Contract
Exhibit 10.14
This Loan
Origination Agreement (this “Agreement”) is
entered into as of the 21st day of
November, 2007 (the “Effective Date”), by
and between Desert Capital REIT, Inc., a Maryland corporation (“Desert Capital”),
Consolidated Mortgage, LLC, a Nevada limited liability company (“Consolidated
Mortgage”) and for the purposes of Paragraph I of Article I hereof,
Sandstone Equity Investors, LLC, a Delaware limited liability company (“Parent”).
RECITALS:
WHEREAS,
Consolidated Mortgage is regularly and actively engaged in the business of
arranging for the financing of and servicing mortgage loans for the acquisition
of, development of, and construction on real estate (collectively, “Mortgage
Loans”);
WHEREAS,
Desert Capital is a real estate investment trust that originates and invests in,
among other things, Mortgage Loans; and
WHEREAS,
Consolidated Mortgage and Desert Capital desire to enter into this agreement to
set forth certain rights and obligations between the parties regarding the
origination and servicing of Mortgage Loans by Consolidated Mortgage and the
funding of Mortgage Loans by Desert Capital.
NOW,
THEREFORE, in consideration of the foregoing and of the mutual premises
hereinafter expressed, the parties hereto do mutually agree as
follows:
ARTICLE
I. RIGHT OF
FIRST REFUSAL.
A. Consolidated
Mortgage hereby agrees to continue arranging for the financing of Mortgage Loans
in accordance with its historical practices. Commencing as of
November 19, 2007, on a weekly basis, Consolidated Mortgage shall
send a written report (a “Mortgage Loan
Report”) to Desert Capital setting forth in reasonable detail all
Mortgage Loans identified by Consolidated Mortgage for funding (including loan
to value ratio, credit scores, interest rates and other criteria applicable to
the Mortgage Loans). Desert Capital shall have a right of first
refusal in its sole discretion to fund all or any portion of such Mortgage Loans
as set forth herein. No later than two (2) Business Days (hereinafter
defined) following its receipt of a Mortgage Loan Report (the “Initial Election
Period”), Desert Capital shall send written notice to Consolidated
Mortgage specifying each Mortgage Loan or specified portion thereof that Desert
Capital desires to fund (a “Preliminary Funding
Notice”). The Preliminary Funding Notice shall constitute an
offer by Desert Capital to fund all or the specified portion of each Mortgage
Loan listed in the Preliminary Funding Notice upon the terms and conditions set
forth in the Mortgage Loan Report, with such changes thereto as Desert Capital
shall deem appropriate for its funding thereof and upon the terms set forth
herein. If Desert Capital fails to deliver a Preliminary Funding
Notice to Consolidated Mortgage prior to the expiration of the Initial Election
Period, or if the Preliminary Funding Notice delivered by Desert Capital does
not include all of the Mortgage Loans listed on the Mortgage Loan Report, then
Consolidated Mortgage may arrange for the funding of all or any such portion, as
the case may be, of the remaining Mortgage Loans set forth in the applicable
Mortgage Loan Report that were not selected by Desert Capital through one or
more third parties without regard to this Agreement.
B. No later
than two (2) Business Days after its receipt of a Preliminary Funding Notice
(the “Election
Period”), Consolidated Mortgage may elect to accept any changes set forth
in the applicable Preliminary Funding Notice that Desert Capital requests be
made to the terms of any Mortgage Loan listed in such Preliminary Funding
Notice. If Consolidated Mortgage rejects any of the modified terms
requested by Desert Capital, it may withdraw each related Mortgage Loan from the
Preliminary Funding Notice and shall permit Desert Capital to fund all or the
specified portion of the remaining Mortgage Loans listed on the Preliminary
Funding Notice. If Consolidated Mortgage agrees to all modified terms
requested by Desert Capital in the Preliminary Funding Notice, then Consolidated
Mortgage shall permit Desert Capital to fund all or the specified portion of the
Mortgage Loans listed in the Preliminary Funding Notice upon the modified terms
requested by Desert Capital. For purposes hereof “Business Day” means
any day other than Saturday or Sunday or other day on which national banks in
Las Vegas, Nevada are required or permitted by applicable law to
close.
