Exhibit 1.2
VESTIN GROUP, INC.
UP TO
$500,000,000
OF SUBORDINATED NOTES
SELECTED DEALER AGREEMENT
Ladies and Gentlemen:
VESTIN GROUP, INC., a Delaware corporation (the "Company"), invites you
(the "Dealer") to participate in the distribution of subordinated notes to be
issued by the Company (the "Notes") subject to the following terms of this
Selected Dealer Agreement ("Agreement"):
1. Best-Effort Basis
The Notes are offered solely by the Company and through broker-dealers who
are members of the National Association of Securities Dealers, Inc. ("NASD").
Dealer hereby agrees to use its best efforts to sell the Notes for cash on the
terms and conditions stated in the Prospectus (as defined below). Nothing in
this Agreement shall be deemed or construed to make Dealer an employee, agent,
representative or partner of the Company and Dealer is not authorized to act for
the Company or to make any representations on its behalf except as set forth in
the Prospectus and such other printed information furnished to Dealer by the
Company to supplement the Prospectus ("supplemental information").
2. Representations and Warranties of the Company
The Company represents and warrants to the Dealer that:
2.1 A Registration Statement of the Company has been prepared by the
Company in accordance with applicable requirements of the Securities Act of
1933, as amended (the "Securities Act"), and the applicable rules and
regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "SEC"), covering the Notes. Said Registration Statement, which
includes a form of prospectus, was filed with the SEC on or about March 28,
2003. Copies of such Registration Statement and each amendment thereto have been
or will be delivered to the Dealer. (The Registration Statement and Prospectus,
as finally amended and revised, are respectively referred to as the
"Registration Statement" and the "Prospectus").
2.2 The Company has been duly and validly organized and formed as a
Delaware corporation with the power and authority to conduct its business as
described in the Prospectus.
2.3 The Registration Statement and Prospectus comply with the Securities
Act and the Rules and Regulations and do not contain any untrue statements of
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading; provided,
however, that the foregoing provisions of this Section 1.3 will not extend to
such statements contained in or omitted from the Registration Statement or
Prospectus as are primarily within the knowledge of the Dealer and are based
upon information furnished by the Dealer in writing to the Company specifically
for inclusion therein.
2.4 The Company intends to use the funds received from the sale of the
Notes as set forth in the Prospectus.
2.5 No consent, approval, authorization or other order of any governmental
authority, is required in connection with the execution or delivery by the
Company of this Agreement, the issuance and sale by the Company of the Notes, or
the conduct by the Company of its business as described in the Prospectus,
except such as may be required under the Securities Act or applicable state
securities laws.
2.6 There are no actions, suits or proceedings pending or to the knowledge
of the Company, threatened against the Company, at law or equity or before or by
any federal or state commission, regulatory body or administration agency or
other governmental body, domestic or foreign, which will have a material adverse
effect on the business or property of the Company, except as are described on
Attachment 2.6 to this Agreement.
2.7 The execution and delivery of this Agreement, the consummation of the
transactions herein contemplated and compliance with the terms of this Agreement
by the Company will not conflict with or constitute a default under the
Company's Certificate of Incorporation, by-laws, or in any indenture, mortgage,
deed of trust, lease, rule, regulation, writ, injunction or decree of any
government, governmental instrumentality or court, domestic or foreign, having
jurisdiction over the Company, except to the extent that the enforceability of
the indemnity and/or contribution provisions contained in Section 12 of this
Agreement may be limited under applicable securities laws.
2.8 The Company has full legal right, power and authority to enter into
this Agreement and to perform the transactions contemplated hereby, except to
the extent that the enforceability of the indemnity and/or contribution
provisions contained in Section 12 of this Agreement may be limited under
applicable securities laws.
2.9 At time of issuance of the Notes, the Notes will have been duly
authorized and will be binding obligations of the Company.
2.10 The respective financial statements contained in the Registration
Statement and the Prospectus fairly present the financial condition of the
Company and the results of their respective operations as of the dates and for
the periods therein specified; and such financial statements have been prepared
in accordance with generally accepted accounting principles consistently applied
throughout the periods involved; and the accountants who have certified certain
of such financial statements are independent public accountants as required by
the Securities Act and the Rules and Regulations.
