrywide and The Bank of New York, as Trustee,

relating to 6.25% Subordinated Notes due May 15, 2016, incorporated herein by reference toExhibit 4.27 to Countrywide’s Current Report on Form 8-K (File No. 1-8422) filed onMay 16, 2006

4.6 First Supplemental Indenture dated July 1, 2008, among Red Oak Merger Corporation,Countrywide and The Bank of New York Mellon (formerly The Bank of New York), asTrustee, to the Indenture dated as of May 16, 2006, incorporated herein by reference toExhibit 4.1 of Countrywide’s Current Report on Form 8-K (File No. 1-8422) filed July 8,2008

4.7 Second Supplemental Indenture dated as of November 7, 2008 among the Registrant,Countrywide and The Bank of New York Mellon (formerly The Bank of New York), as

Trustee, to the Indenture dated as of May 16, 2006

4.8 Indenture dated as of January 1, 1992 among CHL, Countrywide and The Bank of New York,as Trustee, incorporated herein by reference to Exhibit 4.1 to the Registration Statement onForm S-3 (File No. 33-50661) of CHL and Countrywide

4.9 Supplemental Indenture No. 1 dated as of June 15, 1995 among CHL, Countrywide and TheBank of New York, as Trustee, to the Indenture dated as of January 1, 1992, incorporatedherein by reference to Exhibit 4.9 to Amendment No. 2 to the Registration Statement on FormS-3 (File No. 33-59559) of Countrywide and CHL

4.10 Second Supplemental Indenture dated July 1, 2008, among Red Oak Merger Corporation, CHL,Countrywide and The Bank of New York Mellon (formerly The Bank of New York), asTrustee, to the Indenture dated as of January 1, 1992, incorporated herein by reference to

Exhibit 4.3 of Countrywide’s Current Report on Form 8-K (File No. 1-8422) filed July 8, 2008

4.11 Third Supplemental Indenture dated as of November 7, 2008 among the Registrant, CHL,Countrywide and The Bank of New York Mellon (formerly The Bank of New York), asTrustee, to the Indenture dated as of January 1, 1992

4.12 Fourth Supplemental Indenture dated as of November 7, 2008 among the Registrant,Countrywide and The Bank of New York Mellon (formerly The Bank of New York), asTrustee, to the Indenture dated as of January 1, 1992 w

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4.25 Subordinated Indenture dated as of April 11, 2003 among Countrywide, CHL and The Bank of New York, as Trustee, incorporated herein by reference to Exhibit 4.26 to Countrywide’sCurrent Report on Form 8-K (File No. 1-8422) filed April 15, 2003

4.26 First Supplemental Indenture dated as of April 11, 2003 among Countrywide, CHL and TheBank of New York, as Trustee, to the Subordinated Indenture dated as of April 11, 2003,incorporated herein by reference to Exhibit 4.27 to Countrywide’s Current Report on Form 8-K (File No. 1-8422) filed April 15, 2003

4.27 Second Supplemental Indenture dated July 1, 2008, among Red Oak Merger Corporation,Countrywide, CHL and The Bank of New York Mellon (formerly The Bank of New York), asTrustee, to the Subordinated Indenture dated as of April 11, 2003, incorporated herein byreference to Exhibit 4.6 of Countrywide’s Current Report on Form 8-K (File No. 1-8422) filedJuly 8, 2008

4.28 Third Supplemental Indenture dated as of November 7, 2008 among the Registrant,Countrywide, CHL and The Bank of New York Mellon (formerly The Bank of New York), asTrustee, to the Subordinated Indenture dated as of April 11, 2003

4.29 Fourth Supplemental Indenture dated as of November 7, 2008 among the Registrant, CHL and

The Bank of New York Mellon (formerly The Bank of New York), as Trustee, to theSubordinated Indenture dated as of April 11, 2003

4.30 Indenture dated as of June 4, 1997, among CHL, Countrywide and The Bank of New York, asTrustee, incorporated herein by reference to Exhibit 4.4 to the Registration Statement on FormS-4 (File No. 333-37047) of CHL and Countrywide

4.31 First Supplemental Indenture dated July 1, 2008, among Red Oak Merger Corporation, CHL,Countrywide and The Bank of New York Mellon (formerly The Bank of New York), asTrustee, to the Indenture dated as of June 4, 1997, incorporated herein by reference to Exhibit4.8 of Countrywide’s Current Report on Form 8-K (File No. 1-8422) filed July 8, 2008

4.32 Second Supplemental Indenture dated as of November 7, 2008 among the Registrant, CHL,Countrywide and The Bank of New York Mellon (formerly The Bank of New York), as

Trustee, to the Indenture dated as of June 4, 1997

4.33 Third Supplemental Indenture dated as of November 7, 2008 among the Registrant,Countrywide and The Bank of New York Mellon (formerly The Bank of New York), asTrustee, to the Indenture dated as of June 4, 1997

4.34 Trust Deed dated 1st May, 1998, among CHL, Countrywide and Bankers Trustee CompanyLimited, as Trustee, for Euro Medium Notes of CHL, incorporated herein by reference toExhibit 4.15 to Countrywide’s Quarterly Report on Form 10-Q (File No. 1-8422) for thequarter ended May 31, 1998

4.35 First Supplemental Trust Deed dated 16th December, 1998, modifying the provisions of the

Trust Deed dated 1st May 1998, among CHL, Countrywide and Bankers Trustee CompanyLimited, as Trustee, incorporated herein by reference to Exhibit 4.16 to Countrywide’s AnnualReport on Form 10-K (File No. 1-8422) for the year ended February 28, 1999

4.36 Second Supplemental Trust Deed dated 23rd December, 1999, further modifying the provisionsof the Trust Deed dated 1st May, 1998, among CHL, Countrywide and Bankers TrusteeCompany Limited, as Trustee, incorporated herein by reference to Exhibit 4.16.3 toCountrywide’s Annual Report on Form 10-K (File No. 1-8422) for the year ended February 28,2001 w

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4.49 Form of First Supplemental Note Deed Poll Guarantee and Indemnity, dated as of November 7,2008, by the Registrant and CHL, to the Deed Poll Guaranty and Indemnity dated April 29,2005

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(3) COUNTRYWIDE FINANCIAL CORPORATION, formerly Red Oak Merger Corporation, a

Delaware corporation (“CFC”); and

(4) DEUTSCHE TRUSTEE COMPANY LIMITED, a company incorporated with limited liability inEngland and Wales, as Trustee (the “Trustee”) under the Trust Deed referred to herein.

WHEREAS(A) CHL, CFC and the Trustee are parties to a Trust Deed dated 1 May 1998, as modified and restated by

the First Supplemental Trust Deed dated 16 December 1998, as supplemented by the Second

Supplemental Trust Deed dated 23 December 1999, the Third Supplemental Trust Deed dated

12 January 2001, the Fourth Supplemental Trust Deed dated 29 January 2002 and the FifthSupplemental Trust Deed dated 1 July 2008 (as amended and supplemented, the “Trust Deed”),

providing for the issuance of Notes by CHL, as Issuer thereunder.

(B) There is outstanding under the terms of the Trust Deed one or more series of Notes (the “Securities”).

(C) Amongst others, BAC and CHL have entered into an Asset Purchase Agreement (the “CHL Purchase

Agreement”) dated as of 7 November, 2008 pursuant to which BAC will purchase substantially all of

the properties and assets of CHL (the “CHL Acquisition”) the consideration for which will include the

assumption by BAC of the indebtedness of CHL under the Trust Deed (the “CHL Assumption”).

(D) The CHL Acquisition and the CHL Assumption are expected to be effective as of 7 November, 2008.

(E) Clause 19(D)(1) of the Trust Deed provides that in the case of a conveyance and transfer of the

properties and assets of CHL substantially as an entirety to a corporation organised and existing under

the laws of the United States of America, any political subdivision thereof or any state thereof, the

transferee shall expressly assume by a supplemental trust deed all the obligations and covenants under

the Securities and the Trust Deed to be performed and observed by CHL.

(F) Amongst others, BAC and CFC have entered into a Stock Purchase Agreement (the “CFC Purchase


the properties and assets of CFC (the “CFC Acquisition”) the consideration for which will include the

assumption by BAC of the indebtedness of CFC under the Securities and the Trust Deed (the “CFC

Assumption”).

(G) The CFC Acquisition and the CFC Assumption are expected to be effective as of 7 November, 2008.

(H) Clause 19(D)(3) of the Trust Deed provides that in the case of a conveyance and transfer of the

properties and assets of CFC substantially as an entirety to a corporation organised and existing under


transferee shall expressly assume by a supplemental trust deed the obligations of CFC contained in

clause 7 of the Trust Deed and the performance of every covenant under the Securities and the Trust

Deed to be performed and observed by CFC.

1

(I) This Sixth Supplemental Trust Deed has been duly authorised by all necessary corporate action on the

part of each of BAC, CHL and CFC.

(J) The Trustee has determined that this Sixth Supplemental Trust Deed is proper and satisfactory in form.

(K) All things necessary to make this Sixth Supplemental Trust Deed a valid trust deed and agreement

according to its terms have been done.

(L) In consideration of these premises, BAC, CHL, CFC and the Trustee agree as follows for the benefit of

the holders of the Securities.

THE PARTIES AGREE AS FOLLOWS: www .S

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1. ASSUMPTION BY SUCCESSOR CORPORATION AND SUPPLEMENTAL PROVISIONS

1.1 The Representations and Warranties

With effect on and from the Effective Date (as defined in Clause 2.1) BAC represents and warrantsthat:

(a) it is a corporation organised and existing under the laws of the State of Delaware and is the

transferee of the properties and assets of each of CHL and CFC in each case substantially as anentirety; and

(b) the execution, delivery and performance of this Sixth Supplemental Trust Deed has been dulyauthorised by the Board of Directors of BAC.

1.2 Assumption of Indebtedness from CHL

(a) The parties hereto agree that with effect on and from the Effective Date:

(i) BAC hereby expressly takes over and assumes the due and punctual payment of the principal

of and any interest on all the Securities and the due and punctual performance of all

obligations and the performance of every covenant of the Trust Deed on the part of the Issuer

(as defined in the Trust Deed) to be performed or observed;

(ii) all the rights, obligations and liabilities of CHL under or in respect of the Securities and

under the Trust Deed shall be taken over and assumed by BAC including, but without

limiting the generality of the foregoing, the obligation to pay (a) interest on the Securities

accrued up to and including the Effective Date but unpaid and (b) all other moneys payable in

respect of the Securities or under or pursuant to the Trust Deed accrued up to and including,

or payable prior to, the Effective Date but unpaid, and any other amounts payable under theSecurities and under the Trust Deed; and

(iii) all the terms, provisions and conditions of the Trust Deed and the Securities and theretoforeapplying to CHL shall apply to BAC in all respects as if BAC had been a party to the Trust

Deed in place of CHL and the Trust Deed in respect thereof shall be read and construed as if

all references therein to CHL were references to BAC.

(b) BAC hereby covenants with the Trustee that with effect on and from the Effective Date it will dulyobserve and perform and be bound by all of the covenants (including, but without limiting the

generality of the foregoing, any covenant to

2

pay), conditions and provisions of the Trust Deed, the Securities issued under the Programme by

CHL and the Conditions of the Securities as prior thereto have been expressed to be binding on

CHL.

1.3 Assumption of Obligations from CFC


(i) all the obligations of CFC under or in respect of the Trust Deed and the performance of every

covenant under the Trust Deed shall be taken over and assumed by BAC; and

(ii) all the terms, provisions and conditions of the Trust Deed and theretofore applying to CFC

shall apply to BAC in all respects as if BAC had been a party to the Trust Deed in place of

CFC and the Trust Deed in respect thereof shall be read and construed as if all references

therein to CFC were references to BAC.

(b) BAC hereby covenants with the Trustee that with effect on and from the Effective Date it will duly

observe and perform and be bound by all of the covenants (including, but without limiting the

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In case any provision in this Sixth Supplemental Trust Deed shall be invalid, illegal or unenforceable,

the validity, legality and enforceability of the remaining provisions shall not in any way be affected

or impaired thereby.

2.6 Terms Defined in the Trust Deed

(a) All capitalised terms not otherwise defined herein shall have the meanings ascribed to them in theTrust Deed.

(b) All references to a “certificate signed by two Directors”, a “certificate signed by two of its

Directors”, a “certificate signed by any two Directors”, a “certificate in writing signed by two of its

Directors” or any such reference however described shall hereafter be deemed to be references to a

“certificate signed by two authorised officers”. For the purposes of the Trust Deed “authorised

officer” means the Chief Executive Officer, the Chief Financial Officer, any Executive Vice

President, any Senior Vice President, the General Counsel, any Deputy General Counsel, any

Associate General Counsel, the Secretary and any Assistant Secretary of the relevant corporation.

2.7 Addresses for Notice, etc., to BAC and the Trustee

Any notice or demand which by any provisions of this Sixth Supplemental Trust Deed or the Trust

Deed is required or permitted to be given or served by the Trustee or by the holders of Securities toor on BAC may be given or served by pre-paid post (first class if inland, first class airmail if

overseas) or by facsimile transmission or by delivering it by hand (until another address is filed by

BAC with the Trustee) as follows:

Bank of America CorporationBank of America Corporate Center


NCI-007-07-13

Corporate Treasury Division

Charlotte, North Carolina 28255

Telephone: (980) 387-3776 begin_of_the_skype_highlighting (980) 387-

3776 end_of_the_skype_highlighting Facsimile: (980) 387-8794 Attention: B. Kenneth Burton, Jr.

4

Together with a copy to:

Bank of America Corporation

Legal Department

NCI-002-29-01

101 South Tryon Street


Telephone: (704) 386-4238 begin_of_the_skype_highlighting (704) 386-4238 end_of_the_skype_highlighting

Facsimile: (704) 386-1670 Attention: Teresa M. Brenner, Esq.

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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 BAC, CHL

or CFC shall not impair the validity of such service or of any judgment based thereon; and

(iii) agrees that nothing in this Sixth Supplemental Trust Deed shall affect the right to serve

process in any other manner permitted by law.

6

IN WITNESS WHEREOF this Sixth Supplemental Trust Deed has been duly executed as a deed by the

parties as of the date first written above.

Executed as a deed by BANK OF AMERICA CORPORATION

by acting under the authority of that company in the presence of:

) ) ) ) )

Signature of officer

Signature of witness

Name of witness

Address of witness

Occupation of witness

Executed as a deed by COUNTRYWIDE HOME LOANS, INC.

by acting under the authority of that company in the presence of:

) )

) ) )



Name of witness

Address of witness


7

Executed as a deed by COUNTRYWIDE FINANCIAL CORPORATION (formerly Red Oak Merger Corporation)

by

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acting under the authority of that company in the presence of:

)



Name of witness Address of witness


The common seal of DEUTSCHE TRUSTEE COMPANY LIMITED was affixed in the presence of:

) ) ) )

Director Associate Director

8

SCHEDULE 1

Countrywide Home Loans, Inc.

Officers’ Certificate

Each of the undersigned authorised officers of Countrywide Home Loans, Inc., a New York corporation

(“CHL”), pursuant to clause 19(D)(1)(c) of the Trust Deed dated 1 May 1998, by and among Countrywide

Financial Corporation (“CFC”), CHL, and Deutsche Trustee Company Limited, a company incorporated

with limited liability in England and Wales, as trustee (the “Trustee”), as supplemented by (i) the FirstSupplemental Trust Deed dated 16 December 1998 (ii) the Second Supplemental Trust Deed dated23 December 1999 (iii) the Third Supplemental Trust Deed dated 12 January 2001 (iv) the Fourth

Supplemental Trust Deed dated 29 January 2002 and (v) the Fifth Supplemental Trust Deed dated 1 July2008 (and as further amended and supplemented, the “Trust Deed”), in each case as among inter alia

CHL, CFC and the Trustee, hereby certifies, on behalf of CHL in the undersigned’s respective capacity as

an authorised officer of CHL, and not individually, that:

(A) on the date hereof, CHL conveyed substantially all of its properties and assets to Bank of America

Corporation, a Delaware corporation (“BAC”);

(B) the undersigned has read and is familiar with the provisions of the Trust Deed and the SixthSupplemental Trust Deed, dated as of the date hereof, by and among BAC, CFC, CHL and the Trustee

(the “Sixth Supplemental Trust Deed”), including all covenants and conditions precedent provided

therein;

(C) the undersigned’s statements and opinions contained herein are based on his or her examination or

investigation of the provisions of the Trust Deed, including all covenants and conditions precedent andthe definitions relating thereto, and the Sixth Supplemental Trust Deed, as well as such other

instruments, agreements and documents as the undersigned has deemed necessary or appropriate to

certify as to the matters set forth herein;

(D) the undersigned has made such examination or investigation as is necessary to enable the undersigned

to express an informed opinion as to whether the covenants and the conditions precedent provided for www .S

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in the Trust Deed relating to the CHL Acquisition and CHL Assumption (as defined in the Sixth

Supplemental Trust Deed) and the Sixth Supplemental Trust Deed have been complied with and has an

informed opinion as to the CHL Acquisition and CHL Assumption and the Sixth Supplemental Trust

Deed;

(E) all conditions precedent and covenants provided for in the Trust Deed relating to the CHL Acquisition

and CHL Assumption and the Sixth Supplemental Trust Deed have been complied with;

(F) the CHL Acquisition and CHL Assumption and the execution of the Sixth Supplemental Trust Deed

comply with the requirements of clause 19(D)(1) of the Trust Deed;

(G) no Event of Default or Potential Event of Default has happened or has been or is anticipated and,immediately following the CHL Acquisition and CHL Assumption, no Event of Default or Potential

Event of Default will have happened, will happen or is anticipated to happen;

(H) on the date hereof CHL is solvent and is able to pay its debts as and when they fall due and meet its

other obligations as and when they fall to be performed and immediately following the execution of the

Sixth Supplemental Trust Deed CHL will be solvent and able to pay its debts as and when they fall due

and meet its other obligations as and when they fall to be performed; and

9

(I) (a) the CHL Acquisition and CHL Assumption shall not breach any applicable law or regulation; and

(b) on or before the date hereof, all governmental, regulatory and other approvals, consents andlicences in respect of the CHL Acquisition and CHL Assumption have been obtained and on the

date hereof are in full force and effect.

Capitalised terms used but not defined herein shall have the meaning assigned to them in the Trust Deed.

IN WITNESS WHEREOF, I have hereunder signed my name on behalf of CHL (and not on my

individual behalf) this Seventh day of November 2008.

By:

Title: Authorised Officer

By:


10

SCHEDULE 2

Countrywide Financial CorporationOfficers’ Certificate

Each of the undersigned authorised officers of Countrywide Financial Corporation (formerly Red Oak Merger Corporation), a Delaware corporation (“CFC”), pursuant to clause 19(D)(3)(C) of the Trust Deed

dated 1 May 1998, by and among CFC, Countrywide Home Loans, Inc., a New York corporation

(“CHL”), and Deutsche Trustee Company Limited, a company incorporated with limited liability in

England and Wales, as trustee (the “Trustee”), as supplemented by (i) the First Supplemental Trust Deed

dated 16 December 1998 (ii) the Second Supplemental Trust Deed dated 23 December 1999 (iii) the Thirdwww .S

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Supplemental Trust Deed dated 12 January 2001 (iv) the Fourth Supplemental Trust Deed dated 29 January

2002 and (v) the Fifth Supplemental Trust Deed dated 1 July 2008 (and as further amended and

supplemented, the “Trust Deed”), in each case as among inter alia CFC, CHL and the Trustee, hereby

certifies, on behalf of CFC in the undersigned’s respective capacity as an authorised officer of CFC, and

not individually, that:

(A) on the date hereof, CFC conveyed substantially all of its properties and assets to Bank of America


(B) the undersigned has read and is familiar with the provisions of the Trust Deed and the Sixth

Supplemental Trust Deed, dated as of the date hereof, by and among BAC, CFC, CHL and the Trustee

(the “Sixth Supplemental Trust Deed”), including all covenants and conditions precedent provided

therein;


investigation of the provisions of the Trust Deed, including all covenants and conditions precedent and

the definitions relating thereto, and the Sixth Supplemental Trust Deed, as well as such other




to express an informed opinion as to whether the covenants and the conditions precedent provided for in the Trust Deed relating to the CFC Acquisition and CFC Assumption (as defined in the Sixth

Supplemental Trust Deed) and the Sixth Supplemental Trust Deed have been complied with and has an

informed opinion as to the CFC Acquisition and CFC Assumption and the Sixth Supplemental Trust

Deed;

(E) all conditions precedent and covenants provided for in the Trust Deed relating to the CFC Acquisition

and CFC Assumption and the Sixth Supplemental Trust Deed have been complied with;

(F) the CFC Acquisition and CFC Assumption and the execution of the Sixth Supplemental Trust Deed


(G) no Event of Default or Potential Event of Default has happened or has been or is anticipated and,

immediately following the CFC Acquisition and CFC Assumption, no Event of Default or Potential


(H) on the date hereof CFC is solvent and is able to pay its debts as and when they fall due and meet its

other obligations as and when they fall to be performed and immediately following the execution of the

Sixth Supplemental Trust Deed CFC will be solvent and able to pay its debts as and when they fall due


11

(I) (a) the CFC Acquisition and CFC Assumption shall not breach any applicable law or regulation; and

(b) on or before the date hereof, all governmental, regulatory and other approvals, consents and

licences in respect of the CFC Acquisition and CFC Assumption have been obtained and on the



IN WITNESS WHEREOF, I have hereunder signed my name on behalf of CFC (and not on my


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By:


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EX-4.44 17 dex444.htm 3RD SUPP. TRUST DEED 11/07/08, TO THE TRUST DEEDDATED 8/15/05

Exhibit 4.44

EXECUTION VERSION

Third Supplemental Trust Deed


and

Countrywide Financial Corporation

and

Countrywide Home Loans, Inc.and

Deutsche Trustee Company Limited

Supplementing the Trust Deed dated 15 August 2005 as modified and restated by the First Supplemental

Trust Deed dated 31 August 2006 and the Second Supplemental Trust Deed dated 1 July 2008

7 November 2008

CONTENTS

CLAUSE PAGE 1. ASSUMPTION BY SUCCESSOR CORPORATION AND SUPPLEMENTAL

PROVISIONS 2 2. MISCELLANEOUS 3 SCHEDULE 1 9 Countrywide Financial Corporation Officers’ Certificate 9 SCHEDULE 2 11 Countrywide Home Loans, Inc. Officers’ Certificate 11

THIS THIRD SUPPLEMENTAL TRUST DEED dated 7 November 2008 (the “Third SupplementalTrust Deed”) is made

BETWEEN:

(1) BANK OF AMERICA CORPORATION, a Delaware corporation (“BAC”);

(2) COUNTRYWIDE FINANCIAL CORPORATION, formerly Red Oak Merger Corporation, a

Delaware corporation (“CFC”);

(3) COUNTRYWIDE HOME LOANS, INC., a New York corporation (“CHL”); and

(4) DEUTSCHE TRUSTEE COMPANY LIMITED, a company incorporated with limited liability in

England and Wales, as Trustee (the “Trustee”) under the Trust Deed referred to herein.www .S

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WHEREAS

(A) CFC, CHL and the Trustee are parties to a Trust Deed dated 15 August 2005, as modified and restated

by the First Supplemental Trust Deed dated 31 August 2006 and as supplemented by the SecondSupplemental Trust Deed dated 1 July 2008 (as amended and supplemented, the “Trust Deed”),

providing for the issuance of Notes by CFC, as Issuer thereunder.

(B) There is outstanding under the terms of the Trust Deed one or more series of Notes (the “Securities”).(C) Amongst others, BAC and CFC have entered into a Stock Purchase Agreement (the “CFC Purchase


the properties and assets of CFC (the “CFC Acquisition”) the consideration for which will include theassumption by BAC of the indebtedness of CFC under the Securities and the Trust Deed (the “CFC

Assumption”).

(D) The CFC Acquisition and the CFC Assumption are expected to be effective as of 7 November, 2008.

(E) Clause 19(D)(1) of the Trust Deed provides that in the case of a conveyance and transfer of the properties and assets of CFC substantially as an entirety to a corporation organised and existing under

the laws of the United States of America, any political subdivision thereof or any state thereof, thetransferee shall expressly assume by a supplemental trust deed all the obligations and covenants under the Securities and the Trust Deed to be performed and observed by CFC.

(F) Amongst others, BAC and CHL have entered into an Asset Purchase Agreement (the “CHL Purchase


the properties and assets of CHL (the “CHL Acquisition”) the consideration for which will include the

assumption by BAC of the indebtedness of CHL under the Trust Deed (the “CHL Assumption”).

(G) The CHL Acquisition and the CHL Assumption are expected to be effective as of 7 November, 2008.

(H) Clause 19(D)(3) of the Trust Deed provides that in the case of a conveyance and transfer of the

properties and assets of CHL substantially as an entirety to a corporation organised and existing under


transferee shall expressly assume by a supplemental trust deed the obligations of CHL contained inclause 7 of the Trust Deed and the performance of every covenant under the Securities and the Trust

Deed to be performed and observed by CHL.

1

(I) This Third Supplemental Trust Deed has been duly authorised by all necessary corporate action on the

part of each of BAC, CFC and CHL.

(J) The Trustee has determined that this Third Supplemental Trust Deed is proper and satisfactory in form.

(K) All things necessary to make this Third Supplemental Trust Deed a valid trust deed and agreement

according to its terms have been done.

(L) In consideration of these premises, BAC, CFC, CHL and the Trustee agree as follows for the benefit of

the holders of the Securities.

THE PARTIES AGREE AS FOLLOWS:

1. ASSUMPTION BY SUCCESSOR CORPORATION AND SUPPLEMENTAL PROVISIONS

1.1 The Representations and Warranties

With effect on and from the Effective Date (as defined in Clause 2.1) BAC represents and warrants

that:

(a) it is a corporation organised and existing under the laws of the State of Delaware and is the

transferee of the properties and assets of each of CFC and CHL in each case substantially as an

entirety; andwww .S

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(b) the execution, delivery and performance of this Third Supplemental Trust Deed has been duly

authorised by the Board of Directors of BAC.

1.2 Assumption of Indebtedness from CFC


(i) BAC hereby expressly takes over and assumes the due and punctual payment of the principal

of and any interest on all the Securities and the due and punctual performance of all

obligations and the performance of every covenant of the Trust Deed on the part of the Issuer

(as defined in the Trust Deed) to be performed or observed;

(ii) all the rights, obligations and liabilities of CFC under or in respect of the Securities and under

the Trust Deed shall be taken over and assumed by BAC including, but without limiting the

generality of the foregoing, the obligation to pay (a) interest on the Securities accrued up to

and including the Effective Date but unpaid and (b) all other moneys payable in respect of theSecurities or under or pursuant to the Trust Deed accrued up to and including, or payable

prior to, the Effective Date but unpaid, and any other amounts payable under the Securities

and under the Trust Deed; and

(iii) all the terms, provisions and conditions of the Trust Deed and the Securities and theretofore

applying to CFC shall apply to BAC in all respects as if BAC had been a party to the Trust

Deed in place of CFC and the Trust Deed in respect thereof shall be read and construed as if

all references therein to CFC were references to BAC.

(b) BAC hereby covenants with the Trustee that with effect on and from the Effective Date it will duly

observe and perform and be bound by all of the covenants (including, but without limiting the

generality of the foregoing, any covenant to pay), conditions and provisions of the Trust Deed, the

Securities issued under the Programme by CFC and the Conditions of the Securities as prior

thereto have been expressed to be binding on CFC.

2

1.3 Assumption of Obligations from CHL


(i) all the obligations of CHL under or in respect of the Trust Deed and the performance of everycovenant under the Trust Deed shall be taken over and assumed by BAC; and

(ii) all the terms, provisions and conditions of the Trust Deed and theretofore applying to CHL

shall apply to BAC in all respects as if BAC had been a party to the Trust Deed in place of CHL and the Trust Deed in respect thereof shall be read and construed as if all references

therein to CHL were references to BAC.

(b) BAC hereby covenants with the Trustee that with effect on and from the Effective Date it will dulyobserve and perform and be bound by all of the covenants (including, but without limiting the

generality of the foregoing, any covenant to pay), conditions and provisions of the Trust Deed.

1.4 Name

Effective on and from the Effective Date, the name of the Issuer and the Guarantor (each as defined

in the Trust Deed) shall be “Bank of America Corporation”, as the successor corporation under theTrust Deed.

1.5 Trustee’s Acceptance

The Trustee hereby accepts this Third Supplemental Trust Deed and agrees to perform the same

under the terms and conditions set forth in the Trust Deed.www .S

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2. MISCELLANEOUS

2.1 Effect of Third Supplemental Trust Deed

Upon the first date upon which each of the following events shall have occurred (the “Effective

Date”):

(a) the execution and delivery of this Third Supplemental Trust Deed by BAC, CFC, CHL and the

Trustee; and

(b) the closing date of the CFC Acquisition and the CHL Acquisition (the “Closing Date”);

(c) the receipt by the Trustee of certificates signed by two authorised officers of each of CFC and

CHL substantially in the form set out in schedules 1 and 2 hereto (dated the Closing Date); and

(d) the receipt by the Trustee of legal opinions from:

(i) Ashurst LLP as to English law; and

(ii) McGuireWoods LLP as to the laws of New York and Delaware,

the Trust Deed shall be supplemented in accordance herewith, and this Third Supplemental Trust

Deed shall be effective and shall form a part of the Trust Deed for all purposes, and every holder of Securities heretofore or hereafter authenticated and delivered under the Trust Deed shall be boundthereby.

3

2.2 Trust Deed Remains in Full Force and Effect

Except as supplemented hereby, all provisions in the Trust Deed shall remain in full force and effect.

2.3 Trust Deed and Supplemental Trust Deeds Construed Together

This Third Supplemental Trust Deed is supplemental to and in implementation of the Trust Deed, and

the Trust Deed and this Third Supplemental Trust Deed shall henceforth be read and construed

together.

2.4 Confirmation and Preservation of Trust Deed

The Trust Deed as supplemented by this Third Supplemental Trust Deed is in all respects confirmed

and preserved.

2.5 Severability

In case any provision in this Third Supplemental Trust Deed shall be invalid, illegal or

unenforceable, the validity, legality and enforceability of the remaining provisions shall not in anyway be affected or impaired thereby.

2.6 Terms Defined in the Trust Deed

(a) All capitalised terms not otherwise defined herein shall have the meanings ascribed to them in the

Trust Deed.

(b) All references to a “certificate signed by two Directors”, a “certificate signed by two of its

Directors”, a “certificate signed by any two Directors”, a “certificate in writing signed by two of its

Directors” or any such reference however described shall hereafter be deemed to be references to a“certificate signed by two authorised officers”. For the purposes of the Trust Deed “authorised

officer” means the Chief Executive Officer, the Chief Financial Officer, any Executive Vice

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Associate General Counsel, the Secretary and any Assistant Secretary of the relevant corporation.

2.7 Addresses for Notice, etc., to BAC and the Trustee

Any notice or demand which by any provisions of this Third Supplemental Trust Deed or the Trust

Deed is required or permitted to be given or served by the Trustee or by the holders of Securities to

or on BAC may be given or served by pre-paid post (first class if inland, first class airmail if

overseas) or by facsimile transmission or by delivering it by hand (until another address is filed byBAC with the Trustee) as follows:


Bank of America Corporate Center


NCI-007-07-13

Corporate Treasury DivisionCharlotte, North Carolina 28255

Telephone: (980) 387-3776 begin_of_the_skype_highlighting (980) 387-

3776 end_of_the_skype_highlighting

Facsimile: (980) 387-8794 Attention: B. Kenneth Burton, Jr.

4

Together with a copy to:


Legal Department NCI-002-29-01

101 South Tryon Street


Telephone: (704) 386-4238 begin_of_the_skype_highlighting (704) 386-4238 end_of_the_skype_highlighting

Facsimile: (704) 386-1670 Attention: Teresa M. Brenner, Esq.

2.8 Headings

The clause headings of this Third Supplemental Trust Deed have been inserted for convenience of

reference only, are not to be considered part of this Third Supplemental Trust Deed and shall in no

way modify or restrict any of the terms or provisions hereof.

2.9 Benefits of Third Supplemental Trust Deed, etc.

Nothing in this Third Supplemental Trust Deed or the Securities, express or implied, shall give to anyPerson, other than the parties hereto and thereto and their successors hereunder and thereunder and

the holders of the Securities, any benefit of any legal or equitable right, remedy or claim under the

Trust Deed, this Third Supplemental Trust Deed or the Securities.

2.10Certain Duties and Responsibilities of the Trustees

In entering into this Third Supplemental Trust Deed, the Trustee shall be entitled to the benefit of every provision of the Trust Deed relating to the conduct or affecting the liability or affording

protection to the Trustee, whether or not elsewhere herein so provided.www .S

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2.11Counterparts

The parties may sign any number of copies of this Third Supplemental Trust Deed. Each signed copy

shall be an original, but all of them together represent the same agreement.

2.12Governing Law

This Third Supplemental Trust Deed is governed by, and shall be construed in accordance with,

English law.

2.13Submission to Jurisdiction

(a) Each of BAC, CHL and CFC irrevocably agrees for the benefit of the Trustee that the courts of

England are to have jurisdiction to settle any disputes which may arise out of or in connection withthis Third Supplemental Trust Deed and that accordingly any suit, action or proceedings arising

out of or in connection with this Third Supplemental Trust Deed (together referred to as

“Proceedings”) may be brought in the courts of England. Each of BAC, CHL and CFC

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 BAC, CHL or

CFC 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.

5

(b) Each of BAC, CHL and CFC irrevocably and unconditionally appoints Clifford Chance Secretaries

Limited at its registered office for the time being (being at the date hereof at 10 Upper Bank Street,

London E14 5JJ) and in the event of its ceasing so to act will appoint such other person as theTrustee may approve and as BAC, CHL and CFC may nominate in writing to the Trustee for the

purpose of accepting service of process on their behalf in England in respect of any Proceedings.Each of BAC, CHL and CFC:

(i) agrees to procure that, so long as any of the Notes issued by the Issuer 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 BAC, CHL

or CFC shall not impair the validity of such service or of any judgment based thereon; and

(iii) agrees that nothing in this Third Supplemental Trust Deed shall affect the right to serve

process in any other manner permitted by law.

6

IN WITNESS WHEREOF this Third Supplemental Trust Deed has been duly executed as a deed by the parties as of the date first written above.

