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EXHIBIT 10.25
PURCHASE AND SALE AGREEMENT
This purchase and sale agreement, dated as of February 11, 1999
(the "Agreement") is between Salomon Brothers Realty Corp. ("SBRC") and Long
Beach Mortgage Company (the "Seller"). From time to time SBRC may engage in
purchase and sale transactions (each, a "Transaction") whereby the Seller sells
to SBRC fixed and adjustable rate one- to-four family first lien mortgage loans
acceptable to SBRC in its sole discretion ("Eligible Mortgage Loans"), any
related prepayment charges payable in connection with any voluntary principal
prepayment in full on related Eligible Mortgage Loans (the "Prepayment Charges")
and related servicing rights at a price equal to the Purchase Price (as defined
in the Letter Agreement) and whereby, on a date fixed by agreement between SBRC
and the Seller (the "Repurchase Date"), the Seller agrees to repurchase such
Eligible Mortgage Loans, Prepayment Charges and related servicing rights from
SBRC, and SBRC agrees to resell such Mortgage Loans, Prepayment Charges and
related servicing rights to the Seller, at the repurchase price, which is based
on the Purchase Price and reflects the agreed upon return to SBRC as provided in
Paragraph 1 of the Letter Agreement (the "Repurchase Price"), all subject to and
in accordance with the terms and conditions set forth below. The Repurchase Date
shall be 30 days after the related Purchase Date, or such shorter period of time
if the related Purchase Date is not a "Roll Date". A "Roll Date" is the date
each month on which all of the Mortgage Loans subject to the Aggregation Line
are repurchased by the Seller. All such Eligible Mortgage Loans, Prepayment
Charges and related servicing rights which shall at any time have been purchased
by SBRC and not yet repurchased by the Seller hereunder, together with all
rights related thereto, shall hereinafter be referred to as the "Mortgage Loans"
and the date on which SBRC purchases each such Mortgage Loan shall be referred
to as the "Purchase Date". Capitalized terms used but not defined herein shall
have the meanings set forth in the letter agreement dated February 11, 1999
between SBRC and the Seller (the "Letter Agreement"). The Purchase Prices for
the Mortgage Loans are as set forth in the Letter Agreement.
The Seller will from time to time offer to enter into
Transactions with SBRC. SBRC agrees to enter into such Transactions, provided
the following conditions have been met:
1. As the Seller and SBRC enter into a Transaction, then on the
same day the Seller shall sell and deliver to SBRC or its agent the agreed upon
Eligible Mortgage Loans including any applicable Prepayment Charges, together
with all rights related thereto (including the servicing rights), against the
crediting of the Purchase Price for such Transaction to an account of the Seller
in immediately available funds. The Seller represents and warrants that it has
the unqualified right to sell, transfer, assign or pledge the Eligible Mortgage
Loans (any related servicing rights) that will become Mortgage Loans and that
such Mortgage Loans, upon delivery to SBRC, will be free and clear of any lien,
claim or encumbrance (other than the Seller's obligation to resell such Mortgage
Loan to the Seller on the related Repurchase Date). The Seller further
represents that this Agreement is legally entered into by the Seller, does not
violate any ordinance, charter, rule or statute applicable to it and that the
person executing this Agreement on behalf of the Seller has been duly and
properly authorized to do so. The Seller hereby represents and warrants that as
of the Purchase Date of any Mortgage Loan, each of the representations and
warranties specified on Exhibit A attached hereto are true and correct and each
of the representations and warranties specified on Exhibit B attached hereto are
true and correct as to
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each of the Mortgage Loans delivered to SBRC on such date. If the Seller
breaches a representation or warranty specified on Exhibit A attached hereto
such breach shall be deemed a Seller Event of Default under Section 6(d) hereof
and SBRC shall have the remedies provided for in Section 7. If the Seller
breaches a representation or warranty specified on Exhibit B attached hereto,
SBRC shall have the right to accelerate to a date designated by SBRC the
Repurchase Date of the directly affected Mortgage Loan.
2. No later than the business day on which each Transaction as
described in paragraph 1 is effected, SBRC shall send to the Seller a
confirmation (the "Confirmation") setting forth with respect to such
Transaction: the Eligible Mortgage Loans subject thereto; the Purchase Price of
such Eligible Mortgage Loans (including the related servicing rights); the
Aggregation Cost Rate; the Repurchase Date; and the Repurchase Price. Each
Confirmation shall be binding upon the parties hereto unless written notice of
objection is given by the objecting party within two (2) business days after the
objecting party's receipt of such confirmation. In addition, the Seller shall
deliver to SBRC on each Purchase Date a ▇▇▇▇ of Sale with respect to the related
Mortgage Loans in the form of Exhibit C hereto.
3. On the Repurchase Date for any Mortgage Loan, such repurchase
will be effected by delivery to the Seller or its agent of the Mortgage Loans
against the crediting of the Repurchase Price to an account of SBRC in
immediately available funds.
4. Upon a Seller Event of Default (as defined herein) or upon
the failure of the Seller to repurchase the Mortgage Loans on a Repurchase Date,
SBRC may reregister any of the Mortgage Loans in its name or the name of its
agent and may resell the Mortgage Loans, with the right to reregister given to
the purchaser in accordance with the provisions of Section 7.
5. The Seller has delivered to SBRC its most recent financial
statements and represents that such statements fairly represent its financial
condition as to the date of such statements. The Seller also represents that
there has been no material adverse change in its financial condition since that
date. During the term of this Agreement, the Seller shall promptly deliver to
SBRC all monthly financial statements, including but not limited to, balance
sheets, income statements and cashflow statements. The Seller agrees that its
agreement to enter into each Transaction shall constitute a representation that
there has been no material adverse change in its financial condition since the
date of the latest such statement.
