exv10w1






SETTLEMENT AGREEMENT




     THIS SETTLEMENT AGREEMENT, dated as of the 10th day of October, 2008 (“Agreement”),
is entered into by and between The Bank of New York Mellon, solely in its capacity as Indenture
Trustee for the Series B Floating Rate Convertible Senior Debentures Due 2037, a corporation
organized and existing under the laws of the State of New York (“BONYM”), and Countrywide Financial
Corporation, a corporation organized and existing under the laws of the State of Delaware (“CFC”).



     WHEREAS, BONYM has filed an action against CFC entitled The Bank of New York Mellon,
solely in its capacity as Indenture Trustee for the Series B Floating Rate Convertible Senior
Debentures Due 2037 v. Countrywide Financial Corporation in the Court of Chancery of the State
of Delaware (the “BONYM Action”); and



     WHEREAS, the parties wish to resolve the BONYM Action amicably and without resort to the time,
effort and expense of additional litigation;



     NOW, THEREFORE, it is hereby agreed as follows:



     1. Tender Offer



     CFC will commence a tender offer for the Series B Floating Rate Convertible Senior Debentures
Due 2037 (the “Series B Debentures”) issued under the Indenture dated as of May 22, 2007 for the
Series A and Series B Floating Rate Convertible Senior Debentures Due 2037 (the “Indenture”) on or
before October 20, 2008 (the “Tender Offer”), subject to receiving any necessary regulatory
approvals for such Tender Offer. The purchase price for the Tender Offer shall be $980 per $1000
principal amount of Series B Debentures, plus accrued interest (computed in accordance with the
terms thereof) from the date of the last interest payment thereon (i.e., August 15, 2008 in the
case of Series B Debentures tendered on or prior to November 14, 2008, and November 15, 2008 in the
case of Series B Debentures tendered on or



 









 







after November 15, 2008) excluding the date of payment. The Tender Offer shall remain open
for 30 business days, or any longer duration required by applicable law. During the Tender Offer
period, CFC will accept tender of Series B Debentures either by delivery of certificates or by
compliance with other appropriate procedures similar to the procedures described in Section 3.01(c)
of the Indenture for the delivery by Holders for repurchase by the Company of Securities (as such
capitalized terms are defined in the Indenture). Except for compliance with such procedures, there
shall be no other conditions for payment. CFC will pay for Series B Debentures as and when validly
tendered with customary documentation unless payments at such time are contrary to applicable
federal securities law in which case payment will be made as soon as is permissible thereafter.



     2. Purchase Agreement Regarding Certain Debentures



     It is understood that certain Series B Debentures may be held in street name accounts with
Lehman Brothers Inc., Lehman Brothers International (Europe), or any of their respective affiliates
(collectively, “Lehman”) or one or more firms having account relationships with or holding
securities in Lehman accounts, and that, as a result, the beneficial holders of such Series B
Debentures (the “Frozen Debentures”) may be unable to duly comply with tender procedures for all or
a portion of their Frozen Debentures on or before the date of termination of the Tender Offer.
With respect to Frozen Debentures the beneficial holders of which are unable to tender such
securities in the Tender Offer and are identified in the letter dated October 10, 2008 addressed to
Mitchell A. Lowenthal (the “October 10 Letter”), which letter shall be provided on an attorneys’
eyes only basis (and, upon commencement of the Tender Offer, disclosed to CFC on a confidential
basis), CFC agrees that, subsequent to the expiration of the Tender Offer and subject to applicable
law, it will purchase the Frozen Debentures at the Tender



2









 







Offer price set forth above (as adjusted to reflect any interest payments previously made
thereon) if requested by the beneficial holder as and when they can be delivered and sold free and
clear of any liens; provided, however, that such agreement (i) applies only to the beneficial
holders of Frozen Debentures identified in the October 10 Letter and (ii) shall expire on the date
occurring three (3) months after the commencement of the Tender Offer.



     3. Attorneys’ Fees and Trustee’s Fees



     CFC will pay for and reimburse legal fees and costs actually incurred in connection with the
prosecution and settlement of the BONYM Action, in an aggregate amount not to exceed $775,000, for
services rendered, and related expenses incurred by, the law firms Brown Rudnick LLP, Fox
Rothschild LLP, and Carter Ledyard & Millburn LLP. In addition, CFC will pay for and reimburse
BONYM for expenses incurred in its capacity as Indenture Trustee under the Indenture with respect
to the BONYM Action and settlement of the BONYM Action, which expenses shall be included as part of
the foregoing aggregate amount not to exceed $775,000.



     4. Dismissal of BONYM Action with Prejudice; Public Disclosure



     (a) Upon the execution of this Agreement, the parties will advise the Court regarding this
Agreement and seek an adjournment, to the first available date after October 20, 2008, of the
hearing of the parties’ respective motions for summary judgment.



