EXHIBIT 10.27
SALOMON BROTHERS REALTY CORP.
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August 27, 1997
New Century Mortgage Corporation
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Attention: ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇
President & General Counsel
Ladies and Gentlemen:
This letter agreement (the "Letter Agreement") confirms the
understanding and agreements between New Century Mortgage Corporation ("New
Century") and Salomon Brothers Realty Corp. ("Salomon"), under the terms set
forth herein, regarding (i) New Century's agreement to securitize certain
adjustable rate, one-to-four family, first lien mortgages (the "Mortgage Loans")
either (a) using Salomon Brothers Mortgage Securities VII Inc. or (b) pursuant
to a shelf registration filing of New Century in connection with pass-through
transfers with respect to which Salomon or one of its affiliates is the sole
underwriter and (ii) Salomon's agreement to provide an aggregation line to New
Century in connection with certain mortgage loans that are originated by New
Century.
1. Mortgage Loans.
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(a) In General. New Century hereby agrees to securitize Mortgage
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Loans with an unpaid principal balance, as of the date of securitization, of not
less than $750,000,000 between September 1, 1997 and June 30, 1998, securitized
through a program of securitizations (the "Securitizations") of AAA and Aaa-
rated mortgage-backed securities (the "Securities") either (i) using Salomon
Brothers Mortgage Securities VII Inc. or (ii) pursuant to a shelf registration
filing of New Century in connection with pass-through transfers with respect to
which Salomon or one of its affiliates is the sole underwriter.
(b) Servicing of the Mortgage Loans. Unless otherwise agreed to
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between Salomon and New Century, New Century shall service the Mortgage Loans
through Comerica or such other sub-servicer which Salomon has accepted in
writing, as the sub-servicer (the "Sub-Servicer"); provided that, Salomon shall
have the right to perform due diligence on any entity appointed as servicer or
sub-servicer of the Mortgage Loans (including Comerica) and may require New
Century to select another servicer or sub-servicer to the extent that Salomon is
not satisfied with the results of such due diligence. The Mortgage Loans shall
be serviced pursuant to the terms of the Mortgage Loan Purchase and Servicing
Agreement currently in effect between
New Century Mortgage Corporation
August 27, 1997 Page 2.
Salomon and New Century. New Century or the Sub-Servicer shall remit payments of
principal and interest to Salomon on a date prior to the 25th day of each month
beginning with the month after the Settlement Date (as defined in Section 3(a))
to permit remittances to certificateholders on the 25th day of each month in
connection with a securitization, shall enforce "due-on-sale" provisions to the
extent permitted by law, shall administer all escrow/impound deposits, shall pay
compensating interest on principal prepayments in any month up to the amount of
its servicing compensation in such month, and shall make all servicing advances
on any Mortgage Loan (including advances of delinquent principal and interest
payments) on the Mortgage Loans. New Century or the Sub-Servicer shall be
required to make advances in respect of delinquent payments of principal and
interest on the Mortgage Loans through foreclosure and in connection with any
properties acquired by the related trustee in any securitization transaction
through liquidation of such properties, subject to New Century's or the Sub-
Servicer's determination regarding recoverability. The Mortgage Loans shall be
serviced for a servicing fee equal to .50% per annum payable monthly on the
then-outstanding principal balance of each Mortgage Loan (the "Servicing Fee").
Any fee payable to the Sub-Servicer shall be paid by New Century without any
right of reimbursement by Salomon.
(c) Conditions Precedent to Mortgage Loan Purchases. Salomon's
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obligation to purchase any Mortgage Loans which it accepts for its Aggregation
Line (as defined in Section 3(a)) shall be subject to each of the following
conditions:
(i) there shall have been delivered to Salomon a Trust Receipt
issued by First Bank National Association ("First Bank")
with a mortgage loan schedule attached thereto and an
exception report which is acceptable to Salomon in its sole
discretion;
(ii) Salomon 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 Salomon; and
(iii) New Century shall have provided to Salomon such other
documents which are then required to have been delivered
under the Purchase and Sale Agreement (as defined in
Section 3(a)) or which are reasonably requested by Salomon,
which other documents may include UCC financing statements,
a favorable opinion or opinions of counsel with respect to
matters which are reasonably requested by Salomon, and/or
an officer's or secretary's certificate.
