Document:

exv10w1

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, 16th 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) Notwithstanding anything to the contrary contained herein, including Article XII,
the Company covenants and agrees that (i) the Company has no right, title, or interest in the
Reserve Account whatsoever, other than the Company’s rights set forth herein and under applicable
law, and (ii) the Trustee shall have the right to withdraw funds from the Reserve Account as set
forth in this Section 10.10 and to apply such amounts to any 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 and any such
withdrawal and/or application by the Trustee and the holders of the Preferred Securities as set
forth in this Section 10.10 shall (A) not be subordinate or subject in right of payment to
the prior payment in full of any Senior Debt, (B) be permitted to be made prior to the payment of
any Senior Debt even if (x) a default has occurred and is continuing (whether at maturity, by
acceleration or otherwise) with respect to any Senior Debt, (y) any Proceeding has been commenced
or (z) any other condition exists pursuant to Article XII or otherwise in this Indenture or
any other document executed in connection with this Indenture that would, but for this Section
10.10(e), prohibit such withdrawal or application. The Company hereby represents and warrants
that it has reviewed the terms and provisions of its Senior Debt documents, if any,

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and that nothing contained in Sections 10.10, 10.11 or 10.12 of the Indenture
violates, or is prohibited by, the terms of such Senior Debt documents.

     SECTION 10.11 Security Interest in Interest Reserve Fund.

     (a) The Company hereby pledges, assigns and grants a security interest to the Trustee, as
security for payment of the principal, premium, if any, and interest due on the Preferred
Securities and the performance of all other terms, conditions and covenants of this Indenture on
the Company’s part to be paid and performed, in all of the Company’s right, title and interest in
and to the Reserve Account and all deposits at any time contained therein and the proceeds thereof.
The Reserve Account shall be under the sole dominion and control of the Trustee. The Company
shall take all actions necessary to maintain in favor of the Trustee a perfected security interest
in the Reserve Account.

     (b) The Company shall not, without the prior written consent of the holders of a majority in
aggregate principal amount of the outstanding Preferred Securities (i) in any way alter or modify
the Reserve Account or (ii) further pledge, assign or grant any security interest in the Reserve
Account or permit any other lien or encumbrance to attach thereto (other than liens for taxes,
assessments or other governmental charges that are not yet due or payable, or that are being
diligently contested in good faith) or any levy to be made thereon, or any UCC-1 financing
statements, except those naming the Trustee as the secured party, to be filed with respect thereto.

     SECTION 10.12. Provisions Regarding Letters of Credit.

     (a) Delivery of Letters of Credit.

     (i) Within ten (10) calendar days after the Minimum Balance has been deposited into the
Reserve Account pursuant to Section 10.10(a), the Company shall deliver to the
Trustee a Letter of Credit in the amount of the Minimum Balance. The Trustee shall have the
right to draw down such Letter of Credit as set forth herein. Upon the Trustee’s receipt of
the Letter of Credit, the Trustee shall, and the holders of a majority in aggregate
principal amount of the outstanding Preferred Securities shall direct the Trustee to,
promptly terminate and release its security interest in the Reserve Account and the Account
Control Agreement. The Trustee shall have no further interest in, or control over, the
Reserve Account following the delivery of the Letter of Credit by the Company to the
Trustee.

     (ii) The Company shall pay to the Trustee and the holders of the Preferred Securities
(including Taberna Capital Management, LLC) all of their reasonable out-of-pocket costs and
expenses in connection with the delivery of the Letter of Credit. In no event shall (i) the
Company be entitled to draw from the 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 proceeds drawn upon the Letter of Credit; provided,
however, that the Company shall have the right to make a claim under this Indenture if such
proceeds are not applied in accordance with the terms of this Indenture. Upon no less than
fifteen (15) days written notice to the Trustee, the

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Company may replace the Letter of Credit delivered pursuant to this Section
10.12 with a substitute Letter of Credit of an equal notional amount from another
Eligible Institution.