Executed as a deed by BANK OF AMERICA CORPORATION

by acting under the authority of that

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company in the presence of: )



Name of witness

Address of witness


Executed as a deed by COUNTRYWIDE FINANCIAL CORPORATION (formerly Red Oak

Merger Corporation) by acting under the authority of that company in the presence of:

) )

) ) ) )



Name of witness

Address of witness


7

Executed as a deed by COUNTRYWIDE HOME LOANS, INC.

by acting under the authority of that

company in the presence of:

) ) ) )

)



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The common seal of DEUTSCHE TRUSTEE COMPANY LIMITED was affixed in the presence of:

) ) ) )

Director

Associate Director

8

SCHEDULE 1

Countrywide Financial CorporationOfficers’ Certificate

Each of the undersigned authorised officers of Countrywide Financial Corporation (formerly Red Oak Merger Corporation), a Delaware corporation (“CFC”), pursuant to clause 19(D)(1)(c) of the Trust Deed

dated 15 August 2005, by and among CFC, Countrywide Home Loans, Inc., a New York corporation

(“CHL”), and Deutsche Trustee Company Limited, a company incorporated with limited liability in

England and Wales, as trustee (the “Trustee”), as supplemented by (i) the First Supplemental Trust Deed

dated 31 August 2006 among Countrywide Financial Corporation, CHL and the Trustee and (ii) the Second

Supplemental Trust Deed dated 1 July 2008 among Countrywide Financial Corporation, CHL, Red Oak

Merger Corporation and the Trustee (and as further amended and supplemented, the “Trust Deed”),

hereby certifies, on behalf of CFC in the undersigned’s respective capacity as an authorised officer of CFC,

and not individually, that:

(A) on the date hereof, CFC conveyed substantially all of its properties and assets to Bank of America


(B) the undersigned has read and is familiar with the provisions of the Trust Deed and the Third

Supplemental Trust Deed, dated as of the date hereof, by and among BAC, CFC, CHL and the Trustee(the “Third Supplemental Trust Deed”), including all covenants and conditions precedent provided

therein;



the definitions relating thereto, and the Third Supplemental Trust Deed, as well as such other



(D) the undersigned has made such examination or investigation as is necessary to enable the undersignedto express an informed opinion as to whether the covenants and the conditions precedent provided for

in the Trust Deed relating to the CFC Acquisition and CFC Assumption (as defined in the Third

Supplemental Trust Deed) and the Third Supplemental Trust Deed have been complied with and has an

informed opinion as to the CFC Acquisition and CFC Assumption and the Third Supplemental TrustDeed;

(E) all conditions precedent and covenants provided for in the Trust Deed relating to the CFC Acquisition

and CFC Assumption and the Third Supplemental Trust Deed have been complied with;

(F) the CFC Acquisition and CFC Assumption and the execution of the Third Supplemental Trust Deed


(G) no Event of Default or Potential Event of Default has happened or has been or is anticipated and,www .S

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immediately following the CFC Acquisition and CFC Assumption, no Event of Default or Potential


(H) on the date hereof CFC is solvent and is able to pay its debts as and when they fall due and meet itsother obligations as and when they fall to be performed and immediately following the execution of the

Third Supplemental Trust Deed CFC will be solvent and able to pay its debts as and when they fall due


9

(I) (a) the CFC Acquisition and CFC Assumption shall not breach any applicable law or regulation;and


licences in respect of the CFC Acquisition and CFC Assumption have been obtained and on the



IN WITNESS WHEREOF, I have hereunder signed my name on behalf of CFC (and not on my


By: Title: Authorised Officer


10

SCHEDULE 2

Countrywide Home Loans, Inc.

Officers’ Certificate

Each of the undersigned authorised officers of Countrywide Home Loans, Inc., a New York corporation

(“CHL”), pursuant to clause 19(D)(3)(c) of the Trust Deed dated 15 August 2005, by and among

Countrywide Financial Corporation (“CFC”), CHL, and Deutsche Trustee Company Limited, a companyincorporated with limited liability in England and Wales, as trustee (the “Trustee”), as supplemented by

(i) the First Supplemental Trust Deed dated 31 August 2006 among CFC, CHL and the Trustee and (ii) the

Second Supplemental Trust Deed dated 1 July 2008 among CFC, CHL, Red Oak Merger Corporation and

the Trustee (and as further amended and supplemented, the “Trust Deed”), hereby certifies, on behalf of

CHL in the undersigned’s respective capacity as an authorised officer of CHL, and not individually, that:

(A) on the date hereof, CHL conveyed substantially all of its properties and assets to Bank of America


(B) the undersigned has read and is familiar with the provisions of the Trust Deed and the Third

Supplemental Trust Deed, dated as of the date hereof, by and among BAC, CFC, CHL and the Trustee

(the “Third Supplemental Trust Deed”), including all covenants and conditions precedent provided

therein;


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the definitions relating thereto, and the Third Supplemental Trust Deed, as well as such other




to express an informed opinion as to whether the covenants and the conditions precedent provided for

in the Trust Deed relating to the CHL Acquisition and CHL Assumption (as defined in the ThirdSupplemental Trust Deed) and the Third Supplemental Trust Deed have been complied with and has an

informed opinion as to the CHL Acquisition and CHL Assumption and the Third Supplemental Trust

Deed;

(E) all conditions precedent and covenants provided for in the Trust Deed relating to the CHL Acquisition

and CHL Assumption and the Third Supplemental Trust Deed have been complied with;

(F) the CHL Acquisition and CHL Assumption and the execution of the Third Supplemental Trust Deed


(G) no Event of Default or Potential Event of Default has happened or has been or is anticipated and,

immediately following the CHL Acquisition and CHL Assumption, no Event of Default or Potential


(H) on the date hereof CHL is solvent and is able to pay its debts as and when they fall due and meet itsother obligations as and when they fall to be performed and immediately following the execution of the

Third Supplemental Trust Deed CHL will be solvent and able to pay its debts as and when they fall due


11

(I) (a) the CHL Acquisition and CHL Assumption shall not breach any applicable law or regulation; and


licences in respect of the CHL Acquisition and CHL Assumption have been obtained and on the



IN WITNESS WHEREOF, I have hereunder signed my name on behalf of CHL (and not on myindividual behalf) this Seventh day of November 2008.


By:


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EX-99.1 2 v43700exv99w1.htm EXHIBIT 99.1

Exhibit 99.1

UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION

On July 1, 2008, Countrywide Financial Corporation, a Delaware corporation (“Countrywide”),completed its merger (the “Merger ”) with Red Oak Merger Corporation (“ Red Oak ” or the “ Registrant ”), aDelaware corporation and a wholly-owned subsidiary of Bank of America Corporation, a Delawarecorporation (“ Bank of America”), pursuant to the terms of the previously announced Agreement and Plan of Merger, dated as of January 11, 2008 (the “Merger Agreement ”), by and among Bank of America, Red Oak and Countrywide. Upon consummation of the Merger, Red Oak was renamed “Countrywide Financial

Corporation”.

The Merger was announced on January 11, 2008 and provided for each outstanding share of Countrywide common stock to be converted into the right to receive 0.1822 of a share of Bank of Americacommon stock. As discussed in Note 3— Pro Forma Adjustments from Transactions, the Registrant sold or otherwise disposed of assets to other wholly-owned subsidiaries of Bank of America subsequent to thecompletion of the Merger (the “Transactions”).

The following unaudited pro forma condensed financial information and explanatory notes present theimpact of the Merger and the Transactions on Countrywide’s historical financial position and results of operations under the purchase method of accounting with the Registrant treated as the acquirer. Theunaudited pro forma condensed financial information has been derived from and should be read inconjunction with the historical consolidated financial statements and the related notes of Countrywide.Under the purchase method of accounting, the assets and liabilities of Countrywide have been recorded bythe Registrant at their estimated fair values as of the date of the Merger. The unaudited pro formacondensed balance sheet as of June 30, 2008 assumes the Merger and Transactions were completed on thatdate. The unaudited pro forma condensed statements of operations give effect to the Merger andTransactions as if the Merger and Transactions had been completed on January 1, 2007.

The unaudited pro forma condensed financial information is presented for illustrative purposes only anddoes not indicate the financial results of Countrywide Financial Corporation had the Merger andTransactions occurred at the beginning of each period presented, nor the impact of possible business model

changes. The unaudited pro forma condensed financial information also does not consider the impact of current market conditions on revenues, expense efficiencies, asset dispositions and share repurchases,among other factors. In addition, as explained in more detail in the accompanying notes to the unaudited

pro forma condensed financial information, the preliminary allocation of the purchase price reflected in the pro forma condensed financial information is subject to adjustment.

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Countrywide Financial CorporationPro Forma Condensed Balance Sheet

(unaudited)

The following preliminary unaudited pro forma condensed balance sheet adjusts the historical balance sheetof Countrywide assuming the Merger and Transactions had occurred on June 30, 2008.

June 30, 2008

Preliminary

Purchase

Accounting Pro

(Dollars in millions) As reported Adjustments (1) Transactions (1) Forma

Assets

Cash $ 6,650 $ — $ 4,940 L,M,N,P,R $ 11,590

Mortgage loans held for sale 11,816 — (472 ) M,O 11,344

Trading securities owned, atestimated fair value 1,193 — (147 )

P 1,046

Securities purchased under agreements to resell, securities

borrowed and federal funds sold 6,649 — — 6,649

Loans held for investment, net of allowance for loan losses of $5,036 94,231 (9,313 ) A (9,170 ) M 75,748

Investments in other financialinstruments, at estimated fair value 18,848 (324 ) B (1,520 ) R 17,004

Mortgage servicing rights, atestimated fair value 18,402 (1,643 ) C (13,863 ) L 2,896

Premises and equipment, net 1,539 (150 ) D — 1

Other assets 12,748 (629 ) E 7,259 L,M,Q 23,435

4,057 F

Deferred taxes from merger — 4,761 G — 4

Total assets $ 172,076 $ (3,241 ) $ (12,973 ) $ 155,862

Liabilities

Deposit liabilities $ 62,812 $ 179 H $ — $ 62,991

Securities sold under agreements torepurchase 3,544 — — 3,544

Trading securities sold, not yet purchased, at estimated fair value 31 — — 31

Notes payable and other liabilities 92,988 819I (12,973 ) N 80,834

Income taxes payable 2,281 — — 2,281

Total liabilities 161,656 998 (12,973 ) 149,681

Shareholders’ Equity www .S

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Preferred stock 1 (1 ) K — —

Common stock 29 (29 ) K — —

Additional paid-in capital 4,222 (4,222 ) K — 6

6,181 K —

Retained earnings 7,209 (7,209 ) K — —

Accumulated other comprehensive

loss (1,041 ) 1,041

K

— —

Total shareholders’ equity 10,420 (4,239 ) — 6,181

Total liabilities andshareholders’ equity $ 172,076 $ (3,241 ) $ (12,973 ) $ 155,862

(1) See Notes to Unaudited Pro Forma Condensed Financial Information.

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Countrywide Financial CorporationPro Forma Condensed Statement of Operations

(unaudited)

The following preliminary unaudited pro forma condensed statement of operations adjusts the historicalstatement of operations of Countrywide assuming the Merger and Transactions had occurred on January 1,2007.

For the Six Months Ended June 30, 2008

Preliminary

Purchase

Accounting

(Dollars in millions, except per share data) As reported Adjustments (1) Transactions (1) Pro Forma

Revenues

Gain on sale of loans andsecurities $ 162 $ — $ — $ 162

Interest income 5,269 290 A,B (589 ) L,M,O,P,Q 4,970

Interest expense (3,882 ) 80 E,H,I 215 N (3,587 )

Net interest income 1,387 370 (374 ) 1,383

Provision for loan losses (3,832 ) 1,942 A 495 M (1,395 )

Net interest expense after provision for loan losses (2,445 ) 2,312 121 (12 )

Loan servicing fees and other income from mortgageservicing rights and retainedinterests 2,745 — (2,542 ) L 203

Realization of expected cash

flows from mortgage servicingrights (1,421 ) — 1,376 L (45 )

Change in fair value of mortgageservicing rights 435 — (291 )

L 144

Impairment of retained interests (706 ) — 33 L (673 )

Servicing hedge losses (620 ) — 501 L (119 )

Net loan servicing fees andother income frommortgage servicing rightsand retained interests 433 — (923 ) (490 )

Net insurance premiums earned 974 — — 974

Realized loss on available for salesecurities (492 ) — — (492 )

Other 424 20 E 82 P 526

Total revenues (944 ) 2,332 (720 ) 668

Expenses

Compensation 2,051 — (110 ) L 1,941

Occupancy and other office 492 (10 ) D (20 ) L 462www .S

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Insurance claims 722 — — 722

Advertising and promotion 139 — — 139

Other 960 35 E (180 ) L 815

Total expenses 4,364 25 (310 ) 4,079

Loss before income tax benefit (5,308 ) 2,307 (410 ) (3,411 )Benefit for income taxes (2,085 ) 856 G (152 ) G (1,381 )

NET LOSS $ (3,223 ) $ 1,451 $ (258 ) $ (2,030 )

Loss per Common Share:

Basic $ (5.68 ) $ (3.50 ) J

Diluted $ (5.68 ) $ (3.50 ) J

Weighted Average CommonShares Outstanding:

Basic 580,649 — — 580,649

Diluted 580,649 — — 580,649


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Countrywide Financial CorporationPro Forma Condensed Statement of Operations

(unaudited)

The following preliminary unaudited pro forma condensed statement of operations presents the historicalstatement of operations of Countrywide assuming the Merger and Transactions had occurred on January 1,2007.

For the Year Ended December 31, 2007

Preliminary

Purchase

Accounting

(Dollars in millions, except per share data) As reported Adjustments (1) Transactions (1) Pro Forma

Revenues

Gain on sale of loans andsecurities $ 2,435 $ — $ — $ 2,435

Interest income 13,162 585 A,B (1,765 ) L,M,O, P,Q 11,982

Interest expense (10,288 ) (10 ) E,H,I 247 N (10,051 )

Net interest income 2,874 575 (1,518 ) 1,931

Provision for loan losses (2,286 ) 1,526 A 385 M (375 )

Net interest income after provision for loan losses 588 2,101 (1,133 ) 1,556

Loan servicing fees and other income from mortgageservicing rights and retainedinterests 5,716 — (5,361 ) L 355

Realization of expected cash

flows from mortgage servicingrights (3,012 ) — 3,008 L (4 )

Change in fair value of mortgageservicing rights (1,085 ) — 1,086

L 1

Impairment of retained interests (2,381 ) — 70 L (2,311 )

Servicing hedge losses 1,672 — (1,611 ) L 61

Net loan servicing fees and other income from mortgageservicing rights and retainedinterests 910 — (2,808 ) (1,898 )

Net insurance premiums earned 1,523 — — 1,523

Other 605 55 E 8 P 668

Total revenues 6,061 2,156 (3,933 ) 4,284

Expenses

Compensation 4,165 — (180 ) L 3,985

Occupancy and other office 1,126 (20 ) D (40 ) L 1,066

Insurance claims 525 — — 525

Advertising and promotion 322 — — 322www .S

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Other 1,234 70 E (60 ) L 1,244

Total expenses 7,372 50 (280 ) 7,142

Loss before income tax benefit (1,311 ) 2,106 (3,653 ) (2,858 )

Benefit for income taxes (607 ) 781 G (1,355 ) G (1,181 )

NET LOSS $ (704 ) $ 1,325 $ (2,298 ) $ (1,677 )

Loss per Common Share:

Basic $ (2.03 ) $ (2.89 ) J

Diluted $ (2.03 ) $ (2.89 ) J

Weighted Average CommonShares Outstanding:

Basic 581,025 — — 581,025

Diluted 581,025 — — 581,025


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COUNTRYWIDE FINANCIAL CORPORATIONNOTES TO THE UNAUDITED PRO FORMA CONDENSED

FINANCIAL INFORMATION

Note 1 — Basis of Pro Forma Presentation

The unaudited pro forma condensed financial information related to the Merger and Transactions areincluded as of June 30, 2008 and for the year ended December 31, 2007 and for the six months endedJune 30, 2008. The pro forma adjustments included herein reflect the conversion of Countrywide commonstock into Bank of America common stock using an exchange ratio of 0.1822 of a share of Bank of America common stock for each of the 583 million shares of Countrywide common stock outstanding atJune 30, 2008. The estimated purchase price of $4.2 billion, which includes the value of equity-basedawards and certain deal costs, is based on a per share price for Bank of America common stock of $38.73,which was the average of the closing prices of Bank of America common stock for the period commencingtwo trading days before and ending two trading days after January 11, 2008, the date of the Merger Agreement. The $2.0 billion Series B convertible preferred shares of Countrywide that were previouslyheld by Bank of America were cancelled.

The unaudited pro forma condensed financial information includes preliminary estimated adjustments torecord the assets and liabilities of Countrywide at their respective fair values and represents management’sestimates based on available information. The pro forma preliminary adjustments included herein may berevised as additional information becomes available and as additional analyses are performed. The finalallocation of the purchase price will be determined after completion of a final analysis determining the fair values of Countrywide’s tangible and identifiable intangible assets and liabilities as of July 1, 2008.Accordingly, the final purchase accounting adjustments and exit and termination costs may be materiallydifferent from the pro forma adjustments presented in this document. Increases or decreases in the fair value of the net assets and other items of Countrywide as compared to the information shown in thisdocument may change the amount of the purchase price allocated to goodwill, other assets and liabilitiesand may impact the statement of operations due to adjustments in yield and/or amortization of the adjustedassets or liabilities.

The unaudited pro forma condensed financial information is presented for illustrative purposes only anddoes not indicate the financial results of Countrywide had the Merger and Transactions occurred at the

beginning of each period presented and had the impact of possible business model changes as a result of current market conditions which may impact revenues, expense efficiencies, asset dispositions and sharerepurchases, among other factors, been considered.

Note 2 — Preliminary Purchase Accounting Allocation

The unaudited pro forma condensed financial information for the Merger and Transactions includes the pro forma condensed balance sheet as of June 30, 2008 assuming the Merger and Transactions werecompleted on June 30, 2008. The pro forma condensed statements of operations for the six months endedJune 30, 2008 and the year ended December 31, 2007 were prepared assuming the Merger and Transactionswere completed on January 1, 2007.

The unaudited pro forma condensed financial information reflects the issuance of 106 million shares of

Bank of America common stock and cancellation of Bank of America’s $2.0 billion Series B convertible preferred stock investment in Countrywide. Common stock issued in the exchange was valued using themethodology discussed in Note 1 above.

The Merger will be accounted for using the purchase method of accounting; accordingly, Bank of America’s cost to acquire Countrywide will be allocated to the assets (including identifiable intangibleassets) and liabilities of Countrywide at their respective fair values as of July 1, 2008. Accordingly, the

purchase price was preliminarily allocated to the assets acquired and the liabilities assumed based on their estimated fair values at the Merger date as summarized in the following table.www .S

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Preliminary Purchase Price Allocation (unaudited)

(Dollars in billions)

Purchase price Countrywide common stock exchanged (in thousands) 583,256

Exchange ratio .1822

Total shares of Bank of America’s common stock exchanged (in thousands) 106,269

Purchase price per share of Bank of America’s common stock (1) $ 38.73

Total purchase price $ 4.2

Preliminary allocation of the purchase price

Countrywide shareholders’ equity (2) 8.4

Pre-tax adjustments to reflect assets acquired and liabilities assumed at fair value:

Loans (9.3 )

Mortgage servicing rights (1.6 )All other (2.2 )

Pre-tax total adjustments (13.1 )

Deferred income taxes 4.8

After tax total adjustments (8.3 )

Fair value of net assets acquired 0.1

Preliminary goodwill resulting from the Merger $ 4.1

(1) The value of the shares of common stock exchanged with Countrywide shareholders was based uponthe average of the closing prices of Bank of America’s common stock for the period commencing two

trading days before and ending two trading days after January 11, 2008, the date of the Merger Agreement.

(2) Represents the remaining Countrywide shareholders’ equity as of the Merger date after the cancellationof the $2.0 billion Series B convertible preferred shares held by Bank of America.

The preliminary purchase accounting allocation included in the unaudited pro forma condensedfinancial information is as follows:

A Adjustment to record impaired loans at fair value and non-impaired loans at present value of amounts to be received at current interest rates. For non-impaired loans, Countrywide’s existingallowance for loan losses was retained. The adjustments were approximately $8.2 billion and$1.6 billion for the impaired and non-impaired portfolios, respectively. Additionally, approximately$470 million of net deferred costs and basis adjustments were written off. The effect of theseadjustments is to increase interest income by approximately $115 million and $235 million anddecrease provision for loan losses for the impaired portfolio by approximately $1.9 billion and$1.5 billion for the six months ended June 30, 2008 and the twelve months ended December 31,2007, respectively. The adjustments reflected herein are based on current assumptions andvaluations which are subject to change.

B Adjustment to fair value investments in other securities. Prior to the acquisition of Countrywide byRed Oak, Countrywide had recorded a decrease in the fair value of its available for sale securities of approximately $1.8 billion with a corresponding amount recorded in other comprehensive income,w

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net of tax. As a result of purchase accounting, this amount is recorded as a discount on the securitiesand amortized over the remaining life. The effect of these adjustments is to increase interest income

by approximately $175 million and $350 million for the six months ended June 30, 2008 and thetwelve months ended December 31, 2007, respectively.

C Adjustment to fair value mortgage servicing rights consistent with Bank of America assumptions,

such as Bank of America’s view of credit and prepayment speeds. The adjustments to the pro formacondensed statements of operations cannot be reasonably estimated due to the nature of the assetand ongoing recognition of change in fair value through earnings. The adjustments to the pro formacondensed balance sheet reflected herein are based on current assumptions and valuations which aresubject to change.

D Adjustment to record the fair value of owned real estate, leased property and related improvements,signage and equipment. The effect of these adjustments is to reduce occupancy and other officecosts by approximately $10 million and $20 million for the six months ended June 30, 2008 and thetwelve months ended December 31, 2007, respectively.

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credit loans, and construction loans.

• The Registrant novated to Bank of America, N.A. (“ BANA”) a portfolio of derivative instruments.

• The Registrant sold a pool of commercial mortgage loans held by Countrywide Commercial RealEstate Finance to NBHC (the “Commercial Loan Sale”).

• The Company sold a pool of securities to Blue Ridge Investments, LLC (the “CSC SecuritiesSale”). The pool of securities included asset-backed securities and mortgage-backed securities held

by Countrywide Securities Corporation.

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The Registrant effected the dispositions described above to facilitate and optimize its fundingrequirements, including the repayment of all outstanding borrowings under the terminated credit facilitiesdescribed in Item 1.02 of the Registrant’s Current Report on Form 8-K dated July 8, 2008 (the “Terminated

Credit Facilities”), and the payment of other obligations.

The pro forma adjustments included in the unaudited pro forma condensed financial information aredescribed below. The estimated impact on the pro forma condensed statements of operations is determinedas if the Transactions occurred as of the beginning of the period based on Countrywide’s historical results.

L The impact of the Sale of Servicing LP was to remove the net assets, including mortgage servicingrights and reimbursable servicing advances of approximately $13.9 billion and $4.4 billion,respectively, for a fair value purchase price of approximately $19.7 billion, subject to certainadjustments. In connection with the Sale of Servicing LP, CHL agreed to retain and assume allliabilities of Servicing LP as of the date of the sale. The impact of the sale on the pro formacondensed statements of operations was the removal of CHL’s servicing activities, which resultedin a decrease to interest income by approximately $440 million and $1.5 billion, net loan servicingfees and other income from mortgage servicing r ights by approximately $925 million and$2.8 billion, and other expenses by approximately $310 million and $280 million for the six monthsended June 30, 2008 and the twelve months ended December 31, 2007, respectively. Subsequent tothese Transactions, the Registrant continues to hold limited mortgage servicing rights.

M The Residential Loan Sale, including held for sale and held for investment loans, was completed for a fair value purchase price of approximately $9.4 billion, subject to certain adjustments. The impactof the sale on the pro forma condensed statement of operations was to decrease interest income byapproximately $360 million and $720 million and provision for loan losses by approximately$495 million and $385 million for the six months ended June 30, 2008 and the twelve monthsended December 31, 2007, respectively.

N The Registrant repaid the Terminated Credit Facilities in the amount of approximately

$13.0 billion. The impact of the repayment on the pro forma condensed statement of operations wasto decrease interest expense by approximately $215 million and $250 million for the six monthsended June 30, 2008 and the twelve months ended December 31, 2007, respectively.

O The Commercial Loan Sale was completed for a fair value purchase price of approximately$238 million, subject to certain adjustments. These commercial mortgage loans exclude loansscheduled to be sold or mature in the near future. The impact of the sale on the pro formacondensed statement of operations was to decrease interest income by approximately $9 millionand $18 million for the six months ended June 30, 2008 and the twelve months endedDecember 31, 2007, respectively.

P The CSC Securities Sale was completed for a fair value purchase price of approximately$147 million in cash. The impact of the sale on the pro forma condensed statement of operations

was to decrease interest income by approximately $5 million and $2 million and increase other income by approximately $82 million and $8 million related primarily to the impact of net tradinglosses for the six months ended June 30, 2008 and the twelve months ended December 31, 2007,respectively.

Q In connection with the Transactions, NBHC delivered to CHL promissory notes totalingapproximately $13 billion that bear interest at a rate per annum equal to three-month LIBOR plus0.65%, are due upon demand and can be prepaid in whole or in part at any time. The impact of the

promissory notes on the pro forma condensed statement of operations was to increase interestwww .S

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income by approximately $225 million and $450 million for the six months ended June 30, 2008and the twelve months ended December 31, 2007, respectively.

R The Registrant’s novation to BANA was completed in exchange for $1.5 billion in cash. Theimpact on the pro forma condensed statement of operations cannot be reasonably estimated, due tothe nature of the asset and ongoing recognition of change in fair value through earnings.

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer,""accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act (check one):

Large accelerated

filer

Accelerated

filer

Non-accelerated filer

(Do not check if a smaller reportingcompany)

Smaller reporting

company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act): Yes No

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of thelatest practicable date.

Class Outstanding at August 8, 2008

Common Stock $0.01 par value 1,000

The Registrant meets the conditions set forth in general instructions H(1)(a) and (b) of Form 10-Q andis therefore filing this Form 10-Q with the reduced disclosure format.


FORM 10-Q

June 30, 2008

TABLE OF CONTENTS

Page

PART I. FINANCIAL INFORMATION 1 Item 1. Financial Statements:

Consolidated Balance Sheets—June 30, 2008 and December 31, 2007 1 Consolidated Statements of Operations—Three and Six Months Ended June 30, 2008 and

2007 2 Consolidated Statement of Changes in Shareholders' Equity—Six Months Ended June 30,

2008 and 2007 3 Consolidated Statements of Cash Flows—Six Months Ended June 30, 2008 and 2007 4

Notes to Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 55

Overview 55 Results of Operations Comparison—Quarters Ended June 30, 2008 and 2007 60 Results of Operations Comparison—Six Months Ended June 30, 2008 and 2007 68 Liquidity and Capital Resources 75 Credit Risk Management 78 w

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Loan Servicing 91 Off-Balance Sheet Arrangements and Aggregate Contractual Obligations 92 Prospective Trends 94 Regulatory Trends 95 Accounting Developments 96

Factors That May Affect Our Future Results 98 Item 4. Controls and Procedures 99

PART II. OTHER INFORMATION 100 Item 1. Legal Proceedings 100 Item 6. Exhibits 100

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

June 30,

2008

December 31,

2007

(Unaudited) (in thousands, except share data)

ASSETS Cash $ 6,650,317 $ 8,810,399 Mortgage loans held for sale (includes $8,638,178 carried at estimated fair

value at June 30, 2008) 11,816,362 11,681,274 Trading securities owned, at estimated fair value 1,193,001 14,504,563 Trading securities pledged as collateral, at estimated fair value — 6,838,044 Securities purchased under agreements to resell, securities borrowed and

federal funds sold 6,649,086 9,640,879 Loans held for investment, net of allowance for loan losses of $5,035,651

and $2,399,491 at June 30, 2008 and December 31, 2007, respectively(includes $46,120 carried at estimated fair value at June 30, 2008) 94,230,990 98,000,713

Investments in other financial instruments, at estimated fair value 18,847,997 25,817,659 Mortgage servicing rights, at estimated fair value 18,402,390 18,958,180 Premises and equipment, net 1,539,200 1,564,438 Other assets 12,747,151 12,550,775

Total assets $ 172,076,494 $ 208,366,924

LIABILITIES Deposit liabilities $ 62,811,922 $ 60,200,599 Securities sold under agreements to repurchase 3,544,580 18,218,162 Trading securities sold, not yet purchased, at estimated fair value 31,415 3,686,978

Notes payable (includes $1,212,252 carried at estimated fair value atJune 30, 2008) 82,335,591 97,227,413 www .S

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Accounts payable and accrued liabilities 10,651,933 10,194,358 Income taxes payable 2,280,985 4,183,543

Total liabilities 161,656,426 193,711,053

Commitments and contingencies — —

SHAREHOLDERS' EQUITY Preferred stock, par value $0.05—authorized, 1,500,000 shares; issued

and outstanding at June 30, 2008 and December 31, 2007, 20,000 sharesof 7.25% Series B non-voting convertible cumulative shares with a totalliquidation preference of $2,000,000 1 1

Common stock, par value $0.05—authorized, 1,000,000,000 shares;issued, 583,256,956 shares and 578,881,566 shares at June 30, 2008 andDecember 31, 2007, respectively; outstanding 583,256,956 shares and578,434,243 shares at June 30, 2008 and December 31, 2007,respectively 29,163 28,944

Additional paid-in capital 4,223,513 4,155,724 Retained earnings 7,208,574 10,644,511 Accumulated other comprehensive loss (1,041,183 ) (173,309 )

Total shareholders' equity 10,420,068 14,655,871

Total liabilities and shareholders' equity $ 172,076,494 $ 208,366,924

The accompanying notes are an integral part of these consolidated financial statements.

1


CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

June 30,

Six Months Ended

June 30,

2008 2007 2008 2007

(Unaudited) (in thousands, except per share data)

Revenues

(Loss) gain on sale of loans and securities $ (126,942 ) $ 1,493,458 $ 162,369 $ 2,727,562

Interest income 2,462,546 3,499,644 5,269,105 6,851,626

Interest expense (1,806,595 ) (2,771,648 ) (3,881,834 ) (5,392,693 )

Net interest income 655,951 727,996 1,387,271 1,458,933

Provision for loan losses (2,330,925 ) (292,924 ) (3,832,277 ) (444,886 )

Net interest (expense) income after provision for loan losses (1,674,974 ) 435,072 (2,445,006 ) 1,014,047

Loan servicing fees and other income frommortgage servicing rights and retainedinterests 1,337,849 1,421,255 2,744,258 2,808,544 www .S

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Realization of expected cash flows from

mortgage servicing rights (667,652 ) (857,125 ) (1,421,278 ) (1,657,007 ) Change in fair value of mortgage servicing

rights 1,896,008 1,177,330 435,295 1,231,513

Recovery (impairment) of retained interests 35,280 (268,117 ) (705,740 ) (697,718 )

Servicing Hedge losses (2,624,321 ) (1,373,089 ) (619,914 ) (1,486,827 )

Net loan servicing fees and other incomefrom mortgage servicing rights andretained interests (22,836 ) 100,254 432,621 198,505

Net insurance premiums earned 484,766 352,384 973,595 686,561 Realized loss on available for sale investment

securities (467,808 ) (4,889 ) (491,880 ) (3,886 )

Other 184,956 172,118 424,337 331,384

Total revenues (1,622,838 ) 2,548,397 (943,964 ) 4,954,173

Expenses

Compensation 996,848 1,109,016 2,050,833 2,184,424 Occupancy and other office 249,169 269,017 491,948 533,230

Insurance claims 366,469 154,769 722,120 212,074

Advertising and promotion 65,638 79,540 138,898 149,557

Other 514,874 271,357 960,300 509,395

Total expenses 2,192,998 1,883,699 4,364,099 3,588,680

(Loss) earnings before income taxes (3,815,836 ) 664,698 (5,308,063 ) 1,365,493

(Benefit) provision for income taxes (1,485,737 ) 179,630 (2,084,911 ) 446,444

NET (LOSS) EARNINGS $ (2,330,099 ) $ 485,068 $ (3,223,152 ) $ 919,049

(Loss) earnings per share

Basic $ (4.07 ) $ 0.83 $ (5.68 ) $ 1.57

Diluted $ (4.07 ) $ 0.81 $ (5.68 ) $ 1.53


2


CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

Common Stock Convertible

Preferred

Stock Shares Amount

Additional

Paid-in

Capital

Retained

Earnings

Accumulated

Other

Comprehensive

Income (Loss) Total

(Unaudited) (in thousands, except share data) w

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Balance at December 31, 2006 $ — 585,182,298 $ 29,273 $ 2,154,438 $ 12,151,691 $ (17,556 ) $ 14,317,846 Remeasurement of income taxes

payable upon adoption of FIN 48 — — — — (12,719 ) — (12,719 ) Balance as adjusted, January 1,

2007 — 585,182,298 29,273 2,154,438 12,138,972 (17,556 ) 14,305,127 Comprehensive income:

Net earnings for the period — — — — 919,049 — 919,049 Other comprehensive income

(loss), net of tax: Net unrealized losses from

available-for-sale securities — — — — — (130,123 ) (130,123 ) Net change in foreign currency

translation adjustment — — — — — 9,237 9,237 Change in unfunded liability

relating to defined benefit plans — — — — — 2,214 2,214

Total comprehensive income 800,377 Issuance of common stock pursuant

to stock-based compensation — 9,887,079 502 226,734 — — 227,236 Excess tax benefit related to stock-

based compensation plans — — — 68,348 — — 68,348 Issuance of common stock, net of

treasury stock — 652,447 33 25,862 — — 25,895 Repurchase and cancellation of

common stock — (21,503,512 ) (1,075 ) (862,481 ) — — (863,556 ) Cash dividends paid—$0.30 per

common share — — — — (177,532 ) — (177,532 ) Balance at June 30, 2007 $ — 574,218,312 $ 28,733 $ 1,612,901 $ 12,880,489 $ (136,228 ) $ 14,385,895

Balance at December 31, 2007 $ 1 578,434,243 $ 28,944 $ 4,155,724 $ 10,644,511 $ (173,309 ) $ 14,655,871 Cumulative effect of adoption of

SFAS 159 — — — — 34,249 (2,197 ) 32,052 Balance as adjusted, January 1,

2008 1 578,434,243 28,944 4,155,724 10,678,760 (175,506 ) 14,687,923 Comprehensive income:

Net loss for the period — — — — (3,223,152 ) — (3,223,152 ) Other comprehensive (loss),

income net of tax: Net unrealized losses fromavailable-for-sale securities — — — — — (864,910 ) (864,910 )

Net change in foreign currencytranslation adjustment — — — — — (2,410 ) (2,410 )

Change in unfunded liabilityrelating to defined benefit

plans — — — — — 1,643 1,643

Total comprehensive loss (4,088,829 ) Issuance of common stock pursuant

to stock-based compensation — 4,253,286 191 68,729 — — 68,920 Excess tax benefit related to stock-

based compensation plans — — — (4,361 ) — — (4,361 ) Issuance of common stock, net of

treasury stock — 569,427 28 3,421 — — 3,449

Cash dividends paid—$0.30 per common share — — — — (174,534 ) — (174,534 )

Cash dividends paid—$3,625 per preferred share — — — — (72,500 ) — (72,500 )

Balance at June 30, 2008 $ 1 583,256,956 $ 29,163 $ 4,223,513 $ 7,208,574 $ (1,041,183 ) $ 10,420,068


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Proceeds from sale and repayment of investments in other financial instruments 8,891,282 2,930,650

Sale (purchases) of mortgage servicing rights, net 1,300,151 (184,511 )

Purchases of premises and equipment, net (70,218 ) (135,173 )

Net cash provided (used) by investing activities 5,280,953 (10,010,499 ) Cash flows from financing activities:

Net increase in deposit liabilities 2,597,802 4,703,046

Net (decrease) increase in securities sold under agreements to repurchase (14,673,582 ) 4,073,347

Net (decrease) increase in short-term borrowings (2,841,746 ) 3,510,080

Issuance of long-term debt 500,000 24,026,503

Repayment of long-term debt (8,060,931 ) (21,364,797 )

(Expense) benefit related to stock-based compensation (4,361 ) 68,535

Repurchase and cancellation of common stock — (863,556 )

Issuance of common stock 15,984 204,778

Payment of dividends (247,034 ) (177,532 )

Net cash (used) provided by financing activities (22,713,868 ) 14,180,404 Net decrease in cash (2,160,082 ) (252,968 ) Cash at beginning of period 8,810,399 1,407,000

Cash at end of period $ 6,650,317 $ 1,154,032


4


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1—Basis of Presentation

Countrywide Financial Corporation ("Countrywide" or "CFC") is a holding company which, throughits subsidiaries (collectively, the "Company"), is engaged in real estate finance-related businesses,including mortgage banking, banking and mortgage warehouse lending, dealing in securities and insuranceunderwriting. As discussed in Note 2— Subsequent Events—Merger and Subsequent Transactions with

Bank of America Corporation, effective on July 1, 2008, the Company became a wholly-owned subsidiary

of Bank of America Corporation ("Bank of America").

