ASSIGNMENT, ASSUMPTION AND RECOGNITION AGREEMENT
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This is an Assignment, Assumption and Recognition Agreement made this 30th
day of September, 1998, among Salomon Brothers Realty Corp. (the "Seller"),
Wilshire Real Estate Investment Trust Inc. (the "Purchaser") and Ameriquest
Mortgage Company (the "Company").
WHEREAS, pursuant to a Liquidation Agreement (the "Liquidation Agreement"),
dated as of September 30, 1998, among Salomon Brothers Mortgage Securities VII,
Inc. ("Salomon Brothers"), the Company, Norwest Bank Minnesota, National
Association ("Norwest") and Salomon Smith Barney Inc. ("SSBI"), the Trust Fund
(as defined in the Pooling and Servicing Agreement (the "Servicing Agreement"),
dated as of November 1, 1996, relating to 1996-LB3, among Salomon Brothers, the
Company f/k/a Long Beach Mortgage Company and Norwest) was liquidated and
terminated, and SSBI became the owner of a 100% ownership interest in the
mortgage loans identified on the Mortgage Loan Schedule annexed hereto as
EXHIBIT ONE (the "Mortgage Loans");
WHEREAS, the Seller is the holder of all right, title and interest in and
to the Mortgage Loans pursuant to the Liquidation Agreement;
WHEREAS, the Company made certain representations and warranties with
respect to the Mortgage Loans pursuant to a Mortgage Loan Purchase Agreement
(the "Purchase Agreement"), dated November 20, 1996, among Salomon Brothers, the
Company and the Seller which was terminated in accordance with the terms of the
Liquidation Agreement;
WHEREAS, pursuant to Article III of the Liquidation Agreement, the Company
restated such representations and warranties with respect to the Mortgage Loans
as of November 20, 1996; and
WHEREAS, pursuant to Article III of the Liquidation Agreement, the Mortgage
Loans are being serviced by the Company in accordance with the terms of the
Servicing Agreement;
WHEREAS, the Seller desires to sell to the Purchaser, and the Purchaser
desires to purchase from the Seller, the Mortgage Loans;
NOW, THEREFORE, in consideration of the premises and mutual agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Seller, the Purchaser and the
Company agree as follows:
WARRANTIES
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1. (a) The Seller and the Company warrant and represent that attached
hereto as EXHIBIT TWO is a true, accurate and complete copy of the Liquidation
Agreement.
(b) The Seller warrants and represents that attached hereto as
EXHIBIT THREE is a true, accurate and complete copy of the Purchase Agreement as
in effect prior to the termination of such Purchase Agreement.
(c) The Seller warrants and represents that it is the lawful owner of
the Mortgage Loans with the full right to transfer the Mortgage Loans free from
any claim or encumbrance whatsoever.
(d) The Seller hereby warrants and represents to the Purchaser that
no event has occurred from November 20, 1996 to the date hereof that would
result in any representation and warranty made pursuant to Section 6 of the
Purchase Agreement being untrue if made as of the date hereof with respect to
the Mortgage Loans (other than any statistical information with respect to the
Mortgage Loans and any changes due to the receipt of payments on the Mortgage
Loans, adjustment of the Mortgage Interest Rates on the Mortgage Loans and
similar changes, which information reflected on EXHIBIT ONE hereto is accurate
in all material respects as of September 1, 1998). In the event of a breach of
the foregoing representation and warranty which materially and adversely affects
the value of any Mortgage Loan or the Purchaser's interest therein, the Seller
shall repurchase such affected Mortgage Loan at a repurchase price equal to the
unpaid principal balance of such Mortgage Loan plus accrued interest at the net
Mortgage Interest Rate from the paid through date of the Mortgage Loan to the
first day of the month following the month in which such repurchase is effected;
provided, that to the extent that the Company would otherwise be required to
repurchase a Mortgage Loan due to the breach of any of the representations and
warranties that are made or deemed to have been made by the Company as of
November 20, 1996, then the Seller shall repurchase the affected Mortgage Loan
from the Purchaser upon the reassignment of the Liquidation Agreement from the
Purchaser to the Seller with respect to such Mortgage Loan. It is understood and
agreed that the obligations of the Seller set forth in this Section 1(d) to
repurchase an affected Mortgage Loan constitutes the sole remedy of the
Purchaser respecting a breach of the representation and warranty made in this
Section 1(d).
ASSIGNMENT AND ASSUMPTION
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2. The Seller hereby assigns to the Purchaser all of its right, title and
interest in, and to the Mortgage Loans.
3. The Seller hereby assigns to the Purchaser all of its right, title and
interest in, and under Article III of the Liquidation Agreement to the extent of
the Mortgage Loans, and the Purchaser hereby assumes all of the Seller's
obligation under Article III of the Liquidation Agreement to the extent of the
Mortgage Loans from and after the date hereof.
RECOGNITION OF THE PURCHASER
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4. From and after the date hereof, the Company shall recognize the
Purchaser as the owner of the Mortgage Loans.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
SALOMON BROTHERS REALTY CORP.,
Seller
By:___________________________
Name:_________________________
Title:________________________
WILSHIRE REAL ESTATE INVESTMENT
TRUST INC.
Purchaser
By:___________________________
Name:_________________________
Title:________________________
AMERIQUEST MORTGAGE COMPANY
Company
By:___________________________
Name:_________________________
Title:________________________
MORTGAGE LOAN PURCHASE AGREEMENT
This is a Mortgage Loan Purchase Agreement (the "Agreement"), dated
November 20, 1996, among Salomon Brothers Mortgage Securities VII, Inc., a
Delaware corporation (the "Purchaser"), Long Beach Mortgage Company, a Delaware
corporation (the "Originator") and Salomon Brothers Realty Corp., a New York
corporation (the "Seller").
Preliminary Statement
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The Seller intends to sell the Mortgage Loans (as hereinafter defined)
to the Purchaser on the terms and subject to the conditions set forth in this
Agreement. The Mortgage Loans were purchased by the Seller from the Originator
pursuant to a certain Master Mortgage Loan Purchase and Servicing Agreement,
dated as of May 1, 1996 (the "Purchase and Servicing Agreement"), among the
Seller, as initial purchaser and the Originator, as seller and servicer. The
Purchaser intends to deposit the Mortgage Loans into a mortgage pool comprising
the trust fund. The trust fund will be evidenced by a single series of asset-
backed floating rate certificates designated as Series 1996-LB3, (the
"Certificates"). The Certificates will consist of four classes of certificates.
