Document:

ex10-16.htm

    Exhibit 10.16

     

     

    UNIT PLEDGE
AGREEMENT

     

    

     

    THIS UNIT PLEDGE AGREEMENT
(“Agreement”)
is made as of the 21st day of November, 2007, by SANDSTONE EQUITY INVESTORS,
LLC, a Delaware limited liability company (“Debtor”), whose
principal place of business and chief executive office is located at 1291
Galleria Drive, Henderson, Nevada 89014, in favor of DESERT CAPITAL TRS, INC., a
Delaware corporation (“Secured Party”),
whose address is 1291 Galleria Drive, Henderson, Nevada 89014.  Debtor
hereby agrees with Secured Party as follows:

     

    1. Definitions.  As
used in this Agreement, the following terms shall have the meanings indicated
below:

     

    (a) The term
“Obligor” shall
mean Debtor and Consolidated Mortgage, LLC, a Nevada limited liability company
(“Borrower”).

     

    (b) The term
“Code” shall
mean Chapter 104 of the Nevada Revised Statutes as in effect in the State of
Nevada on the date of this Agreement or as it may hereafter be amended from time
to time.

     

    (c) The term
“Collateral”
shall mean all personal property of Debtor specifically described on Schedule A attached
hereto and made a part hereof.  The term Collateral, as used herein,
shall also include (i) all certificates, instruments and/or other documents
evidencing the foregoing, (ii) all renewals, replacements and substitutions
of all of the foregoing, (iii) all Additional Property (as hereinafter
defined), and (iv) all PRODUCTS and PROCEEDS of all of the
foregoing.  The designation of proceeds does not authorize Debtor to
sell, transfer or otherwise convey any of the foregoing property.  The
delivery at any time by Debtor to Secured Party of any property as a pledge to
secure payment or performance of any indebtedness or obligation whatsoever shall
also constitute a pledge of such property as Collateral hereunder.

     

    (d) The term
“Indebtedness”
shall mean all indebtedness, obligations and liabilities of Obligor to Secured
Party of any kind or character, now existing or hereafter arising, whether
direct, indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several or joint and several, including without limitation
all indebtedness, obligations and liabilities of Obligor to Secured Party now
existing or hereafter arising by note, draft, acceptance, guaranty, endorsement,
letter of credit, assignment, purchase, overdraft, discount, indemnity agreement
or otherwise, including, without limitation, (i) that one certain promissory
note dated November 21, 2007, in the original principal amount of $15,500,000
executed by Borrower and payable to the order of Secured Party (the “Note”), (ii) that
certain Purchase Agreement dated November 21, 2007, among Secured Party, Desert
Capital REIT, Inc., a Maryland corporation (the “REIT”), and Debtor,
as the same may be amended or otherwise modified from time to time (the “Purchase Agreement”),
(iii) under any documents evidencing, securing, governing and/or pertaining
to all or any part of the indebtedness described in (i) and (ii) above,
(iv) all costs and expenses incurred by Secured Party in connection with
the collection and administration of all or any part of the indebtedness and
obligations described in (i), (ii) and (iii) above or the protection or
preservation of, or realization upon, the collateral securing all or any part of
such indebtedness and obligations, including without limitation all reasonable
attorneys’ fees and expenses, and (v) all renewals, extensions,
modifications and rearrangements of the indebtedness and obligations described
in (i), (ii), (iii) and (iv) above.

     

    (e) The term
“Loan
Documents” shall mean all instruments and documents evidencing, securing,
governing, guaranteeing and/or pertaining to the Indebtedness.

     

    (f) The term
“Obligated
Party” shall mean any party other than Obligor who secures, guarantees
and/or is otherwise obligated to pay all or any portion of the
Indebtedness.

     

    (g)           The
term “Farrar
Litigation” shall mean the litigation filed on April 27, 2007 and pending
in Clark County, Nevada as Case Number A540243 against Todd Parriott, et al by
Robert Farrar, as Trustee for the Frank L. Farrar and Patricia J. Farrar
Irrevocable Trust and Consolidated Mortgage, LLC, f/k/a Consolidated Mortgage,
Inc.

     

    All words
and phrases used herein which are expressly defined in Section 104.1201,
Article 8 or Article 9 of the Code shall have the meaning provided for
therein.  Other words and phrases defined elsewhere in the Code shall
have the meaning specified therein except to the extent such meaning is
inconsistent with a definition in Section 104.1201, Article 8 or
Article 9 of the Code.

     

    2. Security
Interest.  As security for the Indebtedness, Debtor, for value
received, hereby grants to Secured Party a continuing security interest in the
Collateral.

     

    3. Additional
Property.  Collateral shall also include the following property
(collectively, the “Additional Property”)
which Debtor becomes entitled to receive or shall receive in connection with any
other Collateral:  (a) any unit certificate, including without
limitation, any certificate representing a distribution or any certificate in
connection with any recapitalization, reclassification, merger, consolidation,
conversion, sale of assets, combination of shares, split or spin-off;
(b) any option, warrant, subscription or right, whether as an addition to
or in substitution of any other Collateral; (c) any dividends or
distributions of any kind whatsoever, whether distributable in cash, units or
other property; (d) any interest, premium or principal payments; and
(e) any conversion or redemption proceeds; provided, however, that until
the occurrence of an Event of Default (as hereinafter defined), Debtor shall be
entitled to all cash distributions and all interest paid on the Collateral
(except interest paid on any certificate of deposit pledged hereunder) free of
the security interest created under this Agreement.  All Additional
Property received by Debtor shall be received in trust for the benefit of
Secured Party.  All Additional Property and all certificates or other
written instruments or documents evidencing and/or representing the Additional
Property that is received by Debtor, together with such instruments of transfer
as Secured Party may request, shall immediately be delivered to or deposited
with Secured Party and held by Secured Party as Collateral under the terms of
this Agreement.  If the Additional Property received by Debtor shall
be certificated units or other securities, such certificated units or other
securities shall be duly endorsed in blank or accompanied by proper instruments
of transfer and assignment duly executed in blank with, if requested by Secured
Party, signatures guaranteed by a bank or member firm of the New York Stock
Exchange, all in form and substance satisfactory to Secured
Party.  Secured Party shall be deemed to have possession of any
Collateral in transit to Secured Party or its agent.

