JOINT VENTURE AGREEMENT OPERATING
Exhibit
No. 5.4
OPERATING
JOINT."
VENTURE AGREEMENT (this "Agreement"), dated as of the day of February 28 ,
2007
by and among Shearson Home Loans, a Nevada Corporation herein after referred
to
as ("SHL"), and Xxxxxxx Financial Group, Inc., a California Corporation herein
after referred to as ("SFG").
RECITALS
WHEREAS,
effective as of February 28, 2007, the Board of Directors of SHL has determined
that it is appropriate and in the best interest of SHL and all related parties
that such a joint initiative be carried out in the form of a joint venture
between SHL and SFG on the terms and subject to the conditions set forth in
this
Agreement (the "Joint Venture")
NOW,
THEREFORE, the parties hereto hereby agree as follows;
1.
Formation.
SHL and SFG hereby agree to the legal formation of the Joint Venture, which
Joint Venture shall be structured in the manner acceptable to SHL and SFG which
shall require the formation of an entity i.e. an LLC in the State of Nevada.
Described in Exhibit A attached hereto.
2. `Name.
The
name of the Joint Venture shall be Shearson Group I, LLC ("SG"). The Joint
Venture shall be referred to as a joint venture; with SHL and SFG.
3. Field.
The
business of the Joint Venture shall be limited to the field which is originating
and banking mortgage loans (as such description may be amended from time to
time
in accordance with this Agreement, the "JV Field").
4.
Contributions. SHL and SFG agree to make the contributions to the Joint Venture
as described further in this Agreement (the "Initial SHL Contribution and,
together with the Initial SHL Contribution, the "Initial
Contributions").
5.
Employees.
The initial employees of the Joint Venture shall be those employees of SHL
and
SFG identified on Exhibit B attached hereto (the" Employees").
6.
Terms
and
Conditions. Term. of this Agreement will have a term of one (1) year and shall
automatically renew for additional one (1) years unless either party notifies
the other of its intent not to renew at least ninety (90) days prior to the
Agreement's scheduled expiration. Either party may suspend performance and/or
terminate this Agreement immediately upon written notice at any time the other
party is in material breach of any material warranty, term, condition or
covenant of this Agreement.
The
Terms
and Conditions described hereto shall govern all other aspects of the Joint
Venture.
TERMS
AND
CONDITIONS OF JOINT VENTURE
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7.
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Joint
Venture Business and Related Fundamental
Principles
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7.1 Scope
of SG
Business. Activities of SHL and. SFG. The business of the Joint Venture as
conducted through the SG shall be limited to the JV Field (which expressly
includes the right to conduct such business jointly with collaboration
partners). The SG shall not conduct any other similar business outside of the
JV
Field unless the JV Field definition is amended to include such other business
in accordance with the terms and conditions contained herein. SHL and SFG shall
engage in activities in the JV Field (whether directly or indirectly through
collaboration with third parties) exclusively through the SG and shall not
conduct any other similar business within the JV Field other than through the
SG, the Joint Venture shall collect all revenues or other consideration from
the
loans generated.
(a) Purposes
of
Company. SHL is a direct-to-consumer mortgage broker and banker, SFCT will originate
mortgage loans from its branch network which will be banked with SHL. SG will
manage the payroll accounts, disbursement of funds and commissions to respective
branches, personnel and HR functions and otherwise any and all management
associated with the origination of loans which are banked with SHL. SG will
perform all functions associated with banking a mortgage loan originated by
SFG
including, if required, underwriting, funding, dots, shipping, and warehousing
said loans on 5HL's warehouse credit facilities. SHL shall allow SFG to use
and
benefit from its state licenses in various states and from time to time shall
set up additional licenses as may be required.
7.2 Role
within SG. The
following principles shall govern the operation of the Joint
Venture as a business unit within SG:
(a) As
specified in
further detail in Section 14 below, the SG shall have its own
board
of managers (the "JV Board") and management who shall be responsible for the
operation of the SG's business. The term of employment for management shall
be
determined by the JB Board.
