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EXHIBIT 10.5
FORM OF CONTRIBUTION AGREEMENT
This Contribution Agreement (this "Agreement") is entered into on April
___, 1997 by and among Ameriquest Capital Corporation, a Delaware corporation
("Old Long Beach Holdings"), Long Beach Mortgage Company, a Delaware corporation
and a wholly-owned subsidiary of Old Long Beach Holdings to be renamed
Ameriquest Mortgage Company as contemplated herein ("Old Long Beach"), Long
Beach Financial Corporation, a Delaware corporation ("LBFC"), and Ameriquest
Mortgage Corporation, a Delaware corporation and a wholly-owned subsidiary of
LBFC to be renamed Long Beach Mortgage Company as contemplated herein ("New Long
Beach"). LBFC and New Long Beach are sometimes hereinafter referred to
collectively as the "Company."
RECITALS
A. Old Long Beach's business operations currently include wholesale and
retail mortgage lending and loan servicing activities and other business
activities. LBFC, which is a wholly-owned subsidiary of Old Long Beach,
currently does not conduct, and in the past has not conducted, any business
operations.
B. Old Long Beach is reorganizing its business operations (the
"Reorganization") by transferring to LBFC assets and personnel related to Old
Long Beach's broker-sourced mortgage lending and loan sales operations (the
"Wholesale Lending Business") in exchange for shares of the common stock of
LBFC. Immediately following such transfer, LBFC will transfer substantially all
of the assets and personnel received from Old Long Beach to New Long Beach.
C. LBFC has filed a registration statement on Form S-1 (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended, pursuant to which Old Long
Beach intends to sell to the public the common stock of LBFC that it will
receive in the Reorganization.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the mutual
covenants and conditions contained herein, the parties agree as follows:
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ARTICLE I
CONTRIBUTION OF ASSETS
1.1 TRANSFER OF ASSETS. Effective as of the Effective Time (as defined
in Section 1.7 below):
(a) Transfer of Tangible Assets. Old Long Beach hereby sells,
conveys, transfers, assigns and grants to LBFC all of Old Long Beach's legal,
beneficial and other right, title and interest in and to the furniture, fixtures
and equipment, computer equipment, office supplies, maintenance supplies and
other fixed assets and similar items and the books, records, materials and other
assets described on Schedule 1.1(a)(i) (collectively, the "Transferred Tangible
Assets"). The books, records and other materials and information not used
exclusively by the Wholesale Lending Business as described on Schedule
1.1(a)(ii) (the "Shared Information") shall be provided to LBFC in the form of
copies thereof and LBFC shall have the perpetual, royalty-free and non-exclusive
right to use all such information in any form or medium. LBFC hereby assumes and
agrees to perform and pay when due all liabilities and obligations of Old Long
Beach that relate to the Transferred Tangible Assets to the extent such
obligations or duties are applicable to and accrue with respect to, or are to be
performed in, periods after the Effective Time. Except as set forth in Section
3.2, the Transferred Tangible Assets are hereby transferred to LBFC as is, where
is, without any representation or warranty by Xxx Xxxx Xxxxx xxx Xxx Xxxx Xxxxx
specifically disclaims any and all express and implied warranties with respect
to the Transferred Tangible Assets, including without limitation the implied
warranties of merchantability and fitness for a particular purpose;
(b) Transfer of Real Property Leases. Old Long Beach hereby
sells, conveys, transfers, assigns and grants to LBFC all of Old Long Beach's
legal, beneficial and other right, title and interest in and to those certain
real property leases listed on Schedule 1.1(b) (the "Transferred Real Property
Leases"), and LBFC hereby assumes and agrees to observe, perform, discharge and
be bound by the terms and conditions thereof to the extent such obligations or
duties are applicable to and accrue with respect to, or are to be performed in,
periods after the Effective Time. Except as set forth in Section 3.2, the
Transferred Real Property Leases are hereby transferred to LBFC without any
representation or warranty by Xxx Xxxx Xxxxx xxx Xxx Xxxx Xxxxx specifically
disclaims any and all express and implied warranties with respect to the
Transferred Real Property Leases, including without limitation the implied
warranties of merchantability and fitness for a particular purpose. On or prior
to the Effective Time, Old Long Beach shall arrange for, and the Company shall
execute, a new lease for the 9th Floor of 1100 Town & Country Road, Orange,
California on substantially similar economic terms as the lease for such space
by Old Long Beach. Any expansion/future space lease rights included in any Old
Long Beach lease at 0000 Xxxx & Xxxxxxx Xxxx, Xxxxxx, Xxxxxxxxxx, are expressly
retained by Old Long Beach. Any expansion/future space lease rights included in
any lease of the Company at 0000 Xxxx & Xxxxxxx Xxxx, Xxxxxx, Xxxxxxxxxx, are
expressly retained by the Company;
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(c) Transfer of Certain Contracts. Old Long Beach hereby
sells, conveys, transfers, assigns and grants to LBFC all of Old Long Beach's
legal, beneficial and other right, title and interest in and to those certain
contracts, leases and agreements listed on Schedule 1.1(c) (the "Transferred
Contracts"), and LBFC hereby assumes and agrees to observe, perform, discharge
and be bound by the terms and conditions thereof to the extent such obligations
or duties are applicable to and accrue with respect to, or are to be performed
in, periods after the Effective Time. Except as set forth in Section 3.2, the
Transferred Contracts (and any related assets) are hereby transferred to LBFC
without any representation or warranty by Xxx Xxxx Xxxxx xxx Xxx Xxxx Xxxxx
specifically disclaims any and all express and implied warranties with respect
to the Transferred Contracts, including without limitation the implied
warranties of merchantability and fitness for a particular purpose.;
(d) Transfer of Pipeline Loans. Old Long Beach hereby sells,
conveys, transfers, assigns and grants to LBFC all of Old Long Beach's legal,
beneficial and other right, title and interest in the unfunded loans and loans
in process at the Wholesale Lending Business at the Effective Time (the
"Pipeline Loans"). The Company agrees to process the Pipeline Loans in
compliance with the policies and procedures of the Wholesale Lending Business
and further agrees to fund all such loans in accordance with its current
practices and as required by applicable law. [Loans which were funded by the
Wholesale Lending Business prior to the Effective Time, but which are unfunded
after the Effective Time, shall be included within the definition of Pipeline
Loans and Old Long Beach shall receive the proceeds of such unfunding]; and
(e) Transfer of Intangible Assets. Old Long Beach hereby
sells, conveys, transfers, assigns and grants to LBFC all of Old Long Beach's
legal, beneficial and other right, title and interest in and to the following
assets:
(i) All information regarding the approved
independent mortgage brokers with whom the Wholesale Lending Business does
business;
(ii) All trade names, trademarks and service marks
(in any such case, whether registered or to be registered in the United States
of America or elsewhere and including any derivations thereof) applied for,
issued to or owned by Old Long Beach for the name "Long Beach Mortgage Company,"
including without limitation the stylized "seagull" logo and all related
goodwill;
(iii) All goodwill and going concern value
attributable to the Wholesale Lending Business; and
(iv) All prepaid charges and expenses relating to the
Wholesale Lending Business as described on Schedule 1.1(e)(iv);
(collectively, the "Transferred Intangible Assets"). The Transferred Intangible
Assets are hereby transferred to LBFC without any express or implied
representation or warranty of any kind by Old Long Beach.
