Sample Business Contracts

Agreement Regarding Affiliate Loans - Primecore Funding Corp. Inc., 99 Investors LLC and Primecore Mortgage Trust Inc.

Sponsored Links


                  This Agreement Regarding Affiliate Loans (the "Agreement") is
         entered into effective as of October 17, 2002 (the "Effective Date")
         between PRIMECORE FUNDING GROUP, INC., a California corporation
         ("Funding Group"), 99 INVESTORS, LLC ("99 Investors"), and PRIMECORE
         MORTGAGE TRUST, INC., a Maryland corporation ("REIT").


     This Agreement is based on the foregoing facts,  each of which is agreed to
be true:

     A. The REIT was  incorporated  on March 18, 1999 and  commenced  operations
effective May 1, 1999 as a real estate investment trust.

     B. Funding Group is, and at all times since formation of the REIT, has been
the REIT's manager.

     C. Prior to  formation  of the REIT,  Funding  Group was in the business of
originating and servicing real estate loans for investors,  and had entered into
a servicing  agreement with Jim Ward and Associates to service loans in the Ward
portfolio.  Included  in the loans  serviced  by  Funding  Group were loans (the
"Windy Hill Loans") made to Windy Hill Associates,  Inc.  ("Windy Hill").  Windy
Hill was a company  solely  owned by James Ward  ("Ward"),  one of the  original
founders of Funding Group.

     D. In November  1999,  Ward and Windy Hill  defaulted on their  obligations
under a series of agreements,  thereby  triggering an event of default under the
Windy Hill Loans.

     E. The REIT declared the Windy Hill Loans in default, and foreclosure sales
were scheduled for on or about March 22, 2000.

     F. On March 22,  2000,  Eprime,  Inc.  ("Eprime"),  an  affiliated  entity,
purchased  the Windy  Hill Loans by way of a loan from the REIT,  designated  as
Loan No. 2447 (the "Eprime  Loans").  The Eprime note  purchase  and  assumption
agreement  provided  guarantees  of  repayment  and  the  pledge  of  additional
security.  A  blanket,  second  deed  of  trust  lien  against  several  parcels
collateralized  Loan No. 2447.  Thereafter,  Eprime foreclosed on the Windy Hill
Loans, and took title to all Windy Hill parcels thus encumbered,  subject to the
liens in favor of the REIT.  Funding Group has since completed and sold all real
property securing the Eprime loans.

     G. In addition  to the Windy Hill  Loans,  the REIT also made loans (each a
"99 Investors Loan" and collectively the "99 Investors  Loans") to 99 Investors,
which  are or  were  secured  by  properties  (the  "99  Investors  Properties")
developed or being developed by 99 Investors.

     H. In  consideration of Funding Group's  willingness to concurrently  enter
into an amended and restated  Management  Agreement of even date  herewith  (the
"Amended  and  Restated  Management   Agreement")  that  benefits  the  REIT  in
significant respects, and furthermore in consideration of the desire of the REIT
to conclude its practice of originating and continuing to make advances on loans
to affiliated entities, the REIT and Funding Group have determined to enter into
this  Agreement  in order to  clarify,  modify  and set forth in full all of the
obligations to the REIT with respect to the Windy Hills Loans,  the Eprime Loans
and the 99 Investors Loans.

     I.  This  Agreement  has been  approved  by a  resolution  of the  Board of
Directors of the REIT, acting by those directors who have no affiliation with or
financial  stake in  Funding  Group or any of its  affiliates.  All of the other
directors of the REIT, namely William Whitlow, Susan Fox and Michael Rider, have
abstained from voting upon the REIT's  acceptance of the terms of this Agreement
in order to avoid any potential conflict of interest.



         Now, therefore, for good and valuable consideration, including but not
necessarily limited to the covenants and agreements contained herein, the
parties to this Agreement agree as follows:

     1.  Commitment of Funding Group  Regarding  Eprime Loans.  On or before the
Effective  Date,  Funding  Group  shall pay to the REIT the amount of  $733,159,
representing  the remaining  carrying  amount of the Eprime Loans  determined in
accordance with generally accepted accounting principles.

     2. Transfer of 99 Investors Properties. With respect to any properties held
in the name of 99 Investors,  LLC as of the Effective Date, the ownership of all
such  properties  shall,  as soon as  practicable,  be  transferred to the REIT.
Transfer of the 99 Investors  Properties to the REIT shall be  accomplished in a
manner that is determined by the REIT's tax and  accounting  advisors to be most
advantageous to the REIT, including but not necessarily limited to a transfer of
ownership of 99 Investors to the REIT.