The Certificates will be issued pursuant to a Pooling and Servicing Agreement,
dated as of November 1, 1996 (the "Pooling and Servicing Agreement"), among the
Purchaser, as depositor, Norwest Bank Minnesota, National Association, as
trustee, and the Originator, as master servicer (in such capacity, the "Master
Servicer"). Capitalized terms used but not defined herein shall have the
meanings set forth in the Pooling and Servicing Agreement.
The parties hereto agree as follows:
SECTION 1. Agreement to Purchase. The Seller agrees to sell, and the
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Purchaser agrees to purchase, on or before November 25, 1996 (the "Closing
Date"), certain adjustable-rate conventional residential mortgage loans (the
"Mortgage Loans"), having an aggregate principal balance as of the close of
business on November 1, 1996 (the "Cut-off Date") of approximately $199,895,673
(the "Closing Balance"), after giving effect to all payments due on the Mortgage
Loans on or before the Cut-off Date, whether or not received.
SECTION 2. Mortgage Loan Schedule. The Purchaser and the Seller have
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agreed upon which of the mortgage loans owned by the Seller are to be purchased
by the Purchaser pursuant to this Agreement and the Seller will prepare or cause
to be prepared on or prior to the Closing Date a final schedule (the "Closing
Schedule") that together shall describe such Mortgage Loans and set forth all of
the Mortgage Loans to be purchased under this Agreement. The Closing Schedule
will conform to the requirements set forth in this Agreement and to the
definition of "Mortgage Loan Schedule" under the Pooling and Servicing
Agreement. The Closing Schedule shall be used as the Mortgage Loan Schedule
under the Pooling and Servicing Agreement.
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SECTION 3. Consideration.
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(a) In consideration for the Mortgage Loans to be purchased
hereunder, the Purchaser shall, as described in Section 8, pay to or upon the
order of the Seller in immediately available funds an amount (the "Purchase
Price") equal to approximately 106.644% times the Closing Balance, plus accrued
interest thereon from the Cut-off Date up to but not including the Closing Date.
(b) The Purchaser or any assignee, transferee or designee of the
Purchaser shall be entitled to all scheduled payments of principal due after the
Cut-off Date, all other payments of principal due and collected after the Cut-
off Date, and all payments of interest on the Mortgage Loans allocable to the
period after the Cut-off Date. All scheduled payments of principal and interest
due on or before the Cut-off Date and collected after the Cut-off Date shall
belong to the Seller.
(c) Pursuant to the Pooling and Servicing Agreement, the
Purchaser will assign all of its right, title and interest in and to the
Mortgage Loans, together with its rights under this Agreement, to the Trustee
for the benefit of the related Certificateholders.
SECTION 4. Transfer of the Mortgage Loans.
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(a) Possession of Mortgage Files. The Seller does hereby sell,
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transfer, assign, set over and convey to the Purchaser, without recourse but
subject to the terms of this Agreement, all of its right, title and interest in,
to and under the Mortgage Loans. The contents of each Mortgage File not
delivered to the Purchaser or to any assignee, transferee or designee of the
Purchaser on or prior to the Closing Date are and shall be held in trust by the
Seller for the benefit of the Purchaser or any assignee, transferee or designee
of the Purchaser. Upon the sale of the Mortgage Loans the ownership of each
Mortgage Note, the related Mortgage and the other contents of the related
Mortgage File is vested in the Purchaser and the ownership of all records and
documents with respect to the related Mortgage Loan prepared by or that come
into the possession of the Seller on or after the Closing Date shall immediately
vest in the Purchaser and shall be delivered immediately to the Purchaser or as
otherwise directed by the Purchaser.
(b) Delivery of Mortgage Loan Documents. The Seller will, on or
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prior to the Closing Date, deliver or cause to be delivered to the Purchaser or
any assignee, transferee or designee of the Purchaser each of the following
documents for each Mortgage Loan:
(i) the original Mortgage Note, endorsed in the following form: "Pay
to the order of Norwest Bank Minnesota, National Association, as Trustee
for the registered holders of Salomon Brothers Mortgage Securities VII,
Inc., Asset-Backed Floating Rate Certificates, Series 1996-LB3, without
recourse," with all prior and intervening endorsements showing a complete
chain of endorsement from the originator to the Person so endorsing to the
Trustee;
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(ii) the original Mortgage with evidence of recording thereon;
(iii) an original Assignment of Mortgage executed in the following
form: "Norwest Bank Minnesota, National Association, as Trustee for the
registered holders of Salomon Brothers Mortgage Securities VII, Inc.,
Asset-Backed Floating Rate Certificates, Series 1996-LB3";
(iv) the original recorded Assignment or Assignments of the Mortgage
showing a complete chain of assignment from the originator to the Person
assigning the Mortgage to the Trustee as contemplated by the immediately
preceding clause (iii);
(v) the original or copies of each assumption, modification,
written assurance or substitution agreement, if any; and
(vi) the original lender's title insurance policy, together with all
endorsements or riders which were 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.
Notwithstanding anything to the contrary contained in this Section 4,
if any document referred to in Section 4(b)(ii) or 4(b)(iv) above has been
submitted for recording but either (x) has not been returned from the applicable
public recording office or (y) has been lost or such public recording office has
retained the original of such document, the obligations of the Seller hereunder
shall be deemed to have been satisfied upon (1) delivery by or on behalf of the
Seller promptly upon receipt thereof to or on behalf of the Purchaser or any
assignee, transferee or designee of the Purchaser of either the original or a
copy of such document certified by the Originator 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
Originator delivery 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.
In the event that the original lender's title insurance policy has not
yet been issued, the Seller shall deliver to the Purchaser or any assignee,
transferee or designee of the Purchaser a written commitment or interim binder
or preliminary report of title issued by the title insurance or escrow company.
The Seller shall deliver to the Purchaser or any assignee, transferee or
designee of the Purchaser promptly upon receipt by the Seller of any such
original title insurance policy or original Primary Mortgage Insurance Policy.
(c) Acceptance of Mortgage Loans. The documents delivered
----------------------------
pursuant to Section 4(b) hereof shall be reviewed by the Purchaser or any
assignee, transferee or designee of the Purchaser at any time before or after
the Closing Date (and with respect to each document permitted to be delivered
after the Closing Date within seven days of its delivery) to ascertain that all
required documents have been executed and received and that such documents
relate to the Mortgage Loans identified on the Mortgage Loan Schedule.