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The Transferred Tangible Assets, the Transferred Real Property
Leases, the Transferred Contracts, the Pipeline Loans and the Transferred
Intangible Assets are hereinafter referred to as the "Wholesale Lending Assets".
1.2 CASH CONTRIBUTION. At the Effective Time, Old Long Beach shall
contribute to LBFC the sum of Forty Million Dollars ($40,000,000) less (i) the
amount of cash previously contributed to and retained by LBFC or New Long Beach
and (ii) $1,500,000 for the costs, fees and expenses incurred by Old Long Beach
in connection with the Reorganization, which fees and expenses Old Long Beach
agrees to pay. All costs of the Reorganization and the public offering of the
Shares shall be paid by Old Long Beach.
1.3 ISSUANCE OF SHARES. At the Effective Time, as consideration for the
transfers and cash contribution described above, LBFC shall issue to Old Long
Beach Twenty Four Million Nine Hundred Ninety Nine Thousand Nine Hundred Ninety
Nine (24,999,999) newly issued shares of LBFC's common stock (the "Shares").
1.4 EXCLUDED ASSETS. Any and all businesses, properties, assets and
other rights and liabilities of Old Long Beach of whatever kind and nature, real
or personal, tangible or intangible, existing or contingent, liquidated or
unliquidated, that are not specifically transferred pursuant to the terms of
this Agreement shall be retained by Old Long Beach.
1.5 EMPLOYEES.
(a) Employment of Employees by the Company. As of the
Effective Time, each of the employees identified on Schedule 1.5(a) who are
employed by Old Long Beach at the Effective Time shall become employees of the
Company (the "Subject Employees"), and Old Long Beach and the Company shall take
all steps necessary or appropriate to accomplish the transfer of such employees
from Old Long Beach to the Company. The Company hereby agrees to employ the
Subject Employees for not less than sixty (60) days following the Effective Time
on terms and conditions no less favorable to each Subject Employee than those
provided by Old Long Beach immediately prior to the Effective Time.
As of the Effective Time, Old Long Beach agrees to transfer to
the Company and the Company agrees to assume each Subject Employee's respective
benefits, seniority, vacation, sick or other leave, holidays, and floating
personal days accrued by such Subject Employees under Old Long Beach policies,
practices and programs as of the Effective Time, and from and after the
Effective Time neither Old Long Beach nor any employee benefit plan of Old Long
Beach shall have any further liability or responsibility in respect of such
items with respect to the Subject Employees, except as may otherwise be provided
herein. All payroll withholding and tax reporting by Old Long Beach with respect
to Subject
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Employees are hereby terminated as of the Effective Time and Old Long
Beach agrees to pay over to federal, state and local governments, in accordance
with and at the times required by applicable law, all amounts withheld prior to
the Effective Time. Old Long Beach also will issue, at Old Long Beach's expense,
by the date prescribed under applicable law, Forms W-2 for wages paid through
the Effective Time. Old Long Beach shall be responsible for all benefit,
payroll, tax-related and other responsibilities and liabilities with respect to
Subject Employees resulting from operations prior to the Effective Time and the
Company shall be responsible for all benefit, payroll, tax-related and other
responsibilities and liabilities with respect to Subject Employees resulting
from operations after the Effective Time.
(b) Retirement Benefits. As of the Effective Time, all Subject
Employees shall cease actively to accrue further benefits under the Old Long
Beach 401(k) Plan. As soon as practicable following the Effective Time, the
Company shall establish or designate an individual account plan for the benefit
of Subject Employees (the "Successor Individual Account Plan"), shall take all
necessary action, if any, to qualify such plan under the applicable provisions
of the Internal Revenue Code of 1986, as amended (the "Code") and shall make any
and all filings and submissions to the appropriate governmental agencies
required to be made by it in connection with the transfer of assets described
below. As soon as practicable following the earlier of the delivery to Old Long
Beach of a favorable determination letter from the Internal Revenue Service
regarding the qualified status of the Successor Individual Account Plan as
amended to the date of transfer, or the issuance of assurances satisfactory to
Old Long Beach, Old Long Beach shall cause the trustee of the Old Long Beach
401(k) Plan to transfer in the form of cash (or such other form as may be agreed
by Old Long Beach and the Company) the full account balances of the Subject
Employees under the Old Long Beach 401(k) Plan (which account balances shall be
valued for purposes of such transfer in a manner consistent with the approach to
valuation generally applicable at the time of such transfer to distributions
under the Old Long Beach 401(k) Plan or in such other manner as Old Long Beach
and the Company may agree in writing), reduced to the extent necessary to
reflect any necessary benefit or withdrawal payments to or in respect of Subject
Employees, to the appropriate trustee as designated by the Company under the
trust agreement forming a part of the Successor Individual Account Plan.