6. The occurrence of any of the following shall constitute a
"Seller Event of Default":
(a) the judgment by SBRC in good faith that a material
adverse change has occurred with respect to the
business, properties, assets or condition (financial
or otherwise) of the Seller;
(b) SBRC shall reasonably request, specifying the reasons
for such request, information, and/or written responses
to such requests, regarding the financial well-being of
the Seller and such information and/or responses shall
not have been provided within three business days of
such request;
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(c) A change in control of the Seller shall have occurred
without the consent of SBRC, other than in connection
with and as a result of the issuance and sale by the
Seller of registered, publicly offered common stock;
(d) There is (A) a material breach by the Seller of any
representation and warranty contained in this Agreement
or the Letter Agreement, other than a representation or
warranty relating to a particular Mortgage Loan, and
SBRC has reason to believe in good faith either that
such breach is not curable within 30 days or that such
breach may not have been cured in all material respects
at the expiration of 30 days following discovery thereof
by the Seller or (B) a failure by the Seller to make any
payment payable by it hereunder or -- -- (C) any other
failure by the Seller to observe and perform in any
material respect its material covenants, agreements and
obligations with SBRC, including without limitation
those contained in this Agreement or any other agreement
between SBRC and the Seller, and SBRC has reason to
believe in good faith that such failure may not have
been cured in all material respects at the expiration of
30 days following discovery thereof by the Seller;
(e) If the Seller shall fail to provide written notification
to SBRC of any material change in its loan origination,
acquisition or appraisal guidelines or practices, or the
Seller, without the prior consent of SBRC (which shall
not be unreasonably withheld), shall amend in any
material respect its loan origination, acquisition or
appraisal guidelines or practices;
(f) If the Seller shall fail to fully and timely perform any
obligation to SBRC or to any broker, dealer, bank or
other financial institution in respect of a transaction
involving securities, commodities or other instruments
("Instruments") (regardless of whether SBRC has any
right, title or interest therein);
(g) If the Seller admits its inability or SBRC reasonably
believes the Seller is unable to perform fully when such
performance will become due any obligation on the
Seller's part to any broker, dealer, bank or other
financial institution in respect of a transaction
involving Instruments not then due (regardless of
whether SBRC has any right, title or interest therein);
(h) If the Seller shall make an assignment for the benefit
of creditors, or admit in writing its inability to pay
debts as they become due, or generally not pay its debts
as they become due, or file any petition, application or
answer seeking for itself any entry of an order for
relief, protective decree, reorganization, arrangement,
composition, readjustment, liquidation, dissolution or
similar relief under the Bankruptcy Code or any other
federal, state or foreign, present or future, statute,
law or regulation, or be subject to any such order for
relief or protective decree entered by a court,
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or file any answer admitting or not controverting the
material allegations of such a petition or application
filed against the Seller, or seek or acquiesce in the
appointment or designation of, on taking possession by,
any trustee, receiver, liquidator or agent in respect of
all or a substantial part of the Seller's property, or
the Seller's trustees, directors, majority shareholders,
partners or other principals, as the case may be, shall
take any action looking to the dissolution or
liquidation of the Seller or to the taking of any action
described in this paragraph (h), or any of the foregoing
shall occur in respect of any one or more of the
Seller's general partners, principals or parent entities
or other persons exercising control over the Seller;
(i) If an action shall be commenced or a petition or
application shall be filed against the Seller seeking
any order for relief, protective decree, reorganization,
arrangement, composition, readjustment, liquidation,
dissolution or similar relief under the Bankruptcy Code,
Securities Investor Protection Act or any federal, state
or foreign present or future statute, law or regulation
and such action, petition or application shall not have
been dismissed or all orders or proceedings thereunder
stayed or vacated, or such stay shall be set aside, or
any trustee, receiver, liquidator or agent of all or a
substantial part of the Seller's property shall be
appointed or designated and such appointment or
designation shall not have been vacated, or any of the
foregoing shall occur in respect of any one or more of
the Seller's general partners, principals or parent
entities or other persons exercising control over the
Seller;
(j) If a material judgment for the payment of money or
affecting all or a substantial part of the Seller's
business or property shall be entered or rendered
against the Seller, and such judgment shall not have
been discharged in full or effectively stayed as to
enforcement and execution;
(k) If the Seller shall default (as principal, guarantor or
surety) in the performance of any material contract or
in the material payment of any principal or interest on
any indebtedness or in the performance of or compliance
with any material agreement, instrument or other writing
evidencing such indebtedness or delivered pursuant
thereto or in connection therewith, which default shall
have continued beyond any applicable period of grace
and, in the case of a default in respect of
indebtedness, would permit the holder of such
indebtedness to accelerate payment of the principal
thereof;
(l) If any statement of the Seller's financial condition
prepared by the Seller or at its request shall indicate
that, or it shall have acknowledged that, the Seller has
a negative net worth or is insolvent;
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(m) If the Securities and Exchange Commission, Commodity
Futures Trading Commission, any securities or
commodities exchange or association, any banking
department or authority, or any other business
association or governmental entity or authority shall
revoke, cancel, enjoin, suspend or fail to renew the
Seller's registration, licensing, qualification or other
authorization to do business in respect of any type of
business or any geographic area, or any of the foregoing
shall occur in respect of any one or more of the
Seller's general partners, principals or parent entities
or other persons exercising control over the Seller to
the extent such event has a material adverse effect on
the Seller;
(n) If the Seller shall fail to maintain, or acknowledge
that it has failed to maintain, sufficient net capital
or any other indicia of financial condition as required
by any rule or regulation applicable to the Seller of
the Securities and Exchange Commission, Commodity
Futures Trading Commission, any securities or
commodities exchange or association, any banking
department or authority, or any other business
association or governmental entity or authority to the
extent such event has a material adverse effect on the
Seller;
(o) If any securities or commodities exchange or association
or other business association shall revoke, cancel,
enjoin, suspend or fail to renew the Seller's membership
to the extent such event has a material adverse effect
on the Seller;
(p) If there shall have occurred any outbreak or material
escalation of hostilities, declaration by the United
States of a national emergency or war or other calamity
or crisis, the effect of which on the financial markets
is such as to make it, in the judgment of SBRC,
impracticable to continue this Agreement; or
(q) If the Seller or any of its affiliates shall default in
respect of any transaction with SBRC or any of its
affiliates.
Notwithstanding any other provision of this Agreement, any grace
or notice period provided herein in respect of a notice to be given or action to
be taken by SBRC may be shortened or eliminated by SBRC if, in its sole good
faith discretion, it is reasonable to do so under the circumstances, taking into
consideration, among other things, the volatility of the market for the
collateral involved, the extent and nature of any Seller Events of Default (or
events which with the giving of such notice and passage of time would constitute
Seller Events of Default), and the risks inherent in deferring the exercise of
remedies for the otherwise applicable grace or notice period.
7. If a Seller Event of Default shall have occurred and be
continuing, SBRC may, upon notice to the Seller (which notice shall not be
required to be given in advance in the case of a Seller Event of Default of a
type described in paragraph 6(h) or (i)), (a) terminate or
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accelerate to a date designated by SBRC the date fixed for termination of the
directly affected Transaction or all of the Transactions hereunder and (b) sell
a sufficient amount of the Mortgage Loans and related servicing rights in a
commercially reasonable manner or elect to be deemed to have sold to the Seller
such Mortgage Loans and related servicing rights, and in either event apply the
proceeds of such sale (excluding any reasonable expenses incurred in connection
therewith) or, in the case of a deemed sale, the market value of such Mortgage
Loans as of the date of such deemed sale, against the payment of the Purchase
Price and any other amounts owing by the Seller under this Agreement, upon which
application the Purchase Price or any such other amounts shall be reduced by the
amount as applied and SBRC shall be released from any obligation to sell, return
or redeliver such Mortgage Loans. If any Mortgage Loans remain after all
obligations of the Seller under this Agreement have been satisfied, SBRC or its
agent shall promptly return to the Seller or its agent the balance of the
Mortgage Loans. If the Mortgage Loans are not sufficient to satisfy all such
obligations, the Seller shall be liable to SBRC for the amount of remaining
obligations plus interest at the then prevailing effective Federal Funds Rate as
determined by SBRC in its sole discretion. Notwithstanding anything contained in
this Agreement, except as expressly provided for in this paragraph 7, SBRC shall
under no circumstances whatsoever have any obligation or liability to the Seller
in respect of any Transaction following the failure of the Seller to pay the
applicable Repurchase Price or deliver the applicable Mortgage Loans as and when
required by the terms of this Agreement.
8. The occurrence of any of the following shall constitute a
"SBRC Event of Default":
(a) If the Purchase Price is not paid as specified in the
Letter Agreement;
(b) If SBRC shall make a general assignment for the benefit
of creditors; admit in writing its inability to pay its
debts as they become due; file a petition in bankruptcy
or a petition seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or
similar relief under any present or future bankruptcy,
reorganization, insolvency or similar statute, law or
regulation or seek the appointment of any trustee,
receiver, custodian or liquidator of SBRC or of all or
substantially all of its properties;
(c) If a proceeding is commenced against SBRC seeking relief
or an appointment of a type described in paragraph 8(b)
above and such proceeding is not dismissed within 30
days after the commencement thereof;
(d) If a final judgment for the payment of money shall be
rendered against SBRC, and such judgment shall not have
been discharged or its execution stayed pending appeal
within 60 days of entry or such judgment shall not have
been discharged within 60 days of expiration of any such
stay;
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(e) If SBRC shall have defaulted under this Agreement by
operation of clause (a) of the second sentence of
paragraph 16 below, and such default is not cured within
three business days after notice; or
(f) If SBRC or any of its affiliates shall default in
respect of any transaction with the Seller or any of its
affiliates.
