Exhibit 10.1
SECOND SUPPLEMENTAL INDENTURE
THIS SECOND SUPPLEMENTAL INDENTURE,
dated as of June 6, 2008 (this “ Supplemental
Indenture ”) is entered into by and between Desert Capital REIT, Inc. , a
Maryland corporation (the “ Company ”), and
The Bank of New York Trust
Company, National Association , a national banking
association (as successor to JPMorgan Chase Bank, National
Association) , as Trustee (the “ Trustee
”).
Reference is made to the Junior
Subordinated Indenture dated as of June 16, 2006 as amended by
that certain First Supplemental Indenture dated as of
November 21, 2007 (the “ 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.
WHEREAS, the Company desires to,
among other things, (i) amend Section 1.01 of the
Indenture, (ii) delete Section 10.6(d) of the Indenture
in its entirety, (iii) amend Section 10.9(a) of the
Indenture in its entirety and (iii) amend Article X of
the Indenture to provide for additional covenants of the Company;
and
WHEREAS, execution and delivery by
the Company of this Supplemental Indenture has been duly authorized
by all requisite corporate 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 1.01
Section 1.1 of the Indenture is amended by adding the
following defined terms:
“
Account Control Agreement ” has the meaning specified
in Section 10.10(b) .
“Additional Reserve Deposit” has the meaning
specified in Section 10.13 .
“Eligible Account” means a separate and
identifiable account held by the holding institution that is either
(i) an account or accounts maintained with a federal or
state-chartered depository institution or trust company which
complies with the definition of Eligible Institution, or
(ii) a segregated trust account or accounts maintained with a
federal or state chartered depository institution or trust company
acting in its fiduciary capacity which, in the case of a state
chartered depository institution or trust company, is subject to
regulations substantially similar to 12 C.F.R. §9.10(b),
having in either case a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by federal
and state authority. An Eligible Account will not be evidenced by a
certificate of deposit, passbook or other instrument.
“
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.). The
Bank of Nevada shall be deemed an Eligible Institution so long as
either (a) it has net assets equal to or greater than One
Billion and 00/100 Dollars ($1,000,000,000) or (b) its parent
company, Western Alliance Bankcorporation (which is traded on the
New York Stock Exchange under the symbol “WAL”)
maintains a Moody’s Investors Service, Inc. rating of at
least “Ba2”; provided, however, that The Bank of Nevada
must be a wholly-owned subsidiary of Western Alliance
Bankcorporation.
“Existing Revolver” has the meaning specified in
Section 10.14 .
“
Extended Reduced Covenant Period ” has the meaning
specified in Section 10.9(a) .
“
Initial Reduced Covenant Period ” has the meaning
specified in Section 10.9(a) .
“
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.
“Loan
Principal Payment” has the meaning specified in
Section 10.13 .
“
Minimum Balance ” has the meaning specified in
Section 10.10(b) .
“
Reduced Covenant Period ” has the meaning specified in
Section 10.9(a) .
“
Regular Reserve Deposit ” has the meaning set forth in
Section 10.10(b).
“
Reserve Account ” has the meaning specified in
Section 10.10(a) .
“Short-fall” has the meaning specified in
Section 10.13 .
Section 1.02 The
definition of “ Corporate Trust Office ” under
Section 1.1 of the Indenture is deleted in its entirety
and replaced with the following:
“ Corporate Trust Office
” means the principal office of the Trustee at which at any
particular time its corporate trust business shall be administered,
which office at the date of this Indenture is located at 601 Travis
Street, 16 th Floor, Houston,
Texas 77002 Attn: Global
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Corporate Trust – Desert Capital TRS Statutory Trust I. All
notices and correspondence to the Trustee hereunder shall be
addressed to Mudassir Mohamed, telephone number
(713) 483-6029.
Section 1.03
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 Sections 10.10 (a), (b) or
(d) , 10.11(b) , 10.12(a), (b) or (d) ,
10.13 or 10.14 hereof or any violation of the
conditions set forth in Sections 10.12(c) shall have
otherwise occurred.”
Section 1.04
Section 7.3(b)(iii) of the Indenture is hereby deleted and
replaced with the following:
(iii) Taberna Capital Management LLC,
450 Park Avenue, Floor 11, New York, New York 10022, Attn: Raphael
Licht
Section 1.05
Section 10.6(d) of the Indenture is deleted in its
entirety.
Section 1.06
Section 10.9(a) of the Indenture is deleted in its entirety
and replaced with the following:
(a) (i) From December 31,
2007 and for a period of four (4) consecutive calendar
quarters ending on December 31, 2008 (the “ Initial
Reduced Covenant Period ”), the Company shall not permit
Tangible Net Worth, at any time, to be less than $100,000,000;
provided, however, that the Company may request that the period
ending December 31, 2008 be extended for up to two extension
periods of one (1) calendar quarter each, with the first
extension period ending on March 31, 2009 and the second
extension period ending on June 30, 2009 (each such extension
period, an “ Extended Reduced Covenant Period
”), by written request to the Trustee and the holders of a
majority in aggregate principal amount of the outstanding Preferred
Securities given no later than thirty (30) days prior to
December 31, 2008 and, if applicable, March 31, 2009 (the
Initial Reduced Covenant Period, including any Extended Reduced
Covenant Periods, the “ Reduced Covenant Period
”), and each such Extended Reduced Covenant Period shall
become effective as of the expiration date of the prior period,
provided , that (x) no Event of Default has occurred
and is continuing either at the time of any such request or on the
applicable extension date and (y) the Letter of Credit in the
amount of the Minimum Balance has been delivered to the Trustee
prior to December 31, 2008 and no draw has been made thereon
by the Trustee.