2. Securitizations.
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(a) In General. As noted above, New Century shall meet its commitment
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to Salomon with respect to not less than $750,000,000 in Mortgage Loans between
September 1,
New Century Mortgage Corporation
August 27, 1997 Page 3.
1997 and June 30, 1998 by using Salomon Brothers Mortgage Securities VII Inc. or
a shelf registration statement of New Century pursuant to transactions in which
Salomon or an affiliate shall act as the sole underwriter. In connection with
any such offering, New Century shall appoint Salomon as New Century's exclusive
underwriter of New Century's mortgage loan securitization transactions. New
Century will pay to Salomon promptly upon the closing of each Securitization an
underwriting discount equal to the product of (i) the applicable Underwriting
Fee Percentage (as defined herein) multiplied by (ii) the aggregate unpaid
principal balance of the Mortgage Loans subject to such Securitization (the
"Underwriting Fee"). The "Underwriting Fee Percentage" with respect to each
Securitization shall be one-fourth of one percent (0.25%). If in any given
period commencing with the period from September 1, 1997 through December 31,
1997, and thereafter on a quarterly basis, New Century fails to pay Salomon a
cumulative Underwriting Fee of at least $500,000, New Century shall pay to
Salomon on the last business day of such period an amount equal to (i) $500,000
less (ii) the cumulative Underwriting Fee for such period; provided, however,
that any Underwriting Fees paid by New Century in any quarter in excess of
$500,000 shall be carried forward and applied toward New Century's Underwriting
Fee commitment hereunder; provided, further, that the minimum quarterly
Underwriting Fee commitment shall not apply in any quarter in which New Century
utilizes Salomon or an affiliate as the exclusive underwriter for all adjustable
rate securitizations completed by New Century during such quarter. In addition,
if on June 30, 1998 (or August 31, 1998 in the event that this Letter Agreement
is extended pursuant to Section 5(c) hereof), New Century has not paid to
Salomon a cumulative Underwriting Fee of at least $1,875,000, New Century shall
pay to Salomon on the last business day of such period an amount equal to (i)
$1,875,000 less (ii) the cumulative Underwriting Fee.
(b) Expenses. New Century shall pay all reasonable costs and expenses
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arising from the preparation for and execution of the Securitizations, including
but not limited to, the fees and disbursements of legal counsel (including
investor's counsel in any private placement, if retained), rating agency fees,
credit enhancement fees, SEC registration fees (or equivalent ratable fees of a
Salomon affiliate in lieu thereof if such affiliate's shelf registration is
utilized), auditors' fees, due diligence expenses (other than Salomon's), costs
of preparing and printing any offering documents and trustee fees, etc. Salomon
shall be responsible for the fees and disbursements of its own legal counsel and
any due diligence expenses incurred by Salomon. It is understood and agreed that
New Century may require that the parties incurring or charging such costs and
expenses agree in advance that they are payable or reimbursable by New Century
only to a specified reasonable extent or cap.
(c) Information. New Century will furnish Salomon with all financial and
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other information concerning New Century as ▇▇▇▇▇▇▇ ▇▇▇▇▇ reasonably appropriate
in connection with the performance of the services contemplated by this letter
and in that connection will provide Salomon with reasonable access during normal
business hours to New Century's officers, directors, employees, accountants, and
other representatives. New Century acknowledges and confirms that Salomon (i)
will rely on such information in the performance of the services contemplated by
this letter without independently investigating or verifying any of it and (ii)
assumes no responsibility for the accuracy or completeness of such information.
New Century Mortgage Corporation
August 27, 1997 Page 4.
