Exhibit 10.1
TABERNA CAPITAL MANAGEMENT, LLC
450 PARK AVENUE
FLOOR 11
NEW YORK, NEW YORK 10022
November 7, 2008
Jonathan W. Trutter
Chief Executive Officer
Deerfield Capital Management LLC
Deerfield Capital LLC
and Deerfield Capital Corp.
6250 North River Road
Rosemont, Illinois, 60018
Re: Letter Agreement (“Letter Agreement”) regarding Deerfield Capital LLC
Dear Mr. Trutter:
Reference is hereby made to (i) that certain Junior Subordinated Indenture (as
amended, supplemented or otherwise modified from time to time, the “Indenture
I”) between Deerfield Capital LLC (formerly Deerfield Triarc Capital LLC, the
“Company”), and The Bank of New York Trust Company, National Association (as
successor to JPMorgan Chase Bank, National Association) (the “Trustee”), dated
as of September 29, 2005, (ii) that certain Junior Subordinated Indenture (as
amended, supplemented or otherwise modified from time to time, the “Indenture
II”) between the Company and the Trustee, dated as of August 2, 2006, and (iii)
that certain Junior Subordinated Indenture (as amended, supplemented or
otherwise modified from time to time, the “Indenture III” and together with the
Indenture I and the Indenture II, the “Indentures”) between the Company and the
Trustee, dated as of October 27, 2006, pursuant to which the Company issued
junior subordinated notes which evidence loans made to the Company
(collectively, the “Trust Preferred Securities”). Taberna Capital Management,
LLC (“Taberna”) serves as collateral manager for the entities that own all of
the Trust Preferred Securities and is authorized to enter into this Agreement on
their behalf. Capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to such terms in the Indentures.
Reference is also made to those certain Parent Guaranty Agreements given by
Deerfield Capital Corp. (formerly Deerfield Triarc Capital Corp., the “Parent”)
for the benefit of the Trustee wherein the Parent guarantees the payment
obligations of the Company to the Trustee under the respective Indentures and
related documents.
Pursuant to Section 10.6(d) of each of the Indentures, the Company covenanted
that it would:
From and after May 6, 2008 and until the Securities and all of the other
obligations under this Indenture have been paid and satisfied in full, the
Company shall maintain a Consolidated Net Worth of not less than One Hundred
Seventy-Five Million Dollars ($175,000,000) (the “Minimum Net Worth Covenant”).
As of the date hereof, the Consolidated Net Worth of the Company and its
Subsidiaries may be less than $175,000,000 and the Company is seeking the waiver
provided herein.

 

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Pursuant to Section 10.7 of each of the Indentures, Taberna, on behalf of all
holders of the Trust Preferred Securities, hereby waives (i) any prior
noncompliance with the Minimum Net Worth Covenant and any such noncompliance
shall be deemed to have been cured for every purpose under the Indenture and
(ii) any future noncompliance with the Minimum Net Worth Covenant through the
earlier to occur of (a) April 1, 2010 (the “Waiver Period”) or (b) the date the
Company and the Trustee enter in Supplemental Indentures in accordance with
paragraph 5 below; provided, however, that a failure to satisfy the thirty
(30) day deadline in paragraph 5 below shall not have any effect on the waiver
granted pursuant to this clause (ii) and the Waiver Period shall remain in
effect. In consideration for the waiver of the Minimum Net Worth Covenant, the
parties hereto agree to the following terms and conditions effective upon
execution of this Letter Agreement:
1) During the Waiver Period only, the Parent, the Company and Deerfield Capital
Management LLC (the “Management Company”) shall not incur any indebtedness
except for indebtedness permitted to be incurred in accordance with provisions
that are substantially similar to the provisions of the documents, existing as
of the date hereof, in relation to (i) those certain Series A Senior Secured
Notes issued by DFR Merger Company, LLC and Deerfield & Company due 2012 and
(ii) those certain Series B Senior Secured Notes issued by DFR Merger Company,
LLC and Deerfield & Company LLC due 2012 (collectively, the “Seller Notes”).
2) During the Waiver Period only, the Parent, the Company and the Management
Company shall not make any dividend or distribution in respect of their
respective capital stock except as permitted in accordance with provisions that
are substantially similar to the provisions of the documents, existing as of the
date hereof, in relation to the Seller Notes.
3) Taberna shall have the right, upon not less than three (3) business days
prior written notice to the Company to have representatives and agents of
Taberna visit and inspect, at such reasonable time during normal business hours
as stated in such notice, any of the Parent’s and its Subsidiaries’ properties,
to examine their respective corporate, financial and operating records, and make
abstracts therefrom, and to discuss their affairs, finances and accounts with
their respective directors and officers, all (unless an Event of Default has
occurred and is then continuing) at the expense of Taberna (which expense shall
not be reimbursable by the Parent and its Subsidiaries); provided that Taberna
may not exercise such rights (which shall include where Taberna has exercised
such similar rights pursuant to the Indenture I, the Indenture II or the
Indenture III) more than once in any fiscal quarter of the Parent, unless an
Event of Default is continuing, in which case Taberna may do any of the
foregoing at the expense of the Parent or its Subsidiaries at any reasonable
time during normal business hours and as often as may reasonably be desired.
4) Section 10.9(b) of each of the Indentures will be amended so that it reads as
follows:
“The Company shall not, and shall not permit any its Subsidiaries to, directly
or indirectly, without the prior written consent of the Holders of not less than
a majority in aggregate principal amount of the outstanding Preferred
Securities, (a) sell, transfer, pledge or issue, in one or more transactions,
any direct or indirect beneficial ownership interests in the Management Company
which results in (i) any Person, whether directly or indirectly, other than the
Guarantor (and/or any Subsidiaries wholly owned, directly or indirectly, by the
Guarantor) owning any equity interests in the Management Company or any rights
to distributions from the Management Company or (ii) any Person other than the
Guarantor (and/or any Subsidiary wholly owned, directly or indirectly, by the
Guarantor) having responsibility for the management of the Management Company
and the administration of the day-to-day business and affairs of the Management
Company or (b) sell, transfer, pledge or assign any material asset of the
Management Company other than to the Guarantor (and/or any Subsidiaries wholly
owned, directly or indirectly, by

