Exhibit 10.5
BEACHWOLD PARTNERS, L.P.
423 West 55th Street, 12th Floor
New York, NY 10019
March 27, 2008
Tarragon Corporation
423 West 55th Street, 12th Floor
New York, NY 10019
      Re:    $36,032,861.12 Term Loan
Gentlemen:
     This is to confirm the terms of the $36,032,861.12 credit facility (the
“Loan”) pursuant to which Beachwold Partners, L.P. (“Beachwold”), Mr. Robert
Rothenberg (“Rothenberg”) and the other lenders who are or hereafter become
signatories hereto (together with Beachwold and Rothenberg, collectively,
“Lender”) have loaned funds to Tarragon Corporation (“Borrower”). This
instrument shall amend, restate, replace and supercede in its entirety that
certain January 7, 2008 letter agreement between Beachwold, Lender and Borrower.

  1.   Maximum Amount of Facility: Borrower and Lender agree that the
outstanding principal balance of the loan (the “Loan”) made by Lender to
Borrower is $36,032,861.12 as of the date hereof. The principal amount of the
Loan owed to each party comprising Lender as of the date hereof is set forth on
Exhibit A annexed hereto.     2.   Maturity Date: The later to occur of
(a) March 27, 2013, and (b) the second anniversary of the repayment in full of
the Senior Indebtedness, as defined below (the “Maturity Date”).     3.  
Advances: Lender has no further obligation to make any advances to Borrower with
respect to the Loan.     4.   Interest Rate: The unpaid principal balance of the
Loan (including any PIK Interest (as defined below) added to the unpaid
principal balance of the Loan under Section 5 below) shall bear interest in an
amount equal to (a) cash interest at the rate of 5.00% per annum (“Cash
Interest”) plus (b) payment-in-kind interest at the rate of 7.50% per annum
(“PIK Interest”). Interest shall be calculated hereunder on the basis of a
360-day year consisting of twelve 30 day months. In no event shall interest be
charged hereunder which would violate any applicable law.

 

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  5.   Payments: Accrued and unpaid Cash Interest is due and payable in cash in
immediately available funds on the later of (a) each January 30, April 30,
July 30 and October 30 of each year and (b) the day after required quarterly
interest payments are made with respect to the Senior Indebtedness. So long as
the Senior Indebtedness has not been paid in full, accrued and unpaid PIK
Interest is automatically added to the unpaid principal balance of the Loan as
additional principal of the Loan on the first day of each month (and such
interest will no longer be accrued and unpaid). After the Senior Indebtedness
has been paid in full, accrued and unpaid PIK Interest is due and payable in
cash in immediately available funds on each date that Cash Interest is due and
payable. All payments shall be made to Beachwold, as agent for Lender, to be
distributed by Beachwold to the parties comprising Lender on a pro rata basis.  
  6.   Voluntary Prepayment: Voluntary prepayments on the unpaid principal
balance of the Loan may be made without penalty or premium, in whole or in part,
at any time.     7.   Mandatory Prepayment: If (x) the Senior Indebtedness or
(y) any indebtedness issued in exchange for, or the net proceeds of which are
used to extend, refinance, renew, replace, defease or refund, the Senior
Indebtedness (including any accrued and unpaid interest thereon) has been repaid
in full, then within 10 days after the date on which Borrower files its next
quarterly report with the Securities Exchange Commission for the fiscal quarter
in which the Senior Indebtedness or such other indebtedness has been repaid in
full and for each subsequent fiscal quarter as long as the Loan remains
outstanding, Borrower shall prepay an aggregate principal amount of the Loan
equal to the lesser of (a) 25% of (i) cash and cash equivalents set forth on
Borrower’s balance sheet as of the end of such fiscal quarter (as reduced by
“cut” but “uncashed” checks reflected as overdrafts in Borrower’s general ledger
as of such fiscal quarter-end) minus (ii) $10,000,000 and (b) 25% of (i) the
lowest amount of Excess Cash (as defined below) available to Borrower as of the
last business day of any month in the next twelve (12) month period following
such fiscal quarter minus (ii) $10,000,000; provided that the aggregate
principal amount of the Loan to be repaid pursuant to this Section 7 at any time
shall be determined and approved by the disinterested members of Borrower’s
board of directors, whose determination shall be final and binding. For purposes
of this Section 7, “Excess Cash” shall mean the excess cash forecasted to be
available to Borrower as of the last business day of each month of the relevant
rolling twelve month period following each fiscal quarter-end, as set forth in
Borrower’s business plan for such period, which business plan shall have been
prepared in a manner consistent with past practice.     8.   Final Payment: The
outstanding principal balance of the Loan (including any PIK Interest added to
the unpaid principal balance of the Loan under