     (iii) Under no circumstances shall the Trustee as beneficiary under the Letter of
Credit for the benefit of the holders of the Preferred Securities be required to transfer
the 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 Letter of Credit should be transferred to a second beneficiary or
(ii) the Trustee should no longer hold the Letter of Credit, either the holders of not less
than a majority in aggregate principal amount of the outstanding Preferred Securities or the
Trustee may require that the existing Letter of Credit be cancelled and that, upon such
cancellation or return of the existing Letter of Credit to the Company, a new Letter of
Credit be issued to the second beneficiary by giving to each of the other parties hereto no
less than fifteen (15) days written notice of such requirement, at which time the parties
hereto, shall, if necessary and requested by any party hereto, endeavor to enter into a
supplemental indenture (and other documents which may be reasonably necessary) to address
any circumstances arising as a result of such transfer.

     (b) Any Letter of Credit delivered under this Indenture 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 Letter
of Credit 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 Letter of Credit or any proceeds drawn
thereon; provided, however, that the Company shall have the right to make a claim under this
Indenture if such proceeds are not applied in accordance with the terms of this Indenture. 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 draw on the Letter of Credit and
application of any proceeds of such draw and the Trustee shall not have any duty, obligation or
right to determine when and if a draw is to be made on the Letter of Credit or how the proceeds of
the Letter of Credit will be applied. Upon notice from the holders of a majority in aggregate
principal amount of the outstanding Preferred Securities of the occurrence and continuance of an
Event of Default, the Trustee shall have the right to draw on the Letter of Credit in full or in
part, as directed by the holders of a majority in aggregate principal amount of the outstanding
Preferred Securities, and to apply all or any part thereof to any amounts then due and owing and/or
to become due and owing with respect to the Preferred Securities, as directed solely by the holders
of a majority in the aggregate principal amount of the outstanding Preferred Securities. The
Trustee shall give the Company written notice of any such application of funds.

     (c) In addition, the Trustee shall, as directed by the holders of a majority in aggregate
principal amount of the outstanding Preferred Securities, draw in full any Letter of Credit: (a)
if the Trustee has received a notice from the issuing bank or the Company that the Letter of Credit
will not be renewed and a substitute Letter of Credit is not provided at least five (5) Business
Days prior to the date on which the outstanding Letter of Credit is scheduled to expire; (b) upon
receipt of notice from the issuing bank or the Company that the Letter of Credit will be

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terminated (except if the termination of such Letter of Credit is permitted pursuant to the
terms and conditions of this Indenture or a substitute Letter of Credit is provided no later than
five (5) Business Days prior to such termination); or (c) if the Trustee has received notice from
either the issuing bank or the Company that the bank issuing the Letter of Credit shall cease to be
an Eligible Institution and the Company has not replaced the outstanding Letter of Credit with a
substitute Letter of Credit from an Eligible Institution within five (5) Business Days of notice to
the Company by the holders of a majority in aggregate principal amount of the Preferred Securities.
The Company agrees that it will promptly notify, in writing, the Trustee and the holders of a
majority in aggregate principal amount of the Preferred Securities of the occurrence of any event
set forth in clause (a), (b) or (c) of the preceding sentence, which occurrence shall be deemed to
be an Event of Default hereunder. The Trustee shall apply all or any part of the proceeds drawn on
any Letter of Credit pursuant to Section 10.12(b). Notwithstanding anything to the
contrary contained in the above, the Trustee shall not be liable for any losses sustained by any
Person due to the insolvency of the bank issuing the Letter of Credit.

          (d) Notwithstanding anything to the contrary contained herein, including Article XII,
the Company covenants and agrees that (i) the Letter of Credit shall be the independent obligation
of the Eligible Institution issuing the Letter of Credit and that the Company has no right, title,
or interest in the Letter of Credit whatsoever; provided, however, that the Company shall have the
right to make a claim under this Indenture if such proceeds are not applied in accordance with the
terms of this Indenture, and (ii) the Trustee shall have the right to draw upon the Letter of
Credit as set forth in this Section 10.12 and may apply such proceeds to any 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
and any such draw and application by the Trustee and/or the holders of the Preferred Securities as
set forth in this Section 10.12 hereof shall (i) not be subordinate or subject in right of
payment to the prior payment in full of any Senior Debt, (ii) be permitted to be made prior to the
payment of any Senior Debt even if (A) a default has occurred and is continuing (whether at
maturity, by acceleration or otherwise) with respect to any Senior Debt, (B) any Proceeding has
been commenced or (C) any other condition exists pursuant to Article XII or otherwise in
this Indenture or any other document executed in connection with this Indenture that would, but for
this Section 10.12(d), prohibit such draw or application.