9. If an SBRC Event of Default shall have occurred and be
continuing, the Seller may, upon one business day's prior notice to SBRC, which
notice shall not be required to be given in advance in the case of an SBRC Event
of Default of a type described in paragraph 8(b) or (c)), (a) terminate or
accelerate to a date designated by the Seller the date fixed for termination of
the directly affected Transaction or all Transactions hereunder and (b) either
(x) purchase in a commercially reasonable manner Eligible Mortgage Loans with a
market value equal to any Mortgage Loans required to be returned or delivered by
SBRC but not so returned or delivered and apply the cost of such purchase
(including any reasonable expenses incurred in connection therewith) against the
Repurchase Price and any other amounts owing by the Seller under this Agreement,
upon which application the Repurchase Price and any such other amounts shall be
reduced by the amount so applied and SBRC shall be released from any obligation
to sell, return or deliver such Mortgage Loans or (y) pay to SBRC the Repurchase
Price and repurchase the related Mortgage Loans. If the Seller chooses the
remedy available in clause 9(b)(x) above, after all obligations of SBRC under
this Agreement have been satisfied, the Seller shall promptly pay SBRC any
portion of such positive amount (after such reduction) which has not previously
been paid or SBRC shall promptly pay to the Seller any excess of such cost of
purchase of replacement Eligible Mortgage Loans (including expenses as
aforesaid) over the amount of the Repurchase Price (prior to reduction), plus
interest on such excess for the period from the date of such purchase until the
date of full payment by SBRC at the then prevailing effective Federal Funds
Rate.
10. The market value of the Mortgage Loans shall be determined
by SBRC acting in good faith.
11. The Seller represents that it will have the authority to
enter into and perform any Transactions under this Agreement. Each party
represents that the person executing this Agreement and the persons executing
Transactions under this Agreement on its behalf have and will have the authority
to do so and that this Agreement does not conflict with any other agreement
binding on such party.
12. The Mortgage Loans shall be identified on a detailed listing
to be provided by the Seller to SBRC (a "Mortgage Loan Schedule") by diskette or
via modem. The Mortgage Loan Schedule must be received by SBRC not less than two
(2) business days prior to each transfer of Mortgage Loans and must be in a
format acceptable to SBRC, consisting of the loan characteristics set forth in
the definition of "Mortgage Loan Schedule" in the Custodial Agreement. The
Confirmation shall be sent by SBRC to the Seller and the documents contained in
the Mortgage File (as defined herein) shall be delivered to Chase Bank of Texas,
National Association (the "Custodian") and held by the Custodian pursuant to the
terms of a Custodial
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Agreement, dated as of February 11, 1999 (the "Custodial Agreement"), among the
Seller, SBRC and the Custodian pursuant to which the Custodian shall, among
other things, issue trust receipts, as defined therein (the "Trust Receipts").
As a condition to closing any Transaction on any Purchase Date, the Custodian
must deliver to SBRC a Trust Receipt in form and substance acceptable to SBRC.
The transfer of such Mortgage Loans for the purposes of this paragraph 12 shall
include the delivery to the Custodian of the following documents (the "Mortgage
File") with respect to each Mortgage Loan, as set forth in the Custodial
Agreement:
(a) the original Mortgage Note, endorsed in the following form: "Pay to
the order of ____________________, without recourse", with all prior and
intervening endorsements showing a complete chain of endorsement from the
originator to the Seller;
(b) the original Mortgage with evidence of recording thereon, and the
original recorded power of attorney, if the Mortgage was executed pursuant to a
power of attorney, with evidence of recording thereon;
(c) an executed original Assignment of Mortgage, in blank, from the
Seller, which assignment shall be in form and substance acceptable for
recording;
(d) the original recorded Assignment or Assignments of the Mortgage
showing a complete chain of assignment from the originator to the Seller;
(e) the original or copies of each assumption, modification, written
assurance or substitution agreement, if any; and
(f) the original lender's title insurance policy, together with all
endorsements or riders which when issued with or subsequent to the issuance of
such policy, insuring the priority of the Mortgage as a first lien on the
Mortgaged Property represented therein as a fee interest vested in the
Mortgagor, or in the event such original title policy is unavailable, a written
commitment or uniform binder or preliminary report of title issued by the title
insurance or escrow company.
Notwithstanding anything to the contrary contained in this
Section 12, in those instances where either (x) the public recording office has
not returned the original Mortgage, power of attorney or Assignment or (y) the
public recording office retains the original Mortgage, power of attorney or
Assignment after it has been recorded or such document has been lost, the
obligations of the Seller hereunder and under the Custodial Agreement shall be
deemed to have been satisfied upon (1) delivery by the Seller to the Custodian
of a copy of such Mortgage, power of attorney or Assignment certified by the
Seller in the case of (x) above or the public recording office in the case of
(y) above to be a true and complete copy of the recorded original thereof and
(2) if such copy is certified by the Seller, delivery to the Custodian, promptly
upon receipt thereof of either the original or a copy of such document certified
by the public recording office to be a true and complete copy of the original.
Upon delivery to the Seller (x) by the public recording office of any recorded
original Mortgage, power of attorney or Assignment or (y) by a title insurance
or escrow company of any lender's title insurance policy, the Seller promptly
shall (and
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in no event later than five business days following such receipt) deliver such
document to the Custodian.
In addition to the documents contained in the Mortgage File, the Seller
shall deliver to SBRC on or prior to the Purchase Date for such Transaction a
security release certification acceptable to SBRC, certifying the release of any
security interest of a third party which may have existed with respect to any of
the Mortgage Loans subject to such Transaction during the 45-day period prior to
the related Purchase Date and a ▇▇▇▇ of Sale in the form of Exhibit C.
13. Unless otherwise agreed to between SBRC and the Seller, SBRC
hereby covenants and agrees to hire the Seller to service; and the Seller hereby
covenants and agrees to service each Mortgage Loan for a term beginning on the
related Purchase Date of such Mortgage Loan and ending on the related Repurchase
Date; provided that if a Seller Event of Default shall have occurred and be
continuing, the Seller shall immediately be terminated as servicer. The Mortgage
Loans shall be serviced in accordance with Accepted Servicing Practices.
"Accepted Servicing Practices" shall mean that in performing its servicing
duties, the Seller must comply with all applicable state and federal laws and
shall exercise the degree of skill and care consistent with the highest degree
of skill and care that the Seller exercises with respect to similar Mortgage
Loans serviced by it for its own account or others but in no event shall
Accepted Servicing Practices mean any duties less than those set forth in the
Pooling and Servicing Agreement, Series 1997-LB5, dated as of November 1, 1997
(the "1997-LB5 PSA") among Salomon Brothers Mortgage Securities VII, Inc., the
Borrower and Norwest Bank Minnesota, National Association; provided, however
that Accepted Servicing Practices shall not include the advance of any
delinquent principal or interest payments on the Mortgage Loans. Any payments
received by the Seller on the Mortgage Loans (including any Prepayment Charges)
must be placed into a collection account for the benefit of SBRC. The collection
account must meet the requirements of an Eligible Account, as such term is
defined in the ▇▇▇▇-▇▇▇ ▇▇▇. After payment of all funds due to SBRC on each
Repurchase Date, SBRC will instruct the bank holding the collection account to
release any funds in the collection account to the Seller. Notwithstanding the
foregoing, if the Seller fails to repurchase the Mortgage Loans on a Repurchase
Date or upon a Seller Event of Default, all funds held in the collection account
will be released to SBRC by such Bank.