(b) The
parties
recognize that certain matters relating to or affecting SG may also relate
to or
affect SHL or SFG. Therefore, as a general principle these matters should be
subject to the same procedures and processes currently used to resolve issues
between SHL and SFG, with the understanding that SG would be included in those
procedures and processes as applied to such matters. These procedures and
processes includes any processes or procedures for resolution of issues between
SHL and SFG, or among SHL, SFG, and the SG, as may be applicable from time
to
time.
(c) The
parties also
recognize that, since SG operate under the authority of the board of managers
(the "SG Board"), the terms, conditions, ownership, and operation of the Joint
Venture shall at all times remain subject to the ultimate supervision of the
SG
Board. Section 14 below outlines this principle in further detail, and in
particular identifies certain "Fundamental Changes" which require the approval
of the SG Board.
(d) Within
this framework, the parties anticipate that disputes and disagreements can
be
minimized by encouraging ongoing consultation and discussions among the parties
and by using formal processes and procedures where necessary or appropriate.
The
parties shall communicate regarding potential concerns before signing agreements
or committing to transactions, and are encouraged to initiate dialogue, whenever
there is potential for conflict or disagreement even where this potential is
not
deemed significant.
7.3 JV
Field Definition and Interpretation. The JV Field definition affects all
parties, and therefore interpretation and amendment of the definition shall
be
subject to the approval and oversight of the SG Board as outlined in Section
14.
However, the SG Board, acting in consultation with SG management, shall have
the
primary responsibility for reviewing the JV Field definition from time to time
and recommending any proposed amendments to the SG Board. Such review shall
occur at least on an annual basis, but shall also occur more frequently as
circumstances require from time to time as they believe necessary or appropriate
with respect to the JV Field definition,
7.4 Business
Opportunities, Including New Computer Technology and IP. If either SHL or SFG
identifies a business opportunity within the JV Field (including any proposed
acquisition of technology or other intellectual property or improvements thereto
with applications within the JV Field, they shall present this opportunity
to
the SG Board., it shall be within the sole discretion of the SG Board as to
whether or not the SG shall pursue the business opportunity.
7.5 Certain
Third Party
Collaborations. Notwithstanding the restriction in Section 7.1 above, SG, SHL
and SFG may individually establish collaborations with third party companies
to
conduct business to include Loan originations, processing, underwriting banking,
funding and establishing warehouse lines and facilities specifically in
connection with the business.
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8.
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Formation/Capitalization
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8.1 Nature
of Joint
Venture; Ownership. The Joint Venture shall be conducted by SFG and SHL through
the SG. SHL and SFG shall each own their respective interests in SG through
SHL
with 50% and SFG with 50% in SG. The economic and voting rights associated
with
those membership interests in SG shall represent equal membership interests
in
the SG with respect to all matters (including voting and economic rights) except
as otherwise specifically provided in this Agreement. SHL and SFG, as members,
respectively, of the SG, shall account for their respective membership interests
in the SG consistent with the rights and obligations associated with those
interests pursuant to the JV Operating Agreement, which shall embody and/or
incorporate by reference the principles outlined in Section 13
below.
8.2 Initial
Capital
Contributions. The Initial Contributions of SHL shall be $1,000 and SFG shall
be
$1,000 to for the benefit of SG.
8.3 Future
Capital
Contributions. All future funding needs for the SG shall be satisfied in
accordance with Section 13.3 and subject to the following:
(a) Except
as set forth in this
Agreement with respect to the Initial Contributions, all contributions from
the
parties shall be in the form of cash unless otherwise approved by the SG Board.
Non-cash contributions shall be valued at the fair value of the property
contributed as determined by the SG Board.
The
SG
Board shall review and approve the SG business plan and corresponding budget
(including fixed and working capital requirements) prior to the commencement
of
each of its fiscal years, and at such other times a the SG Board determines
from
time to time.
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9.
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Intellectual
Property Matters
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9.1 IP
Contributions by
SHL and SFG. The initial intellectual property contributions of each of SHL
and
SFG to SG. respectively, include the intellectual property specifically
presently used in the day to clay operation of the business to include computer
technology, and know-how (including improvements and modifications thereto)
for
applications within the JV Field, SG shall have the right to use such
intellectual property within the JV Field including the right to any State
license or sublicense required to do business in any given state. SHL and SFG
shall use their reasonable efforts to ensure that future contrasts with third
parties do not contain restrictions that would restrict the SG's access to
and
use of their intellectual property as contemplated by this Section, and before
entering into any contract that contains such a restriction they shall obtain
the approval of the SG Board.