     (b) Upon the commencement of the Tender Offer on or before October 20, 2008, BONYM and CFC
shall execute a stipulation and proposed order in the form annexed hereto as Exhibit A (the
“Stipulation”), dismissing with prejudice the BONYM Action to the extent permitted by the Indenture
and the parties shall jointly submit the same for approval by the Court. The BONYM Action was
brought by BONYM at the direction of certain beneficial



3









 







holders (the “Directing Holders”) of Series B Debentures. BONYM’s execution of the
Stipulation shall be at the direction of the Directing Holders and with the consent of the
Directing Holders who, in consideration of this settlement, agree to waive, pursuant to Section
6.04 of the Indenture, any rights such Directing Holders may have under the Indenture by reason of
the default alleged in the complaint filed in the BONYM Action (the “BONYM Complaint”) to have
occurred on or about July 16, 2008. The parties to this settlement agree that the dismissal of the
BONYM Action shall be with prejudice as to the Directing Holders with respect to the claims
asserted in the BONYM Complaint. Such dismissal shall be without prejudice to the rights of holders
other than the Directing Holders.



     (c) In the event that, for any reason, the Tender Offer is not commenced on or before October
20, 2008, then, unless the parties have entered into a written agreement to the contrary, (i)
BONYM’s obligation to settle the BONYM Action on the terms stated herein shall terminate, (ii) each
party shall be free to pursue any remedy it may have under this Agreement by reason of the breach
of the other party, and (iii) each party shall be restored to its pre-settlement position in the
BONYM Action. In the event of the termination of the settlement upon the non-occurrence of the
Tender Offer, CFC agrees that it will make no objection to an application by BONYM to the Court for
an expeditious hearing of the parties’ summary judgment motions.



     (d) Contemporaneously with the execution of this Agreement, counsel to CFC (attn. Mitchell
Lowenthal) shall be provided, on an attorneys’ eyes only basis, a listing of all Directing Holders,
along with the aggregate amount of Series B Debentures held by all the Directing Holders (the
“Directing Holders List”). The Directing Holders List may be disclosed to CFC upon the
commencement of the Tender Offer provided that CFC shall treat the Directing Holders list as
confidential.



4









 





     (e) Contemporaneously with or following the execution of this Agreement CFC and/or BONYM may
issue a press release describing the terms of this Agreement.



     5. Representations and Warranties



     (a) BONYM represents and warrants to CFC that BONYM has the right and authority to enter into
this Agreement and to undertake all of the duties and obligations created hereunder.



     (b) CFC represents and warrants to BONYM that it has the right and authority to enter into
this Agreement and to undertake all of the duties and obligations created hereunder.



     6. Compromise



     Neither CFC nor BONYM admits to any liability or wrongdoing whatsoever arising out of,
relating to or in connection with the BONYM Action or the Series B Debentures. This Agreement
shall not be construed, described or characterized by any party as an admission by CFC or BONYM of
any liability or wrongdoing. This Agreement is a compromise of disputed claims between CFC and
BONYM.



     7. Successors and Assigns



     This Agreement is binding upon and inures to the benefit of all successors in interest and
assigns of CFC and BONYM.



     8. Choice of Law; Continuing Jurisdiction



     This Agreement shall be governed by and be interpreted in accordance with the law of the State
of Delaware, excluding the choice of law provisions thereof. The Court of Chancery of the State of
Delaware shall have continuing jurisdiction over any disputes arising out of or relating to this
Agreement, and the parties (i) agree that any action, suit, or proceeding brought to enforce,
apply, or construe, or otherwise arising out of, this Agreement shall be



5









 







brought only in the Court of Chancery of the State of Delaware, (ii) consent to submit to the
exclusive jurisdiction of the Court of Chancery of the State of Delaware in connection with any
action, suit, or proceeding brought to enforce, apply, or construe, or otherwise arising out of,
this Agreement, and (iii) waives any objection to the laying of venue of any such action, suit, or
proceeding in the Court of Chancery of the State of Delaware. Each of the parties hereby consents
to service of any summons and complaint and any other process that may be served in any action,
suit, or proceeding brought to enforce, apply, or construe, or otherwise arising out of, this
Agreement by a nationally recognized private courier, or by registered mail, with postage and
charges prepaid, copies of such process to such party at its address for receiving notice pursuant
to Paragraph 12 hereof. Nothing herein shall preclude service of process by any other means
permitted by applicable law.



     9. Enforcement by Holders



     Notwithstanding anything set forth in the Indenture or elsewhere to the contrary, each holder
of Series B Debentures shall have the right to bring suit seeking enforcement of CFC’s obligations
hereunder to make the Tender Offer and any other rights as they may have at law.



     10. Amendment



     This Agreement may not be changed or modified except in a writing signed by all parties
hereto.



     11. Entire Agreement



     This Agreement contains the entire understanding between CFC and BONYM. All prior discussions
and agreements between the parties are merged herein. There are no
representations, warranties, covenants, promises, or undertakings except those expressly set
forth herein.



6









 





     12. Execution; Counterparts



     This Agreement may be executed by manual or facsimile signature in any number of counterparts,
and all such counterparts executed by all parties hereto, each as an original, shall constitute one
and the same instrument.