          (e) Upon the the expiration of the Reduced Covenant Period and provided that there is no Event
of Default and the Company is in compliance with all of the terms, covenants, conditions and
requirements set forth in this Indenture, as certified in writing by the Company to the Trustee and
the holders of the outstanding Preferred Securities and as confirmed by the holders of a majority
in aggregate principal amount of the outstanding Preferred Securities, the Letter of Credit shall
be cancelled and the Trustee shall make a good faith effort to return the original Letter of Credit
to the Company.

     SECTION 10.13 Limitation on Dividends. During the Reduced Covenant Period, the Company shall
not, without the prior written consent of the holders of a majority in aggregate principal amount
of the outstanding Preferred Securities, declare or pay dividends or make any other distributions
on the Company’s Equity Interests; provided, however, notwithstanding anything to the contrary
contained in this Section 10.13, the Company shall have the right to declare and pay dividends to
the holders of its Equity Interests in an amount equal to the greater

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of (i) the amount required to maintain the Company’s status as a REIT under the Code, or (ii)
$.025 per share of common stock per month. In the event that the aggregate amount of the dividends
paid during any calendar month pursuant to clause (ii) of this Section 10.13 exceeds the
aggregate amount of the Regular Reserve Deposits made during such calendar month, as and to the
extent required pursuant to Section 10.10(b) above (a “Short-fall”), the Company shall
deposit into the Reserve Account (each such deposit, an “Additional Reserve Deposit”) within two
(2) Business Days after its receipt thereof, twenty-five percent (25%) of each principal payment it
receives in respect of any loans in which the Company has any right, title or interest, or in which
the Company has any other rights to receive payment (each, a “Loan Principal Payment”), until such
time as the Short-fall has been deposited into the Reserve Account. The Company shall, within five
(5) calendar days of (A) each Regular Reserve Deposit, (B) each Loan Principal Payment it receives
and (C) each Additional Reserve Deposit into the Reserve Account, notify the Trustee and Taberna
Capital Management, LLC in writing of the amount of such deposit or Loan Principal Payment, as
applicable; provided, however, the Company’s failure to provide such notice as provided in
Subsections (A) and (C) shall not constitute an Event of Default under Section 5.1(g). For the
purposes of this Section 10.13 only, the calendar quarter ending June 30, 2008 shall be
treated as if it contains only the months of May and June.

     SECTION 10.14 Limitation on Incurrence of Debt. Until such time as the Letter of Credit has
been delivered to Trustee pursuant to Section 10.12, the Company shall not, without the
prior written consent of the holders of a majority in aggregate principal amount of the outstanding
Preferred Securities, incur any additional Debt; provided that so long as no Event of Default
exists (i) the Company may incur additional Debt under the Company’s revolving credit facility with
The Bank of Nevada, pursuant to that certain Revolving Loan Agreement, dated November 26, 2007, as
modified by that certain Modification Agreement dated March ___, 2008 (collectively, the “Existing
Revolver”), provided, that the total outstanding Debt under such Existing Revolver does not exceed
$7,500,000.00 and (ii) the Company shall be permitted to foreclose upon liens and security
interests in real property and personalty associated therewith and, in connection with such
foreclosure proceedings, assume any then-existing senior indebtedness secured by such real property
upon the existing terms thereof so long as such foreclosure is conducted in the ordinary course of
the Company’s business, the assumption of any such senior indebtedness will not adversely affect
the Company’s business, and such foreclosure and/or assumption will not adversely affect the
satisfaction of any obligations to the holders of the Preferred Securities. The Company represents
and warrants that, as of May 30, 2008, the amount outstanding under the Existing Revolver is
$4,170,000.00. The Company shall give five (5) Business Days prior written notice of any proposed
amendment, supplement or other modification to the terms of the Existing Revolver to the holders of
a majority in aggregate amount of the outstanding principal amount of the outstanding Preferred
Securities.

