FIRST SUPPLEMENTAL
INDENTURE
THIS FIRST SUPPLEMENTAL INDENTURE (this "
Supplemental Indenture "), dated as of February 3, 2009
(the " Effective Date "), is entered into by and among
VESTIN REALTY MORTGAGE II, INC., a Maryland corporation (the "
Company "), THE BANK OF NEW YORK MELLON TRUST COMPANY,
NATIONAL ASSOCIATION, a national banking association, as successor
trustee to The Bank of New York Trust Company, National Association
(the " Trustee "), and, solely as to the provisions of
Article III, TABERNA PREFERRED FUNDING VIII, LTD. (" TPF
VIII "), TABERNA PREFERRED FUNDING IX, LTD. (" TPF IX ")
and VESTIN II CAPITAL TRUST I (" Vestin Capital
").
RECITALS
WHEREAS, reference is made to the Junior
Subordinated Indenture, dated as of June 22, 2007 (the "
Original Indenture "), by and between the Company and the
Trustee. Capitalized terms used herein and not defined
herein shall have the meanings given to such terms under the
Indenture. The term " Indenture " as used herein
shall refer to the Original Indenture, as modified, amended and
supplemented by this Supplemental Indenture.
WHEREAS, the parties hereto desire to, among
other things, amend the Original Indenture as of the Effective Date
upon the terms and conditions set forth herein to, among other
things: (a) amend Sections 2.1 and 11.1(a) of the Original
Indenture, and amend the form of Junior Subordinated Note, to
delete the restriction on the Company's ability to redeem the
Securities prior to July 30, 2012 under the Original Indenture; (b)
amend Section 5.1 of the Original Indenture to provide that all
notice and cure periods of thirty (30) days or greater shall
be reduced to fifteen (15) days; (c) amend certain financial
covenants as set forth in Section 10.9(a) and Section 10.9(b) of
the Original Indenture; (d) amend Section 11.2 of the Original
Indenture to provide that any Special Event Redemption be at par;
(e) add additional Section 10.12 to the Original Indenture to
provide for delivery to Trustee of a letter of credit in the
aggregate amount of Five Million Dollars ($5,000,000.00) as
additional security for all payment obligations under the Preferred
Securities, which letter of credit and any draw thereon and
application of the proceeds thereof shall not be subordinated or
subject to the terms of any Senior Debt; and (f) amend Section
10.11 of the Original Indenture to provide the holders of the
Preferred Securities, including Taberna Capital Management,
LLC (" Taberna "), in its capacity as collateral
manager for such Holders, with certain broader rights to inspect
books and records of the Company and its Affiliates, and the right
to meet with management representatives of the Company in
connection with the business of the Company and its
Affiliates.
WHEREAS, the execution and delivery by the
Company of this Supplemental Indenture has been duly authorized by
all requisite company action and all other action required to make
this Supplemental Indenture a valid and binding instrument has been
duly taken and performed.
NOW, THEREFORE, in consideration of the
foregoing, the Trustee and the Company are entering into this
Supplemental Indenture pursuant to Section 9.2 of the
Indenture as follows:
ARTICLE I
AMENDMENTS TO
INDENTURE
Section 1.
Section 1.1 of the Indenture is amended by adding the
following defined terms:
" Eligible
Institution " mean a depository institution insured
by the Federal Deposit Insurance Corporation the short term
unsecured debt obligations or commercial paper of which are rated
at least "A-1" by Standard & Poor's Ratings Group, "P-1" by
Moody's Investors Service, Inc. and "F-1+" by Fitch IBCA, Inc. in
the case of accounts in which funds are held for thirty (30) days
or less (or, in the case of letters of credit or accounts in which
funds are held for more than thirty (30) days, the long term
unsecured debt obligations of which are rated at least "AA" by
Fitch IBCA, Inc. and Standard & Poor's Ratings Group and "Aa2"
by Moody's Investors Service, Inc.).
" Letter of
Credit " means an evergreen, irrevocable, unconditional,
transferable, clean sight draft letter of credit in form and
substance acceptable to Taberna in favor of the Trustee and
entitling the Trustee to draw thereon in either New York, New York
or Houston, Texas (whether in person or by facsimile), issued in
U.S. Dollars by a domestic Eligible Institution or the U.S. agency
or branch of a foreign Eligible Institution.
Section 2. Additional
Event of Default. Section 5.1 of the Indenture
is amended to add an additional Event of Default by (a) deleting
the "or" at the end of Section 5.1(e) , (b) replacing the
"." at the end of Section 5.1(f) with "; or" and
(c) adding the following thereafter:
"(g) the
Company shall have failed in the performance of, or breached, any
covenant, warrant or obligation set forth in Section 10.12
."