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(d) Transfer of Interest in Agreements. The Purchaser has the
----------------------------------
right to assign its interest under this Agreement, in whole or in part, to the
Trustee, as may be required to effect the purposes of the Pooling and Servicing
Agreement, without the consent of the Seller or the Originator, and the assignee
shall succeed to the rights and obligations hereunder of the Purchaser. Any
expense reasonably incurred by or on behalf of the Purchaser or the Trustee in
connection with enforcing any obligations of the Seller or the Originator under
this Agreement will be promptly reimbursed by the Seller or the Originator, as
applicable.
(e) Examination of Mortgage Files. Prior to the Closing Date,
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the Seller shall either (i) deliver in escrow to the Purchaser or to any
assignee, transferee or designee of the Purchaser, for examination, the Mortgage
File pertaining to each Mortgage Loan, or (ii) make such Mortgage Files
available to the Purchaser or to any assignee, transferee or designee of the
Purchaser for examination. Such examination may be made by the Purchaser or the
Trustee, and their respective designees, upon reasonable notice to the Seller
during normal business hours before the Closing Date and within 60 days after
the Closing Date. If any such person makes such examination prior to the Closing
Date and identifies any Mortgage Loans that do not conform to the requirements
of the Purchaser as described in this Agreement, such Mortgage Loans shall be
deleted from the Closing Schedule. The Purchaser may, at its option and without
notice to the Seller, purchase all or part of the Mortgage Loans without
conducting any partial or complete examination. The fact that the Purchaser or
any person has conducted or has failed to conduct any partial or complete
examination of the Mortgage Files shall not affect the rights of the Purchaser
or any assignee, transferee or designee of the Purchaser to demand repurchase or
other relief as provided herein or under the Pooling and Servicing Agreement.
SECTION 5. Representations, Warranties and Covenants of the
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Seller and the Originator.
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(a) The Originator hereby represents and warrants to the Seller and
the Purchaser, as of the date hereof and as of the Closing Date, and covenants,
that:
(i) The Originator 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 Originator 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 the Pooling and Servicing Agreement;
(ii) The Originator 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 Originator the execution, delivery
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and performance of this Agreement; and this Agreement, assuming the due
authorization, execution and delivery thereof by the Purchaser, constitutes a
legal, valid and binding obligation of the Originator, enforceable against the
Originator 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;
(iii) The execution and delivery of this Agreement by the
Originator, the servicing of the Mortgage Loans by the Originator under the
Pooling and Servicing Agreement, 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 Originator and will
not (A) result in a breach of any term or provision of the charter or by-laws of
the Originator 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 Originator is a party or by which it may be
bound, or any statute, order or regulation applicable to the Originator of any
court, regulatory body, administrative agency or governmental body having
jurisdiction over the Originator; and the Originator 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 Originator's
knowledge, would in the future materially and adversely affect, (x) the ability
of the Originator to perform its obligations under this Agreement or (y) the
business, operations, financial condition, properties or assets of the
Originator taken as a whole;
(iv) No consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery and
performance by the Originator of, or compliance by the Originator with, this
Agreement or the consummation of the transactions contemplated hereby, or if any
such consent, approval, authorization or order is required, the Originator has
obtained the same;
(v) The Originator is an approved seller/servicer for FNMA or
FHLMC in good standing and is a HUD approved mortgagee pursuant to Section 203
of the National Housing Act; and
(vi) No litigation is pending against the Originator that would
materially and adversely affect the execution, delivery or enforceability of
this Agreement or the ability of the Originator to service the Mortgage Loans or
to perform any of its other obligations hereunder in accordance with the terms
hereof;
(b) The Seller hereby represents and warrants, as of the date hereof
and as of the Closing Date, and covenants, that:
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(i) The Seller is a corporation, duly organized and validly
existing and in good standing under the laws of the State of New York with full
corporate power and authority to conduct its business as presently conducted by
it to the extent material to the consummation of the transactions contemplated
herein. The Seller had the full corporate power and authority to acquire the
Mortgage Loans. The Seller has the full corporate power and authority to own the
Mortgage Loans and to transfer and convey the Mortgage Loans to the Purchaser
and has the full corporate power and authority to execute and deliver, engage in
the transactions contemplated by, and perform and observe the terms and
conditions of this Agreement;
(ii) This Agreement has been duly and validly authorized,
executed and delivered by the Seller, all requisite corporate action having been
taken, and (assuming the due authorization, execution and delivery hereof by the
Purchaser and the Originator) constitutes the valid, legal and binding
obligation of the Seller, enforceable in accordance with its terms, except as
such enforcement may be limited by (A) bankruptcy, insolvency, reorganization,
receivership, moratorium or other similar laws relating to or affecting the
rights of creditors generally, (B) general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or at law) or
(C) public policy considerations underlying the securities laws, to the extent
that such public policy considerations limit the enforceability of the
provisions of this Agreement which purport to provide indemnification from
securities laws liabilities;
(iii) No consent, approval, authorization or order of,
registration or filing with, or notice to any governmental authority or court is
required, under federal laws or the laws of the State of New York, for the
execution, delivery and performance by the Seller of, or compliance by the
Seller with, this Agreement or the consummation by the Seller of any other
transaction contemplated hereby and by the Pooling and Servicing Agreement;
provided, however, that the Seller makes no representation or warranty regarding
federal or state securities laws in connection with the sale or distribution of
the Certificates;
(iv) Neither the sale of the Mortgage Loans to the Purchaser,
nor the execution, delivery or performance of this Agreement by the Seller,
conflicts or will conflict with or results or will result in a breach of or
constitutes or will constitute a default (or an event, which with notice or
lapse of time or both, would constitute a default) under (A) any terms or
provisions of the certificate of incorporation or by-laws of the Seller, (B) any
term or provision of any material agreement, contract, instrument or indenture,
to which the Seller is a party or by which the Seller or any of its property is
bound, or (C) any law, rule, regulation, order, judgment, writ, injunction or
decree of any court or governmental authority having jurisdiction over the
Seller or any of its property, or results or will result in the creation or
imposition of any lien, charge or encumbrance which would have a material
adverse effect upon the Mortgage Loans or any documents or instruments
evidencing or securing the Mortgage Loans;
(v) The Seller has not dealt with any broker, investment
banker, agent or other person, except for the Purchaser or any of its
affiliates, that may be entitled to any commission or compensation in connection
with the sale of the Mortgage Loans;
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(vi) There is no litigation currently pending or, to the best
of the Seller's knowledge, threatened against the Seller that would reasonably
be expected to adversely affect the transfer of the Mortgage Loans, the issuance
of the Certificates, the execution, delivery, performance or enforceability of
this Agreement or that would result in a material adverse change in the
financial condition of the Seller;
(vii) Each Mortgage Note, each Mortgage, each Assignment and any
other document required to be delivered by or on behalf of the Seller under this
Agreement or the Pooling and Servicing Agreement to the Purchaser or any
assignee, transferee or designee of the Purchaser for each Mortgage Loan has