3. Covenants of the Company
The Company covenants and agrees with the Dealer that:
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3.1 It will, at no expense to the Dealer, furnish the Dealer with such
number of printed copies of the Registration Statement, including all amendments
and exhibits thereto, as the Dealer may reasonably request. It will similarly
furnish to the Dealer and others designated by the Dealer as many copies as the
Dealer may reasonably request in connection with the offering of the Notes of:
(a) the Prospectus in preliminary and final form and every form of supplemental
or amended prospectus; (b) this Agreement; and (c) any other printed sales
literature or other materials (provided that the use of said sales literature
and other materials has been approved for use by the Company and all appropriate
regulatory agencies).
3.2 It will furnish such proper information and execute and file such
documents as may be necessary for the Company to register or qualify the Notes
for offer and sale under the securities laws of such jurisdictions as the Dealer
may reasonably designate and will file and make in each year such filings as may
be required. The Company will furnish to the Dealer a copy of such papers filed
by the Company in connection with any such registration or qualification.
3.3 It will: (a) use its best efforts to cause the Registration Statement
to become effective; (b) file for review and use its best efforts to obtain
approval by the NASD Corporate Financing Department of the offering; (c) furnish
copies of any proposed amendment or supplement of the Registration Statement or
Prospectus to the Dealer; (d) file every amendment or supplement to the
Registration Statement or the Prospectus that may be required by the SEC; and
(e) if at any time the SEC shall issue any stop order suspending the
effectiveness of the Registration Statement, it will use its best efforts to
obtain the lifting of such order at the earliest possible time.
3.4 If at any time when a Prospectus is required to be delivered under the
Securities Act any event occurs as a result of which, in the opinion of either
the Company or the Dealer, the Prospectus or any other prospectus then in effect
would include an untrue statement of a material fact or, in view of the
circumstances under which they were made, omit to state any material fact
necessary to make the statements therein not misleading, the Company will
promptly notify the Dealer thereof (unless the information shall have been
received from the Dealer) and will effect the preparation of an amended or
supplemental prospectus which will correct such statement or omission. The
Company will then promptly prepare such amended or supplemental prospectus or
prospectuses as may be necessary to comply with the requirements of Section 10
of the Securities Act.
4. Obligations of the Dealer
4.1 Promptly after the effective date of the Registration Statement, the
Dealer shall commence the offering of the Notes for cash to the public in
jurisdictions in which the Notes are registered or qualified for sale or in
which such offering is otherwise permitted. The Dealer will suspend or terminate
offering of the Notes upon request of the Company at any time and will resume
offering the Notes upon subsequent request of the Company.
4.2 Dealer will offer Notes only to persons who meet all applicable
suitability requirements and will only make offers to persons in the states in
which it is advised in writing that the Notes are qualified for sale or that
such qualification is not required. In offering Notes,
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Dealer will comply with the provisions of Rule 2310 of the Conduct Rules set
forth in NASD Manual, as well as other applicable rules and regulations relating
to suitability of investors. The Company will not assume any obligation or
responsibility as to the right of Dealer to sell the Notes in any jurisdiction.
Dealer shall provide such certification as the Company may reasonably request
regarding its compliance with applicable law.
5. Submission of Subscription Agreements
Those persons who purchase Notes will be instructed by the Dealer to make
their checks payable to the Company. Any Dealer receiving a check not conforming
to the foregoing instructions shall return such check directly to such
subscriber not later than the end of the next business day following its
receipt. Checks received by the Dealer which conform to the foregoing
instructions shall be transmitted for deposit pursuant to one of the methods in
this Article 5. Transmittal of received investor funds will be made in
accordance with the following procedures:
Where, pursuant to the Dealer's internal supervisory procedures,
internal supervisory review is conducted at the same location at
which subscription documents and checks are received from
subscribers, checks will be transmitted in care of the Company by
the end of the next business day following receipt by the Dealer for
deposit to the Company.