As part of its servicing duties, the Seller enforce "due-on-sale"
provisions to the extent permitted by law, shall administer all escrow/impound
deposits and shall make all servicing advances (not including the advances of
delinquent principal and interest) on the Mortgage Loans. The Mortgage Loans
shall be serviced for a servicing fee equal to 0.50% per annum payable monthly
on the then-outstanding principal balance of each Mortgage Loan (the "Servicing
Fee"). Such Servicing Fee will be deemed to be paid to Long Beach out of the
funds delivered on each Repurchase Date from the collection account to Long
Beach. If the Seller is terminated as servicer hereunder, its entitlement to
such fee is subordinate to any rights and interests of SBRC under this
Agreement. Notwithstanding the foregoing, in the event the Seller fails to
repurchase a Mortgage Loan on the related Repurchase Date or if a Seller Event
of Default has occurred and is continuing, the Seller will no longer be servicer
with respect to such Mortgage Loan or Mortgage Loans, unless the term of
servicing is extended by SBRC in its sole discretion. In such event, SBRC shall
have the right to transfer such servicing to another servicer without payment of
any
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fee to the Seller. The Seller will cooperate in good faith to effect such
servicing transfer and shall pay all costs associated with such servicing
transfer.
14. All notices, deliveries and payments under this Agreement
shall be sufficient if in writing and delivered to the party entitled to receive
such notices, deliveries or payments, or if transmitted to such party by
facsimile transfer, at the following address or facsimile number: (i) if to
SBRC: Salomon Brothers Realty Corp., ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, Attention: Secretary (facsimile no.: (▇▇▇) ▇▇▇-▇▇▇▇); (ii) if to the
Seller: Long Beach Mortgage Company, ▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Treasurer (telecopy number: (714)
560-0508), or to such other addresses as either party may furnish the other
party by written notice under this paragraph.
15. It is the intention of the parties to this Agreement that
Transactions entered into hereunder be considered purchases and sales of
Mortgage Loans notwithstanding their treatment for certain accounting purposes
as financing transactions. Notwithstanding any other provision of this
Agreement, in the event that a Transaction hereunder is deemed not to constitute
a purchase and sale (a) the Seller shall be deemed to have hereby pledged to
SBRC the Mortgage Loans applicable to such Transaction as security for the
performance by the Seller of its obligations in respect of such Transaction and
any other Transaction between SBRC and the Seller and (b) the existence of such
pledge shall be deemed not to violate the representations and warranties in
respect of such Mortgage Loans made by the Seller in paragraph 1 above.
16. SBRC and the Seller hereby acknowledge that they consider
each Transaction hereunder and all other transactions under this Agreement or
any other agreement between the parties, either party and any affiliate of the
other party or any affiliates of the parties to constitute a single business and
contractual relationship and to have been made in consideration of each other.
Therefore, (a) each party and each affiliate of each party hereby agrees to
fulfill all of its obligations to the other party and any affiliate of the other
party with respect to any transaction or agreement between them or any of their
affiliates, and agrees that a default in the performance of any such obligations
shall constitute a default hereunder, (b) each party and any of its affiliates
shall have a right of setoff against the other party and any of its affiliates
of amounts owing hereunder and any other amounts or obligations owing in respect
of any other agreement or transaction whatsoever and (c) payments and deliveries
made by either party or any of either party's affiliates hereunder shall be
considered to have been made in consideration of payments and deliveries made by
the other party or any of the other party's affiliates with respect to any other
agreement or transaction between them, and the obligations to make any such
payments and deliveries may be applied against each other and netted. In order
to secure any obligation of either party to the other party or to any affiliate
of the other party under this Agreement or any other agreement, each party
grants to the other party and the affiliates of the other party a security
interest in all property heretofore or hereafter held by or for the benefit of
such other party or the affiliates of such other party.
17. In the event, for any reason, any purchase by SBRC hereunder
on any Purchase Date is construed by a court as a secured loan rather than a
purchase and sale, the parties intend that SBRC shall have a perfected first
priority security interest in all of the related Mortgage
-10-
11
Loans. The Seller shall pay all fees and expenses associated with perfecting
such security interest, including, without limitation, the cost of filing
financing statements under the Uniform Commercial Code to the extent required by
SBRC.
18. The most recent Confirmation by SBRC to the Seller of each
Transaction delivered pursuant to paragraph 2, as supplemented by this
Agreement, shall constitute a binding agreement between SBRC and the Seller. In
the event of any conflict between the provisions of this Agreement and any other
agreement, confirmation, instrument or other document, the provisions of this
Agreement shall govern; provided that, in the event of any conflict between the
terms of this Agreement and any Confirmation duly executed pursuant to Section 2
of this Agreement, such Confirmation shall govern. This Agreement shall not be
assignable by the Seller without prior written consent of SBRC, shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns, shall not be changed except by an instrument in writing signed by each
of the parties, and shall be governed by the laws of the State of New York. This
Agreement may be executed in any number of counterparts, each of which
counterparts shall constitute but one and the same instrument. The Seller shall
promptly provide such further assurances or agreements as SBRC may request in
order to effect the purposes of this Agreement.
19. In connection with each Transaction entered into between the
Seller and SBRC, the Seller and SBRC agree as follows:
(a) In the case of any Transaction for which the
Repurchase Date is other than the business day immediately
following the Purchase Date and with respect to which Seller
does not have any existing right to substitute substantially the
same mortgage loans for the Mortgage Loans, Seller shall have
the right, subject to the proviso to this sentence, upon notice
to SBRC, which notice shall be given at or prior to 10 A.M. New
York time on such business day, to substitute substantially the
same mortgage loans for any Mortgage Loans; provided, however,
that SBRC may elect, by the close of business on the business
day notice is received, or by the close of the next business day
if notice is given after 10 A.M. New York time on such day, not
to accept such substitution. In the event such substitution is
accepted by SBRC, such substitution shall be made by Seller's
transfer to SBRC of such other mortgage loans and SBRC's
transfer to Seller of such Mortgage Loans, and after such
substitution, the substituted mortgage loans shall be deemed to
be Mortgage Loans. In the event SBRC elects not to accept such
substitution, SBRC shall offer Seller the right to terminate
such Transaction.
(b) In the event Seller exercises its right to
substitute or terminate under sub-paragraph (a), Seller shall be
obligated to pay to SBRC, by the close of the business day of
such substitution or termination, as the case may be, an amount
equal to (A) SBRC's actual cost (including all fees, expenses
and commissions) of (i) entering into replacement transactions;
(ii) entering into or terminating hedge transactions; and/or
(iii) terminating transactions or substituting mortgage loans in
like transactions with third parties in connection with or as a
result of such
-11-
12
substitution or termination, and (B) to the extent SBRC
determines not to enter into replacement transactions, the loss
incurred by SBRC directly arising or resulting from such
substitution or termination. The foregoing amounts shall be
solely determined and calculated by SBRC in good faith.
-12-
13
IN WITNESS WHEREOF, SBRC and the Seller have caused their names
to be signed hereto by their respective officers thereunto duly authorized as of
February 11, 1999.
SALOMON BROTHERS REALTY CORP.