C. Consolidated
Mortgage may freely arrange for the funding of any Mortgage Loans that were set
forth in a Mortgage Loan Report or portions thereof that Desert Capital did not
elect to fund or as to which any modified terms set forth in the Preliminary
Funding Notice were not accepted by Consolidated Mortgage.
D. No later
than the Business Day immediately following the delivery of a Preliminary
Funding Notice, Consolidated Mortgage shall deliver to Desert Capital the due
diligence materials, reports and documents described in Attachment “C” hereto
(the “Specified
Materials”) relating to the Mortgage Loans to be participated in or
purchased by Desert Capital then in the possession of Consolidated
Mortgage. Desert Capital shall have three (3) Business Days to review
and approve or object in writing to the Specified Materials
received. In addition, Consolidated Mortgage shall provide Desert
Capital with any additional documents and other information that Desert Capital
may reasonably request with respect to any Mortgage Loans to be purchased by
Desert Capital hereunder. It shall be a condition to the obligation
of Desert Capital to fund any Mortgage Loan at a Closing (hereinafter defined)
that Consolidated Mortgage shall have timely provided to Desert Capital all of
the Specified Materials (and any other documents and other information
reasonably requested by Desert Capital). In the event that with
respect to any Mortgage Loan, (i) Desert Capital does not approve the Specified
Materials initially delivered to Desert Capital within such three (3) day
period, or (ii) the Specified Materials received by Desert Capital thereafter do
not support or conform to the representations and description of the Mortgage
Loan provided by Consolidated Mortgage to Desert Capital in the Mortgage Loan
Report, including, without limitation, the borrower, loan amount, collateral
type, ownership, appraised value, lien priority and environmental condition,
Desert Capital shall have no obligation to fund such Mortgage Loan at a
Closing.
E. Each
closing of a funding of a Mortgage Loan by Desert Capital hereunder (each a
“Closing”)
shall take place at the principal offices of Desert Capital, at the address
specified in Article IX hereof, on the Business Day specified as the
closing date for the applicable Mortgage Loan in the applicable Mortgage Loan
Report. At the Closing, Consolidated Mortgage shall arrange for the
execution and delivery to Desert Capital of a standard set of investment
documents, in form and substance reasonably acceptable to Desert Capital (and
shall provide Desert Capital with customary representations and warranties as
well as adequate assurances that such Mortgage Loans are valid and enforceable
obligations of the respective borrowers and that no default, event of default,
or similar event has occurred of which Consolidate Mortgage could reasonably be
expected to be aware with respect to such Mortgage Loans). At the
Closing, unless otherwise agreed upon by the parties, Desert Capital shall fund
all or the specified portion of each Mortgage Loan in the applicable amount
payable in immediately available funds.
F. Desert
Capital may, at its election, request periodic accounting and other financial
records from Consolidated Mortgage that demonstrate its compliance with this
Agreement. Any proprietary information and associated products,
copyrights, trademarks and logos developed by parties to this Agreement shall
remain the property of the party which developed them.
G. Each
party hereto shall, in a professional manner, take all steps reasonably
necessary to perform its duties hereunder.
H. In
addition to the other matters set forth in this Article I, the parties
agree to the covenants and other matters set forth in Attachment “A” hereto,
which are incorporated by reference as if fully set forth herein.
I. As
promptly as possible but in any event within thirty (30) days (or such later
date as the parties may agree) after (i) any person or entity engaged in the
business of originating or brokering commercial loans becomes an Affiliate (as
defined in Rule 12b-2 of the regulations promulgated under the Securities
Exchange Act of 1934, as amended) of Parent and/or Consolidated Mortgage, or
(ii) any Affiliate of Parent and/or Consolidated Mortgage becomes engaged in the
business of originating or brokering commercial loans, Parent shall provide
Desert Capital with written notice thereof setting forth information in
reasonable detail describing the business of such person or entity and shall, if
requested by Desert Capital, within thirty (30) days after the date of such
notice, cause each such person or entity to deliver to Desert Capital a joinder
agreement in form and substance reasonably acceptable to Desert Capital pursuant
to which such person or entity becomes a party to and agrees to be bound by the
terms and provisions of this Agreement.