Where, pursuant to the Dealer's internal supervisory procedures,
final and internal supervisory review is conducted at a different
location, checks will be transmitted by the end of the next business
day following receipt by the Dealer to the office of the Dealer
conducting such final internal supervisory review (the "Final Review
Office"). The Final Review Office will in turn by the end of the
next business day following receipt by the Final Review Office,
transmit such checks for deposit to the Company.
6. Pricing
Notes shall be offered to the public at the offering price set forth in
supplements to the Prospectus.
7. Dealers' Commissions
The Dealer's compensation for the offering and sale of Notes will be sales
commissions of up to three percent (3%), marketing incentive fees of up to one
half of one percent (0.5%) and reimbursement of accountable expenses of up to
one-half of one percent (0.5%) of the aggregate proceeds generated from the sale
of Notes by such Dealer. For these purposes, a "sale of Notes" shall occur if
and only if a transaction has closed with a purchaser of Notes pursuant to all
applicable offering and subscription documents and the Company has thereafter
distributed the commission to the Dealer in connection with such transaction.
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8. Payment
Payments of selling commissions will be made by the Company to Dealer
within 30 days after receipt by the Company of the proceeds derived from the
sale of Notes by such Dealer.
9. Right to Reject Order or Cancel Sales
All orders, whether initial or additional, are subject to acceptance by
and shall only become effective upon confirmation by the Company; the Company
reserves the right to reject any order in whole or in part. If an order is
rejected, cancelled or rescinded for any reason, the Dealer agrees to return to
the Company any commission theretofore paid with respect to such order.
10. Prospectus and Supplemental Information
Dealer is not authorized or permitted to give and will not give, any
information or make any representation concerning the Notes except as set forth
in the Prospectus and any supplements or amendments thereto. The Company will
supply Dealer with reasonable quantities of the Prospectus, any supplements
thereto and any amended Prospectus, for delivery to investors, and Dealer will
deliver a copy of the Prospectus and all then current supplements thereto and
any amended Prospectus to each investor to whom an offer is made prior to or
simultaneously with the first solicitation of an offer to sell the Notes to an
investor. The Dealer agrees that it will not send or give any supplements
thereto and any amended Prospectus to that investor unless it has previously
sent or given a currently effective version of the Prospectus to the investor or
has simultaneously sent or given a currently effective version of the
Prospectus. Dealer agrees that it will not show or give to any investor or
reproduce any material or writing which is supplied to it by the Company and
marked "dealer only" or otherwise bearing a legend denoting that it is not to be
used with respect to members of the public. Dealer further agrees that it will
not use in connection with the offer or sale of Notes any materials or writings
which have not been previously approved by the Company. On becoming a Dealer,
and in offering and selling Notes, Dealer agrees to comply with all the
applicable requirements under the Securities Act of 1933 and the Securities
Exchange Act of 1934, including, without limitation, the provisions of Rule
15c2-4 of the Securities and Exchange Commission. Notwithstanding the
termination of this Agreement or the payment of any amount to Dealer, Dealer
agrees to pay Dealer' proportionate share of any claim, demand or liability
asserted against Dealer and the other Dealers on the basis that Dealers or any
of them constitute an association, unincorporated business or other separate
entity, including in each case Dealer's proportionate share of any expenses
incurred in defending against any such claim, demand or liability.
11. License and Association Membership
Dealer's acceptance of this Agreement constitutes a representation to the
Company that Dealer is a properly registered or licensed broker-dealer, duly
authorized to sell Notes under Federal and state securities laws and regulations
and in all states where it offers or sells Notes, and that it is a member in
good standing of the NASD. This Agreement shall automatically
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terminate if the Dealer ceases to be a member in good standing of to NASD, or in
the case of a foreign dealer, so to conform. Dealer agrees to notify the Company
immediately if Dealer ceases to be a member in good standing, or in the case of
a foreign dealer, so to conform. The Company also hereby agrees to abide by the
Conduct Rules of the NASD.
