March 25, 2009 Michael Fralin Managing Director Taberna Capital Management, LLC
March 25,
2009
Xxxxxxx
Xxxxxx
Managing
Director
Taberna
Capital Management, LLC
000 Xxxx
Xxxxxx - 00xx Xxxxx
New York,
New York 10022
Dear Xx.
Xxxxxx:
This
letter reflects the terms of our agreement with respect to the matters set forth
below.
Vestin
Realty Mortgage II, Inc. (“VRMII” or the “Issuer”) issued $56,250,000 of trust
preferred securities on or about 5/23/2007 (the “Existing
Securities”). The Issuer is interested in an exchange transaction
whereby it would tender replacement securities (the “Replacement Securities”)
having a cash value (not par) of $10 million in exchange for $20 million of the
Existing Securities. The Replacement Securities shall be acceptable to Taberna
Capital Management, LLC (“Taberna”) and must meet credit and eligibility
criteria established by the collateralized debt obligation vehicles which
beneficially own the Existing Securities. The Replacement Securities
will be acquired with funds consisting of $5 million from VRMII’s operating
funds and $5 million from VRMII’s letter of credit currently being held by
Taberna. On or before April 2, 2009, the Issuer shall deposit
$5,000,000 in cash (together with the letter of credit funds, the “Cash”) in an
escrow account to be established with a bank of Taberna’s choosing (the
“Bank”). The Cash shall be used to purchase the Replacement
Securities acceptable to Taberna within the next thirty (30) days, and the
Issuer agrees to cooperate with the Taberna in connection with such
purchase(s). Xxxxxxx agrees and acknowledges that following the
exchange, the Existing Securities shall be reduced to $36,250,000.
The
parties understand that the interest payable on the Replacement Securities will
be significantly less than the interest payable on the Existing
Securities. Because of the forgoing shortfall, the Issuer agrees to
pay additional interest equal to $250,000 per year which shall be payable
quarterly on the same payment dates set forth in the documents evidencing the
Existing Securities until the Existing Securities are retired or
redeemed.
In
connection with the exchange transaction described herein, Taberna or its
designee will engage (a) outside legal counsel to draft and negotiate the
documents and (b) one or more parties to provide financial advisory,
underwriting and due diligence work solely with respect to the Replacement
Securities. The Issuer (or its designated affiliate) agrees to
make a nonrefundable payment of $200,000 to cover the foregoing third party
costs and will deposit such amount in the Bank escrow account upon execution and
delivery of this letter. Subject to the conditions set forth
herein, the parties agree to proceed in good faith to negotiate definitive
agreements to effect of the exchange transactions. Except as
provided above, the parties shall be bear their own costs and expenses incurred
in connection with the exchange transaction.
By
accepting the terms of this letter agreement, Taberna grants VRM II a waiver of
all financial covenants pertaining to the Existing Securities, which waiver
shall be effective as of December 31, 2008 and will expire on June
30, 2009.
Please
indicate your agreement to the foregoing terms by counter-signing where
indicated below.
Sincerely,
__________________________________
Xxxxxxx
X. Xxxxxxx
Chief
Executive Officer
Agreed to
by:
Taberna
Capital Management, LLC
______________________________________
Xxxxxxx
X. Xxxxxx
Managing
Director