9.2 Rights
to
Technology Developed or Acquired by SHL, SFG and SG. SG shall have the
exclusive; right to use intellectual property developed or acquired by SHL
or
SFG within the JV Field.
9.3 Rights
to
Third-Party Technology. SHL's or SFG's subsequent acquisition of rights to
technology or other intellectual property or improvements thereto from a third
party with applications within the JV Field shall be available to
SG.
9.4 SFG's
Existing
Collaborations. The parties acknowledge that SFG currently is a party to certain
collaboration (warehouse lines) and other agreements that, among other things,
provide third parties with access to certain SFG technology for use in certain
fields, including fields that would be considered within the JV Field.
Notwithstanding anything to the contrary contained herein, these agreements
and
the transactions and relationships established by them shall be deemed excluded
from the JV Field and the grant. of rights to third parties under these
agreements shall not be a violation of this Joint Venture Agreement if and
to
the extent that SFG is, under the terms and conditions of such collaboration
and
other agreements, prohibited from assigning them to the SG. SFG and the SG
will
separately agree in writing on the list of collaboration and other agreements.
For the avoidance of doubt, it is understood that even if collaboration or
other
agreement is excluded under this Section, intellectual property that SFG may
derive from such agreement within the JV Field will be deemed contributed to
the
SG for its exclusive use within the JV Field, unless prohibited under the terms
of such collaboration and other agreements.
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10.
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Governance.
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10.1 SG
Board, The Joint
Venture shall operate under the supervision of the SG Board, which shall have
the authority of a "manager" of a limited liability company under the Limited
Liability Company Act of the State of Nevada, subject to the specific limits
set
forth herein. The following provisions shall apply to the SG Board:
(a) Composition.
The SG
Board shall have two (2) members, consisting; of.
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(i)
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one
member appointed by SHL as a member of SG (the "SHL Nominee"),
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(ii)
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one
member appointed by SFG as members of SG (the "SFG
Nominee")
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(b) Meetings.
Meetings of the SG Board shall be held from time to time as the parties deem
necessary or as required to take the actions specified herein, and as may
otherwise be requested from time to time by the any one member. A quorum for
meetings requires the presence of the SHL Nominee and one SFG Nominee. (Or,
if
applicable, their designated alternates or proxies).
(c) Voting.
Approval of matters voted on by the SG Board at meetings requires unanimous
vote
of the entire SG Board (regardless of who is present at a meeting);
(d) No
Fiduciary Duties. No members of the SG Board shall have any fiduciary or similar
duties to the members of the SG, and are therefore free to vote in accordance
with instructions from the parties nominating such members.
(e) Action
By Written Consent. Notwithstanding the foregoing, any action required or
permitted to be taken at any meeting of the SG Board may be taken without a
meeting if all members of the SG Board consent thereto in writing.
(f) Indemnification.
The G shall indemnify and hold harmless each member of the SG Board from and
against any and all claims and demands to the fullest extent permitted by
law.
10.2 Joint
Venture
Management. The day-to-day operations of the Joint Venture shall be run by
a
management team employed by, and dedicated to, SG under the management and
direction of the SG Board. Such management team shall be headed by a president
(the "JV President") who shall initially be determined. The balance of the
management team, and the personnel filling management positions, shall be
determined from time to time by the JV President under the supervision of the
SG
Board. The management of the SG shall have such authority as the SG Board shall
from time to time delegate.
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11.
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Operations
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11.1 Access
to SHL and
SFG Products and Services. From time to time, the SG may require products and
services of SHL or SFG in addition to those products and services that
constitute the Initial Contributions. SHL and SFG, as applicable, shall supply
the SG with such products and services on terms and conditions approved by
the
SG Board.
11.2 Access
to Corporate
Overhead. SG shall have access to SHL and SFG general
corporate resources (including, accounting and legal).
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12.
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Employees
and Benefits and Payroll
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11.1 Employees.
SG shall be
staffed with employees who are dedicated full time at this time with SHL or
SFG
to the business of the SG. SG shall be prohibited from hiring employees of
either SHL or SFG without the consent of the affected group, except that the
employees identified on Exhibit B shall initially staff the JV and no consent
of
SHL or SFG is required with respect to such employees.