ARTICLE
II. PERIOD OF
PERFORMANCE.
This
Agreement shall be effective as of the Effective Date and shall expire on the
later of (i) one month after the last day of the month in which the
obligations of Consolidated Mortgage and Parent pursuant to Section 2.2(b) of
that certain Purchase Agreement dated as of November 21, 2007, among Desert
Capital, Desert Capital TRS, Inc. and Parent have been paid in full, or (ii)
with respect to any projects, commercial loans or open contracts and/or related
residual income such date that all business has been
completed. Thereafter, this Agreement shall be automatically renewed
for successive one year periods unless any party gives written notice of
termination to the other party at least 30 days prior to the scheduled date of
expiration. Notwithstanding the foregoing, this Agreement shall be
earlier terminated (x) at any time by mutual agreement of the parties, or
(y) at any time by Desert Capital or Consolidated Mortgage upon 60 days’ advance
written notice after an event constituting “cause” has occurred with respect to
the other party. For purposes of this Agreement “cause” means a
judgment by a court of competent jurisdiction that the subject party has
committed fraud either against third parties or against the other party to this
Agreement; the bankruptcy, insolvency or dissolution of the subject party; or
the material breach of this Agreement by the subject party (that is not cured by
the subject party within 30 days after receipt of written
notice). Time is of the essence in the performance of the obligations
under this Agreement.
ARTICLE
III. MANAGEMENT.
Each
party shall designate a partner, officer or other senior person to be
responsible for the overall administration of such party’s responsibilities
under this Agreement. Neither party shall have management authority
over the other outside the scope and performance of this Agreement.
ARTICLE
IV. CONFIDENTIAL
INFORMATION.
Consolidated
Mortgage acknowledges and agrees that in the course of the performance of this
Agreement or additional services pursuant to this Agreement, it may be given
access to, or come into possession of, confidential information of Desert
Capital, which information may contain trade secrets, proprietary data or other
confidential material of Desert Capital. Therefore, the parties have
executed a Non-Disclosure Agreement which is attached hereto as
“Attachment B”, and incorporated by reference as if fully set forth herein.
Materials used in any engagement undertaken pursuant to this Agreement shall not
be altered or changed without the consent of both parties.
ARTICLE
V. NO
PARTNERSHIP.
Nothing
herein contained shall be construed to imply a joint venture, partnership or
principal-agent relationship between Desert Capital and Consolidated Mortgage,
and neither party shall have the right, power or authority to obligate or bind
the other in any manner whatsoever, except as otherwise agreed to in
writing. The parties do not contemplate a sharing of profits relating
to the business of Desert Capital or Consolidated Mortgage so as to create a
separate taxable entity under Section 761 of the Internal Revenue Code of 1986,
as amended, nor co-ownership of a business or property so as to create a
separate partnership under the law of any jurisdiction, including, without
limitation, the state of Nevada or Maryland. Revenues and expenses
relating to the Mortgage Loans hereunder and any activities relating thereto
shall be reported separately by the parties for tax purposes. This
provision does not eliminate the possibility that the parties may enter into
various revenue or equity sharing agreements with regard to any Mortgage Loans
that the parties may consider on a case by case basis. During the
performance of the any of the contemplated business activities set forth herein,
Desert Capital’s employees will not be considered employees of Consolidated
Mortgage, and vice versa, within the meaning or the applications of any federal,
state or local laws or regulations including, but not limited to, laws or
regulations covering unemployment insurance, retirement or medical benefits,
worker’s compensation, industrial accident, labor or taxes of any
kind.
ARTICLE
VI. TRADEMARK,
TRADE NAME AND COPYRIGHTS.
This
Agreement does not give any party any ownership rights or interest in another
party’s trade name, trademarks or copyrights.