By:
-------------------------------------
Name:
Title:
LONG BEACH MORTGAGE COMPANY
By:
-------------------------------------
Name:
Title:
14
EXHIBIT A
The Seller represents, warrants and covenants to SBRC as of each
Purchase Date or as of such other date as specifically provided herein:
(a) The Seller is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and is
duly authorized and qualified to transact any and all business
contemplated by this Agreement to be conducted by the Seller in
any state in which a Mortgaged Property is located or is
otherwise not required under applicable law to effect such
qualification and, in any event, is in compliance with the doing
business laws of any such State, to the extent necessary to
ensure its ability to enforce each Mortgage Loan and to service
the Mortgage Loans in accordance with the terms of this
Agreement;
(b) The Seller has the full corporate power and authority to
originate, hold, sell and service each Mortgage Loan, and to
execute, deliver and perform, and to enter into and consummate
the Transactions contemplated by this Agreement and has duly
authorized by all necessary corporate action on the part of the
Seller the execution, delivery and performance of this
Agreement; and this Agreement, assuming the due authorization,
execution and delivery thereof by SBRC, constitutes a legal,
valid and binding obligation of the Seller, enforceable against
the Seller in accordance with its terms, except to the extent
that (a) the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium, receivership and other
similar laws relating to creditors' rights generally and (b) the
remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to
the discretion of the court before which any proceeding therefor
may be brought;
(c) The execution and delivery of this Agreement by the Seller, the
servicing of the Mortgage Loans by the Seller hereunder, the
consummation of any other of the Transactions herein
contemplated, and the fulfillment of or compliance with the
terms hereof are in the ordinary course of business of the
Seller and will not (A) result in a breach of any term or
provision of the charter or by-laws of the Seller or (B)
conflict with, result in a breach, violation or acceleration of,
or result in a default under, the terms of any other material
agreement or instrument to which the Seller is a party or by
which it may be bound, or any statute, order or regulation
applicable to the Seller of any court, regulatory body,
administrative agency or governmental body having jurisdiction
over the Seller; and the Seller is not a party to, bound by, or
in breach or violation of any indenture or other agreement or
instrument, or subject to or in violation of any statute, order
or regulation of any court, regulatory body, administrative
agency or governmental body having jurisdiction over it, which
materially and adversely affects or, to the Seller's knowledge,
would in the future materially and adversely affect, (x) the
ability of the Seller to perform its obligations under this
Agreement or (y) the business, operations, financial condition,
properties or assets of the Seller taken as a whole;
15
(d) The Seller is an approved seller/servicer for ▇▇▇▇▇▇ ▇▇▇ or
▇▇▇▇▇▇▇ Mac in good standing and is a HUD approved mortgagee
pursuant to Section 203 of the National Housing Act;
(e) No litigation is pending against the Seller that would
materially and adversely affect the execution, delivery or
enforceability of this Agreement or the ability of the Seller to
service the Mortgage Loans or to perform any of its other
obligations hereunder in accordance with the terms hereof;
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution,
delivery and performance by the Seller of, or compliance by the
Seller with, this Agreement or the consummation of the
Transactions contemplated hereby, or if any such consent,
approval, authorization or order is required, the Seller has
obtained the same;
-2-
16
EXHIBIT B
Any capitalized terms used in this Exhibit B but not otherwise defined
in the Purchase and Sale Agreement shall have the meanings assigned to them in
the Master Mortgage Loan Purchase and Servicing Agreement, dated and effective
as of June 1, 1997 between the Seller and SBRC.
The Seller hereby represents and warrants to SBRC that, as to each
Mortgage Loan, as of the related Purchase Date, or as of such date specifically
provided herein:
(i) The information set forth in the Mortgage Loan Schedule (as defined
in the Custodial Agreement) is complete, true and correct as of the related
Purchase Date;
(ii) The Mortgage Loan is in compliance with all requirements set forth
in the applicable Confirmation, and the characteristics of the Mortgage Loans as
set forth in such Confirmation are true and correct;
(iii) [intentionally omitted];
(iv) Each Mortgage is a valid and enforceable first lien on the
Mortgaged Property, including all improvements thereon, subject only to (a) the
lien of nondelinquent current real property taxes and assessments, (b)
covenants, conditions and restrictions, rights of way, easements and other
matters of public record as of the date of recording of such Mortgage, such
exceptions appearing of record being acceptable to mortgage lending institutions
generally or specifically reflected in the appraisal made in connection with the
origination of the related Mortgage Loan, and (c) other matters to which like
properties are commonly subject which do not materially interfere with the
benefits of the security intended to be provided by such Mortgage;
(v) Immediately prior to the assignment of the Mortgage Loans to SBRC,
the Seller had good title to, and was the sole legal and beneficial owner of,
each Mortgage Loan free and clear of any pledge, lien, encumbrance or security
interest and has full right and authority, subject to no interest or
participation of, or agreement with, any other party to sell and assign the
same;
(vi) To the best of the Seller's knowledge, there is no delinquent tax
or assessment lien against any Mortgaged Property;
(vii) There is no valid offset, defense or counterclaim to any Mortgage
Note or Mortgage, including the obligation of the Mortgagor to pay the unpaid
principal of or interest on such Mortgage Note, nor will the operation of any of
the terms of the Mortgage Note and the Mortgage, or the exercise of any right
thereunder, render the Mortgage unenforceable, in whole or in part, or subject
to any right of rescission, set-off, counterclaim or defense, including the
defense of usury and no such right of rescission, set-off, counterclaim or
defense has been asserted with respect thereto;
(viii) To the best of the Seller's knowledge, there are no mechanics'
liens or claims for work, labor or material affecting any Mortgaged Property
which are or may be a lien prior to, or
17
equal with, the lien of the related Mortgage, except those which are insured
against by the title insurance policy referred to in (xii) below;
(ix) To the best of the Seller's knowledge, each Mortgaged Property is
free of material damage and is in good repair;
(x) Each Mortgage Loan at origination complied in all material respects
with applicable local, state and federal laws, including, without limitation,
usury, equal credit opportunity, real estate settlement procedures,
truth-in-lending and disclosure laws, and consummation of the transactions
contemplated hereby will not involve the violation of any such laws;
(xi) Neither the Seller nor any prior holder of any Mortgage has
modified the Mortgage in any material respect (except that a Mortgage Loan may
have been modified by a written instrument which has been recorded, if
necessary, to protect the interests of SBRC and which has been delivered to the
Custodian); satisfied, cancelled or subordinated such Mortgage in whole or in
part; released the related Mortgaged Property in whole or in part from the lien
of such Mortgage; or executed any instrument of release, cancellation,
modification or satisfaction with respect thereto;
(xii) A lender's policy of title insurance together with a condominium
endorsement and extended coverage endorsement, if applicable, and, with respect
to each Adjustable Rate Mortgage Loan, an adjustable rate mortgage endorsement
in an amount at least equal to the balance of the Mortgage Loan as of the
related Purchase Date or a commitment (binder) to issue the same was effective
on the date of the origination of each Mortgage Loan, each such policy is valid
and remains in full force and effect, the transfer of the related Mortgage Loan
to SBRC will not affect the validity or enforceability of such policy and each
such policy was issued by a title insurer qualified to do business in the
jurisdiction where the Mortgaged Property is located and acceptable to FNMA or
FHLMC and in a form acceptable to FNMA or FHLMC, which policy insures the Seller
and successor owners of indebtedness secured by the insured Mortgage, as to the
first priority lien of the Mortgage; to the best of the Seller's knowledge, no
claims have been made under such mortgage title insurance policy and no prior
holder of the related Mortgage, including the Seller, has done, by act or
omission, anything which would impair the coverage of such mortgage title
insurance policy;
(xiii) Each Mortgage Loan was originated by the Seller (or, if generated
on behalf of the Seller by a Person other than the Seller, is subject to the
same standards and procedures used by the Seller in originating mortgage loans