(ii)
From and after the end of the Reduced Covenant Period, the Company
shall not permit Tangible Net Worth, at any time, to be less than
the sum of (i) $100,000,000 plus (ii) 75% of all proceeds of
Equity Interests issued by the Company after June 16,
2006.
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Section 1.07
Article X of the Indenture is amended by adding the following
Sections 10.10, 10.11, 10.12, 10.13, 10.14 and 10.15:
SECTION 10.10. Reserve Fund and
Additional Monthly Payment.
(a) The Company shall establish
and maintain a segregated Eligible Account with an Eligible
Institution in trust for the benefit of the Trustee (the “
Reserve Account ”). The Reserve Account shall be
entitled “The Bank of New York Trust Company, National
Association, as trustee pursuant to a Junior Subordinated
Indenture, dated as of June 16, 2006, on behalf of the holders
of the Preferred Securities.” The Company shall notify the
Trustee in writing of the account number of the Reserve Account.
The Trustee, on behalf of, and at the direction of, the holders of
the Preferred Securities, shall have the sole right to make
withdrawals from the Reserve Account in accordance with the terms
hereof. All costs and expenses for establishing and maintaining the
Reserve Account shall be paid by the Company.
(b) Subject to
Section 10.12 , the Company shall deposit within ten
(10) Business Days after the end of each calendar month,
commencing with respect to the calendar month ending on May 31,
2008, twenty-five percent (25%) of all Net Income for such calendar
month (each such deposit, a “ Regular Reserve Deposit
”) until such time as an amount equal to $2,100,000 (the
“Minimum Balance” ) has been deposited into the
Reserve Account. The Company shall, within five (5) calendar
days of each deposit into the Reserve Account, notify the Trustee
and Taberna Capital Management, LLC in writing of the amount of
such deposit; provided, however, the Company’s failure to
provide such notice shall not constitute an Event of Default under
Section 5.1(g). The Reserve Account shall at all times be
subject to an account control agreement (the “ Account
Control Agreement ”) among the Company, the applicable
Eligible Institution holding the Reserve Account and the Trustee,
in form and substance reasonably satisfactory to the holders of the
Preferred Securities. The Trustee shall have no liability for
losses on any investments made with respect to the Reserve Account.
Any amounts earned on funds on deposit in the Reserve Account shall
be added to amounts on deposit in the Reserve Account; provided,
however, that any amounts in excess of the Minimum Balance shall,
so long as no Event of Default has occurred, be released to the
Company. Upon the occurrence and during the continuance of an Event
of Default, amounts deposited in the Reserve Account may, at the
option and at the direction of the holders of a majority in
aggregate principal amount of the outstanding Preferred Securities,
be applied by the Trustee to amounts then due and owing and/or to
become due and owing with respect to the Preferred Securities, as
directed by the holders of a majority in aggregate principal amount
of the outstanding Preferred Securities. The Trustee shall give the
Company written notice of any such application of funds. The
Trustee shall have no liability for monitoring or otherwise
verifying compliance by the Company with its obligations
hereunder.
(c) The Company agrees and
acknowledges that neither the insufficiency or sufficiency of the
amount of, nor the unavailability or availability of, funds in the
Reserve Account is intended to, and shall therefore not, constitute
a limitation on (i) the obligation the Company to pay when due
all amounts of principal, premium, if any, and interest due under
this Indenture or (ii) the holders of the Preferred Securities
to be paid all amounts due and to become due with respect to the
Preferred Securities. Upon the earlier to occur of (A) the
first date after the expiration of the Reduced Covenant Period on
which the Company is in compliance with all
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of the
terms, covenants, conditions and requirements set forth in this
Indenture and no Event of Default exists or (B) satisfaction
of the conditions set forth in Section 4.1 of this
Indenture, each as certified in writing by the Company to the
Trustee and the holders of the outstanding Preferred Securities and
confirmed by the holders of a majority in aggregate principal
amount of the outstanding Preferred Securities, any remaining funds
in the Reserve Account then in the Trustee’s possession shall
be paid over to the Company. The Trustee shall have no liability
for any action taken in reliance on the direction of the holders of
a majority in aggregate principal amount of the outstanding
Preferred Securities.
(d) The Reserve Account shall be
security for all payments due and to become due with respect to the
Preferred Securities. Notwithstanding anything to the contrary
contained in this Indenture or any documents executed in connection
herewith, the Reserve Account is collateral solely for the benefit
of the holders of the Preferred Securities, and no other Person
shall have any right, title or interest in the Reserve Account, any
funds on deposit therein or any amounts withdrawn therefrom, other
than the Company’s rights set forth herein or under
applicable law. The Trustee shall, notwithstanding any contrary
requirement or direction arising or given hereunder (including
pursuant to Article XII) or under any documents executed in
connection herewith, follow the written direction of the holders of
a majority in aggregate principal amount of the outstanding
Preferred Securities, as set forth herein, with respect to any
disposition of funds in the Reserve Account and disbursement of any
amounts withdrawn therefrom and acknowledges that the Trustee shall
not have any duty, obligation or right to determine when and if a
withdrawal is to be made from the Reserve Account or how the
proceeds of such withdrawal will be applied. Upon notice from the
holders of a majority in aggregate principal amount of the
outstanding Preferred Securities of the occurrence and the
continuance of an Event of Default, the Trustee shall have the
right to withdraw funds on deposit in the Reserve Account in full
or in part, as directed by the holders of a majority in aggregate
principal amount of the outstanding Preferred Securities, and shall
apply such funds to amounts then due and owing and/or to become due
and owing with respect to the Preferred Securities, as directed by
such holders of a majority in the aggregate principal amount of the
outstanding Preferred Securities.
(e) Notwithst
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