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                             EMPLOYMENT AGREEMENT
                             --------------------

     THIS EMPLOYMENT AGREEMENT (the "Agreement") has been executed as of
December 23, 1998 by and between IndyMac Mortgage Holdings, Inc., a Delaware
corporation ("Employer"), and Angelo R. Mozilo ("Officer").


                             W I T N E S S E T H:
                             --------------------

     WHEREAS, Officer currently holds the offices of Vice Chairman of the Board
of Directors of Employer (the "Board") and Chief Executive Officer of Employer;
and

     WHEREAS, Employer desires to obtain the benefit of continued services of
officer and Officer desires to continue to render services to Employer; and

     WHEREAS, the Board has determined that it is in Employer's best interest
and that of its stockholders to recognize the substantial contribution that
Officer has made and is expected to continue to make to the Company's business
and to retain his services in the future; and

     WHEREAS, Employer and Officer desire to set forth the continued terms and
conditions of Officer's employment with Employer under this Agreement.

     NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties hereto agree as follows:

     1.  Term.  Employer agrees to employ Officer and Officer agrees to serve
         ----                                                                
Employer, in accordance with the terms hereof, for a term beginning on January
1, 1999 (the "Effective Date") and ending on December 31, 2003, unless earlier
terminated in accordance with the provisions hereof.

     2.  Specific Position; Duties and Responsibilities.  Employer and Officer
         ----------------------------------------------                       
hereby agree that, subject to the provisions of this Agreement, Employer will
employ Officer and Officer will serve Employer and its subsidiaries as Vice
Chairman of the Board and Chief Executive Officer of Employer.  Employer agrees
that Officer's duties hereunder shall be the usual and customary duties of the
offices of Vice Chairman of the Board and Chief Executive Officer and such
further duties consistent therewith as may be designated from time to time by
the Board, and shall not be inconsistent with the provisions of the charter
documents of Employer or applicable law.  Officer shall have such executive
power and authority as shall reasonably be required to enable him to discharge
his duties in the offices which he may hold.  All compensation paid to Officer
by Employer or any of its subsidiaries shall be aggregated in determining
whether Officer has received the benefits provided for herein.

     3.  Scope of this Agreement and Outside Affiliations.  Except as expressly
         ------------------------------------------------                      
provided below, during the term of this Agreement, Officer shall devote such
portion of his business time and energy as the Board may reasonably require to
the business, affairs and interests of Employer 
<PAGE>
 
and its subsidiaries, and matters related thereto, and shall use his best
efforts and abilities to promote its interests. Officer agrees that he will
diligently endeavor to promote the business, affairs and interests of Employer
and its subsidiaries and perform services contemplated hereby, in accordance
with the policies established by the Board, which policies shall be consistent
with this Agreement. Officer agrees to serve without additional remuneration in
such senior executive capacity not below the rank of Vice President for one or
more (direct or indirect) subsidiaries of Employer as the Board may from time to
time request, subject to appropriate authorization by the subsidiary or
subsidiaries involved and any limitation under applicable law. Employer and
Officer acknowledge and agree that Officer may perform his duties hereunder
outside the State of California. Officer's failure to discharge an order or
perform a function because Officer reasonably and in good faith believes such
would violate a law or regulation or be dishonest shall not be deemed a breach
by him of his obligations or duties pursuant to any of the provisions of this
Agreement, including without limitation pursuant to Section 5(c) hereof.

     Officer may not serve as a director or in any other capacity of any
business enterprise, including an enterprise whose activities may involve or
relate to the business of Employer, unless such service is expressly approved
herein or by the Board.  Officer may make and manage personal business
investments of his choice and serve in any capacity with any civic, educational
or charitable organization, or any governmental entity or trade association,
without seeking or obtaining approval by the Board, provided such activities and
services do not materially interfere or conflict with the performance of his
duties hereunder.

     Notwithstanding any provisions of this Section 3, Employer and Officer
acknowledge that Officer currently serves as an officer and director of
Countrywide Credit Industries, Inc. and certain of its subsidiaries
("Countrywide") and agree that Officer shall be permitted to perform such
duties, engage in such activities and devote such portion of his business time
and energy as may be required under the terms of his employment with
Countrywide.