     3. Commitment of Funding Group Regarding 99 Investors Loans. The REIT shall
commission appraisals of all of the 99 Investors Properties that are transferred
to the  REIT,  which  appraisals  shall  determine  the  value  of  each  of the
properties  as of the date of transfer.  The  appraiser or  appraisers  shall be
acceptable  to and approved by the  unaffiliated  directors of the REIT.  Should
such  appraisals  show a deficiency  between (i) the  carrying  amount of the 99
Investors  Loans  secured by such  properties,  according to generally  accepted
accounting principles,  plus the cost of completion of the property and (ii) the
appraised finished value of such properties, then Funding Group shall pay to the
REIT the amount of the  deficiency  (the  "Deficiency  Amount").  The Deficiency
Amount  shall be  specified  in an addendum to this  Agreement  once it has been
determined,  and shall be payable,  with  interest as  specified  below,  out of
Performance  Bonuses,  as that  term is  defined  in the  Amended  and  Restated
Management  Agreement,  due to Funding Group, provided that a maximum of seventy
percent  (70%) of the amount due in any period to Funding  Group as  Performance
Bonuses shall be utilized to pay the Deficiency Amount, with Funding Group being
entitled to receive the other thirty  percent  (30%) whether or not there is any
outstanding  balance of the  Deficiency  Amount,  and provided  further that the
Deficiency  Amount  shall be paid in full no later than  January  2,  2010.  The
Deficiency  Amount shall bear simple  interest at the rate of seven percent (7%)
per annum on the outstanding  balance.

     4. Mediation,  Arbitration and Jury Trial Waiver.  The parties  acknowledge
that there are significant costs and expenses, both monetary and otherwise,  and
possible  delays in  connection  with the  resolution  of  disputes  through the
judicial  system.  Accordingly,  the  parties  agree that it would be in each of
their best interests that any and all disputes,  claims or controversies arising
out of or relating to this Agreement or to the relationship that is contemplated
by this Agreement, whether based on tort, contract, statutory, or equitable law,
or  otherwise,  should  first be  submitted  to  mediation  conducted  under the
auspices of a neutral,  commercial  mediation and arbitration firm,  selected in
accordance  with Ca. Code Civ.  Proc.  Section  1281.6.  The parties  agree that
participation  in such a mediation shall be a precondition to seeking to enforce
any alleged rights or claims.  The parties  further agree that if such mediation
is unsuccessful,  then any and all disputes, claims or controversies arising out
of or relating to this Agreement or to the relationship  that is contemplated by
this Agreement, whether based on tort, contract, statutory, or equitable law, or
otherwise,  shall be determined  exclusively  by binding  arbitration  under the
Federal  Arbitration  Act, in conformity  with the  procedures of the California
Arbitration Act (Ca. Code Civ. Proc. Section 1280, et. seq.); provided, however,
that in addition  to  requirements  imposed by law,  such  arbitration  shall be
conducted in San Mateo County, California under the commercial arbitration rules
of a neutral,  commercial mediation and arbitration firm, selected in accordance
with Ca. Code Civ. Proc.  Section 1281.6,  and any arbitrator shall be a retired
California  Superior Court Judge who shall be subject to disqualification on the
same grounds as would apply to a judge of such court.  To the extent  applicable
in civil  actions  in  California  courts,  the  following  shall  apply  and be
observed: all rules of pleading (including the right of demurrer),  all rules of
evidence,  all rights to  resolution  of the  dispute  by means of  motions  for
summary  judgment,  judgment on the pleadings,  and judgment under Code of Civil
Procedure  section  631.8.  Resolution of the dispute shall be based solely upon
the law governing the claims and defenses  pleaded,  and the  arbitrator may not
invoke any basis for decision  other than such  controlling  law. As  reasonably
required to allow full use and benefit of this agreement's  modifications to the
Arbitration Act's  procedures,  the arbitrator shall extend the times set by the
Arbitration  Act for the giving of notices  and  settings  of  hearings.  Awards
exceeding $50,000 shall include the Arbitrator's written reasoned opinion,  and,


at either  party's  written  request  within  twenty days after  issuance of the
award, shall be subject to review, reversal,  remand,  modification or reduction
following  review  of the  record  and  arguments  of the  parties  by a  second
arbitrator  who shall also be a retired  California  Superior  Court Judge,  and
shall,  as far as  practicable,  proceed  according  to the law  and  procedures
applicable  to  appellate  review by the  California  Court of Appeal of a civil
judgment following court trial. Any court of competent jurisdiction in San Mateo
County may enforce the provisions of this clause and any arbitration  award, and
any party seeking  enforcement  shall be entitled to an award of all costs, fees
and expenses,  including  attorneys'  fees, to be paid by the party against whom
enforcement  is ordered.  In agreeing to the  foregoing  procedure,  the parties
understand, acknowledge and agree that each will be liable for an equal share of
all costs of mediation and arbitration,  except as otherwise  provided herein or
by law, and that there shall be no right to any trial by court or jury.