12.2 Compensation
and
Benefits. Matters relating to the compensation and benefits of SG personnel
shall be determined by management of SHL or SFG respectively consistent with
and
in accordance; with applicable policies.
12.3 Funds
to both
Members will be distributed on an as funded basis meaning
disbursements will be made upon the closings of each loan
transaction.
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13.
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Tax/Accounting
Matters
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13.1 Joint
Venture
Losses. SG losses shall be for the account of SHL, as a member of the SG, and
SFG, as a member of the SG (and accordingly recorded by SHL or SFG, as
applicable, on their books), as follows:
(a) SHL
and SFG shall seek advise from their accountants as to determine the proper
structure; and
(b) All
operating profits or losses of the SG above shall be allocated proportionately
based on the respective interest of ownership.
13.2 Joint
Venture
Profits. SG profits shall be for the account of SHL, as a member of SG, and
SFG
as a member of SG (and accordingly recorded by SHL or SFG, as applicable, on
their books), as follows:
(a) All
profits of SG
shall be allocated 50% for the account of SFG and 50% for the account of SHL
of
the net proceeds after all expenses.
(b) A
schedule of
direct and indirect expenses by both parties will be attached as Exhibit C
to
the agreement and will be allocable expenses to be paid out to each respective
Member prior to the pro-rata distribution of profits per
transaction,
13.3 Cash
Contributions.
(a) Cash
operating
losses of SG if any shall be funded by SHL and SFG LLC.
(b) Working
capital
requirements of thy; SG shall be funded by SHL equal to $1,000 and SFG equal
to
$ 1,000 as members of SG. Working capital shall be measured at the end of each
fiscal quarter as the cash flow impact of the change in the current asserts
and
liabilities of the SG.
13.4 Reimbursement
of
Tax Benefits. SHL and SHG shall split proportionately any benefits based on
their respective interest in ownership.
13.5 Distributions
on
Liquidation. Upon a liquidation of the SG's business
(which
for these purposes includes a sale of the business regardless of the legal
structure of such transaction), the assets of the SG (or, if applicable, the
proceeds of such sale) shall be allocated to SHL and SFG as the members of
the
SG proportionately based on the respective interest in ownership.
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14.
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Matters
Subject to SG Board Approval or
Review
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14.1 Role
of SG Board.
Notwithstanding anything to the contrary contained herein, all matters relating
to SG shall at all tines remain within the purview of SG Board, which shall
have
the authority to review matters relating to the SG or the SG Board
on
its own initiative and, if it deems appropriate, instruct SG or the SG Board
regarding particular matters (in which case SG and the SG Board shall be bound
to comply with such instructions). Without limiting the foregoing, the conduct
of the business of SHL, SFG, and the SG shall at all times remain in full
compliance of the law.
14.2 Fundamental
Changes. Although the parties do not anticipate any material alteration in
the
fundamental structure and ownership of SG for the foreseeable future, from
time
to time circumstances may arise, which warrant consideration of such alterations
("Fundamental Changes"), Fundamental Changes, defined to include the following
matters, require approval of the SG Board:
(a) Terminating
the
Joint Venture by transferring its business to either or both of SHL and/or
SFG.
(b) Spinning
off SG
into an independent business.
(c) Altering
the
ownership of the SO between SHL and SFG
due to, for example, alterations in the rights or obligations (including
contribution commitments) associated with their direct or indirect interests
in
the SG as set forth in Section 13 above).
(d) Allowing
a third
party to participate in the SG, including by way of a transfer by either or
both
of SHL and/or SFG of its direct or indirect interest or by contribution of
new
equity into the SG.
(e) Liquidating
the SG
in whole or in part by disposing of some or all of its assets to a third party,
and
(f) Other
matters
identified by the, SG Board from time to time as Fundamental
Changes,
14.3 Interpretation
of
Agreement; Resolution of Disputes. It is the intent of the parties that, subject
to the preceding provisions of this Section, all issues relating to SG,
including the interpretation of this Agreement, be decided or resolved by the
SG
Board or, in the case of issues which affect or relate to SHL or SFG (including,
without limitation, issues relating to the definition of the JV Field), However,
any dispute, disagreement, or deadlock relating to the SG which cannot be so
resolved may be taken to arbitration and any resulting determination by
arbitration shall be binding on the parties.