     4.  Compensation and Benefits.

          (a)  Base Salary.  Employer shall pay to Officer a base salary in each
               -----------                                                      
fiscal year of Employer (a "Fiscal Year") or portion thereof covered by this
Agreement at the annual rate of $550,000.  Such base salary shall be subject to
annual review by the Board for increase (but not decrease).

          (b)  Execution Bonus.  Upon the execution of this Agreement by Officer
               ---------------                                                  
and Employer (the "Execution Date"), Employer shall owe to Officer a one time
execution bonus of $1,100,000.  Employer shall pay such bonus to Officer as soon
as practicable after the Execution Date.

          (c)  Restricted Stock and Stock Options.  Upon the Execution Date,
               ----------------------------------                           
Employer shall grant to Officer 100,000 restricted shares of the Employer's
common stock, such restricted shares to become vested and transferable as to
20,000 shares on each of the first five (5) anniversaries of the date of grant,
provided that Officer remains in continuous service with Employer until such
anniversary.  In respect of each of the Fiscal Years during the term of this
Agreement, Employer shall also grant to Officer stock options and/or restricted
shares for such 
<PAGE>
 
number of shares of Employer's common stock as the Compensation Committee of the
Board in its sole discretion determines (but not less than stock options for
100,000 shares of such common stock), taking into account Officer's and
Employer's performance in each of such Fiscal Years and the competitive
practices then prevailing regarding the granting of stock options and restricted
shares. All stock options and restricted shares granted in accordance with this
Section 4(c) shall be granted pursuant to the 1998 Stock Incentive Plan, as
amended (the "1998 Plan"), or such other stock option plan or plans as may be or
come into effect during the term of this Agreement and, in the case of stock
options, shall have a per share exercise price equal to the fair market value
(as defined in the 1998 Plan or such other plan or plans) of the common stock at
the time of grant. The stock options granted pursuant to this Section shall
consist of incentive stock options to the extent permitted by law or regulation.

          (d)  Additional Benefits.  Officer shall also be entitled to all
               -------------------                                        
rights and benefits for which he is otherwise eligible under any bonus plan,
stock purchase plan, participation or extra compensation plan, executive
compensation plan, pension plan, profit-sharing plan, life and medical insurance
policy, or other plans or benefits, which Employer or its subsidiaries may
provide for him, or provided he is eligible to participate therein, for senior
officers generally or for employees generally, during the term of this Agreement
(collectively, "Additional Benefits").  This Agreement shall not affect the
provision of any other compensation, retirement or other benefit program or plan
of Employer.

          (e)  Continuation of Benefits.  If Officer's employment is terminated
               ------------------------                                        
hereunder, pursuant to Section 5(a), 5(b) or 5(d) hereof, Employer shall
continue for the period specified in Section 5(a) or 5(b) hereof or three years
in the case of a termination pursuant to Section 5(d) hereof, as the case may
be, to provide benefits substantially equivalent to Additional Benefits (other
than qualified pension or profit-sharing plan benefits and option, equity or
stock appreciation or other incentive plan benefits as distinguished from
health, disability and welfare type benefits) on behalf of Officer and his
dependents and beneficiaries which were being provided to them immediately prior
to Officer's Termination Date, but only to the extent that Officer is not
entitled to comparable benefits from other employment.

          (f)  Deferral of Amounts Payable Hereunder.  In the event Officer
               -------------------------------------                       
should desire to defer receipt of any cash payments to which he would otherwise
be entitled hereunder, he may elect to do so under Employer's nonqualified
deferred compensation program, subject to the terms and conditions of such
program.

          (g)  Termination Bonus.  Upon the termination of Officer's employment
               -----------------                                               
hereunder for any reason other than Cause (including, without limitation, death,
Disability, Good Reason, voluntary termination and nonrenewal or expiration of
this Agreement), the Employer shall owe to Officer a one-time termination bonus
of $1,000,000, in addition to any other amounts or benefits payable to Officer
under Section 5.  Employer shall pay such bonus to Officer as soon as
practicable after the date of such termination.
<PAGE>
 
     5.  Termination.  The compensation and benefits provided for herein and the
         -----------                                                            
employment of Officer by Employer shall be terminated only as provided for below
in this Section 5:

          (a)  Disability.  In the event that Officer shall fail, because of
               ----------                                                   
illness, injury or similar incapacity ("Disability"), to render for four (4)
consecutive calendar months, or for shorter periods aggregating eighty (80) or
more business days in any twelve (12) month period, services contemplated by
this Agreement, Officer's full-time employment hereunder may be terminated, by
written Notice of Termination from Employer to Officer; and thereafter, Employer
shall continue, from the Termination Date until Officer's death or the tenth
(10th) anniversary of such notice, whichever first occurs (the "Disability
Payment Period"), (i) to pay compensation to Officer, in the same manner as in
effect immediately prior to the Termination Date, in an amount equal to (1)
sixty percent (60%) of the then existing base-salary payable immediately prior
to the termination, minus (2) the amount of any cash payments to him under the
terms of Employer's disability insurance or other disability benefit plans or
Employer's tax-qualified defined benefit pension plan, and any compensation he
may receive pursuant to any other employment (other than compensation for
disability), (ii) to provide during the Disability Payment Period the benefits
specified in Section 4(e) hereof, and (iii) to continue during the Disability
Payment Period the vesting of all option, equity and stock appreciation rights
granted to Officer.

          The determination of Disability shall be made only after 30 days
notice to Officer and only if Officer has not returned to performance of his
duties during such 30-day period.  In order to determine Disability, both
Employer and Officer shall have the right to provide medical evidence to support
their respective positions, with the ultimate decision regarding Disability to
be made by a majority of Employer's disinterested directors.

          (b)  Death.  In the event that Officer shall die during the term of
               -----                                                         
this Agreement, Employer shall pay Officer's base salary for the remainder of
the term of this Agreement following the date of Officer's death and in the
manner otherwise payable hereunder, to such person or persons as Officer shall
have directed in writing or, in the absence of a designation, to his estate (the
"Beneficiary").  Employer shall also provide during the three (3) year period
following the date of the Officer's death the benefits specified in Section 4(e)
hereof and fully vest all option, equity and stock appreciation rights granted
to Officer.  If Officer's death occurs while he is receiving payments for
Disability under Section 5(a)(i) above, such payments shall cease and the
Beneficiary shall be entitled to the payments and benefits under this Subsection
(b).  This Agreement in all other respects will terminate upon the death of
Officer; provided, however, that the termination of the Agreement shall not
affect Officer's entitlement to all other benefits in which he has become vested
or which are otherwise payable in respect of periods ending prior to or upon its
termination.

          (c)  Cause.  Employer may terminate Officer's employment under this
               -----                                                         
Agreement for "Cause." A termination for Cause is a termination by reason of (i)
a material breach of this Agreement by Officer (other than as a result of
incapacity due to physical or mental illness) which is committed in bad faith or
without reasonable belief that such breach is in 
<PAGE>
 
the best interests of Employer and which is not remedied within a reasonable
period of time after receipt of written notice from Employer specifying such
breach, (ii) Officer's conviction by a court of competent jurisdiction of a
felony, or (iii) entry of an order duly issued by any federal or state
regulatory agency having jurisdiction in the matter removing Officer from office
of Employer or its subsidiaries or permanently prohibiting him from
participating in the conduct of the affairs of Employer or any of its
subsidiaries. If Officer shall be convicted of a felony or shall be removed from
office and/or temporarily prohibited from participating in the conduct of
Employer's or any of its subsidiaries' affairs by any federal or state
regulatory authority having jurisdiction in the matter, Employer's obligations
under Sections 4(a) and 4(c) hereof shall be automatically suspended; provided,
however, that if the charges resulting in such removal or prohibition are
finally dismissed or if a final judgment on the merits of such charges is issued
in favor of Officer, or if the conviction is overturned on appeal, then Officer
shall be reinstated in full with back pay for the removal period plus accrued
interest at the rate then payable on judgments. During the period that
Employer's obligations under Sections 4(a) and 4(c) hereof are suspended,
Officer shall continue to be entitled to receive Additional Benefits under
Section 4(d) until the conviction of the felony or removal from office has
become final and non-appealable. When the conviction of the felony or removal
from office has become final and non-appealable, all of Employer's obligations
hereunder shall terminate; provided, however, that the termination of Officer's
employment pursuant to this Section 5(c) shall not affect Officer's entitlement
to all benefits in which he has become vested or which are otherwise payable in
respect of periods ending prior to or upon his termination of employment.