These financial statements have been prepared assuming that Countrywide will continue to operate asa stand-alone entity and do not take into account any purchase accounting adjustments that may berecorded pursuant to Bank of America's acquisition of the Company, which was effective on July 1, 2008.These financial statements also do not reflect accounting changes that may be made to conformCountrywide's accounting policies to those of Bank of America.

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The accompanying consolidated financial statements have been prepared in compliance with U.S.generally accepted accounting principles for interim financial information and with the Securities andExchange Commission's instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, theydo not include all of the information and notes required by U.S. generally accepted accounting principlesfor complete financial statements.

Preparation of financial statements in compliance with U.S. generally accepted accounting principlesrequires management to make estimates and assumptions that materially affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements, andrevenues and expenses during the reporting period. Actual results could differ from those estimates.

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 periods endedJune 30, 2008 are not necessarily indicative of the results that may be expected for the year endingDecember 31, 2008. For further information, including a description of the Company's significantaccounting policies, refer to the consolidated financial statements and notes thereto included in theCompany's Annual Report on Form 10-K for the year ended December 31, 2007 (the "2007 AnnualReport").

Certain amounts included in the prior period consolidated financial statements have been reclassifiedto conform to the current year presentation.

Note 2—Subsequent Events—Merger and Subsequent Transactions with Bank of America

Corporation

On January 11, 2008, Countrywide and Bank of America entered into an Agreement and Plan of Merger, pursuant to which Countrywide would merge (the "Merger") with and into Red Oak Merger Corporation, a wholly-owned merger subsidiary of Bank of America ("Merger Sub"), with Merger Subcontinuing as the surviving company. The details of this agreement are contained in a Current Report onForm 8-K filed with the Securities and Exchange Commission on January 17, 2008, and the AmendedRegistration Statement on Form S-4 of Bank of America filed on May 28, 2008.

The Merger was concluded on July 1, 2008. On July 1, 2008, Merger Sub was renamed CountrywideFinancial Corporation. As the result of the Merger, Countrywide common stock was converted into 0.1822of a share of Bank of America common stock plus an amount of cash in lieu of

5


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

any fractional share and all shares of the Company's 7.25% Series B Non-Voting Convertible PreferredStock were cancelled.

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The Company notified the New York Stock Exchange of the conversion of its shares and related preferred stock purchase rights, requested that its common stock and preferred stock purchase rights bedelisted and cease to trade at the close of business on June 30, 2008, and that the NYSE submit to the SECForm 25s to report that the Company's shares of common stock and preferred stock purchase rights are nolonger listed on the NYSE. The NYSE filed the Form 25s with the SEC on July 1, 2008.

Following completion of the Merger, the Company sold assets to other subsidiaries of Bank of America and used proceeds from these sales to repay its unsecured revolving lines of credit and bank loans.The Company expects to record no material gain or loss on these transactions after giving effect to

purchase price adjustments.

• The Company sold two entities that own all of the partnership interests in Countrywide HomeLoans Servicing, LP ("Servicing LP") to NB Holdings Corporation ("NBHC") for approximately$19.7 billion, subject to certain adjustments. At June 30, 2008, Servicing LP's assets includedapproximately $15.3 billion of Mortgage Servicing Rights ("MSRs") and $4.4 billion of reimbursable servicing advances

•

The Company sold a pool of residential mortgage loans held by Countrywide Home Loans("CHL") to NBHC for approximately $9.5 billion, subject to certain adjustments. The pool of residential mortgage loans included first and second lien mortgages, home equity line of creditloans, and construction loans

• The Company novated to Bank of America, N.A. a portfolio of derivative instruments held byCHL in exchange for $1.5 billion

• The Company sold a pool of commercial mortgage loans held by Countrywide Commercial RealEstate to NBHC for approximately $238 million, subject to certain adjustments

• The Company sold a pool of securities to Blue Ridge Investments, LLC for approximately$147 million. The pool of securities included asset-backed securities and mortgage-backedsecurities (MBS) held by Countrywide Securities Corporation ("CSC")

• The Company terminated and repaid its unsecured revolving lines of credit and bank loans,including interest and fees, with approximately $11.5 billion.

Details of these subsequent events and other transactions, are contained in the Company's CurrentReport on Form 8-K filed with the Securities and Exchange Commission on July 8, 2008.

Note 3—Adoption of New Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements, ("SFAS 157"). SFAS 157 provides aframework for measuring fair value when such measurements are used for accounting purposes. Theframework focuses on an exit price in the principal (or, alternatively, the most advantageous) marketaccessible in an orderly transaction between willing market participants. SFAS 157 establishes a three-tiered fair value hierarchy based on the level of observable inputs used in the measurement of fair value(e.g., Level 1 representing quoted prices for identical assets or liabilities in an active market and Level 3representing estimated values based on significant unobservable inputs). Under SFAS 157,www .S

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(Unaudited)

related disclosures are segregated for assets and liabilities measured at fair value based on the level usedwithin the hierarchy to determine their fair values. The Company adopted SFAS 157 on its effective date of January 1, 2008 and there was no financial impact. However, as permitted under FASB Staff Position

No. 157-2, "Effective Date of FASB Statement No. 157," the Company elected to defer the application of SFAS 157 to certain nonfinancial assets and liabilities, which are not measured at fair value on a recurring

basis, until January 1, 2009.

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair

Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement

No. 115, ("SFAS 159"). SFAS 159 permits fair value accounting to be irrevocably elected for mostfinancial assets and liabilities on an individual contract basis at the time of acquisition or remeasurementevent date. Upon adoption of SFAS 159, fair value accounting may also be elected for existing financialassets and liabilities. For those instruments for which fair value accounting is elected, changes in fair valuewill be recognized in earnings and fees and costs associated with origination or acquisition will berecognized as incurred rather than deferred. The Company adopted SFAS 159 on its effective date of January 1, 2008 and the financial impact upon adoption was an increase in beginning retained earnings of $34.2 million. See Note 5— Fair Value for further discussion.

In April 2007, the FASB issued FASB Staff Position No. FIN 39-1, Amendment of FASB

Interpretation No. 39, ("FSP FIN 39-1"). FSP FIN 39-1 amends certain paragraphs of FASB Interpretation Number 39, Offsetting of Amounts Related to Certain Contracts,—an interpretation of APB Opinion No. 10

and FASB Statement No. 105 ("FIN 39") to permit a reporting entity to offset fair value amounts recognizedfor the right to reclaim cash collateral or the obligation to return cash collateral against fair value amountsrecognized for derivative instruments executed with the same counterparty under the same master nettingarrangement. Upon adoption on the effective date of January 1, 2008, the Company changed its accounting

policy to offset the right to reclaim or obligation to return cash collateral against fair value amountsrecognized for derivative instruments under master netting arrangements. Adoption of FSP FIN 39-1resulted in a reduction in total assets of $3.4 billion at December 31, 2007.

In November 2007, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 109 ("SAB 109"). SAB 109 supersedes Staff Accounting Bulletin No. 105 ("SAB 105"), Application of

Accounting Principles to Loan Commitments. It clarifies that the expected net future cash flows related to

the associated servicing of a loan should be included in the measurement of all written loan commitmentsthat are accounted for at fair value through earnings. However, it retains the guidance in SAB 105 thatinternally-developed intangible assets should not be recorded as part of the fair value of a derivative loancommitment. The guidance is effective on a prospective basis to derivative loan commitments issued or modified in fiscal quarters beginning after December 15, 2007. This guidance generally has resulted inhigher fair values being recorded upon initial recognition of derivative interest rate lock commitments. Theinitial and subsequent changes in value of interest rate lock commitments are a component of gain on saleof loans and securities. The effect of the adoption of SAB 109 was to increase gain on sale of loans andsecurities by $216.0 million. This amount represents the revenue recognized at the time the loanwww .S

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commitment was issued that is included in the value of the interest rate lock commitments or MortgageLoan Inventory at June 30, 2008.

7



(Unaudited)

Note 4—(Loss) Earnings Per Share

Basic (loss) earnings per share is determined using net (loss) earnings (adjusted for dividends declaredon preferred stock) divided by the weighted-average common shares outstanding during the period. Diluted

earnings per share is computed by dividing net (loss) earnings attributable to common shareholders by theweighted-average shares outstanding, assuming all potentially dilutive common shares were issued. TheCompany has potentially dilutive shares in the form of employee stock-based compensation instruments,convertible debentures and convertible preferred stock. As detailed in Note 18— Shareholders' Equity—

Series B Convertible Preferred Stock , included in the consolidated financial statements of the 2007 AnnualReport, the Company issued $2.0 billion of convertible preferred stock on August 22, 2007.

The following table summarizes the basic and diluted (loss) earnings per share calculations for the periods indicated:

Three Months Ended

June 30,

Six Months Ended

June 30,

2008 2007 2008 2007(in thousands, except per share data)

Net (loss) earnings:

Net (loss) earnings $ (2,330,099 ) $ 485,068 $ (3,223,152 ) $ 919,049

Dividends on convertible preferred stock (36,250 ) — (72,500 ) —

Net (loss) earnings attributable to commonshareholders $ (2,366,349 ) $ 485,068 $ (3,295,652 ) $ 919,049

Weighted-average shares outstanding: Basic weighted-average number of common

shares outstanding 581,958 583,669 580,649 585,901

Effect of dilutive securities: Dilutive stock-based compensation instruments — 11,871 — 12,963

Diluted weighted-average number of commonshares outstanding 581,958 595,540 580,649 598,864

Net (loss) earnings per common share:

Basic (loss) earnings per share $ (4.07 ) $ 0.83 $ (5.68 ) $ 1.57

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Diluted (loss) earnings per share $ (4.07 ) $ 0.81 $ (5.68 ) $ 1.53

Due to the loss attributable to common shareholders for the three and six months ended June 30, 2008,no potentially dilutive shares are included in loss per share calculation as including such shares in thecalculation would be anti-dilutive. During the three and six months ended June 30, 2007, stock appreciationrights and options to purchase 172,011 shares and 26,390 shares, respectively, were outstanding but notincluded in the computation of diluted earnings per share because they were anti-dilutive.

8



(Unaudited)

Note 5—Fair Value

The Company's financial statements include assets and liabilities that are measured based on their estimated fair values. The application of fair value estimates may be on a recurring or nonrecurring basisdepending on the accounting principles applicable to the specific asset or liability or whether managementhas elected to carry the item at its estimated fair value as discussed in the following paragraphs.

As discussed in Note 3— Adoption of New Accounting Pronouncements, effective January 1, 2008, theCompany adopted two pronouncements affecting the Company's fair value measurements and accounting:SFAS 157 and SFAS 159.

Transition Adjustment

Management identified existing mortgage loans held for sale and commitments to purchase mortgageloans within the Capital Markets Segment to be accounted for at estimated fair value for consistency withits peers who generally use fair value accounting as well as to reduce the burden of compliance with therequirements for hedge accounting. Such loans represented 2% of mortgage loans held for sale at the timeof adoption of SFAS 159.

Management elected to account for certain outstanding asset-backed secured financings and themortgage loans securing such financings at their estimated fair values to eliminate potential timingdifferences between recognition of changes in the estimated fair value of the loans securing these

borrowings (which had been recorded at the lower of amortized cost or estimated fair value) and theestimated fair value of the borrowings (which had been recorded at amortized cost). This election was made

for mortgage-backed secured financings collateralized by mortgage loans where the secondary market for the securities backed by the loans was disrupted. At the time of adoption, such borrowings represented 25%of mortgage-backed secured financings and the mortgage loans securing such borrowings represented 23%of mortgage loans held for sale.

Management elected fair value accounting for those portions of its investments in municipal bondsincluded in its available-for-sale securities investment portfolio managed by nonaffiliated investmentmanagers to improve the operational efficiency of using investment managers. Such investmentsrepresented 1% of the securities investment portfolio at the time of adoption.www .S

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(Unaudited)

As a result of these elections, the Company recorded a $34.2 million cumulative effect adjustment toopening retained earnings as summarized below:

Transition Adjustments to

Carrying Value

Before

Adoption

Retained

Earnings

Gain/(Loss)

Other

Comprehensive

Income

Carrying

Value

After Adoption

(in thousands) Assets:

Mortgage loans held for sale(1) $ 2,897,216 $ 237 $ 2,897,453

Investment in other financial instruments:

Investment securities 244,902 2,197 $ (2,197 ) 244,902

Interest rate lock commitments(2) — 432 432

Total assets $ 3,142,118 $ 3,142,787

Liabilities:

Notes payable:

Asset-backed secured financings $ 2,353,250 51,060 $ 2,302,190

Accounts payable and accrued liabilities: Interest rate lock commitments(2) 51 51 —

Total liabilities $ 2,353,301 $ 2,302,190

Pre-tax cumulative-effect of adoption of the fair value option 53,977

Effect on income taxes payable (19,728 )

Cumulative effect of adoption of the fair valueoption $ 34,249

(1) A lower of cost or market valuation allowance of $96.5 million was recorded as part of the basis

of the loans accounted for at estimated fair value.

(2) Interest rate lock commitments include commitments to originate or purchase mortgage loans thatqualify as derivative financial instruments under SFAS 133 and commitments to purchase loansaccounted for at estimated fair value under the fair value option.

Prospective Fair Value Accounting Elections

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Management identified certain new mortgage loans originated or purchased for sale in the Company'smortgage banking operations to be accounted for at estimated fair value so the changes in the fair value of such loans will be reflected in earnings as they occur to match the accounting to related hedginginstruments, as well as to reduce the burden of compliance with the requirements for hedge accounting. Themortgage loans identified were those that have an existing active market (primarily agency-eligiblemortgage loans). Such loans represented 85% and 86% of mortgage loans

10



(Unaudited)

originated or purchased and held for sale during the three and six months ended June 30, 2008,respectively.

Fair Value Measurements

Gains (losses) from changes in estimated fair values included in earnings for financial statement itemscarried at estimated fair value pursuant to the fair value option are summarized below:

Three Months

Ended

Six Months

Ended

June 30, 2008

(in thousands) Assets:

Mortgage loans at fair value (1) $ (253,717 ) $ (623,275 )

Investments in other financial instruments:

Investment securities (5,741 ) (2,493 )

Interest rate lock commitments 1,692 208

Liabilities: Notes Payable:

Asset-backed secured financings 37,304 388,464

(1) $90.5 million and $187.0 million of the loss recognized on mortgage loans was related to changesin the credit risk of the loans for the three and six months ended June 30, 2008, respectively.

Following is the fair value and related principal amount due upon maturity of assets and liabilitiesaccounted for under the fair value option as of June 30, 2008:

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Trading securities sold, not yet

purchased 3 1,960,835 — (1,929,423 ) 31,415

Notes Payable: Asset-backed secured

financings — — 1,212,252 — 1,212,252 Accounts payable and accrued

liabilities: Interest rate lock

commitments(2) — — 43,868 — 43,868

Other derivative instruments — 1,459,423 — (1,306,119 ) 153,304

(1) Amounts represent the netting of the impact of qualifying master netting agreements that allow theCompany to settle positive and negative positions in accordance with FIN 39, and cash collateralheld or placed with the same counterparties.

(2) Interest rate lock commitments include commitments to originate or purchase mortgage loans that

qualify as derivative financial instruments under SFAS 133 and commitments to purchase loansaccounted for at estimated fair value under the fair value option (SFAS 159).

12



(Unaudited)

Following is a summary of changes in balance sheet line items measured using Level 3 inputs:

Three Months Ended June 30, 2008

Investments in Other

Financial Instruments

Mortgage

Loans

Trading

Securities

Investment

Securities

Retained

Interests

Interest

Rate Lock

Commitments,

Net

Mortgage

Servicing

Rights Total

(in thousands) Assets: Balance,

March 31,2008 $ 2,411,044 $ 1,346,992 $ 14,658,098 $ 1,853,177 $ 216,105 $ 17,154,574 $ 37,639,990

Total (losses)gains:

Included inearnings (116,542 ) (85,440 ) (457,703 ) (138,714 ) 434,179 1,228,356 864,136

Included inother comprehensi

— — (441,482 ) (32,288 ) — — (473,770 ) w

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ve income Purchases,

issuances andsettlements (814,467 ) (137,201 ) (334,881 ) (171,596 ) — 19,460 (1,438,685 )

Transfers tomortgage

loans: Level 2 — — — — (598,162 ) — (598,162 )

Level 3 (54,827 ) — — — 54,827 — —

Balance,June 30, 2008 $ 1,425,208 $ 1,124,351 $ 13,424,032 $ 1,510,579 $ 106,949 $ 18,402,390 $ 35,993,509

Changes inunrealized(losses) gainsrelating toassets stillheld atJune 30, 2008 $ (127,171 ) $ 41,432 $ (457,791 ) $ (152,158 ) $ 109,156 $ 1,896,007 $ 1,309,475

Notes Payable:

Asset-backed

Secured

Financings

(in thousands) Liabilities: Balance, March 31, 2008 $ 1,692,472

Total gains:

Included in earnings (37,304 ) Purchases, issuances and settlements (442,916 )

Balance, June 30, 2008 $ 1,212,252

Change in unrealized gains relating to liabilities still held at June 30, 2008 $ 72,852

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(Unaudited)

Six Months Ended June 30, 2008

Investments in Other

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Mortgage

Loans

Trading

Securities

Investment

Securities

Retained

Interests

Interest

Rate Lock

Commitments,

Net

Mortgage

Servicing

Rights Total

(in thousands) Assets: Balance,

December 31,2007 $ 3,480,673 $ 1,924,558 $ 16,330,950 $ 3,358,756 $ 107,718 $ 18,958,180 $ 44,160,835 Impact of

SFAS 157andSFAS 159adoption 237 — — — 483 — 720

Balance,January 1,2008 3,480,910 1,924,558 16,330,950 3,358,756 108,201 18,958,180 44,161,555

Total (losses)gains:

Included in

earnings (574,725 ) (290,385 ) (491,735 ) (675,047 ) 1,356,915 (985,983 ) (1,660,960 ) Included in

other comprehensive income — — (1,369,547 ) (32,633 ) — — (1,402,180 )

Purchases,issuances andsettlements (1,342,016 ) (509,822 ) (1,045,636 ) (1,140,497 ) — 430,193 (3,607,778 )

Transfers tomortgageloans:

Level 2 — — — — (1,497,128 ) — (1,497,128 )

Level 3 (138,961 ) — — — 138,961 — — Balance, June 30,

2008 $ 1,425,208 $ 1,124,351 $ 13,424,032 $ 1,510,579 $ 106,949 $ 18,402,390 $ 35,993,509

Changes inunrealized(losses) gainsrelating toassets still heldat June 30,2008 $ (509,978 ) $ (2,992 ) $ (491,789 ) $ (707,853 ) $ 1,252 $ 435,295 $ (1,276,065 )

Notes Payable:

Asset-backed

Secured

Financings

(in thousands) Liabilities: Balance, December 31, 2007 $ 2,353,250 w

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Impact of SFAS 157 and SFAS 159 adoption (51,060 )

Balance, January 1, 2008 2,302,190 Total gains:

Included in earnings (388,464 )

Purchases, issuances and settlements (701,474 )

Balance, June 30, 2008 $ 1,212,252

Change in unrealized gains relating to liabilities still held at June 30, 2008 $ 423,968

Gains and losses from changes in the estimated fair value of mortgage loans held for sale, interest ratelock commitments ("IRLCs"), trading securities and asset-backed secured financings are included in gainon sale of loans and securities. Gains and losses from changes in the estimated fair value of investmentsecurities are included in other income and in realized loss on available for sale securities. Gains and lossesfrom changes in the estimated fair value of retained interests are included in impairment of retainedinterests. Gains and losses from changes in the estimated fair value of mortgage

14



(Unaudited)

servicing rights are included in realization of expected cash flows from mortgage servicing rights and

change in fair value of mortgage servicing rights.

Valuation Techniques

For a complete discussion of valuation techniques used to value financial instruments, refer to Note 19— Fair Value of Financial Instruments to the consolidated financial statements included in theCompany's 2007 Annual Report. The following describes the methods used by the Company in estimatingthe fair values of Level 3 financial statement items:

Mortgage Loans

The Company estimates the fair value of Level 3 loans based on relevant factors, including dealer

price quotations, whole loan bid sheets, prices available for similar securities and valuation modelsintended to approximate the amounts that would be received from a third party. These techniques andrelated assumptions are used to approximate the whole loan price that would be received from anunaffiliated buyer.

The Company regularly compares the values developed from our valuation models to executed tradesto assure that the valuations are reflective of actual sale prices. However, due to the illiquidity of themortgage marketplace prevalent at June 30, 2008, which resulted in a lack of executed trades that could beused to assure that the valuations are reflective of fair value, it was necessary to look for alternative sourcesof value, including the whole loan purchase market for similar loans, and to apply more judgment to thewww .S

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valuations of non-conforming prime, prime home equity and subprime (formerly known as nonprime)loans, which represented approximately 18% of mortgage loans originated or purchased for resaleexcluding loans secured by commercial real estate at June 30, 2008.

Trading Securities

Level 3 trading securities primarily represent collateralized mortgage obligations for which fair valueis estimated using valuation models and observable and unobservable assumptions intended to approximatethe amounts that would be received from an unaffiliated buyer.

Investments in Other Financial Instruments:

Investment Securities

Mortgage-Backed Securities

Fair value for Level 3 non-agency mortgage-backed securities, which consist primarily of collateralized mortgage obligations, is estimated using valuation models and observable andunobservable assumptions intended to approximate the amounts that would be received from anunaffiliated buyer.

Retained Interests

Fair value of retained interests, with the exception of interest-only securities and mortgage- backed securities, is estimated through the use of proprietary, "static" (single rate path) discountedcash flow models. The Company has incorporated mortgage prepayment and credit loss

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assumptions in its valuation models that it believes other major market participants would consider in deriving the fair value of such retained interests.

Principal-Only Securities

Fair value is estimated through the use of a proprietary, multiple rate path discounted cash

flow model. The Company has incorporated mortgage prepayment assumptions in its valuationthat it believes other major market participants would consider in deriving the fair value of

principal-only securities.

Interest-Only Securities

Fair value is estimated through the use of a proprietary, multiple rate path discounted cashflow model. The Company has incorporated mortgage prepayment assumptions in its valuationw

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model that it believes other major market participants would consider in deriving the fair value of interest-only securities.

Interest Rate Lock Commitments

Effective January 1, 2008, the Company adopted SAB 109, which is effective on a

prospective basis for IRLCs issued or modified after December 31, 2007. For IRLCs issued or modified after December 31, 2007, the Company estimates the fair value of an IRLC based on theestimated fair value of the underlying mortgage loan less the commitment price adjusted for the

probability that the mortgage loan will fund within the terms of the IRLC. The Company generallyestimates the fair value of the underlying loan based on quoted market prices for securities backed

by similar types of loans together with estimated servicing value adjusted for the estimated costsand profit margin associated with securitization to approximate the whole loan price that would bereceived from an unaffiliated buyer. The estimated probability of mortgage loan funding is basedon the Company's historical experience and is adjusted to reflect the risk of variability in such

probability using an option pricing model. If quoted market prices for relevant securities are notavailable, fair value is estimated based on other relevant factors, including dealer price quotations,

prices available for similar securities, and valuation models intended to approximate the amountsthat would be received from a third party.

For IRLCs issued before January 1, 2008, the Company estimates the fair value of an IRLC based on the change in estimated fair value of the underlying mortgage loan and the probabilitythat the mortgage loan will fund within the terms of the IRLC. The change in fair value of theunderlying mortgage loan is measured from the date the IRLC is issued. At the time of issuancethe estimated fair value of an IRLC is zero. Subsequent to issuance, the value of an IRLC can beeither positive or negative, depending on the change in value of the underlying mortgage loan. TheCompany generally estimates the fair value of the underlying loan based on quoted market pricesfor securities backed by similar types of loans. If quoted market prices are not available, fair valueis estimated based on other relevant factors, including dealer price quotations, prices available for similar instruments, and valuation models intended to approximate the amounts that would bereceived from a third party.

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Mortgage Servicing Rights

The Company estimates the fair value of its MSRs using a process that combines the use of adiscounted cash flow model and analysis of current market data to arrive at an estimate of fair value at each

balance sheet date. The cash flow assumptions (which consider only contractual cash flows) and prepayment assumptions used in Countrywide's discounted cash flow model are based on market factorsand encompass the historical performance of our MSRs. The key assumptions used in the valuation of MSRs include mortgage prepayment speeds and discount rates (projected London Inter Bank Offering Rate("LIBOR") plus option-adjusted spread). These variables can, and generally do, change from quarter toquarter as market conditions and projected interest rates change. The current market data utilized in theMSR valuation process and in the assessment of the reasonableness of the MSR valuation are obtainedwww .S

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from peer group MSR valuation surveys, MSR market trades, MSR broker valuations and prices of interest-only securities.

The cash flow model and underlying prepayment and interest rate models used to value the MSRs aresubjected to validation in accordance with the Company's model validation policies. This process includesreview of the theoretical soundness of the models and the related development process, back testing of

actual results to model predictions, benchmarking to commercially available models and ongoing performance monitoring.

Asset-Backed Secured Financings

The Company estimates the fair value of Level 3 asset-backed secured financings based on relevantfactors expected to reflect the amounts that would be received by an unaffiliated seller of the financingsfrom an unaffiliated buyer, including dealer price quotations, prices available for similar instruments, andvaluation models.

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Following is a summary of items that are measured at estimated fair value on a nonrecurring basis:

Gain (Loss)

Level 1 Level 2 Level 3 Total

ThreeMonths

Ended

June 30,

2008

Six Months

Ended

June 30,

2008

(in thousands) At June 30, 2008:

Mortgage loans held for sale $ — $ 2,502,233 $ 675,951 $ 3,178,184 $ (16,751 ) $ (136,379 ) Three months ended June 30,

2008: Mortgage loans held for

investment transferred frommortgage loans held for sale $ — $ 213,438 $ 338,429 $ 551,867 $ (53,891 ) $ —

Six months ended June 30, 2008:

Mortgage loans held for saletransferred from mortgageloans held for investment(1) $ — $ 363,354 $ 2,042,953 $ 2,406,307 $ — $ (19,477 )

Mortgage loans held for investment transferred frommortgage loans held for sale $ — $ 1,272,241 $ 353,301 $ 1,625,542 $ — $ (58,859 )

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The mortgage loans transferred from mortgage loans held for investment to mortgage loans heldfor sale during the quarter ended March 31, 2008, consist of loans that had been carried as part of the mortgage loan investment portfolio for an average of 4.0 years. No such transfers were madeduring the quarter ended June 30, 2008.

Note 6—Derivative Financial Instruments

Derivative Financial Instruments

A significant market risk facing the Company is interest rate risk, which includes the risk that changesin market interest rates will result in unfavorable changes in the value of our assets or liabilities ("pricerisk") and the risk that net interest income from our mortgage loan and investment portfolios will change inresponse to changes in interest rates. This risk includes both changes in "risk-free" rates (usually the U.S.Treasury rate for an asset of the same duration) and changes in the premiums to risk-free rates of returnrequired by investors, which may be the result of liquidity and/or investor perceptions of risk ("MarketSpread"). The overall objective of the Company's interest rate risk management activities is to reduce thevariability of earnings caused by changes in interest rates.

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The Company manages interest rate risk with derivative financial instruments and by the structure of its activities as follows:

• The Company uses various financial instruments, including derivatives, to manage the interest raterisk related specifically to the values of its IRLCs, mortgage loans held by the Company pendingsale ("Mortgage Loan Inventory"), MSRs, retained interests, trading securities, and a portion of itsdebt.

• Structurally, the Company manages interest rate risk in its mortgage banking activities through thenatural counterbalance of its loan production and servicing businesses while using portfolios of financial instruments, including derivatives, to separately moderate interest rate driven changes invalue of these businesses' assets. However, the market disruption that began in the latter part of 2007 has impacted the availability and the cost of derivative financial instruments used to manage

Market Spread-driven changes in the value of our mortgage banking assets. Although separate portfolios of financial instruments were maintained to manage the interest rate risk inherent in themortgage banking assets, the Company managed its aggregate changes in value of those assetsarising from Market Spread risk during the six months ended June 30, 2008 by relying more onthe opposing Market Spread risk inherent in the loan production and loan servicing assets.Specifically, as Market Spreads widen the value of our IRLCs and Mortgage Loan Inventorygenerally decrease while the value of MSRs increase. Accordingly, Market Spread related changesin the value of sector assets and the related hedge instruments (collectively the "Position") were

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allocated between loan production activities and loan servicing activities in the six months endedJune 30, 2008.

• The Company manages interest rate risk relating to its portfolios of investment securities of loansheld for investment largely by funding interest-earning assets with liabilities of similar duration or a combination of derivative instruments and certain liabilities that create repricing characteristicsthat closely reflect the repricing behaviors of those assets.

Risk Management Activities Related to Mortgage Loan Inventory and Interest Rate Lock Commitments

The Company actively manages the risk profiles of its IRLCs and Mortgage Loan Inventory on a daily basis. To manage the price risk associated with the IRLCs, the Company generally uses a combination of net forward sales of MBS and put and call options on MBS, Treasury futures and Eurodollar futures. TheCompany generally enters into forward sales of MBS in an amount equal to the portion of the IRLCsexpected to close, assuming no change in mortgage interest rates. The Company acquires put and calloptions to protect against the variability of loan closings caused by changes in mortgage rates. TheCompany may enter into credit default swaps as part of its management of Market Spread risk.

The Company manages the price risk related to the Mortgage Loan Inventory primarily by enteringinto forward sales of MBS and Eurodollar futures. The value of these forward MBS sales and Eurodollar futures moves in opposite direction to the value of the Mortgage Loan Inventory. The Company may enter into credit default swaps or similar instruments as part of its management of Market Spread-driven changesassociated with its Mortgage Loan Inventory.

The Company manages the price risk related to its commercial mortgage loans using interest rateswaps, total rate of return and credit default swaps.

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During the six months ended June 30, 2008, the interest rate risk management activities associatedwith 14% of the fixed-rate mortgage loan inventory and 11% of the adjustable-rate mortgage loan inventorywere accounted for as fair value hedges. These percentages decreased from prior periods because theCompany began accounting for a substantial portion of its inventory at estimated fair value. For the sixmonths ended June 30, 2008 and 2007, the Company recognized pre-tax losses of $18.7 million and$6.4 million, respectively, representing the ineffective portion of the hedges of its Mortgage Loan

Inventory that qualified as fair value hedges.

Risk Management Activities Related to Mortgage Servicing Rights and Retained Interests

To moderate the impact on earnings caused by a rate-driven decline in fair value of its MSRs andretained interests from securitization, the Company maintains a portfolio of financial instruments, includingderivatives and securities, which generally increase in value when interest rates decline. During early 2007,the Company used credit-related derivative financial instruments to moderate the negative impact on

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earnings caused by a Market Spread-driven decline in fair value. This portfolio of financial instruments iscollectively referred to as the "Servicing Hedge."

The following table summarizes the activity for derivative contracts included in the Servicing Hedgeexpressed by notional amounts:

Balance,

December 31,

2007 Additions

Dispositions/

Expirations

Balance,

June 30,

2008

(in millions) Interest rate swaptions $ 102,410 $ 93,200 $ (98,690 ) $ 96,920 Interest rate swaps 47,675 100,251 (71,090 ) 76,836 Treasury futures 45,000 21,678 (21,678 ) 45,000 Call options on interest rates futures 15,500 96,550 (112,050 ) — Mortgage forward rate agreements 13,000 51,100 (15,000 ) 49,100 MBS forward contracts 9,500 90,830 (94,550 ) 5,780

Risk Management Activities Related to Issuance of Long-Term Debt

The Company has entered into interest rate swap contracts in which the rate received is fixed and therate paid is adjustable and is indexed to LIBOR. These interest rate swaps enable the Company to convert a

portion of its fixed-rate, long-term debt to U.S. dollar LIBOR-based floating-rate debt (notional amount of $2.3 billion as of June 30, 2008) and a portion of its foreign currency-denominated fixed and floating-rate,long-term debt to U.S. dollar LIBOR-based floating-rate debt (notional amount of $4.0 billion as of June 30, 2008). These transactions are generally designated as fair value hedges. For the six months endedJune 30, 2008 and 2007, the Company recognized pre-tax gains of $58.2 million and $9.8 million,respectively, representing the ineffective portion of its fair value hedges of debt.

Risk Management Activities Related to Deposit Liabilities

The Company has entered into interest rate swap contracts that have the effect of converting a portionof its fixed-rate deposit liabilities to LIBOR-based variable-rate deposit liabilities. These transactions aredesignated as fair value hedges. For the six months ended June 30, 2008 and 2007, the Companyrecognized a pre-tax loss of $10.0 million and pre-tax gains of $0.3 million, respectively, representing thehedge ineffectiveness related to these contracts.

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Risk Management Activities Related to the Broker-Dealer Securities Trading Portfolio

The Company is exposed to price changes in its trading portfolio of fixed-income securities, primarilyMBS, held in connection with its broker-dealer activities. To manage the price risk that results from interestrate changes during the period it holds the securities, the Company utilizes derivative instruments includingwww .S

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forward sales/purchases of To-Be-Announced ("TBA") MBS, interest rate futures contracts, interest rateswaps, total rate of return swaps, put/call options on interest rate futures contracts, interest rate caps,receiver swaptions, credit default swaps and forward rate agreements.

Note 7—Mortgage Loans Held for Sale

Mortgage loans held for sale include the following:

June 30,

2008

December 31,

2007

(in thousands) Mortgage loans carried at estimated fair value:

Prime $ 7,225,291 $ —

Subprime 1,328,074 —

Commercial real estate 84,813 —

8,638,178 —

Mortgage loans carried at lower of amortized cost or estimated fair value:

Prime 2,880,816 7,815,880

Subprime 2,432 3,038,980

Prime home equity 25,964 82,131

Commercial real estate 270,938 1,055,343

Deferred premiums, discounts, fees and costs, net 44,104 (167,945 )

Lower of cost or market valuation allowance (46,070 ) (143,115 )

3,178,184 11,681,274

$ 11,816,362 $ 11,681,274

The Company generally estimates the fair value of loans held for sale based on quoted market pricesfor securities backed by similar types of loans. If quoted market prices are not available, fair value isestimated based on other relevant factors, including dealer price quotations, prices available for similar instruments, and valuation models intended to approximate the amounts that would be received from a third

party. We regularly compare the values developed from our valuation models to executed trades to assurethat the valuations are reflective of actual sale prices. However, due to the illiquidity of the mortgagemarketplace at June 30, 2008, which resulted in a lack of executed trades that could be used to assure thatthe valuations are reflective of fair value, it was necessary to look for alternative sources of value, includingthe whole loan purchase market for similar loans, and to apply more judgment to the valuations of non-conforming prime, prime home equity and subprime loans, which represented approximately 18% of mortgage loans held for sale excluding loans secured by commercial real estate at June 30, 2008.