Notwithstanding the preceding sentence, no transfer shall be made of any
insurance or similar investment contract which is not divisible between the Old
Long Beach 401(k) Plan and the Successor Individual Account Plan.
(c) Other Benefits. The Subject Employees are, as of the
Effective Time, immediately eligible for all such benefits provided by the
Company on the same basis as if service for Old Long Beach were recognized as
service for the Company, and without application of any waiting period or any
limitation with respect to preexisting conditions that would not have been
applicable under Old Long Beach policies, practices or plans (subject to the
terms and conditions of each policy). Old Long Beach shall remain responsible
for COBRA coverage for "qualifying events" (as defined in COBRA) occurring prior
to the Effective Time. With respect to the Flexible Spending Account Plan of Old
Long Beach, there shall be transferred to the Company as of or immediately
following the Effective Time the current unused balances in Flexible Spending
Accounts and an accounting of contributions to the Effective Time made by
Subject Employees. To the extent that any account of a Subject Employee under
the health care portion of the Flexible Spending Account shows disbursements in
excess of receipts as of the Effective Time, New Long Beach shall reimburse Old
Long Beach to the extent of future contributions during the remainder of the
plan year by such Subject Employee.
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(d) Accrued Incentive Compensation. Notwithstanding anything
herein to the contrary, all incentive compensation amounts due to Subject
Employees pursuant to existing Old Long Beach policy on loans closed and funded
(including closed and funded loans transferred to the Company pursuant to
Section 2.8 below but excluding unfundings in accordance with Old Long Beach's
existing policy for such unfundings) will be paid to such employees by Old Long
Beach in accordance with Old Long Beach's normal payment schedule for such
compensation. The Company will be responsible for all incentive compensation on
transferred Pipeline Loans.
(e) Deferred Transfer Employees. Old Long Beach and the
Company acknowledge and agree that the employees of Old Long Beach set forth on
Schedule 1.5(e) (the "Deferred Transfer Employees") shall become employees of
the Company, and Old Long Beach and the Company shall take all steps necessary
or appropriate to accomplish the transfer of such employees from Old Long Beach
to the Company effective on or before the dates set forth in Schedule 1.5(e),
subject to the condition that such employee is employed by Old Long Beach at the
scheduled time of transfer. The Company hereby agrees to employ the Deferred
Transfer Employees for not less than sixty (60) days following their date of
transfer on terms and conditions no less favorable to each Deferred Transfer
Employee than those provided by Old Long Beach immediately prior to the
Effective Time. Old Long Beach and the Company agree that the other provisions
of this Section 1.5 shall apply to each such Deferred Transfer Employee and such
employees shall be treated as "Subject Employees" at and as of the date on which
such Employee is actually transferred to the Company.
1.6 ASSUMPTION OF LIABILITIES AND OBLIGATIONS. The liabilities and
obligations expressly assumed by the Company pursuant to this Agreement are
hereinafter referred to as the "Assumed Liabilities". The Company is not
assuming and shall not be liable for any liabilities, indebtedness or
obligations of Old Long Beach other than the Assumed Liabilities.
1.7 EFFECTIVE TIME. The "Effective Time" shall mean the time that is
immediately prior to the consummation of the sale of the Shares by Old Long
Beach pursuant to that certain Underwriting Agreement, dated as of April __,
1997, by and among LBFC, Old Long Beach and Friedman, Billings, Xxxxxx & Co.,
Inc. (the "Underwriting Agreement"). In the event the Effective Time has not
occurred on or prior to June 30, 1997, this Agreement shall terminate and become
null and void.
1.8 DELAYED TRANSFERS. To the extent that any required consent with
respect to the assignment, transfer or bifurcation of a contract, agreement,
lease or other instrument included in the Wholesale Lending Assets has not been
obtained on or prior to the Effective Time and Old Long Beach is unable (by
sublease or otherwise) to transfer the legal benefit thereof to LBFC, such
contract, assignment, lease or instrument (a "Delayed Asset") shall not be
transferred as a Wholesale Lending Asset hereunder and any related liability (a
"Delayed Liability") shall not be assumed by LBFC as an Assumed Liability
hereunder, unless and until such required consent has been obtained or Old Long
Beach is otherwise able to transfer the legal benefit thereof to LBFC.
Notwithstanding the foregoing, if such a required consent to transfer is not
obtained, Old Long Beach will use its best efforts to attempt to provide to the
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Company the benefits of any such Delayed Assets. At such time and on each
occasion after the Effective Time that a required consent shall be obtained with
respect to a Delayed Asset, such Delayed Asset shall forthwith be deemed
transferred and assigned to LBFC hereunder, and all related Delayed Liabilities
shall be simultaneously assumed by LBFC hereunder, whereupon (i) such delayed
asset shall constitute a Wholesale Lending Asset for all purposes hereunder, and
(ii) such delayed liability shall constitute an Assumed Liability for all
purposes hereunder.
1.9 FURTHER TRANSFERS. Old Long Beach acknowledges that certain of the
Wholesale Lending Assets and certain of LBFC's obligations hereunder are
concurrently herewith being transferred and assigned to New Long Beach. Old Long
Beach hereby consents to such transfer; provided, however, that:
(i) such transfer and Old Long Beach's consent
thereto shall not constitute in any manner a release of LBFC from its
obligations hereunder; and
(ii) New Long Beach hereby acknowledges and agrees to
be bound by all of the provisions of this Agreement to the extent such
provisions relate or are applicable to the Wholesale Lending Assets or LBFC
obligations transferred to New Long Beach.