          (d)  Good Reason.  Officer may terminate his employment for Good
               -----------                                                
Reason.  For purposes of this Agreement, "Good Reason" shall be deemed to occur
if (i) Employer notifies Officer of a termination of his employment other than
for Cause, (ii) Employer breaches this Agreement in any material respect, (iii)
the Board (A) elects a person other than Officer as Employer's Vice Chairman of
the Board or Chief Executive Officer without Officer's consent, (B) reorganizes
management so as to require him to report to a person or persons other than the
Board, or (C) takes any other action which, in Officer's sole judgment, results
in the diminution in Officer's status, title, position and responsibilities
other than an insubstantial action not taken in bad faith and which is remedied
by Employer promptly after receipt of notice by Officer, or (iv) Officer is not
elected to the Board.  Notwithstanding the foregoing, Officer may terminate his
employment for any or no reason within one year following a "Change in Control"
(as defined in Appendix A to this Agreement) and such termination shall be
considered a termination for Good Reason hereunder.  If Officer's employment
shall be terminated by Employer other than for Cause or by Officer for Good
Reason, then Employer shall pay to Officer in a single payment, as severance pay
and in lieu of any further salary and incentive compensation for periods
subsequent to the Termination Date, but in addition to the payment under Section
4(g), an amount in cash equal to (a) if such termination occurs in 1999, 2.99
times the Officer's base amount as determined under Section 280G(b)(3) of the
Internal Revenue Code of 1986, as amended (the "Code"), on the Termination Date
(the "Base Amount"), (b) if such termination occurs in 2000, 2.50 times the Base
Amount, (c) if such termination occurs in 2001, 2.00 times the Base Amount, (d)
if such termination occurs in 2002, 1.50 times the Base Amount, and (e) if such
termination occurs in 2003, 1.00 times the Base Amount.
<PAGE>
 
          If in the opinion of tax counsel selected by Officer and reasonably
acceptable to Employer, Officer has or will receive any compensation or
recognize any income (whether or not pursuant to this Agreement or any plan or
other arrangement of Employer and whether or not Officer's employment with
Employer has terminated, unless such employment is terminated for Cause) which
will constitute an "excess parachute payment" within the meaning of Section
280G(b)(1) of the Code (or for which a tax is otherwise payable under Section
4999 of the Code or any successor provision thereto), then Employer shall pay
Officer an additional amount (the "Additional Amount") equal to the sum of (i)
all taxes payable by Officer under Section 4999 of the Code with respect to all
such excess parachute payments and any such Additional Amount, plus (ii) all
federal, state and local income taxes payable by Officer with respect to any
such Additional Amount.  Any amounts payable pursuant to this paragraph shall be
paid by Employer to Officer within 30 days of each written request therefor made
by Officer.

          (e)  Resignation.  Except as provided in Section 5(d) hereof, if
               -----------                                                
during the term of this Agreement, Officer shall resign voluntarily, all of his
rights to payment or benefits hereunder shall immediately terminate; provided,
however, that the termination of Officer's employment pursuant to this Section
5(e) shall not affect Officer's entitlement to all benefits in which he has
become vested or which are otherwise payable in respect of periods ending prior
to or upon his termination of employment, including the payment under Section
4(g).

          (f)  Notice of Termination.  Any purported termination by Employer or
               ---------------------                                           
by Officer shall be communicated by a written Notice of Termination to the other
party hereto which indicates the specific termination provision in this
Agreement, if any, relied upon and which sets forth in reasonable detail the
facts and circumstances, if any, claimed to provide a basis for termination of
Officer's employment under the provision so indicated.  For purposes of this
Agreement, no such purported termination shall be effective without such Notice
of Termination.  The "Termination Date" shall mean the date specified in the
Notice of Termination, which shall be no less than 30 or more than 60 days from
the date of the Notice of Termination.  Notwithstanding any other provision of
this Agreement, in the event of any termination of Officer's employment
hereunder for any reason, Employer shall pay Officer his full base salary
through the Termination Date, plus any Additional Benefits which have been
earned or become payable, but which have not yet been paid as of such
Termination Date.

