<PAGE>
 
                                                                    Exhibit 10.1
                                                                    ------------
                                                                                
                              EMPLOYMENT AGREEMENT
                                        
THIS EMPLOYMENT AGREEMENT (the "Agreement") has been executed as of January 1,
1998 by and between IndyMac Mortgage Holdings, Inc. ("Employer") and Carmella
Grahn ("Officer").

                                  WITNESSETH:

WHEREAS, Employer desires to obtain the benefit of continued services of Officer
and Officer desires to continue to render services to Employer and its
affiliates.

WHEREAS, Employer and Officer desire to set forth the terms and conditions of
Officer's employment with Employer and its affiliates 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
   and its affiliates, in accordance with the terms hereof, for a term beginning
   on the date first written above and ending on December 31, 2000, unless
   earlier terminated in accordance with the provisions hereof.

2. 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, as a senior manager  of either
   IndyMac, Inc. ("IndyMac") or Employer, or a similarly structured entity in
   which Employer owns the majority of the economic interest, as determined in
   the sole discretion of Employer.  Officer's role may, from time to time, be
   redefined by Employer, except that Officer shall at all times remain a senior
   manager.  Employer agrees that Officer's duties hereunder shall be the usual
   and customary duties of such office and such further duties shall not be
   inconsistent with the provisions of applicable law.  Officer agrees that
   Employer may add to or change Officer's duties as business considerations
   dictate, as determined by the President of Employer.  Officer shall have such
   official power and authority as shall reasonably be required to enable her to
   discharge her duties in the offices which she may hold.  All compensation
   paid to Officer by Employer or any of its affiliates shall be aggregated in
   determining whether Officer has received the benefits provided for herein,
   but without prejudice to the allocation of costs among the entities to which
   Officer renders services hereunder.  If Employer requests Officer to relocate
   outside of Los Angeles County, Ventura County or Orange County in connection
   with the relocation of Employer's headquarters, Officer shall have the option
   of agreeing to such relocation and the terms of this contract shall continue
   in full force and effect.  If Officer declines to relocate, either Officer or
   Employer shall provide the other party with a Notice of Termination in
   accordance with Section 5(f) and all of the rights and obligations of both
   parties under this Agreement shall cease upon such termination and no
   provisions shall survive (including, without limitation, Sections 5(d) and
   8(k)), except for Section 8(g) and the right to enforce that provision
   through injunctive relief pursuant to Section 8(h).  If Employer requests
   Officer to relocate outside of 
<PAGE>
 
   Los Angeles County, Ventura County or Orange County and Employer's
   headquarters are not also relocating, Officer shall have the option of
   agreeing to such relocation and the terms of this contract shall continue in
   full force and effect. If Officer declines to relocate, Employer's request to
   relocate shall be deemed a termination other than for Cause pursuant to
   Section 5(d).

3. SCOPE OF THIS AGREEMENT AND OUTSIDE AFFILIATIONS.  During the term of this
   Agreement, Officer shall devote her full business time and energy, except as
   expressly provided below, to the business, affairs and interests of Employer
   and its affiliates, and matters related thereto, and shall use her best
   efforts and abilities to promote their respective interests.  Officer agrees
   that she will diligently endeavor to promote the business, affairs and
   interests of Employer and its affiliates and perform services contemplated
   hereby, in accordance with the policies established by the Board of the
   applicable entity, which policies shall be consistent with this Agreement.
   Officer agrees to serve without additional remuneration as an officer of one
   or more (direct or indirect) subsidiaries or affiliates of Employer as
   Employer may from time to time request, subject to appropriate authorization
   by the affiliate or subsidiary involved and any limitation under applicable
   law.

   During the course of Officer's employment as a full-time officer hereunder,
   Officer shall not, without the consent of Employer, compete, directly or
   indirectly, with Employer in the business then conducted by Employer or any
   of its affiliates.

   Officer may make and manage personal business investments of her 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 her duties
   hereunder.