been or will be, in accordance with Section 4(b) hereof, delivered to the
Purchaser or any such assignee, transferee or designee. With respect to each
Mortgage Loan, the Seller is in possession of a complete Mortgage File in
compliance with the Pooling and Servicing Agreement, except for such documents
that (A) have been delivered (1) to the Purchaser or any assignee, transferee or
designee of the Purchaser or (2) for recording to the appropriate public
recording office and have not yet been returned or (B) are not required to be
delivered to the Purchaser or any assignee, transferee or designee of the
Purchaser until 90 days following the Closing Date or such later date as
provided in Section 4;
(viii) The transfer, assignment and conveyance of the Mortgage
Notes and the Mortgages by the Seller pursuant to this Agreement are not subject
to the bulk transfer or any similar statutory provisions in effect in any
relevant jurisdiction, except any as may have been complied with;
(ix) The Seller (A) is a solvent entity and is paying its debts
as they become due and (B) after giving effect to the transfer of the Mortgage
Loans, will be a solvent entity and will have sufficient resources to pay its
debts as they become due;
(x) The form of endorsement of each Mortgage Note satisfied
the requirement, if any, of endorsement in order to transfer all right, title
and interest of the party so endorsing, as noteholder or assignee thereof, in
and to that Mortgage Note; and each Assignment to be delivered hereunder is in
recordable form and is sufficient to effect the assignment of and to transfer to
the assignee thereunder the benefits of the assignor, as mortgagee or assignee
thereof, under each Mortgage to which that Assignment relates;
(xi) The transfer of the Mortgage Loans to the Purchaser at the
Closing Date will be treated by the Seller for financial accounting and
reporting purposes as a sale of assets; and
(xii) Immediately prior to the sale of the Mortgage Loans to the
Purchaser as herein contemplated, the Seller had good title to, and was the sole
owner of, the Mortgage Loans, and such sale validly transfers the Mortgage Loans
to the Purchaser free and clear of any pledge, lien, encumbrance or security
interest.
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SECTION 6. Representations and Warranties of the Originator
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Relating to the Mortgage Loans.
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(a) Representations and Warranties as to Individual Mortgage Loans. The
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Originator hereby represents and warrants to the Seller and the Purchaser, that
as to each Mortgage Loan as of the Closing Date:
(i) The information set forth on the related Mortgage Loan
Schedule with respect to each Mortgage Loan is true and correct in all material
respects;
(ii) Except as set forth on Exhibit 1, all payments due prior
to the Cut-off Date have been made and none of the Mortgage Loans will have been
contractually delinquent for more than one calendar month more than once since
the origination thereof;
(iii) 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;
(iv) Immediately prior to the assignment of the Mortgage Loans
to the Purchaser pursuant to the Purchase and Servicing Agreement, the
Originator 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;
(v) To the best of the Originator's knowledge, there is no
delinquent tax or assessment lien against any Mortgaged Property;
(vi) 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;
(vii) To the best of the Originator's knowledge, there are no
mechanics' liens or claims for work, labor or material affecting any Mortgaged
Property which are or may
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be a lien prior to, or equal with, the lien of the related Mortgage, except
those which are insured against by the title insurance policy referred to in
(xi) below;
(viii) To the best of the Originator's knowledge, each Mortgaged
Property is free of material damage and is in average repair;
(ix) 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;
(x) Neither the Originator 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 the Seller and the Purchaser
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;
(xi) A lender's policy of title insurance together with a
condominium endorsement and extended coverage endorsement, if applicable, and,
with respect to each Mortgage Loan, an adjustable rate mortgage endorsement in
an amount at least equal to the Cut-off Date Principal Balance of each such
Mortgage Loan 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
the Seller and Purchaser 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 Originator and successor owners of indebtedness secured by
the insured Mortgage, as to the first priority lien of the Mortgage; to the best
of the Originator's knowledge, no claims have been made under such mortgage
title insurance policy and no prior holder of the related Mortgage, including
the Originator, has done, by act or omission, anything which would impair the
coverage of such mortgage title insurance policy;
(xii) Each Mortgage Loan was originated by the Originator 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 and, if originated on behalf of the Originator by a Person other
than the Originator, is subject to the same standards and procedures used by the
Originator in originating mortgage loans directly;
(xiii) With respect to each Mortgage Loan on each Adjustment
Date, the
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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-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. All rate adjustments have been performed in accordance
with the terms of the related Mortgage Note or subsequent modifications, if any.
(xiv) To the best of the Originator'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;
(xv) 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;
(xvi) 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
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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 the Purchaser to the trustee
under the deed of trust, except in connection with a trustee's sale after
default by the Mortgagor;
(xxi) Each Mortgage Note and each Mortgage is in
substantially one of the forms attached hereto as Exhibit 2;
(xxii) 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 Originator have been capitalized under the
Mortgage or the related Mortgage Note;
(xxiii) The origination, underwriting and collection practices
used by the Originator with respect to each Mortgage Loan have been in all
respects legal, proper, prudent and customary in the mortgage servicing
business;
(xxiv) There is no pledged account or other security other
than real estate securing the Mortgagor's obligations;
(xxv) No Mortgage Loan has a shared appreciation feature, or
other contingent interest feature;
(xxvi) No Mortgage Loan provides for primary mortgage
insurance;
(xxvii) 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 (xxviii) below
contain a standard mortgagee clause naming the Originator or the original
mortgagee, and its successors in interest, as mortgagee, and the Originator 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;
(xxviii) 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
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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;
(xxix) There is no default, breach, violation or event of
acceleration existing under the Mortgage or the related Mortgage Note; and the
Originator has not waived any default, breach, violation or event of
acceleration;
(xxx) 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 Originator's knowledge,
does not include cooperatives or mobile homes and does not constitute other than
real property under state law;
(xxxi) There is no obligation on the part of the Originator 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;
(xxxii) Any future advances made prior to the Cut-off 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;
(xxxiii) Each Mortgage Loan was underwritten in accordance with
the Originator's underwriting guidelines as described in the Prospectus
Supplement;
(xxxiv) 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;
(xxxv) None of the Mortgage Loans is a graduated payment
mortgage loan, nor is any Mortgage Loan subject to a temporary buydown or
similar arrangement;
(xxxvi) 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 Originator at the time of origination of such
Mortgage Loan;
(xxxvii) The characteristics of the Mortgage Loans as set forth
on Exhibit 1 hereto are true and correct in all material respects;
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(xxxviii) 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;
(xxxix) The Originator has not advanced funds, or induced,
solicited or knowingly received any advance of funds by a party other than the
mortgagor, directly or indirectly, for the payment of any amount required under
the mortgage loan; and
(xl) There is no proceeding pending, or to best of the
Originator's knowledge threatened, for the total or partial condemnation of the
Mortgaged Property or the taking by eminent domain of any Mortgaged Property.