directly) or by a savings and loan association, savings bank, commercial bank,
credit union, insurance company or similar institution which is supervised and
examined by a federal or state authority, or by a mortgagee approved by the
Secretary of Housing and Urban Development pursuant to sections 203 and 211 of
the National Housing Act;
(xiv) With respect to each Adjustable Rate Mortgage Loan on each
adjustment date, the Mortgage Interest Rate will be adjusted to equal the Index
plus the Margin, rounded to the nearest 0.125%, subject to the Periodic Rate
Cap, the Maximum Rate and the Minimum Rate. Except for Balloon Loans, the
related Mortgage Note is payable on the first day of each month in self-
-2-
18
amortizing monthly installments of principal and interest, with interest payable
in arrears, and requires a Monthly Payment which is sufficient to fully amortize
the outstanding principal balance of the Mortgage Loan over its remaining term
and to pay interest at the applicable Mortgage Interest Rate. No Mortgage Loan
is subject to negative amortization;
(xv) To the best of the Seller's knowledge, all of the improvements
which were included for the purpose of determining the Appraised Value of the
Mortgaged Property lie wholly within the boundaries and building restriction
lines of such property, and no improvements on adjoining properties encroach
upon the Mortgaged Property;
(xvi) All inspections, licenses and certificates required to be made or
issued with respect to all occupied portions of the Mortgaged Property and, with
respect to the use and occupancy of the same, including but not limited to
certificates of occupancy, have been made or obtained from the appropriate
authorities and the Mortgaged Property is lawfully occupied under applicable
law;
(xvii) All parties which have had any interest in the Mortgage, whether
as mortgagee, assignee, pledgee or otherwise, are (or, during the period in
which they held and disposed of such interest, were) in compliance with any and
all applicable licensing requirements of the laws of the state wherein the
Mortgaged Property is located;
(xvii) The Mortgage Note and the related Mortgage are genuine, and each
is the legal, valid and binding obligation of the maker thereof, enforceable in
accordance with its terms and with applicable laws. All parties to the Mortgage
Note and the Mortgage had legal capacity to execute the Mortgage Note and the
Mortgage and each Mortgage Note and Mortgage have been duly and properly
executed by such parties;
(xviii) The proceeds of each Mortgage Loan have been fully disbursed,
there is no requirement for future advances thereunder and any and all
requirements as to completion of any on-site or off-site improvements and as to
disbursements of any escrow funds therefor have been complied with. All costs,
fees and expenses incurred in making, closing or recording the Mortgage Loans
were paid;
(xix) The related Mortgage contains customary and enforceable provisions
which render the rights and remedies of the holder thereof adequate for the
realization against the Mortgaged Property of the benefits of the security,
including, (i) in the case of a Mortgage designated as a deed of trust, by
trustee's sale, and (ii) otherwise by judicial foreclosure. There is no
homestead or other exemption available to the Mortgagor which would interfere
with the right to sell the Mortgaged Property at a trustee's sale or the right
to foreclose the Mortgage;
(xx) With respect to each Mortgage constituting a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been properly
designated and currently so serves and is named in such Mortgage, and no fees or
expenses are or will become payable by SBRC to the trustee under the deed of
trust, except in connection with a trustee's sale after default by the
Mortgagor;
-3-
19
(xxi) There exist no deficiencies with respect to escrow deposits and
payments, if such are required, for which customary arrangements for repayment
thereof have not been made, and no escrow deposits or payments of other charges
or payments due the Seller have been capitalized under the Mortgage or the
related Mortgage Note;
(xxii) The origination, underwriting and collection practices used by
the Seller with respect to each Mortgage Loan have been in all respects legal,
proper, prudent and customary in the mortgage servicing business;
(xxiii) There is no pledged account or other security other than real
estate securing the Mortgagor's obligations;
(xxiv) No Mortgage Loan has a shared appreciation feature, or other
contingent interest feature;
(xxv) No Mortgage Loan provides for primary mortgage insurance;
(xxvi) The improvements upon each Mortgaged Property are covered by a
valid and existing hazard insurance policy with a generally acceptable carrier
that provides for fire extended coverage and such other hazards as are customary
in the area where the Mortgaged Property is located representing coverage not
less than the lesser of the outstanding principal balance of the related
Mortgage Loan or the minimum amount required to compensate for damage or loss on
a replacement cost basis. All individual insurance policies and flood policies
referred to in clause (xxvii) below contain a standard mortgagee clause naming
the Seller or the original mortgagee, and its successors in interest, as
mortgagee, and the Seller has received no notice that any premiums due and
payable thereon have not been paid; the Mortgage obligates the Mortgagor
thereunder to maintain all such insurance, including flood insurance, at the
Mortgagor's cost and expense, and upon the Mortgagor's failure to do so,
authorizes the holder of the Mortgage to obtain and maintain such insurance at
the Mortgagor's cost and expense and to seek reimbursement therefor from the
Mortgagor;
(xxvii) If the Mortgaged Property is in an area identified in the
Federal Register by the Federal Emergency Management Agency as having special
flood hazards, a flood insurance policy in a form meeting the requirements of
the current guidelines of the Flood Insurance Administration is in effect with
respect to such Mortgaged Property with a generally acceptable carrier in an
amount representing coverage not less than the least of (A) the original
outstanding principal balance of the Mortgage Loan, (B) the minimum amount
required to compensate for damage or loss on a replacement cost basis or (C) the
maximum amount of insurance that is available under the Flood Disaster
Protection Act of 1973;
(xxviii) Other than with respect to any failure of a Mortgagor to make
timely payments of principal and interest due on the related Mortgage Note,
there is no default, breach, violation or event of acceleration existing under
the Mortgage or the related Mortgage Note; and the Seller has not waived any
default, breach, violation or event of acceleration;
-4-
20
(xxix) Each Mortgaged Property is improved by a one- to four-family
residential dwelling, including condominium units and dwelling units in planned
unit developments, which, to the best of the Seller's knowledge, does not
include cooperatives or mobile homes and does not constitute other than real
property under state law;
(xxx) There is no obligation on the part of the Seller or any other
party under the terms of the Mortgage or related Mortgage Note to make payments
in addition to those made by the Mortgagor;
(xxxi) Any future advances made prior to the related Purchase Date have
been consolidated with the outstanding principal amount secured by the Mortgage,
and the secured principal amount, as consolidated, bears a single interest rate
and single repayment term reflected on the related Mortgage Loan Schedule. The
consolidated principal amount does not exceed the original principal amount of
the Mortgage Loan;
(xxxii) Each Mortgage Loan was underwritten in accordance with the
Seller's underwriting guidelines;
(xxxiii) The Mortgage File contains an appraisal which was performed by
an appraiser who satisfied, and which was conducted in accordance with, all of
the applicable requirements of the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, as amended;
(xxxiv) None of the Mortgage Loans is a graduated payment mortgage loan,
nor is any Mortgage Loan subject to a temporary buydown or similar arrangement;
(xxxv) With respect to each Mortgage Loan, no loan junior in lien
priority to such Mortgage Loan and secured by the related Mortgaged Property was
originated by the Seller at the time of origination of such Mortgage Loan;
(xxxvi) The Mortgage contains an enforceable provision for the
acceleration of the payment of the unpaid principal balance of the Mortgage Loan
in the event that the Mortgaged Property is sold or transferred without the
prior written consent of the mortgagee thereunder.
-5-
21
Schedule ▇
-▇-
▇▇
▇▇▇▇▇▇▇ ▇
▇▇▇▇ ▇▇ ▇▇▇▇
▇▇ this ____ day of __________, 199__, Long Beach Mortgage
Company ("Long Beach") does hereby sell, transfer, assign, set over and convey
to Salomon Brothers Realty Corp. ("SBRC"), without recourse, all of the right,
title and interest of Long Beach in and to each of the fixed rate and adjustable
rate one-to-four family residential first and second lien mortgage loans
identified on the Mortgage Loan Schedule attached hereto as Exhibit One (the
"Mortgage Loans"), and the related Mortgage Loan Files. Such Mortgage Loans are
sold to SBRC pursuant to the Purchase and Sale Agreement dated as of February
11, 1999 between SBRC and Long Beach (the "Agreement").