Such further transfers shall be made pursuant to an Assignment and Assumption
Agreement reasonably acceptable to the parties to this Agreement.
ARTICLE II
OTHER AGREEMENTS
2.1 EXECUTION AND DELIVERY OF OTHER AGREEMENTS. At the Effective Time,
the parties shall execute and deliver the following documents:
(a) Administrative Services Agreement among Old Long Beach,
New Long Beach and LBFC pursuant to which Old Long Beach will provide certain
services to the Company for a period of time after the Effective Time;
(b) Administrative Services Agreement between New Long Beach
and Old Long Beach pursuant to which New Long Beach will provide secondary
marketing services to Old Long Beach for a period of time after the Effective
Time;
(c) Loan Sub-Servicing Agreement between Old Long Beach and
New Long Beach; and
(d) Such other documents as may be necessary for Old Long
Beach to convey the assets in accordance with this Agreement.
2.2 DOJ SETTLEMENT.
(a) Each of LBFC and New Long Beach agrees that it shall, and
it shall cause its subsidiaries and affiliates to, comply in all respects with
the terms and conditions set
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forth in Old Long Beach's settlement agreement with the United States Department
of Justice, dated September 6, 1996 (the "DOJ Settlement") (excluding Sections
12 and 17 through 23 of the DOJ Settlement). The parties agree to cooperate with
each other in good faith with respect to any issues related to the DOJ
Settlement; provided, however, that the parties will not make, and each will
cause its employees, officers, directors and agents not to make, any public
statement regarding the DOJ Settlement other than to describe and discuss how
the DOJ Settlement specifically applies to and affects such party.
(b) To the extent of its rights therein, effective as of the
Effective Time, Old Long Beach hereby grants to LBFC, New Long Beach and their
respective subsidiaries a non-transferable (other than by operation of law),
perpetual, royalty-free and nonexclusive license to use the statistical model
(the "DOJ Model") that Old Long Beach has developed to monitor direct-sourced
mortgage loan prices as part of the DOJ Settlement. Old Long Beach will provide
LBFC with a copy of the DOJ Model as it exists at the Effective Time. Old Long
Beach shall have no obligation (a) to provide LBFC with updates of the DOJ
Model, (b) to make modifications to the DOJ Model or (c) to otherwise correct
any deficiencies in the DOJ Model that may exist or that Old Long Beach may
later discover. Old Long Beach specifically disclaims any and all express and
implied warranties with respect to the DOJ Model, including without limitation
the implied warranties of merchantability and fitness for a particular purpose.
Each of LBFC and New Long Beach acknowledges and agrees that Old Long Beach has
not made any representation or warranty or provided any other assurance that the
DOJ Model complies with the terms of the DOJ Settlement. The Company shall not
be required to use the DOJ Model, but may instead develop its own statistical
functions for the purpose of complying with the DOJ Settlement. The Company
shall not be required to provide to Old Long Beach copies of or a license to use
any such statistical function that is independently developed by the Company.
2.3 NAME CHANGE.
(a) At or prior to the Effective Time, Old Long Beach shall
file with the Secretary of State of the State of Delaware a certificate of
amendment to its certificate of incorporation to change Old Long Beach's name to
"Ameriquest Mortgage Company" or any other name that it chooses that does not
include the words "Long Beach." As soon as practicable after the Effective Time,
Old Long Beach shall take all action necessary to change its name in each state
in which it is qualified to conduct business.
(b) At or prior to the Effective Time, New Long Beach shall
file with the Secretary of State of the State of Delaware a certificate of
amendment to its certificate of incorporation to change New Long Beach's name to
"Long Beach Mortgage Company." As soon as practicable after the Effective Time,
New Long Beach shall take all action necessary to change its name in each state
in which it is qualified to conduct business.
(c) After the Effective Time, (i) Old Long Beach Holdings and
Old Long Beach shall not, and shall cause their respective subsidiaries and
affiliates (such affiliates determined as of the Effective Time) not to, conduct
business under a name including the words "Long Beach" in connection with
originating, purchasing, servicing or selling residential mortgage loans and
(ii) LBFC and New Long Beach shall not, and shall cause their respective
subsidiaries not to, conduct business under a name including the
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words "Long Beach" in connection with the automobile loan business. Other than
as set forth above, the parties shall each be free to utilize the name "Long
Beach" in connection with any business activities. Each party agrees to
cooperate with the other with respect to the use of the name "Long Beach" as set
forth above, including providing any and all necessary consents, without cost.
2.4 NO SOLICITATION OR HIRING OF EMPLOYEES. For a period of sixty (60)
months after the Effective Time:
(a) Old Long Beach Holdings and Old Long Beach shall not, and
shall cause their respective subsidiaries not to, hire, or solicit to hire, any
employee of LBFC or New Long Beach or their respective subsidiaries without the
written consent of LBFC or New Long Beach; and
(b) LBFC and New Long Beach shall not, and shall cause their
respective subsidiaries not to, hire, or solicit to hire, any employee of Old
Long Beach Holdings or Old Long Beach or their respective subsidiaries without
the written consent of Old Long Beach Holdings or Old Long Beach, other than the
Subject Employees or Deferred Transfer Employees.
2.5 FURTHER ASSURANCES. Each party shall execute and deliver such
further instruments and take such further actions as the other party may
reasonably request in order to carry out the intent of this Agreement and to
consummate the transactions contemplated hereby.