4. COMPENSATION AND BENEFITS.

   a. BASE SALARY. Employer shall pay to Officer a base salary in respect of the
      fiscal year of Employer (a "Fiscal Year") ending December 31, 1998 at the
      annual rate as set forth on Appendix A (the "Annual Rate"). In respect of
      the Fiscal Years ending in 1999 and 2000, the Compensation Committee of
      the Board (the "Compensation Committee) may, based upon the recommendation
      of Michael W. Perry and the performance of Officer and Employer, increase
      the Annual Rate. While any such increase shall be at the discretion of the
      Compensation Committee, it is anticipated that, for any Fiscal Year, a
      performance rating of good would result in an increase in the Annual Rate
      of between 5% and 15%. During the term of this Agreement, Employer may not
      decrease the Annual Rate below the amount set forth in Appendix A unless
      decreased by the same percentage for all officers at Officer's level.

  b.  INCENTIVE COMPENSATION. Employer shall pay to Officer for each of the
      Fiscal Years ending during the term of this Agreement an incentive
      compensation award in an amount determined pursuant to the Annual
      Incentive Plan attached hereto as Appendix A. The terms of the Annual
      Incentive Plan shall be determined in the first quarter of each Fiscal
      year during the term of this Contract, as mutually agreed upon by Employer
      and Officer. The incentive compensation award payable to 

                                       2
<PAGE>
 
     Officer for any Fiscal Year shall be paid no later than thirty (30) days
     after completion and publication of the applicable audited financial
     statements for such Fiscal Year.

  c. STOCK OPTIONS.  Beginning with the 1998 Fiscal Year and in respect of each
     of the following Fiscal Years during the term of this Agreement, Employer
     may grant to Officer stock options for such number of shares of Employer's
     common stock as the Compensation Committee in its sole discretion
     determines, taking into account Officer's and Employer's performance and
     the competitive practices then prevailing regarding the granting of stock
     options.  Subject to the foregoing, it is anticipated that the number of
     shares in respect of each annual stock option grant shall be in accordance
     with the number of shares granted to officers of Employer at a level
     similar to Officer's level.  The stock options described in this Section
     4(c) in respect of a Fiscal Year shall be granted at the same time as
     Employer grants stock options to its other officers in respect of such
     Fiscal Year.

     All stock options granted in accordance with this Section 4(c): (i) shall
     be granted pursuant to Employer's current stock option plan, or such other
     stock option plan or plans as may be or come into effect during the term of
     this Agreement, (ii) shall have a per share exercise price equal to the
     fair market value (as defined in the current Plan or such other plan or
     plans) of the common stock at the time of grant, (iii) shall become
     exercisable in three equal installments on each of the first three
     anniversaries of the date of grant, (iv) shall become immediately and fully
     exercisable in the event of a Change in Control (as defined in Appendix B)
     or in the event that Officer's employment is terminated due to death or
     Disability or by Employer other than for Cause (as defined in Section
     5(c)), and (v) shall be subject to such other reasonable and consistent
     terms and conditions as may be determined by the Compensation Committee and
     set forth in the agreement evidencing the award.

  d. ADDITIONAL BENEFITS.  Officer shall also be entitled to all rights and
     benefits for which she 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 her, or provided she is eligible to
     participate therein, for senior officers generally or for employees
     generally, during the term of this Agreement (collectively, "Additional
     Benefits").  Officer shall also be entitled to three (3) weeks of vacation
     each Fiscal Year, subject to all applicable policies of Employer relating
     to vacation time.  This Agreement shall not affect the provision of any
     other compensation, retirement or other benefit program or plan of
     Employer.  If Officer's employment is terminated hereunder, pursuant to
     Section 5(a), 5(b) or 5(d), Employer shall continue for the period
     specified in Section 5(a), 5(b) or 5(d) hereof, 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 her
     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.

                                       3
<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 December 31, 2000, 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) fifty percent (50%) of the then existing base
      salary payable immediately prior to the termination, minus (2) the amount
      of any cash payments due to her 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 she may receive
      pursuant to any other employment, and (ii) to provide during the
      Disability Payment Period the additional benefits specified in the last
      sentence of Section 4(d) hereof.