     SECTION 10.15. Inspection of Books and Records.  Upon the request of the holders of the
Preferred Securities and/or Taberna Capital Management, LLC on the behalf of such holders, 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 to make copies
thereof and extracts therefrom) during normal business hours, (b) make management representatives
of the Company and its Subsidiaries 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

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and its Subsidiaries 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 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 10.15
shall provide for at least one (1) business day notice. All costs and expenses of the Company and
the holders of the Preferred Securities and Taberna Capital Management, LLC incurred pursuant to
this Section 10.15 shall be paid by the Company.

ARTICLE II

MISCELLANEOUS

     Section 2.01 By execution of this Supplemental Indenture, each of the Administrative
Trustees, on behalf of Desert Capital TRS Statutory Trust I, as Holder of 100% in aggregate
principal amount of the Outstanding Securities and each of Taberna Preferred Funding VI, Ltd., as
Holder of approximately 83.33% in aggregate principal amount of the outstanding Preferred
Securities (“TPF VI”) and Taberna Preferred Funding VIII, Ltd., as Holder of approximately 16.67%
in aggregate principal amount of the outstanding Preferred Securities (“TPF VIII”), in accordance
with Section 9.2 of the Indenture, hereby (i) consents to the Trustee and the Company executing and
delivering this Supplemental Indenture, (ii) directs the Trustee to execute and deliver this
Supplemental Indenture and (iii) agrees to and does hereby release the Trustee for any action taken
or to be taken by the Trustee in connection with its execution and delivery of this Supplemental
Indenture and for any liability or responsibility arising in connection herewith.

     Section 2.02 The Trustee accepts the trust in this Supplemental Indenture declared and
provided upon the terms and conditions set forth in the Indenture. The Trustee shall not be
responsible in any manner whatsoever for the validity or sufficiency of this Supplemental Indenture
or the due execution hereof by the Company or for or in respect of the recitals and statements
contained herein, all of which recitals and statements are made solely by the Company.

     Section 2.03 Except as hereby expressly modified, the Indenture and the Securities
issued thereunder are ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect.

     Section 2.04 This Supplemental Indenture shall become effective only upon the
satisfaction of the following conditions: (i) the Trustee shall have received a counterpart of
this Supplemental Indenture duly executed by the Company, (ii) the execution and delivery of the
Account Control Agreement, (iii) the delivery of an Opinion of Counsel relating to this
Supplemental Indenture in accordance with Sections 1.2 and 9.3 of the Indenture,
(iv) the delivery of an Officer’s Certificate relating to this Supplemental Indenture in accordance
with Sections 1.2 and 9.3 of the Indenture, and (v) the Company shall have paid all
legal expenses of the holders of the Preferred Securities and the Trustee in connection with this
Supplemental Indenture.

Second Supplemental Indenture

10

 

     Section 2.05 This Supplemental Indenture may be executed in any number of
counterparts, each of which shall be deemed to be an original for all purposes; but such
counterparts shall together be deemed to constitute but one and the same instrument. The executed
counterparts may be delivered by facsimile or other electronic transmission, which facsimile or
other electronic copies shall be deemed original copies.

     Section 2.06 The laws of the State of New York shall govern this Supplemental
Indenture without regard to the conflict of law principles thereof.

     Section 2.07 In the event of any inconsistency between the terms and conditions of
this Second Supplemental Indenture and the terms and conditions of the Indenture, the terms and
conditions of this Second Supplemental Indenture shall prevail.

     Section 2.08 The Company agrees that this Second Supplemental Indenture contains the
entire agreement between the Company and TPF VI and TPF VIII with respect to all of the matters set
forth in that certain Letter Agreement, dated March 24, 2008, and such Letter Agreement is hereby
superseded by the terms and conditions of this Second Supplemental Indenture.