2.6 PROPRIETARY INFORMATION. Xxx Xxxx Xxxxx Xxxxxxxx xxx Xxx Xxxx Xxxxx
acknowledge and agree that all documents listed or described in Schedule
1.1(a)(i) as proprietary documents, information or data is the sole property of
the Company, and Xxx Xxxx Xxxxx Xxxxxxxx xxx Xxx Xxxx Xxxxx may not make use of
such proprietary information at any time or in any way without the express
written consent of LBFC or New Long Beach. The Company acknowledges and agrees
that, other than information identified on Schedules 1.1(a)(i) or 1.1(a)(ii),
all other documents, information or data of Old Long Beach or its affiliates
(including, without limitation, retail mortgage source lists and other
written/data information relating to retail mortgage lending and mortgage
servicing, automobile lending and Old Long Beach's other businesses or
affiliated businesses; but excluding therefrom publicly available information)
is proprietary information that is the sole property of Old Long Beach and/or
its affiliates, and the Company may not make use of such proprietary information
at any time or in any way without the express written consent of Old Long Beach
or as otherwise specifically permitted by the terms of this Agreement. Each
party agrees to make its employees, officers and agents aware of this
restriction and to cause such employees, officers and agents to comply with the
terms hereof. If any party discovers that an employee, officer or agent of such
party is in possession of any such proprietary information
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of the other party, such information shall immediately be returned to such other
party. The parties hereto acknowledge that the personal knowledge of any person
with respect to general know-how or processes of conducting a broker-sourced or
direct-sourced mortgage lending business shall not be construed as proprietary
information of any party and the use of such knowledge by such person for the
benefit of a party to this Agreement shall not constitute an unfair trade
practice, a breach of this or any other agreement among the parties.
2.7 COOPERATION. Each of Old Long Beach, Old Long Beach Holdings, LBFC
and New Long Beach acknowledge and agree that because of the relationship
between the parties prior to the Effective Time, a very high degree of
cooperation between the parties will be necessary subsequent to the Effective
Time in order to ensure a smooth and efficient transition. Each party therefore
agrees to cooperate in good faith with the other party for the purpose of
ensuring a smooth transition and to ensure that neither party is unfairly
disadvantaged by virtue of the Reorganization. Such cooperation shall be without
charge (other than reimbursement of expenses) and shall include, but shall not
be limited to, cooperation by each party in preparing, reviewing, analyzing and
responding to inquiries, claims, requests, threats of litigation or actual
litigation involving the business or the assets of the other party (such
cooperation to be not less than the level of cooperation that either party would
have provided to the other prior to the Reorganization). Old Long Beach, Old
Long Beach Holdings, LBFC and New Long Beach further agree that because of their
knowledge of each other's respective businesses, any disparaging comments by one
party against the other would place the party making the disparaging remarks at
an unfair competitive advantage. Each party therefore agrees to avoid making any
disparaging remarks about the other party. Old Long Beach, Old Long Beach
Holdings, LBFC and New Long Beach agree that given the nature of their
respective businesses, this Agreement to cooperate shall continue for a period
of five (5) years.
2.8 TRANSFER OF LOANS.
(a) Effective as of the Effective Time, Old Long Beach hereby
transfers and assigns to the Company (i) all mortgage loans funded by the
broker-sourced mortgage lending division of Old Long Beach on or after April 1,
1997 and prior to the Effective Time (the "April Window Loans") and (ii) all
rights and obligations under commitments of Old Long Beach to sell the April
Window Loans to third parties (the "Sale Commitments"). The Company hereby
agrees to purchase from Old Long Beach all April Window Loans that comply with
the representations and warranties described in Section 2.8(c) below and further
agrees to assume the obligations set forth in the Sale Commitments.
(b) The purchase price the Company shall pay for each April
Window Loan shall be equal to the purchase price to be paid by the purchaser for
such loan under the related Sale Commitment. Such purchase price will be payable
to Old Long Beach upon the closing of the purchase and sale of such April Window
Loan under the respective Sale Commitment.
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(c) Old Long Beach agrees to make representations, warranties
and indemnities in respect of each April Window Loan as of the sale date thereof
pursuant to a Sale Commitment, which representations, warranties and indemnities
shall be the same as those the Company is required to make to the purchaser
under the sale commitment.
(d) Old Long Beach agrees that from time to time on and after
the Effective Time, it shall provide to the Company historical loan data with
respect to mortgage loans originated or purchased by the broker-sourced lending
division of Old Long Beach prior to April 1, 1997 as (i) reasonably requested by
the Company in connection with the Company's ongoing secondary marketing
activities, including any securitizations and (ii) in such form and scope as is
necessary for inclusion in disclosure documents to be provided to investors in
the secondary mortgage market; provided that such information is used solely in
connection with the sale or securitization of loans originated or purchased by
the Company or its investor relations. Such information will not include
borrower name, property address or other borrower or property level data (other
than zip code and state of location) that could facilitate the solicitation of
such borrowers by the Company or other recipients of such information. Fees for
the provision of such information shall be as reasonably agreed between the
parties from time to time.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 BY LBFC. LBFC hereby represents and warrants to Old Long Beach as
of the Effective Time that the Shares have been duly and validly authorized and,
when issued in accordance with the terms hereof, will be (a) duly and validly
issued, fully paid and nonassessable, and (b) free and clear of all liens,
encumbrances, mortgages, pledges, security interests, restrictions, prior
assignments and claims of any kind or nature whatsoever, except as otherwise
provided in the Underwriting Agreement.
3.2 BY OLD LONG BEACH. Old Long Beach hereby represents and warrants to
LBFC as of the Effective Time as follows:
(a) the Transferred Tangible Assets transferred hereunder are
transferred free and clear of all liens, encumbrances, mortgages, pledges,
security interests and prior assignments and claims of any kind or nature
whatsoever;
(b) all consents to assignment or transfer of Wholesale
Lending Assets as set forth on Schedules 1.1(b) and 1.1(c) have been validly
obtained; and
(c) all employee benefit plans covering Subject Employees are
set forth on Schedule 3.2(c).