      The determination of Disability shall be made only after 30 days' notice
      to Officer and only if Officer has not returned to performance of her
      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 the members of Employer's Benefits
      Committee.

  b.  DEATH. In the event that Officer shall die during the term of this
      Agreement, Employer shall pay Officer's base salary for a period of twelve
      (12) months 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 her
      estate (the "Beneficiary"). Employer shall also (1) pay to such
      Beneficiary (x) an amount equal to the incentive compensation that would
      have been payable to Officer pursuant to Section 4(b) in respect of the
      Fiscal Year in which the Officer's death occurs multiplied by a fraction,
      the numerator of which is the number of days in such Fiscal Year through
      the date of Officer's death and the denominator of which is 365 and (y)
      any unpaid incentive compensation payable to Officer pursuant to Section
      4(b) in respect of the Fiscal Year immediately preceding the Fiscal Year
      in which her death occurs and (2) provide during the twelve-month period
      following the date of Officer's death the additional benefits specified in
      the last sentence of Section 4(d) hereof. If Officer's death occurs while
      she is receiving payments for Disability under Section 5(a) above, such
      payments shall cease and the Beneficiary shall be entitled to the payments
      and benefits under this Section 5(b), which shall continue for a period of
      twelve months thereafter at the full rate of base salary in effect
      immediately prior to the Disability. This Agreement in all other respects
      will terminate upon the death of Officer; provided, however, that (i) the
      termination of the Agreement shall not affect Officer's entitlement to all
      other benefits in which she has become vested or which are otherwise
      payable in respect of periods ending prior to its termination, and (ii) to
      the extent not otherwise vested, all outstanding stock options granted to
      Officer pursuant to Section 4(c) will vest upon her death.

                                       4
<PAGE>
 
  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 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, or (ii) Officer's conviction by a court of competent jurisdiction
     of a felony or misdemeanor carrying a jail term, or (ii) 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 affiliates or
     permanently prohibiting her from participation in the conduct of the
     affairs of Employer of any of its affiliates.  If Officer shall be
     convicted of a felony or misdemeanor carrying a jail term, or shall be
     removed from office and/or temporarily prohibited from participating in the
     conduct of Employer's or any of its affiliates' affairs by any federal or
     state regulatory authority having jurisdiction in the matter, Employer's
     obligations under Sections 4(a), 4(b), 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), 4(b), 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 misdemeanor carrying a jail term,
     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 she has become vested or which are otherwise payable in respect of
     periods ending prior to her termination of employment.

d.   SEVERANCE.

(i)  Except as provided in Section 5(d)(ii) below, if during the term of this
     Agreement, Officer's employment shall be terminated by Employer other than
     for Cause, or by Officer because Employer has committed a "Material Breach"
     of this Agreement, then Employer shall (1) pay Officer in a single payment
     as soon as practicable after the Termination Date, but in no event later
     than thirty (30) days thereafter, (A) an amount in cash equal to six months
     of Officer's base salary at the Annual Rate at the Termination Date and (B)
     an amount equal to one-half the incentive compensation paid or payable to
     Officer pursuant to Section 4(b) in respect of the Fiscal Year immediately
     preceding the Fiscal Year in which Officer's Termination Date occurs (the
     "Bonus Rate"); provided, however, that in the event the first anniversary
     of the Termination Date occurs on a date prior to the end of a Fiscal Year,
     Employer shall also pay Officer an amount equal to the product of (x) the
     Bonus Rate and (y) a fraction, the numerator of which is (I) the number of
     days elapsed since the end of the immediately preceding Fiscal Year through
     the end of the Severance Period and (II) the denominator of which is 365,
     and (2) until the first anniversary of the Termination Date, provide the
     benefits specified in the last sentence of Section 4(d) hereof. Employer
     shall also pay in a single payment as soon as practicable after the
     Termination Date, but in no event later than thirty (30) days thereafter,
     any unpaid incentive compensation payable to Officer pursuant to Section
     4(b) in respect of the

                                       5
<PAGE>
 
      Fiscal Year immediately preceding the Fiscal Year in which Officer's
      Termination Date occurs, as calculated pursuant to the terms and
      conditions of this Agreement, including, but not limited to, the terms of
      Appendix A. For the purpose of this provision, the term "Material Breach"
      shall mean a material breach of this Agreement by Employer which is
      committed in bad faith and which is not remedied within a reasonable
      period of time after receipt of written notice from Officer specifying
      such breach.