     

    4. Voting
Rights.  As long as no Event of Default shall have occurred
hereunder, any voting rights incident to any units or other securities pledged
as Collateral may be exercised by Debtor; provided, however, that Debtor will
not exercise, or cause to be exercised, any such voting rights, without the
prior written consent of Secured Party, if the direct or indirect effect of such
vote will result in an Event of Default hereunder.

     

    5. Maintenance of
Collateral.  Other than the exercise of reasonable care to
assure the safe custody of any Collateral in Secured Party’s possession from
time to time, Secured Party does not have any obligation, duty or responsibility
with respect to the Collateral.  Without limiting the generality of
the foregoing, Secured Party shall not have any obligation, duty or
responsibility to do any of the following:  (a) ascertain any
maturities, calls, conversions, exchanges, offers, tenders or similar matters
relating to the Collateral or informing Debtor with respect to any such matters;
(b) fix, preserve or exercise any right, privilege or option (whether
conversion, redemption or otherwise) with respect to the Collateral unless
(i) Debtor makes written demand to Secured Party to do so, (ii) such
written demand is received by Secured Party in sufficient time to permit Secured
Party to take the action demanded in the ordinary course of its business, and
(iii) Debtor provides additional collateral, acceptable to Secured Party in
its sole discretion; (c) collect any amounts payable in respect of the
Collateral (Secured Party being liable to account to Debtor only for what
Secured Party may actually receive or collect thereon); (d) sell all or any
portion of the Collateral to avoid market loss; (e) sell all or any portion
of the Collateral unless and until (i) Debtor makes written demand upon
Secured Party to sell the Collateral, and (ii) Debtor provides additional
collateral, acceptable to Secured Party in its sole discretion; or (f) hold
the Collateral for or on behalf of any party other than Debtor.

     

    6. Representations and
Warranties.  Debtor hereby represents and warrants the
following to Secured Party:

     

    (a) Authority.  The
execution, delivery and performance of this Agreement and all of the other Loan
Documents by Debtor have been duly authorized by all necessary corporate action
of Debtor.

     

    (b) Accuracy of
Information.  All information heretofore, herein or hereafter
supplied to Secured Party by or on behalf of Debtor with respect to the
Collateral is true and correct.  The exact legal name, social security
number (if applicable), tax identification number, employee identification
number and organization number of Debtor is correctly shown in the first
paragraph hereof.

     

    (c) Enforceability.  This
Agreement and the other Loan Documents constitute legal, valid and binding
obligations of Debtor, enforceable in accordance with their respective terms,
except as limited by bankruptcy, insolvency or similar laws of general
application relating to the enforcement of creditors’ rights and except to the
extent specific remedies may generally be limited by equitable
principles.

     

    (d) Ownership and
Liens.  Debtor has good and marketable title to the Collateral
free and clear of all liens, security interests, encumbrances or adverse claims,
except for the security interest created by this Agreement and the Farrar
Litigation.  The Collateral constitutes 100% of the beneficial
ownership interests in Borrower and the Collateral constitutes the only
beneficial ownership in Borrower.  Except for the Farrar Litigation,
no dispute, right of setoff, counterclaim or defense exists with respect to all
or any part of the Collateral.  Debtor has not executed any other
security agreement currently affecting the Collateral and no financing statement
or other instrument similar in effect covering all or any part of the Collateral
is on file in any recording office except as may have been executed or filed in
favor of Secured Party.

     

    (e) No Conflicts or
Consents.  Neither the ownership, the intended use of the
Collateral by Debtor, the grant of the security interest by Debtor to Secured
Party herein nor the exercise by Secured Party of its rights or remedies
hereunder, will (i) conflict with any provision of (A) any domestic or
foreign law, statute, rule or regulation, (B) the articles or certificate
of incorporation or bylaws of Debtor, or (C) any agreement, judgment,
license, order or permit applicable to or binding upon Debtor or otherwise
affecting the Collateral, or (ii) result in or require the creation of any
lien, charge or encumbrance upon any assets or properties of Debtor or of any
person except as may be expressly contemplated in the Loan
Documents.  Except as expressly contemplated in the Loan Documents, no
consent, approval, authorization or order of, and no notice to or filing with,
any court, governmental authority or third party is required in connection with
the grant by Debtor of the security interest herein or the exercise by Secured
Party of its rights and remedies hereunder.

     

    (f) Security
Interest.  Debtor has and will have at all times full right,
power and authority to grant a security interest in the Collateral to Secured
Party in the manner provided herein, free and clear of any lien, security
interest or other charge or encumbrance except for the Farrar Litigation. This
Agreement creates a legal, valid and binding security interest in favor of
Secured Party in the Collateral.

     

    (g) Location/Identity.  Debtor’s
principal place of business and chief executive office (as those terms are used
in the Code) is located at the address set forth on the first page
hereof.  Except as specified elsewhere herein, all Collateral and
records concerning the Collateral shall be kept at such
address.  Debtor’s organizational structure, state of organization,
and organizational number (the “Organizational Information”) are as set forth on
the first page hereof.  Except as specified herein, the Organizational
Information shall not change.

     

    (h) Solvency of
Debtor.  As of the date hereof, and after giving effect to this
Agreement and the completion of all other transactions contemplated by Debtor at
the time of the execution of this Agreement, (i) Debtor is and will be
solvent, (ii) the fair saleable value of Debtor’s assets exceeds and will
continue to exceed Debtor’s liabilities (both fixed and contingent),
(iii) Debtor is paying and will continue to be able to pay its debts as
they mature, and (iv) if Debtor is not an individual, Debtor has and will
have sufficient capital to carry on Debtor’s businesses and all businesses in
which Debtor is about to engage.