          (g)  Payments.  All payments required under this Agreement (other than
               --------                                                         
the Additional Benefits payable pursuant to Section 4(e) hereof) as a result of
the termination of Officer's employment hereunder shall be made within 15 days
of the Termination Date or, if any portion is not then reasonably determinable,
within five (5) days after such portion is so determinable.  In the event of a
dispute concerning the validity of a purported termination which is maintained
in good faith, the Termination Date shall mean the date the dispute is finally
resolved and Employer will continue to provide Officer with the compensation and
benefits provided for under this Agreement, until the dispute is finally
resolved without any obligation by Officer to repay any of such amounts to
Employer, notwithstanding the final outcome of the dispute.  Payments required
to be made by this Section 5(g) are in addition to all other amounts due under
Section 5 of this Agreement and shall not be offset against or reduce any other
amounts due under Section 5 of this Agreement.  Officer shall be required to
render services to 
<PAGE>
 
Employer during the period following his Termination Date but before the dispute
concerning the termination is finally determined unless Employer fails to
provide Officer with a reasonable opportunity to perform his duties under this
Agreement during such period.

     6.  Reimbursement of Business Expenses.  During the term of this Agreement,
         ----------------------------------                                     
Employer shall reimburse Officer promptly for all expenditures (including
travel, entertainment, parking, business meetings, and the monthly costs
(including dues) of maintaining memberships at appropriate clubs) to the extent
that such expenditures meet the requirements of the Code for deductibility by
Employer for federal income tax purposes or are otherwise in compliance with the
rules and policies of Employer and are substantiated by Officer as required by
the Internal Revenue Service and rules and policies of Employer.

     7.  Indemnity.  To the extent permitted by applicable law, the Certificate
         ---------                                                             
of Incorporation and the By-Laws of Employer (as from time to time in effect)
and any indemnity agreements entered into from time to time between Employer and
Officer, Employer shall indemnify Officer and hold him harmless for any acts or
decisions made by him in good faith while performing services for Employer, and
shall use reasonable efforts to obtain coverage for him under liability
insurance policies now in force or hereafter obtained during the term of this
Agreement covering the other officers or directors of Employer.

     8.  Miscellaneous.
         ------------- 

          (a)  Succession.  This Agreement shall inure to the benefit of and
               ----------                                                   
shall be binding upon Employer, its successors and assigns, but without the
prior written consent of Officer, this Agreement may not be assigned other than
in connection with a merger or sale of substantially all the assets of the
Employer or similar transaction.  Employer shall not agree to any such
transaction unless the successor to or assignee of Employer's business and/or
assets in such transaction expressly assumes all obligations of the Employer
hereunder.  The obligations and duties of Officer hereby shall be personal and
not assignable.

          (b)  Notices.  Any notices provided for in this Agreement shall be
               -------                                                      
sent to Employer at 155 North Lake Avenue, Pasadena, California 91101,
Attention:  Corporate Counsel/Secretary, with a copy to the Chairman of the
Compensation Committee at the same address, or to such other address as Employer
may from time to time in writing designate (or his business address of record in
the absence of such designation).  All notices shall be deemed to have been
given two (2) business days after they have been deposited as certified mail,
return receipt requested, postage paid and properly addressed to the designated
address of the party to receive the notices.

          (c)  Entire Agreement.  This instrument contains the entire agreement
               ----------------                                                
of the parties relating to the subject matter hereof, and it replaces and
supersedes any prior agreements between the parties relating to said subject
matter.  No modifications or amendments of this Agreement (including, but not
limited to the provisions of Section 4 hereof) shall be valid unless made in
writing and signed by the parties hereto.
<PAGE>
 
          (d)  Waiver.  The waiver of the breach of any term or of any condition
               ------                                                           
of this Agreement shall not be deemed to constitute the waiver of any other
breach of the same or any other term or condition.

          (e)  California Law.  This Agreement shall be construed and
               --------------                                        
interpreted in accordance with the laws of California.