(d) Offering Documents. In connection with each Securitization, New
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Century will be solely responsible for the contents of any private placement
memorandum, prospectus supplement or other offering document used in connection
with the placement of the Securities (as such documents may be amended or
supplemented and including any information incorporated therein by reference,
the "Offering Document") and any and all other written communications provided
by, or authorized to be provided on behalf of, New Century to any actual or
prospective purchaser of the Securities except to the extent such contents of
the Offering Document are provided by Salomon in writing expressly for use in
the Offering Document and provided that any statistical, tabular or similar
information, including computer runs, initially prepared by or on behalf of
Salomon (but as to which Salomon is not taking responsibility in the Offering
Document) shall have been verified by New Century's independent public
accountants. New Century shall represent and warrant that the Offering Document
and such other written communications will not, as of the date of the offer or
sale of the Securities or the closing date of any such sale, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Such
representation and warranty will not cover information provided in writing by
Salomon for use specifically in such Offering Document. New Century shall
authorize Salomon to provide the Offering Document to prospective purchasers of
the Securities. If at any time prior to the completion of the offer and sale of
the Securities an event occurs as a result of which the Offering Document (as
then supplemented or amended) would include any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, New Century will promptly notify Salomon of such event and
Salomon will suspend solicitations of prospective purchasers of the Securities
until such time as New Century shall prepare (and New Century agrees that, if it
shall have notified Salomon to suspend solicitations after orders have been
accepted from prospective purchasers, it will promptly prepare) a supplement or
amendment to the Offering Document which corrects such statement or omission.
(e) Indemnification. New Century agrees to indemnify and hold harmless
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Salomon and each person who controls Salomon within the meaning of either the
Securities Act of 1933, as amended (the "Act") or the Securities Exchange Act of
1934, as amended (the "Exchange Act") against any and all losses, claims,
damages or liabilities, joint or several, suffered or incurred which arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Offering Document or in any revision or amendment
thereof or supplement thereof or arise out of or are based upon the omission or
alleged omission to state in the Offering Document or in any revision or
amendment thereof or supplement thereto a material fact required to be stated
therein or the omission or alleged omission to state a material fact in any
Offering Document or in any revision or amendment thereof or supplement thereto
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and agrees to reimburse each such
indemnified party for any legal or other expenses reasonably incurred by it or
him in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however that New Century shall not be liable to
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Salomon or any person who controls Salomon to the extent that any misstatement
or alleged misstatement or
New Century Mortgage Corporation
August 27, 1997 Page 5.
omission or alleged omission was made in reliance upon and in conformity with
the information provided in writing to New Century by Salomon specifically for
inclusion in the Offering Document. This indemnity agreement will be in addition
to any liability which New Century may otherwise have.
In order to provide for just and equitable contribution in circumstances
in which the indemnification provided for in this Section 2(e) is due in
accordance with its terms but is for any reason held by a court to be
unavailable on grounds of policy or otherwise, the parties entitled to
indemnification thereunder shall be entitled to contribution for the aggregate
losses, claims, damages and liabilities (including legal and other expenses
reasonably incurred in connection with investigating or defending same) to which
it or they may be subject, except that no person guilty of fraudulent
misrepresentation shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. In determining the amount of
contribution to which the respective parties are entitled, consideration shall
be given to the relative benefits and also the relative fault of the party in
connection with the statements or omissions that resulted in losses, the
parties' relative knowledge and access to information concerning the matter with
respect to which the claim was asserted, the opportunity to correct and/or
prevent the breach, and any other equitable considerations appropriate under the
circumstances. For purposes of this Section 2(e), each person who controls
Salomon within the meaning of either the Act or the Exchange Act shall have the
same rights to contribution as Salomon. Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against New Century under this Section 2(e), notify New Century, but the
omission to so notify New Century shall not relieve New Century from any other
obligation it may have hereunder or otherwise than under this Section 2(e).
(f) All financial data and other documentation prepared by Salomon in
connection with the transactions contemplated hereby (including, without
limitation, any computer models, cash flow analyses, and any documentation
prepared by counsel for Salomon) shall be proprietary to Salomon. Except as
otherwise required by law, neither New Century, any New Century affiliate, nor
any person acting on behalf of any of them (including, without limitation,
counsel and the independent accountants to New Century) shall disseminate,
distribute, or otherwise make available such data or documentation without
Salomon's prior written consent (other than New Century making such data
available to any New Century affiliate, its counsel or its independent
accountants, in each case on a need-to-know basis).