[Remainder of Page Intentionally Left Blank]

Second Supplemental Indenture

11

 

     IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be
duly executed as of the day and year first above written.

	 	 	 	 	 
	 	DESERT CAPITAL REIT, INC.

as Company

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

Signature Page to Second Supplemental Indenture

 

 

	 	 	 	 	 
	 	THE BANK OF NEW YORK TRUST COMPANY, NATIONAL
ASSOCIATION,

as Trustee

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

Signature Page to Second Supplemental Indenture

 

 

	 	 	 	 	 
	 	DESERT CAPITAL TRS STATUTORY TRUST I

(as to Section 2.01 only)

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	Administrative Trustee 	 
	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	Administrative Trustee 	 
	 

Signature Page to Second Supplemental Indenture

 

 

	 	 	 	 	 
	 	TABERNA PREFERRED FUNDING VI, LTD.

(as to Section 1.07 (adding Sections 10.10(c) and

10.12(a) and(e) to the Indenture) and Section 2.01

only)

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	TABERNA PREFERRED FUNDING VIII, LTD.

(as to Section 1.07 (adding Sections 10.10(c) and

10.12(a) and(e) to the Indenture) and Section 2.01

only)

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

Signature Page to Second Supplemental Indentureexv10w3

Exhibit 10.3

INDEMNITY AGREEMENT

     This
Agreement is made and entered into this _th day of                     ,                     by and between
IXYS Corporation, a Delaware corporation (the “Corporation”), and                     (“Agent”).

Recitals

     Whereas, Agent performs a valuable service to the Corporation in his capacity as a
                     of the Corporation;

     Whereas, the stockholders of the Corporation have adopted bylaws (the “Bylaws”)
providing for the indemnification of the directors, officers, employees and other agents of the
Corporation, including persons serving at the request of the Corporation in such capacities with
other corporations or enterprises, as authorized by the Delaware General Corporation Law, as
amended (the “Code”);

     Whereas, the Bylaws and the Code, by their non-exclusive nature, permit contracts
between the Corporation and its agents, officers, employees and other agents with respect to
indemnification of such persons; and

     Whereas, in order to induce Agent to continue to serve as a                      of the Corporation,
the Corporation has determined and agreed to enter into this Agreement with Agent;

     Now, Therefore, in consideration of Agent’s continued service as a                      after the
date hereof, the parties hereto agree as follows:

Agreement

     1. Services to the Corporation. Agent will serve, at the will of the Corporation or under
separate contract, if any such contract exists, as a                      of the Corporation or as a director,
officer or other fiduciary of an affiliate of the Corporation (including any employee benefit plan
of the Corporation) faithfully and to the best of his ability so long as he is duly elected and
qualified in accordance with the provisions of the Bylaws or other applicable charter documents of
the Corporation or such affiliate; provided, however, that Agent may at any time and for any reason
resign from such position (subject to any contractual obligation that Agent may have assumed apart
from this Agreement) and that the Corporation or any affiliate shall have no obligation under this
Agreement to continue Agent in any such position.

     2. Indemnity of Agent. The Corporation hereby agrees to hold harmless and indemnify Agent to
the fullest extent authorized or permitted by the provisions of the Bylaws and the Code, as the
same may be amended from time to time (but, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than the Bylaws or the Code permitted prior
to adoption of such amendment).

1.

 

     3. Additional Indemnity. In addition to and not in limitation of the indemnification
otherwise provided for herein, and subject only to the exclusions set forth in Section 4 hereof,
the Corporation hereby further agrees to hold harmless and indemnify Agent:

          (a) against any and all expenses (including attorneys’ fees), witness fees, damages,
judgments, fines and amounts paid in settlement and any other amounts that Agent becomes legally
obligated to pay because of any claim or claims made against or by him in connection with any
threatened, pending or completed action, suit or proceeding, whether civil, criminal,
arbitrational, administrative or investigative (including an action by or in the right of the
Corporation) to which Agent is, was or at any time becomes a party, or is threatened to be made a
party, by reason of the fact that Agent is, was or at any time becomes a director, officer,
employee or other agent of Corporation, or is or was serving or at any time serves at the request
of the Corporation as a director, officer, employee or other agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise; and

          (b) otherwise to the fullest extent as may be provided to Agent by the Corporation under the
non-exclusivity provisions of the Code and Section ___ of the Bylaws.