     

    (i) Securities.  Any
certificates evidencing securities pledged as Collateral are valid and genuine
and have not been altered.  All securities pledged as Collateral have
been duly authorized and validly issued, are fully paid and non-assessable, and
were not issued in violation of the preemptive rights of any party or of any
agreement by which Debtor or the issuer thereof is bound.  No
restrictions or conditions exist with respect to the transfer or voting of any
securities pledged as Collateral, except as has been disclosed to Secured Party
in writing.  To the best of Debtor’s knowledge, no issuer of such
securities (other than securities of a class which are publicly traded) has any
outstanding rights, rights to subscribe, options, warrants or convertible
securities outstanding or any other rights outstanding entitling any party to
have issued to such party securities of such issuer, except as has been
disclosed to Secured Party in writing.

     

    7. Affirmative
Covenants.  Debtor will comply with the covenants contained in
this Section at all times during the period of time this Agreement is effective
unless Secured Party shall otherwise consent in writing.

     

     

    (a) Ownership and
Liens.  Debtor will maintain good and marketable title to all
Collateral free and clear of all liens, security interests, encumbrances or
adverse claims, except for (i) the security interest created by this Agreement,
(ii) the security interests and other encumbrances expressly permitted by the
other Loan Documents, and (iii) the Farrar Litigation.  Debtor will
own at all times 100% of the beneficial ownership interests in
Borrower.  Except for the Farrar Litigation, Debtor will not permit
any dispute, right of setoff, counterclaim or defense to exist with respect to
all or any part of the Collateral.  Debtor will cause any financing
statement or other security instrument with respect to the Collateral to be
terminated, except as may exist or as may have been filed in favor of Secured
Party.  Debtor hereby irrevocably appoints Secured Party as Debtor’s
attorney-in-fact, such power of attorney being coupled with an interest, with
full authority in the place and stead of Debtor and in the name of Debtor or
otherwise, for the purpose of terminating any financing statements currently
filed with respect to the Collateral.  Debtor will defend at its
expense Secured Party’s right, title and security interest in and to the
Collateral against the claims of any third party.

     

    (b) Inspection of Books and
Records.  Debtor will keep adequate records concerning the
Collateral and will permit Secured Party and all representatives and agents
appointed by Secured Party to inspect Debtor’s books and records of or relating
to the Collateral at any time during normal business hours, to make and take
away photocopies, photographs and printouts thereof and to write down and record
any such information.

     

    (c) Adverse
Claim.  Debtor covenants and agrees to promptly notify Secured
Party of any claim, action or proceeding affecting title to the Collateral, or
any part thereof, or the security interest created hereunder and, at Debtor’s
expense, defend Secured Party’s security interest in the Collateral against the
claims of any third party.  Debtor also covenants and agrees to
promptly deliver to Secured Party a  copy of all written notices
received by Debtor with respect to the Collateral, including without limitation,
notices received from the issuer of any securities pledged hereunder as
Collateral.

     

    (d) Further
Assurances.  Debtor will contemporaneously with the execution
hereof and from time to time thereafter at its expense promptly execute and
deliver all further instruments and documents and take all further action
necessary or appropriate or that Secured Party may request in order (i) to
perfect and protect the security interest created or purported to be created
hereby and the first priority of such security interest, (ii) to enable
Secured Party to exercise and enforce its rights and remedies hereunder in
respect of the Collateral, and (iii) to otherwise effect the purposes of
this Agreement, including without limitation:  (A) executing (if
requested) and filing any financing or continuation statements, or any
amendments thereto; (B) obtaining written confirmation from the issuer of
any securities pledged as Collateral of the pledge of such securities, in form
and substance satisfactory to Secured Party; (C) cooperating with Secured
Party in registering the pledge of any securities pledged as Collateral with the
issuer of such securities; (D) delivering notice of Secured Party’s
security interest in any securities pledged as Collateral to any financial
intermediary, clearing corporation or other party required by Secured Party, in
form and substance satisfactory to Secured Party; and (E) obtaining written
confirmation of the pledge of any securities constituting Collateral from any
financial intermediary, clearing corporation or other party required by Secured
Party, in form and substance satisfactory to Secured Party.  If all or
any part of the Collateral is securities issued by an agency or department of
the United States, Debtor covenants and agrees, at Secured Party’s request, to
cooperate in registering such securities in Secured Party’s name or with Secured
Party’s account maintained with a Federal Reserve Secured Party.

     

    (e) Control
Agreements.  Debtor will cooperate with Secured Party in
obtaining a control agreement in form and substance satisfactory to Secured
Party with respect to Collateral for which such agreement is required for
perfection of a security interest pursuant to the Code (as determined by Secured
Party in its sole discretion)

     

    8. Negative
Covenants.  Debtor will comply with the covenants contained in
this Section at all times during the period of time this Agreement is effective,
unless Secured Party shall otherwise consent in writing.

     

    (a) Transfer or
Encumbrance.  Debtor will not (i) sell, assign (by
operation of law or otherwise) or transfer Debtor’s rights in any of the
Collateral, (ii) grant a lien or security interest in or execute,
authorize, file or record any financing statement or other security instrument
with respect to the Collateral to any party other than Secured Party, or
(iii) deliver actual or constructive possession of any certificate,
instrument or document evidencing and/or representing any of the Collateral to
any party other than Secured Party.  Debtor will not permit the sale,
pledge or encumbrance or other transfer of ownership interest in Borrower or the
issuance of any additional ownership interests in Borrower.

     

    (b) Impairment of Security
Interest.  Debtor will not take or fail to take any action
which would in any manner impair the value or enforceability of Secured Party’s
security interest in any Collateral.