Long Beach hereby represents and warrants that Long Beach is the
sole legal, beneficial and equitable owner of each Mortgage Loan and has full
power and authority to transfer and sell each Mortgage Loan to SBRC free and
clear of any encumbrance, equity, lien, pledge, charge, claim or security
interest that Long Beach had or created in the Mortgage Loans or the related
Mortgage Loan Files and that as of the date hereof the representations and
warranties specified in Exhibits A and B to the Agreement are true and correct
as to Long Beach and the Mortgage Loans.
This ▇▇▇▇ of Sale shall be governed by, and construed in
accordance with, the laws of the State of New York.
LONG BEACH MORTGAGE COMPANY
By:
-------------------------------------
Name:
Title:
23
EXHIBIT ONE
MORTGAGE LOAN SCHEDULE
24
SALOMON BROTHERS REALTY CORP.
SEVEN ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
February 11, 1999
Long Beach Mortgage Company
▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Ladies and Gentlemen:
This letter agreement (the "Letter Agreement") confirms the
understanding and agreements between Long Beach Mortgage Company ("Long Beach")
and Salomon Brothers Realty Corp. ("SBRC"), under the terms set forth herein,
regarding SBRC's agreement to provide an Aggregation Line (as defined herein) to
Long Beach in connection with certain fixed-rate and adjustable-rate, first lien
mortgage loans (the "Mortgage Loans") that are originated or purchased by Long
Beach, its affiliates and/or subsidiaries and any related prepayment charges
payable in connection with any voluntary principal prepayment in full on the
related Mortgage Loans (the "Prepayment Charges").
1. Aggregation Line.
SBRC shall make available to Long Beach an aggregation line (the
"Aggregation Line") from February 11, 1999 until January 31, 2000 pursuant to
which SBRC shall simultaneously purchase from, and sign a forward commitment to
resell to, Long Beach, Mortgage Loans, Prepayment Charges and the related
servicing rights that are deemed acceptable for such Aggregation Line as set
forth below. The Aggregation Line shall be more fully documented pursuant to the
Mortgage Loan Purchase and Sale Agreement (the "Purchase and Sale Agreement")
being entered into on the date hereof between Long Beach and SBRC. Under the
Purchase and Sale Agreement, Long Beach will make standard secondary market
corporate representations and warranties as of the date such Purchase and Sale
Agreement is executed and as of any Purchase Date (as defined herein) for the
purchase and sale of any Mortgage Loans pursuant to such Purchase and Sale
Agreement and Long Beach shall make standard secondary market representations
and warranties with respect to each Mortgage Loan as of the Purchase Date on
which such Mortgage Loan is sold to SBRC.
The "Purchase Price" with respect to each Mortgage Loan,
Prepayment Charge and related servicing rights shall be equal to the lesser of
(i) the market value of such Mortgage Loan, Prepayment Charge and related
servicing rights as determined by SBRC acting in good faith and (ii) the greater
of (a)(I) 100% of the unpaid principal balance of such Mortgage Loan as of the
date
25
Long Beach Mortgage Company
February 11, 1999 Page 2.
of purchase if such Mortgage Loan is current or delinquent one payment or (II)
100% of the unpaid principal balance of such Mortgage Loan, minus an additional
10% of the unpaid principal balance of such Mortgage Loan for each additional
delinquent payment (after the first delinquent payment) and (b) 65% of the
Broker's Price Opinion obtained by Long Beach at its expense regarding the real
property subject to the Mortgage Loan. The vendor providing such Broker's Price
Opinion must be approved by SBRC.
The repurchase price (the "Repurchase Price") shall reflect the
agreed upon return to SBRC for providing the Aggregation Line (the "Aggregation
Cost Rate"). With respect to any Mortgage Loan, the Aggregation Cost Rate shall
equal One Month LIBOR (as defined herein) plus 1.25% per annum, calculated on
the basis of a 360-day year and the actual number of days between the Purchase
Date and the Repurchase Date (as defined herein) and rounded up to the nearest
0.0625%. The Repurchase Price shall equal the sum of (i) the Purchase Price and
(ii) the Purchase Price multiplied by the Aggregation Cost Rate.
"One Month LIBOR" means as of the related Settlement Date, the
30 day London Interbank Offered Rate as of 11:00 a.m. (London time) on such
date, as indicated on page number 3750 of the Telerate Service. If One Month
LIBOR cannot be so determined, then One Month LIBOR shall mean the rate
determined by SBRC in its sole discretion.
The Aggregation Line at any one time shall be limited to $100
million in amount of Mortgage Loans and shall have a term of one month or
shorter period of time if the related Purchase Date is not a "Roll Date". A
"Roll Date" is the date each month on which all of the Mortgage Loans subject to
the Aggregation Line are repurchased by Long Beach and then purchased again by
SBRC.
Long Beach shall have the right to add Mortgage Loans to the
Aggregation Line up to twice each month. Long Beach may remove Mortgage Loans
from the Aggregation Line twice a month (one of which shall be on the Roll
Date).
SBRC shall provide not less than twenty eight days' prior notice
to Long Beach in the event that SBRC elects to not renew the Aggregation Line
for any month.
2. Servicing of the Mortgage Loans. The purchase by SBRC of a
Mortgage Loan pursuant to the Aggregation Line shall include the purchase of any
related Prepayment Charge and the related servicing rights for such Mortgage
Loan and the repurchase by Long Beach shall also include the repurchase of the
related Prepayment Charge and the related servicing rights. Unless otherwise
agreed to between SBRC and Long Beach, SBRC hereby covenants and agrees to hire
Long Beach to service; and Long Beach hereby covenants and agrees to service the
Mortgage Loans for a term beginning on the related purchase date (each such
date, a "Purchase Date") and ending on the related date fixed for repurchase
(the "Repurchase Date"); provided that if a Seller Event of Default (as defined
herein) has occurred, Long Beach shall immediately be terminated as servicer.
The Mortgage Loans shall be serviced in accordance with Accepted Servicing
Practices (as defined in the Purchase and Sale Agreement). Any payments received
by
26
Long Beach Mortgage Company
February 11, 1999 Page 3.
Long Beach on the Mortgage Loans (including any Prepayment Charges) must be
placed into a collection account for the benefit of SBRC. The collection account
must meet the requirements of an Eligible Account, as such term is defined in
the Pooling and Servicing Agreement, Series 1997-LB5 dated as of November 1,
1997 among Norwest Bank Minnesota, National Association, SBMSVII and Long Beach.
After the payment of all funds due to SBRC on each Repurchase Date, SBRC will
instruct the bank holding the collection account to release any funds in the
collection account to Long Beach. Notwithstanding the foregoing, if Long Beach
fails to repurchase the Mortgage Loans on a Repurchase Date or upon a Seller
Event of Default, all funds held in the collection account will be released to
SBRC by such bank.