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At June 30, 2008, the Company had pledged mortgage loans held for sale with unpaid principal balances totaling $1.3 billion and $0.3 billion to secure collateral for asset-backed secured financings andsecure Federal Home Loan Bank ("FHLB") advances, respectively.

At December 31, 2007, the Company had pledged mortgage loans held for sale with unpaid principal balances totaling $0.3 billion, $0.01 billion, $4.4 billion and $0.8 billion to secure a secured revolving lineof credit, securities sold under agreements to repurchase, collateral for asset-backed secured financings andto secure FHLB advances, respectively.

Note 8—Trading Securities and Trading Securities Sold, Not Yet Purchased

Trading securities, which consist of trading securities owned and trading securities pledged ascollateral, include the following:

June 30,

2008

December 31,

2007

(in thousands) U.S. Treasury securities $ — $ 3,974,806 Agency mortgage pass-through securities 2 13,767,268 Obligations of U.S. Government-sponsored enterprises — 781,470 Collateralized mortgage obligations 255,859 1,988,054 Asset-backed securities 55,072 121,582 Interest-only securities 808,191 404,364 Residual securities 5,310 857 Mark-to-market on TBA securities 37,226 67,213 Derivative financial instruments 31,339 231,587 Other 2 5,406

$ 1,193,001 $ 21,342,607

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Trading securities by credit rating were as follows:

June 30, 2008

Credit Rating

Total(1) AAA AA A <A

Not

Rated(2)

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U.S. Treasury securities $ — $ — $ — $ — $ — $ — Agency mortgage pass-through

securities 2 2 — — — — Collateralized mortgage

obligations 255,859 227,718 6,266 1,119 19,362 1,394 Asset-backed securities 55,072 9,525 32,052 1,025 12,470 —

Interest-only securities 808,191 490,445 — — — 317,746 Residual securities 5,310 23 — 612 1,129 3,546 Other 2 — — — — 2

$ 1,124,436 $ 727,713 $ 38,318 $ 2,756 $ 32,961 $ 322,688

(1) Derivative financial instruments, including mark-to-market on TBA securities, are not included inthis table as derivative financial instruments are contracts between Countrywide and acounterparty. Such contracts are not rated by the rating agencies. Countrywide manages itsderivatives counterparty risk by entering into derivatives only with creditworthy counterpartiesand limiting its exposure to individual counterparties.

(2) These securities are generally not rated due to their illiquidity and the absence of significanttrading activity.

As of June 30, 2008, $133.2 million of the Company's trading securities had been pledged as collateralfor financing purposes. None of the financing agreements provided the counterparties with the contractualright to sell or re-pledge the trading securities.

As of December 31, 2007, $15.4 billion of the Company's trading securities had been pledged ascollateral for financing purposes, of which the counterparty had the contractual right to sell or re-pledge$6.8 billion.

Trading securities sold, not yet purchased, include the following:

June 30,

2008

December 31,

2007

(in thousands) U.S. Treasury securities $ — $ 2,744,206 Obligations of U.S. Government-sponsored enterprises — 401,298 Mark-to-market on TBA securities 17,359 196,733 Derivative financial instruments 14,053 343,782 Other 3 959

$ 31,415 $ 3,686,978

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)www .S

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Note 9—Securities Purchased Under Agreements to Resell, Securities Borrowed and Federal Funds

Sold

The following table summarizes securities purchased under agreements to resell, securities borrowedand federal funds sold:

June 30,

2008

December 31,

2007

(in thousands) Securities purchased under agreements to resell $ 2,874,086 $ 5,384,569 Securities borrowed — 928,857 Federal funds sold 3,775,000 3,327,453

$ 6,649,086 $ 9,640,879

As of June 30, 2008, the Company had accepted collateral related to securities purchased under agreements to resell and securities borrowed with a fair value of $5.8 billion that it had the contractualability to sell or re-pledge, including $3.2 billion related to amounts offset by securities sold under agreements to repurchase under master netting arrangements. As of June 30, 2008, the Company had re-

pledged $4.9 billion of such collateral for financing purposes.

Through June 30, 2008, the Company had an informal agreement with one of its primary securitiescustodial banks to have on deposit adequate cash to ensure orderly clearance and settlement of securitiesand financing transactions on the date of settlement. At June 30, 2008, Countrywide had $0.5 billion ondeposit with the custodial bank available to clear future transactions.

As of December 31, 2007, the Company had accepted collateral related to securities purchased under agreements to resell and securities borrowed with a fair value of $17.6 billion, that it had the contractualability to sell or re-pledge, including $9.0 billion related to amounts offset by securities sold under agreements to repurchase under master netting arrangements. As of December 31, 2007, the Company hadre-pledged $14.3 billion of such collateral for financing purposes.

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Note 10—Loans Held for Investment, Net

Loans held for investment include the following:

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June 30,

2008

December 31,

2007

(in thousands) Mortgage loans:

Prime

Pay option and payment advantage $ 26,409,335 $ 28,509,138

Other 30,071,783 25,517,950 56,481,118 54,027,088

Prime home equity 32,864,577 34,539,144

Subprime 2,454,542 2,725,407

Commercial real estate 181,390 265,845

Total mortgage loans 91,981,627 91,557,484

Defaulted FHA-insured and VA-guaranteed loans repurchased fromsecurities 3,411,386 2,691,563

Warehouse lending advances secured by mortgage loans 904,647 887,134

96,297,660 95,136,181 Premiums, discounts and deferred loan origination fees and costs, net (469,411 ) (363,560 ) Allowance for loan losses (5,035,651 ) (2,399,491 )

90,792,598 92,373,130 Mortgage Loans Held in SPEs 3,438,392 5,627,583

Loans held for investment, net $ 94,230,990 $ 98,000,713

Loans are transferred from mortgage loans held for sale to mortgage loans held for investment whenthe Company makes the decision to hold such loans for the foreseeable future, which has been defined asthe next twelve months, and has made an assessment that the Company has the ability to hold them for thattime. During the six months ended June 30, 2008, the Company transferred prime, prime home equity andsubprime mortgage loans with an unpaid principal balance of $1.5 billion, $0.1 billion and $0.1 billion,

respectively, from mortgage loans held for sale to mortgage loans held for investment, as managementmade the decision in the first six months of 2008 to hold those loans for the foreseeable future. Inconnection with these transfers, impairment in the amount of $73.4 million was recorded as a component of gain on sale of loans and securities.

Mortgage loans with unpaid principal balances totaling $58.8 billion and $62.6 billion were pledged tosecure FHLB advances and to enable additional borrowings from the FHLB at June 30, 2008 andDecember 31, 2007, respectively.

Mortgage loans held for investment with unpaid principal balances totaling $7.4 billion and$6.0 billion were pledged to secure an unused borrowing facility with the Federal Reserve Bank ("FRB") atJune 30, 2008 and December 31, 2007, respectively.

Mortgage loans held for investment with unpaid principal balances totaling $0.5 billion were pledgedto secure securities sold under agreements to repurchase at June 30, 2008.

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(Unaudited)

Defaulted FHA-insured and VA-guaranteed loans repurchased from securities totaling $1.3 billionwere pledged to secure securities sold under agreements to repurchase at December 31, 2007. No amounts

were pledged at June 30, 2008.

Mortgage loans with unpaid principal balances totaling $1.9 billion were pledged to secure a revolvingline of credit at December 31, 2007. No amounts were pledged at June 30, 2008.

Mortgage loans held in special purpose entities ("SPEs") with carrying values totaling $3.4 billion and$5.6 billion were pledged to secure asset-backed secured financings at June 30, 2008 and December 31,2007, respectively. These amounts included $0.2 billion and $0.3 billion of real estate acquired insettlement of loans as of June 30, 2008 and December 31, 2007, respectively. These assets were re-recognized on the Company's consolidated balance sheets at their estimated fair value after managementconcluded that certain securities collateralized by these loans it had reacquired as part of its market-makingactivities would be held for an other-than-temporary period. The carrying value of the mortgage loans heldin SPEs includes fair value discounts of $862.1 million and $960.7 million at June 30, 2008 and

December 31, 2007, respectively.

As of both June 30, 2008 and December 31, 2007, the Company had accepted mortgage loan collateralsecuring warehouse lending advances of $1.0 billion, that it had the contractual ability to re-pledge.

The Company modified loans for borrowers who would not be able to obtain refinancing from other lenders under the modified terms. Other loans were modified to retain borrowers with good paymenthistory but the modifications were considered to represent credit concessions. These transactions wereclassified as troubled debt restructurings. The majority of these transactions involved modifications of current loans from payment option adjustable-rate mortgage ("ARM") loans to payment advantage ARMloans with interest rates that are fixed for five years. Because these modifications were made at terms notcomparable to market terms that would be offered if the modified loans were fully underwritten, theCompany categorized these transactions as troubled debt restructurings.

Troubled debt restructurings at June 30, 2008 and December 31, 2007 totaled $1.2 billion and$282.6 million, respectively, the majority of which were the conversions of current payment-option ARMloans to payment-advantage ARM loans. Of the troubled debt restructurings, $1.1 billion and $6.3 millionwere on accrual status as of June 30, 2008 and December 31, 2007, respectively. An impairment allowanceof $117.2 million and $11.0 million relating to these loans is included in the allowance for loan losses as of June 30, 2008 and December 31, 2007, respectively. Management considered $28.8 million and$37.3 million of warehouse lending loans to be impaired as of June 30, 2008 and December 31, 2007,respectively. The average investment in impaired loans, consisting of troubled debt restructurings andnonperforming warehouse lines of credit, during the six months ended June 30, 2008 was $784.9 millionand none during the six months ended June 30, 2007.

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Changes in the allowance for loan losses, the composition of the provision for loan losses and theallowance for loan losses were as follows:

Three Months Ended

June 30,

Six Months Ended

June 30,

2008 2007 2008 2007

(in thousands) Balance, beginning of period $ 3,351,304 $ 464,131 $ 2,399,491 $ 326,817 Provision for loan losses before estimated pool

mortgage insurance recoveries 2,614,321 368,811 4,172,399 544,774 Charge-offs (942,020 ) (157,447 ) (1,571,623 ) (198,516 ) Recoveries 12,046 3,060 35,384 5,480

Balance, end of period $ 5,035,651 $ 678,555 $ 5,035,651 $ 678,555

Three Months Ended

June 30,

Six Months Ended

June 30,

2008 2007 2008 2007

(in thousands) Provision for loan losses before estimated pool

mortgage insurance recoveries $ 2,614,321 $ 368,811 $ 4,172,399 $ 544,774 Change in estimate of amounts recoverable from

pool mortgage insurance (283,396 ) (75,887 ) (340,122 ) (99,888 )

Provision for loan losses $ 2,330,925 $ 292,924 $ 3,832,277 $ 444,886

June 30,

2008 2007

(in thousands) Allowance for loan losses $ 5,035,651 $ 678,555 Estimated amount recoverable from pool mortgage insurance (895,925 ) (165,651 )

Allowance for loan losses, net of estimated pool mortgage insurance $ 4,139,726 $ 512,904

The Company has recorded a liability for losses on unfunded loan commitments in accounts payableand accrued liabilities totaling $63.7 million and $38.4 million at June 30, 2008 and December 31, 2007,respectively. The provision for these losses is recorded in other expenses. The following is a summary of changes in the liability:

Three Months Ended

June 30,

Six Months Ended

June 30,

2008 2007 2008 2007

(in thousands) Balance, beginning of period $ 65,835 $ 13,759 $ 38,384 $ 8,104 Provision for losses on unfunded loan commitments (2,181 ) 4,463 25,270 10,118

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Note 11—Investments in Other Financial Instruments, at Estimated Fair Value

Investments in other financial instruments include the following:

June 30,

2008

December 31,

2007

(in thousands) Securities accounted for as available-for-sale:

Prime non-agency mortgage-backed securities $ 13,421,562 $ 16,328,280

Prime agency mortgage-backed securities 1,645,915 2,944,210

Subprime mortgage-backed securities 786 35

Obligations of U.S. Government-sponsored enterprises 145,901 255,205

Municipal bonds 167,707 419,540

U.S. Treasury securities 88,433 92,900

Corporate bonds 97,596 74,643

Investment securities 15,567,900 20,114,813

Interests retained in securitization—non credit-sensitive:

Mortgage-backed pass-through securities 34,616 37,567

Prime interest-only and principal-only securities 227,924 256,832

Prepayment penalty bonds 6,615 9,516

Total interests retained in securitization—non credit-sensitive 269,155 303,915

Interests retained in securitization—credit-sensitive(1):

Mortgage-backed pass-through securities 176 281

Prime residual securities 9,254 8,026

Prime home equity retained interests 77,175 94,112

Subprime retained interests 27,382 29,770 Total interests retained in securitization—credit-sensitive(1) 113,987 132,189

Total securities accounted for as available-for-sale 15,951,042 20,550,917 Financial instruments with changes in unrealized gains and losses recognized in earnings in the period of

change:

Securities accounted for as trading:

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Prime interest-only and principal-only securities 730,759 745,160

Prepayment penalty bonds 45,979 70,401

Interest rate swaps — 50

Total interests retained in securitization—non credit-sensitive 952,617 1,375,491

Interests retained in securitization—credit-sensitive(1):


Prime residual securities 20,479 12,531

Prime home equity retained interests 76,916 328,569

Subprime retained interests 54,518 263,278

Total interests retained in securitization—credit-sensitive(1) 174,820 638,802

Servicing Hedge principal-only securities — 908,358

Municipal bonds 358,390 —

Corporate bonds 75,638 72,685

Total securities accounted for as trading 1,561,465 2,995,336

Hedging and pipeline derivatives 1,335,490 2,271,406 Total financial instruments with changes in unrealized gains and losses recognized in earnings in the

period of change 2,896,955 5,266,742

Total investments in other financial instruments $ 18,847,997 $ 25,817,659

(1) Credit-sensitive securities retained in securitization includes securities that are expected to absorb credit losses from interests thatare senior in the securitization structure.

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Investments in other financial instruments by credit rating were as follows:

June 30, 2008

Credit Rating

Total(1) AAA AA A <A

Not

Rated(2)

(in thousands) Securities accounted for as available-for-sale:

Prime non-agency mortgage-backed securities $ 13,421,562 $ 13,325,612 $ 63,024 $ 21,798 $ 11,128 $ —

Prime agency mortgage-backed securities 1,645,915 1,645,915 — — — —

Sub prime mortgage-backed securities 786 786 — — — — www .S

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Obligations of U.S. Government-sponsored enterprises 145,901 145,901 — — — —

Municipal bonds 167,707 55,775 95,059 16,873 — —

U.S. Treasury securities 88,433 88,433 — — — —

Corporate bonds 97,596 97,546 — 50 — —

Investment securities 15,567,900 15,359,968 158,083 38,721 11,128 —


Mortgage-backed pass-through securities 34,616 22,511 12,105 — — —

Prime interest-only and principal-only securities 227,924 201,821 — — — 26,103

Prepayment penalty bonds 6,615 535 — — — 6,080 Total interests retained in securitization—non credit-

sensitive 269,155 224,867 12,105 — — 32,183

Interests retained in securitization—credit-sensitive:

Mortgage-backed pass-through securities 176 — — — 176 —

Prime residual securities 9,254 — — — — 9,254

Prime home equity retained interests 77,175 — — — — 77,175

Subprime retained interests 27,382 4,548 — — — 22,834 Total interests retained in securitization—credit-

sensitive 113,987 4,548 — — 176 109,263

Total securities accounted for as available-for-sale $ 15,951,042 $ 15,589,383 $ 170,188 $ 38,721 $ 11,304 $ 141,446

Financial instruments with changes in unrealized gains andlosses recognized in earnings in the period of change:

Securities accounted for as trading:


Mortgage-backed pass-through securities $ 175,879 $ 116,153 $ 29,463 $ 23,373 $ 6,890 $ —

Prime interest-only and principal-only securities 730,759 730,759 — — — —

Prepayment penalty bonds 45,979 — — — — 45,979 Total interests retained in securitization—noncredit-sensitive 952,617 846,912 29,463 23,373 6,890 45,979

Interests retained in securitization—credit-sensitive:

Mortgage-backed pass-through securities 22,907 — — — 21,387 1,520

Prime residual securities 20,479 — — — — 20,479

Prime home equity retained interests 76,916 — — — — 76,916

Subprime retained interests 54,518 — — — — 54,518 Total interests retained in securitization—credit-

sensitive 174,820 — — — 21,387 153,433

Municipal bonds 358,390 111,285 174,002 61,817 11,286 —

Corporate bonds 75,638 3,956 13,367 42,093 16,222 —

Total securities accounted for as trading 1,561,465 962,153 216,832 127,283 55,785 199,412

Total investments in other financial instruments $ 17,512,507 $ 16,551,536 $ 387,020 $ 166,004 $ 67,089 $ 340,858

(1) Hedging and mortgage pipeline derivative financial instruments are not included in this table as derivatives are contracts betweenCountrywide and a counterparty and are not rated by the rating agencies. Countrywide manages its derivatives counterparty risk byentering into derivatives only with creditworthy counterparties and limiting its exposure to individual counterparties.w

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(2) These securities are generally not rated due to their illiquidity and the absence of significant trading activity.

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At June 30, 2008, the Company had pledged $0.8 billion of investments in other financial instrumentsto secure securities sold under agreements to repurchase, which the counterparty had the contractual rightto re-pledge. At June 30, 2008, the Company had pledged $0.05 billion of MBS to secure its derivativeinstrument liabilities and $0.03 billion of MBS to secure a borrowing facility with the FRB.

At December 31, 2007, the Company had pledged $0.08 billion of MBS to secure securities sold under agreements to repurchase, which the counterparty had the contractual right to re-pledge. At December 31,2007, the Company had also pledged $0.01 billion of MBS to secure margin calls on derivative instrumentsand $1.6 billion of MBS to secure a borrowing facility with the FRB.

At June 30, 2008 and December 31, 2007, the Company had pledged $12.4 billion and $13.4 billion of MBS to enable future borrowings with the FHLB.

Amortized cost and fair value of available-for-sale securities were as follows:

June 30, 2008

AmortizedCost

Gross

UnrealizedGains

Gross

UnrealizedLosses Fair Value

(in thousands) Prime non-agency mortgage-backed securities $ 15,196,885 $ 3,926 $ (1,779,249 ) $ 13,421,562 Prime agency mortgage-backed securities 1,650,082 10,290 (14,457 ) 1,645,915 Subprime mortgage-backed securities 802 — (16 ) 786 Obligations of U.S. Government-sponsored

enterprises 141,468 4,433 — 145,901 Municipal bonds 167,214 851 (358 ) 167,707 U.S. Treasury securities 84,682 3,779 (28 ) 88,433 Interests retained in securitization 372,322 65,242 (54,422 ) 383,142 Corporate bonds 97,288 1,464 (1,156 ) 97,596

$ 17,710,743 $ 89,985 $ (1,849,686 ) $ 15,951,042

December 31, 2007

Amortized

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Gross

Unrealized

Gains

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Unrealized

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(in thousands) Prime non-agency mortgage-backed securities $ 16,734,057 $ 10,147 $ (415,924 ) $ 16,328,280 Prime agency mortgage-backed securities 2,942,460 18,628 (16,878 ) 2,944,210 Subprime mortgage-backed securities 35 — — 35 Obligations of U.S. Government-sponsored

enterprises 249,826 5,379 — 255,205

Municipal bonds 415,420 4,678 (558 ) 419,540 U.S. Treasury securities 89,142 3,760 (2 ) 92,900 Interests retained in securitization 392,966 63,690 (20,552 ) 436,104 Corporate bonds 72,519 2,127 (3 ) 74,643

$ 20,896,425 $ 108,409 $ (453,917 ) $ 20,550,917

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The Company's available-for-sale securities in an unrealized loss position were as follows:

June 30, 2008

Less Than 12 Months 12 Months or More Total

Fair Value

Gross

Unrealized

Loss Fair Value

Gross

Unrealized

Loss Fair Value

Gross

Unrealized

Loss

(in thousands) Prime non-agency

mortgage-backedsecurities $ 7,031,496 $ (917,859 ) $ 5,195,697 $ (861,390 ) $ 12,227,193 $ (1,779,249 )

Prime agency mortgage- backed securities 447,927 (5,987 ) 491,375 (8,470 ) 939,302 (14,457 )

Subprime mortgage- backed securities 633 (4 ) 153 (12 ) 786 (16 )

Municipal bonds — — 53,366 (358 ) 53,366 (358 ) U.S. Treasury securities 3,483 (28 ) — — 3,483 (28 ) Interests retained in

securitization 46,095 (15,876 ) 111,306 (38,546 ) 157,401 (54,422 )

Corporate Bonds 34,426 (1,156 ) 50 — 34,476 (1,156 ) $ 7,564,060 $ (940,910 ) $ 5,851,947 $ (908,776 ) $ 13,416,007 $ (1,849,686 )

December 31, 2007

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Prime non-agency mortgage-backed securities: Gross realized gains 90 —

Gross realized losses (3,394 ) —

Net (3,304 ) —

Municipal bonds: Gross realized gains — 75

Gross realized losses — (857 )

Net — (782 )

Obligations of U.S. Government-sponsored enterprises: Gross realized gains 1,608 —

Gross realized losses — —

Net 1,608 —

Interests retained in securitization: Gross realized gains — 1,615

Gross realized losses (1,599 ) (12 ) Net (1,599 ) 1,603

Total gains and losses on available-for-sale securities: Gross realized gains 13,191 1,701

Gross realized losses (7,108 ) (869 )

Net $ 6,083 $ 832

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Note 12—Mortgage Servicing Rights, at Estimated Fair Value

The activity in MSRs was as follows:

Six Months Ended

June 30,

2008 2007

(in thousands) Balance at beginning of period $ 18,958,180 $ 16,172,064

Additions:

Servicing resulting from transfers of financial assets 1,730,344 4,156,287 www .S

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Purchases 7,420 184,511

Total additions 1,737,764 4,340,798

Less sales (1,307,571 ) —

Change in fair value: Due to changes in valuation inputs or assumptions used in valuation

model(1) 435,295 1,231,513 Other changes in fair value(2) (1,421,278 ) (1,657,007 )

Balance at end of period $ 18,402,390 $ 20,087,368

(1) Principally reflects changes in discount rates and prepayment speed assumptions, primarily due tochanges in interest rates.

(2) Represents changes due to realization of expected cash flows.

As detailed in Note 2— Subsequent Events—Merger and Subsequent Transactions with Bank of America Corporation, on July 2, 2008, the Company sold two entities that hold the partnership interests inthe Company's primary loan servicing subsidiary, Servicing LP, to NBHC. Servicing LP's assets included$15.3 billion of the Company's MSRs at June 30, 2008.

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Note 13—Other Assets

Other assets include the following:

June 30,

2008

December 31,

2007

(in thousands) Reimbursable servicing advances, net $ 5,216,792 $ 3,981,703

Investments in FRB and FHLB stock 1,993,036 2,172,987 Real estate acquired in settlement of loans 952,329 807,843 Estimated amounts recoverable from pool mortgage insurance 895,925 555,803 Interest receivable 633,097 932,477 Receivables from custodial accounts 382,813 387,509 Capitalized software, net 379,172 385,276 Prepaid expenses 326,595 374,943 Cash surrender value of assets held in trust for deferred compensation

plans 292,039 307,902 www .S

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Cash surrender value of Company-owned life insurance 221,500 229,835 Margin accounts 219,369 669,391 Mortgage guaranty insurance tax and loss bonds 188,667 165,066 Securities broker-dealer receivables 87,489 203,206 Restricted cash 75,565 86,078 Receivables from sale of securities 12,720 98,021 Other 870,043 1,192,735

$ 12,747,151 $ 12,550,775

The Company had pledged $0.01 billion of receivables from sale of securities to secure securities soldunder agreements to repurchase at June 30, 2008 and December 31, 2007.

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Note 14—Deposit Liabilities

Deposit liabilities include the following:

June 30,

2008

December 31,

2007(in thousands)

Non-interest-bearing checking accounts $ 729,152 $ 457,487 Retail savings and money market accounts:

Retail 9,724,721 8,268,969

Brokered 1,715,642 3,159,124

Commercial money market accounts 219,015 892,085 Time deposits:

Retail 31,095,961 25,119,310

Brokered 7,575,540 9,107,958

Commercial

Premier business banking 502,437 545,118 Other 41,486 42,711

543,923 587,829

39,215,424 34,815,097

Company-administered custodial deposit accounts(1) 11,192,367 12,591,401

62,796,321 60,184,163

Basis adjustment through application of hedge accounting 15,601 16,436 www .S

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$ 62,811,922 $ 60,200,599

(1) These accounts represent the portion of the investor custodial accounts administered byCountrywide that have been placed on deposit with Countrywide Bank, FSB ("CountrywideBank" or the "Bank").

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Substantially all of the time deposits outstanding were interest-bearing. The contractual maturities of those deposits as of June 30, 2008, are shown in the following table:

Time Deposit Maturities eighted Average Rate

(dollar amounts in thousands) Quarter ending:

September 30, 2008 $ 14,650,810 4.88 %

December 31, 2008 9,523,683 4.71 %

March 31, 2009 2,793,532 4.17 %

June 30, 2009 7,400,499 3.98 %

Total twelve months ending June 30, 2009 34,368,524 4.58 % Twelve months ending June 30, 2010 1,833,014 4.32 %

2011 872,346 4.53 %

2012 193,727 4.79 %

2013 190,460 4.93 %

Thereafter 1,757,353 5.77 %

39,215,424 4.62 %

Basis adjustment through application of hedge accounting 15,601

$ 39,231,025

Note 15—Securities Sold Under Agreements to Repurchase

The Company routinely enters into short-term financing arrangements to sell securities under agreements to repurchase ("repurchase agreements"). The repurchase agreements are collateralized bymortgage loans and securities. All securities underlying repurchase agreements are held in safekeeping by

broker-dealers or banks. All agreements are to repurchase the same or substantially identical securities.www .S

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At June 30, 2008, repurchase agreements were secured by $0.1 billion of trading securities,$4.9 billion of securities purchased under agreements to resell and securities borrowed, $0.5 billion of loansheld for investment, $0.8 billion in investments in other financial instruments and $0.01 billion of other assets. At June 30, 2008, $3.2 billion of the pledged securities purchased under agreements to resell andsecurities borrowed related to amounts offset against securities sold under agreements to repurchase

pursuant to master netting agreements.

At December 31, 2007, repurchase agreements were secured by $0.01 billion of mortgage loans heldfor sale, $15.4 billion of trading securities, $14.3 billion of securities purchased under agreements to reselland securities borrowed, $1.3 billion in loans held for investment, $0.1 billion in investments in other financial instruments and $0.01 billion of other assets. At December 31, 2007, $9.0 billion of the pledgedsecurities purchased under agreements to resell and securities borrowed related to amounts offset againstsecurities sold under agreements to repurchase pursuant to master netting agreements.

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Note 16—Notes Payable

The following table summarizes notes payable:

June 30,

2008

December 31,

2007(in thousands)

Secured revolving lines of credit $ — $ 1,547,648 Unsecured revolving lines of credit 8,120,000 10,820,000 Unsecured bank loans 3,360,000 660,000 Borrowings from the Federal Reserve Bank — 750,000 Federal Home Loan Bank advances 43,675,000 47,675,000

Medium-term notes: Floating-rate 8,196,680 10,779,722

Fixed-rate 7,022,293 8,221,445

15,218,973 19,001,167

Asset-backed secured financings 3,438,391 9,453,478 Asset-backed secured financings at estimated fair value 1,212,252 — Convertible debentures 4,000,000 4,000,000 Subordinated debt 1,082,726 1,067,010 Junior subordinated debentures 2,193,703 2,219,511 Other 34,546 33,599 w

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$ 82,335,591 $ 97,227,413

Secured Revolving Lines of Credit

The Company formed a special purpose entity (Park Monaco) to finance inventory with funding

provided by a group of bank-sponsored conduits that were financed through the issuance of asset-backedcommercial paper. The entity incurred interest based on prevailing money market rates approximating thecost of asset-backed commercial paper. On May 2, 2008, the Company repaid the outstanding balance, andon May 9, 2008, the Company terminated the facility.

For the six months ended June 30, 2008, the average borrowings under this facility totaled $0.5 billionand the weighted-average interest rate was 4.43%. For the six months ended June 30, 2007, the average

borrowings under this facility totaled $0.7 billion and the weighted-average interest rate was 5.34%. AtJune 30, 2007, the weighted-average interest rate was 5.35%.

During 2007, the Company had a $4.0 billion master trust facility to finance Countrywide WarehouseLending ("CWL") receivables backed by mortgage loans through the sale of such receivables to a multi-asset conduit finance company financed by issuing extendable maturity asset-backed commercial paper. At

June 30, 2007, the Company had pledged $1.1 billion in loans held for investment to secure this facility.For the six months ended June 30, 2007, the average borrowings under this facility totaled $1.1 billion andthe weighted-average interest rate was 5.38%. At June 30, 2007, the weighted-average interest rate was5.39%. This facility was terminated during 2007.

Unsecured Revolving Lines of Credit and Unsecured Bank Loans

As of June 30, 2008, the Company had unsecured credit agreements (revolving credit facilities) with agroup of commercial banks permitting the Company to borrow an aggregate maximum total

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amount of $11.5 billion. In August 2007, the Company borrowed $11.5 billion from these revolving creditfacilities, of which $3.4 billion was converted to unsecured term bank loans with maturities through May

2009.

For the six months ended June 30, 2008, the average outstanding borrowings under the remainingrevolving credit facilities totaled $10.0 billion and the weighted-average interest rate was 3.26%. AtJune 30, 2008, the weighted-average interest rate was 3.22%. No amount was outstanding under thisfacility at June 30, 2007. For the six months ended June 30, 2008, the average outstanding borrowingsunder the unsecured bank loan totaled $1.5 billion and the average interest rate was 3.63%. At June 30,2008, the weighted average interest rate was 3.42%. On July 1, 2008, all amounts owing under thesefacilities were repaid and the facilities were terminated.www .S

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Backup Credit Facilities

As of June 30, 2008, the Company had pledged $7.4 billion and $0.03 billion of mortgage loans heldfor investment and MBS, respectively, to secure an unused borrowing facility with the FRB.

Federal Home Loan Bank Advances

During the six months ended June 30, 2008, the Company obtained $0.5 billion of fixed-rate advancesfrom the FHLB, and repaid $4.5 billion of advances of which, $2.4 billion was fixed-rate. At June 30, 2008,the Company had pledged $58.8 billion and $12.4 billion respectively, of mortgage loans and investmentsin other financial instruments to secure its outstanding FHLB advances and enable future advances.

At December 31, 2007, the Company had pledged $62.6 billion and $13.4 billion, respectively, of mortgage loans and investments in other financial instruments to secure its outstanding FHLB advancesand enable future advances.

Medium-Term Notes

During the six months ended June 30, 2008, the Company did not issue any medium-term notes andredeemed $4.1 billion of maturing medium-term notes.

As of June 30, 2008, $4.0 billion of foreign currency-denominated medium-term notes wereoutstanding. Such notes are denominated in Swiss Francs, Pounds Sterling, Canadian Dollars, AustralianDollars and Euros. These notes have been effectively converted to U.S. dollar-denominated debt throughcurrency swaps.

Asset-Backed Secured Financings

The Company records certain mortgage loan securitization transactions as secured borrowings whenthey do not meet the accounting requirements for sale recognition. The securitization transactionsaccounted for as secured borrowings totaled $1.2 billion and $3.8 billion at June 30, 2008 and

December 31, 2007, respectively. At June 30, 2008 and December 31, 2007, the Company had pledgedmortgage loans held for sale with unpaid principal balances totaling $2.1 billion and $4.4 billion,respectively, to secure these borrowings.

In its market-making and trading activities, CSC would reacquire securities with embedded derivativescreated in Countrywide loan sales activities. After reacquiring certain of those securities during 2007, themarket for non-agency MBS was disrupted. Management subsequently concluded that certain securities itreacquired beginning in 2007 were no longer readily salable. When the Company

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Maturities of Notes Payable

Maturities of notes payable were as follows:

Principal, Premiums and Discounts

Unsecured

Revolving

Lines of

Credit and

Bank Loan(1)All Other

Notes Payable

Basis

Adjustment Total

(in thousands) Quarter ending:

September 30, 2008 $ — $ 1,198,970 $ 62,889 $ 1,261,859

December 31, 2008 660,000 2,971,786 447,696 4,079,482

March 31, 2009 — 1,807,234 43,002 1,850,236

June 30, 2009 2,700,000 1,823,426 40,582 4,564,008

Total twelve months ending June 30, 2009 3,360,000 7,801,416 594,169 11,755,585 Twelve months ending June 30,

2010 — 13,191,063 4,776 13,195,839

2011 6,580,000 18,478,647 348,947 25,407,594

2012 1,540,000 8,750,312 144,571 10,434,883 2013 — 4,950,117 762 4,950,879

Thereafter — 16,527,421 63,390 16,590,811

Total $ 11,480,000 $ 69,698,976 $ 1,156,615 $ 82,335,591

(1) On July 1, 2008, the Company terminated these credit facilities and repaid all the outstanding

borrowings plus accrued interest and fees.

Note 17—Regulatory and Agency Capital Requirements

Countrywide Bank is regulated by the Office of Thrift Supervision ("OTS") and is therefore subject toOTS capital requirements. At June 30, 2008, the Bank's regulatory capital ratios and amounts and minimumrequired capital ratios for the Bank to maintain a "well capitalized" status are as follows based both on itsactual balances and proforma balances giving effect to the $5.5 billion capital contribution made by theCompany on July 2, 2008:

Actual Proforma(2)www .S

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Minimum

Required(1) Ratio Amount Ratio Amount

(dollar amounts in thousands) Tier 1 Capital 5.0 % 6.9 % $ 8,071,716 11.1 % $ 13,601,716 Risk-Based Capital:

Tier 1 6.0 % 11.1 % $ 8,071,716 18.7 % $ 13,601,716

Total 10.0 % 12.4 % $ 9,016,959 20.0 % $ 14,545,788

(1) Minimum required to qualify as "well capitalized."

(2) The proforma capital ratios reflect the cash contributed to the Bank. These ratios will decrease aswe reinvest the proceeds of the capital contribution into interest earning assets with higher risk weightings.

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(Unaudited)

The Bank is required by OTS regulations to maintain tangible capital of at least 1.5% of assets.However, the Bank is also required to maintain a tangible equity ratio of at least 2% to avoid beingclassified as "critically undercapitalized." Critically undercapitalized institutions are subject to the promptcorrective action provisions of the Financial Institution Reform Recovery and Enforcement Act of 1989.The Bank's tangible capital ratio was 6.9% and 8.0% at June 30, 2008 and December 31, 2007,

respectively.

The OTS has prescribed that the Company and its affiliates are not authorized to receive, and the Bank is not authorized to pay the Company or its affiliates, capital distributions without receipt of prior writtenOTS non-objection.

The Company is also subject to U.S. Department of Housing and Urban Development, Fannie Mae,Freddie Mac and Government National Mortgage Association ("Ginnie Mae") net worth requirements.Management believes the Company is in compliance with those requirements.