     5. Entire Agreement. It is the intention of the parties that this Agreement
restate and clarify, and set forth fully and completely,  all obligations to the
REIT  on the  part  of  Funding  Group,  and  any of  its  officers,  directors,
shareholders, principals, subsidiaries, and related or affiliated entities, with
respect to the Eprime  Loans and the 99  Investors  Loans.  Except as  expressly
provided  herein,  it is hereby  understood  and agreed by the parties  that all
prior  or  contemporaneous  understandings,  discussions,  representations,  and
agreements,  whether written or oral, regarding the Windy Hill Loans, the Eprime
Loans and the 99 Investors Loans, and any guarantee or other  obligations of the
parties or any of their officers, directors,  shareholders,  principals, related
or affiliated entities with respect to such matters,  are released,  discharged,
superceded by and merged into this  Agreement  which alone fully and  completely
expresses  the  parties'  agreement  with  respect to the Windy Hill Loans,  the
Eprime Loans and the 99 Investor Loans, and any payment or guaranty  obligations
in connection therewith.

     6. Exercise of Independent Judgment. Prior to entering into this Agreement,
each of the parties has made such investigation, considered all information they
deem relevant,  and received all independent  advice that they deem  appropriate
and necessary prior to entering into this Agreement.

     7. No Oral Agreements or Modifications.  This Agreement may be amended only
in a writing that has been executed by the parties,  and shall not be amended or
deemed  amended  by  subsequent  conduct  of a party of parties or any course of
dealings between the parties.  In order for any agreement to be effected between
the parties,  whether  prior,  during,  or subsequent to the Effective  Date, it
shall be set forth in writing and executed by the parties to be bound.

     8.  Authority  to   Sign/Counterparts/Facsimile   Signatures.   Each  party
executing  this  Agreement has been and is duly  authorized to do so by Board of
Director's  resolution or otherwise.  This Agreement may be executed in separate
counterparts, which when taken together shall constitute the entire agreement. A
copy or telefax of a signature  shall be  effective  the same as an original ink
signature, but the party submitting any copy or telefax of a signature agrees to
replace each signature with an original ink signature within ten (10) days after
any request for an original ink  signature.  Each of the parties  agrees to sign
this Agreement and return it to the other party,  or his or its attorney  within
three days after the Effective Date.

     9.  Construction of Agreement.  The headings in this Agreement are inserted
only for  convenience  and shall not be construed as limiting or broadening  the
scope  of the  Agreement  or  any of its  provisions.  The  Agreement  shall  be
construed as if each of the parties was the author,  and any ambiguities in this
Agreement shall not be construed against the original drafter of the Agreement.

     10.  Impairment.  Should any provision of this Agreement be held illegal or
unenforceable,  then such provision  shall be deemed severed from this Agreement
and the  remainder  of this  Agreement  shall  continue  to be of full force and
effect. In addition, if this Agreement is for any reason deemed to be invalid or
unenforceable  against the  Company,  then the Amended and  Restated  Management
Agreement,  entered into concurrently herewith, and which constitutes additional
consideration for the agreements made herein, shall be of no force or effect and
the parties will revert to the Management  Agreement in force prior thereto,  as
set forth in such Amended and Restated Management Agreement.

     11. Binding  Effect.  It is expressly  agreed that this Agreement  shall be
binding upon each of the parties to the Agreement and each of their heirs, legal
representatives  (but  not  attorneys),  insurers,  executors,   administrators,
agents, successors, and assigns.

     12.  Further  Actions.  The  parties  agree  that each will do all acts and
execute  and  deliver  all  documents  necessary  to  effectuate  the  terms and
provisions of this Agreement.


     Dated as of the Effective Date set forth above.

                                    PRIMECORE FUNDING GROUP, INC.

                                    By /s/ SUSAN FOX
                                       Susan Fox, President


                                    By /s/ MICHAEL RIDER
                                       Michael Rider, Chief Financial Officer

                                    PRIMECORE MORTGAGE TRUST, INC.

                                    By /s/ WILLIAM WHITLOW
                                       William Whitlow
                                       Chairman and Chief Operating Officer

                                    99 INVESTORS, LLC

                                    By /s/ SUSAN FOX
                                       Susan Fox, Managing Member