12. Indemnification
12.1 The Company will indemnify and hold harmless the Dealer, its officers
and directors and each person, if any, who controls such Dealer within the
meaning of Section 15 of the Securities Act from and against any losses, claims,
damages or liabilities, joint or several, to which such Dealer, its officers and
directors, or such controlling person may become subject, under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon (a) any untrue
statement or alleged untrue statement of a material fact contained (i) in the
Registration Statement (including the Prospectus as a part thereof) or any
post-effective amendment thereto or in the Prospectus or any amendment or
supplement to the Prospectus or (ii) in any application or other document
executed by the Company or on its behalf specifically for the purposes of
registering or qualifying any or all of the Notes for sale under the securities
laws of any state or based upon written information furnished by the Company
under the securities laws thereof (any such application, document or information
being hereinafter called a "Blue Sky Application"), or (b) the omission or
alleged omission to state in the Registration Statement (including the
Prospectus as a part thereof) or any post-effective amendment thereof or in any
Blue Sky Application a material fact required to be stated therein or necessary
to make the statements therein not misleading, or (c) any untrue statement or
alleged untrue statement of a material fact contained in any preliminary
prospectus, if used prior to the effective date of the Registration Statement,
or in the Prospectus or any amendment or supplement to the Prospectus or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, and will reimburse
each Dealer, its officers and directors and each such controlling person for any
legal or other expenses reasonably incurred by such Dealer, its officers and
directors, or such controlling persons in connection with investigating or
defending such loss, claim, damage, liability or action; provided that the
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of, or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of any Dealer specifically for use with reference to such Dealer in
the preparation of the Registration Statement or any such post-effective
amendment thereof, any such Blue Sky Application or any such preliminary
prospectus or the Prospectus or any such amendment thereof or supplement
thereto; and further provided that the Company will not be liable in any such
case if it is determined that such Dealer was at fault in connection with the
loss, claim, damage, liability or action.
12.2 Each Dealer severally will indemnify and hold harmless the Company,
each of its directors (including any persons named in the Registration
Statements with his consent, as about to become a director), each of its
officers who has signed the Registration Statement and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act from
and against any losses, claims, damages or liabilities to which the Company, any
such
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director or officer, or controlling person may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (a)
any untrue statement or alleged untrue statement of a material fact contained
(i) in the Registration Statement (including the Prospectus as a part thereof)
or any post-effective amendment thereof or (ii) in any Blue Sky Application, or
(b) the omission or alleged omission to state in the Registration Statement
(including the Prospectus as a part thereof) or any post-effective amendment
thereof or in any Blue Sky Application a material fact required to be stated
therein or necessary to make the statements therein not misleading, or (c) any
untrue statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, if used prior to the effective date of the Registration
Statement, or in the Prospectus, of in any amendment or supplement to the
Prospectus or the omission therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Dealer specifically for use with reference to
such Dealer in the preparation of the Registration Statement or any such
post-effective amendments thereof or any such Blue Sky Application or any such
preliminary prospectus or the Prospectus or any such amendment thereof or
supplement thereto, or (d) any unauthorized use of sales materials or use of
unauthorized verbal representations concerning the Notes by such Dealer and will
reimburse the Company, any such directors or officers, or controlling person, in
connection with investigating or defending any such loss, claim, damage,
liability or action. This indemnity agreement will be in addition to any
liability which such Dealer may otherwise have.
12.3 Promptly after receipt by an indemnified party under this Section 12
of notice of the commencements of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under the
Section 12, notify in writing the indemnifying party of the commencement thereof
and the omission so as to notify the indemnifying party will relieve it from any
liability under this Section 12 as to the particular item for which
indemnification is then being sought, but not from any other liability which it
may have to any indemnified party. In case any such action is brought against
any indemnified party, and it notifies an indemnifying party of the commencement
thereof, the indemnifying party will be entitled, to the extent it may wish,
jointly with any other indemnifying part similarly notified, to participate in
the defense thereof, with separate counsel. Such participation shall not relieve
such indemnifying party of the obligation to reimburse the indemnified party for
reasonable legal and other expenses (subject to Section 12.4) incurred by such
indemnified party in defending itself, except for such expenses incurred after
the indemnifying party has deposited funds sufficient to effect the settlement,
with prejudice, of the claim in respect of which indemnity is sought. Any such
indemnifying party shall not be liable to any such indemnified party on account
of any settlement of any claim effected without the consent of such indemnifying
party.
