Document:

exv10w5

 

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.

 

 

	 	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

 

 

	 	 	 	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.

 

 

     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	 	 

 

 

EXHIBIT A

	 	 	 	 
	Lender
	 	 	 
	 
	 	 	 
	Beachwold Partners, L.P.

	 	$	26,032,861.12
	 
	 	 	 
	Robert P. Rothenberg

	 	 	10,000,000.00exv10w6

 

Exhibit 10.6

The indebtedness evidenced by this instrument 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 Partners, L.P., Mr. Robert Rothenberg
and Tarragon Corporation.

Amended and Restated Promissory Note

			
	$26,032,861.12
	 	March 27, 2008          

     For value received, Tarragon Corporation, a Nevada corporation (“Borrower”), promises
to pay to the order of Beachwold Partners, L.P., the principal sum of Twenty-Six Million,
Thirty-Two Thousand, Eight Hundred Sixty-One Dollars and 12/100 ($26,032,861.12), or so much
thereof as may be outstanding, with interest on the unpaid principal balance thereof at the rate
set forth in the Loan Agreement (as defined below).

     1. Defined Terms. This Amended and Restated Promissory Note (this “Note”) is given
pursuant to that certain letter agreement dated as of the date hereof among Borrower, Lender and
Mr. Robert Rothenberg (the “Loan Agreement”). As used in this Note, (i) the term “Lender” means
the holder of this Note, (ii) the term “Indebtedness” means the principal of, interest on, or any
other amounts due at any time under, this Note including late charges and default interest, and any
other sums due and owing pursuant to the Loan Agreement, (iii) “Event of Default” means any failure
to pay any portion of the Indebtedness within the earlier to occur of (a) 30 days after the due
date therefor and (b) the Maturity Date (as defined below) or any failure by Borrower to otherwise
comply in any respect with its obligations under the Loan Agreement and (iv) “Termination Date”
means the later to occur of (a) March 27, 2013, and (b) the second anniversary of the repayment in
full of the Senior Indebtedness.

     2. Address for Payment. All payments due under this Note shall be payable c/o
Beachwold Partners, L.P., 423 West 55th Street, 12th Floor, New York, NY
10019, Attn: William S. Friedman.

     3. Payment of Principal and Interest. The unpaid principal balance of the Loan (as
defined in the Loan Agreement), including any PIK Interest (as defined below) added to the unpaid
principal balance of the Loan as described 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. Accrued and
unpaid Cash Interest is due and payable in cash in

 

 

immediately available funds on the later of (i)
each January 30, April 30, July 30 and October 30 of each year and (ii) 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. The outstanding
principal balance of the Loan (including any PIK Interest added to the unpaid principal balance of
the Loan as described 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 earliest to occur
of (A) the Termination Date and (B) any earlier date on which the unpaid principal balance of this
Note becomes due and payable, by acceleration or otherwise (the “Maturity Date”).

          The principal balance of this Note, together with all accrued and unpaid interest and all
other amounts then payable hereunder shall also be due and payable within ten (10) days after
demand by Lender if, at any time after the Subordinated Notes (as hereinafter defined) have been
paid in full, there shall occur a Change of Control (as hereinafter defined). For purposes of the
preceding sentence:

          (i) “Subordinated Notes” shall mean those certain unsecured subordinated notes previously
issued by Borrower, which are held by Taberna Preferred Fundings II Ltd., holder of $37,500,000 of
Subordinated Notes, Taberna Preferred Funding III, Ltd., holder of $27,500,000 of Subordinated
Notes, Taberna Preferred Funding IV, Ltd., holder of $24,375,000 of Subordinated Notes, Taberna
Preferred Funding V, Ltd., holder of $25,000,000 of Subordinated Notes and Taberna Preferred
Funding VI, Ltd., holder of $10,625,000 of Subordinated Notes; and

          (ii) “Change in Control” shall mean the occurrence of any of the following events:

	 	(A)	 	upon the approval by the Board of Directors
of Borrower (the “Board”) (or if approval of the Board is not
required as a matter of law, the stockholders of the Borrower) of (A)
any consolidation or merger of the Borrower in which the Borrower is
not the continuing or surviving entity or pursuant to which shares of
Borrower’s common stock would be converted into cash, securities or
other property other than a merger in which the holders of shares of
Borrower’s common stock immediately prior to the merger will have the
same proportionate ownership of common
stock of the surviving entity immediately after the merger, (B)
any sale, lease, exchange, or other transfer (in one transaction
or a series of related transactions) of all or substantially all
the assets of the Borrower or (C) adoption

2

 

	 	 	 	of any plan or proposal
for the liquidation or dissolution of the Borrower;
	 