Note 18—Supplemental Cash Flow Information

The following table presents supplemental cash flow information:

Six Months Ended

June 30,

2008 2007

(in thousands) Cash used to pay interest $ 3,939,669 $ 5,356,090 www .S

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Cash (refunded) used to pay income taxes (704,031 ) 13,796 Non-cash investing activities:

Transfer of loans from mortgage loans held for sale at lower of cost or estimated fair value to loans held for investment (1,625,542 ) (1,636,114 )

Transfer of loans held for investment to mortgage loans held for sale 2,406,307 — Transfer of real estate acquired in settlement of loans from loans receivable

to other assets 865,234 407,302 Servicing resulting from transfers of financial assets 1,730,344 4,156,287 Retention of other financial instruments classified as available-for-sale in

securitization transactions 15,852 1,829 Unrealized loss on available-for-sale securities, foreign currency translation

adjustments, cash flow hedges and change in unfunded liability relatingto defined benefit plans, net of tax (865,677 ) (118,672 )

Remeasurement of financial assets and liabilities upon adoption of SFAS 159 34,249 —

Remeasurement of income taxes payable upon adoption of FIN 48 — (12,719 )

Decrease in Mortgage Loans Held in SPEs 2,189,191 — Non-cash financing activities:

Decrease in asset-backed secured financings (4,728,777 ) —

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(Unaudited)

Note 19—Net Interest Income

The following table summarizes net interest income:

Three Months Ended

June 30,

Six Months Ended

June 30,

2008 2007 2008 2007

(in thousands) Interest income:

Loans $ 1,766,287 $ 2,150,060 $ 3,728,520 $ 4,270,105

Trading securities 142,203 341,932 356,067 660,884 Securities purchased under agreements to resell,

securities borrowed and federal funds sold 172,497 613,410 394,117 1,274,689

Investments in other financial instruments 268,451 233,261 538,945 360,752

Other 113,108 160,981 251,456 285,196

Total interest income 2,462,546 3,499,644 5,269,105 6,851,626

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Deposit liabilities 560,831 544,030 1,149,759 1,043,869

Securities sold under agreements to repurchase 208,975 911,104 519,774 1,801,771

Trading securities sold, not yet purchased 19,463 60,375 52,253 122,504

Notes payable 933,575 1,116,212 1,977,786 2,173,445

Other 83,751 139,927 182,262 251,104

Total interest expense 1,806,595 2,771,648 3,881,834 5,392,693

Total net interest income $ 655,951 $ 727,996 $ 1,387,271 $ 1,458,933

Note 20—Restructuring Charges

During the third quarter of 2007, the Company initiated a program to reduce costs and improveoperating efficiencies in response to lower mortgage market origination volumes and other marketconditions. As part of this plan, the Company expected to incur lease and other contract termination costs.Management recorded restructuring charges totaling $144.6 million in 2007 and recorded an additional$16.1 million in the first six months of 2008. Specific actions taken in 2007 included reducing the

workforce by approximately 11,000 and the closure of 259 branches. These reductions occurred in mostgeographic locations and levels of the organization. The restructuring charges were recorded in the "Other"segment. During the first six months of 2008, the specific actions included reducing the workforce byapproximately 1,500.

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The following table summarizes the restructuring liability balance, recorded in accounts payable andaccrued liabilities at June 30, 2008, and related activity during the six months ended June 30, 2008:

UtilizedBalance

December 31,

2007 Additions Reversals Cash Non-Cash

Balance

June 30,

2008

(in thousands) Severance and benefits $ 2,959 $ 3,264 $ — $ (6,223 ) $ — $ —

Lease termination costs 45,399 10,581 — (24,634 ) (5,884 ) 25,462 Other costs — 2,228 — — (2,228 ) —

$ 48,358 $ 16,073 $ — $ (30,857 ) $ (8,112 ) $ 25,462

Note 21—Pension Plans

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The Company provides retirement benefits to its employees using a variety of plans. For employeeshired prior to January 1, 2006, the Company has a defined benefit pension plan (the "Pension Plan"). For employees hired after December 31, 2005, the Company makes supplemental contributions to employee401(k) Plan accounts.

Net periodic benefit cost for the Pension Plan during the three and six months ended June 30, 2008

and 2007, includes the following components:

Three Months Ended

June 30,

Six Months Ended

June 30,

2008 2007 2008 2007

(in thousands) Service cost $ 17,404 $ 19,400 $ 34,808 $ 41,479 Interest cost 7,158 6,355 14,316 12,337 Expected return on plan assets (5,950 ) (5,483 ) (11,900 ) (10,974 ) Amortization of prior service cost 87 87 174 174 Recognized net actuarial loss — 217 — 217

Net periodic benefit cost $ 18,699 $ 20,576 $ 37,398 $ 43,233

Note 22—Segments and Related Information

The Company has five business segments: Mortgage Banking, Banking, Capital Markets, Insuranceand Global Operations.

The Mortgage Banking Segment is comprised of three sectors: Loan Production, Loan Servicing andLoan Closing Services.

The Loan Production Sector originates prime and subprime loans for sale or securitization through a

variety of channels on a national scale. Historically, mortgage banking loan production has occurred inCHL. Over the past several years, the Company has been transitioning this production to its bank subsidiary, Countrywide Bank. Effective January 1, 2008, the Company's production channels have movedinto the Bank, completing the migration of substantially all of Countrywide's loan production activitiesfrom CHL to the Bank. During the six months ended June 30, 2008, over 97% of Countrywide's mortgageloan production occurred in Countrywide Bank. The mortgage loan production, the related balance sheetand the income relating to the holding and sale of these loans is

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included in the Mortgage Banking Segment regardless of whether the activity occurred in CHL or theBank.

The Loan Production Sector is comprised of three lending channels:

•

Retail Channel sources mortgage loans primarily from consumers through the Company's retail branch network and call centers, as well as through real estate agents and homebuilders

• Wholesale Lending Channel sources mortgage loans primarily from mortgage brokers

• Correspondent Lending Channel purchases mortgage loans from other mortgage lenders, includingfinancial institutions, commercial banks, savings and loan associations, home builders and creditunions.

The Loan Servicing Sector includes investments in MSRs, retained interests including senior andmezzanine mortgage-backed securities which remain unsold from prior securitizations, the Mortgage

Banking investment loan portfolio as well as the Company's loan servicing operations and subservicing for other domestic financial institutions. Subsequent to sale, adjustments to the liability for representations andwarranties are included in this sector. The Loan Closing Services Sector is comprised of the LandSafecompanies, which provide credit reports, appraisals, title reports and flood determinations to the Company'sLoan Production Sector, as well as to third parties.

The Banking Segment includes Banking Operations—primarily the investment and fee-basedactivities of Countrywide Bank—together with the activities of Countrywide Warehouse Lending andcertain loans held for investment and owned by Countrywide Home Loans. Banking Operations invests inmortgage loans sourced from the Loan Production Sector and mortgage loans and MBS purchased fromnon-affiliated entities. Countrywide Warehouse Lending provides third-party mortgage lenders withtemporary financing secured by mortgage loans.

The Capital Markets Segment includes the operations of CSC, a registered broker-dealer specializingin the mortgage securities market. It also includes the operations of Countrywide Asset ManagementCorporation, Countrywide Commercial Real Estate Finance Inc., Countrywide Servicing Exchange,Countrywide Alternative Investments Inc., CSC Futures Inc., Countrywide Capital Markets Asia (H.K.)Limited, CAA Management Inc., Countrywide Sunfish Management LLC and Countrywide DerivativeProducts, Inc.

The Insurance Segment includes Balboa Insurance Group, a national provider of property, casualty,life, disability and credit insurance; Balboa Reinsurance Company, a primary mortgage reinsurancecompany; and Countrywide Insurance Services, a national insurance agency offering a specialized menu of insurance products directly to consumers.

The Global Operations Segment includes Countrywide International Technology Holdings Limited, a

licensor of loan origination processing, servicing and residential real estate value assessment technology;CFC India Private Limited, a provider of call center, data processing and information technology relatedservices; and CFC International (Processing Services), Limited, located in Costa Rica, a provider of callcenter and data processing services.

Segment selection was based upon internal organizational structures, and the process by which theseoperations are managed and evaluated, including how resources are allocated to the operations. Certainamounts reflected in the prior period have been adjusted to conform to the current period presentation.

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Intersegment transactions are generally recorded on an arms-length basis. However, prior to October 2007, the fulfillment fees paid by Banking Operations to the Production Sector for origination costsincurred on mortgage loans funded by Banking Operations were generally determined on an incrementalcost basis, which may be less than the fees that Banking Operations would pay to a third party.

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COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Financial highlights by operating segments are as follows:


Mortgage Banking

Loan

Production

Loan

Servicing

Closing

Services Total Banking

Capital

Markets Insurance

Global

Operations Other

Total

Consolidated

(in thousands) Revenues:

External $ 765,710 $ (1,115,865 ) $ 98,888 $ (251,267 ) $ (1,827,393 ) $ (87,699 ) $ 534,364 $ 12,041 $ (2,884 ) $ (1,622,838 )

Intersegment (3,078 ) 84,692 (480 ) 81,134 (57,108 ) (295 ) (1,812 ) 30,099 (52,018 ) —

TotalRevenues

$ 762,632 $ (1,031,173 ) $ 98,408 $ (170,133 ) $ (1,884,501 ) $ (87,994 ) $ 532,552 $ 42,140 $ (54,902 ) $ (1,622,838 )

Pre-taxEarnings(Loss)

$ (135,175 ) $ (1,406,754 ) $ 33,115 $ (1,508,814 ) $ (2,145,667 ) $ (170,034 ) $ 12,042 $ 11,723 $ (15,086 ) $ (3,815,836 )

Total Assetsat PeriodEnd

$ 14,203,239 $ 39,731,833 $ 412,477 $ 54,347,549 $ 107,451,467 $ 5,878,284 $ 4,298,360 $ 259,240 $ (158,406 ) $ 172,076,494


Mortgage Banking

Loan

Production

Loan

Servicing

Closing


Capital

Markets Insurance

Global

Operations Other

Total

Consolidated


External $ 1,499,331 $ (220,185 ) $ 89,397 $ 1,368,543 $ 490,740 $ 223,744 $ 390,742 $ 7,165 $ 67,463 $ 2,548,397

Intersegment 14,366 260,886 (138 ) 275,114 (202,969 ) 21,013 (1,925 ) 21,733 (112,966 ) —

TotalRevenues

$

1,513,697

$

40,701

$

89,259

$

1,643,657

$

287,771

$

244,757

$

388,817

$

28,898

$

(45,503

)

$

2,548,397

Pre-tax

Earnings(Loss)

$ 492,139 $ (200,798 ) $ 28,261 $ 319,602 $ 128,910 $ 109,510 $ 98,721 $ 6,688 $ 1,267 $ 664,698


$ 32,873,872 $ 33,492,428 $ 333,244 $ 66,699,544 $ 93,464,293 $ 57,457,168 $ 3,342,309 $ 247,572 $ (5,626,980 ) $ 215,583,906

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Included in the columns above labeled "Other" are the holding company activities includingrestructuring charges of $1.5 million during the three months ended June 30, 2008 and certainreclassifications to conform management reporting to the consolidated financial statements.

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COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)


Mortgage Banking

Loan

Production

Loan

Servicing

Closing


Capital

Markets Insurance

Global

Operations Other

Total

Consolidated


External $ 1,879,048 $ (1,709,013 ) $ 196,115 $ 366,150 $ (2,393,666 ) $ (5,786 ) $ 1,091,226 $ 24,467 $ (26,355 ) $ (943,964 ) Intersegment (12,098 ) 197,914 (1,014 ) 184,802 (141,166 ) (763 ) (3,927 ) 59,014 (97,960 ) —

TotalRevenues

$ 1,866,950 $ (1,511,099 ) $ 195,101 $ 550,952 $ (2,534,832 ) $ (6,549 ) $ 1,087,299 $ 83,481 $ (124,315 ) $ (943,964 )

Pre-taxEarnings(Loss)

$ 97,200 $ (2,224,300 ) $ 66,290 $ (2,060,810 ) $ (3,106,038 ) $ (169,037 ) $ 47,543 $ 22,702 $ (42,423 ) $ (5,308,063 )


$ 14,203,239 $ 39,731,833 $ 412,477 $ 54,347,549 $ 107,451,467 $ 5,878,284 $ 4,298,360 $ 259,240 $ (158,406 ) $ 172,076,494


Mortgage Banking

Loan

Production

Loan

Servicing

Closing


Capital

Markets Insurance

Global

Operations Other

Total

Consolidated


External $ 2,660,943 $ (348,728 ) $ 174,873 $ 2,487,088 $ 1,110,188 $ 451,535 $ 761,908 $ 11,043 $ 132,411 $ 4,954,173

Intersegment 16,897 508,385 (138 ) 525,144 (393,156 ) 53,878 (3,375 ) 38,305 (220,796 ) —

TotalRevenues

$ 2,677,840 $ 159,657 $ 174,735 $ 3,012,232 $ 717,032 $ 505,413 $ 758,533 $ 49,348 $ (88,385 ) $ 4,954,173

Pre-taxEarnings

(Loss)

$ 662,793 $ (301,104 ) $ 58,217 $ 419,906 $ 417,004 $ 241,718 $ 278,379 $ 10,694 $ (2,208 ) $ 1,365,493


$ 32,873,872 $ 33,492,428 $ 333,244 $ 66,699,544 $ 93,464,293 $ 57,457,168 $ 3,342,309 $ 247,572 $ (5,626,980 ) $ 215,583,906

Included in the columns above labeled "Other" are the holding company activities includingrestructuring charges of $16.1 million during the six months ended June 30, 2008 and certainreclassifications to conform management reporting to the consolidated financial statements.

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Note 23—Summarized Financial Information

Summarized financial information for Countrywide Financial Corporation (parent only) andsubsidiaries is as follows:

June 30, 2008

Countrywide

Financial

Corporation

(Parent Only)

Countrywide

Home

Loans, Inc.

(Consolidated)

Other

Subsidiaries Eliminations Consolidated

(in thousands) Balance Sheets:

Mortgage loans held for sale $ — $ 1,684,003 $ 10,133,395 $ (1,036 ) $ 11,816,362 Trading securities, at

estimated fair value 168,772 143,085 881,144 — 1,193,001 Securities purchased under

agreements to resell,securities borrowed andfederal funds sold — 250,000 9,278,885 (2,879,799 ) 6,649,086

Loans held for investment,net 620,476 16,167,473 77,463,414 (20,373 ) 94,230,990

Investments in other financial instruments, atestimated fair value 507,524 750,819 17,611,785 (22,131 ) 18,847,997

Mortgage servicing rights, atestimated fair value — 16,371,301 2,031,089 — 18,402,390

Investments in subsidiaries 12,358,342 — 6,579 (12,364,921 ) —

Other assets 22,907,320 20,966,276 12,294,253 (35,231,181 ) 20,936,668

Total assets $ 36,562,434 $ 56,332,957 $ 129,700,544 $ (50,519,441 ) $ 172,076,494

Deposit liabilities $ — $ — $ 63,362,940 $ (551,018 ) $ 62,811,922

Securities sold under agreements to repurchase 556,959 800,517 5,062,814 (2,875,710 ) 3,544,580

Notes payable 16,245,277 23,168,348 43,675,000 (753,034 ) 82,335,591

Other liabilities 9,340,130 29,916,958 7,661,108 (33,953,863 ) 12,964,333

Equity 10,420,068 2,447,134 9,938,682 (12,385,816 ) 10,420,068

Total liabilities and equity $ 36,562,434 $ 56,332,957 $ 129,700,544 $ (50,519,441 ) $ 172,076,494

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Countrywide

Financial

Corporation

(Parent Only)

Countrywide

Home

Loans, Inc.

(Consolidated)

Other


(in thousands) Statements of Operations:

Revenues $ (33,457 ) $ (728,500 ) $ 431,550 $ (613,557 ) $ (943,964 )

Expenses 12,542 1,126,118 3,800,794 (575,355 ) 4,364,099

Benefit for income taxes (17,663 ) (701,057 ) (1,350,791 ) (15,400 ) (2,084,911 )

Equity in net loss of subsidiaries

(3,194,816 ) — — 3,194,816 —

Net loss $ (3,223,152 ) $ (1,153,561 ) $ (2,018,453 ) $ 3,172,014 $ (3,223,152 )

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December 31, 2007

CountrywideFinancial

Corporation

(Parent Only)

CountrywideHome

Loans, Inc.

(Consolidated)

Other


(in thousands) Balance Sheets:

Mortgage loans held for sale $ 67 $ 5,439,813 $ 6,208,511 $ 32,883 $ 11,681,274 Trading securities, at

estimated fair value — 233,046 21,299,559 (189,998 ) 21,342,607 Securities purchased under

agreements to resell,securities borrowed andfederal funds sold — 1,250,000 12,126,762 (3,735,883 ) 9,640,879

Loans held for investment,net 582,760 18,362,522 79,071,775 (16,344 ) 98,000,713

Investments in other financial instruments, atestimated fair value 549,221 2,949,971 22,318,467 — 25,817,659

Mortgage servicing rights, atestimated fair value — 18,573,055 385,125 — 18,958,180

Investments in subsidiaries 16,953,677 — 6,265 (16,959,942 ) —

Other assets 27,019,705 22,861,754 14,145,494 (41,101,341 ) 22,925,612 www .S

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Total assets $ 45,105,430 $ 69,670,161 $ 155,561,958 $ (61,970,625 ) $ 208,366,924

Deposit liabilities $ — $ — $ 61,184,312 $ (983,713 ) $ 60,200,599 Securities sold under

agreements to repurchase 440,000 2,228,004 19,307,168 (3,757,010 ) 18,218,162

Notes payable 19,156,790 31,619,553 48,452,915 (2,001,845 ) 97,227,413

Other liabilities 10,852,769 32,243,730 13,238,393 (38,270,013 ) 18,064,879 Equity 14,655,871 3,578,874 13,379,170 (16,958,044 ) 14,655,871

Total liabilities and equity $ 45,105,430 $ 69,670,161 $ 155,561,958 $ (61,970,625 ) $ 208,366,924


Countrywide

Financial

Corporation

(Parent

Only)

Countrywide

Home

Loans, Inc.

(Consolidated)

Other


(in thousands) Statements of Operations:

Revenues $ (51,127 ) $ 3,068,101 $ 2,530,976 $ (593,777 ) $ 4,954,173

Expenses 6,795 2,541,297 1,608,111 (567,523 ) 3,588,680 (Benefit) provision for income

taxes (19,264 ) 160,514 313,397 (8,203 ) 446,444 Equity in net earnings of

subsidiaries 957,707 — — (957,707 ) —

Net earnings $ 919,049 $ 366,290 $ 609,468 $ (975,758 ) $ 919,049

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Note 24—Borrower and Investor Custodial Accounts

As of June 30, 2008 and December 31, 2007, the Company managed $16.5 billion and $19.2 billion,respectively, of borrower and investor custodial cash accounts. These custodial accounts relate to theCompany's mortgage servicing activities. Of these amounts, $11.2 billion and $12.6 billion, respectively,were deposited at the Bank, and included in the Company's deposit liabilities as custodial deposit accounts.The remaining balances were deposited with other depository institutions and are not recorded on theCompany's balance sheets.

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Note 25—Loan Commitments

The following table summarizes the Company's outstanding contractual loan commitments for the periods indicated:

June 30,

2008

December 31,

2007

(in thousands) Commitments to fund mortgage loans $ 18,987,936 $ 23,940,795 Commitments to fund commercial real estate loans — 480,872 Undisbursed home equity lines of credit 5,249,554 9,073,370 Undisbursed construction loans 1,058,994 714,896 Undisbursed warehouse lines of credit 936,713 938,089

Note 26—Legal Proceedings

The Company has been named as a defendant in various legal proceedings involving matters generallyincidental to its businesses and also in the following matters.

Equity and Debt Securities Class Action Matters

The Company has been named as one of the defendants in four putative securities class action casesrelating to its equity and debt securities. Two cases have been filed in the U.S. District Court for the CentralDistrict of California. One of those cases (entitled In re Countrywide Financial Corp. Securities Litigation)was filed by certain New York state and municipal pension funds ("NY Funds") ostensibly on behalf of

purchasers of the Company's common stock and certain other equity and debt securities; the other case(entitled Argent Classic Convertible Arbitrage Fund L.P. v. Countrywide Financial Corp. et al.) was filedostensibly on behalf of purchasers of certain Series A and B debentures issued in various private

placements pursuant to a May 16, 2007 offering memorandum. Both actions assert claims under theantifraud provisions of the federal securities laws. The NY Funds action also asserts claims under theSecurities Act of 1933 relating to the public offering of certain securities. Both complaints allege, amongother things, that the Company made misstatements (including in certain SEC filings) concerning the natureand quality of its loan underwriting practices and its financial results during the relevant period. Theseactions seek unspecified compensatory damages, among other remedies. Defendants have filed motions todismiss these actions.

The Company also has been named as one of the defendants in two class action cases concerning theCompany's common stock pending in Los Angeles Superior Court. One case (entitled Layne v.Countrywide Financial Corp., et al.) was filed ostensibly on behalf of a putative class of participants in theCompany's 401(k) retirement plan whose retirement account contributions were voluntarily

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matched by the Company in the form of shares of Countrywide common stock. This case allegesmisstatements in a May 11, 2007 registration statement that the Company filed with the SEC in connectionwith these shares. The other case (entitled Teratsonian v. Countrywide Financial Corp. et al.) was filedostensibly on behalf of a putative class of Countrywide employees who received Countrywide common

stock under the Company's 2006 equity incentive plan and alleges misstatements in an August 8, 2006registration statement filed in connection with these shares. The alleged misstatements concern, amongother things, the nature and quality of the Company's loan underwriting practices and its financial resultsduring the relevant period. Both cases assert claims under the Securities Act of 1933. The Company intendsto ask the Court to dismiss these matters on various grounds.

Mortgage-Backed Securities Related Matters

The Company has been named as one of the defendants in two putative securities class actions filed inLos Angeles Superior Court relating to the Company's public offering of various mortgage-backedsecurities. One lawsuit (entitled Luther v. Countrywide Home Loans Servicing LP, et al.) is ostensibly

brought on behalf of a class of purchasers of certain mortgage pass-through certificates for whichCWALT, Inc. and various issuing trusts filed registration statements; the other case (entitled Washington

State Plumbing & Pipefitting Pension Trust v. Countrywide Financial Corporation, et al.) is ostensibly brought on behalf of purchasers of such CWALT, Inc. mortgage pass-through certificates, as well asvarious other mortgage-backed securities registered by certain other Company subsidiaries. Both lawsuitsallege, among other things, that the mortgage loans underlying these securities were not originated inaccordance with the underwriting guidelines and processes described in the prospectus supplements issuedin connection with the sale of such securities. The complaints seek unspecified compensatory damages,among other relief. In addition, the Company may have indemnification obligations arising from other mortgage-backed securities transactions to the purchasers of those securities or to other parties.

Shareholder Derivative Matters

The Company has been named as a nominal defendant in two shareholder derivative actions inCalifornia. These actions are brought ostensibly on the Company's behalf and do not seek to recover any

amounts from the Company. One action (entitled In re Countrywide Financial Corp. Derivative Litigation)was filed by the Arkansas Teachers Retirement System and certain other state and municipal pension fundsin the U.S. District Court for the Central District of California (Arkansas); the other action (entitled In reCountrywide Financial Corp. Shareholder Derivative Litigation) was filed by Robert Garber in LosAngeles Superior Court. Both complaints allege, among other things, breaches of fiduciary duty byCompany officers and directors, and misstatements in certain SEC filings concerning the Company's loanunderwriting practices, financial condition and prospects. After the announcement of the Bank of America/Countrywide merger, plaintiffs in both actions amended their complaints to include merger-related class action claims filed ostensibly on behalf of a putative class of all Countrywide shareholders.The federal court has stayed those merger-related class claims in favor of substantially identical claims

pending in the Delaware Court of Chancery, as discussed below in Merger-Related Class Action Matters,and the Los Angeles Superior Court has stayed the entire action in favor of the substantially identicalclaims pending in California federal court and the Delaware Chancery Court. The federal court has granted

in part and denied in part the defendants' motions to dismiss the Arkansas case. Defendants have alsomoved for judgment on the pleadings seeking

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(Unaudited)

dismissal of the Arkansas matter on the grounds that plaintiffs may no longer pursue derivative claims on behalf of the Company because they are no longer Countrywide shareholders after the merger with Bank of America. That motion is pending.

The Company also has been named as a nominal defendant in a consolidated shareholder derivativeaction in the U.S. District Court for the District of Delaware (entitled In re Countrywide Financial Corp.Derivative Litigation) that was filed by the International Brotherhood of Electrical Workers. The complaintalleges that certain Company officers and directors breached their fiduciary duty by causing the Companyto repurchase its stock at allegedly inflated prices in late 2006 and the spring of 2007. Defendants havemoved to dismiss the case on various grounds, including on the grounds that plaintiffs may no longer

pursue derivative claims on behalf of the Company because they are no longer Countrywide shareholders.

A shareholder derivative action (entitled Seymour v. Samuels, et al.) has been filed ostensibly on behalf of Countrywide Capital V ("CCV"), a Delaware trust, against the Company and certain other defendants in the Delaware Court of Chancery by an alleged purchaser of CCV preferred trust securities.The complaint alleges that CCV was harmed when it purchased certain debentures from the Companywhose value the complaint claims the Company had artificially inflated. The Company intends to ask theCourt to dismiss this matter on various grounds.

The Company also has been named as one of the defendants in shareholder derivative lawsuitsostensibly brought on behalf of the Federal Home Loan Mortgage Corp. ("Freddie Mac") (entitled Bassmanv. Syron, et. al.) in the U.S. District Court for the Southern District of New York, and on behalf of theFederal National Mortgage Association ("Fannie Mae") (entitled Agnes v. Raines, et al.) in the U.S. DistrictCourt for the District of Columbia. These complaints allege, among other things, that the Company soldloans to these government-sponsored entities that had not been properly appraised and that the Companymisrepresented the appraised value of the loans it sold in the secondary mortgage market. The Companyintends to ask the courts in these matters to dismiss them on various grounds.

ERISA Class Action Matters

Eighteen class action complaints have been filed against the Company and certain other defendantsalleging violations of the Employee Retirement Income Security Act of 1974 ("ERISA") in the U.S.District Court for the Central District of California. The complaints principally contend that it was not

prudent for the Company to permit employees participating in the Countrywide 401(k) retirement plan tocontinue to invest in the Company's common stock during a roughly two year period ending in September 2007. The Court has stayed all but the first-filed ERISA class action case (entitled Alvidres v. CountrywideFinancial Corp., et al.). The Court has declined to grant defendants' motions to dismiss the complaint in theAlvidres matter, and has granted plaintiff's motion to certify the case as a class action on behalf of current

participants in the Company 401(k) plan.

Indenture Trustee Suit

The Company has been named as a defendant in a case filed in the Delaware Court of Chancery by theBank of New York Mellon in its capacity as indenture trustee with respect to certain Series B floating rateconvertible senior debentures due 2037 having a principal amount of $2 billion and issued by the Companyunder an indenture dated as of May 22, 2007 (the "Indenture"). The complaint alleges, among other things,that the Company's merger with Bank of America constituted awww .S

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Investigation ("FBI") in connection with mortgage business practices. The Department of Justice ("DOJ")has stated to the Company that the DOJ cannot confirm or deny whether the FBI is conducting aninvestigation of the Company.

The Federal Trade Commission has issued Civil Investigative Demands for Documentary Material andfor Written Interrogatories and Report ("CIDs"). The CIDs direct the Company to provide various

documents and items of information in connection with an investigation by the agency regarding

52



(Unaudited)

whether any laws administered by the Commission have been violated in connection with certain aspects of the Company's loan servicing activities. The Company is cooperating with the investigation.

Although management believes it has meritorious defenses to each of these proceedings and intends todefend them vigorously, it is difficult to predict the resulting outcome of such proceedings, particularlywhere investigations and other proceedings are in their early stages. Given the inherent difficulty in

predicting the outcome of legal proceedings, management cannot estimate losses or ranges of losses for legal proceedings where there is only a reasonable possibility that a loss may be incurred, such as thosediscussed above. The Company provides for potential losses that may arise out of legal proceedings to theextent such losses are deemed probable and can be estimated. Although the ultimate outcome of theCompany's legal proceedings discussed above cannot be ascertained at this time, management believes that

any resulting liability will not materially affect its consolidated financial position; such resolution,however, could be material to its operating results for a particular future period depending upon theoutcome of the proceedings and the operating results for a particular period. This assessment is based, in

part, on the existence of insurance coverage.

Note 27—Recently Issued Accounting Pronouncements

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141(R),Business Combinations, ("SFAS 141(R)"). SFAS 141(R) expanded the scope of SFAS 141 to all businesscombinations which previously applied only to business combinations for which control was obtained bytransferring consideration. Under SFAS 141(R), the acquisition date is the date at which control isobtained, requiring the acquirer to recognize and measure the fair value of the acquiree as a whole, and theassets acquired and liabilities assumed at their full fair value as of that date, regardless of the percentageownership in the acquiree. The Company has determined that it will adopt SFAS 141(R) on its effectivedate of January 1, 2009 and the financial impact, if any, upon adoption is not expected to be significant.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51,("SFAS 160"). SFAS 160 amends ARB No. 51 to establish accounting and reporting standards for thenoncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that anoncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should bewww .S

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reported as a separate component of equity in the consolidated financial statements and requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated. Under SFAS 160,expanded disclosures are required to identify and distinguish between the interests of the parent's ownersand the interests of the noncontrolling owners of a subsidiary. The Company has determined that it willadopt SFAS 160 on its effective date of January 1, 2009 and the financial impact, if any, upon adoption isnot expected to be significant.

In February 2008, the FASB issued FASB Staff Position No. FSP 140-3, Accounting for Transfers of Financial Assets and Repurchasing Transactions, ("FSP 140-3"). FSP 140-3 addresses accounting for repurchase agreements related to previously transferred financial assets when the repurchase arrangement is

between the same parties as the original transfer. This FSP presumes that an initial transfer of a financialasset and a repurchase agreement are considered part of the same arrangement under Statement of FinancialAccounting Standards No. 140, Accounting for Transfers and Servicing of Financial Assets andExtinguishments of Liabilities, ("SFAS 140"). However, if certain criteria are met, the initial transfer andrepurchase financing shall not be evaluated as a linked transaction and instead

53



(Unaudited)

should be evaluated separately under SFAS 140. This FSP is effective for financial statements issued for fiscal years beginning after November 15, 2008 and shall be applied prospectively to initial transfers andrepurchase financings for which the initial transfer is executed on or after the beginning of the fiscal year

this FSP is initially applied. The Company has not yet determined the financial impact, if any, uponadoption.

In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, Disclosuresabout Derivative Instruments and Hedging Activities, an Amendment to FASB Statement No. 133,("SFAS 161"). SFAS 161 was issued to improve transparency of a company's derivative instruments andhedging activities by requiring qualitative disclosures about objectives and strategies for using derivatives,quantitative disclosures about fair value amounts of gains and losses on derivative instruments, anddisclosure about credit-risk related features in derivative agreements. This Statement also requires that theoverall objectives for using derivative instruments be disclosed in terms of underlying risk and accountingdesignation. SFAS 161 is effective prospectively for financial statements beginning after November 15,2008.

In May 2008, the FASB issued FASB Staff Position APB 14-1, Accounting for Convertible DebtInstruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement), ("FSPAPB 14-1"). FSP APB 14-1 applies to convertible debt securities that, upon conversion, may be settled bythe issuer fully or partially in cash. Under this FSP, the issuer must segregate the convertible debtinstrument into two components: (1) a debt component, representing the issuer's contractual obligation to

pay principal and interest and (2) an equity component, representing the holder's option to convert the debtsecurity into equity of the issuer. The proceeds are allocated between the liability and the equitycomponents. First, the liability component is measured based on the fair value of a similar debt instrumentwith no equity conversion feature. Any remaining proceeds are allocated to the equity component andwww .S

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recorded as a discount on the debt. The debt discount is amortized as additional interest expense using theinterest method over the expected life of the debt. This FSP is effective for financial statements issued

beginning after December 15, 2008 and interim periods within that fiscal year. The FSP is to be appliedretrospectively to all prior periods presented. The Company has preliminary determined that approximately$200 million of the proceeds from its convertible debt issuance in 2007 will be allocated to the equityconversion feature and represent a discount on that debt.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

As used in this Report, references to "we," "our," "the Company" or "Countrywide" refer toCountrywide Financial Corporation and its consolidated subsidiaries unless otherwise indicated. Thisdiscussion includes forward-looking statements which are subject to certain risks and uncertainties asdiscussed in the section Factors That May Affect Our Future Results of this Report.

Overview

This section gives an overview of critical items that are discussed in more detail throughoutManagement's Discussion and Analysis of Financial Condition and Results of Operations.

Merger with Bank of America Corporation

On July 1, 2008, Countrywide Financial Corporation completed its merger with Red Oak Merger Corporation, a wholly-owned subsidiary of Bank of America Corporation, pursuant to the terms of the

previously announced Agreement and Plan of Merger, dated as of January 11, 2008. Red Oak Merger Corporation has subsequently been renamed Countrywide Financial Corporation. Under the terms of theMerger agreement, Countrywide shareholders received 0.1822 of a share of Bank of America Corporationcommon stock in exchange for one share of Countrywide common stock, plus an amount of cash in lieu of

any fractional share. All shares of the Company's 7.25% Series B Non-Voting Convertible Preferred Stock were cancelled. Trading of the Company's common stock was ceased and the Company's common stock has been delisted from the New York Stock Exchange. As a result of the Merger, the Company's principalexecutive officer, principal financial officer, other executive officers and the members of the Company'sBoard of Directors resigned and were replaced by individuals appointed by Bank of America.

As a result of Bank of America's acquisition of Countrywide, we are omitting certain information asallowed by general instruction H of Form 10-Q. Specifically, we are omitting Part I, Item 3, Quantitativeand Qualitative Disclosures About Market Risk; Part II, Item 2, Changes in Securities (Unregistered Salesof Equity Securities and Use of Proceeds) and Part II, Item 4, Submission of Matters to a Vote of SecurityHolders. We have also abbreviated Management's Discussion and Analysis of Financial Condition andResults of Operations as allowed by general instruction H.

Results of Operations

Following is a summary of our results of operations for the quarters ended June 30, 2008 and 2007:

Quarters Ended June 30,

2008 2007

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Carrying value of credit-sensitive retained interests at periodend $ 288,807 $ 1,523,016 (81 %)

Loss Reserves and Liabilities:

Allowances for credit losses $ 5,099,305 $ 696,777 632 %

Liability for representations and warranties 1,536,347 431,823 256 %

Liability for impairment losses related to future drawobligations 637,493 — N/M

Liability for corporate guarantees 73,988 56,016 32 %

Liability for reinsurance claims 585,811 112,350 421 %

$ 7,932,944 $ 1,296,966 512 %

(1) The provision for credit losses is comprised of:

Quarters EndedJune 30,

2008 2007

(in thousands) Provision for loan losses before pool mortgage insurance recoveries $ 2,614,321 $ 368,811 Provision for losses on unfunded commitments (2,181 ) 4,463 Increase in estimate of amounts recoverable from pool mortgage insurance (283,396 ) (75,887 )

$ 2,328,744 $ 297,387

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(2) Excludes both loans held in SPEs where the beneficial interest holder of the securitized assetretains the credit risk relating to the loans and the allowance for loan losses.