ARTICLE
VII. INDEMNIFICATION.
Each of
Desert Capital and Consolidated Mortgage, at its own expense, shall indemnify,
defend and hold the other, its partners, members, shareholders, directors,
officers, employees and agents harmless from and against any and all third-party
suits, actions, investigations and proceedings, and related costs and expenses
(including, reasonable attorney’s fees), resulting solely and directly from the
indemnifying party’s gross negligence, willful misconduct or material breach of
this Agreement. Neither Desert Capital nor Consolidated Mortgage
shall be required hereunder to defend, indemnify or hold harmless the other or
its partners, shareholders, directors, officers, employees and agents, or any of
them, from any liability resulting from the negligence, willful misconduct or
material breach of this Agreement by the party seeking indemnification or by any
third party. Each of Desert Capital and Consolidated Mortgage agrees
to give the other prompt written notice of any claim or other matter as to which
it believes this indemnification provision is applicable.
ARTICLE
VIII. INTELLECTUAL
PROPERTY.
Work
performed pursuant to this Agreement by either Desert Capital or Consolidated
Mortgage and information, materials, products and deliverables developed in
connection with business endeavors pursuant to this Agreement shall be the
property of the respective parties performing the work or creating the
information. All underlying methodology utilized by Consolidated
Mortgage and Desert Capital, which was created or developed prior to the date of
this Agreement and utilized in the course of performing their duties pursuant to
this Agreement, shall not become the property of the other.
ARTICLE
IX. GENERAL
PROVISIONS.
A. Entire
Agreement. This Agreement, together with the attachments
hereto and all documents executed in connection herewith or incorporated by
reference herein, constitutes the entire and sole agreement between the parties
hereto with respect to the subject matter hereof and supersedes any prior
agreements, negotiations, understandings or other matters, whether oral or
written, with respect to the subject matter hereof. This Agreement
cannot be modified, changed or amended, except in writing signed by a duly
authorized representative of each of the parties hereto.
B. Conflict. In
the event of any conflict, ambiguity or inconsistency between this Agreement and
any other document which may be annexed hereto, the terms of this Agreement
shall govern. Any conflicts or disputes that are not amicably settled
in the due course of this business relationship shall be settled through binding
arbitration, in accordance with the latest edition of rules as set forth by the
American Arbitration Association, such arbitration to be held in Las Vegas,
Nevada. Said rulings in arbitration shall be considered final and
binding on the parties hereto and shall be enforceable in any competent United
States court.
C. Assignment and
Delegation. No party shall voluntarily assign or delegate this
Agreement or any rights, duties or obligations hereunder to any other person or
entity without prior express written approval of the other party, provided that,
notwithstanding the foregoing, a party may assign this Agreement by operation of
law to any successor to such party by merger or consolidation (without the prior
consent of the other parties).
D. Notices. Any
notice required or permitted to be given under this Agreement shall be in
writing, by hand delivery, commercial overnight courier or registered or
certified U.S. Mail, to the address stated below across from such party’s name,
and shall be deemed duly given upon receipt, or if by registered or certified
mail three Business Days following deposit in the U.S. Mail. The
parties hereto may from time to time designate in writing other addresses
expressly for the purpose of receipt of notice hereunder.
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If
to Desert Capital:
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Desert
Capital REIT, Inc.
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0000
Xxxxxxxx Xxxxx, Xxxxx 000
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Xxxxxxxxx,
Xxxxxx 00000
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If
to Consolidated Mortgage:
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Consolidated
Mortgage, Inc.
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0000
Xxxxxxxx Xxxxx, Xxxxx 000
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Xxxxxxxxx,
Xxxxxx 00000
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E. Severability. If
any provision of this Agreement is declared invalid or unenforceable, such
provision shall be deemed modified to the extent necessary and possible to
render it valid and enforceable. In any event, the unenforceability
or invalidity of any provision shall not affect any other provision of this
Agreement, and this Agreement shall continue in full force and effect, and be
construed and enforced, as if such provision had not been included, or had been
modified as above provided, as the case may be.
F. Governing
Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada without giving effect to its
choice of law principles.
G. Headings. The
article and paragraph headings set forth in this Agreement are for the
convenience of the parties, and in no way define, limit, or describe the scope
or intent of this Agreement and are to be given no legal effect.
H. Counterparts. This
Agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
I. Attachments. The
Attachments attached hereto are made a part of this Agreement as if fully set
forth herein.
[Signature page immediately
follows.]