SECTION 7. Repurchase Obligation for Defective Documentation and
-----------------------------------------------------
for Breach of Representation and Warranty.
-----------------------------------------
(a) The representations and warranties contained in Section 6 shall
not be impaired by any review and examination of loan files or other documents
evidencing or relating to the Mortgage Loans or any failure on the part of the
Seller or the Purchaser to review or examine such documents and shall inure to
the benefit of any assignee, transferee or designee of the Purchaser, including
the Trustee for the benefit of holders of asset-backed floating rate
certificates evidencing an interest in all or a portion of the Mortgage Loans.
With respect to the representations and warranties contained herein which are
made to the knowledge or the best of knowledge of the Originator or the Seller,
as the case may be, or as to which the Originator or the Seller, as the case may
be, has no knowledge, if it is discovered that the substance of any such
representation and warranty was inaccurate as of the date such representation
and warranty was made or deemed to be made, and such inaccuracy materially and
adversely affects the value of the related Mortgage Loan or the interest therein
of the Purchaser or the Purchaser's assignee, transferee or designee, then
notwithstanding the lack of knowledge by the Originator or the Seller, as the
case may be, with respect to the substance of such representation and warranty
being inaccurate at the time the representation and warranty was made, the
Originator or the Seller, as the case may be, shall take such action described
in the following paragraph in respect of such Mortgage Loan.
-14-
Upon discovery by the Originator, the Seller, the Purchaser or any
assignee, transferee or designee of the Purchaser of any materially defective
document in, or that any material document was not transferred by the Seller,
and not transferred by the Originator to the Seller (as listed on the Trustee's
Preliminary Exception Report), as part of, any Mortgage File or of a breach of
any of the representations and warranties contained in Section 6 that materially
and adversely affects the value of any Mortgage Loan or the interest therein of
the Purchaser or the Purchaser's assignee, transferee or designee, the party
discovering the breach shall give prompt written notice to the others. Within
ninety (90) days of its discovery or its receipt of notice of any such missing
documentation which was not transferred to the Seller as described above or
materially defective documentation or any such breach of a representation and
warranty the Originator promptly shall deliver such missing document or cure
such defect or breach in all material respects, or in the event the Originator
cannot deliver such missing document or such defect or breach cannot be cured,
the Originator shall, within 90 days of its discovery or receipt of notice,
either (i) repurchase the affected Mortgage Loan at the Purchase Price (as such
term is defined in the Pooling and Servicing Agreement) or (ii) pursuant to the
provisions of the Pooling and Servicing Agreement, cause the removal of such
Mortgage Loan from the Trust Fund and substitute one or more Qualified
Substitute Mortgage Loans. With respect to Mortgage Loans where the Mortgage
File is missing a material document that was transferred from the Originator to
the Seller, within ninety (90) days of its discovery or its receipt of notice of
any such missing document the Seller promptly shall deliver such missing
document or in the event the Seller cannot deliver such missing document, the
Seller shall, within 90 days of its discovery or receipt of notice, either (i)
repurchase the affected Mortgage Loan at the Purchase Price (as such term is
defined in the Pooling and Servicing Agreement) or (ii) pursuant to the
provisions of the Pooling and Servicing Agreement, cause the removal of such
Mortgage Loan from the Trust Fund and substitute one or more Qualified
Substitute Mortgage Loans. The Originator or the Seller, as the case may be,
shall amend the Closing Schedule to reflect the withdrawal of such Mortgage Loan
from the terms of this Agreement and the Pooling and Servicing Agreement and the
addition, if any, of a Qualified Substitute Mortgage Loan. The Originator or the
Seller, as the case may be, shall deliver to the Purchaser such amended Closing
Schedule and shall deliver such other documents as are required by this
Agreement or the Pooling and Servicing Agreement within five (5) days of any
such amendment. Any repurchase pursuant to this Section 7(a) shall be
accomplished by deposit in the Collection Account of the amount of the Purchase
Price in accordance with Section 2.03 of the Pooling and Servicing Agreement.
Any repurchase or substitution required by this Section shall be made in a
manner consistent with Section 2.03 of the Pooling and Servicing Agreement.
(b) It is understood and agreed that the obligations of the
Originator or the Seller, as the case may be, set forth in this Section 7 to
cure, repurchase or substitute for a defective Mortgage Loan constitute the sole
remedies of the Seller and the Purchaser against the Originator respecting a
missing or defective document or a breach of the representations and warranties
contained in Section 6. It is understood and agreed that the obligations of the
Seller set forth in this Section 7 to repurchase or substitute for a Mortgage
Loan as to which a material document is missing constitute the sole remedies of
the Purchaser against the Seller respecting a missing document.
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SECTION 8. Closing; Payment for the Mortgage Loans. The closing of
---------------------------------------
the purchase and sale of the Mortgage Loans shall be held at the New York City
office of Thacher Proffitt & Wood at 10:00 AM New York City time on the Closing
Date.