(3) Excludes $3,022.2 million and $1,361.4 million, at June 30, 2008 and 2007, respectively, of loansthat we have the option (but not the obligation) to repurchase but have not exercised that option.These loans are required to be included on our balance sheet. Also excluded are nonaccrual loansheld for sale that are carried on the consolidated balance sheet at the lower of cost or estimated fair value and government guaranteed loans held for investment, as follows:

June 30,

2008 2007

(in thousands) Loans held for sale $ 288,532 $ 279,824 Government guaranteed loans, held for investment 376,438 350,452

$ 664,970 $ 630,276

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The carrying value of the Company's portfolio of loans held for investment was $94.2 billion atJune 30, 2008. As previously disclosed by Bank of America, the preliminary purchase price adjustments tosuch carrying value were estimated to be approximately $8.1 billion.

Liquidity and Capital

During the second half of 2007, our access to capital was severely challenged when the non-agencysegments of the secondary mortgage market and the commercial paper, medium-term note and repurchaseagreement segments of the public corporate debt markets were severely restricted by illiquidity, particularlyfor mortgage companies and other financial institutions. These conditions have not abated through the dateof this Report.

In response to the disruption in the second half of 2007, we:

• Modified our funding structure to that of a thrift holding company, which has access to stable,non-capital markets based funding, by accelerating the integration of our mortgage bankingactivities into our bank subsidiary

• Significantly changed our underwriting standards to focus the majority of our loan production onloans that are available for direct sale or securitization into programs sponsored by thegovernment-sponsored agencies

• Entered into an agreement and plan of merger with Bank of America on January 11, 2008 andcompleted the merger on July 1, 2008.

After being acquired, we sold certain assets to Bank of America for approximately $30.7 billion indemand notes and cash. We used proceeds from the asset sales to repay our unsecured revolving lines of credit and bank loans for approximately $11.5 billion and to increase the capital of our Bank subsidiary by$5.5 billion.

On July 1, 2008, Standard and Poor's Ratings Service (S&P) upgraded its credit rating of CFC andCHL from BB+ to AA, an investment grade rating. S&P also upgraded its credit rating of the Bank fromBBB to AA+. The Rating Outlook for all three entities was changed from Credit Watch Developing to

Negative.

Critical Accounting Policies

The accounting policies with the greatest impact on our financial condition and results of operationsthat require the most judgment, and which are most likely to result in materially different amounts beingrecorded under different conditions or using different assumptions, pertain to our

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measurement of provisions and reserves associated with credit risk inherent in our operations; our mortgageloan sale and securitization activities, including valuation of loans pending sale; our investments in MSRsand retained interests and our use of derivatives to manage interest rate risk, including the valuation of interest rate lock commitments. A discussion of the critical accounting policies related to these activities isincluded in our 2007 Annual Report.www .S

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Effective January 1, 2008, we adopted SEC Staff Accounting Bulletin No. 109 ("SAB 109"). SAB 109supersedes Staff Accounting Bulletin No. 105 ("SAB 105"), Application of Accounting Principles to LoanCommitments. SAB 109 changed the requirements of SAB 105 to require that the expected net future cashflows related to the servicing of a loan should be included in the measurement of all written loancommitments that are accounted for at fair value through earnings. The guidance is effective on a

prospective basis to derivative loan commitments issued or modified after December 31, 2007. The effectof this guidance on Countrywide is for us to recognize higher estimated fair values of our interest rate lock commitments when the commitments are made, effectively changing the timing of revenue recognition tothe time a derivative loan commitment is issued. Before adoption of SAB 109, revenue was recognizedupon transfer of the loans in transactions that met the accounting requirements for sale accounting. Theeffect of adoption of SAB 109 was to increase gain on sale of loans and securities by $216.0 million for thesix months ended June 30, 2008. This amount represents the revenue recognized at the time the loancommitment was issued that is included in the value of our interest rate lock commitments or MortgageLoan Inventory at June 30, 2008.

For loan commitments issued after December 31, 2007, the Company estimates the fair value of anIRLC based on the estimated fair value of the underlying mortgage loan less the commitment price adjustedfor the probability that the mortgage loan will fund within the terms of the IRLC. The Company generallyestimates the fair value of the underlying loan based on quoted market prices for securities backed bysimilar types of loans together with estimated servicing value adjusted for the estimated costs and profitmargin associated with securitization. The estimated probability of mortgage loan funding is based on theCompany's historical experience and is adjusted to reflect the risk of variability in such probability using anoption pricing model. If quoted market prices for relevant securities are not available, fair value isestimated based on other relevant factors, including dealer price quotations, prices available for similar securities, and valuation models intended to approximate the amounts that would be received from a third

party.

As detailed in Item 7— Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies of our 2007 Annual Report, many of our key accounting policiesrely on estimates of value. The estimates for those items identified in that section of the 2007 AnnualReport all fall in Level 3 of the fair value hierarchy. Accordingly, many of our estimates of the fair valueamounts included in our financial statements depend on significant assumptions that are difficult to observeor derive from marketplace data.

Changes in significant assumptions underlying our estimates can have a significant effect on thevalues we have recorded. Following is an illustration of the effect of a change in key assumptions—

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where applicable to the specific instrument types—on our estimates of value of these items as of June 30,2008:

Investments in Other Financial Instruments

Mortgage

Loans Held

for Sale

Trading

Securities

Investment

Securities

Retained

Interests IRLCs Net

Mortgage

Servicing

Rights

(in thousands) Assets: Level 3 balances at

June 30, 2008 $ 1,425,208 $ 1,124,351 $ 13,424,032 $ 1,510,579 $ 106,949 $ 18,402,390 www .S

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Weighted-average rate(1) or OAS: Effect of 20% adverse

change $ (87,192 ) $ (57,677 ) $ (363,770 ) $ (94,008 ) — $ (674,666 ) Effect of 20%

favorable change $ 103,168 $ 67,581 $ 416,095 $ 118,548 — $ 742,010

Weighted-average prepayment speed: Effect of 20% adverse

change — $ (84,870 ) $ (229,066 ) $ (60,373 ) — $ (1,292,012 ) Effect of 20%

favorable change — $ 96,233 $ 183,265 $ 88,556 — $ 1,597,226

Weighted-average netlifetime credit losses: Effect of 20% adverse

change — — — $ (58,604 ) — $ (180,941 ) Effect of 20%

favorable change — — — $ 137,900 — $ 148,043

Weighted-averagefunding ratio: Effect of 20% adverse

change — — — — $ (21,390 ) — Effect of 20%

favorable change — — — — $ 21,390 —

Asset-backed Secured Financings

Liabilities: Level 3 balances at June 30, 2008: $ 1,212,252

Weighted-average discount rate: Effect of 20% adverse change $ (68,518 )

Effect of 20% favorable change $ 79,446

(1) Includes discount rate or Market Spread.

The sensitivities shown are solely for illustrative purposes and should be used with caution. Thisinformation is furnished to provide the reader with a basis for assessing the sensitivity of the values

presented to changes in key assumptions. Certain key assumptions are common to several of the financialstatement items that are measured at their estimated fair value. While the qualitative nature of theassumption may be the same, the assumptions vary by specific instrument and do not necessarily change atthe same rate. A 20% change in an assumption for one of the financial statement items does not necessarilyimply that assumption would also change in the same direction or by the same amount for other items. Asthe figures indicate, changes in fair value based on a given percentage variation in individual assumptionsgenerally cannot be extrapolated. In the preceding table, the effect of a variation in a particular assumptionwww .S

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on the fair value of the item is calculated without changing any other assumption. In reality, changes in onefactor may coincide with changes in another, which could compound or counteract the sensitivities.

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Results of Operations Comparison—Quarters Ended June 30, 2008 and 2007

Detailed Line Item Discussion of Consolidated Revenue and Expense Items

(Loss) Gain on Sale of Loans and Securities

(Loss) gain on sale of loans and securities is summarized below:


2008 2007

(Loss) Gain on Sale (Loss) Gain on Sale

Loans Sold Amount Margin Loans Sold Amount Margin

(dollar amounts in thousands) Prime Mortgage Loans $ 56,759,841 $ 773,954 1.36 % $ 109,425,578 $ 1,085,656 0.99 % Subprime Mortgage Loans — (64,655 ) N/M 5,164,101 187,201 3.63 %

Prime Home Equity Loans:

Initial Sales 4,599 6,131 N/M 1,998,399 50,262 2.52 %

Subsequent draws 246,821 6,315 2.56 % 1,042,353 22,976 2.20 %

251,420 12,446 4.95 % 3,040,752 73,238 2.41 %

Commercial real estate 539,922 (24,149 ) (4.47 %) 2,737,967 28,650 1.05 %

Conduit 650,902 2,409 0.37 % 7,848,462 82,712 1.05 % $ 58,202,085 700,005 1.20 % $ 128,216,860 1,457,457 1.14 %

Underwriting 3,607 32,862 Securities trading and other (162,582 ) 36,418 Adjustments to estimated

liability for losses onrepresentations (677,276 ) (51,883 )

Other 9,304 18,604

$ (126,942 ) $ 1,493,458

Prime Mortgage Loans

Gain on sale of Prime Mortgage Loans decreased in the quarter ended June 30, 2008 compared to thequarter ended June 30, 2007, due primarily to a 48% decrease in the volume of loans sold. This reductionwas partially offset by improvement in our gain on sale margins compared to the previous period.

Subprime Mortgage Loans

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Loss on sale of Subprime Mortgage Loans increased in the quarter ended June 30, 2008 as comparedto the year-ago period primarily due to a discontinuation of subprime lending and sales in late 2007. Theloss in the quarter ended June 30, 2008 consisted primarily of valuation adjustments on subprime loans heldfor sale due to continuing declines in the value of such mortgage loans. These loans consisted primarily of $1.3 billion of loans that have previously been transferred in securitization transactions but which did notqualify as sales in accordance with SFAS 140.

Prime Home Equity Loans

Gain on sale of Prime Home Equity Loans decreased in the quarter ended June 30, 2008 as comparedto the year-ago period due primarily to a discontinuation of lending and sales of home equity loans, exceptfor additional draws under existing loan agreements and securitizations.

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Commercial Real Estate

During the quarter ended June 30, 2008, commercial real estate loss on sale increased due tocontinuing illiquidity in the commercial mortgage securitization market along with our discontinuation of commercial real estate lending, and included a net loss on related credit default swaps of $9.2 million.

Conduit and Underwriting Activities

During the quarter ended June 30, 2008, both conduit and underwriting gain on sale decreasedcompared to the year-ago period as a result of our exit from these activities due in large part to lack of demand in the mortgage marketplace for non-agency securities.

Securities Trading and Other

The negative result for gain on sale arising from securities trading and other activities compared to thequarter ended June 30, 2007, was primarily due to additional write-downs of trading securities at depressed

prices.

Provision for Losses on Representations and Warranties

Our losses on representations and warranties arise when such representations and warranties are breached and generally only when a loss results from the breach. We estimate our liability for representations and warranties at the time of sale and update our estimates quarterly. At the time of sale, theliability is a component of the product's gain on sale. Subsequent to sale, adjustments to our liability for representations and warranties are included in provision for losses on representations and warranties, whichis included in the income statement as a component of (loss) gain on sale of loans and securities. Theexpense applicable to our estimate of future representations and warranty claims increased to$755.1 million in the quarter ended June 30, 2008 from $73.4 million in the year-ago period. Of theseamounts, $677.3 million and $51.9 million for the current quarter and the year-ago quarter, respectively,were adjustments made subsequent to sale and are included in the provision for losses related torepresentations and warranties. The increase was primarily driven by increased levels of claims that we arecurrently experiencing along with our expectations for elevated levels of claims in the near future. Thelevels of claims is due largely to worsening trends and expectations for delinquencies and home prices andthe related increase in the projection of future defaults to which representation and warranty claims relate.

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Net Interest (Expense) Income and Provision for Loan Losses

Net interest (expense) income is summarized below:

Quarters Ended

June 30,

2008 2007

(in thousands) Net interest (expense) income:

Investment loans and securities $ 585,883 $ 476,257

Loans and securities relating to mortgage banking activities 44,512 147,647

Net interest income on custodial balances 36,159 224,197

Net interest expense relating to loan servicing activities (135,133 ) (249,470 )

Securities inventory 74,656 19,915

Other 49,874 109,450 Net interest income 655,951 727,996

Provision for loan losses (2,330,925 ) (292,924 )

Net interest (expense) income after provision for loan losses $ (1,674,974 ) $ 435,072

The increase in net interest income from the investment loans and securities was attributable to growthin average interest-earning assets partially offset by a decrease in the net interest margin. Average interest-earning assets in the investment loans and securities increased to $110.5 billion during the quarter endedJune 30, 2008, an increase of $23.8 billion, or 27%, over the year-ago period. Net interest margin relatingto investment loans and securities decreased to 2.11% during the quarter ended June 30, 2008, from 2.17%during the year-ago period primarily as a result of increasing levels of non accrual loans.

The decrease in net interest income from mortgage banking-related loans and securities reflects asharp decrease in average interest-earning assets resulting from lower mortgage loan production.

Interest income on custodial balances decreased from the year-ago period due to a reduction in theearnings rate along with a reduction in average balances, partially offset by a decrease in interest expenseon paid-off loans resulting from a decrease in payoffs. Interest income on custodial balances is reduced bythe interest we are required to pass through to security holders on paid-off loans, which was $62.1 millionand $113.6 million during the quarters ended June 30, 2008 and 2007, respectively.

Net interest expense related to loan servicing assets decreased due to increased interest income on alarger portfolio of mortgage loans held for investment allocated to servicing activities combined with areduction in the cost of debt used to finance servicing-related assets partially offset by an increase in our

investment in MSRs and other loan servicing-related assets.

The increase in net interest income from the trading securities and securities purchased under agreements to resell inventories is attributable to an increase in the net interest margin from 0.11% duringthe quarter ended June 30, 2007 to 0.77% during the quarter ended June 30, 2008, partially offset by a 46%decrease in the average inventory of securities held.

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mortgage loans. Such factors continue to be reflected in our current experience and expectations for levelsof mortgage delinquencies, defaults and loss severities.

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Loan Servicing Fees and Other Income from MSRs and Retained Interests

Loan servicing fees and other income from MSRs and retained interests are summarized below:

Quarters Ended

June 30,

2008 2007

(in thousands) Servicing fees, net of guarantee fees(1) $ 1,112,473 $ 1,102,707 Income from retained interests 92,336 123,941

Late charges 97,198 90,137 Prepayment penalties 8,696 70,018 Ancillary fees 27,146 34,452

Total loan servicing fees and income from MSRs and retained interests $ 1,337,849 $ 1,421,255

(1) Includes contractually specified servicing fees.

The increase in servicing fees, net of guarantee fees, was principally due to a 9% increase in theaverage servicing portfolio, partially offset by a decrease in the overall annualized net service fee earnedfrom 0.340% of the average portfolio balance during the quarter ended June 30, 2007 to 0.316% during thequarter ended June 30, 2008.

The decrease in income from retained interests was due primarily to a 18% decrease in the averageinvestment in these assets from the quarter ended June 30, 2007 to the current quarter, combined with areduction in the average yield on such instruments from 16% during the year-ago period to 15% during thecurrent quarter. Income from retained interests excludes any impairment charges or recoveries, which areincluded in impairment of retained interests in the consolidated statements of operations. These investmentsinclude interest-only and principal-only securities, and certain mortgage pass-through and residualsecurities that arise from the securitization of mortgage loans, primarily Subprime Mortgage and PrimeHome Equity Loans.

Realization of Expected Cash Flows from Mortgage Servicing Rights

The change in fair value of MSRs that is included in the statements of operations during the quartersended June 30, 2008 and 2007 consists of two primary components—a reduction in fair value due to therealization of expected cash flows from the MSRs and a change in fair value resulting from changes inmarket factors, such as interest rates.

The realization of expected cash flows from MSRs resulted in a value reduction of $667.7 million and$857.1 million during the quarters ended June 30, 2008 and 2007, respectively. This amount declined

because of a decrease in the prepayment rate of loans in our MSR portfolio due to a worsening housingmarket and lesser credit availability in the mortgage market which, in turn, extends the expected life of theexisting asset.www .S

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Change in Fair Value of Mortgage Servicing Rights

We recorded an increase in the fair value of the MSRs due to changes in market factors in the quartersended June 30, 2008 and 2007 of $1,896.0 million and $1,177.3 million, respectively, primarily as a resultof increasing mortgage rates which decreased expected future prepayments, which in turn increasesexpected cash flows from our current servicing portfolio.

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Recovery (Impairment) of Retained Interests

Recovery (impairment) of retained interests is summarized below:


2008 2007

Recovery

(Impairment)

AssetBalance at

Period End

Recovery

(Impairment)

AssetBalance at

Period End

(in thousands) Credit-sensitive retained interests $ (64,351 ) $ 288,807 $ (416,673 ) $ 1,523,016

Non credit-sensitive retained interests 99,631 1,221,772 148,556 1,212,497

Recovery (impairment) of retained interests $ 35,280 $ 1,510,579 $ (268,117 ) $ 2,735,513

In the quarter ended June 30, 2008, we recognized impairment of credit-sensitive retained interests of $64.4 million, including impairment of $74.5 million related to Subprime and related residual interests

partially offset by a recovery of $17.1 million related to subordinated interests on Prime Home Equitysecuritizations. The recovery on Prime Home Equity securitizations consists of impairment of retained

interests of $81.3 million and recovery of previously recorded impairment losses of $98.4 million related toestimated future draw obligations on the securitizations that have entered or are probable to enter rapidamortization status. The impairment charges were primarily the result of the effect of increased estimatesfor future losses on the loans underlying these securities driven by continued expectations of future declinesin the value of the real estate collateral securing our loans and the effect on delinquencies of significanttightening of available credit compared to prior periods. The loss estimate, as measured by grossundiscounted losses embedded in the valuation of subordinated interests as a percentage of the unpaid

principal balance of the loans underlying such interests, increased from 11.0% to 15.6% during the quarter ended June 30, 2008.

The recovery of previously recorded impairment losses related to estimated future draw obligations onthe securitizations that have entered or are probable to enter rapid amortization status is due to a reductionin projections of future expected funding obligations under rapid amortization. The reduction in estimatedfuture fundings is due primarily to not renewing lines of credit and suspending borrowers' access to existinglines of credit, in accordance with the borrowers' line of credit agreements, when their loans enter aspecified delinquency status or when their property values decline below a specified threshold.

In the quarter ended June 30, 2007, we recognized impairment of credit-sensitive retained interests of $416.7 million, including $388.1 million related to subordinated interests on prime home equitysecuritizations. The impairment charges on these subordinated interests were driven by weakening housingmarket conditions, which resulted in increased estimates for future losses on the loans underlying thesesecurities. The loss estimate, as measured by undiscounted losses embedded in the valuation of www .S

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subordinated interests as a percentage of the unpaid principal balance of the loans underlying such interests,increased from 3.1% to 5.2% during the quarter ended June 30, 2007.

In the quarter ended June 30, 2008, recovery in the estimated fair value of the non credit-sensitiveretained interests was due to the effect of increasing interest rates on the estimated cash flows relating tointerest-only securities, partly offset by the offsetting effects of the change in interest rates on the values of

principal-only and prepayment securities. In addition, the value of senior and mezzanine securities that we began retaining as a result of the market disruption during 2007 continued to decline.

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During the quarter ended June 30, 2007, recovery of non credit-sensitive retained interests was due primarily to an increase in the value of interest-only securities resulting from an increase in interest rates.

Servicing Hedge Gains/Losses

The Servicing Hedge is designed to supplement the macro hedge and to offset a portion of the interestrate driven change in the value of MSRs and retained interests recorded in the current period. The values of the derivatives and securities that are the primary components of the Servicing Hedge are tied to long-termmortgage, swap and Treasury rates. Overall, these rates increased during the current period. The ServicingHedge produced a loss of $2,624.3 million, including $519.7 million of time value decay of the optionsincluded in the Servicing Hedge (our "hedge cost"). The composition of the Servicing Hedge is a primarydriver of hedge cost. In selecting among alternative hedge instruments to meet the desired risk profile, weconsider such factors as cost, cash flow requirements and counterparty risk in addition to a particular instrument's effect on our interest rate risk profile.

During the quarter ended June 30, 2007, interest rates increased and as a result, the Servicing Hedgeincurred a loss of $1,373.1 million, including $125 million of hedge cost.

Net Insurance Premiums Earned

The $132.4 million increase in net insurance premiums earned was primarily attributable to growth inlender-placed property business.

Other Revenue

Other revenue consists of the following:

Quarters Ended

June 30,

2008 2007

(in thousands) Appraisal fees, net $ 52,608 $ 41,674 Title services 30,480 15,773 Change in cash surrender value of life insurance 9,171 14,898 Credit report fees, net 7,336 18,164 Loss on sale of fixed assets and intangible assets (19,440 ) (2,037 ) Other 104,801 83,646

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Realized Loss on Available for Sale Investment Securities

During the quarter ended June 30, 2008, we recognized other-than temporary impairment totaling$467.8 million in our portfolio of investment securities classified as available-for-sale. This loss wasrecognized primarily because, based on the loss estimates embedded in the value of certain non-agency

securities held in our investment portfolio, we no longer believed that it was reasonably assured that thedecline in value would be recovered. This amount compares to a loss totaling $4.9 million in the quarter ended June 30, 2007.

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Compensation Expenses

Compensation expenses decreased $112.2 million, or 10%, during the quarter ended June 30, 2008 ascompared to the year-ago period as summarized below:

Quarters Ended

June 30,

2008 2007

(in thousands) Base salaries $ 560,143 $ 624,734 Incentive bonus and commissions 273,266 475,941 Payroll taxes and other benefits 180,896 195,214 Deferral of loan origination costs (17,457 ) (186,873 )

Total compensation expenses $ 996,848 $ 1,109,016

Our average workforce declined from 58,261 during the quarter ended June 30, 2007 to 50,455 duringthe quarter ended June 30, 2008. This decline was centered in our mortgage origination operations andreflects the dramatic decline in mortgage loan production which began in the third quarter of 2007. Thisreduction in headcount, along with reductions in the profitability of the Company's activities upon whichincentive compensation expense is based caused a 22% reduction in compensation expenses before deferralof loan origination costs.

Effective January 1, 2008, we adopted SFAS 159 and have elected to account for most of our mortgage loans originated or purchased for sale at their estimated fair value. Because of this election, feesand costs are recorded in earnings as incurred instead of being deferred. Accordingly, the deferral of loanorigination costs declined by 91% from the prior period.

Occupancy and Other Office Expenses

Occupancy and other office expenses are summarized below:

Quarters Ended

June 30,

2008 2007

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Office and equipment rentals $ 74,885 $ 65,221 Depreciation 53,526 59,177 Utilities 38,348 41,234 Postage and courier service 27,941 27,568 Office supplies 17,047 21,963 Dues and subscriptions 12,552 15,088 Repairs and maintenance 9,572 14,546 Other 15,298 24,220

Total occupancy and other office expenses $ 249,169 $ 269,017

During the quarter ended June 30, 2008, occupancy and other office expenses decreased by 7%, or $19.8 million, reflecting the reductions in our workforce discussed previously in Compensation Expenses.

Insurance Claim Expenses

Insurance claim expenses were $366.5 million during the quarter ended June 30, 2008 as compared to$154.8 million during the year-ago period. The increase in insurance claim expenses was primarily the

result of a $185.1 million increase in the provision for mortgage reinsurance claims arising from

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increased loss expectations caused by the current elevated delinquencies and defaults inherent in our loanservicing portfolio.

Other Operating Expenses

Other operating expenses are summarized below:

Quarters Ended

June 30,

2008 2007

(in thousands) Legal, consulting, accounting and auditing expenses $ 101,706 $ 47,261 Operations of foreclosed real estate 79,647 21,769 Losses on servicing-related advances 77,640 22,635 Insurance commission expense 39,216 43,705 Insurance 26,140 17,686 Mortgage insurance 22,567 23,938 Taxes and licenses 22,269 18,146 Software amortization and impairment 19,850 19,561 Travel and entertainment 18,678 27,771 Other 108,012 58,021 Deferral of loan origination costs (851 ) (29,136 )

Total other operating expenses $ 514,874 $ 271,357

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Losses on servicing-related advances increased $55.0 million due to increases in the level of defaultedloans in the servicing portfolio.

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Results of Operations Comparison—Six Months Ended June 30, 2008 and 2007

Gain on Sale of Loans and Securities

Gain on sale of loans and securities is summarized below:

Six Months Ended June 30,

2008 2007

Gain on Sale Gain on Sale

Loans Sold Amount Margin Loans Sold Amount Margin

(dollar amounts in thousands) Prime Mortgage Loans $ 117,511,650 $ 1,941,944 1.65 % $ 202,304,717 $ 2,017,227 1.00 % Subprime Mortgage Loans 3,281 (173,161 ) N/M 13,054,123 149,386 1.14 %

Prime Home Equity Loans:

Initial Sales 9,184 (22,229 ) N/M 8,785,234 193,466 2.20 %

Subsequent draws 904,049 20,735 2.29 % 2,085,493 50,438 2.42 %

913,233 (1,494 ) N/M 10,870,727 243,904 2.24 %

Commercial real estate 701,451 7,559 1.08 % 4,228,239 66,215 1.57 % Conduit 2,501,383 39,132 1.56 % 15,282,847 139,995 0.92 %

$ 121,630,998 1,813,980 1.49 % $ 245,740,653 2,616,727 1.06 %

Underwriting 12,886 97,028 Securities trading and other (234,518 ) 67,200

Hedge allocation (340,500 ) — Adjustment to estimated

liability for losses onrepresentations andwarranties (1,053,550 ) (79,064 )

Other (35,929 ) 25,671

$ 162,369 $ 2,727,562

Prime Mortgage Loans

Gain on sale of Prime Mortgage Loans decreased by 4% in the six months ended June 30, 2008 ascompared to the six months ended June 30, 2007. The Company's adoption of SAB 109 contributed to theincrease in the prime gain on sale in the six months ended June 30, 2008 by $216.0 million. The adoptionof this guidance results in revenue being recorded upon initial recognition of derivative interest rate lock commitments. Prior to adoption, revenue was recorded when the loans were sold. In addition, our electionto account for the majority of our loans held for sale at estimated fair value effective January 1, 2008www .S

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positively impacted prime gain on sale margins. Because of this election, origination costs and fees arerecorded in earnings as incurred instead of being deferred, which resulted in increased prime gain on salemargins of approximately $176 million. This amount is offset by higher production expenses. Increasedgain on sale margins on Prime Mortgage Loans also contributed to higher gain on sale of Prime MortgageLoans. These positive factors were partially offset by a 42% decline in the volume of loans sold.

Subprime Mortgage Loans

Loss on sale of Subprime Mortgage Loans increased in the six months ended June 30, 2008 ascompared to the year-ago period due primarily to discontinuation of lending and sales of subprimemortgage loans in late 2007. The loss in the six months ended June 30, 2008 consisted primarily of valuation adjustments on subprime loans held for sale due to continuing declines in the value of these

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loans. These loans included $1.3 billion of loans that have previously been securitized but which did notqualify as sales in accordance with SFAS 140 as of June 30, 2008.

Prime Home Equity Loans

We recorded a small net loss on sale of Prime Home Equity Loans in the six months ended June 30,2008 as compared to a gain on sale for the year-ago period due primarily to discontinuation of lending andsales of Prime Home Equity loans in late 2007.

Commercial Real Estate

During the six months ended June 30, 2008, commercial real estate gain on sale decreased due tocontinuing illiquidity in the commercial mortgage securitization market along with our discontinuation of commercial real estate lending and included $24.7 million in gains on credit default swaps.

Conduit and Underwriting Activities

During the six months ended June 30, 2008, both conduit and underwriting gain on sale decreasedcompared to the year-ago period as a result of our exit from these activities due, in part, to lack of demandin the mortgage marketplace for non-agency securities.

Securities Trading and Other

The negative results for gain on sale arising from securities trading and other activities compared tothe six months ended June 30, 2007, was primarily due to additional write-downs of trading securities atdepressed prices.

Hedge Allocation

As discussed in Note 6— Derivative Financial Instruments, during the six months ended June 30, 2008we managed in aggregate the risk of Market Spread changes in value of our mortgage banking assets, whilemaintaining separate portfolios of financial instruments to manage the interest rate risk inherent in our

production and servicing assets. Accordingly, changes in the value of mortgage banking assets and therelated hedge instruments (collectively the "Position") arising from changes in Market Spreads wereallocated between those arising from loan production activities and those arising from loan servicingwww .S

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activities. In the six months ended June 30, 2008, Market Spread declines in the value of the LoanProduction Sector Position of $340.5 million were allocated to the Loan Servicing Sector.

Provision for Losses Related to Representations and Warranties

The expense applicable to our estimate of future representations and warranty claims increased to

$1,183.3 million in the six months ended June 30, 2008 from $90.4 million in the year-ago period.Adjustments to the estimate made subsequent to sale during the current period were $1,053.6 million, andare included in the adjustment to estimated liability for losses on representations and warranties line in thetable above. The increase was primarily driven by increased levels of claims that we are currentlyexperiencing along with our expectations for elevated levels of claims in the near future. The level of claims is due largely to worsening trends and expectations for delinquencies and home prices and therelated increase in the projection of future defaults to which representation and warranty claims arecorrelated.

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Net Interest (Expense) Income and Provision for Loan Losses

Net interest (expense) income is summarized below:

Six Months Ended

June 30,

2008 2007

(in thousands) Net interest (expense) income:

Investment loans and securities $ 1,220,459 $ 987,010

Loans and securities relating to mortgage banking activities 81,572 258,030

Net interest income on custodial balances 104,757 428,017 Net interest expense relating to loan servicing activities (263,369 ) (477,994 )

Trading securities inventory 136,648 44,395

Other 107,204 219,475

Net interest income 1,387,271 1,458,933

Provision for loan losses (3,832,277 ) (444,886 )

Net interest (expense) income after provision for loan losses $ (2,445,006 ) $ 1,014,047

The increase in net interest income from investment loans and securities was attributable to growth inaverage interest-earning assets partially offset by a decrease in the net interest margin. Average investmentloans and securities assets increased to $111.5 billion during the six months ended June 30, 2008, anincrease of $26.6 billion, or 31%, over the year-ago period. Net interest margin attributable to investmentloans and securities declined to 2.17% during the six months ended June 30, 2008, from 2.29% during theyear-ago period primarily as a result of increasing levels of non accrual loans.

The decrease in net interest income from mortgage banking-related loans and securities reflects adecrease in the balance of average interest-earning assets resulting from lower mortgage loan production,

partially offset by an increase in net interest margin from the year-ago period. The mortgage banking-related loan and securities inventory is financed in part with borrowings tied to short-term indices. Duringwww .S

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the current period, the difference between long-term and short-term interest rates was more favorable thanin the year-ago period, causing the increase in net interest margin.

Interest income on custodial balances decreased from the year-ago period due to a reduction in theearnings rate along with a reduction in average balances, partially offset by a decrease in interest expenseon paid-off loans resulting from a decrease in payoffs. Interest income on custodial balances is reduced by

the interest we are required to pass through to security holders on paid-off loans, which was $139.4 millionand $202.9 million during the six months ended June 30, 2008 and 2007, respectively.

Net interest expense related to loan servicing activities decreased primarily due to increased interestincome on a larger mortgage loan investment portfolio resulting from transfers of mortgage loans held for sale to held for investment and increased holdings of repurchased loans.

The increase in net interest income from the trading securities and securities purchased under agreements to resell inventory is attributable to an increase in the net interest margin from 0.12% during thesix months ended June 30, 2007 to 0.69% during the six months ended June 30, 2008, partially offset by a44% decrease in the average inventory of securities held. During the current period the yield curvesteepened, which resulted in a shift in trading revenues from gain on sale to interest income, which causedthe increase in the net interest margin earned on the securities portfolio.

The increase in the provision for loan losses was primarily due to increased losses inherent in the loan portfolio, resulting from increased levels of mortgage delinquencies, defaults and loss severities, as well asdownward revisions in expectations of changes in home prices.

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Loan Servicing Fees and Other Income from MSRs and Retained Interests

Loan servicing fees and other income from MSRs and retained interests are summarized below:

Six Months Ended

June 30,

2008 2007

(in thousands) Servicing fees, net of guarantee fees(1) $ 2,263,333 $ 2,141,350 Income from retained interests 191,279 272,263 Late charges 204,373 180,410 Prepayment penalties 23,740 148,814 Ancillary fees 61,533 65,707

Total loan servicing fees and income from MSRs and retained interests $ 2,744,258 $ 2,808,544

(1) Includes contractually specified servicing fees.

The increase in servicing fees, net of guarantee fees, was principally due to a 11% increase in theaverage servicing portfolio, partially offset by a decrease in the overall annualized net service fee earnedfrom 0.338% of the average portfolio balance during the six months ended June 30, 2007 to 0.322% duringthe six months ended June 30, 2008.www .S

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The decrease in income from retained interests was due primarily to a 18% decrease in the averageinvestment in these assets from the six months ended June 30, 2007 to the current period, combined with areduction in the average yield on such instruments from 17% during the year-ago period to 15% during thecurrent period. Income from retained interests excludes any impairment charges or recoveries, which areincluded in impairment of retained interests in the consolidated statements of operations.

Realization of Expected Cash Flows from Mortgage Servicing Rights

The realization of expected cash flows from MSRs resulted in a value reduction of $1,421.3 millionand $1,657.0 million during the six months ended June 30, 2008 and 2007, respectively. This amountdeclined because of a decrease in the prepayment rate of loans in our MSR portfolio due to a worseninghousing market and lesser credit availability in the mortgage market, which in turn, extends the expectedlife of the existing asset.

Change in Fair Value of Mortgage Servicing Rights

We recorded an increase in the fair value of the MSRs from changes in market factors in the sixmonths ended June 30, 2008 and 2007, of $435.3 million, and $1,231.5 million, respectively, primarily as aresult of increasing mortgage rates, which increased expected future cash flows from our current servicing

portfolio.

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(Impairment) Recovery of Retained Interests

(Impairment) recovery of retained interests is summarized below:


2008 2007

Impairment

Asset

Balance at

Period End Impairment

Asset

Balance at

Period End

(in thousands) Credit-sensitive retained interests $ (505,638 ) $ 288,807 $ (782,226 ) $ 1,523,016

Non credit-sensitive retained interests (200,102 ) 1,221,772 84,508 1,212,497

Impairment of retained interests $ (705,740 ) $ 1,510,579 $ (697,718 ) $ 2,735,513

In the six months ended June 30, 2008, we recognized impairment of credit-sensitive retained interestsof $505.6 million, including $330.0 million related to subordinated interests on Prime Home Equitysecuritizations and $141.0 million related to Subprime and related residual interests. The impairment on

Prime Home Equity securitizations consists of impairment of retained interests of $274.0 million andimpairment losses of $56.0 million related to estimated future draw obligations on the securitizations thathave entered or are probable to enter rapid amortization status. These impairment charges were primarilythe result of the effect of increased estimates for future losses on the loans underlying the credit sensitiveretained interests driven by weakening housing market conditions and significant tightening of availablecredit. The loss estimate, as measured by gross undiscounted losses embedded in the valuation of subordinated interests as a percentage of the unpaid principal balance of the loans underlying such interests,increased from 11.0% to 15.6% during the six months ended June 30, 2008.

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In the six months ended June 30, 2007, impairment of credit-sensitive subordinated and residualinterests retained in prime home equity and subprime securitizations was due to increased estimates for future losses on the loans underlying these securities as well as to the effect of increased market yieldrequirements for the subprime securities.