 

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the Guarantor); provided, however, that the existing liens under the documents
relating to the Seller Notes shall not constitute a breach of this
Section 10.9(b).”
5) The parties hereto agree to enter into supplemental indentures (the
“Supplemental Indentures”) amending the Indentures to (a) incorporate the
requirements of paragraphs (1) through (4) above into the Indentures. The
parties hereto agree to execute the Supplemental Indentures evidencing the
agreements set forth herein within thirty (30) days of the date hereof and the
Company agrees to pay all reasonable attorneys’ fees and disbursements incurred
by Taberna in connection with the execution of the proposed Supplemental
Indentures. The parties hereto agree to cooperate in good faith in the
completion of the Supplemental Indentures and that time is of the essence;
The Company agrees to pay Taberna, or its designee, a one time fee of $375,000
to enter into this Letter Agreement and the Supplemental Indentures which shall
be payable on execution by Taberna of this Letter Agreement.
The execution of this Letter Agreement shall not modify or amend any obligations
of the Company under the Indenture (and related documents) except as
specifically provided herein.
Except as otherwise provided herein, this waiver shall not extend to any default
under Section 10.6(d) of the Indenture occurring after the execution of the
Supplemental Indentures, or to any default under any other provision of the
Indenture, and this notice is given to you by Taberna without waiving, without
prejudice to and expressly reserving all other rights and remedies available to
Taberna now or hereafter existing at law, in equity or otherwise.
We appreciate your attention to this matter. Should you have any questions
regarding the foregoing, please do not hesitate to contact Raphael Licht, Chief
Legal Officer, and Chief Administrative Officer of RAIT Financial Trust, at
(215) 243-9033.

            Very truly yours,

TABERNA PREFERRED FUNDING III, LTD.
      By:   TABERNA CAPITAL MANAGEMENT, LLC,
as Collateral Manager
      By:   /s/ Jack E. Salmon       Name:   Jack E. Salmon       Title:   CFO
and EVP  

 

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            TABERNA PREFERRED FUNDING V, LTD.
      By:   TABERNA CAPITAL MANAGEMENT, LLC,
as Collateral Manager
      By:   /s/ Jack E. Salmon       Name:   Jack E. Salmon       Title:   CFO
and EVP       TABERNA PREFERRED FUNDING VII, LTD.
      By:   TABERNA CAPITAL MANAGEMENT, LLC,
as Collateral Manager
      By:   /s/ Jack E. Salmon       Name:   Jack E. Salmon       Title:   CFO
and EVP       TABERNA PREFERRED FUNDING VIII, LTD.
      By:   TABERNA CAPITAL MANAGEMENT, LLC,
as Collateral Manager
      By:   /s/ Jack E. Salmon       Name:   Jack E. Salmon       Title:   CFO
and EVP       TABERNA PREFERRED FUNDING IX, LTD.
      By:   TABERNA CAPITAL MANAGEMENT, LLC,
as Collateral Manager
      By:   /s/ Jack E. Salmon       Name:   Jack E. Salmon       Title:   CFO
and EVP    

 

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          ACCEPTED AND AGREED TO BY:

DEERFIELD CAPITAL LLC
      By:   /s/ Jonathan W. Trutter       Name:   Jonathan W. Trutter      
Title:   CEO       DEERFIELD CAPITAL CORP.
      By:   /s/ Jonathan W. Trutter       Name:   Jonathan W. Trutter      
Title:   CEO