	 	(B)	 	when any “person” (as defined in Section
13(d) of the Exchange Act), other than the Borrower or any subsidiary
or affiliate or employee benefit plan or trust maintained by the
Borrower, shall become the “beneficial owner” (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of more than
20% of the Borrower’s common stock outstanding at the time, without
the prior approval of the Board;
	 
	 	(C)	 	at any time during a period of two
consecutive years, individuals who at the beginning of such period
constituted the Board shall cease for any reason to constitute at
least a majority thereof, unless the election or the nomination for
election by the stockholders of the Borrower of each new director
during such two year period was approved by a vote of at least
two-thirds of the directors then still in office who were Directors
at the beginning of such two-year period;
	 
	 	(D)	 	a filing pursuant to any federal or state
law in connection with any tender offer for shares of the Borrower
(other than a tender offer by the Borrower); or
	 
	 	(E)	 	the occurrence of any other event or series
of events, which, in the opinion of the Board, will, or is likely to,
if carried out, result in a change of control of the Borrower.

     4. Application of Payments. If at any time Lender receives, from Borrower or
otherwise, any amount applicable to the Indebtedness which is less than all amounts due and payable
at such time, Lender may apply that payment to amounts then due and payable in any manner and in
any order determined by Lender, in Lender’s discretion. Borrower agrees that neither Lender’s
acceptance of a payment from Borrower in an amount that is less than all amounts then due and
payable nor Lender’s application of such payment shall constitute or be deemed to constitute either
a waiver of the unpaid amounts or an accord and satisfaction.

     5. Acceleration. If an Event of Default has occurred and is continuing, the
Indebtedness may, at the option of Lender, without any prior notice to Borrower, at once become due
and payable.

     6. Default Rate. If an Event of Default has occurred and is continuing, PIK Interest
shall, at Lender’s option, accrue and be payable at the lesser of 25.00% per annum or the maximum
interest rate which may be collected from Borrower under applicable law. Borrower acknowledges
that its failure to make timely payments will

3

 

cause Lender to incur additional expenses in
servicing and processing the Loan, that, during the time that any monthly installment or other
payment under this Note is delinquent for more than 30 days, Lender will incur additional costs and
expenses arising from its loss of the use of the money due and from the adverse impact on Lender’s
ability to meet is other obligations and to take advantage of other investment opportunities, and
that it is extremely difficult and impractical to determine those additional costs and expenses.
Borrower also acknowledges that, during the time that any monthly installment or other payment due
under this Note is delinquent for more than 30 days, Lender’s risk of nonpayment of this Note will
be materially increased and Lender is entitled to be compensated for such increased risk. Borrower
agrees that the increase in the rate of interest payable under this Note as set forth in this
Section 6 represents a fair and reasonable estimate, taking into account all circumstances existing
on the date of this Note, of the additional costs and expenses Lender will incur by reason of the
Borrower’s delinquent payment and the additional compensation Lender is entitled to receive for the
increased risks of nonpayment associated with a delinquent loan.

     7. Prepayments. The principal amount of the Indebtedness evidenced by this Note is
prepayable in full or in part at any time, without premium. 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 Indebtedness remains outstanding, Borrower shall
prepay an aggregate principal amount of the Indebtedness 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 Indebtedness 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. Costs and Expenses. Borrower shall pay on demand all expenses and costs, including
fees and out-of-pocket expenses of attorneys and expert witnesses and costs of investigation,
incurred by Lender as a result of any Event of Default or in
connection with efforts to collect any amount due under this Note, or to enforce the
provisions of the Loan Agreement, including those incurred in post-judgment collection efforts and
in any bankruptcy proceedings (including any action for relief from the

4

 

automatic stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure proceeding.

     9. Forbearance. Any delay by Lender in exercising any right or remedy under this Note
or the Loan Agreement or otherwise afforded by applicable law, shall not be a waiver of or preclude
the exercise of that or any other right or remedy. The acceptance by Lender of any payment after
the due date of such payment, or in an amount which is less than the required payment, shall not be
a waiver of Lender’s right to require prompt payment when due of all other payments or to exercise
any right or remedy with respect to any failure to make prompt payment. Enforcement by Lender of
any remedy for Borrower’s obligations under this Note shall not constitute an election by Lender of
remedies so as to preclude the exercise of any other right or remedy available to Lender.

     10. Waivers. Presentment, demand, notice of dishonor, protest, notice of
acceleration, notice of intent to demand or accelerate payment or maturity, presentment for
payment, notice of nonpayment, grace, and diligence in collecting the Indebtedness are waived by
Borrower, and all endorsers and guarantors of this Note and all other third party obligors.