          (f)  Attorneys' Fees in Action on Contract.  If any litigation shall
               -------------------------------------                          
occur between the Officer and Employer, which litigation arises out of or as a
result of this Agreement or the acts of the parties hereto pursuant to this
Agreement, or which seeks an interpretation of this Agreement, the prevailing
party in such litigation, in addition to any other judgment or award, shall be
entitled to receive such sums as the court hearing the matter shall find to be
reasonable as and for the attorneys' fees of the prevailing party.

          (g)  Confidentiality.  Officer agrees that he will not divulge or
               ---------------                                             
otherwise disclose, directly or indirectly, any trade secret or other
confidential information concerning the business or policies of Employer or any
of its subsidiaries which he may have learned as a result of his employment
during the term of this Agreement or prior thereto as an employee, officer or
director of or consultant to Employer or any of its subsidiaries, except to the
extent such use or disclosure is (i) necessary or appropriate to the performance
of this Agreement and in furtherance of Employer's best interests, (ii) required
by applicable law, (iii) lawfully obtainable from other sources, or (iv)
authorized by Employer.  The provisions of this subsection shall survive the
expiration, suspension or termination, for any reason, of this Agreement.

          (h)  Remedies of Employer.  Officer acknowledges that the services he
               --------------------                                            
is obligated to render under the provisions of this Agreement are of a special,
unique, unusual, extraordinary and intellectual character, which gives this
Agreement peculiar value to Employer.  The loss of these services cannot be
reasonably or adequately compensated in damages in an action at law and it would
be difficult (if not impossible) to replace these services.  By reason thereof,
Officer agrees and consents that if he violates any of the material provisions
of this Agreement, Employer, in addition to any other rights and remedies
available under this Agreement or under applicable law, shall be entitled during
the remainder of the term to seek injunctive relief, from a tribunal of
competent jurisdiction, restraining Officer from committing or continuing any
violation of this Agreement, or from the performance of services to any other
business entity, or both.

          (i)  Severability.  If any provision of this Agreement is held invalid
               ------------                                                     
or unenforceable, the remainder of this Agreement shall nevertheless remain in
full force and effect, and if any provision is held invalid or unenforceable
with respect to particular circumstances, it shall nevertheless remain in full
force and effect in all other circumstances.
<PAGE>
 
          (j)  No Obligation to Mitigate.  Officer shall not be required to
               -------------------------                                   
mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise and, except as provided in Section 5(a)(i)(2)
hereof, no payment hereunder shall be offset or reduced by the amount of any
compensation or benefits provided to Officer in any subsequent employment.

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

                                    INDYMAC MORTGAGE
                                    HOLDINGS, INC.


ATTEST


s:/ Richard H. Wohl                 By: /s/ Michael W. Perry
-------------------                     -------------------
Richard H. Wohl                         Michael W. Perry
Title: Secretary                        Title: Secretary


                                    OFFICER:


                                    s:/ Angelo R. Mozilo
                                    --------------------
                                    Angelo R. Mozilo, in his individual capacity
<PAGE>
 
                                  APPENDIX A
                   To Angelo R. Mozilo Employment Agreement


     A "Change in Control" shall mean the occurrence during the term of the
Agreement, of any one of the following events:

          (a)  An acquisition (other than directly from Employer) of any common
               stock or other "Voting Securities" (as hereinafter defined) of
               Employer by any "Person" (as the term person is used for purposes
               of Section 13(d) or 14(d) of the Securities Exchange Act of 1934,
               as amended (the "Exchange Act")), immediately after which such
               Person has "Beneficial Ownership" (within the meaning of Rule
               13d-3 promulgated under the Exchange Act) of twenty five percent
               (25%) or more of the then outstanding shares of Employers common
               stock or the combined voting power of Employer's then outstanding
               Voting Securities; provided, however, that in determining whether
                                  --------  -------                             
               a Change in Control has occurred, Voting Securities which are
               acquired in a "Non-Control Acquisition" (as hereinafter defined)
               shall not constitute an acquisition which would cause a Change in
               Control.  For purposes of this Agreement, (1) "Voting Securities"
               shall mean Employer's outstanding voting securities entitled to
               vote generally in the election of directors and (2) a "Non-
               Control Acquisition" shall mean an acquisition by (i) an employee
               benefit plan (or a trust forming a part thereof) maintained by
               (A) Employer or (B) any corporation or other Person of which a
               majority of its voting power or its voting equity securities or
               equity interest is owned, directly or indirectly, by Employer
               (for purposes of this definition, a "Subsidiary"), (ii) Employer
               or any of its Subsidiaries, (iii) any Person in connection with a
               "Non-Control Transaction" (as hereinafter defined), or (iv)
               Countrywide or any of its affiliates (the "Countrywide
               Entities");