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15.
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Amendment
and Waiver
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15.1 Subject
to any
approval of the SG Board required under Section 14 of this Agreement, the terms
and conditions contained in this Agreement may be amended, and the conduct
of
the parties may deviate from such terms and conditions, with the approval
of the SG .Board, provided, however, that any amendment to this Agreement,
upon
receiving the necessary approval, shall be, in a written instrument signed
by
(a) SHL and (b) SFG. In addition. if any provision of this Agreement specifies
that the approval or determination of the SG Board is required for or with
respect to any matter, then such prevision may not be amended, and the conduct
of the parties shall not deviate from such provision, without the approval
of
the SG Board.
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16.
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Miscellaneous
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16.1 Notices.
All
notices, authorizations, and requests sent to either party in connection with
this Agreement shall be deemed given on
the day they
are delivered in person or sent by air express courier, charges prepaid, and
addressed as follows (or to such other address as the party to receive the
notice or request so designates by written notice to the other).
If
to:
Xxxxxxx Financial Group, Inc
0000
Xxxxxx Xxx Xxx X., Xxx. 000 Xxx Xxxxx, XX 00000 -1700
Attn.
Xxxxx Xxxxx
If
to:
Shearson Home Loans
0000
Xx.Xxxx Xxxxxxx, Xxx. 000 Xxxxxxxxx, XX 00000
Attn:
Xxxxxxx Xxxxxx
16.2 Severability.
If
any provision of this Agreement be held by a court of competent jurisdiction
to
be illegal, invalid or unenforceable, the provisions shall be interpreted to the
maximum extent as necessary to carry out the intent of the parties and any
remaining provisions, as applicable, shall remain in full force and
effect.
16.3 Waiver.
Any waiver
of a default or condition held by either party shall not be deemed a. continuing
waiver of such default or condition or a waiver of any other default or
condition.
16.4 Assignment.
Neither
party may assign any of its rights, obligations or privileges (by operation
of
law or otherwise) hereunder without the consent of the other party, which shall
not be unreasonably withheld.
16.5 Captions.
The
heading of articles, sections and other subdivisions hereof
are inserted only for the purpose of convenient reference and it is recognized
that they
may
not adequately or accurately describe the contents of the paragraph that they
head. Such headings shall not be deemed to govern, limit, modify or in any
other
manner affect the scope, meaning or intent of the provisions of this agreement,
or any part or portion thereof, nor shall they otherwise be given any legal
effect.
16.6 Applicable
Law.
This Agreement shall he governed by, performed under and construed in accordance
with the laws of the State of California, without giving effect to the Conflict
of law principles thereof.
16.7 Jurisdiction
and
Process. The parties hereby consent to the exclusive jurisdiction and venue
of
the state and federal courts of San Diego, California. Process may be served
on
any party by U.S. Mail, postage prepaid, certified or registered, return receipt
requested, or by such other method as is authorized by law.
16.8 Attorneys'
Fees. If
SHL or SFG Employs attorneys to enforce any rights arising out of or relating
to
this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees and costs, including expert witness fees.
16.9 Entire
Agreement.
This Agreement does not constitute an offer by either party and it shall not
be
effective until signed by all parties. This Agreement, constitute the entire
Agreement and understanding between the parties as to the subject matter hereof,
and supersedes and replaces all prior or contemporaneous Agreements, written
or
oral, as to such subject matter. This Agreement may be changed only in writing
stating that it is an amendment or modification to this Agreement, and signed
by
an authorized representative of each of the parties hereto.
SIGNATURES
ON NEXT PAGE
IN
WITNESS WHEREOF, the parties agree to the foregoing as of
the
date
first written above.
SHEARSON
HOME LOANS
By
/s/
Xxxxxxx Xxxxxx
Name:
Xxxxxxx Xxxxxx
Title:
Chief Executive Officer
XXXXXXX
FINANCIAL GROUP, INC.
By: /s/
Xxxxx Xxxxx
Name:
Xxxxx Xxxxx
Title:
President