IN
WITNESS WHEREOF, the parties, by their duly authorized representatives, have
caused this Agreement to be executed as of the date first written
above.
DESERT
CAPITAL REIT, INC.
By: /s/ Xxxx X.
Xxxxxxxx
Xxxx
X. Xxxxxxxx
President
CONSOLIDATED
MORTGAGE, LLC
By: /s/ Xxxx X.
Xxxxxxxx
Xxxx X. Xxxxxxxx
President
SANDSTONE CAPITAL,
LLC
By: /s/ G. Xxxxxx
Xxxxxx
G. Xxxxxx Xxxxxx
Managing Director
ATTACHMENT
“A”
Additional
Provisions
In
accordance with the provisions set forth in the foregoing Strategic Alliance
Agreement of which this Attachment forms an integral part, it is agreed and
understood between the parties as follows:
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1)
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Consolidated
Mortgage is entitled to retain origination fees with respect to any
Mortgage Loans funded by Desert Capital hereunder, as well as any agreed
to shared equity if either an acquisition or participatory
loan.
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2)
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Consolidated
Mortgage can identify, and present for purchase by Desert Capital,
qualified commercial and/or residential loan portfolios on a case by case
basis. Fees and potential participations will be agreed to on a
case by case basis, and said additional agreements, if so applicable,
shall be added to this schedule and agreement as further
attachments.
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3)
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Consolidated
Mortgage is entitled to service any Mortgage Loans sold to Desert Capital
hereunder, and to receive servicing fees for doing so, provided that, in
the event Desert Capital, in its reasonable good faith judgment (as
communicated to Consolidated Mortgage in writing), determines that the
servicing of any Mortgage Loan, in which it owns or in which it is an
investor, by Consolidated Mortgage is being administered in such a manner
so as to jeopardize the value of such Mortgage Loan, including, without
limitation, the collection of principal and interest on such Mortgage Loan
or realization on the collateral therefor, Consolidated Mortgage shall,
upon receipt of such written request, transfer the servicing right to sell
the Mortgage Loan to Desert
Capital.
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ATTACHMENT
“B”
Non-Circumvention/Non-Disclosure
Agreement
The
undersigned, Consolidated Mortgage, LLC (“Consolidated Mortgage”), intending to
be legally bound, hereby irrevocably agrees not to circumvent, avoid, bypass or
obviate Desert Capital REIT, Inc. (“Desert Capital”), directly or indirectly, in
connection with the origination and sale of mortgage loans or any other
transaction involving any sale, disposition or funding of any mortgage
loans.
Nor shall
Consolidated Mortgage disclose or otherwise reveal to any third party any
confidential information provided by Desert Capital, particularly that
concerning Desert Capital’s lenders, business, securities, borrowers, sellers,
buyers, affiliates, agent’s names, addresses, telex, telephone, email, fax
numbers or other means of access thereto, bank accounts, codes or references, or
any such information that Desert Capital so indicates or advises Consolidated
Mortgage of as being confidential or privileged, without the specific written
consent of Desert Capital.
In the
event of circumvention, either directly or indirectly, Desert Capital shall be
entitled to a monetary penalty equal to the maximum financial benefits it should
have realized from such transactions, including all legal expenses in the
recovery of funds.
This
agreement shall be binding on the parties, hereunder signed, their successors,
heirs, and assigns.
This
agreement may be executed in one or more counterparts each of which shall be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed signature page of this agreement
by facsimile or electronic transmission shall be effective as delivery of a
manually executed counterpart hereof.
[Remainder
of page intentionally left blank.]
DESERT
CAPITAL REIT, INC.
By:
Name:
Title:
CONSOLIDATED
MORTGAGE, LLC
By:
Name:
Title:
ATTACHMENT
“C”
Specified
Materials
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1.
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All
customary due diligence reports, documents, and analyses including,
without limitation, all appraisals, title commitments and related
exception documents, surveys, engineering reports, environmental reports,
UCC, tax and judgment lien searches, organizational documents,
construction contracts, architect’s plans and specifications, rent rolls,
leases, management agreements and other material agreements, reports and
analyses.
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2.
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All
other materials, documents and information reasonably requested by Desert
Capital.
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