     

    (c) Dilution of
Ownership.  As to any securities pledged as Collateral (other
than securities of a class which are publicly traded), Debtor will not consent
to or approve of the issuance of (i) any additional units or shares of any
class of securities of such issuer (unless immediately upon issuance additional
securities are pledged and delivered to Secured Party pursuant to the terms
hereof to the extent necessary to give Secured Party a security interest after
such issuance in at least the same percentage of such issuer’s outstanding
securities as Secured Party had before such issuance), (ii) any instrument
convertible voluntarily by the holder thereof or automatically upon the
occurrence or non-occurrence of any event or condition into, or exchangeable
for, any such securities, or (iii) any warrants, options, contracts or
other commitments entitling any third party to purchase or otherwise acquire any
such securities.

     

    (d) Restrictions on
Securities.  Debtor will not enter into any agreement creating,
or otherwise permit to exist, any restriction or condition upon the transfer,
voting or control of any securities pledged as Collateral, except as consented
to in writing by Secured Party.

     

    9. Rights of Secured
Party.  Secured Party shall have the rights contained in this
Section at all times during the period of time this Agreement is
effective.

     

    (a) Power of
Attorney.  Debtor hereby irrevocably appoints Secured Party as
Debtor’s attorney-in-fact, such power of attorney being coupled with an
interest, with full authority in the place and stead of Debtor and in the name
of Debtor or otherwise, to take any action and to execute any instrument after
the occurrence and during the continuance of an Event of Default, which Secured
Party may from time to time in Secured Party’s discretion deem necessary or
appropriate to accomplish the purposes of this Agreement, including without
limitation, the following action:  (i) transfer any securities,
instruments, documents or certificates pledged as Collateral in the name of
Secured Party or its nominee; (ii) use any interest, premium or principal
payments, conversion or redemption proceeds or other cash proceeds received in
connection with any Collateral to reduce any of the Indebtedness;
(iii) exchange any of the securities pledged as Collateral for any other
property upon any merger, consolidation, reorganization, recapitalization or
other readjustment of the issuer thereof, and, in connection therewith, to
deposit and deliver any and all of such securities with any committee,
depository, transfer agent, registrar or other designated agent upon such terms
and conditions as Secured Party may deem necessary or appropriate;
(iv) exercise or comply with any conversion, exchange, redemption,
subscription or any other right, privilege or option pertaining to any
securities pledged as Collateral; provided, however, except as provided herein,
Secured Party shall not have a duty to exercise or comply with any such right,
privilege or option (whether conversion, redemption or otherwise) and shall not
be responsible for any delay or failure to do so; and (v) file any claims
or take any action or institute any proceedings which Secured Party may deem
necessary or appropriate for the collection and/or preservation of the
Collateral or otherwise to enforce the rights of Secured Party with respect to
the Collateral.

     

    (b) Performance by Secured
Party.  If Debtor fails to perform any agreement or obligation
provided herein, Secured Party may itself perform, or cause performance of, such
agreement or obligation, and the expenses of Secured Party incurred in
connection therewith shall be a part of the Indebtedness, secured by the
Collateral and payable by Debtor on demand.

     

    Notwithstanding
any other provision herein to the contrary, Secured Party does not have any duty
to exercise or continue to exercise any of the foregoing rights and shall not be
responsible for any failure to do so or for any delay in doing so.

     

    10. Events of
Default.  Each of the following constitutes an “Event of Default”
under this Agreement:

     

    (a) Default in
Payment.  The failure, refusal or neglect of Obligor to make
any payment of principal or interest on the Indebtedness, or any portion
thereof, as the same shall become due and payable and such failure, refusal or
neglect shall continue for five (5) days; or

     

    (b) Non-Performance of
Covenants.  The failure of Obligor or any Obligated Party to
timely and properly observe, keep or perform any covenant, agreement, warranty
or condition required herein or in any of the other Loan Documents and such
failure shall continue for ten (10) days after written notice thereof has been
given to Obligor or such Obligated Party; or

     

    (c) Default Under other Loan
Documents.  The occurrence of an event of default under any of
the other Loan Documents; or

     

    (d) False
Representation.  Any representation contained herein or in any
of the other Loan Documents made by Obligor or any Obligated Party is false or
misleading in any material respect; or

     

    (e) Default to Third
Party.  The occurrence of any event which permits the
acceleration of the maturity of any indebtedness owing by Obligor or any
Obligated Party to any third party under any agreement or undertaking;
or

     

    (f) Debtor’s Secured Bankruptcy
or Insolvency.  If Obligor or any Obligated Party:
(i) becomes insolvent, or makes a transfer in fraud of creditors, or makes
an assignment for the benefit of creditors, or admits in writing its inability
to pay its debts as they become due; (ii) generally is not paying its debts
as such debts become due; (iii) has a receiver, trustee or custodian
appointed for, or take possession of, all or substantially all of the assets of
such party or any of the Collateral, either in a proceeding brought by such
party or in a proceeding brought against such party and such appointment is not
discharged or such possession is not terminated within sixty (60) days after the
effective date thereof or such party consents to or acquiesces in such
appointment or possession; (iv) files a petition for relief under the
United States Secured Bankruptcy Code or any other present or future federal or
state insolvency, bankruptcy or similar laws (all of the foregoing hereinafter
collectively called “Applicable Secured
Bankruptcy Law”) or an involuntary petition for relief is filed against
such party under any Applicable Secured Bankruptcy Law and such involuntary
petition is not dismissed within sixty (60) days after the filing thereof, or an
order for relief naming such party is entered under any Applicable Secured
Bankruptcy Law, or any composition, rearrangement, extension, reorganization or
other relief of debtors now or hereafter existing is requested or consented to
by such party; (v) fails to have discharged within a period of sixty (60) days
any attachment, sequestration or similar writ levied upon any property of such
party; or (vi) fails to pay within thirty (30) days any final money judgment
against such party; or

     

    (g) Execution on
Collateral.  The Collateral or any portion thereof is taken on
execution or other process of law in any action against Debtor; or

     

    (h) Abandonment.  Debtor
abandons the Collateral or any portion thereof; or

     