This Section 2 shall survive the termination of this Letter Agreement.
3. Aggregation Line.
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(a) In General. In addition to the rights provided to Salomon pursuant
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to Sections 1 and 2 of this Letter Agreement, Salomon shall make available to
New Century an aggregation line (the "Aggregation Line") pursuant to which
Salomon shall simultaneously purchase from, and
New Century Mortgage Corporation
August 27, 1997 Page 6.
sign a forward commitment to resell to, New Century adjustable rate Mortgage
Loans that are deemed acceptable for such Aggregation Line as set forth below.
For purposes of the Aggregation Line, Mortgage Loans shall be deemed to be
adjustable rate Mortgage Loans if they do not include any period of more than
three years during which the related mortgage interest rate thereunder will not
be subject to adjustment. Only Mortgage Loans which are deemed to be adjustable
rate Mortgage Loans by Salomon in its sole discretion shall be eligible for
inclusion under the Aggregation Line. Notwithstanding the foregoing, New
Century shall have until September 30, 1997 to remove from the Aggregation Line
any fixed rate Mortgage Loans currently subject to the Aggregation Line. Such
Mortgage Loans shall be removed from the Aggregation Line upon three Business
Day's prior notice to Salomon but in no event later than September 30, 1997.
The Aggregation Cost (as defined below) for such Mortgage Loans shall equal One
Month LIBOR plus 1.25%. In the event that any such fixed rate Mortgage Loan
has not been removed from the Aggregation Line on or before September 30, 1997,
Salomon may, in its sole discretion permit such fixed rate Mortgage Loan to
remain subject to the terms of the Aggregation Line at an Aggregation Cost (as
defined below) equal to One Month LIBOR plus 2.00%. It is understood and agreed
that in connection with the resale of the Mortgage Loans by Salomon to New
Century pursuant to the prior sentence, Salomon shall not make any
representations and warranties regarding the Mortgage Loans and the Mortgage
Loans will not be subject to due diligence review by New Century. The
Aggregation Line shall be more fully documented pursuant to the Mortgage Loan
Purchase and Sale Agreement (the "Purchase and Sale Agreement") to be entered
into between New Century and Salomon, which shall be substantially similar in
form to the Mortgage Loan Purchase and Sale Agreement dated November 4, 1996
between New Century and Salomon. Under the Purchase and Sale Agreement, New
Century will make standard secondary market corporate representations and
warranties as of the date such Purchase and Sale Agreement is executed and as of
any settlement date for the purchase and sale of any Mortgage Loans pursuant to
such Purchase and Sale Agreement (each such date, a "Settlement Date") and New
Century shall make standard secondary market representations and warranties with
respect to each Mortgage Loan as of the Settlement Date on which such Mortgage
Loan is sold to Salomon. In the event that New Century satisfies its
obligations under the terms of this Letter Agreement, the Aggregation Line shall
terminate on the last day of the calendar quarter in which New Century satisfies
its obligations to Salomon pursuant to Section 1(a) of this Letter Agreement.
The Purchase Price with respect to each Mortgage Loan which conforms to
the Underwriting Standards of New Century which were most recently reviewed and
approved by Salomon and which is not a Problem Mortgage Loan (as defined in
Section 3(b) or a Non-Standard Mortgage Loan (as defined in Section 3(c) (a
"Standard Mortgage Loan") shall be equal to the market value of such Mortgage
Loan, as determined by Salomon acting in good faith. The Purchase Price for
each Non-Standard Mortgage Loan shall be equal to the lesser of (i) the market
value of such Mortgage Loan as determined by Salomon acting in good faith or
(ii) the amount determined in accordance with the provisions of Section 3(c)(ii)
of this Letter Agreement. Unless Salomon provides notice to New Century and
First Bank, the Purchase Price for each Standard Mortgage Loan shall be equal to
at least 103% of the unpaid principal balance of such Standard
New Century Mortgage Corporation
August 27, 1997 Page 7.