(ii)  If within two (2) years after a "Change in Control" (as defined in
      Appendix B to this Agreement) and during the term of this Agreement,
      Officer's employment shall be terminated by Employer other than for Cause
      or by Officer for Good Reason, then (A) Employer shall pay Officer in a
      single payment as soon as practicable after the Termination Date, but in
      no event later than thirty (30) days thereafter, (x) as severance pay and
      in lieu of any further salary and incentive compensation for periods
      subsequent to the Termination Date, an amount in cash equal to one-half
      times the sum of (1) Officer's base salary at the Annual Rate at the
      Termination Date and (2) the incentive compensation paid or payable to
      Officer pursuant to Section 4(b) in respect of the Fiscal Year immediately
      preceding the Fiscal Year in which Officer's Termination Date occurs and
      (y) any unpaid incentive compensation payable to Officer pursuant to
      Section 4(b) in respect of the Fiscal Year immediately preceding the
      Fiscal Year in which Officer's Termination Date occurs, and (B) Employer
      shall continue to provide for six months from the Termination Date the
      benefits specified in the last sentence of Section 4(d) hereof.

(iii) For purposes of this Agreement, "Good Reason" shall be deemed to occur if
      Employer (x) commits a Material Breach of this Agreement (as defined in
      Section 5(d)(i)) or (y) takes any other action which results in the
      substantial diminution in Officer's status, title, position, authority and
      responsibilities.

(iv)  Notwithstanding anything in this Agreement to the contrary, in the event
      it shall be determined that any payment or distribution by Employer or any
      other person or entity to or for the benefit of Officer (within the
      meaning of Section 280G(b)(2) of the Internal Revenue Code of 1986, as
      amended (the "Code"), whether paid or payable or distributed or
      distributable pursuant to the terms of this Agreement or otherwise in
      connection with, or arising out of, her employment with Employer or a
      change in ownership or effective control of Employer or a substantial
      portion of its assets (a "Payment"), would be subject to the excise tax
      imposed by Section 4999 of the Code (the "Excise Tax"), the Payments shall
      be reduced (but not below zero) to the extent necessary so that no Excise
      Tax would be imposed. If the application of the preceding sentence should
      require a reduction in Payments or other "parachute payment" (within the
      meaning of Section 280G of the Code), unless Officer shall have designated
      otherwise, such reduction shall be implemented, first, by reducing any 
      non-cash benefits (other than stock options) to the extent necessary,
      second, by reducing any cash benefits to the extent necessary and, third,
      by reducing any stock options to the extent necessary. In each case, the
      reductions shall be made starting with the payment or benefit to be made
      on the latest date following the Termination Date and reducing payments or
      benefits in reverse chronological order therefrom. All determinations
      concerning the application of this paragraph shall be made by a nationally
      recognized firm of independent accountants, selected by Officer and

                                       6
<PAGE>
 
        satisfactory to Employer, whose determination shall be conclusive and
        binding on all parties. The fees and expenses of such accountants shall
        be borne by Employer.

  e. RESIGNATION.  If during the term of this Agreement, Officer shall resign
     voluntarily, all of her 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 she has become vested or which are
     otherwise payable in respect of periods ending prior to her termination of
     employment, and all obligations of Officer under Sections 8(g) and 8(k)
     shall expressly survive such termination.

  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
     (except in the event of Officer's death or physical incapacity, in which
     case such written Notice of Termination shall be provided by Officer's
     executor or legal representative).  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 her 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.