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ARTICLE IV
CONDITIONS PRECEDENT
4.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES. The
obligations of each of the parties to effect the transactions contemplated
hereby are subject to the satisfaction, at or prior to the Effective Time, of
each of the following conditions:
(a) There being, at the Effective Time, no (i) threatened,
instituted or pending action, proceeding, application, claim or counterclaim by
or before any court or governmental authority or agency seeking to restrain or
prohibit the consummation of the transactions contemplated hereby or by the
Underwriting Agreement or (ii) statute, rule, regulation, decree, order or
injunction promulgated, enacted, entered or enforced by any court or
governmental agency or authority restraining or prohibiting the consummation of
such transactions;
(b) The Registration Statement shall have been declared
effective by the SEC and, at the Effective Time, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall be pending before the SEC or any state
securities or "blue sky" commissioner or authority; and
(c) All conditions precedent to the obligations of the
Underwriters to consummate the purchase of the Shares from Old Long Beach
pursuant to the Underwriting Agreement (except the consummation of the
Reorganization) shall have been satisfied or waived and each of the parties to
Underwriting Agreement shall be prepared to consummate the transactions
contemplated thereby.
4.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF LBFC. The obligations of
LBFC to effect the transactions contemplated hereby are subject to the
satisfaction, at or prior to the Effective Time, of the following conditions:
(a) The representations and warranties of Old Long Beach
contained in this Agreement shall be true, correct and complete in all material
respects as of the Effective Time; and
(b) Old Long Beach shall have performed all obligations and
agreements and complied with all covenants contained in this Agreement or in any
document delivered in connection herewith required to be performed or complied
with at or prior to the Effective Time.
4.3 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF OLD LONG BEACH. The
obligations of Old Long Beach to effect the transactions contemplated hereby are
subject to the satisfaction, at or prior to the Effective Time, of each of the
following conditions:
(a) The representations and warranties of LBFC contained in
this Agreement shall be true, correct and complete in all material respects as
of the Effective Time; and
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(b) LBFC shall have performed all obligations and agreements
and complied with all covenants contained in this Agreement or in any document
delivered in connection herewith required to be performed or complied with at or
prior to the Effective Time.
ARTICLE V
INDEMNIFICATION
5.1 INDEMNIFICATION.
(a) Old Long Beach shall indemnify and hold harmless LBFC and
New Long Beach, each of their subsidiaries and their respective officers,
directors, employees, representatives, agents, successors and assigns
(collectively, the "New Long Beach Indemnitees") against and in respect of any
and all damages, claims, liabilities, expenses as incurred (including reasonable
attorneys' fees) and losses (collectively "Damages") incurred by the New Long
Beach Indemnitees that arise out of or relate to (i) any breach or violation of
this Agreement by Old Long Beach, (ii) any breach of any of the representations
or warranties made in this Agreement by Old Long Beach, (iii) the conduct of Old
Long Beach's business (including the Wholesale Lending Business) or corporate
transactions occurring prior to the Effective Time, or (iv) the conduct of Old
Long Beach's business after the Effective Time; excluding therefrom any Damages
relating to (x) the DOJ Settlement or (y) any Assumed Liabilities.
(b) LBFC and New Long Beach shall indemnify and hold harmless
Old Long Beach and its subsidiaries and affiliates and their respective
officers, directors, employees, representatives, agents, successors and assigns
(collectively, the "Old Long Beach Indemnitees") against and in respect of any
and all Damages incurred by the Old Long Beach Indemnitees that arise out of or
relate to (i) any breach or violation of this Agreement by LBFC, New Long Beach
or their respective subsidiaries, (ii) any breach of any of the representations
or warranties made in this Agreement by LBFC, (iii) the conduct of the Company's
business (including the Wholesale Lending Business) after the Effective Time or
(iv) the Pipeline Loans, (v) the Sale Commitments or (vi) the Assumed
Liabilities.
(c) In the event of a claim by a Subject Employee relating to
periods including such Subject Employee's employment with both Old Long Beach
and the Company, Old Long Beach and the Company shall cooperate in good faith
with respect to defending any such claim and shall, to the extent possible,
apportion responsibility with respect to such claim based upon a comparison of
the relative fault of each party using objective factors, such as length of time
the complained-of acts occurred while the Subject Employee was the employee of
each party and the events precipitating the claim. In the event that the claim
cannot be apportioned on the basis of objective factors, the parties shall meet
and shall attempt in good faith to determine reasonably an appropriate
apportionment. In the event Old Long Beach and the Company are unable to make
such determination, the matter of apportionment shall be referred to
arbitration. Such arbitration shall determine the relative
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fault of the parties and such determination shall be binding on the parties,
notwithstanding a different result regarding relative fault in the underlying
action.
5.2 TAX INDEMNIFICATION.
(a) Old Long Beach and Old Long Beach Holdings jointly and
severally shall indemnify the Company and each of its respective officers,
directors, employees and agents and hold them harmless from (i) all liability
for Taxes (as defined in Section 5.2(g)) of the Old Long Beach Group (as defined
in Section 5.2(h)) incurred during the Pre-Closing Tax Period (as defined in
Section 5.2(b)) and (ii) all liability for reasonable legal fees and expenses
incurred with respect to any item indemnified pursuant to clause (i).