As part of its servicing duties, Long Beach shall enforce
"due-on-sale" provisions to the extent permitted by law, shall administer all
escrow/impound deposits, and shall make all servicing advances (not including
advances of delinquent principal and interest) on the Mortgage Loans. The
Mortgage Loans shall be serviced for a servicing fee equal to 0.50% per annum
payable monthly on the then-outstanding principal balance of each Mortgage Loan
(the "Servicing Fee"). Such Servicing Fee will be deemed to be paid to Long
Beach out of the funds delivered on each Repurchase Date from the collection
account to Long Beach. If the Seller is terminated as Servicer hereunder, the
entitlement to such Servicing Fee is subordinate to any rights and interests of
SBRC under this Letter Agreement. Notwithstanding the foregoing, in the event
Long Beach fails to repurchase a Mortgage Loan on the related Repurchase Date or
if a Seller Event of Default occurs, Long Beach will no longer be servicer with
respect to such Mortgage Loan or Mortgage Loans, unless the term of servicing is
extended by SBRC in its sole discretion. In such event, SBRC shall have the
right to transfer such servicing to another servicer without payment of any fee
to Long Beach. Long Beach will cooperate in good faith to effect such servicing
transfer and shall pay all costs associated with such servicing transfer.
3. Conditions Precedent to Mortgage Loan Purchases. SBRC's
obligation to purchase any Mortgage Loans and related servicing rights which it
accepts for its Aggregation Line shall be subject to each of the following
conditions:
(i) there shall have been delivered to SBRC a Trust Receipt
issued by Chase Bank of Texas, National Association
("Chase") with a mortgage loan schedule attached thereto
and an exception report which is acceptable to SBRC in
its sole discretion;
(ii) SBRC shall have had an opportunity to perform a due
diligence review of each Mortgage Loan and shall have
arranged for reappraisals of value with respect to each
Mortgage Loan if desired by SBRC; and
(iii) Long Beach shall have provided to SBRC such other
documents which are then required to have been delivered
under the Purchase and Sale Agreement or which are
reasonably requested by SBRC, which other documents may
include UCC financing statements, a
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Long Beach Mortgage Company
February 11, 1999 Page 4.
favorable opinion or opinions of counsel with respect to
matters which are reasonably requested by SBRC
(including a perfection opinion), and/or an officer's or
secretary's certificate.
4. Custodial Agreement. Long Beach will pay all expenses in
connection with the custodial agreement, dated as of February 11, 1999 (the
"Custodial Agreement"), among SBRC, Long Beach and Chase, which Custodial
Agreement will be used to hold the mortgage files relating to the Mortgage
Loans.
5. Information. Long Beach will furnish, in a timely manner, to
SBRC all financial and other information (including historical loan information)
concerning Long Beach as SBRC deems reasonably appropriate in connection with
the performance of the services contemplated by this letter. In addition, Long
Beach will provide SBRC reasonable access during normal business hours to Long
Beach's officers, directors, employees, accountants, and other representatives.
Long Beach acknowledges and confirms that SBRC (i) will rely on such information
in the performance of the services contemplated by this letter without
independently investigating or verifying any of it, (ii) assumes no
responsibility for the accuracy or completeness of such information and (iii)
will not disclose such information to any third party (other than its
affiliates, its counsel or its independent accountants) without the prior
written consent of Long Beach; provided, however, SBRC can use such information
if necessary in connection with a Seller Event of Default under the Purchase and
Sale Agreement to market the Mortgage Loans for sale.
6. Unfundings. In the event any Mortgage Loan subject to the
Aggregation Line unfunds, the Repurchase Date with respect to such Mortgage Loan
will immediately accelerate to the next business day and Long Beach with
repurchase the Mortgage Loan at the Repurchase Price (including interest only
for the actual number of days since the Purchase Date).
7. Mortgage Loan Schedule. No Mortgage Loan shall be included in
the Aggregation Line unless Long Beach shall have delivered to SBRC at least two
(2) business days prior to such inclusion, a magnetic tape, in a format
acceptable to SBRC, consisting of the loan characteristics set forth in the
definition of "Mortgage Loan Schedule" in the Custodial Agreement. In addition,
Long Beach shall deliver to SBRC, a magnetic tape, in a format acceptable to
SBRC, with updated loan characteristics agreed upon by SBRC and Long Beach with
respect to each Mortgage Loan.
8. Hedging. Long Beach will have the option to establish one or
more securities or commodities accounts at ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc. and to
enter into transactions in such accounts (and only in such accounts) that are
intended to hedge the interest rate risk on Mortgage Loans included in the
Aggregation Line.
9. Third party whole loan sales. During the course of the
Aggregation Line, Long Beach may sell mortgage loans to third parties; provided,
that SBRC is given the "last look" in order to match the whole loan offer on the
Mortgage Loans from the third party.
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Long Beach Mortgage Company
February 11, 1999 Page 5.
10. Financing of REO Properties. In the event there is a
foreclosure sale for any Mortgage Loan, simultaneously with the occurrence of
such foreclosure, Long Beach will repurchase such Mortgage Loan from SBRC on
such date.
11. Termination.
(a) Long Beach shall have the right to terminate this Letter
Agreement upon the occurrence of any of the SBRC Events of Default under the
Purchase and Sale Agreement and shall be afforded any of the remedies provided
thereunder.
(b) SBRC shall have the right to terminate this Letter Agreement
upon the occurrence of any of the Seller Events of Default under the Purchase
and Sale Agreement and shall be afforded any of the remedies provided
thereunder.
(c) Subject to the provisions of this Paragraph 11, this Letter
Agreement shall terminate upon January 31, 2000.
12. General Provisions.
(a) SBRC's Discretion. It is understood that SBRC shall have the
right to approve or disapprove any Mortgage Loan for this Aggregation Line. In
addition, unless SBRC consents, it will not allow any Mortgage Loan with an
unpaid principal balance in excess of $500,000 onto the Aggregation Line.
(b) Governing Law. This Letter Agreement shall be governed by
and construed in accordance with the laws of the State of New York (without
regard to its conflicts of laws principles).
(c) Amendment or Waiver. This Letter Agreement may not be
amended or modified except in writing signed by each of the parties hereto.
(d) Counterparts. This Letter Agreement may be executed
simultaneously in any number of counterparts. Each counterpart shall be deemed
to be an original, and all such counterparts shall constitute one and the same
instrument.
(e) Severability Clause. Any part, provision, representation or
warranty of this Letter Agreement which is prohibited or which is held to be
void or unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any part,
provision, representation or warranty of this Letter Agreement which is
prohibited or unenforceable or is held to be void or unenforceable in any
jurisdiction shall be ineffective, as to such jurisdiction, to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. To the extent permitted by applicable law, the parties hereto
waive any provision of law which prohibits or renders void or unenforceable any
provision hereof. If the invalidity of any part, provision, representation or
warranty of this Letter
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Long Beach Mortgage Company
February 11, 1999 Page 6.
Agreement shall deprive any party of the economic
benefit intended to be conferred by this Letter Agreement, the parties shall
negotiate, in good-faith, to develop a structure the economic effect of which is
nearly as possible the same as the economic effect of this Letter Agreement
without regard to such invalidity.
(f) No Partnership. Nothing herein contained shall be deemed or
construed to create a co-partnership or joint venture between the parties
hereto.
(g) Further Agreements. Long Beach and SBRC each agree to
execute and deliver to the other such reasonable and appropriate additional
documents, instruments or agreements as may be necessary or appropriate to
effectuate the purposes of this Letter Agreement.
(h) Expenses. Each party hereto shall pay its own expenses in
connection with any amendment hereto.
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Long Beach Mortgage Company
February 11, 1999 Page 7.
Please confirm that the foregoing is in accordance with your
understanding by signing this letter of agreement and two enclosed copies and
returning to us the enclosed copies. The letter signed by you shall constitute a
binding agreement between us as of the date first above written.
Yours sincerely,
SALOMON BROTHERS REALTY CORP.
By:
-------------------------------------
Name:
Title:
ACCEPTED AND AGREED TO
AS OF THE DATE FIRST ABOVE WRITTEN:
LONG BEACH MORTGAGE COMPANY
By:
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Name:
Title: