IMC Mortgage Company Enters into $33 Million Credit Facility and Seeks a Sale of the Company.

TAMPA, Fla.--(BUSINESS WIRE)--Oct. 16, 1998--IMC Mortgage Company (the "Company") reached an agreement on October 15, 1998 for a $33 million standby revolving credit facility with Greenwich Street Capital Partners, II, L.P., and certain affiliates ("Greenwich Street").

The facility is available to provide working capital for a period of up to 90 days, during which time the Company intends to explore financial and strategic alternatives including the possible sale of the Company. The terms of the new facility result in substantial dilution of existing common stockholders' equity equating to a minimum of 40%, up to a maximum of 90%, on a fully diluted basis, depending on (among other things) when, or whether, a change of control transaction occurs, as described below.

The Company has also entered into intercreditor arrangements with its three largest warehouse and residual certificate lenders which have agreed to a "standstill" keeping their facilities in place for up to 90 days in order for the Company to explore its financial alternatives. In addition, the Company has entered into a forbearance and intercreditor agreement with respect to its $95 million revolving bank credit facility, which has matured by its terms. That agreement provides that the bank will take no collection action for 45 days, extending for an additional 45 days (to a total of 90 days) if a letter of intent to effectuate a change of control has been entered into by the Company during the initial 45-day period.

In view of, among other things, reductions in available cash and credit resources, the Company has retained Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") to advise the Company as to financial and strategic alternatives. The Company is actively working with DLJ to seek a long-term investor in the Company or a sale or similar transaction resulting in a change of control of the Company.

Pursuant to the $33 million Greenwich Street facility executed yesterday, Greenwich Street received a $3.3 million commitment fee, and exchangeable preferred stock representing the equivalent of 40% of the fully diluted equity of the Company, for making the facility available to the Company. The Greenwich Street facility provides that under certain circumstances, upon the Company entering into a definitive agreement which effectuates a change of control of the Company, Greenwich Street may elect either to receive (a) a repayment of the facility, plus accrued interest at 10% per annum, and a take-out premium or (b) additional preferred stock.

The amount of any take-out premium is based on the average balance of the facility outstanding between the facility's effective date and the date of any definitive agreement for a change of control, multiplied by either 20%, 100% or 200% as outlined below. If there is no change of control then no take-out premium is due.

The amount of additional preferred stock potentially issuable to Greenwich Street is based upon the time elapsed between the effective date of the facility and the date of any such definitive agreement as outlined below. -0-

              Take-Out
  Days        Premium            Percentage of Cumulative Fully
  Elapsed     Percentage         Diluted Equity Issued in the Form of
                                 Additional Preferred Stock
                                 (In addition to the initial 40%)

  0-45           20%                        -0%-
  46-90         100%                        20%
  Over 90       200%                        50%

The facility matures at the end of the 90-day commitment period, at which time, as explained above, it could be exchanged at the holder's election for preferred stock representing the equivalent of an additional 50% of the fully diluted equity. If not exchanged for preferred stock, the facility must be repaid together with interest.

The Company has historically sold treasury securities short to hedge against interest rate movements affecting the mortgage loans held for sale. Over the last several weeks the Company has paid approximately $40 million net to cover margin calls on short treasury positions. The Company has now closed its short treasury positions, and is not currently hedging its mortgage loans held for sale. Payments to close short treasury positions since the end of the prior fiscal quarter ended June 30, 1998, have totaled approximately $47.5 million net. During the same period, the Company has paid approximately $12 million to cover margin calls from its significant warehouse and interest- only and residual certificate lenders based on revaluation by these lenders of their underlying collateral position.

In light of, among other things, the factors noted above, the Company does not expect to meet earnings expectations for the quarter ended September 30, 1998, and presently anticipates the possibility of a third quarter loss.

The Company's three most significant warehouse and interest-only and residual certificate lenders have entered into intercreditor agreements pursuant to which, subject to certain conditions, they will not take any action, including issuing margin calls, while the Company is exploring its financial and strategic alternatives. The intercreditor agreements are for an initial period of 45 days extending for an additional 45 days (to a total of 90 days) if a letter of intent to effectuate a change of control is entered into by the Company within the initial 45-day period. These three lenders provide warehouse facilities totaling $3.25 billion.

To induce one such lender, which comprised approximately 30% of the $3.25 billion available warehouse facilities, to enter into an intercreditor agreement, the Company agreed to allow that lender's committed warehouse facility to become uncommitted and issued to the lender warrants exercisable at $1.72 per share to purchase 2.5% of the common stock of the Company on a fully diluted basis. To induce another such lender, which comprised approximately 38% of the available warehouse facilities, to enter into the intercreditor agreement, the Company reduced the cap on premium financing (percentage advanced over the par value of the mortgage loan) on such lender's uncommitted facility from 4% over the par of the mortgage loan to 3%. All three of the Company's significant warehouse and interest-only and residual certificate lenders are to receive a fee of one million dollars each upon a change of control of the Company, and the bank will receive a similar fee for its forbearance agreement. All significant warehouse and interest-only and residual certificate lenders have informally indicated that they will continue to fund the Company under their uncommitted warehouse facilities, consistent with their past practices. However, there can be no assurance that they will not change that position in the future.

The foregoing is only a general summary of certain terms of the Greenwich Street facility, the intercreditor agreements and certain related matters and is not intended to be a complete description of those agreements or their most important features; it is qualified by reference to the full text of the agreements, which will be publicly filed with the Securities and Exchange Commission (the "SEC") and available online through the EDGAR database on the SEC's web site at www.sec.gov.

Certain statements in this press release that are not historical facts but allude to future operations and/or future events relating to the Company are forward-looking statements. There are a number of important factors which could cause the actual results of the Company and the actual future events to differ materially from those indicated in such forward-looking statements. Those factors include, but are not limited to, continuing tightening of credit available to the subprime mortgage origination industry, early termination of the intercreditor and forbearance agreements, increased yield requirements by investors in asset backed bond yields, risks of margin calls on credit facilities, lack of continued availability of credit facilities, reductions in residential real estate values, competition, general economic conditions such as changes in interest rates and the demand for sub-prime loans, risks relating to not hedging against loss of value of the Company's mortgage loan inventory, price volatility of the Company's equity securities, availability of funding, loan prepayment rate, delinquency and default rates, lower than expected performance by acquired companies, change in the legal and accounting standards regulating the mortgage industry, changes which influence the loan securitization and the net interest margin security generally, market forces affecting the price of the Company's shares and other risk factors identified in the Company's SEC filings.

Due to the complex nature of the transactions and documents referred to above, the Company does not expect to comment further at this time. Shareholders and others are referred to the full text of such documents, available as described above.