Mortgage Loan and the Purchase Price with respect to each Non-Standard Mortgage
Loan shall be equal to at least 100% of the unpaid principal balance of such
Non-Standard Mortgage Loan.
The repurchase price shall reflect the agreed upon return to Salomon for
providing the Aggregation Line (the "Aggregation Cost"). With respect to any
Mortgage Loan which is a Standard Mortgage Loan, the Aggregation Cost shall
equal One Month LIBOR plus 1.25%. With respect to any Problem Mortgage Loan or
Non-Standard Mortgage Loan, or in the event that New Century sells any Mortgage
Loan which is subject to the Aggregation Line to a party other than Salomon, the
Aggregation Cost shall equal One Month LIBOR plus 2.00%. In the event that a
Mortgage Loan is sold to a party other than Salomon, the Mortgage Loan shall be
subject to the foregoing increased rate from the day such Mortgage Loan became
subject to the Aggregation Line until the date of the sale to such third party.
A copy of the letter with the terms to the sale to such third party shall be
delivered to Salomon. New Century shall retain principal and interest on any
Mortgage Loans subject to the Aggregation Line.
The Aggregation Line, inclusive of any Problem Mortgage Loans and Non-
Standard Mortgage Loans, at any one time shall be limited to $335 million in
amount of Mortgage Loans and shall have a term of one month; provided that,
Salomon may, in its sole discretion, increase the maximum amount of the
Aggregation Line to an amount not in excess of $400 million to the extent
requested by New Century to accumulate adjustable rate Mortgage Loans which New
Century has committed to securitize using Salomon as the sole underwriter. The
maximum amount of Problem Mortgage Loans and Non-Standard Mortgage Loans in the
Aggregation Line shall not exceed $35 million at any one time.
New Century shall have the right to add Mortgage Loans to the Aggregation
Line up to four times each month. Standard Loans may be removed from the
Aggregation Line once a month on the roll date. Problem Mortgage Loans and Non-
Standard Mortgage Loans may be removed from the Aggregation Line with two weeks
prior written notice by New Century to Salomon.
Salomon shall provide not less than twenty eight days' prior notice to
New Century and First Bank (or such other warehouse lender as directed by New
Century) in the event that Salomon elects to not renew the Aggregation Line for
any month.
(b) Problem Mortgage Loans. Salomon, in its sole discretion, may
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determine that a Mortgage Loan is (x) of insufficient quality to be financed or
purchased, (y) missing documentation or other information and such problem is
not cured by New Century in sixty days or (z) a loan which is delinquent at the
time of financing by Salomon, which becomes delinquent during such financing by
Salomon or was more than thirty days delinquent on one or more occasions in the
prior twelve months (each such Mortgage Loan, a "Problem Mortgage Loan").
Problem Mortgage Loans shall be subject to the following qualifications with
respect to the Aggregation Line:
New Century Mortgage Corporation
August 27, 1997 Page 8.
(i) the maximum Aggregation Line with respect to Problem
Mortgage Loans shall equal $10 million as of any trade date
on which there was formal notification of a trade by a
confirmation letter or trade ticket; and
(ii) the Purchase Price shall be equal to (A) for the first
ninety-day period after purchase, 80% of the unpaid
principal balance of the Problem Mortgage Loan as of the
date of purchase and (B) thereafter, 80% of the unpaid
principal balance of the Problem Mortgage Loan, minus 20%
of the unpaid principal balance of such Problem Mortgage
Loan for each additional month after the initial ninety-day
period.
In the event that Salomon determines in its sole discretion that any Problem
Mortgage Loan has ceased to be a Problem Mortgage Loan, such Mortgage Loan shall
be treated as a Standard Loan or a Non-Standard Mortgage Loan, as the case may
be, as of the first day of the month following such determination.