In the six months ended June 30, 2008, impairment of the non credit-sensitive retained interests was

related primarily to senior and mezzanine securities that we began retaining as a result of the marketdisruption during 2007 resulting from higher investor yield requirements for such securities partially offset by an increase in the value of interest-only securities caused by decreased prepayment speeds as a result of increasing mortgage interest rates.

During the six months ended June 30, 2007, recovery of non credit-sensitive retained interests was due primarily to an increase in the value of interest-only securities.

Servicing Hedge Gains/Losses

The values of the derivatives and securities that are the primary components of the Servicing Hedgeare tied to long-term mortgage, swap and Treasury rates. Overall, these rates decreased for much of the

period and volatility of these rates increased during the six months ended June 30, 2008 and as a result, the

Servicing Hedge produced a loss of $619.9 million, including $943.1 million of hedge cost.

During the six months ended June 30, 2007, rates increased. In addition, we supplemented theServicing Hedge with credit default swaps to moderate the negative impact on earnings caused by creditspread-driven declines in fair value of our retained interests during the early part of 2007. During this

period, credit spreads widened, resulting in a gain related to the credit default swaps.

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During the six months ended June 30, 2007, the Servicing Hedge incurred a loss of $1,486.8 million,including $238.9 million of hedge cost and a $57.2 million gain related to credit default swaps.

Net Insurance Premiums Earned

The $287.0 million increase in net insurance premiums earned was primarily attributable to growth inlender-placed business.

Other Revenue

Other revenue consists of the following:

Six Months Ended

June 30,

2008 2007

(in thousands) Appraisal fees, net $ 105,746 $ 81,809 Title services 51,959 30,126 Credit report fees, net 19,590 36,302 Gain (loss) on sale of fixed assets and intangible assets 10,744 (4,777 ) w

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Change in cash surrender value of life insurance 1,017 19,688 Other 235,281 168,236

Total other revenue $ 424,337 $ 331,384

Realized Loss on Available for Sale Investment Securities

During the six months ended June 30, 2008, we recognized other-than temporary impairment totaling$491.9 million in our portfolio of investment securities classified as available-for-sale. This loss wasrecognized primarily because, based on the loss estimates embedded in the value of certain non-agencysecurities held in our investment portfolio, we no longer believed that it was reasonably assured that thedecline in value would be recovered. This amount compares to a loss totaling $3.9 million during the sixmonths ended June 30, 2007.

Compensation Expenses

Compensation expenses decreased $133.6 million, or 6%, during the six months ended June 30, 2008as compared to the year-ago period as summarized below:

Six Months Ended

June 30,

2008 2007

(in thousands) Base salaries $ 1,119,157 $ 1,198,486 Incentive bonus and commissions 607,498 922,884 Payroll taxes and other benefits(1) 365,995 419,189 Deferral of loan origination costs (41,817 ) (356,135 )

Total compensation expenses $ 2,050,833 $ 2,184,424

(1) Includes restructuring charges of $3.3 million during the six months ended June 30, 2008.

Our average workforce declined from 56,856 during the six months ended June 30, 2007 to 50,386 for the six months ended June 30, 2008. The reduction was centered in our mortgage origination operationsand reflects the dramatic decline of the mortgage markets which began in the third quarter

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of 2007. This reduction in headcount, along with reductions in the profitability of the Company's activities,upon which incentive compensation is based caused an 18% reduction in compensation expenses beforedeferral of loan origination costs.

Effective January 1, 2008, we adopted SFAS 159 and have elected to account for most of our mortgage loans originated or purchased for sale at their estimated fair value. Because of this election, feesand costs are recorded in earnings as incurred instead of being deferred. Accordingly, the deferral of loanorigination costs declined by 88% from the prior period.

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Occupancy and Other Office Expenses

Occupancy and other office expenses are summarized below:

Six Months Ended

June 30,2008 2007

(in thousands) Office and equipment rentals $ 131,929 $ 131,619 Depreciation 109,509 116,488 Utilities 76,575 81,847 Postage and courier service 54,746 52,719 Office supplies 35,735 41,912 Dues and subscriptions 25,488 30,188 Repairs and maintenance 21,304 30,850 Other(1) 36,662 47,607

Total occupancy and other office expenses $ 491,948 $ 533,230

(1) Includes restructuring charges of $10.6 million during the six months ended June 30, 2008.

During the six months ended June 30, 2008, occupancy and other office expenses decreased by 8%, or $41.3 million, reflecting the reductions in our workforce discussed in Compensation Expenses, preceding.

Insurance Claim Expenses

Insurance claim expenses were $722.1 million during the six months ended June 30, 2008 ascompared to $212.1 million during the year-ago period. The increase in insurance claim expenses was

primarily the result of a $480.9 million increase in comparison to the year-ago period in the provision for

mortgage reinsurance claims arising from an increase in the projection for future claims payments caused by a worsening housing market and resulting higher actual and projected default rates. The year-ago periodincluded a $74.0 million reversal of the liability for claims losses related to the 2003 books of business, onwhich negligible remaining loss exposure was deemed to exist in the six months ended June 30, 2007.

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Other Operating Expenses

Other operating expenses are summarized below:

Six Months Ended

June 30,

2008 2007

(in thousands) Legal, consulting, accounting and auditing expenses $ 154,940 $ 85,786 Operations of foreclosed real estate 146,272 35,656 Losses on servicing-related advances 136,641 32,388 w

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Insurance commission expense 90,919 93,577 Insurance 52,437 34,602 Mortgage insurance 49,794 43,332 Taxes and licenses 42,018 35,508 Software amortization and impairment 39,228 36,800 Travel and entertainment 34,850 48,857 Other 216,896 118,350 Deferral of loan origination costs (3,695 ) (55,461 )

Total other operating expenses $ 960,300 $ 509,395

Losses on servicing-related advances increased $104.3 million due to increases in the level of defaulted loans in the servicing portfolio.

Liquidity and Capital Resources

Our short-term financing needs arise primarily from our holding of mortgage loans pending sale, thetrading activities of our broker-dealer and our warehouse lending business. Our long-term financing needs

arise primarily from our investments in our mortgage loan portfolio, MSRs and retained interests and thefinancial instruments acquired to manage the interest rate risk associated with those investments. Thestructure and mix of our debt and equity capital are driven by our strategic objectives and those of our

parent, regulatory and credit rating agency requirements and capital markets conditions. These factorsaffect the type of financing we are able to obtain and the size of our operations.

Our primary sources of debt include deposits taken by our Bank, FHLB advances, the public corporatedebt markets, unsecured bank lines and loans, repurchase agreements and the secondary mortgage market.Our primary source of equity capital is retained earnings. From time to time, we have issued common or

preferred stock, subordinated debt or other securities that receive equity-like treatment by the credit ratingagencies as a means of increasing our capital base and supporting our operations. To this end, in the thirdquarter of 2007 we issued 20,000 shares of 7.25% Series B non-voting convertible preferred stock for anaggregate price of $2.0 billion. The preferred stock ranked senior to our common stock with respect to

payment of dividends and distribution upon liquidation. The Series B non-voting convertible preferredstock was cancelled on July 2, 2008, upon completion of the acquisition of Countrywide by Bank of America. We also have $2.2 billion outstanding in junior subordinated debentures that receive varyingdegrees of "equity treatment" from rating agencies, bank lenders and regulators.

In response to the disruptions in the secondary mortgage markets, we have evolved our fundingstructure such that it more closely resembles that of a thrift holding company rather than that of a financecompany with a banking subsidiary.

During the six months ended June 30, 2008, Standard & Poor's, Moody's Investor Services and Fitchtook negative ratings actions on Countrywide. As a result, certain of our debt ratings dropped

75

below investment grade. On July 1, 2008, following the announcement that Bank of America hadcompleted their acquisition of Countrywide, Standard and Poor's Ratings Service (S&P) upgraded its ratingof CFC and CHL from BB+ to AA, an investment grade rating. S&P also upgraded its rating of the Bank from BBB to AA+. The Rating Outlook for all three entities was changed from Credit Watch Developing towww .S

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Negative. On July 1, 2008, Moody's upgraded its rating of CFC and CHL from Baa3 to Aa2. Moody's alsoupgraded its rating of the Bank from Baa1 to Aaa. Our Fitch rating remains unchanged.

Following are our credit ratings as determined by the nationally recognized statistical ratingorganizations ("credit rating agencies") as of July 1, 2008:

Countrywide Financial

Corporation Countrywide Home Loans Countrywide Bank

Credit Rating AgencyShort-

Term

Long-

Term

Rating

Outlook

Short-

Term

Long-

Term

Rating

Outlook

Short-

Term

Long-

Term

Rating

Outlook

Standard & Poor's A-1+ AA Negative A-1+ AA Negative A-1+ AA+ Negative

Moody's Investors Service P1 Aa2 Negative P1 Aa2 Negative P1 Aaa Negative

Fitch F3 BBB- Rating WatchEvolving

F3 BBB- Rating WatchEvolving

F3 BBB- Rating WatchEvolving

As noted in the preceding paragraphs, during the period of 2008 leading up to the acquisition of Countrywide by Bank of America, the rating agencies took negative actions on our debt ratings. These

actions, along with the effect of developing perceptions in the media and financial marketplace regardingour prospects, affected our ability to retain and obtain financing and make securities and derivativestransactions with other institutions.

During the second quarter:

• As a result of earlier rating action on CFC and CHL's debt, we terminated our $10.4 billionsecured revolving line of credit (Park Monaco)

• The MBS Gestation conduit ($5 billion of committed liquidity available to CHL) matured and wasnot renewed

• A $2.5 billion committed repurchase facility available to CHL and the Bank matured and was notrenewed

• The FHLB decreased its advance rates and increased its required level of over-collateralization for advances, decreasing available FHLB borrowing capacity available to us

• CFC accessed two new sources of funding during the quarter—the Term Secured Lending Facilityand the Primary Dealer Credit Facility—both of which were established by the Federal Reserve to

provide increased liquidity to the financial markets. These programs were available to the Bank

and CSC during the quarter. However, amounts borrowed by CSC were repaid on July 2, 2008,and these facilities are no longer available to CSC. The facilities remain available to the Bank.

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Because of these developments, CFC's available committed liquidity declined by $18.1 billion duringthe second quarter of 2008.www .S

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corrective action provisions of the Financial Institution Reform Recovery and Enforcement Act of 1989.The Bank's tangible capital ratio was 6.9% and 8.0% at June 30, 2008 and December 31, 2007,respectively.

The OTS has prescribed that the Company and its affiliates are not authorized to receive, and the Bank is not authorized to pay the Company or its affiliates, capital distributions without receipt of prior written

OTS non-objection.

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The Company is also subject to U.S. Department of Housing and Urban Development, Fannie Mae,Freddie Mac and Government National Mortgage Association ("Ginnie Mae") net worth requirements.Management believes the Company is in compliance with those requirements.

Cash Flow

Cash provided by operating activities was $15.3 billion for the six months ended June 30, 2008,compared to cash used by operating activities of $4.4 billion for the year-ago period. Cash provided byoperating activities includes the proceeds from the sales and principal repayments of mortgage loans heldfor sale and the cash used for the origination and purchase of mortgage loans held for sale. We generallyretain servicing rights and may retain other interests when these loans are sold. The recognition of theamounts retained is a non-cash investing activity. See Note 18 —Supplemental Cash Flow Information inthe financial statement section of this Report. In the six months ended June 30, 2008, funds used tooriginate and purchase mortgage loans exceeded proceeds from the sales of mortgage loans by $2.4 billion.In the year-ago period, funds used to originate and purchase mortgage loans exceeded proceeds from thesales and principal repayments of mortgage loans by $5.9 billion. Cash provided by operations was

primarily due to a decrease in trading securities of $20.2 billion, partially offset by an increase in tradingsecurities sold, not yet purchased.

Net cash provided by investing activities was $5.3 billion for the six months ended June 30, 2008,compared to cash used by investing activities of $10.0 billion for the year-ago period. The increase in netcash provided by investing activities was attributable to a $20.6 billion increase in net proceeds frominvestments in other financial instruments combined with a $2.1 billion decrease in securities purchasedunder agreements to resell, securities borrowed, and federal funds sold, partially offset by an increase of $3.8 billion in loans held for investment compared to a decrease of $5.2 billion in the year-ago period.

Net cash used by financing activities for the six months ended June 30, 2008 totaled $22.7 billion,compared to net cash provided by financing activities of $14.2 billion for the year-ago period. In the sixmonths ended June 30, 2008, there was a $25.1 billion decrease in cash provided by short-term borrowings,including securities sold under agreements to repurchase. During the six months ended June 30, 2008, long-term debt decreased $7.6 billion compared to an increase in long-term debt of $2.7 billion in the six monthsended June 30, 2007.

Credit Risk Management

A significant risk for the Company is credit risk, which is the risk that a counterparty will not performin accordance with the contractual terms of our agreement with them. Our primary credit counterparties areour loan borrowers and counterparties in securities transactions. We balance the level of credit risk againstour expected returns in determining the level of credit risk we accept in our operations.

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Mortgage Loans Held for Investment in Investment Activities

Our portfolio of mortgage loans held for investment in our investment activities consists primarily of Prime Mortgage and Prime Home Equity Loans, with unpaid principal balances that amounted to$85.9 billion at June 30, 2008.

We have taken steps in recent years to reduce the credit risk in our investment loan portfolio byacquiring supplemental mortgage insurance coverage. As of June 30, 2008, $20.8 billion of our investment

portfolio's residential loan portfolio was covered by supplemental mortgage insurance purchased onspecified pools of loans, of which $14.2 billion represents first loss coverage. The maximum loss coverageavailable under these policies on a combined basis is $1.4 billion. While these policies generally providefor first loss coverage, some policies require premium adjustments if claims

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exceed specified levels. Furthermore, coverage limits vary by policy, with some policies having limits atthe pool level, and others at the loan level. The effect of this insurance on our estimate of credit losses is toreduce our provision for loan losses for the six months ended June 30, 2008 by $340.1 million through therecognition of amounts recoverable from pool mortgage insurance. Our estimate of the effect of mortgageinsurance on the loan loss provision contemplates the effect of claim disputes and considers the insurer'sability to pay as discussed below.

In the past, we purchased credit enhancement from those mortgage insurance providers that had anAA- rating or equivalent from the credit rating agencies. Currently, these mortgage insurance providershave no less than an A rating. This requirement is consistent with the eligibility requirements of thegovernment-sponsored enterprises for mortgage insurers. We continue to monitor the respective capital

positions of our mortgage insurance providers to assess their claims paying ability. While the mortgageinsurance industry has experienced recent adverse financial results resulting in ratings downgrades with the

likelihood of further deterioration over the near term, we have concluded that claims paying ability of our mortgage insurance providers is not impaired. If we conclude that this capacity is impaired in the future, wewill adjust our provisions for loan losses and the mortgage insurance recoverable asset.

Following is a summary of our investment loan portfolio's residential mortgage loans, together withapplicable mortgage insurance, by original combined loan-to-value ratio at June 30, 2008:

June 30, 2008

Original Combined Loan-to-Value:

Unpaid

Principal

Balance

"UPB"(1)

UPB with

Lender

Purchased

Mortgage

Insurance(2)

UPB with

Borrower

Purchased

Mortgage

Insurance

(in thousands) <50% $ 3,952,852 $ 368,940 $ — 50.01 - 60.00% 3,768,125 544,747 — 60.01 - 70.00% 9,708,039 2,045,408 — 70.01 - 80.00% 25,788,908 7,816,350 1,654 80.01 - 90.00% 25,026,073 6,908,610 2,597,634 90.01 - 100.00% 17,517,047 3,043,462 1,493,963 >100.00% 170,943 42,434 32,119 w

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$ 85,931,987 $ 20,769,951 $ 4,125,370

(1) Excludes commercial real estate loans.

(2) These amounts may include loans with borrower paid mortgage insurance.

While new originations of these products have virtually ceased by June 30, 2008, Banking Operationsholds a substantial investment in pay option ARM and payment advantage ARM loans (collectively "payoption loans").

• Pay-option ARM loans—have interest rates that adjust monthly and minimum required paymentsthat adjust annually (subject to recast of the loan if minimum payments are made and deferredinterest limits are reached). Annual payment adjustments are subject to a 71/2% maximum change.To ensure that contractual loan payments are adequate to repay a loan, the fully amortizing loan

payment amount is re-established after either five or ten years and again every five years

thereafter. These payment adjustments are not subject to the 7

1

/2% payment limit and may besubstantial due to changes in interest rates and the addition of unpaid interest to the loans' balances.

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• Payment advantage ARM loans—have interest rates that are fixed for an initial period of fiveyears. Payments are subject to recast of the loan if minimum payments are made and deferredinterest limits are reached. If interest deferrals cause the loan's principal balance to reach a certainmaximum level within the first ten years of these loans, the payment is reset to the interest-only

payment; then at the 10-year point, the fully amortizing payment is required.

The difference between the frequency of changes in the loans' interest rates and payments along with alimitation on changes in the minimum monthly payments to 7 1/2% per year can result in payments that arenot sufficient to pay all of the monthly interest charges. Unpaid interest charges are added to the loan

balance until the loan's balance increases to a specified limit, which is no more than 115% of the originalloan amount, at which time a new monthly payment amount adequate to repay the loan over its remainingcontractual life is established.

Following is a summary of pay option loans held for investment by Banking Operations:

June 30,

2008

December 31,

2007

(in thousands) Total pay option loan portfolio $ 25,419,072 $ 28,423,750

Total principal balance of pay option loans with accumulated negativeamortization $ 23,358,463 $ 25,935,223

Accumulated negative amortization (from original loan balance) $ 1,382,636 $ 1,215,649

Unpaid principal balance of pay option loans with supplemental mortgageinsurance coverage $ 17,423,786 $ 18,374,251 www .S

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Average original loan-to-value ratio(1) 76 % 76 % Average refreshed loan-to-value ratio(2) 95 % — Average original FICO score 715 717 Average refreshed FICO score 680 — Loans underwritten with low or no stated income documentation 83 % 81 % Borrowers electing to make less than full interest payments(4) 72 % 81 % Loans delinquent 90 days or more(3) 12.40 % 5.36 %

(1) The ratio of the amount of the loan that is secured by the property to the lower of the originalappraised value or purchase price of the property.

(2) Estimated based upon April 2008 home value indices developed by the Mortgage Risk Assessment Corporation.

(3) Based upon unpaid principal balance.

(4) The ratio is calculated based on borrowers who made a payment during the last month of thereporting period and made less than a full interest payment.

The Company routinely forecasts its exposure to payment recast on negatively amortizing loans. Thefollowing assumptions were used to forecast this exposure as of June 30, 2008:

1) 18% Constant Prepayment Rate

2) Use of forward interest rate curves to estimate interest rates in future periods

3) Loans that do not pay off completely are assumed to negatively amortize 100% of the time.

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Using these assumptions as of June 30, 2008, pay option loans that are expected to reset are shown inthe following table:

Twelve Months Ended June 30,

ProjectedBalance at

Recast or Payoff

(in thousands) 2009 $ 174,339 2010 3,808,533 2011 6,955,560 Thereafter 2,463,522 Loans assumed to repay before recast 9,572,824 w

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22,974,778

Loans serviced by others(1) 3,117,303

$ 26,092,081

(1) We do not maintain the loan level detail necessary to project payoff dates and balances for loansserviced by others.

The information in the table above is limited in that it was performed at a particular point in time andis subject to the accuracy of various assumptions used, including prepayment speeds, interest rates and the

percentage of loans that negatively amortize.

Our primary credit risk management tool for our portfolio of loans held for investment is theorigination and purchase of loans underwritten to balance our assessment of the borrower's credit risk against the expected return on the loan. We assess a loan by considering the borrower's credit profile andthe value of collateral securing the loan. Where a proposed first mortgage loan's loan-to-value ratio ishigher than a specified level, which is usually 80% for conventional loans, we generally require the

borrower to supplement the collateral with primary mortgage insurance.

To minimize credit losses we actively monitor our portfolio of loans held for investment and work with borrowers who contact us or who become delinquent on their loans. Our portfolio monitoringactivities may provide us with information that allows us to take actions to limit our loss exposure such assuspending borrowers' access to their home equity lines of credit when their loans or related senior liensreach a specified delinquency status or when their property values decline below a specified threshold.

We use several tools to establish communication with and assist borrowers in curing defaults on our loans, including frequent outreach efforts throughout the collection process using tools such as brochures,housing fairs, counseling letters and DVD mailings. Our objective in the loss mitigation process is todevelop payment plans or workout options that have both the highest probability of successful resolutionand minimal risk of loss to Countrywide. We have also developed loan modification programs designed toassist borrowers with refinancing their ARM and pay option ARM loans before their loans reset.

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Our investment portfolio's nonperforming assets (comprised of non-accrual loans and foreclosedassets) and troubled debt restructurings, the allowances for credit losses and charge-offs are summarized asfollows:

June 30, 2008 December 31, 2007

Amount

% of

Investment

Portfolio

Loans Amount

% of

Investment

Portfolio

Loans

(dollar amounts in thousands) Nonperforming assets:

Nonaccrual loans:

With third party credit enhancements(1) $ 2,086,725 1.96 % $ 1,272,116 1.12 %

Without third party credit enhancements 3,263,833 3.06 % 1,611,951 1.43 % www .S

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5,350,558 5.02 % 2,884,067 2.55 %

Foreclosed residential real estate 661,566 0.62 % 394,859 0.35 %

Total nonperforming assets $ 6,012,124 5.64 % $ 3,278,926 2.90 %

Troubled debt restructuring on accrual status (2) $ 1,068,179 1.00 % $ 6,320 0.01 %

Amount

% of

Nonaccrual

Loans Amount

% of

Nonaccrual

Loans

Allowances for credit losses:

Allowance for loan losses $ 4,524,466 $ 2,141,247 Liability for losses on unfunded loan

commitments 57,606 37,516 Estimated amounts recoverable from pool

mortgage insurance (895,925 ) (555,803 )

Allowances for credit losses, net of estimated poolmortgage insurance $ 3,686,147 68.89 % $ 1,622,960 56.27 %

(1) Third party credit enhancements include borrower-paid mortgage insurance and pool insuranceacquired by Banking Operations.

(2) During the quarter ended March 31, 2008, we changed our accrual policy for troubled debtrestructurings to take into account the borrower's recent payment performance and prospects for repayment under the modified terms when determining the loan's accrual status on the date of modification.


2008 2007

Amount

Annualized

Net Charge-offs

as % of Average

InvestmentLoans Amount

Annualized

Net Charge-offs

as % of Average

InvestmentLoans

(dollar amounts in thousands) Net charge-offs $ 1,289,210 2.94 % $ 142,124 0.42 %

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The following table shows investment loan charge-offs, net of recoveries, by product:

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2008 2007

(in thousands) Prime Home Equity $ 779,715 $ 103,059 Prime Mortgage:

Pay option and payment advantage 371,850 26,381

Other 129,031 12,684

Subprime 8,614 — Total net charge-offs $ 1,289,210 $ 142,124

The increase in our nonperforming assets and charge-offs from the year-ago period was driven by theeffects that declining real estate collateral values and significant tightening of available credit resultingfrom the market disruption that began in the third quarter of 2007 had on delinquency and default trends aswell as portfolio seasoning. We expect the level of nonperforming assets and credit losses to increase, bothin absolute terms and as a percentage of our loan portfolio, as current weakness in the housing marketdevelops and as our loan portfolio continues to season.

Mortgage Banking Portfolio Lending Activities

The following table shows the unpaid balance of loans held for investment arising from our mortgage banking activities:

June 30,

2008

December 31,

2007

(in thousands) Prime $ 3,622,784 $ 1,768,448 Subprime 1,734,940 2,045,875 Prime Home Equity 510,526 435,695

5,868,250 4,250,018

Defaulted FHA-insured and VA-guaranteed loans repurchased fromsecurities 3,411,386 2,691,563

Total unpaid principal balance $ 9,279,636 $ 6,941,581

Our portfolio of loans held for investment arising from our mortgage banking activities includes loansthat are nonsalable due to an identified defect or that we have repurchased—either to remedy a violation of a representation or warranty made in a loan sale, to minimize the cost of servicing a severely delinquentloan insured or partially guaranteed by the FHA or VA or in connection with a clean-up call (a clean-upcall represents the repurchase of mortgage loans when the remaining outstanding balance of the mortgageloans falls to a level where the cost of servicing the loans becomes burdensome in relation to the benefits of servicing).

As discussed in the following section— Lending Activities — Sale of Loans — Representations and Warranties —we make provisions for losses that may arise from breaches of representations and warrantieswhen we record the sale of loans and we adjust our estimates for losses quarterly. We record repurchasedloans at their estimated fair value when they are repurchased and any resulting loss is charged against theliability.

We may determine that a portion of the loans that we originate or purchase for sale will not be sold because of a defect, which may include a document deficiency or deterioration of the credit status of theloan during the period it is held for sale. Such loans are transferred to our portfolio of loanswww .S

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Total nonperforming assets $ 1,103,517 $ 1,017,614

Troubled debt restructurings on accrual status $ 51,957 $ —

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Amount

% of

Nonaccrual

Loans Amount

% of

Nonaccrual

Loans

Allowances for credit losses:

Allowance for loan losses(5):

Residential $ 502,524 64.10 % $ 247,106 43.55 %

Commercial(4) 8,661 30.10 % 11,138 29.88 %

511,185 62.90 % 258,244 42.71 %

Liability for losses on unfunded loan commitments 6,048 868

Total allowances for credit losses $ 517,233 63.64 % $ 259,112 42.85 %


2008 2007

Amount

Annualized

Net Charge-offs

as % of AverageInvestment Loans Amount

Annualized

Net Charge-offs

as % of AverageInvestment Loans

(dollar amounts in thousands) Net charge-offs $ 247,029 4.22 % $ 50,912 1.82 %

(1)

Excludes $3,022.2 million and $2,171.1 million, at June 30, 2008 and December 31, 2007,respectively, of loans that we have the option (but not the obligation) to repurchase and we havenot exercised such option. These loans are required to be reflected in our balance sheet regardlessof our intention to exercise the option to repurchase the loans.

(2) Excludes government-guaranteed mortgage loans held for investment totaling $376.4 million and

$397.6 million at June 30, 2008 and December 31, 2007, respectively.

(3) Generally these loans have been repurchased and recorded at fair value or transferred to loans heldfor investment at the lower of cost or estimated fair value. Fair value estimates incorporate theimpaired status at the date of repurchase of the loans. Losses related to subsequent deterioration inthe credit quality of the loans are recorded in the allowance for loan losses.

(4) Comprised of warehouse lending advances secured by mortgage loans.w

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(5) The allowance for loan losses excludes any reduction to the cost basis of loans recorded to reflectestimated fair value at repurchase or transfer to held for investment.

The increase in our nonperforming assets and charge-offs from June 30, 2007 was driven by theimpact that the weakening housing market and significant tightening of available credit had on

delinquencies and default trends as well as portfolio seasoning.

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Allowance for Loan Losses

Following is a summary of our consolidated allowance for loan losses by activity for the periods presented:

Six months ended June 30, 2008

Investment Portfolio

Mortgage

Lending

Commercial

Real Estate

Warehouse

Lending

Mortgage

Banking Total

(dollar amounts in thousands) Balance, beginning of period $ 2,140,536 $ 711 $ 11,138 $ 247,106 $ 2,399,491 Provision for loan losses 3,326,787 5,215 — 500,275 3,832,277 Change in estimate of amounts

recoverable from pool mortgageinsurance 340,122 — — — 340,122

Charge-offs (1,310,759 ) — (2,172 ) (258,692 ) (1,571,623 ) Recoveries 21,549 — — 13,835 35,384 Reclassifications and other 305 — (305 ) — —

Balance, end of period $ 4,518,540 $ 5,926 $ 8,661 $ 502,524 $ 5,035,651

Ending allowance as a percentage of loans receivable 5.3 % 3.3 % 1.0 % 8.6 % 5.4 %

Six months ended June 30, 2007

Investment Portfolio

Mortgage

Lending

Commercial

Real Estate

Warehouse

Lending

Mortgage

Banking Total

(dollar amounts in thousands)

Balance, beginning of period $ 294,376 $ 79 $ 12,838 $ 19,524 $ 326,817 Provision for loan losses 365,269 120 145 79,352 444,886 Change in estimate of amounts

recoverable from poolmortgage insurance 99,888 — — — 99,888

Charge-offs (147,343 ) — — (51,173 ) (198,516 ) Recoveries 5,219 — — 261 5,480 Reclassifications and other (1,113 ) — 1,113 — — www .S

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Balance, end of period $ 616,296 $ 199 $ 14,096 $ 47,964 $ 678,555

Ending allowance as a percentageof loans receivable 0.9 % 0.1 % 0.6 % 2.2 % 0.9 %

The increase in the allowance and provision for loan losses is due to increased losses inherent in the

loan portfolio resulting from increased level of mortgage delinquencies, defaults and loss severities, as wellas downward revisions in expectations of changes in home prices.

Lending Activities—Sale of Loans

A significant portion of the mortgage loans that we originate or purchase are sold into the secondarymortgage markets primarily in the form of securities, and to a lesser extent as whole loans. When we sell or securitize our loans we retain varying degrees of credit risk from the representations and warranties or corporate guarantees issued or the continuing investments and/or obligations we

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retain, either in the form of credit-enhancing subordinated interests or through the structure of certain of our securitizations.

Our Prime Mortgage Loans generally are sold on a non-recourse basis, while Prime Home Equity andSubprime Mortgage Loans generally were sold with limited recourse for credit losses. Regardless of whether our loans are sold with recourse, almost all of our loan sale transactions retain credit risk in theform of the representations and warranties we provide and that are customary for loan sales transactions.

Representations and Warranties

When we sell a loan, we make various representations and warranties relating to, among other things,

the following:

• our ownership of the loan

• the validity of the lien securing the loan

• the absence of delinquent taxes or liens against the property securing the loan

• the effectiveness of title insurance on the property securing the loan

• the process used in selecting the loans for inclusion in a transaction

• the loan's compliance with any applicable loan criteria (e.g., loan balance limits, property type,delinquency status) established by the buyer

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the condition of the property securing the loan

• the existence of hazard insurance

•

the loan's compliance with applicable local, state and federal laws

• the absence of fraud in the loan.

The specific representations and warranties made by us depend on the nature of the transaction and therequirements of the buyer. Market conditions and credit-rating agency requirements may also affectrepresentations and warranties and the other provisions we may agree to in loan sales.

In the event of a breach of our representations and warranties, we may be required to either repurchasethe mortgage loans with the identified defects or indemnify the investor or insurer. In such cases, we bear any subsequent credit loss on the mortgage loans. Our representations and warranties are generally notsubject to stated limits. However, our contractual liability arises only when the representations and

warranties are breached and generally only when a loss results from the breach. We attempt to limit our risk of incurring these losses by structuring our operations to ensure consistent production of quality mortgagesand servicing those mortgages at levels that meet secondary mortgage market standards. We makesignificant investments in personnel and technology to ensure the quality of our mortgage loan production.

We estimate our liability for representations and warranties when we sell loans and update our estimate quarterly. Our provision for estimated losses arising from loan sales is recorded as an

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adjustment to gain on sale of loans and securities. Following is a summary of the activity in our liability for representations and warranties for the periods presented:

Six Months Ended

June 30,

2008 2007

(in thousands) Balance, beginning of period $ 639,637 $ 390,111 Provisions for losses 1,183,527 90,435 Charge-offs (286,817 ) (48,723 )

Balance, end of period $ 1,536,347 $ 431,823

Corporate Guarantees

Our corporate guarantees are contracts written to protect purchasers of our loans from credit losses upto a specified amount. We estimate the losses to be absorbed by the guarantees when we sell loans withguarantees and update our estimates every quarter. We record our provision for losses arising from theguarantees as a component of gain on sale of loans and securities. Following is a summary of the activity inour liability for corporate guarantees for the periods presented:www .S

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Six Months Ended

June 30,

2008 2007

(in thousands) Balance, beginning of period $ 46,202 $ 45,425 Provisions for losses 30,339 13,318 Charge-offs (2,553 ) (2,727 )

Balance, end of period $ 73,988 $ 56,016

Corporate guarantees in excess of recorded liability, end of period $ 463,416 $ 506,286

Subordinated Interests

Our exposure to credit losses related to subordinated interests is limited to the assets' carrying values plus the value of additional draws we may be required to subordinate if a rapid amortization event occurs ina securitization. We carry subordinated interests at their estimated fair values. The carrying values of our subordinated interests are as follows:

June 30,

2008

December 31,

2007

(in thousands) Prime home equity retained interests $ 154,091 $ 422,681 Subprime retained interests 81,900 293,048 Subordinated mortgage-backed pass-through securities(1) 94,914 270,744 Prime residual securities 29,733 20,557

$ 360,638 $ 1,007,030

(1)

Included with mortgage-backed pass-through securities.

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The losses absorbed by our subordinated interests are summarized as follows:

Six Months Ended

June 30,

2008 2007

(in thousands) Prime home equity retained interests $ 1,468,730 $ 194,177 Subprime retained interests 644,180 127,000 Prime residual securities 6,750 4,350

$ 2,119,660 $ 325,527

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We have exposure to credit loss in the event of contractual non-performance by our tradingcounterparties and counterparties to the over-the-counter derivative financial instruments that we use in our interest rate risk management activities. We manage this credit r isk by selecting only counterparties we

believe to be financially strong, spreading the credit risk among many such counterparties, by placingcontractual limits on the amount of unsecured credit extended to any single counterparty and by enteringinto netting agreements with the counterparties, as appropriate.

The aggregate amount of counterparty credit exposure after consideration of relevant nettingagreements, before and after collateral held by us, are as follows:

June 30,

2008

December 31,

2007

(in millions) Aggregate credit exposure before collateral held $ 4,107 $ 6,135 Less: collateral held (1,760 ) (3,873 )

Net aggregate unsecured credit exposure $ 2,347 $ 2,262

For the six months ended June 30, 2008 and 2007 we incurred no credit losses due to non-performanceof any of our counterparties.

Loan Servicing

The following table sets forth certain information regarding our servicing portfolio of single-familymortgage loans, including loans held for sale, loans held for investment and loans serviced under subservicing agreements, for the periods indicated:

Six Months Ended

June 30,

2008 2007

(in millions) Beginning owned servicing portfolio $ 1,451,990 $ 1,280,119 Add: Residential loan production(1) 132,025 243,094

Purchased MSRs (bulk acquisitions) 152 20,450 Less: Principal repayments (121,906 ) (144,454 )

Ending owned servicing portfolio 1,462,261 1,399,209 Subservicing portfolio 23,024 16,263

Total servicing portfolio $ 1,485,285 $ 1,415,472

MSR portfolio $ 1,365,869 $ 1,304,250 Mortgage loans owned 96,392 94,959 Subservicing portfolio 23,024 16,263

Total servicing portfolio $ 1,485,285 $ 1,415,472

(1) Excludes purchases from third parties in which servicing rights were not acquired.