Section 3. Notice
and Cure Periods. Sections 5.1 and 5.3 of
the Indenture are hereby amended to provide that: (a) the thirty
(30) day notice and cure periods set forth in each of Sections
5.1(a), 5.1(c)(i) and Section 5.3(a)(i) of the Indenture and (b)
the forty-five (45) day notice and cure period set forth in Section
5.1(c)(ii) of the Indenture, are each hereby amended to substitute
such thirty (30) day and/or forty-five (45) day notice and cure
period with a fifteen (15) day notice and cure period.
Section 4. Financial
Covenants. Each of Section 10.9(a) and Section
10.9(b) of the Indenture is hereby deleted in its entirety
and replaced with the following:
"SECTION 10.9. Financial
Covenants.
(a) The Company shall not permit
Tangible Net Worth, at any time from and after September 30, 2008
until Maturity, to be less than the lesser of (i) $150,000,000
or (ii) 2.5 times the then aggregate outstanding principal
balance of the Preferred Securities.
(b) The Company shall not permit, at
any time from and after September 30, 2008 until Maturity, the
ratio of (i) EBITDA for the period consisting of the preceding four
(4) fiscal quarters ending on, or most recently ended prior to,
such time to (ii) Interest Expense for such period, to be less than
1.50 to 1 (the " Minimum Coverage "); provided, however, the
Minimum Coverage requirement shall be reduced to 1.20 to 1 for the
period ending June 30, 2009."
For the avoidance of doubt, Section
10.9(c) of the Original Indenture shall remain unchanged and the
Company shall remain obligated thereunder.
Section 5. Inspection
Rights. Section 10.11 of the Indenture is hereby deleted
in its entirety and replaced with the following:
SECTION 10.11. Inspection of Books and
Records. Upon the request of the holders of the
Preferred Securities and/or Taberna Capital Management, LLC, the
Company shall (a) permit the holders of the Preferred Securities
and/or Taberna Capital Management, LLC to examine the books and
records of the Company and its Subsidiaries and Affiliates (and to
make copies thereof and extracts therefrom) during normal business
hours, (b) make management representatives of the Company and its
Subsidiaries and Affiliates available to the holders of the
Preferred Securities and/or Taberna Capital Management, LLC during
normal business hours to discuss such books and records and any
other business affairs of the Company and its Subsidiaries and
Affiliates as the holders of the Preferred Securities and/or
Taberna Capital Management, LLC may reasonably request, and (c)
deliver such other instruments and documents with respect to the
Company and its Subsidiaries and Affiliates as the holders of the
Preferred Securities and/or Taberna Capital Management, LLC may
reasonably request. All requests made by the holders of
the Preferred Securities and Taberna Capital Management, LLC
pursuant to this Section 10.11 shall provide for reasonable
notice under the circumstances, and in any event at least one (1)
Business Day's notice.
Section 6. Additional
Covenant - Letter of Credit. The following Section
10.12 is hereby added to Article X of the Indenture:
SECTION
10.12.
Provisions Regarding Letters of Credit.
(a) Delivery
of Letters of Credit.
(i) On
or prior to the Effective Date, the Company shall deliver to the
Trustee a Letter of Credit in the amount of the Five Million
Dollars ($5,000,000.00), of which $3,750,000 shall be available to
be drawn down at any time after the issuance thereof and the entire
remaining balance thereof may be drawn at any time after April 12,
2009. Subject to the foregoing, the Trustee shall have
the right to draw down such Letter of Credit in full or in part as
set forth herein.
(ii) In
no event shall (i) the Company be entitled to draw upon any Letter
of Credit delivered pursuant to this Indenture or (ii) any Person
(including, without limitation, any implied or other third-party
beneficiary) other than the Trustee, on behalf of the holders of
the Preferred Securities, have any title, right or interest in any
Letter of Credit or any proceeds of a draw upon any Letter of
Credit. Upon no less than thirty (30) days' prior
written notice to the Trustee, the holders of the Preferred
Securities or Taberna Capital Management, LLC may request that the
Company replace any Letter of Credit delivered pursuant to this
Section 10.12 with one or more substitute Letters of Credit of an
equal notional amount from another Eligible Institution; provided,
however, that during the first calendar year following the date
hereof, if the Company has used all commercially reasonable, good
faith efforts to but has been unable to obtain such a replacement
Letter of Credit, the Company shall have an additional thirty (30)
days to replace the Letter of Credit.
(iii) Under
no circumstances shall the Trustee as beneficiary under any Letter
of Credit for the benefit of the holders of the Preferred
Securities be required to transfer any Letter of Credit to a second
beneficiary. In the event that the holders of not less
than a majority in aggregate principal amount of the outstanding
Preferred Securities determine that (i) the bank issuing any Letter
of Credit shall cease to be an Eligible Institution or (ii) the
Trustee should no longer hold any Letter of Credit, either the
holders o