    (i) Action by Other
Lienholder.  The holder of any lien or security interest on any
of the assets of Debtor, including without limitation, the Collateral (without
hereby implying the consent of Secured Party to the existence or creation of any
such lien or security interest on the Collateral), declares a default thereunder
or institutes foreclosure or other proceedings for the enforcement of its
remedies thereunder; or

     

    (j) Liquidation, Death and
Related Events.  The liquidation, dissolution, merger or
consolidation of Obligor or any Obligated Party; or

     

    (k) Dilution of
Ownership.  The issuer of any securities (other than securities
of a class which are publicly traded) constituting Collateral hereafter issues
any units or shares of any class of capital stock (unless immediately upon
issuance, additional securities are pledged and delivered to Secured Party
pursuant to the terms hereof to the extent necessary to give Secured Party a
security interest after such issuance in at least the same percentage of such
issuer’s outstanding securities as Secured Party had before such issuance) or
any options, warrants or other rights to purchase any such units or capital
stock;

     

    (l) Secured Bankruptcy of
Issuer.  (i) The issuer of any securities constituting
Collateral files a petition for relief under any Applicable Secured Bankruptcy
Law, (ii) an involuntary petition for relief is filed against any such
issuer under any Applicable Secured Bankruptcy Law and such involuntary petition
is not dismissed within thirty (30) days after the filing thereof, or
(iii) an order for relief naming any such issuer is entered under any
Applicable Secured Bankruptcy Law, or

     

    (m) Search
Report.  If Secured Party shall have elected to file any
financing statement with respect to the Collateral, Secured Party shall receive
at any time following the execution of this Agreement a search report indicating
that Secured Party’s security interest is not prior to all other security
interests or other interests reflected in the report.

     

    11. Remedies and Related
Rights.  If an Event of Default shall have occurred, and
without limiting any other rights and remedies provided herein, under any of the
other Loan Documents or otherwise available to Secured Party, Secured Party may
exercise one or more of the rights and remedies provided in this
Section.

     

    (a) Remedies.  Secured
Party may from time to time at its discretion, without limitation and without
notice except as expressly provided in any of the Loan Documents:

     

    (i) exercise
in respect of the Collateral all the rights and remedies of a secured party
under the Code (whether or not the Code applies to the affected
Collateral);

     

    (ii) reduce
its claim to judgment or foreclose or otherwise enforce, in whole or in part,
the security interest granted hereunder by any available judicial
procedure;

     

    (iii) sell or
otherwise dispose of, at its office, on the premises of Debtor or elsewhere, the
Collateral, as a unit or in parcels, by public or private proceedings, and by
way of one or more contracts (it being agreed that the sale or other disposition
of any part of the Collateral shall not exhaust Secured Party’s power of sale,
but sales or other dispositions may be made from time to time until all of the
Collateral has been sold or disposed of or until the Indebtedness has been paid
and performed in full), and at any such sale or other disposition it shall not
be necessary to exhibit any of the Collateral;

     

    (iv) buy the
Collateral, or any portion thereof, at any public sale;

     

    (v) buy the
Collateral, or any portion thereof, at any private sale if the Collateral is of
a type customarily sold in a recognized market or is of a type which is the
subject of widely distributed standard price quotations;

     

    (vi) apply for
the appointment of a receiver for the Collateral, and Debtor hereby consents to
any such appointment; and

     

    (vii) at its
option, retain the Collateral in satisfaction of the Indebtedness whenever the
circumstances are such that Secured Party is entitled to do so under the Code or
otherwise, to the full extent permitted by the Code, Secured Party shall be
permitted to elect whether such retention shall be in full or partial
satisfaction of the Indebtedness.

     

    In the
event Secured Party shall elect to sell the Collateral, Secured Party may sell
the Collateral without giving any warranties as and shall be permitted to
specifically disclaim any warranties of title or the like.  Further,
if Secured Party sells any of the Collateral on credit, Debtor will be credited
only with payments actually made by the purchaser, received by Secured Party and
applied to the Indebtedness.  In the event the purchaser fails to pay
for the Collateral, Secured Party may resell the Collateral and Debtor shall be
credited with the proceeds of the sale.  Debtor agrees that in the
event Debtor or any Obligor is entitled to receive any notice under the Code, as
it exists in the state governing any such notice, of the sale or other
disposition of any Collateral, reasonable notice shall be deemed given when such
notice is deposited in a depository receptacle under the care and custody of the
United States Postal Service, postage prepaid, at such party’s address set forth
on the first page hereof, ten (10) days prior to the date of any public sale, or
after which a private sale, of any of such Collateral is to be
held.  Secured Party shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given.  Secured
Party may adjourn any public or private sale from time to time  by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so
adjourned.  Debtor further acknowledges and agrees that the redemption
by Secured Party of any certificate of deposit pledged as Collateral shall be
deemed to be a commercially reasonable disposition under Section 104.9610
of the Code.

     

    (b) Private Sale of
Securities.  Debtor recognizes that Secured Party may be unable
to effect a public sale of all or any part of the securities pledged as
Collateral because of restrictions in applicable federal and state securities
laws and that Secured Party may, therefore, determine to make one or more
private sales of any such securities to a restricted group of purchasers who
will be obligated to agree, among other things, to acquire such securities for
their own account, for investment and not with a view to the distribution or
resale thereof.  Debtor acknowledges that each any such private sale
may be at prices and other terms less favorable than what might have been
obtained at a public sale and, notwithstanding the foregoing, agrees that each
such private sale shall be deemed to have been made in a commercially reasonable
manner and that Secured Party shall have no obligation to delay the sale of any
such securities for the period of time necessary to permit the issuer to
register such securities for public sale under any federal or state securities
laws.  Debtor further acknowledges and agrees that any offer to sell
such securities which has been made privately in the manner described above to
not less than five (5) bona fide offerees
shall be deemed to involve a “public sale” for the purposes of Article 9 of the
Code, notwithstanding that such sale may not constitute a “public offering”
under any federal or state securities laws and that Secured Party may, in such
event, bid for the purchase of such securities.