6. REIMBURSEMENT OF BUSINESS EXPENSES.  During the term of this Agreement,
   Employer shall reimburse Officer promptly for all business expenditures 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 defend and indemnify Officer and hold her
   harmless for any acts or decisions made by her in good faith while performing
   services for Employer (including any subsidiary or affiliate of Employer),
   and shall use reasonable efforts to obtain coverage for her 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
     Employer or similar transaction. Notwithstanding the foregoing, Employer
     may assign, whether by assignment agreement, merger, operation of law or
     otherwise, this Agreement to Employer or

                                       7
<PAGE>
 
     IndyMac, or to any successor or affiliate of either of them, subject to
     such assignee's express assumption of all obligations of Employer
     hereunder, and Officer hereby consents to any such assignment. The failure
     of any successor to or assignee of the Employer's business and/or assets in
     such transaction to expressly assume all obligations of Employer hereunder
     shall be deemed a material breach of this Agreement by Employer, triggering
     the severance provision of Section 5(d).

     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 its corporate headquarters, Attention: Chief Administrative
     Officer, with a copy to the Director of Human Resources at the same
     address, or to such other address as Employer may from time to time in
     writing designate, and to Officer at such address as she may from time to
     time in writing designate (or her 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 shall be
     valid unless made in writing and signed by the parties hereto.

  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, without reference to its conflicts
     of laws principles.

  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 hereby acknowledges and agrees that Employer and
     its affiliates have developed and own valuable information related to their
     business, personnel and customers, including, but not limited to, concepts,
     ideas, customer lists, business lists, business and strategic plans,
     financial data, accounting procedures, secondary marketing and hedging
     models, trade secrets, computer programs and plans, and information related
     to officers, directors, employees and agents.  Officer hereby agrees that
     all such information, and all codes, concepts, copies and forms relating to
     such information, Employer's plans and intentions with respect thereto, and
     any information provided by Employer or its affiliates to Officer with
     respect to any of the foregoing, shall be considered "Confidential
     Information" for the purpose of this Agreement.  Officer acknowledges and
     agrees that all such Confidential Information is a valuable asset of
     Employer, and 

                                       8
<PAGE>
 
     if developed by Officer, is developed by Officer in the course of Officer's
     employment with Employer, and is the sole property of Employer. Officer
     agrees that she will not divulge or otherwise disclose, directly or
     indirectly, any Confidential Information concerning the business or
     policies of Employer or any of its affiliates which she may have learned as
     a result of her 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 affiliates, 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
     or in response to a lawful inquiry from a governmental or regulatory
     authority, (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 she 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 she
     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.   The provisions of this subsection shall survive the
     expiration, suspension or termination, for any reason, of this Agreement.

  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.

  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.

  k.  COVENANT NOT TO COMPETE

      (i) IN GENERAL. Officer agrees that while she is employed by Employer
          during the term of this Agreement and for a period of six months after
          the termination of such employment for whatever reason other than (x)
          any termination by Employer, either for Cause or other than for Cause
          or (y) the expiration of this Agreement according to its terms (the
          "Non-Compete Period"), she shall not, unless Officer shall have
          received the prior written consent of Employer within North America:

          (A) engage in any business, whether as an employee, consultant,
              partner, principal, agent, representative or stockholder (other
              than as a stockholder of less than a one percent (1%) 

                                       9
<PAGE>
 
           equity interest) or in any other corporate or representative capacity
           with any other business whether in corporate, proprietorship, or
           partnership form or otherwise, where such business is engaged in any
           activity which competes with the business of Employer (or its
           subsidiaries or affiliates, excluding Countrywide Credit Industries
           and its subsidiaries, other than IndyMac) as conducted on the date
           Officer's employment terminated or which will compete with any
           proposed business activity of Employer (or its subsidiaries or
           affiliates) in the planning stage on such date;

       (B) solicit business from, or perform services for, any company or other
           business entity which at any time during the two-year period
           immediately preceding Officer's termination of employment with
           Employer was a client of Employer (or its subsidiaries or affiliates)
           (including without limitation any lessee, vendor or supplier);
           provided that Officer may solicit business from another company or
           business entity during such time as Officer is employed by Employer
           (and prior to a Notice of Termination being provided pursuant to
           Section 5(f)), so long as such solicitation is solely for the
           intended benefit of Employer and carried out in the ordinary course
           of the performance of Officer's duties; or

       (C) offer, or cause to be offered, employment, either on a full-time,
           part-time or consulting basis, to any person who was employed by
           Employer (or its subsidiaries or affiliates) on the date Officer's
           employment terminated.