 

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      Section 5 above) is payable in full on the Maturity Date. All accrued and
unpaid interest, and all other sums owed under the Loan, shall be due and
payable on the Maturity Date.     9.   Default: Upon any failure by Borrower to
make any payment to Lender within five (5) business days after the date it is
due, Borrower shall be in default under this facility and Lender shall have the
right to declare the entire indebtedness immediately due and payable. Following
any such default, PIK Interest shall, at Lender’s option, accrue and be payable
at the lesser of twenty five percent (25%) per annum or the maximum interest
rate which may be collected from Borrower under applicable law.     10.  
Promissory Notes and Further Documentation: Borrower shall execute one or more
promissory notes in form and substance reasonably satisfactory to Lender to
evidence its indebtedness under the Loan. At the request of Beachwold, separate
promissory notes shall be issued to each party comprising Lender in the
principal amount loaned by each Lender. Advances and repayments and the
outstanding amounts owed to each party comprising Lender shall be recorded on
the books and records of Beachwold, which shall be deemed correct absent
manifest error. Borrower shall execute such further promissory notes and other
documentation as Lender may require, from time-to-time to confirm the terms
and/or status of the Loan, the amount owed to each party comprising Lender, and
any additional parties which become constituent members of Lender hereunder.    
11.   Costs/Attorneys Fees: Borrower shall be responsible for and shall pay to
Lender on demand, all of Lender’s costs and expenses incurred in connection with
the Loan, including without limitation, attorneys fees.     12.   Agent
Provisions: All communications from the Borrower to the Lender shall be made
through Beachwold, as agent for Lender (“Agent”). All communications from any
party comprising Lender to the Borrower shall be made through Agent. Agent shall
have sole authority to act on behalf of Lender in all matters concerning the
Loan, including, without limitation, any modifications or amendments (provided
that no modifications to the Maturity Date or to the principal, interest or
other amounts owed to any party comprising Lender shall be effective without
such party’s written consent), and any subordination agreements between Lender
and the trustees or holders of the Taberna Preferred Funding indebtedness.    
13.   Subordination: The Loan and other indebtedness evidenced by this letter
agreement is subordinated to the prior payment in full of the Senior
Indebtedness as defined in, and to the extent provided in, the Agreement dated
as of March 27, 2008, among Taberna Capital Management, LLC, Beachwold,
Rothenberg and Borrower.

 

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     Kindly indicate your agreement with, and acceptance of, the foregoing terms
by countersigning a copy of this letter agreement where indicated below and
returning it to the undersigned.

            LENDERS:

BEACHWOLD PARTNERS, L.P.
      By:   /s/ William S. Friedman         William S. Friedman        General
Partner              /s/ Robert P. Rothenberg       Robert P. Rothenberg       
   

Agreed and Accepted:
Tarragon Corporation

         
By:
Name:
  /s/ Charles D. Rubenstein
 
Charles D. Rubenstein    
Title:
  Executive Vice President    

 

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EXHIBIT A

       
Lender
     
 
     
Beachwold Partners, L.P.
  $ 26,032,861.12
 
     
Robert P. Rothenberg
    10,000,000.00