12.4 The indemnifying party shall pay all legal fees and expenses of the
indemnified party in the defense of such claims or actions; provided, however,
the indemnifying party shall not be obliged to pay legal expenses and fees to
more than one law firm in connection with the defense of similar claims arising
out of the same alleged acts or omissions giving rise to such claims
notwithstanding that such actions or claims are alleged or brought by one or
more parties against more than one indemnified party. If such claims or actions
are alleged or brought against more than one indemnified party, then the
indemnifying party shall only be obliged to reimburse
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the expenses and fees of the one law firm that has been selected by a majority
of the indemnified parties against which such action is finally brought; and in
the event a majority of such indemnified parties is unable to agree on which law
firm for which expenses or fees will be reimbursable by the indemnifying party,
then payment shall be made to the first law firm of record representing an
indemnified party against the action or claim. Such law firm shall be paid only
to the extent of services performed by such law firm and no reimbursement shall
be payable to such law firm on account of legal services performed by another
law firm.
12.5 The indemnity agreements contained in this Section 12 shall remain
operative and in full force and effect regardless of (a) any investigation made
by or on behalf of any Dealer, or any person controlling any Dealer or by or on
behalf of the Company, any of its officer or director, or any person controlling
the Company (b) delivery of any Notes and payment therefore, and (c) any
termination of this Agreement. A successor of any Dealer or the Company, as the
case may be, shall be entitled to the benefits of the indemnity agreements
contained in this Section 12.
13. Confirmation
The Company hereby agrees and assumes the duty to send an acknowledgement
to each investor whose subscription for Notes is accepted in whole or in part by
the Company.
14. Termination
Dealer will suspend or terminate its offer and sale of Notes upon the
request of the Company at any time and will resume its offer and sale of Notes
hereunder upon subsequent request of the Company. Dealer shall not in any event
sell Notes after two years after the effective date of the registration
statement covering the Notes. Any party may terminate this Agreement by written
notice. Such termination shall be effective 48 hours after the mailing of such
notice. This Agreement is the entire agreement of the parties and supersedes all
prior agreement, if any, between the parties hereto.
15. Survival of Provisions
The respective agreements, representations and warranties of the Company
and the Dealer set forth in this Agreement shall remain operative and in full
force and effect regardless of (a) any termination of this Agreement, (b) any
investigation made by or on behalf of the any Dealer or any person controlling
the Dealer or by or on behalf of the Company, its directors or officers, or any
person controlling the Company, and (c) the acceptance of any payment for the
Notes.
16. Notice
All notices will be in writing and will be duly given to the Company when
mailed to 0000 Xx Xxxxxx Xxxxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxx 00000, and to
Dealer when mailed to the address specified by Dealer herein.
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17. Amendment
This Agreement may be amended as to any Dealer by written agreement
executed by both the Company and such Dealer.
18. Attorney's Fees and Applicable Law
In any action to enforce the provisions of this Agreement or to secure
damages for its breach, the prevailing party shall recover its costs and
reasonable attorney's fees. This Agreement shall be construed under the laws of
the State of Nevada and shall take effect when signed by Dealer and
countersigned by the Company.
19. Counterparts
This Agreement may be executed in any number of counterparts. Each
counterpart, when executed and delivered, shall be an original contract, but all
counterparts, when taken together, shall constitute one and the same Agreement.
[Signature Page to Follow]
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We have read the foregoing Selected Dealer Agreement and we hereby accept
and agree to the terms and conditions therein set forth. We hereby represent
that the list below of jurisdictions in which we are registered or licensed as a
broker or dealer and are fully authorized to sell securities is true and
correct, and we agree to advise you of any change in such list during the term
of this Selected Dealer Agreement.