     (ii) CONSIDERATION. The consideration for the foregoing covenant not to
          compete, the sufficiency of which is hereby acknowledged, is
          Employer's agreement to continue to employ Officer and provide
          compensation and benefits pursuant to this Agreement, including but
          not limited to Section 5(d).

                                       10
<PAGE>
 
 (iii)  EQUITABLE RELIEF AND OTHER REMEDIES. Officer acknowledges and agrees
        that Employer's remedies at law for a breach or threatened breach of any
        of the provisions of this Section would be inadequate and, in
        recognition of this fact, Officer agrees that, in the event of such a
        breach or threatened breach, in addition to any remedies at law,
        Employer, without posting any bond, shall be entitled to obtain
        equitable relief in the form of specific performance, a temporary
        restraining order, a temporary or permanent injunction or any other
        equitable remedy which may then be available.

 (iv)   REFORMATION. If the foregoing covenant not to compete would otherwise be
        determined invalid or unenforceable by a court of competent
        jurisdiction, such court shall exercise its discretion in reforming the
        provisions of this Section to the end that Officer be subject to a
        covenant not to compete, reasonable under the circumstances, enforceable
        by Employer.

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

                                   EMPLOYER                                 
                                                                            
                                                                            
                                                                            
                                   By: /s/ Michael W. Perry                 
                                      ---------------------                 
                                   Name: Michael W. Perry                     
                                   Title: President and Chief Operating Officer
                                                                             
                                                                             
                                   Officer:                                  
                                                                             
                                                                             
                                                                             
                                   /s/ Carmella L. Grahn                     
                                   ---------------------                     
                                   in her individual capacity                

                                       11
<PAGE>
 
                                   APPENDIX A

                             ANNUAL INCENTIVE PLAN

Annual Base Rate for 1998:    $189,750
Target Bonus for 1998:        $155,000    Maximum Bonus for 1998:  $173,988

Annual Incentive Award:
---------------------- 

  Officer shall be eligible for an Annual Incentive Award which shall be
  comprised of the following five components and their corresponding weightings:

     1.   Specific Objectives (45%)                    
     2.   Cost Control Goals (25%)                     
     3.   Earnings Per Share Growth (10%)              
     4.   Survey Results of internal customers (10%)   
     5.   Discretionary/Subjective (10%)                

   These components shall be measured as follows:

1. OBJECTIVES FOR 1998 (45%):
   ------------------------- 

<TABLE>
<CAPTION>
                                               Target Incentive                Performance Percentage:
                   Goal                             Amount                 Excellent Good Satisfactory Poor 
<S>                                               <C>                         <C>     <C>      <C>      <C> 
I.  EXTERNAL FINANCIAL REPORTING                    $27,900                   110%   100%      50%      0%

   A.   Timeliness (33%)  

   B.   Accuracy (33%)    

   C.   No surprises (33%) 

II.  INTERNAL FINANCIAL REPORTING                   $10,463                   110%   100%      50%      0%

   A.   Timeliness (25%)           

   B.   Accuracy (25%)             

   C.   Completeness (25%)         

   D.   Senior Mgr Evaluation (25%) 

III.  FINANCIAL PLANNING                            $ 6,975                   110%   100%      50%      0%

   Timeliness (25%)

   Accuracy (25%)

   Completeness (25%)

   Senior Mgr Evaluation (25%)
</TABLE> 

                                       12
<PAGE>
 
<TABLE> 
<CAPTION> 

                                               Target Incentive                Performance Percentage:
                   Goal                             Amount                 Excellent Good Satisfactory Poor 
<S>                                                 <C>                    <C>        <C>       <C>     <C>  
IV.  FINANCIAL SYSTEMS                              $ 6,975                110%       100%      50%     0%

A.   Strong Team (50%)

B.   Robust Use of PeopleSoft (50%)

V.  GENERAL MANAGEMENT & ORGANIZATION               $17,437                110%       100%      50%     0%

A.   Organization Chart (33%)

B.   Competent Leaders (33%)

C.   Minimize turnover in 4 and 3 rated
     employees, and shall have a minimum of
     50% turnover in 2 rated employees, and
     100% turnover in 1 rated employees.
     Turnover includes an employee leaving
     the company or being reclassified due
     to either improved or decreased
     performance (33%)