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June 30,

2008 2007

(dollar amounts in millions) Composition of owned servicing portfolio at period end:

Conventional mortgage $ 1,236,048 $ 1,173,002 Subprime Mortgage 98,862 123,438

Prime Home Equity 37,687 44,707

Government:

FHA-insured mortgage 71,066 42,781

VA-guaranteed mortgage 18,598 15,281

Total owned portfolio $ 1,462,261 $ 1,399,209

Delinquent mortgage loans(1): 30 days 3.23 % 2.73 %

60 days 1.39 % 1.01 %

90 days or more 2.92 % 1.24 %

Total delinquent mortgage loans 7.54 % 4.98 %

Loans pending foreclosure(1) 1.72 % 0.74 %

Delinquent mortgage loans(1): Conventional 4.89 % 2.64 %

Subprime Mortgage 28.92 % 20.15 %

Prime Home Equity 7.18 % 3.70 %

Government 12.25 % 12.37 %

Total delinquent mortgage loans 7.54 % 4.98 %

Loans pending foreclosure(1): Conventional 1.27 % 0.39 %

Subprime Mortgage 8.55 % 3.96 %

Prime Home Equity 0.08 % 0.12 %

Government 1.26 % 1.14 %

Total loans pending foreclosure 1.72 % 0.74 %

(1) Expressed as a percentage of the total number of loans serviced, excluding subserviced loans andloans purchased at a discount due to their collection status.

We attribute the overall increase in delinquencies in our servicing portfolio from June 30, 2007 toJune 30, 2008 to increased production of loans in recent years with higher loan-to-value ratios and reduceddocumentation requirements, combined with a weakening housing market and significant tightening of available credit and to portfolio seasoning. We believe the delinquency rates in our servicing portfolio areconsistent with rates for similar mortgage loan portfolios in the industry.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

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In the ordinary course of our business we engage in financial transactions that are not reflected on our balance sheet. (See Note 2 —Summary of Significant Accounting Policies in our 2007 Annual Report for adescription of our consolidation policy.) Such transactions are structured to manage our interest rate, creditor liquidity risks, to diversify funding sources or to optimize our capital.

Most of our off-balance sheet arrangements relate to the securitization of mortgage loans. Our

mortgage loan securitizations are normally structured as sales and involve the transfer of mortgage loans toqualifying special-purpose entities that are not subject to consolidation. In a securitization, an

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entity transferring the assets is able to sell those assets for cash. Special-purpose entities used in suchsecuritizations obtain cash by issuing securities representing beneficial interests in the transferred assets toinvestors. In a securitization, we customarily provide representations and warranties with respect to, and wegenerally retain the right to service, the transferred mortgage loans.

We also generally have the right to repurchase mortgage loans from the special-purpose entity pursuant to a clean-up call, which is exercised when the costs exceed the benefits of servicing theremaining loans.

Our Prime Mortgage Loans generally are securitized on a non-recourse basis, while Prime HomeEquity and Subprime Mortgage Loans generally were securitized with limited recourse for credit losses.During the six months ended June 30, 2008, we did not securitize any Subprime Mortgage or Prime HomeEquity Loans. Our exposure to credit losses related to our limited recourse securitization activities islimited to the carrying value of our subordinated interests, to losses that may arise from rapid amortizationevents that cause subsequent draws that we are contractually required to advance to be subordinated to allother interests in these securitizations and to the contractual limit of reimbursable losses under our corporate guarantees less the recorded liability for such guarantees.

Under the terms of our HELOC securitizations, we make advances to borrowers when they make asubsequent draw on their line of credit and we are reimbursed for those advances from the cash flows in thesecuritization. This reimbursement normally occurs within a short period after the advance. However, in theevent that loan losses requiring draws on monoline insurer's policies (which protect the bondholders in thesecuritization) exceed a specified threshold or duration, reimbursement of our advances for subsequentdraws occurs only after other parties in the securitization (including the senior bondholders and themonoline insurer) have received all of the cash flows to which they are entitled. This status, known as arapid amortization event, has the effect of extending the time period for which our advances areoutstanding, and may result in Countrywide not receiving reimbursement for all of the funds advanced. Weevaluate all of our HELOC securitizations for their potential to experience a rapid amortization event byestimating the amount and timing of future losses on the underlying loans and the excess spread availableto cover such losses and by evaluating any estimated shortfalls in relation to contractually defined triggers.

During the fourth quarter of 2007, our off-balance sheet obligations relating to rapid amortizationevents contained in our home equity line-of-credit securitizations were triggered as a result of actual and

probable future losses relating to loans underlying these securitizations exceeding specified thresholds or durations. Normally, a rapid amortization event is not expected to occur and is deemed remote. However,sudden deterioration in the housing market experienced in late 2007 resulted in it becoming probable that arapid amortization event would occur. Because of these events, we recorded impairment losses of $704.1 million in 2007 related to estimated future draw obligations on the home equity securitizations thathave entered or are probable to enter rapid amortization status. During the six months ended June 30, 2008,we recorded impairment losses of $56.0 million.www .S

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• Increasing delinquencies and foreclosures

• Continued disruptions in the secondary mortgage and debt capital markets and

• More restrictive legislative and regulatory environments.

As a result of these conditions, we are experiencing, among other things, the following:

• Lower loan production volumes

• Higher credit losses, impairment of subordinated interests and higher claims under representationsand warranties

•

Reduced access to secondary mortgage and debt capital markets

• Increased cost of debt

• Reduction of availability of credit enhancements for the loans and securities we sell and invest in.

Our outlook is subject to risks and uncertainties as discussed in the section " Factors That May Affect

Our Future Results."

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Housing Values

Housing values affect us in several ways. Declines in housing values affect us by negatively impactingthe demand for mortgage financing, increasing risk of default by mortgagors and increasing risk of loss ondefaulted loans. These factors are somewhat offset by reduced prepayments in our loan servicing portfolio.

Recently, we have seen broad-based declines in housing values. We expect housing values to continueto decrease during the near term which may increase our credit loss experience and which has affected our willingness to offer certain mortgage loan products. Both of these factors have and may continue to impactour results of operations.

Secondary Mortgage Market Investor Demand

Changes in investor demand for mortgage loans can have a significant impact on our ability to accessthe secondary mortgage market as a competitive outlet. In the second quarter of 2008, we saw acontinuation of the illiquidity in the secondary mortgage market and a continuation of downgrades bycertain credit rating agencies of large numbers of mortgage-backed securities. These factors have combinedto severely decrease demand for and profitability of a large portion of the products we have historically

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produced. In response to these developments we have tightened our underwriting and program guidelinesand substantially limited our production of non agency-eligible loans to our investment portfolio.

Impact of Declines in Credit Performance

With the current contraction in the U.S. housing market and the resulting declining housing prices,

along with broad-based worsening of lenders' portfolio performances, we expect elevated credit losses inthe near term. Since 2007, we have observed a marked decline in credit performance (as adjusted for age)for recent vintages, especially those loans with higher risk characteristics, including reduceddocumentation, higher loan-to-value ratios or low credit scores. Deterioration in the credit performance of these loans has resulted in materially increased credit losses, impairment of our related credit-subordinatedinterests, recognition of losses from rapid amortization events, higher claims under our representations andwarranties and elimination of demand for our mortgage-backed securities and the availability of creditenhancements for the loans and securities we sell and invest in. We expect these factors to continue and to

be reflected in future results of operations.

Regulatory Trends

The regulatory environments in which we operate have an impact on the activities in which we may

engage, how the activities may be carried out and the profitability of those activities. Therefore, changes tolaws, regulations or regulatory policies can affect whether and to what extent we are able to operate

profitably.

On February 13, 2008, the Economic Stimulus Act of 2008 was signed into law. The law provides for,among other things, temporary increases in the loan limits for the FHA's Single-Family Program and theconforming loan limits for loans eligible for purchase by Fannie Mae and Freddie Mac. The limits areraised to as high as $729,750 from the current $362,790 for the FHA Single Family program and $417,000for Fannie Mae and Freddie Mac. The temporary increase applies to loans originated between July 1, 2007and December 31, 2008.

With rising delinquency and foreclosure rates in the mortgage market, policymakers at the state andfederal level are increasingly looking to enact measures to delay or halt the foreclosure process and require

servicers to mitigate the impact of foreclosures on local communities. Congress is considering several pieces of legislation to stem rising foreclosures. One of the major items under consideration is a

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change to the bankruptcy law to allow borrowers to declare bankruptcy in order to have their loan balancesreduced and other terms renegotiated (a so-called "cramdown"). In addition, federal legislation targetingmortgage servicing practices and the foreclosure process has been introduced and could be approved in2009. At the state level, dozens of legislatures have already enacted or are preparing to enact legislation to

slow the foreclosure process, up to and including consideration of foreclosure moratoria. Localgovernments are enacting ordinances that require servicers to better maintain real estate owned propertiesand that impose "impact fees" on servicers' real estate owned inventory. While providing some relief tomortgage borrowers, these measures could increase servicing costs and also could be construed asundermining legal certainty for investors, and could therefore have long term consequences for investmentsin mortgage-related securities, and, consequently, our operations.

On July 30, 2008, the Housing and Economic Recovery Act of 2008 was signed into law. In part, theact provides for permanent increases in the loan limits for the FHA's Single-Family Program and thewww .S

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conforming loan limits for loans eligible for purchase by Fannie Mae and Freddie Mac to no more than$625,000. The act also creates a new, temporary, voluntary program within FHA to provide FHA-insuredmortgages to distressed borrowers. FHA-approved lenders for these refinancings will have to accept adiscount on the original loan's principal, and borrowers will have to share the new equity and any futureappreciation with the FHA should they sell or refinance the property. The FHA is authorized to insure up to$300 billion in mortgages under this program, which is to begin on October 1, 2008 and end onSeptember 30, 2011. The act contains a number of provisions reforming regulatory oversight of FannieMae, Freddie Mac, and the Federal Home Loan Banks (collectively "GSEs") and modernizing elements of the FHA. The act also contains provisions to stimulate housing demand through tax credits andenhancements to revenue bond programs. Because new regulations will have to be promulgated toimplement the new refinancing program, the potential impacts of new regulatory oversight of the GSEs areunknown and the reactions of the market to all of these changes are uncertain, we are unable to determineto what extent these changes may affect our operations.

The Federal Reserve has finalized new rules under the Truth-in-Lending Act and Home OwnershipEquity Protection Act to strengthen disclosures and prohibit certain origination and servicing practicesdeemed unfair or deceptive. The new rules will take effect in 2008 and 2009. HUD unveiled in March 2008a proposed revision to the RESPA rules to improve up front disclosures of mortgage costs, however it is notclear whether a final rule will be issued in 2008. After addressing foreclosure-related concerns, Congressand the states are expected to return their focus to matters intended to address the lending and underwriting

practices that are perceived as causing the current market conditions, including:

• Substantially tightening restrictions on subprime and prime lending terms and features

• Imposing certain underwriting standards, up to and including suitability-style regulation of lendersand brokers

• Licensing and/or registering mortgage brokers and loan originators

• Increasing responsibilities of lenders and purchasers of mortgages on the secondary market.

The legislative and regulatory risks facing the mortgage industry should remain intense throughout2008 and into 2009.

Accounting Developments

In December of 2007, The American Securitization Forum ("ASF") issued the Streamlined

Foreclosure and Loss Avoidance Framework for Securitized Adjustable Rate Mortgage Loans (the "ASFFramework"). The ASF Framework was developed to address large numbers of subprime loans that are atrisk of default when the loans reset from their initial fixed interest rates to variable rates during the

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coming 18 months. The objective of the framework is to provide uniform guidelines for evaluating largenumbers of loans for refinancing in an efficient manner while complying with the relevant tax regulationsand off-balance sheet accounting standards for loan securitizations. The ASF Framework was developedwith the participation of representatives of the mortgage securitization industry and the U.S. Government towww .S

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provide streamlined borrower evaluation procedures in the evaluation of loan modification options for borrowers with subprime adjustable-rate loans meeting certain criteria. Specifically, the ASF Framework targets loans:

• originated between January 1, 2005 and July 31, 2007

• with initial fixed interest rate periods of 36 months or less and

• that are scheduled for their first interest rate reset between January 1, 2008 and July 31, 2010.

The ASF Framework requires the loan servicer to categorize the targeted loans into one of threesegments and address the borrowers according to the assigned segment:

• Segment 1 loans: the borrower is likely to be able to refinance into any available mortgage

product—the borrowers should refinance their loans into the available products if they are

unwilling or unable to meet the reset payment

• Segment 2 loans: the loan is current but the borrower is unlikely to be able to refinance into anyreadily available mortgage industry product—these borrowers should be evaluated for streamlined(or "fast track") evaluation and modification

• Segment 3 loans: the loan is not current—the servicer should determine the appropriate lossmitigation strategy—other than a streamlined modification—that maximizes the recoveries to thesecuritization trust that holds the loan. Loss mitigation strategies may include loan modification,forbearance, short sale or foreclosure.

The ASF Framework specifies criteria that borrowers who are evaluated for streamlined modificationmust meet to qualify for a fast track modification, including property occupancy, credit score and anexpected payment change threshold when the interest rate resets. Segment 2 borrowers who meet thespecified criteria are identified for fast track loan modifications.

On January 8, 2008, the SEC's Office of the Chief Accountant issued a letter addressing theaccounting issues relating to the ASF Framework. The letter concluded that the SEC would not object tocontinuing off-balance sheet accounting treatment for Segment 2 loans modified pursuant to the ASFFramework. The SEC's Office of the Chief Accountant also asked the FASB to address the issues related tothe sales accounting guidance in the applicable accounting literature.

For those current loans that are accounted for off-balance sheet that are modified, but not as part of theASF Framework above, the servicer must perform on an individual basis, an analysis of the borrower and

the loan to demonstrate it is probable that the borrower will not meet the repayment obligation in the near term. Such analysis shall provide sufficient evidence to demonstrate that the loan is in imminent or reasonably foreseeable default. The SEC's Office of the Chief Accountant issued a letter in July 2007stating that it would not object to continuing off-balance sheet accounting treatment for these loans.

The Company began fast-track evaluation for loan modifications under Segment 2 of the ASFframework in June 2008 and the off-balance sheet accounting treatment of QSPEs that hold those loans wasnot affected. Other workout activities relating to subprime ARM loans include repayment plans andmodifications of loans evaluated on an individual basis.www .S

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As of June 30, 2008, the principal balance of beneficial interests issued by the QSPEs that holdsubprime ARM loans totaled $57.8 billion. The fair value of beneficial interests related to those QSPEsheld by CFC totaled $54.0 million as of June 30, 2008. Following is a summary of loans in QSPEs that

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hold subprime ARM loans as of June 30, 2008 as well as workout and payoff activity for the subprimeloans by ASF categorization for the six months then-ended:

Activity during the six months ended June 30, 2008(1)

Balance at

June 30,

2008 Payoffs Fast- rack

Other

Workout

Activities Foreclosures

(in millions) Subprime ARM loans:

Segment 1 $ 5,865.1 $ 940.2 $ — $ 219.4 $ 0.6

Segment 2 6,450.4 304.5 411.5 750.5 —

Segment 3 10,054.7 59.4 — 3,056.4 1,358.3

Total subprime ARM loans 22,370.2 $ 1,304.1 $ 411.5 $ 4,026.3 $ 1,358.9

Other loans 32,039.2 Foreclosed real estate 3,343.7

$ 57,753.1

(1) Segment classification was done as of December 31, 2007.

Factors That May Affect Our Future Results

On July 1, 2008, Countrywide completed its Merger with Red Oak Merger Corporation, pursuant tothe terms of the previously announced merger agreement. Upon consummation of the Merger, Red Oak Merger Corporation was renamed "Countrywide Financial Corporation." As a result of the Merger, actualresults may differ significantly from historical results or those anticipated.

We make forward-looking statements in this Report and in other reports we file with the SEC and in press releases. Our management may make forward-looking statements orally in a public forum to analysts,investors, the media and others. Generally, forward-looking statements include:

• Projections of our revenues, income, earnings per share, capital structure or other financial items

• Descriptions of our plans or objectives for future operations, products or services

• Forecasts of our future economic performance, interest rates, profit margins and our share of future marketsw

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• Descriptions of assumptions underlying or relating to any of the foregoing.

Readers are cautioned not to place undue reliance on forward-looking statements. Forward-lookingstatements speak only as of the date they are made. We do not undertake to update them to reflect changesthat occur after the date they are made.

Forward-looking statements give management's expectation about the future and are not guarantees.Words like "believe," "expect," "anticipate," "promise," "plan" and other expressions or words of similar meanings, as well as future or conditional verbs such as "will," "would," "should," "could" or "may" aregenerally intended to identify forward-looking statements. There are a number of factors, many of whichare beyond our control, that could cause actual results to differ significantly from historical results or thoseanticipated include, but are not limited to the following:

• Changes in the Company's management, strategies, operations and business plans that occur as aresult of its acquisition by Bank of America.

Other risk factors are described in other reports and documents that we file with or furnish to the SEC

including the 2007 Annual Report. Other factors that could also cause results to differ from our

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expectations may not be described in any such report or document. Each of these factors could by itself, or together with one or more other factors, adversely affect our business, results of operations and/or financialcondition.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Our management has conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as such term isdefined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the"Exchange Act")), as of the end of the period covered by this Report as required by paragraph (b) of Rules 13a-15 and 15d-15 under the Exchange Act. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Report.

Changes to Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during the quarter endedJune 30, 2008 that has materially affected, or is reasonably likely to materially affect, our internal controlover financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

See Note 26— Legal Proceedings to the consolidated financial statements for litigation and regulatory

disclosures.

Item 6. Exhibits

(a) Exhibits

See Index of Exhibits on page 102.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, theRegistrant has duly caused this report to be signed on its behalf by the undersigned, thereunto dulyauthorized.

COUNTRYWIDE FINANCIAL CORPORATION(Registrant)

Dated: August 11, 2008 By: /s/ ANDREW GISSINGER III

Andrew Gissinger IIIChief Executive Officer

Dated: August 11, 2008 By: /s/ ANNE D. MCCALLION

Anne D. McCallionChief Financial Officer

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FORM 10-Q

June 30, 2008

INDEX OF EXHIBITS

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Exhibit No. Description

3.3* Certificate of Incorporation of Countrywide Financial Corporation (the "Company")(incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K, filedwith the SEC on July 8, 2008).

3.4* Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company's Current

Report on Form 8-K, filed with the SEC on July 8, 2008).

4.63* First Supplemental Indenture, dated July 1, 2008, among Red Oak Merger Corporation, theCompany and The Bank of New York Mellon, as trustee, to the Subordinated Indenture

between the Company, and The Bank of New York Mellon, as trustee, dated as of May 16,2006 (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K,filed with the SEC on July 8, 2008).

4.64* First Supplemental Indenture, dated July 1, 2008, among Red Oak Merger Corporation, theCompany, Countrywide Home Loans, Inc. ("CHL"), and The Bank of New York Mellon, astrustee, to the Indenture between the Company, CHL, and The Bank of New York, as trustee,dated as of February 1, 2005 (incorporated by reference to Exhibit 4.2 to the Company'sCurrent Report on Form 8-K, filed with the SEC on July 8, 2008).

4.65* Second Supplemental Indenture, dated July 1, 2008, among Red Oak Merger Corporation,CHL, the Company, and The Bank of New York Mellon, as trustee, to the Indenture betweenCountrywide Funding Corporation, Countrywide Credit Industries, Inc., and The Bank of NewYork, as trustee dated as of January 1, 1992, as supplemented by First SupplementalIndenture, dated as of June 15, 1995, among CHL (formerly Countrywide FundingCorporation), the Company (formerly Countrywide Credit Industries, Inc.), and The Bank of

New York, as trustee (incorporated by reference to Exhibit 4.3 to the Company's CurrentReport on Form 8-K, filed with the SEC on July 8, 2008).

4.66* First Supplemental Indenture, dated July 1, 2008, among Red Oak Merger Corporation, CHL,the Company, and The Bank of New York Mellon, as trustee, to the Indenture between CHL,Countrywide Credit Industries, Inc., and The Bank of New York, as trustee dated as of

December 1, 2001 (incorporated by reference to Exhibit 4.4 to the Company's Current Reporton Form 8-K, filed with the SEC on July 8, 2008).

4.67* First Supplemental Indenture, dated July 1, 2008, among Red Oak Merger Corporation, theCompany, CHL, Bank of America Corporation, and The Bank of New York Mellon, astrustee, to the Indenture between the Company, CHL, and The Bank of New York, as trustee,dated as of May 22, 2007 (incorporated by reference to Exhibit 4.5 to the Company's CurrentReport on Form 8-K, filed with the SEC on July 8, 2008).

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4.68* Second Supplemental Indenture, dated July 1, 2008, among Red Oak Merger Corporation, theCompany, CHL, and The Bank of New York Mellon, as trustee, to the Subordinated Indenture

between the Company, CHL, and The Bank of New York, as trustee, dated as of April 11,2003, as supplemented by the First Supplemental Indenture, dated as of April 11, 2003, amongthe Company, CHL, and The Bank of New York, as trustee (incorporated by reference toExhibit 4.6 to the Company's Current Report on Form 8-K, filed with the SEC on July 8,2008). w

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4.69* Second Supplemental Indenture, dated July 1, 2008, among Red Oak Merger Corporation, theCompany, and The Bank of New York Mellon, as trustee, to the Junior SubordinatedIndenture between the Company, and The Bank of New York, as trustee, dated as of

November 8, 2006, as supplemented by the Supplemental Indenture, dated as of November 8,2006, between the Company and The Bank of New York, as trustee (incorporated by reference

to Exhibit 4.7 to the Company's Current Report on Form 8-K, filed with the SEC on July 8,2008).

4.70* First Supplemental Indenture, dated July 1, 2008, among Red Oak Merger Corporation, CHL,the Company, and The Bank of New York Mellon, as trustee, to the Indenture among CHL,Countrywide Credit Industries, Inc. and The Bank of New York, as trustee, dated as of June 4,1997 (incorporated by reference to Exhibit 4.8 to the Company's Current Report on Form 8-K,filed with the SEC on July 8, 2008).

4.71* Second Supplemental Trust Deed, dated July 1, 2008, among Red Oak Merger Corporation, theCompany, CHL, and Deutsche Trustee Company Limited, as trustee, to the Trust Deed amongthe Company, CHL, and Deutsche Trustee Company Limited, as trustee, dated as of August 15, 2005, as supplemented and restated by First Supplemental Trust Deed, dated as of

August 31, 2006, among CHL, the Company, and Deutsche Trustee Company Limited, astrustee (incorporated by reference to Exhibit 4.9 to the Company's Current Report on Form 8-K, filed with the SEC on July 8, 2008).

4.72* Fifth Supplemental Trust Deed, dated July 1, 2008, among Red Oak merger Corporation, CHL,the Company, and Deutsche Trustee Company Limited, as trustee, to the Trust Deed amongCHL, the Company (formerly Countrywide Credit Industries, Inc.), and Bankers TrusteeCompany Limited, as trustee, dated as of May 1, 1998, as supplemented and restated byFourth Supplemental Trust Deed, dated as of January 29, 2002, among CHL, the Company(formerly Countrywide Credit Industries, Inc.), and Deutsche Trustee Company Limited, astrustee (incorporated by reference to Exhibit 4.10 to the Company's Current Report on Form 8-K, filed with the SEC on July 8, 2008).

4.73* First Supplemental Note Deed Poll, dated July 1, 2008, between Red Oak Merger Corporationand the Company to the Note Deed Poll by the Company, dated as of April 29, 2005(incorporated by reference to Exhibit 4.11 to the Company's Current Report on Form 8-K,filed with the SEC on July 8, 2008).

+10.118 The Company's Change in Control Severance Plan (As Amended and Restated June 24, 2008).

+10.119 First Amendment dated June 18, 2008 to the Company's 401(k) Savings and Investment Plan,as amended and restated effective January 1, 2007.

12.1 Computation of the Ratio of Earnings to Fixed Charges.

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31.1 Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Actof 2002.

31.2 Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Actwww .S

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of 2002.

32.1 Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350.

32.2 Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350.

* Incorporated by reference

+ Constitutes a management contract or compensatory plan or arrangement

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QuickLinks

COUNTRYWIDE FINANCIAL CORPORATION FORM 10-Q June 30, 2008 TABLE OF CONTENTS PART I. FINANCIAL INFORMATION Financial Statements COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCESHEETS COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATEDSTATEMENTS OF OPERATIONS COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATEDSTATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATEDSTATEMENTS OF CASH FLOWS COUNTRYWIDE FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS (Unaudited)

Note 1—Basis of Presentation Note 2—Subsequent Events—Merger and Subsequent Transactions with Bank of AmericaCorporation

Note 3—Adoption of New Accounting Pronouncements Note 4—(Loss) Earnings Per Share Note 5—Fair Value Note 6—Derivative Financial Instruments Note 7—Mortgage Loans Held for Sale Note 8—Trading Securities and Trading Securities Sold, Not Yet Purchased Note 9—Securities Purchased Under Agreements to Resell, Securities Borrowed and FederalFunds Sold

Note 10—Loans Held for Investment, Net Note 11—Investments in Other Financial Instruments, at Estimated Fair Value Note 12—Mortgage Servicing Rights, at Estimated Fair Value Note 13—Other Assets Note 14—Deposit Liabilities Note 15—Securities Sold Under Agreements to Repurchase Note 16—Notes Payable Note 17—Regulatory and Agency Capital Requirements Note 18—Supplemental Cash Flow Information w

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Note 19—Net Interest Income Note 20—Restructuring Charges Note 21—Pension Plans Note 22—Segments and Related Information Note 23—Summarized Financial Information Note 24—Borrower and Investor Custodial Accounts Note 25—Loan Commitments Note 26—Legal Proceedings Note 27—Recently Issued Accounting Pronouncements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Credit Risk Management Item 4. Controls and Procedures

PART II. OTHER INFORMATION Item 1. Legal Proceedings Item 6. Exhibits

SIGNATURES

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EX-4.49 19 dex449.htm 1ST SUPP. NOTE DEED POLL GUAR. IND., 11/7/8, TO THEDEED POLL GUAR. IND. 4/29/05

Exhibit 4.49

First Supplemental Deed Poll Guarantee and Indemnity

relating to the Deed Poll Guarantee and Indemnity dated 29 April 2005 (as amended and supplementedfrom time to time)

Countrywide Home Loans, Inc. (“CHL”)Bank of America Corporation (“Corporation”)

Mallesons Stephen Jaques

Level 50Bourke Place600 Bourke Street

Melbourne Vic 3000AustraliaT +61 3 9643 4000 begin_of_the_skype_highlighting +61 3 96434000 end_of_the_skype_highlightingF +61 3 9643 5999DX 101 Melbourne

Contents First Supplemental Deed Poll Guarantee and Indemnity

1 Assumption 2

Assumption of the Notes 2 Name 2 Benefit and entitlement 2 Rights independent 3

Noteholders bound 3 Direction to hold this First Supplemental Deed Poll Guarantee and Indemnity 3

2 Miscellaneous 3

Effect of this First Supplemental Deed Poll Guarantee and Indemnity 3 Guarantee Remains in Full Force and Effect 3 Guarantee and First Supplemental Deed Polls Guarantee and Indemnity Construed Together 3 Confirmation and Preservation of Guarantee 4 Severability 4 Terms Defined in the Guarantee 4 Addresses for Notices to the Corporation. 4 Headings 4 Benefits of First Supplemental Deed Poll Guarantee and Indemnity 5 Counterparts 5 w

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Governing law. 5

(i)

First Supplemental Deed Poll Guarantee and Indemnity

Date: 7 November 2008

By: COUNTRYWIDE HOME LOANS, INC., a company incorporated with limitedliability in the State of New York (“CHL”)

And: BANK OF AMERICA CORPORATION, a company incorporated with limitedliability in the State of Delaware (“Corporation”)

In favour of: Each person who is from time to time a Noteholder (as defined in the Note Deed Poll

(defined below)).

Recitals:

A. Countrywide Financial Corporation (formerly known as Red Oak Merger Corporation)(“CFC”) assumed, pursuant to a First Supplemental Note Deed Poll dated 1 July 2008,certain obligations of the Issuer under the Note Deed Poll dated 29 April 2005 (as sosupplemented on 1 July 2008, the “Note Deed Poll”), in connection with a A$3,500,000,000Medium Term Note Programme (the “Programme”).

B. The Corporation has subsequently assumed under a Second Supplemental Note Deed Poll(the “Second Supplemental Note Deed Poll”) certain obligations of CFC under the NoteDeed Poll.

C. CHL has provided a guarantee in respect of the Notes pursuant to a Deed Poll Guarantee and

Indemnity dated 29 April 2005 in relation to the Programme (as amended and supplemented,the “Guarantee”).

D. The Corporation and CHL entered into an Asset Purchase Agreement dated 7 November 2008, pursuant to which CHL will sell to the Corporation substantially all of CHL’s assets(the “Asset Purchase”).

E. The Asset Purchase is expected to be consummated on 7 November 2008.

F. Condition 4.6 of the Notes provides that in the case of a transfer of CHL’s property andassets substantially as an entirety, the person which acquires by transfer the properties andassets shall expressly assume by supplemental deed poll all the obligations of CHL under theGuarantee and the Transaction Documents.

G. This First Supplemental Deed Poll Guarantee and Indemnity has been duly authorized by allnecessary corporate action on the part of CHL and the Corporation.

1

H. CHL and the Corporation are of the opinion that this First Supplemental Deed Poll Guaranteeand Indemnity is not materially prejudicial to the interests of the Noteholders.w

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I. CHL has delivered to the Programme Manager (as defined in the Note Deed Poll) acertificate signed by two of its directors and an opinion of counsel acceptable to theProgramme Manager, stating that the Asset Purchase and this First Supplemental Deed PollGuarantee and Indemnity comply with the Conditions (as defined in the Note Deed Poll) andall conditions precedent provided for in the Conditions (as defined in the Note Deed Poll)relating to the Asset Purchase have been complied with in accordance with Condition 4.6 of

the Notes.

J. All things necessary to make this First Supplemental Deed Poll Guarantee and Indemnity avalid deed poll and agreement according to its terms has been done.

Operative provisions:

1 Assumption

Assumption of the Notes

1.1 The Corporation hereby represents and warrants that:

(a) it is a corporation organized and existing under the laws of the State of Delaware; and

(b) the execution, delivery and performance of this First Supplemental Deed Poll Guaranteeand Indemnity has been duly authorized by the board of directors of the Corporation.

1.2 The Corporation hereby expressly assumes the punctual performance of all the obligations,and the observance of every covenant of CHL under the Guarantee and each other Transaction Document and, in accordance with Condition 4.7 of the Note DeedPoll, the Corporation succeeds to, and is substituted for, and may exercise every right and

power of, CHL under the Transaction Documents with the same effect as if the Corporationhad been named as the Guarantor therein, and following such succession CHL is relieved of all obligations and covenants under the Transaction Documents.

Name

1.3 With effect from the Guarantee Effective Time specified in clause 2.1 below, the name of theGuarantor, under the Guarantee, shall be “Bank of America Corporation”.

Benefit and entitlement

1.4 This First Supplemental Deed Poll Guarantee and Indemnity is executed as a deed poll.Accordingly, each Noteholder has the benefit of, and is entitled to enforce, this FirstSupplemental Deed

2

Poll Guarantee and Indemnity against the Corporation even though it is not a party to, or isnot in existence at the time of execution and delivery of, this First Supplemental Deed PollGuarantee and Indemnity.

Rights independent

1.5 Each Noteholder may enforce its rights under this First Supplemental Deed Poll Guaranteeand Indemnity independently from each other Noteholder.

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Noteholders bound

1.6 Each Noteholder and any person claiming through or under a Noteholder is bound by thisFirst Supplemental Deed Poll Guarantee and Indemnity.

Direction to hold this First Supplemental Deed Poll Guarantee and Indemnity

1.7 Each Noteholder is taken to have irrevocably nominated and authorised the Registrar to holdthis deed poll in New South Wales (or such other place as the Corporation and the Registrar agree) on its behalf. The Corporation acknowledges the right of every Noteholder to the

production of this First Supplemental Deed Poll Guarantee and Indemnity.

2 Miscellaneous

Effect of this First Supplemental Deed Poll Guarantee and Indemnity2.1 Upon:

(a) the execution and delivery of this First Supplemental Deed Poll Guarantee and Indemnity by CHL and the Corporation; and

(b) the Effective Time (as defined in the Second Supplemental Note Deed Poll) havingoccurred,

(the satisfaction of paragraphs (a) and (b) being the “Guarantee Effective Time”) theGuarantee shall be supplemented in accordance with this First Supplemental Deed PollGuarantee and Indemnity, and this First Supplemental Deed Poll Guarantee andIndemnity shall form a part of the Guarantee for all purposes, and every Noteholder shall be bound thereby.

Guarantee Remains in Full Force and Effect

2.2 Except as supplemented hereby, all provisions in the Guarantee shall remain in full force andeffect.

Guarantee and First Supplemental Deed Polls Guarantee and Indemnity Construed Together2.3 This First Supplemental Deed Poll Guarantee and Indemnity is supplemental to the

Guarantee, and the Guarantee and this First Supplemental Deed Poll Guarantee andIndemnity shall be read and construed together.

3

Confirmation and Preservation of Guarantee

2.4 The Guarantee as supplemented by this First Supplemental Deed Poll Guarantee and

Indemnity is in all other respects confirmed and preserved.

Severability

2.5 In case any provision in this First Supplemental Deed Poll Guarantee and Indemnity shall beinvalid, illegal or unenforceable, the validity, legality and enforceability of the remaining

provisions shall not in any way be affected or impaired by this First Supplemental Deed PollGuarantee and Indemnity.

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2.6 All capitalized terms not otherwise defined in this First Supplemental Deed Poll Guarantee

and Indemnity shall have the meanings ascribed to them in the Guarantee.

Addresses for Notices to the Corporation.

2.7 Any notice or demand which by any provisions of this First Supplemental Deed PollGuarantee and Indemnity or the Guarantee is required or permitted to be given or served on

the Corporation may be given in accordance with the Guarantee or served by postage prepaidfirst class mail addressed (until another address is notified by the Corporation in accordancewith the Conditions (as defined in the Note Deed Poll) as follows:

Bank of America CorporationBank of America Corporate Center 100 North Tryon Street

NC1-007-07-13 Corporate Treasury DivisionCharlotte, North Carolina 28255Telephone: (980) 387-3776 begin_of_the_skype_highlighting (980) 387-3776 end_of_the_skype_highlightingFacsimile: (980) 387-8794Attention: B. Kenneth Burton, Jr.

together with a copy to:Bank of America CorporationLegal Department

NC1-002-29-01101 South Tryon StreetCharlotte, North Carolina 28255Telephone: (704) 386-4238 begin_of_the_skype_highlighting (704) 386-4238 end_of_the_skype_highlightingFacsimile: (704) 386-1670Attention: Teresa M. Brenner, Esq.

Headings

2.8 The headings of this First Supplemental Deed Poll Guarantee and Indemnity have beeninserted for convenience of reference only, are not to be considered part of this FirstSupplemental Deed Poll Guarantee and Indemnity and shall in no way modify or restrict anyof the terms or provisions hereof.

4

Benefits of First Supplemental Deed Poll Guarantee and Indemnity

2.9 Nothing in this First Supplemental Deed Poll Guarantee and Indemnity or the Guarantee,express or implied, shall give to any person, other than the parties to this First Supplemental

Deed Poll Guarantee and Indemnity and their successors and the Noteholders, any benefit of any legal or equitable right, remedy or claim under the Guarantee or this First SupplementalDeed Poll Guarantee and Indemnity.

Counterparts

2.10 The parties may sign any number of copies of this First Supplemental Deed Poll Guaranteeand Indemnity. Each signed copy shall be an original, but all of them together represent thesame instrument.w

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6

Cw Bofa Merger Plan Agreement

Documents

Transcript of Cw Bofa Merger Plan Agreement