     

    (c) Application of
Proceeds.  If any Event of Default shall have occurred, Secured
Party may at its discretion apply or use any cash held by Secured Party as
Collateral, and any cash proceeds received by Secured Party in respect of any
sale or other disposition of, collection from, or other realization upon, all or
any part of the Collateral as follows in such order and manner as Secured Party
may elect:

     

    (i) to the
repayment or reimbursement of the reasonable costs and expenses (including,
without limitation, reasonable attorneys’ fees and expenses) incurred by Secured
Party in connection with (A) the administration of the Loan Documents,
(B) the custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, the Collateral, and (C) the
exercise or enforcement of any of the rights and remedies of Secured Party
hereunder;

     

    (ii) to the
payment or other satisfaction of any liens and other encumbrances upon the
Collateral;

     

    (iii) to the
satisfaction of the Indebtedness;

     

    (iv) by
holding such cash and proceeds as Collateral;

     

    (v) to the
payment of any other amounts required by applicable law (including without
limitation, Section 104.9615(a)(3) of the Code or any other applicable
statutory provision); and

     

    (vi) by
delivery to Debtor or any other party lawfully entitled to receive such cash or
proceeds whether by direction of a court of competent jurisdiction or
otherwise.

     

    (d) Deficiency.  In
the event that the proceeds of any sale of, collection from, or other
realization upon, all or any part of the Collateral by Secured Party are
insufficient to pay all amounts to which Secured Party is legally entitled,
Obligor and any party who guaranteed or is otherwise obligated to pay all or any
portion of the Indebtedness shall be liable for the deficiency, together with
interest thereon as provided in the Loan Documents, to the full extent permitted
by the Code.

     

    (e) Non-Judicial
Remedies.  In granting to Secured Party the power to enforce
its rights hereunder without prior judicial process or judicial hearing, Debtor
expressly waives, renounces and knowingly relinquishes any legal right which
might otherwise require Secured Party to enforce its rights by judicial
process.  Debtor recognizes and concedes that non-judicial remedies
are consistent with the usage of trade, are responsive to commercial necessity
and are the result of a bargain at arm’s length.  Nothing herein is
intended to prevent Secured Party or Debtor from resorting to judicial process
at either party’s option.

     

    (f) Other
Recourse.  Debtor waives any right to require Secured Party to
proceed against any third party, exhaust any Collateral or other security for
the Indebtedness, or to have any third party joined with Debtor in any suit
arising out of the Indebtedness or any of the Loan Documents, or pursue any
other remedy available to Secured Party.  Debtor further waives any
and all notice of acceptance of this Agreement and of the creation,
modification, rearrangement, renewal or extension of the
Indebtedness.  Debtor further waives any defense arising by reason of
any disability or other defense of any third party or by reason of the cessation
from any cause whatsoever of the liability of any third party.  Until
all of the Indebtedness shall have been paid in full, Debtor shall have no right
of subrogation and Debtor waives the right to enforce any remedy which Secured
Party has or may hereafter have against any third party, and waives any benefit
of and any right to participate in any other security whatsoever now or
hereafter held by Secured Party.  Debtor authorizes Secured Party, and
without notice or demand and without any reservation of rights against Debtor
and without affecting Debtor’s liability hereunder or on the Indebtedness, to
(i) take or hold any other property of any type from any third party as
security for the Indebtedness, and exchange, enforce, waive and release any or
all of such other property, (ii) apply such other property and direct the
order or manner of sale thereof as Secured Party may in its discretion
determine, (iii) renew, extend, accelerate, modify, compromise, settle or
release any of the Indebtedness or other security for the Indebtedness,
(iv) waive, enforce or modify any of the provisions of any of the Loan
Documents executed by any third party, and (v) release or substitute any
third party.

     

    (g) Voting
Rights.  Upon the occurrence of an Event of Default, Debtor
will not exercise any voting rights with respect to securities pledged as
Collateral.  Debtor hereby irrevocably appoints Secured Party as
Debtor’s attorney-in-fact (such power of attorney being coupled with an
interest) and proxy to exercise any voting rights with respect to Debtor’s
securities pledged as Collateral upon the occurrence of an Event of
Default.

     

    (h) Distribution Rights and
Interest Payments.  Upon the occurrence of an Event of
Default:

     

    (i) all
rights of Debtor to receive and retain the distributions and interest payments
which it would otherwise be authorized to receive and retain pursuant to
Section 3 shall automatically cease, and all such rights shall thereupon
become vested with Secured Party which shall thereafter have the sole right to
receive, hold and apply as Collateral such distributions and interest payments;
and

     

    (ii) all
distributions and interest payments that are received by Debtor contrary to the
provisions of clause (i) of this Subsection shall be received in trust for
the benefit of Secured Party, shall be segregated from other funds of Debtor,
and shall be forthwith paid over to Secured Party in the exact form received
(properly endorsed or assigned if requested by Secured Party), to be held by
Secured Party as Collateral.

     

    12. Indemnity.  Debtor
hereby indemnifies and agrees to hold harmless Secured Party, and its officers,
directors, employees, agents and representatives (each an “Indemnified Person”)
from and against any and all liabilities, obligations, claims, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature (collectively, the “Claims”) which may be
imposed on, incurred by, or asserted against, any Indemnified Person arising in
connection with the Loan Documents, the Indebtedness or the Collateral
(including without limitation, the enforcement of the Loan Documents and the
defense of any Indemnified Person’s actions and/or inactions in
connection  with the Loan Documents).  The indemnification
provided for in this Section shall survive the termination of this Agreement and
shall extend and continue to benefit each individual or entity that is or has at
any time been an Indemnified Person hereunder.