(c) Non~Standard Mortgage Loans. "Non-Standard Mortgage Loans" are
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defined as any Mortgage Loan (x) with an unpaid principal balance in excess of
$1,000,000; or (y) that has a loan-to-value ratio in excess of 85.00% (up to a
maximum of 90.00%); provided, however, at its option, Salomon may deem a
Mortgage Loan with an unpaid principal balance of no more than $1,500,000 to be
a Standard Loan. In addition, if (i) Mortgage Loans with a loan-to-value ratio
greater than 80% (but not more than 85%) have an aggregate unpaid principal
balance in excess of $30 million and (ii) Mortgage Loans with unpaid principal
balances greater than $500,000 and less than or equal to $1,500,000 have an
aggregate unpaid principal balance in excess of $10 million, such excess amounts
shall be deemed "Non-Standard Mortgage Loans". No Mortgage Loan shall be subject
to the terms of the Aggregation Line if the unpaid principal balance of such
Mortgage Loan exceeds $1,500,000 or if such Mortgage Loan is not a first lien.
Non-Standard Mortgage Loans shall be subject to the following qualifications
with respect to the Aggregation Line:
(i) the maximum Aggregation Line with respect to Non-Standard
Mortgage Loans shall equal $30 million (of which no more
than $5 million shall have unpaid principal balances greater
than $500,000 (including any Problem Loans with unpaid
principal balances greater than $500,000) and no more than
$15 million shall be Mortgage Loans with a loan-to-value
ratio in excess of 85.00% (up to a maximum of 90.00%)), as
of any trade date on which there was formal notification of
a trade by a confirmation letter or trade ticket; and
New Century Mortgage Corporation
August 27, 1997 Page 9.
(ii) the maximum Purchase Price for the first sixty days shall be
par and thereafter, the maximum Purchase Price shall be
calculated pursuant to Section 3(b)(ii) above.
(d) Mortgage Loan Schedule. No Mortgage Loan shall be included in the
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Aggregation Line unless New Century shall have delivered to Salomon at least 72
hours prior to such inclusion, a magnetic tape, in a format acceptable to
Salomon, consisting of the loan characteristics agreed upon by Salomon and New
Century with respect to each Mortgage Loan.
(e) Marketing of Mortgage Loans. Salomon may market the Problem
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Mortgage Loans and Non-Standard Mortgage Loans on New Century's behalf for a
purchase price acceptable to New Century and shall provide New Century with a
copy of a trade ticket or letter of intent with respect to any commitment to
sell such Mortgage Loans. New Century must advise Salomon within sixty days
after inclusion of each Mortgage Loan in the Aggregation Line of the course of
action it intends to take with respect to such Mortgage Loan (i.e.,
securitization, whole loan sale, etc.).
4. Financing of ▇▇ ▇▇▇▇▇. Salomon shall provide financing for the CE
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bonds (the "▇▇ ▇▇▇▇▇") created by the asset-backed structure on any New Century
securitizations which Salomon has acted as the sole underwriter pursuant to this
Letter Agreement. Such financing shall be performed at a rate equal to 75% of
the present value of the ▇▇ ▇▇▇▇▇, as determined by Salomon. The ▇▇ ▇▇▇▇▇ shall
be financed by Salomon at a financing fee equal to One Month LIBOR plus 1.50%
and will be subject to standard provisions of the PSA master repurchase
agreement. In addition, at the option of New Century, Salomon may, but is not
obligated to, provide the financing of ▇▇ ▇▇▇▇▇ created by asset-backed
structures on securitizations for which Salomon is not acting as sole
underwriter.
5. Termination.
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(a) New Century shall have the right to terminate its obligations
hereunder upon (i) any material default by Salomon of its obligations under this
Letter Agreement which is not cured within 30 days following written notice of
such default to Salomon by New Century or (ii) the payment by New Century to
Salomon of a termination fee equal to 0.25% times the unfulfilled volume
commitment hereunder.
(b) Salomon shall have the right to terminate this Letter Agreement upon
the occurrence of any of the following events (each, a "Termination Event"):
(i) the judgment by Salomon in good faith that a material
adverse change has occurred with respect to the business,
properties, assets or condition (financial or otherwise) of
New Century;
New Century Mortgage Corporation
August 27, 1997 Page 10.