     11. Loan Charges. Borrower and Lender intend at all times to comply with the laws of
the State of New York governing the maximum rate or amount of interest payable on or in connection
with this Note and the Indebtedness (or applicable United Sates federal law to the extent that it
permits Lender to contract for, charge, take, reserve, or receive a greater amount of interest than
under New York law). If the applicable law is ever judicially interpreted so as to render usurious
any amount payable under this Note, or contracted for, charged, taken, reserved or received with
respect to the Indebtedness, or of acceleration of the maturity of this Note, or if any prepayment
by Borrower results in Borrower having paid any interest in excess of that permitted by any
applicable law, then Borrower and Lender expressly intend that all excess amounts collected by
Lender shall be applied to reduce the unpaid principal balance of this Note (or, if this Note has
been or would thereby be paid in full, shall be refunded to Borrower), and the provisions of this
Note and the Loan Agreement immediately shall be deemed reformed and the amounts thereafter
collectible under this Note or the Loan Agreement reduced, without the necessity of the execution
of any new documents, so as to comply with any applicable law, but so as to permit the recovery of
the fullest amount otherwise payable under this Note or the Loan Agreement. The right to
accelerate the maturity of this Note does not include the right to accelerate any interest which
has not otherwise accrued on the date of such acceleration, and Lender does not intend to collect
any unearned interest in the event of acceleration. All sums paid or agreed to be paid to Lender
for the use, forbearance or detention of the Indebtedness shall, to the extent permitted by any
applicable law, be amortized, prorated, allocated and spread throughout the full term of the
Indebtedness until payment in full so that the rate or amount of interest on account of the
Indebtedness does not exceed the applicable usury ceiling. Notwithstanding any provision contained
in this Note that permits the compounding of interest, including any provision by which any
accrued interest is added to the principal amount of this Note, the total amount of interest that
Borrower is obligated to pay and Lender is entitled to receive with respect to the

5

 

Indebtedness shall not exceed the amount calculated on a simple (i.e. noncompounded) interest basis at
the maximum rate on principal amounts actually advanced to or for the account of Borrower,
including all current and prior advances.

     12. Commercial Purpose. Borrower represents that the Indebtedness is being incurred
by Borrower solely for the purpose of carrying on a business or commercial enterprise, and not for
personal, family or household purposes.

     13. Counting of Days. Except where otherwise specifically provided, any reference in
this Note to a period of “days” means calendar days, not Business Days.

     14. Governing Law. This Note shall be governed by the laws of the State of New York.

     15. Captions. The captions of the sections of this Note are for convenience only and
shall be disregarded in construing this Note.

     16. Notices. All notices, demands and other communications required or permitted to
be given by Lender to Borrower pursuant to this Note shall be given by registered or certified
mail, or by overnight delivery service to Borrower at the address set forth below, and to the
Lender at the address set forth in Section 2.

     17. Consent to Jurisdiction and Venue. Borrower agrees that any controversy arising
under or in relation to this Note shall be litigated exclusively in New York, New York (the
“Jurisdiction”). The state and federal courts and authorities with jurisdiction in the
Jurisdiction shall have exclusive jurisdiction over all controversies which shall arise under or in
relation to this Note. Borrower irrevocably consents to service, jurisdiction, and venue of such
courts for any such litigation and waives any other venue to which it might be entitled by virtue
of domicile, habitual residence or otherwise.

     18. Replacement Note. This Note amends, supercedes and replaces in its entirety that
certain $26,032,861.12 Promissory Note from Borrower to Lender dated January 7, 2008 (the “Original
Note”), and all amounts outstanding thereunder are now owed and outstanding under this Note, with
all accrued interest and other non-principal amounts outstanding under the Original Note as of the
date hereof being allocated to this Note.

     19. Waiver. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (A) AGREE NOT TO ELECT
A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE OR THE RELATIONSHIP BETWEEN THE
PARTIES AS LENDER AND BORROWER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVE ANY RIGHT TO TRIAL
BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE.
THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY, WITH THE
BENEFIT OF COMPETENT LEGAL COUNSEL.

6

 

Exhibit 10.6

     In Witness Whereof, Borrower has signed and delivered this Note, or has caused this
Note to be signed and delivered by its duly authorized representative, on the 27th day of March,
2008.

	 	 	 	 	 	 	 
	 	 	Borrower:	 	 
	 
	 	 	 	 	 	 
	 	 	Tarragon Corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Charles D. Rubenstein
 

	 	 
	 

	 	 	 	     Name: Charles D. Rubenstein	 	 
	 

	 	 	 	     Title: Executive Vice President

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