June 25, 2009 Michael Fralin Managing Director Taberna Capital Management, LLC
Exhibit
4.1
June 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 $60,000,000 of trust
preferred securities on or about 6/22/2007 (the “Existing
Securities”). The Issuer exchanged a portion of the Existing
Securities for replacement securities having a cash value (not par) of
$10,000,000 in exchange for $20,000,000 of the Existing Securities. Following
the initial exchange transaction and purchase by the issuer, the Existing
Securities were reduced to $36,250,000.
The
Issuer is interested in an additional exchange transaction whereby it would
tender replacement securities (the “Replacement Securities”) having a cash value
(not par) of up to $18,125,000, in minimum increments of $5 million (the
“Minimum Increments”), in exchange for up to $36,250,000 of the Existing
Securities (For purposes of the calculation (the “Calculation”), each dollar
paid by Issuer shall be exchanged for two dollars of Existing Securities). For
avoidance of doubt, each exchange shall be at an aggregate discount of 50% of
the face principal amount. 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. As soon as an acceptable
custodial account is in place, the Issuer shall deposit $5,000,000 in cash (the
“Cash”) in an escrow account to be established with the Bank of New York Mellon
Trust Company (the “Bank”). The Cash shall be used to purchase
Replacement Securities acceptable to Taberna within the next thirty (30) days
after the Cash is deposited (the “Bond Approval Period”), and the Issuer agrees
to cooperate with the Manager in connection with such purchase(s). In
addition, at any time, and from time to time, within sixty (60) days after the
Cash is paid, Issuer may deposit additional cash (the “Additional Cash”) up to
$13,125,000 in Minimum Increments unless at the time of the deposit there is
less than $10,000,000 of Existing Securities still outstanding in which case the
Minimum Increment shall be 50% of the then outstanding amount, in an escrow
account with the Bank in exchange for Replacement Securities in accordance with
the Calculation which Replacement Securities will be purchased during the Bond
Approval Period after such Additional Cash is deposited. Xxxxxxx agrees and
acknowledges immediately upon depositing the funds into escrow, (i) the Existing
Securities shall be reduced as set forth based upon the Calculation which if the
full $18,125,000 is tendered by the Issuer the outstanding balance would be $0
(the “Reduced Amount”) and (ii) interest will cease on the Existing Securities
to be retired based upon the Calculation.
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. Issuer will pay up to $50,000 to cover the
foregoing third party costs, set forth in section (a) above and out of the
$50,000 will pay directly to Xxxxx Xxxxxxx and Xxxxxxx upon receipt of
invoices. 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. In addition, the Issuer (or its
designated affiliate) agrees to make a nonrefundable payment of $362,500 to
Taberna, upon the signing of this letter to cover the costs described in
subsection (b) above.
Please
indicate your agreement to the foregoing terms by counter-signing where
indicated below.
Sincerely,
__________________________________
Xxxxx
Xxxxxxx
Chief
Financial Officer
Agreed to
by:
Taberna
Capital Management, LLC
______________________________________
Xxxxxxx
X. Xxxxxx
Managing
Director