     

    13. Miscellaneous.

     

    (a) Entire
Agreement.  This Agreement contains the entire agreement of
Secured Party and Debtor with respect to the Collateral.  If the
parties hereto are parties to any prior agreement, either written or oral,
relating to the Collateral, the terms of this Agreement shall amend and
supersede the terms of such  prior  agreements as to
transactions on or after the effective date of this Agreement, but all security
agreements, financing statements, guaranties, other contracts and notices for
the benefit of Secured Party shall continue in full force and effect to secure
the Indebtedness unless Secured Party specifically releases its rights
thereunder by separate release.

     

    (b) Amendment.  No
modification, consent or amendment of any provision of this Agreement or any of
the other Loan Documents shall be valid or effective unless the same is in
writing and authenticated by the party against whom it is sought to be enforced,
except to the extent of amendments specifically permitted by the Code without
authentication by the Debtor or Obligor.

     

    (c) Actions by Secured
Party.  The lien, security interest and other security rights
of Secured Party hereunder shall not be impaired by (i) any renewal, extension,
increase or modification with respect to the Indebtedness, (ii) any surrender,
compromise, release, renewal, extension, exchange or substitution which Secured
Party may grant with respect to the Collateral, or (iii) any release or
indulgence granted to any endorser, guarantor or surety of the
Indebtedness.  The taking of additional security by Secured Party
shall not release or impair the lien, security interest or other security rights
of Secured Party hereunder or affect the obligations of Debtor
hereunder.

     

    (d) Waiver by Secured
Party.  Secured Party may waive any Event of Default without
waiving any other prior or subsequent Event of Default.  Secured Party
may remedy any default without waiving the Event of Default
remedied.  Neither the failure by Secured Party to exercise, nor the
delay by Secured Party in exercising, any right or remedy upon any Event of
Default shall be construed as a waiver of such Event of Default or as a waiver
of the right to exercise any such right or remedy at a later date.  No
single or partial exercise by Secured Party of any right or remedy hereunder
shall exhaust the same or shall preclude any other or further exercise thereof,
and every such right or remedy hereunder may be exercised at any
time.  No waiver of any provision hereof or consent to any departure
by Debtor therefrom shall be effective unless the same shall be in writing and
signed by Secured Party and then such waiver or consent shall be effective only
in the specific instances, for the purpose for which given and to the extent
therein specified.  No notice to or demand on Debtor in any case shall
of itself entitle Debtor to any other or further notice or demand in similar or
other circumstances.

     

    (e) Costs and
Expenses.  Debtor will upon demand pay to Secured Party the
amount of any and all costs and expenses (including without limitation,
reasonable attorneys’ fees and expenses), which Secured Party may incur in
connection with  the exercise or enforcement of any of the rights of
Secured Party under the Loan Documents or the failure by Debtor to perform or
observe any of the provisions hereof.

     

    (f) GOVERNING
LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEVADA AND APPLICABLE FEDERAL LAWS,
EXCEPT TO THE EXTENT PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION
OF THE SECURITY INTEREST GRANTED HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
NEVADA.

     

    (g) Venue.  This
Agreement has been entered into in the county in Nevada where Secured Party’s
address for notice purposes is located, and it shall be performable for all
purposes in such county.  Courts within the State of Nevada shall have
jurisdiction over any and all disputes arising under or pertaining to this
Agreement and venue for any such disputes shall be in the county or judicial
district where this Agreement has been executed and delivered.

     

    (h) Severability.  If
any provision of this Agreement is held by a court of competent jurisdiction to
be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable, shall not impair or invalidate the remainder
of this Agreement and the effect thereof shall be confined to the provision held
to be illegal, invalid or unenforceable.

     

    (i) No
Obligation.  Nothing contained herein shall be construed as an
obligation on the part of Secured Party to extend or continue to extend credit
to Obligor.

     

    (j) Notices.  All
notices, requests, demands or other communications required or permitted to be
given pursuant to this Agreement shall be in writing and given by
(i) personal delivery, (ii) expedited delivery service with proof of
delivery, or (iii) United States mail, postage prepaid, registered or
certified mail, return receipt requested, sent to the intended addressee at the
address set forth on the first page hereof or to such different address as the
addressee shall have designated by written notice sent pursuant to the terms
hereof and shall be deemed to have been received either, in the case of personal
delivery, at the time of personal delivery, in the case of expedited delivery
service, as of the date of first attempted delivery at the address and in the
manner provided herein, or in the case of mail, upon deposit in a depository
receptacle under the care and custody of the United States Postal
Service.  Either party shall have the right to change its address for
notice hereunder to any other location within the continental United States by
notice to the other party of such new address at least thirty (30) days prior to
the effective date of such new address.

     

    (k) Binding Effect and
Assignment.  This Agreement (i) creates a continuing
security interest in the Collateral, (ii) shall be binding on Debtor and
the heirs, executors, administrators, personal representatives, successors and
assigns of Debtor, and (iii) shall inure to the benefit of Secured Party
and its successors and assigns.  Without limiting the generality of
the foregoing, Secured Party may pledge, assign or otherwise transfer the
Indebtedness and its rights under this Agreement and any of the other Loan
Documents to any other party.  Debtor’s rights and obligations
hereunder may not be assigned or otherwise transferred without the prior written
consent of Secured Party.

     

    (l) Termination.  It
is contemplated by the parties hereto that from time to time there may be no
outstanding Indebtedness, but notwithstanding such occurrences, this Agreement
shall remain valid and shall be in full force and effect as to subsequent
outstanding Indebtedness.  Upon (i) the satisfaction in full of the
Indebtedness, (ii) the termination or expiration of any commitment of Secured
Party to extend credit to Obligor, (iii) written request for the termination
hereof delivered by Debtor to Secured Party, and (iv) written release delivered
by Secured Party to Debtor, this Agreement and the security interests created
hereby shall terminate.  Upon termination of this Agreement and
Debtor’s written request, Secured Party will, at Debtor’s sole cost and expense,
return to Debtor such of the Collateral as shall not have been sold or otherwise
disposed of or applied pursuant to the terms hereof and execute and deliver to
Debtor such documents as Debtor shall reasonably request to evidence such
termination.