The closing shall be subject to each of the following conditions:
(a) All of the representations and warranties of the Seller under
this Agreement shall be true and correct in all material respects
as of the date as of which they are made and no event shall have
occurred which, with notice or the passage of time, would
constitute a default under this Agreement;
(b) All of the representations and warranties of the Originator under
this Agreement shall be true and correct in all material respects
as of the date as of which they are made and no event shall have
occurred which, with notice or the passage of time, would
constitute a default under this Agreement;
(c) The Purchaser shall have received, or the attorneys of the
Purchaser shall have received in escrow (to be released from
escrow at the time of closing), all Closing Documents as
specified in Section 9 of this Agreement, in such forms as are
agreed upon and acceptable to the Purchaser, duly executed by all
signatories other than the Purchaser as required pursuant to the
respective terms thereof;
(d) The Seller shall have delivered or caused to be delivered and
released to the Purchaser or to its designee, all documents
(including without limitation, the Mortgage Loans) required to be
so delivered by the Purchaser pursuant to Section 2.01 of the
Pooling and Servicing Agreement; and
(e) All other terms and conditions of this Agreement shall have been
complied with.
Subject to the foregoing conditions, the Purchaser shall deliver or
cause to be delivered to the Seller on the Closing Date, against delivery and
release by the Seller to the Trustee of all documents required pursuant to the
Pooling and Servicing Agreement, the consideration for the Mortgage Loans as
specified in Section 3 of this Agreement, by delivery to the Seller of the
Purchase Price in immediately available funds.
SECTION 9. Closing Documents. Without limiting the generality of
-----------------
Section 8 hereof, the closing shall be subject to delivery of each of the
following documents:
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(a) An Officers' Certificate of the Seller, dated the Closing
Date, upon which the Originator, the Purchaser, Financial
Security Assurance Inc. ("FSA") and Salomon Brothers Inc
(the "Underwriter") may rely, in the form of Exhibit 3
hereto, and attached thereto copies of the certificate of
incorporation, by-laws and certificate of good standing of
the Seller under the laws of New York;
(b) An Officers' Certificate of the Seller, dated the Closing
Date, upon which the Purchaser, FSA and the Underwriter may
rely, in the form of Exhibit 4 hereto, with respect to
certain facts regarding the sale of the Mortgage Loans by
the Seller to the Purchaser;
(c) An Opinion of Counsel of the Seller, dated the Closing Date
and addressed to the Originator, the Purchaser, FSA and the
Underwriter, substantially in the form attached hereto as
Exhibit 5;
(d) An Officer's Certificate of the Originator, dated the
Closing Date, upon which the Seller, the Purchaser, FSA and
the Underwriter may rely, in the form of Exhibit 6 hereto,
and attached thereto copies of the certificate of
incorporation, by-laws and certificate of good standing of
the Originator under the laws of Delaware;
(e) An opinion of Counsel of the Originator, dated the Closing
Date and addressed to the Seller, the Purchaser, FSA and the
Underwriter, substantially in the form attached hereto as
Exhibit 7;
(f) Such opinions of counsel as the Rating Agencies or the
Trustee may request in connection with the sale of the
Mortgage Loans by the Seller to the Purchaser or the
Seller's execution and delivery of, or performance under,
this Agreement;
(g) A letter from Deloitte & Touche L.L.P., certified public
accountants, dated the date hereof and to the effect that
they have performed certain specified procedures as a result
of which they determined that certain information of an
accounting, financial or statistical nature set forth in the
Purchaser's Prospectus Supplement, dated November 20, 1996
in the Summary under the subheading "The Mortgage Pool" and
under the captions "The Mortgage Pool" and "Pooling and
Servicing Agreement -- The Originator and Master Servicer"
agrees with the records of the Originator;
(h) The Originator shall deliver to the Seller for inclusion in
the Prospectus Supplement for Salomon Brothers Mortgage
Securities
-17-
VII, Inc., Asset-Backed Floating Rate Certificates, Series
1996-LB3, under the captions "The Mortgage Pool --
Underwriting Standards; Representations" and "Pooling and
Servicing Agreement -- The Originator and Master Servicer" ,
or for inclusion in other offering material such publicly
available information regarding the Originator, its
financial condition and its mortgage loan delinquency,
foreclosure and loss experience, underwriting standards,
lending activities and loan sales, production, and servicing
and collection practices, and any similar nonpublic,
unaudited financial information;
(i) A letter from Deloitte & Touche L.L.P., certified public
accountants, dated the date hereof and to the effect that
they have performed certain specified procedures as a result
of which they determined that certain information of an
accounting, financial or statistical nature set forth in the
Purchaser's Prospectus Supplement, dated November 20, 1996
under the captions "Summary of Prospectus Supplement",
"Yield on the Certificates" and "Description of the
Certificates" agrees with the records of the Seller; and
(j) Such further information, certificates, opinions and
documents as the Purchaser or the Underwriter may reasonably
request.
SECTION 10. Costs. The Originator shall pay (or shall reimburse the
-----
Purchaser or any other Person to the extent that the Purchaser or such other
Person shall pay) all costs and expenses incurred in connection with the
transfer and delivery of the Mortgage Loans, including without limitation,
recording fees, fees for title policy endorsements and continuations and the
fees for recording Assignments of Mortgage, the fees and expenses of the
Originator's in-house accountants and in-house attorneys, the costs and expenses
incurred in connection with producing the Originator's loan loss, foreclosure
and delinquency experience, and the costs and expenses incurred in connection
with obtaining the documents referred to in Sections 9(d) and 9(e). The Seller
shall pay (or shall reimburse the Purchaser or any other Person to the extent
that the Purchaser or such other Person shall pay) the costs and expenses of
printing (or otherwise reproducing) and delivering this Agreement, the Pooling
and Servicing Agreement, the Certificates, the prospectus, prospectus
supplement, and private placement memorandum relating to the Certificates, the
Insurance Agreement and other related documents, the initial fees, costs and
expenses of the Trustee, the initial fees, costs and expenses of FSA, the fees
and expenses of the Seller's counsel in connection with the preparation of all
documents relating to the securitization of the Mortgage Loans, the filing fee
charged by the Securities and Exchange Commission for registration of the
Certificates, the cost of outside special counsel that may be required for the
Originator, the cost of obtaining the documents referred to in Section 9(g) and
the fees charged by any rating agency to rate the Certificates. All other costs
and expenses in connection with the transactions contemplated hereunder shall be
borne by the party incurring
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such expense.
SECTION 11. Servicing. The Seller has represented to the Purchaser
---------
that the Mortgage Loans are being serviced under the Purchase and Servicing
Agreement with the Originator, and it is understood and agreed by and among the
Seller, the Originator and the Purchaser that the interim servicing arrangements
under the Purchase and Servicing Agreement with the Originator will be
superseded by the servicing arrangements set forth in the Pooling and Servicing
Agreement.