     13. Notices



     All notices, requests, claims, demands and other communications hereunder shall be in writing
and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in
person, by facsimile, and by registered mail (postage prepaid, return receipt requested) or by a
nationally recognized overnight courier service to the respective parties at the following
addresses (or at such other address for a party as shall be specified in a notice given in
accordance with this Section 13):


if to CFC:




Potter Anderson & Corroon LLP

Hercules Plaza, 6th Floor

1313 North Market Street

Wilmington, DE 19801

Tel: (302) 658-1192

Attention: Donald J. Wolfe, Esq.

                 Michael A. Pittenger, Esq.



with a copy to:



Cleary Gottlieb Steen & Hamilton LLP

One Liberty Plaza

New York, NY 10006

Facsimile: (212) 225-3999

Attention: Mitchell A. Lowenthal, Esq.



if to BONYM:




7









 







Bank of New York Mellon

One Wall Street

New York, New York 10006

Attention:



or

Carter, Ledyard & Millburn LLP

2 Wall Street

New York, New York 10005

Attention: James Gadsden, Esq.



with a copy to:



Fox Rothschild LLP

Citizens Bank Center, Suite 1300

919 North Market Street

Wilmington, DE 19899-2323

Facsimile: (302) 656-8920

Attention: Bernard G. Conaway, Esq.

                 Leslie B. Spoltore, Esq.



and

Brown Rudnick LLP

Seven Times Square

New York, NY 10036

Facsimile: (212) 209-4801

Attention: Sigmund S. Wissner-Gross, Esq.

                 May Orenstein, Esq.




8









 





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



Countrywide Financial Corp.




	 	 	 	 	 
	 	 	 
	 	By 	                                              /s/ Paul Lane
 	 
	 	 	Name:  	Paul Lane 	 
	 	 	Title:  	Senior Vice President, Assistant General
Counsel 	 
	 








 









 











Bank of New York Mellon, solely in

its capacity as Indenture Trustee for

the Series B Floating Rate

Convertible Senior Debentures Due

2037




	 	 	 	 	 
	 	 	 
	 	By 	                                           /s/ Martin Feig
 	 
	 	 	Name:  	Martin Feig 	 
	 	 	Title:  	Vice President 	 
	 




 











 





Exhibit A




IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE




	 	 	 
	 
	 	 
	THE BANK OF NEW YORK MELLON, solely in its capacity as Indenture Trustee
for the Series B Floating Rate Convertible
Senior Debentures Due 2037,


         
            
         Plaintiff,


         
   v.


COUNTRYWIDE FINANCIAL CORPORATION,


           
           
       Defendant.

	 	C.A. No. 3935-VCP






STIPULATION AND ORDER OF DISMISSAL WITH PREJUDICE




     The parties to the above-captioned matter, by and through their undersigned attorneys, hereby
stipulate and agree to the dismissal of the action with prejudice in accordance with the terms of
the Settlement Agreement dated as of October  , 2008.



	 	 	 	 	 	 	 
	FOX ROTHSCHILD LLP

	 	 	 	POTTER ANDERSON & CORROON LLP
	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	Bernard G. Conaway, Esq. (# 2856)

	 	 	 	Donald J. Wolfe, Esq. (# 285)	 	 
	Leslie B. Spoltore, Esq. (# 3605)

	 	 	 	Michael A. Pittenger, Esq. (# 3212)	 	 
	Citizens Bank Center, Suite1300

	 	 	 	Hercules Plaza, 6th Floor	 	 
	919 North Market Street

	 	 	 	1313 North Market Street	 	 
	Wilmington, DE 19899-2323

	 	 	 	Wilmington, DE 19801	 	 
	Tel: (302) 654-7443

	 	 	 	Tel: (302) 984-6000	 	 
	 
	 	 	 	 	 	 
	OF COUNSEL:

	 	 	 	OF COUNSEL:	 	 
	 
	 	 	 	 	 	 
	Sigmund S. Wissner-Gross, Esq.

	 	 	 	Mitchell A. Lowenthal, Esq.	 	 






 









 






	 	 	 	 	 	 	 
	May Orenstein, Esq.

	 	 	 	CLEARY GOTTLIEB STEEN & HAMILTON LLP	 	 
	BROWN RUDNICK LLP

	 	 	 	One Liberty Plaza	 	 
	Seven Times Square

	 	 	 	New York, NY 10006	 	 
	New York, NY 10036

	 	 	 	Tel: (212) 225-2000	 	 
	Tel: (212) 209-4800
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Counsel for Plaintiff The Bank of
New York Mellon, solely in its
capacity as Indenture Trustee for
the Series B Floating Rate
Convertible Senior Debentures Due
2037

	 	 	 	

Counsel for Defendant Countrywide Financial Corporation	 	 






     SO ORDERED this                      day of October, 2008.



	 	 	 	 	 
	 	 	 
	 	
 	 
	 	The Honorable Donald F. Parsons, Jr.