EXHIBIT 10.8

 

CONTRIBUTION AGREEMENT

 

THIS CONTRIBUTION AGREEMENT (the “Agreement”) is made as of this 11th day of
April, 2008 (the “Effective Date”), between CALIFORNIA MORTGAGE AND REALTY,
INC., a Delaware corporation (“CMR”), and DAVID CHOO, an individual (“Choo”),
for the benefit of CMR MORTGAGE FUND, LLC, a California limited liability
company, CMR MORTGAGE FUND II, LLC, a California limited liability company and
CMR MORTGAGE FUND III, LLC, a California limited liability company
(collectively, the “Funds”).

 

RECITALS

 

A.                                    CMR and Choo acknowledge that CMR is
indebted to the Funds for various sums as more particularly set forth in the
respective audited financial statements for each of the Funds.

 

B.                                    Choo, indirectly through various family
trusts and other affiliated entities, is the controlling principal of CMR and
has an economic interest in the financial stability and solvency of CMR.

 

C.                                    CMR is the sole manager of the Funds and,
as such, has a fiduciary duty to manage the Funds in a prudent manner and also
will receive indirect benefits from the solvency and profitability of the Funds.

 

D.                                    Due to current extraordinary conditions in
the real estate credit and capital markets, the Funds are experiencing cash flow
shortages.  Choo wishes to contribute or otherwise advance to CMR funds to
enable CMR to pay debts and obligations owed to the Funds by CMR, which will
provide the Funds with cash for use in protecting and preserving assets and
paying their expenses during a period of reduced cash flow from their mortgage
investments.  Choo also wishes to provide CMR with operating capital to conduct
its business operations and satisfy other debts and obligations.

 

E.                                      Through various limited liability
companies that Choo directly or indirectly owns and/or controls, Choo indirectly
owns various real property assets with substantial equity that can be liquidated
to provide cash to meet the needs described above.

 

AGREEMENT

 

NOW, THEREFORE, for good and valuable consideration, the parties agree as
follows:

 

1.                                      Sale or Refinance of Real Estate Assets.
 Commencing on the date of this Agreement, Choo covenants and agrees to use his
diligent, good faith and best efforts to sell or cause to be sold,  some or all
of the real property assets listed in Exhibit A attached hereto (each
individually, a “Property,” and collectively, the “Properties”) to the extent
necessary to

 

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satisfy the requirements of Section 3 below.  Choo shall promptly cause the
ownership entity for each Property Choo decides to sell to enter into a listing
agreement with a reputable real estate brokerage firm appropriate for the
marketing and sale of each such Property.  Choo further covenants and agrees to
accept the best reasonable offer obtained for each Property selected to be sold
within a time period that is reasonably adequate to enable all such sales to
close within ninety (90) to one hundred eighty (180) days after the date
hereof.  Each Property is encumbered by various mortgages and liens and
agreements with various lenders.  Choo may elect to refinance or
cross-collateralize one or more of the Properties to raise cash proceeds to
contribute or advance to CMR and/or to obtain forbearances or extensions from
existing lenders.  Prior to the sale of any of the Properties, Choo retains the
right to encumber any of the Properties with further liens, pay off liens or
replace collateral for existing secured or unsecured debts of Choo and/or his
affiliates.  Choo is currently in discussions with various lenders regarding
existing secured and unsecured debts.

 

2.                                      Use of Proceeds by Choo; Contribution to
CMR.  Choo covenants and agrees that he will use and apply a substantial portion
of the net cash sales proceeds or refinance proceeds from the Property sales
described above for the sole and exclusive purposes of (a) contributing or
advancing (or causing to be contributed or advanced) all such proceeds to CMR
within two (2) business days after the close of escrow for the sale of each
Property until the requirements of Section 3 below have been satisfied;
(b) paying operating expenses, debt service and other expenditures reasonably
necessary to protect and preserve other Properties and/or to maximize the sales
proceeds obtainable from any sales thereof; and (c) paying or adequately
providing for Choo’s state and federal income tax liabilities.

 

3.                                      Use of Proceeds by CMR.  CMR covenants
and agrees to use funds that it receives pursuant to Section 2 above solely for
the following purposes:

 

(a)           To pay and satisfy in full all of its debts and obligations to the
Funds (including both the current and long-term portions of any such debts and
obligations) up to an aggregate maximum of $5,000,000 and all of its debts to
third parties; and

 

(b)           To fund an operating reserve of at least One Million Five Hundred
Thousand Dollars ($1,500,000.00), of which $400,000 has already been advanced in
April of 2008, by depositing such funds into a deposit account in CMR’s name at
CMR’s primary bank.  The funds in said operating reserve shall be used solely
for the overhead and operating costs of CMR.