(ii) Salomon shall reasonably request, specifying the reasons for
such request, information, and/or written responses to such
requests, regarding the financial well-being of New Century and
such information and/or responses shall not have been provided
within three business days of such request;
(iii) Either (A) a change in control of New Century shall have
occurred other than in connection with and as a result of the
issuance and sale by New Century of registered, publicly
offered common stock; or (B) Salomon determines in its sole
discretion that any material adverse change has occurred in the
management of New Century;
(iv) There is (A) a material breach by New Century of any
representation and warranty contained in the Purchase and Sale
Agreement, other than a representation or warranty relating to
particular Mortgage Loans, and Salomon 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 New Century or (B) a failure by New
--
Century to make any payment payable by it under the Purchase
and Sale Agreement or (C) any other failure by New Century to
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observe and perform in any material respect its material
covenants, agreements and obligations with Salomon, including
without limitation those contained in the Purchase and Sale
Agreement, and Salomon 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 New
Century;
(v) 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 Salomon, impracticable to continue the commitment;
or
(vi) New Century fails to provide written notification to Salomon of
any change in its loan origination, acquisition or appraisal
guidelines or practices, or New Century, without the prior
consent of Salomon (which shall not be unreasonably withheld),
amends in any material respect its loan origination,
acquisition or appraisal guidelines or practices;
New Century Mortgage Corporation
August 27, 1997 Page 11.
provided, that Salomon shall have the right to dispose of any collateral held by
Salomon pursuant to this Letter Agreement or pursuant to the CE Facility in
order to remedy any default based upon a Termination Event occurring hereunder
or under the CE Facility.
(c) Subject to the provisions of Paragrah 3 of this Letter Agreement, this
Letter Agreement shall terminate upon the earlier of (i) satisfaction of the
$750,000,000 commitment and (ii) June 30, 1998; provided that the CE Financing
provided for in Section 4 shall continue under its terms; provided further that,
in the event that New Century has not effected the securitization of any
adjustable rate Mortgage Loans during the term of this Letter Agreement with any
underwriter other than Salomon, then Salomon, in its sole discretion may extend
the term of this Letter Agreement to August 31, 1998.
Notwithstanding any other provision of this Section 5, any grace or
notice period provided herein in respect of a notice to be given or action to be
taken by Salomon may be shortened or eliminated by Salomon if, in its sole good
faith discretion, it is unreasonable to do so under the circumstances, taking
into consideration, among other things, the volatility of the market for the
Mortgage Loans or other Securities involved, the extent and nature of any
Termination Event (or events which with the giving of such notice and passage of
time would constitute Termination Events) and the risks inherent in deferring
the exercise of remedies for the otherwise applicable grace or notice period.
6. General Provisions.
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(a) Salomon's Discretion. It is understood that Salomon shall have
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absolute discretion in determining whether to accept or reject any proposed
offer or proposal to securitize any Mortgage Loan. Notwithstanding the
foregoing, however, subject to New Century's representations, warranties and
covenants as set forth herein and in any related agreements, all Standard
Mortgage Loans, Non-Standard Mortgage Loans and Problem Mortgage Loans
originated by New Century in accordance with the underwriting standards of New
Century which were most recently approved by Salomon shall be eligible for
financing under the Aggregation Line in accordance with the terms hereof;
provided, however, Salomon shall have no obligation to finance any Mortgage Loan
that New Century intends to sell to a party other than Salomon. It is further
understood that Salomon shall have absolute discretion in determining whether
any Mortgage Loan is a Standard Mortgage Loan, Non-Standard Mortgage Loan or
Problem Mortgage Loan.
(b) Governing Law. This Letter Agreement shall be governed by and
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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
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modified except in writing signed by each of the parties hereto.
New Century Mortgage Corporation
August 27, 1997 Page 12.
(d) Counterparts. This Letter Agreement may be executed
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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
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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 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
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construed to create a co-partnership or joint venture between the parties
hereto.
(g) Further Agreements. New Century and Salomon each agree to execute
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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.
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: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Title: Authorized Agent
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ACCEPTED AND AGREED TO
AS OF THE DATE FIRST ABOVE WRITTEN:
NEW CENTURY MORTGAGE CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Title: CEO
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EXHIBIT A
MORTGAGE LOAN SCHEDULE