SECTION 12. Mandatory Delivery; Grant of Security Interest. The sale
----------------------------------------------
and delivery on the Closing Date of the Mortgage Loans described on the Mortgage
Loan Schedule in accordance with the terms and conditions of this Agreement is
mandatory. It is specifically understood and agreed that each Mortgage Loan is
unique and identifiable on the date hereof and that an award of money damages
would be insufficient to compensate the Purchaser for the losses and damages
incurred by the Purchaser in the event of the Seller's failure to deliver the
Mortgage Loans on or before the Closing Date. The Seller hereby grants to the
Purchaser a lien on and a continuing security interest in the Seller's interest
in each Mortgage Loan and each document and instrument evidencing each such
Mortgage Loan to secure the performance by the Seller of its obligation
hereunder, and the Seller agrees that it holds such Mortgage Loans in custody
for the Purchaser, subject to the Purchaser's (i) right, prior to the Closing
Date, to reject any Mortgage Loan to the extent permitted by this Agreement, and
(ii) obligation to deliver or cause to be delivered the consideration for the
Mortgage Loans pursuant to Section 8 hereof. Any Mortgage Loans rejected by the
Purchaser shall concurrently therewith be released from the security interest
created hereby. All rights and remedies of the Purchaser under this Agreement
are distinct from, and cumulative with, any other rights or remedies under this
Agreement or afforded by law or equity and all such rights and remedies may be
exercised concurrently, independently or successively.
Notwithstanding the foregoing, if on the Closing Date, each of the
conditions set forth in Section 8 hereof shall have been satisfied and the
Purchaser shall not have paid or caused to be paid the Purchase Price, or any
such condition shall not have been waived or satisfied and the Purchaser
determines not to pay or cause to be paid the Purchase Price, the Purchaser
shall immediately effect the redelivery of the Mortgage Loans, if delivery to
the Purchaser has occurred and the security interest created by this Section 12
shall be deemed to have been released.
SECTION 13. Notices. All demands, notices and communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered to or mailed by registered mail, postage prepaid, or
transmitted by telex or telegraph and confirmed by a similar mailed writing, if
to the Purchaser, addressed to the Purchaser at Seven World Trade Center, New
York, New York 10048, Attention: Mortgage Finance Group, or such other address
as may hereafter be furnished to the Seller and the Originator in writing by the
Purchaser; if to the Seller, addressed to the Seller at Seven World Trade
Center, New York, New York 10048, Attention: Mortgage Finance Group, or to such
other address as the Seller may
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designate in writing to the Purchaser and the Originator; and if to the
Originator, addressed to the Originator at 1100 Town and Country Road, Orange,
California 92668, Attention: Del Dillingham, Esq., or to such other address as
the Originator may designate in writing to the Purchaser and the Seller.
SECTION 14. Severability of Provisions. Any part, provision,
--------------------------
representation or warranty of this 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 Agreement which
is prohibited or unenforceable or is held to be void or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction as to any Mortgage Loan shall not invalidate or render
unenforceable such provision in any other jurisdiction. 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.
SECTION 15. Agreement of Parties. The Originator, the Seller and the
--------------------
Purchaser each agree to execute and deliver such instruments and take such
actions as either of the others may, from time to time, reasonably request in
order to effectuate the purpose and to carry out the terms of this Agreement and
the Pooling and Servicing Agreement.
SECTION 16. Survival. (a) The Seller agrees that the representations,
--------
warranties and agreements made by it herein and in any certificate or other
instrument delivered pursuant hereto shall be deemed to be relied upon by the
Purchaser, notwithstanding any investigation heretofore or hereafter made by the
Purchaser or on its behalf, and that the representations, warranties and
agreements made by the Seller herein or in any such certificate or other
instrument shall survive the delivery of and payment for the Mortgage Loans and
shall continue in full force and effect, notwithstanding any restrictive or
qualified endorsement on the Mortgage Notes and notwithstanding subsequent
termination of this Agreement, the Pooling and Servicing Agreement or the Trust
Fund.
(b) The Originator agrees that the representations, warranties and
agreements made by it herein and in any certificate or other instrument
delivered pursuant hereto shall be deemed to be relied upon by the Seller and
the Purchaser, notwithstanding any investigation heretofore or hereafter made by
the Seller or the Purchaser or on the behalf of either, and that the
representations, warranties and agreements made by the Originator herein or in
any such certificate shall continue in full force and effect, notwithstanding
subsequent termination of this Agreement, the Pooling and Servicing Agreement or
the Trust Fund.
SECTION 17. Indemnification. (a) The Originator will indemnify and
----------
hold harmless the Purchaser and each person, if any, who controls the Purchaser
within the meaning of the Securities Act of 1933, as amended (the "1933 Act"),
against any losses, claims, damages or liabilities to which such Purchaser or
such controlling person may become subject,
-20-
under the 1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Prospectus Supplement dated November 20, 1996 (the "Prospectus Supplement"),
as amended or supplemented, relating to the public offering of the Certificates,
representing interests in the Mortgage Loans, or in any other offering document
(the "Private Placement Memorandum") relating to the offering by the Purchaser
or an affiliate thereof, of the Class B Certificates, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading to the
extent that such untrue statement or alleged untrue statement or omission or
alleged omission relates to information set forth in the Prospectus Supplement
on the front cover in the fifth paragraph, in the Summary under the subheadings
"Originator," "Master Servicer" and "The Mortgage Pool" and under the captions
"The Mortgage Pool --General", "-- Underwriting Standards; Representations" and
"Pooling and Servicing Agreement -- The Originator and Master Servicer" (and
substantially identical information approved by the Originator set forth in the
Private Placement Memorandum relating to the Class B Certificates)
(collectively, the "Originator Information") and will reimburse the Purchaser
and each such controlling person for any legal or other expenses reasonably
incurred by such Purchaser and each such controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action.
The Originator's liability under this Section 17 shall be in addition to any
other liability the Originator may otherwise have.