          (b)  The individuals who, as of the date of the Agreement are members
               of the Board (the "Incumbent Board"), cease for any reason to
               constitute at least two-thirds of the members of the Board;
                                                                          
               provided, however, that if the election, or nomination for
               --------  -------                                         
               election by Employer's common stockholders, of any new director
               was approved by a vote of at least two-thirds of the Incumbent
               Board, such new director shall, for purposes of this Agreement,
               be considered as a member of the Incumbent Board; provided
                                                                 --------
               further, however, that no individual shall be considered a member
               -------  -------                                                 
               of the Incumbent Board if such individual initially assumed
               office as a result of either an actual or threatened "Election
               Contest" (as described in Rule 14a-11 promulgated under the
               Exchange Act) or other actual or threatened solicitation of
               proxies or consents by or on behalf of a Person other than the
               Board (a "Proxy Contest") including by reason of any agreement
               intended to avoid or settle any Election Contest or Proxy
               Contest; or
<PAGE>
 
          (c)   The consummation of:

               (i)  A merger, consolidation or reorganization involving
                    Employer, unless such merger, consolidation or
                    reorganization is a "Non-Control Transaction."  A "Non-
                    Control Transaction" shall mean a merger, consolidation or
                    reorganization of Employer into, with or involving any
                    Countrywide Entity or where:

                    (A)  the stockholders of Employer, immediately before such
                         merger, consolidation or reorganization, own directly
                         or indirectly immediately following such merger,
                         consolidation or reorganization, at least seventy
                         percent (70%) of the combined voting power of the
                         outstanding Voting Securities of the corporation
                         resulting from such merger, consolidation or
                         reorganization (the "Surviving Corporation") in
                         substantially the same proportion as their ownership of
                         the Voting Securities immediately before such merger,
                         consolidation or reorganization;

                    (B)  the individuals who were members of the Incumbent Board
                         immediately prior to the execution of the agreement
                         providing for such merger, consolidation or
                         reorganization constitute at least two-thirds of the
                         members of the board of directors of the Surviving
                         Corporation, or in the event that, immediately
                         following the consummation of such transaction, a
                         corporation beneficially owns, directly or indirectly,
                         a majority of the Voting Securities of the Surviving
                         Corporation, the board of directors of such
                         corporation; and

                    (C)  no Person other than (i) Employer, (ii) any Subsidiary,
                         (iii) any employee benefit plan (or any trust forming a
                         part thereof) maintained by Employer, the Surviving
                         Corporation, or any Subsidiary, (iv) any Countrywide
                         Entity, or (v) any Person who, immediately prior to
                         such merger, consolidation or reorganization had
                         Beneficial Ownership of twenty five percent (25%) or
                         more of the then outstanding Voting Securities or
                         common stock of Employer, has Beneficial Ownership of
                         twenty five percent (25%) or more of the combined
                         voting power of the Surviving Corporation's then
                         outstanding Voting Securities or its common stock;

               (ii)  A complete liquidation or dissolution of Employer; or
<PAGE>
 
               (iii)   The sale or other disposition of all or substantially all
                       of the assets of Employer to any Person (other than a
                       transfer to a Subsidiary or to any Countrywide Entity).

          Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur solely because any Person (the "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the then outstanding common stock
or Voting Securities as a result of the acquisition of common stock or Voting
Securities by Employer which, by reducing the number of shares of common stock
or Voting Securities then outstanding, increases the proportional number of
shares Beneficially Owned by the Subject Persons; provided, however, that if a
Change in Control would occur (but for the operation of this sentence) as a
result of the acquisition of common stock or Voting Securities by Employer, and
after such share acquisition by Employer, the Subject Person becomes the
Beneficial Owner of any additional common stock or Voting Securities which
increases the percentage of the then outstanding common stock or Voting
Securities Beneficially Owned by the Subject Person, then a Change in Control
shall occur.


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