Total incentive amount:                             $69,750
                                                 (max. $76,725)
</TABLE> 
 
The Incentive Award for Objectives for Officer shall be calculated by (1)
multiplying (x) the Performance Percentage for each Objective times (y) the
                                                              -----        
Target Incentive Amount for such Objective, and (2) adding all sums determined
pursuant to the preceding clause (1) for each Objective.  The Target Incentive
Award for Objectives for Officer for 1998 shall be $69,750 and the Maximum shall
be $76,725.

The Target Incentive Award for Objectives for Officer for 1999 shall be $80,213
and for 2000 shall be $92,245.  The Objectives for 1999 and 2000 and the
Incentive Award amount applicable to each goal or objective shall be determined
by January 15 of each respective Fiscal Year, as mutually agreed upon by
Employer and Officer.

                                       13
<PAGE>
 
2.  COST CONTROL GOALS (25%):
    ------------------------ 

Attached hereto as Exhibit A, is the Financial Plan for 1998 for Officer's areas
of responsibilities.  The Financial Plans for 1999 and 2000 shall be determined
by January 15 of each respective Fiscal Year, as mutually agreed upon by
Employer and Officer.  FOR 1998 ONLY, EVALUATION OF COST CONTROL SHALL BE
SUBJECT TO THE DISCRETION OF THE PRESIDENT OF EMPLOYER.

<TABLE>

<S>                                 <C>                             <C>
----------------------------------------------------------------------------------------------------------------------
Department                                Target Incentive Amount                     Performance Percentage:
                                                                             125%  110%  100%  90%  80%  less than 80%
----------------------------------------------------------------------------------------------------------------------
Cost Control for the Company                             $29,063             125%  110%  100%  80%  70%    0%
 (75%)
----------------------------------------------------------------------------------------------------------------------
Cost Control for Accounting/FPA                          $ 9,687             125%  110%  100%  80%  70%    0%
 (25%)
----------------------------------------------------------------------------------------------------------------------
Total                                                    $38,750
                                                   (max. $48,438)
----------------------------------------------------------------------------------------------------------------------
</TABLE>


The Target Incentive Award for Cost Control Goals for Officer shall be
calculated by (1) multiplying (x) the Performance Percentage for each Department
times (y) the Target Incentive Amount for such Department, and (2) adding all
-----                                                                        
sums determined pursuant to the preceding clause (1) for each Department.  The
Target Incentive Award for Cost Control Goals for Officer for 1998 shall be
$38,750 and the Maximum shall be $48,438.  The Performance Percentage for Cost
Control Goals shall be calculated based on controllable variances between budget
and actual as calculated by FPA and President.  Variances will be evaluated on a
line item basis and in total for the Department.  In instances whereby Officer
is responsible for multiple departments, the Target Incentive Award shall be
prorated based on the relative size of the budget as indicated in Exhibit A.

The Target Incentive Award for Cost Control Goals for Officer for 1999 shall be
$44,563 and for 2000 shall be $51,247.  The Cost Control Goals for 1999 and 2000
and the Incentive Award amount applicable to each goal shall be determined by
January 15 of each respective Fiscal Year, as mutually agreed upon by Employer
and Officer.

                                       14
<PAGE>
 
3.  EARNINGS PER SHARE GROWTH (10%):
    ------------------------------- 

 
<TABLE>
<CAPTION> 
                                                1998            1999                     2000
                                              -------          -------                  -------
<S>                                           <C>              <C>                      <C> 
-------------------------------------------------------------------------------------------------------  
Earnings Per Share Target                     $  2.10            TBD                      TBD
------------------------------------------------------------------------------------------------------- 
Target Incentive Award                        $15,500                  $17,825                  $20,499
-------------------------------------------------------------------------------------------------------
Maximum Incentive Award                       $17,825                  $20,499                  $23,574
-------------------------------------------------------------------------------------------------------
If Earnings Per Share          $596 for each $.01 in    $TBD for each $.01 in    $TBD for each $.01 in
 exceed target, incentive      excess of target         excess of target         excess of target
 award shall be increased      earnings per share,      earnings per share,      earnings per share,
 by:                           subject to Maximum       subject to Maximum       subject to Maximum
-------------------------------------------------------------------------------------------------------
If Earnings Per Share do       $1,192 for each $.01     $TBD for each $.01       $TBD for each $.01
 not meet target, incentive    below target earnings    below target earnings    below target earnings
 award shall be decreased      per share                per share                per share
 by:
-------------------------------------------------------------------------------------------------------
</TABLE>