(b) The Purchaser agrees to indemnify and hold harmless the
Originator, its officers and its directors, and each person who controls the
Seller within the meaning of either the 1933 Act or the 1934 Act against any and
all losses, claims, damages or liabilities, joint or several, to which they may
become subject under the 1933 Act, the 1934 Act, or other federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based in whole or in part upon any untrue statement or alleged untrue
statement of a material fact contained in the Prospectus Supplement, the
Prospectus or Private Placement Memorandum, or in any revision or amendment
thereof or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
in which they were made, not misleading, as of the date thereof and as of the
Closing Date, except insofar as such losses, claims, damages or liabilities are
caused by any untrue statement or omission or alleged untrue statement or
omission made therein in reliance upon and in conformity with the Originator
Information and will reimburse the Originator and each such controlling person
for any legal or other expenses reasonably incurred by such Originator and each
such controlling person in connection with investigating or defending any such
loss, claim, damage, liability or action. The Purchaser's liability under this
Section 17 shall be in addition to any other liability the Purchaser may
otherwise have.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to either
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Section 17(a) or 17(b) above, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the reasonable
fees and disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the reasonable fees and expenses of such counsel shall be at the
expense of such indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel or
(ii) the named parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm for all such indemnified parties. Such
firm shall be designated in writing by the Purchaser, in the case of parties
indemnified pursuant to clause 17(a) and by the Originator, in the case of
parties indemnified pursuant to clause 17(b). The indemnifying party may, at its
option, at any time upon written notice to the indemnified party, assume the
defense of any proceeding and may designate counsel satisfactory to the
indemnified party in connection therewith provided that the counsel so
designated would have no actual or potential conflict of interest in connection
with such representation. Unless it shall assume the defense of any proceeding,
the indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. If the indemnifying party assumes the defense of
any proceeding, it shall be entitled to settle such proceeding with the consent
of the indemnified party or, if such settlement provides for release of the
indemnified party in connection with all matters relating to the proceeding
which have been asserted against the indemnified party in such proceeding by the
other parties to such settlement, without the consent of the indemnified party.
(d) If the indemnification provided for in this Section 17 is
unavailable to an indemnified party under Section 17(a) or 17(b) hereof or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities, in
such proportion as is appropriate to reflect the relative fault of the
indemnified and indemnifying parties in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of the
indemnified and indemnifying parties shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by such parties and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
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(e) The Purchaser and the Originator agree that it would not be just
and equitable if contribution pursuant to Section 17 were determined by pro
rata allocation or by any other method of allocation which does not take
account of the considerations referred to in Section 17(d) above. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in this Section 17 shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim, except where the
indemnified party is required to bear such expenses pursuant to this
Section 17, which expenses the indemnifying party shall pay as and when
incurred, at the request of the indemnified party, to the extent that the
indemnifying party will be ultimately obligated to pay such expenses. In
the event that any expenses so paid by the indemnifying party are
subsequently determined to not be required to be borne by the indemnifying
party hereunder, the party which received such payment shall promptly
refund the amount so paid to the party which made such payment. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
(f) The indemnity and contribution agreements contained in this
Section 17 shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by the Purchaser
or any person controlling the Purchaser or by or on behalf of the Originator and
their respective directors or officers or any person controlling the Originator,
and (iii) acceptance of and payment for any of the Certificates.
SECTION 18. GOVERNING LAW
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THIS AGREEMENT AND THE RIGHTS, DUTIES, OBLIGATIONS AND
RESPONSIBILITIES OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS (INCLUDING THE CHOICE OF LAW PROVISIONS) AND DECISIONS
OF THE STATE OF NEW YORK. THE PARTIES HERETO INTEND THAT THE PROVISIONS OF
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW SHALL APPLY TO THIS
AGREEMENT.
SECTION 19. Miscellaneous. This Agreement may be executed in two or
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more counterparts, each of which when so executed and delivered shall be an
original, but all of which together shall constitute one and the same
instrument. This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns. This Agreement
supersedes all prior agreements and understandings relating to the subject
matter hereof. Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought. The headings in this Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
It is the express intent of the parties hereto that the conveyance of the
Mortgage Loans by the Seller to the Purchaser as provided in Section 4 hereof
be, and be construed as, a
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sale of the Mortgage Loans by the Seller to the Purchaser and not as a pledge of
the Mortgage Loans by the Seller to the Purchaser to secure a debt or other
obligation of the Seller. However, in the event that, notwithstanding the
aforementioned intent of the parties, the Mortgage Loans are held to be property
of the Seller, then, (a) it is the express intent of the parties that such
conveyance be deemed a pledge of the Mortgage Loans by the Seller to the
Purchaser to secure a debt or other obligation of the Seller and (b) (1) this
Agreement shall also be deemed to be a security agreement within the meaning of
Articles 8 and 9 of the New York Uniform Commercial Code; (2) the conveyance
provided for in Section 4 hereof shall be deemed to be a grant by the Seller to
the Purchaser of a security interest in all of the Seller's right, title and
interest in and to the Mortgage Loans and all amounts payable to the holders of
the Mortgage Loans in accordance with the terms thereof and all proceeds of the
conversion, voluntary or involuntary, of the foregoing into cash, instruments,
securities or other property, including without limitation all amounts, other
than investment earnings, from time to time held or invested in the Collection
Account whether in the form of cash, instruments, securities or other property;
(3) the possession by the Purchaser or its agent of Mortgage Notes, the related
Mortgages and such other items of property that constitute instruments, money,
negotiable documents or chattel paper shall be deemed to be "possession by the
secured party" for purposes of perfecting the security interest pursuant to
Section 9-305 of the New York Uniform Commercial Code; and (4) notifications to
persons holding such property, and acknowledgments, receipts or confirmations
from persons holding such property, shall be deemed notifications to, or
acknowledgments, receipts or confirmations from, financial intermediaries,
bailees or agents (as applicable) of the Purchaser for the purpose of perfecting
such security interest under applicable law. Any assignment of the interest of
the Purchaser pursuant to Section 4(d) hereof shall also be deemed to be an
assignment of any security interest created hereby. The Seller and the Purchaser
shall, to the extent consistent with this Agreement, take such actions as may be
necessary to ensure that, if this Agreement were deemed to create a security
interest in the Mortgage Loans, such security interest would be deemed to be a
perfected security interest of first priority under applicable law and will be
maintained as such throughout the term of this Agreement and the Pooling and
Servicing Agreement.
IN WITNESS WHEREOF, the Purchaser, the Seller and the Originator have
caused their names to be signed by their respective officers thereunto duly
authorized as of the date first above written.
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
By:____________________________________________
Name: Susan S. Woodbury
Title:Assistant Vice President
SALOMON BROTHERS REALTY CORP.
By:_____________________________________________
Name: Susan S. Woodbury
Title: Authorized Agent
LONG BEACH MORTGAGE COMPANY
By:______________________________________________
Name: Jeffery A Sorensen
Title:Vice President