 

4.                                      Term.  This Agreement shall continue
until the earlier of (a) the date that the independent registered public
accounting firm(s) employed by each of the Funds and CMR confirms that it/they
would issue an opinion regarding the financial statements of CMR and each Fund
without a qualification as to the ability of CMR or that Fund to continue in
business as a going concern, or (b) the termination of this Agreement by written
agreement of all parties hereto.

 

5.                                      General.

 

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(a)           Governing Law.  This Agreement and performance under it will be
governed by and construed in accordance with the laws of the State of
California.

 

(b)           Attorneys’ Fees.  If any legal or arbitration action or proceeding
is commenced by any party to enforce or interpret any provision of this
Agreement, the prevailing party shall be entitled to recover its reasonable
attorneys’ fees and other costs incurred by such prevailing party in such action
or proceeding.

 

(c)           Further Assurances.  The parties covenant and agree that,
subsequent to the execution and delivery of this Agreement and without any
additional consideration, each of the parties will execute and deliver any
further legal instruments and perform any acts which are or may become
reasonably necessary to effectuate this Agreement.

 

(d)           Assignment.  This Agreement will be binding on the parties hereto
and their respective successors and assigns.

 

(e)           Entire Agreement; Amendment.  This Agreement, including any
Exhibits referred to herein and attached hereto constitute the entire agreement
between the parties with respect to the subject matter contained in this
Agreement and supersede all prior agreements, whether written or oral, with
respect to such subject matter.  No modification, waiver, or discharge hereof
will be valid unless in writing and signed by the parties hereto.

 

(f)            Counterparts.  This Agreement may be executed in several
counterparts, all of which taken together will constitute one single agreement
between the parties.

 

(g)           Headings.  Headings contained in this Agreement are for
convenience only and are not -part of this Agreement and do not in any way
interpret, limit, or amplify the scope, extent, or intent of this Agreement or
any of the provisions hereof.

 

(h)           Severability.  The invalidity of any provision of this Agreement
will not affect the validity and binding effect of any other provision, and any
invalid provision will be severed from this Agreement and the remainder of the
Agreement will be enforced to the maximum extent permitted by applicable law and
in keeping with the original intention of the parties.

 

(i)            Authority.  Each person executing this Agreement hereby covenants
and warrants that he or she is duly and validly authorized to do so.

 

(j)            No Third Party Beneficiaries.  This Agreement is entered into
solely for the benefit of the parties hereto and is not intended to benefit, nor
shall it be enforceable by, any third party not a party thereto.

 

 

(Signature page follows.)

 

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IN WITNESS WHEREOF, the parties have each caused this Agreement to be signed and
delivered as of the date first set forth above.

 

“CMR”

 

“FUNDS”

 

 

 

CALIFORNIA MORTGAGE AND REALTY,

 

CMR MORTGAGE FUND, LLC,

INC., a Delaware corporation

 

a California limited liability company

 

 

 

 

 

 

 

 

By: 

California Mortgage and Realty, Inc.,

By: 

 /s/ James Gala

 

 

its Manager

 

James Gala, Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

By:  

 /s/ James Gala

 

 

 

 

James Gala, Chief Executive Officer

 

 

 

 

“CHOO”

 

 

 

 

 

CMR MORTGAGE FUND, II LLC,

 

 

a California limited liability company

 /s/ David Choo

 

 

 

DAVID CHOO

 

By: 

California Mortgage and Realty, Inc.,

 

 

 

 

its Manager

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:  

 /s/ James Gala

 

 

 

 

 

James Gala, Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

CMR MORTGAGE FUND III, LLC,

 

 

a California limited liability company

 

 

 

 

 

 

By: 

California Mortgage and Realty, Inc.,

 

 

 

 

its Manager

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:  

 /s/ James Gala

 

 

 

 

 

James Gala, Chief Executive Officer

 

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EXHIBIT A

 

PROPERTIES TO BE SOLD

 

CMR Capital, David Choo and Related Entities - Assets Listed for Sale 4/11/2008

 

Asset

 

Listing Agent

 

 

First and Mission - SF, CA

 

CBRE and Eastdil Secured

 

 

524 Howard Street - SF, CA

 

Colliers

 

 

25 Seaview - Piedmont, CA

 

Grubb Co.

 

 

2836 Washington Street - SF, CA

 

TRI Coldwell Banker

 

 

Scotts Valley - CA

 

In Contract

 

 

St. Regis Condo - SF, CA

 

Pacific Union

 

 

NYC Condo

 

Prudential Douglas Elliman

 

 

St. Helena, CA

 

Morgan Lane

 

 

Washington Street - Las Vegas, NV

 

In Contract

 

 

 

A-1

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