(b) For purposes of this Agreement, "Pre-Closing Tax Period"
shall mean (i) any Tax period ending prior to or on the Effective Time,
including, as defined below, any Short Period, and (ii) any Apportioned Short
Period, as defined below, that is deemed to end on the Effective Time. In order
to appropriately apportion any Taxes relating to a period that includes (but
that would not, but for this Section , close on) the Effective Time, the Old
Long Beach Group and the Company will, to the extent permitted by applicable
law, elect with the relevant governmental authority to treat for all purposes
the Effective Time as the last day of a Tax period in which the business
operations of the Wholesale Lending Business are reflected on the Tax returns of
Old Long Beach or the Old Long Beach Group, and such period shall be treated as
a "Short Period." In any case where applicable law does not permit Old Long
Beach or the Old Long Beach Group to treat the Effective Time as the last day of
a Short Period, then for purposes of this Agreement, the portion of Taxes
attributable to the business operations of the Wholesale Lending Business for an
Apportioned Short Period (as defined below) shall be (i) in the case of Taxes
that are not based on income or gross receipts, the total amount of such Taxes
for the period in question multiplied by a fraction, the numerator of which is
the number of days in the Apportioned Short Period, and the denominator of which
is the total number of days in the entire period in question, and (ii) in the
case of Taxes that are based on income or gross receipts, the Taxes that would
be due with respect to the Apportioned Short Period, if such Period were a Short
Period. "Apportioned Short Period" means with respect to any Taxes imposed on
the Wholesale Lending Business on a periodic basis for which the Effective Time
is not the last day of a Short Period, the period of time beginning on the first
day of the actual Tax period in question that includes (but does not end on) the
Effective Time and ending on and including the Effective Time. All
determinations necessary to give effect to the foregoing allocations shall be
made in a manner consistent with the prior practice of Old Long Beach and its
operation of the Wholesale Lending Business.
(c) Except as provided in Section 5.2(d), the Company shall be
solely responsible for the payment of Taxes imposed upon the Company
attributable to Tax periods of the Company beginning (or deemed to begin under
Section 5.2(b)) after the Effective Time, and the Company shall indemnify and
hold harmless the Old Long Beach Group for or against any and all liability for
such Taxes.
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(d) Notwithstanding anything herein to the contrary, Old Long
Beach and Old Long Beach Holdings jointly and severally shall indemnify and hold
the Company harmless from any and all liability for Taxes imposed by any taxing
authority with respect to any period up to and including the Effective Time (i)
in connection with the transfer by Old Long Beach of the Wholesale Lending
Business to LBFC, or (ii) by reason of the Company being severally liable for
the entire tax of the Old Long Beach Group pursuant to Treasury Regulations
Section 1.1502-6(a) or any analogous state or local provision.
(e) Old Long Beach or the Old Long Beach Group shall cause to
be prepared and filed all required Tax returns of the Company that reflect the
business operations of the Wholesale Lending Business for the Pre-Closing Tax
Periods that end (but that are not deemed to end under Section 5.2(b)) prior to
or on the Effective Time and shall be responsible for including on the
consolidated or combined returns of the Old Long Beach Group members any taxable
items for pre-closing periods of Apportioned Short Periods. The Company shall
cooperate with Old Long Beach or the Old Long Beach Group in preparing such Tax
returns, and shall take no position on any tax return filed by the Company that
would be inconsistent with any position taken by Old Long Beach or the Old Long
Beach Group with respect to such Tax returns. Xxx Xxxx Xxxxx xxx xxx Xxx Xxxx
Xxxxx Group shall submit copies of any Tax returns in which the business
operations of the Wholesale Lending Business are included to the Company for the
Company's approval prior to the filing of such Tax returns, which approval shall
not be unreasonably withheld. The Company shall be solely responsible for
preparation and filing of all returns of the Company for Tax periods of the
Company ending (including Tax returns for Tax periods deemed to end on the
Effective Time under Section 5.2(b)) after the Effective Time.
(f) Old Long Beach or the Old Long Beach Group shall promptly
notify the Company in writing upon receipt by them of any notice of (i) any
pending or threatened federal, state or local income or franchise tax audits or
assessments of the Company, and (ii) any pending or threatened federal, state or
local income or franchise tax audits or assessments of Old Long Beach or the Old
Long Beach Group which may affect the liabilities of the Company for Taxes. The
Old Long Beach Group (or any successor group) shall have the right to represent
the Company's interests in any tax audit or administrative or judicial
proceeding relating to any Pre-Closing Tax Period return ending (but that are
not deemed to end under Section 5.2(b)) prior to or on the Effective Time, and
to employ counsel of its choice at its expense. The Old Long Beach Group agrees
to consult with the Company and to keep the Company informed on a regular basis
regarding the status of any such audit or proceeding that may affect the
liabilities of the Company for Taxes. The Company shall have the right to
represent the Company's interest in any tax audit or administrative or judicial
proceeding relating to any Tax return for Tax periods ending after the Effective
Time (including Tax returns for Tax periods deemed to end on the Effective Time
under Section 5.2(b)), and to employ counsel of its choice at its expense. The
Company agrees to keep the Old Long Beach Group (or any successor group)
informed on a regular basis regarding any such audit or proceeding that may
affect the liabilities of the Old Long Beach Group for Taxes and to consult with
the Old Long Beach Group (or any successor group) on such matters with a view to
maintaining positions reasonably consistent with those that may be urged by the
Old
16
Long Beach Group; provided, however, that the Company shall have ultimate
control of any such audit or proceeding.
(g) For purposes of this Section 5.2, "Taxes" means any and
all taxes (including, without limitation, gross receipts, sales, use, property,
income, franchise, capital, occupational, license, value added, excise and stamp
taxes and customs duties), assessments, fees (including, without limitation,
documentation, license, filing and registration fees) and charges, of any nature
or kind whatsoever, together with any penalties, fines, additions to tax or
interest thereon, however imposed, withheld, levied, or assessed by any taxing
authority.
(h) For purposes of this Section 5.2, "Old Long Beach Group"
means (i) Old Long Beach Holdings, (ii) Old Long Beach, and (iii) any other
entity as to which the Company is liable for Taxes incurred pursuant to Treasury
Regulations Section 1.1502-6 or pursuant to any other provision of federal,
state, local or foreign law or regulation.