4.  SURVEY RESULTS OF INTERNAL CUSTOMERS (10%):
    ------------------------------------------ 

The Human Resources Department will conduct a customer service survey of the
various internal customers of Officer's areas of responsibilities, on or before
November 1st of each year.  The Officer's bonus eligibility for this portion of
the Annual Incentive Compensation shall be determined as follows:

<TABLE>
<CAPTION>

--------------------------------------------------------------------
Overall Average Survey Result          % of  10% Portion of Target
                                       Bonus Award
--------------------------------------------------------------------
<S>                                    <C>
Excellent                              100%
--------------------------------------------------------------------
Good                                   75%
--------------------------------------------------------------------
Satisfactory                           50%
--------------------------------------------------------------------
Needs Improvement                      0%
--------------------------------------------------------------------
</TABLE>


The maximum Survey Incentive Award that Officer shall be eligible for is as
follows:

  1998:  up to $15,500
  1999:  up to $17,825
  2000:  up to $20,499

                                       15
<PAGE>
 
5.  DISCRETIONARY/SUBJECTIVE (10%):
    ------------------------------ 

Officer shall be eligible for an additional Discretionary/Subjective Incentive
Award.  Whether a Discretionary/Subjective Incentive Award shall be granted and
the amount of any such award shall be determined by the President of Employer,
in his sole and absolute discretion.  Factors which will be included in the
determination of a Discretionary/Subjective Incentive Award shall be Officer's
management skills, ability to be a corporate team player and such other factors
as shall be determined by the President of Employer, in his sole and absolute
discretion.  The fact that a Discretionary/Subjective Incentive Award is granted
in any year is no indication whether any such award will be granted in following
years.  The maximum Discretionary/Subjective Incentive Award that Officer shall
be eligible for is as follows:

  1998:  up to $15,500
  1999:  up to $17,825
  2000:  up to $20,499

6.  COST CONTROL AND EPS DISCOUNT FACTORS
    -------------------------------------

    % of Cost Control Bonus to be Paid  Cost Control Discount Factor
    ----------------------------------  ----------------------------
     greater than 70%                              100%
     less than 70%                                   0%

    % of EPS Target Met                 EPS Discount Factor
    -------------------                 -------------------
    greater than 90%                               100%
    80% - 89%                                       90%
    70% - 79%                                       70%
    less than 70%                                    0%
 
7.  TOTAL ANNUAL INCENTIVE AWARD
    ----------------------------

The total Annual Incentive Award shall be calculated by multiplying (x) the sum
of the amounts determined pursuant to Paragraphs 1, 2, 3, 4 and 5 above times
(y) the Cost Control Discount Factor determined pursuant to Paragraph 6 above
and if this amount is greater than 0, then multiplying such amount times the EPS
Discount Factor.

                                       16
<PAGE>
 
                                  APPENDIX  B
                                        

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 Employer's common
     stock or the combined voting power of Employer's then outstanding Voting
     Securities; provided, however, 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 Credit Industries, Inc. or any of its affiliates or
     subsidiaries ("Countrywide Credit").

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 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

                                       17
<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
          Countrywide Credit, NDE 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 the Employer, the Surviving
                  Corporation, or any Subsidiary, (iv) Countrywide Credit, 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 combined voting power
                  of the Surviving Corporation's then outstanding Voting
                  Securities or its common stock, owns directly or indirectly
                  more than 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 or Employer; or

            (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 of Countrywide Credit).

                                       18
<PAGE>
 
Notwithstanding the foregoing, a Change of 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 Person; provided, however, that if a Change of
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.

                                       19