     

    (m) Cumulative
Rights.  All rights and remedies of Secured Party hereunder are
cumulative of each other and of every other right or remedy which Secured Party
may otherwise have at law or in equity or under any of the other Loan Documents,
and the exercise of one or more of such rights or remedies shall not prejudice
or impair the concurrent or subsequent exercise of any other rights or
remedies.  Further, except as specifically noted as a waiver herein,
no provision of this Agreement is intended by the parties to this Agreement to
waive any rights, benefits or protection afforded to Secured Party under the
Code.

     

    (n) Gender and
Number.  Within this Agreement, words of any gender shall be
held and construed to include the other gender, and words in the singular number
shall be held and construed to include the plural and words in the plural number
shall be held and construed to include the singular, unless in each instance the
context requires otherwise.

     

    (o) Descriptive
Headings.  The headings in this Agreement are for convenience
only and shall in no way enlarge, limit or define the scope or meaning of the
various and several provisions hereof.

     

    14. Financing Statement
Filings.  Debtor hereby authorizes the filing of and recognizes
that financing statements pertaining to the Collateral have been or may be filed
in one or more of the following jurisdictions:  the location of
Debtor’s place of business, the location of Debtor’s chief executive office, or
other such place as the Debtor may be “located” under the provisions of the
Code; where Debtor maintains any Collateral, or has its records concerning any
Collateral, as the case may be.  Without limitation of any other
covenant herein, Debtor will neither cause or permit any change in the location
of (i) any Collateral, (ii) any records concerning any Collateral, or
(iii) Debtor’s principal residence, the location of Debtor’s place of
business, or the location of Debtor’s chief executive office, as the case may
be, to a jurisdiction other than as represented in Subsection 3(g),
nor will Debtor change its name or the Organizational Information as represented
in Subsection
3(g), unless Debtor shall have notified Secured Party in writing of such
change at least thirty (30) days prior to the effective date of such change, and
shall have first taken all action required by Secured Party for the purpose of
further perfecting or protecting the security interest in favor of Secured Party
in the Collateral.  In any written notice furnished pursuant to this
Subsection, Debtor will expressly state that the notice is required by this
Agreement and contains facts that may require additional filings of financing
statements, amendments or other notices for the purpose of continuing perfection
of Secured Party’s security interest in the Collateral.

     

    Without
limiting Secured Party’s rights hereunder, Debtor authorizes Secured Party to
file financing statements or amendments thereto under the provisions of the Code
as amended from time to time.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXECUTED
as of the date first written above.

     

    
      	
              DEBTOR:

              SANDSTONE
      EQUITY INVESTORS, LLC

              By: /s/G. Steven
      Dawson                                                                

                        
      G. Steven Dawson

                       
      Managing Director

            	
              SECURED
      PARTY:

              DESERT
      CAPITAL TRS, INC.

              By: 
      /s/Todd B.
      Parriott                                                             

                          Todd
      B. Parriott

                         
      President

            
	 
      	 
      

    

    

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
A

     

    TO

     

    PLEDGE
AND SECURITY AGREEMENT

     

    DATED
NOVEMBER 21, 2007

     

    BY
AND BETWEEN

     

    DESERT
CAPITAL TRS, INC.

     

    AND

     

    SANDSTONE
EQUITY INVESTORS, LLC

     

     

    The
following property is a part of the Collateral as defined in Subsection
1(c):

     

    All
membership units of Consolidated Mortgage, LLC, a Nevada limited liability
company, now or hereafter issued and outstanding, and however evidenced,
together with any and all books of account and other records relating in any way
to the foregoing, together with all products and proceeds thereof.ex10-17.htm

    Exhibit 10.17

    

    

    November
21, 2007

    

    

    Desert
Capital REIT, Inc.

    1291
Galleria Drive

    Henderson,
Nevada  89014

    Attn.:  Todd
Parriott

    

    Re:           Advisory
Agreement dated July 15, 2004, between Desert Capital REIT, Inc., a Maryland
corporation (formerly known as Bull Street Real Estate Investment Trust, Inc.)
(the “Company”) and Burton Management Company, Ltd., a Nevada corporation (the
“Advisor”) (the “Advisory Agreement”)

    

    Ladies
and Gentlemen:

    

    Reference is hereby made to the
Advisory Agreement and specifically to Section 6.2.1 thereof.  All
capitalized terms not otherwise defined herein shall have the same meanings as
set forth in the Advisory Agreement.  Pursuant to Section 6.2.1 of the
Advisory Agreement, the Advisor is to be paid Incentive Management Compensation
on a quarterly basis based upon a percentage by which the Company’s Net Income
exceeds the Threshold Return.

    

    The Advisor and the Company are
executing this letter agreement to evidence the Advisor’s and the Company’s
agreement that Consolidated Mortgage, LLC is being sold to an affiliate and
accordingly, the Advisor shall not receive the incremental amount of the
Incentive Management Compensation that is attributable to the gain on sale to be
realized by the Company in connection with the sale of Consolidated Mortgage,
LLC.

    

    This
letter agreement shall be governed by the laws of the State of
Nevada.  This letter agreement may be executed in one or more
counterparts each of which shall be deemed an original and all of which taken
together shall represent one and the same agreement.  Delivery of an
executed signature page of this Agreement by facsimile transmission shall be
effective as delivery of a manually executed counterpart hereof.

    

    

    

    [Signature page immediately
follows.]

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    Sincerely,

    

    BURTON
MANAGEMENT COMPANY, LTD.

    

    

    By:  /s/Todd B. Parriott

    Todd B. Parriott

    President

    

    

    

    ACCEPTED
AND AGREED TO

    THIS 21st
DAY OF November 2007

    

    DESERT
CAPITAL REIT, INC.

    

    

    By: 
/s/G. Steven Dawson

          
G. Steven Dawson

           Chief
Financial Officer

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00140-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00140-of-00352.parquet"}]]