5.3 INDEMNIFICATION PROCEDURE.
(a) Claims for Indemnification. Whenever any claim shall arise
for indemnification hereunder, the party entitled to indemnification (the
"indemnified party") shall promptly notify the other party or parties (the
"indemnifying party") of the claim and, when known, the facts constituting the
basis for such claim; provided that the indemnified party's failure to give such
notice shall not affect any rights or remedies of an indemnified party hereunder
with respect to indemnification for damages except to the extent that the
indemnifying party is materially prejudiced thereby. In the event of any claim
for indemnification hereunder resulting from or in connection with any claim or
legal proceedings by a third party, the notice to the indemnifying party shall
specify, if known, the amount or an estimate of the amount of the liability
arising therefrom. The indemnified party shall not settle or compromise any
claim by a third party for which it is entitled to indemnification hereunder
without the prior written consent of the indemnifying party (which shall not be
unreasonably withheld) unless suit shall have been instituted against it and the
indemnifying party shall not have taken control of such suit after notification
thereof as provided in Section 5.3(b) of this Agreement.
(b) Defense by Indemnifying Party. In connection with any
claim giving rise to indemnity hereunder or resulting from or arising out of any
claim or legal proceeding by a person who is not a party to this Agreement, the
indemnifying party at its sole cost and expense may, upon written notice to the
indemnified party, assume the defense of any such claim or legal proceeding if
it acknowledges to the indemnified party in writing its obligations to indemnify
the indemnified party with respect to such claim, and thereafter diligently
conducts the defense thereof with counsel reasonably acceptable to the
indemnified party. The indemnified party shall be entitled to participate in
(but not control) the defense of any such action, with its counsel and at its
own expense. If the indemnifying party does not assume or fails to conduct in a
diligent manner the defense of any such claim or litigation resulting therefrom,
(a) the indemnified party may defend against such claim or litigation, in such
manner as it may deem appropriate, including, but not limited to, settling such
claim or
17
litigation, after giving notice of the same to the indemnifying party,
on such terms as the indemnified party may deem appropriate, and (b) the
indemnifying party shall be entitled to participate in (but not control) the
defense of such action, with its counsel and at its own expense. If the
indemnifying party thereafter seeks to question the manner in which the
indemnified party defended such third party claim or the amount or nature of any
such settlement, the indemnifying party shall have the burden to prove by a
preponderance of the evidence that the indemnified party did not defend or
settle such third party claim in a reasonably prudent manner. Each party agrees
to cooperate fully with the other, such cooperation to include, without
limitation, attendance at depositions and the provision of relevant documents as
may be reasonably requested by the indemnifying party, provided that the
indemnifying party will hold the indemnified party harmless from all of its
expenses, including reasonable attorney's fees, incurred in connection with such
cooperation by the indemnified party.
ARTICLE VI
MISCELLANEOUS
6.1 NOTICES. All notices, requests, demands and other communications
provided for hereunder shall be in writing (including telegraphic or facsimile
communications) and shall be mailed (return receipt requested), telegraphed,
sent by facsimile or hand delivered to each party at the address set forth as
follows, or at such other address as either party may designate by notice to the
others, and any such notice, request, demand or other communication shall be
effective upon receipt:
If to Xxx Xxxx Xxxxx Xxxxxxxx xx Xxx Xxxx Xxxxx:
AMERIQUEST CAPITAL CORPORATION
AMERIQUEST MORTGAGE COMPANY
0000 Xxxx & Xxxxxxx Xxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Attention: General Counsel
If to the Company:
LONG BEACH FINANCIAL CORPORATION
0000 Xxxx & Xxxxxxx Xxxx
Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Attention: General Counsel
18
6.2 AMENDMENTS. This Agreement shall not be amended, changed, modified,
terminated or discharged in whole or in part except by an instrument in writing
signed by all parties, or their respective successors or assigns, or otherwise
as provided herein.
6.3 ATTORNEYS' FEES. In the event of any dispute arising out of or in
connection with this Agreement, and any documents executed pursuant, the
prevailing party, in addition to any other amounts which it may be entitled to,
shall be entitled to recover from the other party reasonable attorneys' fees and
court costs as shall be awarded in the resolution of such dispute.
6.4 SUCCESSORS AND ASSIGNS. Except as otherwise set forth in Section
1.9 hereof, this Agreement shall not be assignable by any party without the
express written consent of all other parties.
6.5 ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties pertaining to the subject matter hereof. This Agreement
supersedes all prior written agreements and all prior or contemporaneous verbal
agreements with respect to the subject matter hereof.
6.6 WAIVER. Any forbearance by a party to this Agreement in exercising
any right or remedy under this Agreement or otherwise afforded by applicable law
shall not be a waiver of or preclude the exercise of that or any other right or
remedy.
6.7 HEADINGS. The section headings hereof have been inserted for
convenience of reference only and shall not be construed to affect the meaning,
construction or effect of this Agreement.
6.8 SEVERABILITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity of any other provision, and all
other provisions shall remain in full force and effect.
6.9 CHOICE OF LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable to contracts made
and performed in such State, without regard to conflicts of laws principles.
6.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed an original, and
all of which taken together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, this Agreement is executed on behalf of the parties
by duly authorized representatives as of the date first above written.
AMERIQUEST CAPITAL CORPORATION,
a Delaware corporation
By:_______________________________
Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President
LONG BEACH MORTGAGE COMPANY, a
Delaware corporation
By:_______________________________
Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President
LONG BEACH FINANCIAL
CORPORATION, a Delaware corporation
By:_______________________________
Name: Xxxxx X. Xxxxxxxx
Title: Senior Vice President
AMERIQUEST MORTGAGE
CORPORATION, a Delaware corporation
By:_______________________________
Name: Xxxxx X. Xxxxxxxx
Title: Senior Vice President