(a) Identity of Dealer:
Name:
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Type of entity:
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(to be completed by Dealer) (corporation, partnership or proprietorship)
Organized in the State of:
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(to be completed by Dealer) (State)
Licensed as broker-dealer in the following states:
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(to be completed by Dealer)
Tax I.D. #:
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(b) Person to receive notice pursuant to Article 16.
Name:
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Company:
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Address:
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City, State and Zip Code:
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Telephone No.: ( )
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AGREED TO AND ACCEPTED BY:
"Dealer" "Company"
Vestin Group, Inc.
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(Dealer's Firm Name)
By: By:
-------------------------------- --------------------------------
Signature Signature
Title: Title:
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Attachment 2.6
Legal Proceedings
The Company and its subsidiaries are involved in the following litigation in the
ordinary course of business:
On July 2, 2001, Vestin Mortgage brokered a loan to Xxxxxx Heights Golf Club
("Xxxxxx") for $10,000,000. The loan was funded by Fund I and Fund II (together,
the "Funds") and was guaranteed by three guarantors. Subsequently, Xxxxxx
defaulted on the loan, and the Funds foreclosed and took title to the
collateral. Based on an appraisal at the conclusion of the foreclosure, the
Funds determined that there was a $4.8 million shortfall between the carrying
amount of the loan and the value of the collateral. The Funds filed litigation
to recover the shortfall from the individuals who had guaranteed the payment of
the loan. Vestin Mortgage purchased the rights to collect the proceeds of the
guarantee from the Funds on December 31, 2002 in exchange for investments in
mortgage loans on real estate valued at $4.8 million. Vestin Mortgage did not
recognize any gain or loss on the sale to the Funds.
Vestin Mortgage assumed control of the litigation and filed a motion for summary
judgment against the loan guarantors, which was denied by the Nevada State
District Court on May 2, 2003. Trial on this matter is scheduled for July 30,
2003. Vestin Mortgage believes that it will prevail in the litigation against
the guarantors and that at least one of the three guarantors has sufficient
assets to satisfy a judgment of $4.8 million plus interest. However, because of
the inherent risks associated with litigation and enforcement of judgments, the
Company elected to provide a valuation allowance for the entire amount paid for
the rights to receive the proceeds of the judgment and recorded the allowance as
an expense in 2002. This write-off is reflected in General and Administrative
expenses on the Consolidated Statement of Income for the year ended December 31,
2002.
The Company, Vestin Mortgage and Del Mar Mortgage, Inc., ("Del Mar Mortgage"), a
company wholly owned by Xxxx Xxxxxxx, the largest shareholder and CEO of the
Company, and various affiliates of the Company are defendants in a civil action
entitled Desert Land, L.L.C. et al. x. Xxxxx Financial Group, Inc. (the
"Action"). On April 10, 2003, the United States District Court for the District
of Nevada (the "Court") dismissed 17 of the plaintiff's claims, but entered a
judgment on the remaining claim for $5.0 million, plus interest accruing from
March 26, 2003, jointly and severally against Vestin Group, Vestin Mortgage and
Del Mar Mortgage. Subsequent to April 10, 2003, the Court stayed the execution
of the judgment pending the hearing and ruling on post-trial motions and,
accordingly, the Court did not require the defendants to post a bond for the
judgment. Del Mar Mortgage has agreed to indemnify Vestin Group and Vestin
Mortgage for any losses and expenses in connection with the Civil Action. Xx.
Xxxxxxx has guaranteed the indemnification. If the stay of execution is lifted,
Xx. Xxxxxxx has agreed to provide a bond in the amount of the judgment. Although
the ultimate outcome of the Civil Action is uncertain, after consultation with
legal counsel, the Company believes that the judgment against Vestin Group and
Vestin Mortgage will be vacated and will have no effect on the Company's
operating results and financial condition. The defendants are appealing the
ruling by the District Court.
Additionally, the Company is involved with certain other legal proceedings
incidental to its business activities. Management believes that the outcome of
these proceedings will not have a material adverse effect on the Company's
financial condition, results of operations and cash flows.