     4. Limitations on Additional Indemnity. No indemnity pursuant to Section 3 hereof shall be
paid by the Corporation:

          (a) on account of any claim against Agent solely for an accounting of profits made from the
purchase or sale by Agent of securities of the Corporation pursuant to the provisions of Section
16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar provisions of any
federal, state or local statutory law;

          (b) on account of Agent’s conduct that is established by a final judgment as knowingly
fraudulent or deliberately dishonest or that constituted willful misconduct;

          (c) on account of Agent’s conduct that is established by a final judgment as constituting a
breach of Agent’s duty of loyalty to the Corporation or resulting in any personal profit or
advantage to which Agent was not legally entitled;

          (d) for which payment is actually made to Agent under a valid and collectible insurance policy
or under a valid and enforceable indemnity clause, bylaw or agreement, except in respect of any
excess beyond payment under such insurance, clause, bylaw or agreement;

          (e) if indemnification is not lawful (and, in this respect, both the Corporation and Agent
have been advised that the Securities and Exchange Commission believes that indemnification for
liabilities arising under the federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to appropriate courts for
adjudication); or

          (f) in connection with any proceeding (or part thereof) initiated by Agent, or any proceeding by Agent against the Corporation or
its directors, officers, employees or other agents, unless (i) such indemnification is expressly required to be made by law,
(ii) the proceeding was authorized by the Board of Directors of the Corporation, (iii) such

2.

 

indemnification is provided by the Corporation, in its sole discretion, pursuant to the powers vested in the Corporation under the Code, or (iv) the proceeding is initiated pursuant to Section 9 hereof.

     5. Continuation of Indemnity. All agreements and obligations of the Corporation contained
herein shall continue during the period Agent is a director, officer, employee or other agent of
the Corporation (or is or was serving at the request of the Corporation as a director, officer,
employee or other agent of another corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise) and shall continue thereafter so long as Agent shall be subject to any
possible claim or threatened, pending or completed action, suit or proceeding, whether civil,
criminal, arbitrational, administrative or investigative, by reason of the fact that Agent was
serving in the capacity referred to herein.

     6. Partial Indemnification. Agent shall be entitled under this Agreement to indemnification
by the Corporation for a portion of the expenses (including attorneys’ fees), witness fees,
damages, judgments, fines and amounts paid in settlement and any other amounts that Agent becomes
legally obligated to pay in connection with any action, suit or proceeding referred to in Section 3
hereof even if not entitled hereunder to indemnification for the total amount thereof, and the
Corporation shall indemnify Agent for the portion thereof to which Agent is entitled.

     7. Notification and Defense of Claim. Not later than thirty (30) days after receipt by Agent
of notice of the commencement of any action, suit or proceeding, Agent will, if a claim in respect
thereof is to be made against the Corporation under this Agreement, notify the Corporation of the
commencement thereof; but the omission so to notify the Corporation will not relieve it from any
liability which it may have to Agent otherwise than under this Agreement. With respect to any such
action, suit or proceeding as to which Agent notifies the Corporation of the commencement thereof:

          (a) the Corporation will be entitled to participate therein at its own expense;

          (b) except as otherwise provided below, the Corporation may, at its option and jointly with
any other indemnifying party similarly notified and electing to assume such defense, assume the
defense thereof, with counsel reasonably satisfactory to Agent. After notice from the Corporation
to Agent of its election to assume the defense thereof, the Corporation will not be liable to Agent
under this Agreement for any legal or other expenses subsequently incurred by Agent in connection
with the defense thereof except for reasonable costs of investigation or otherwise as provided
below. Agent shall have the right to employ separate counsel in such action, suit or proceeding
but the fees and expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of Agent unless (i) the employment of
counsel by Agent has been authorized by the Corporation, (ii) Agent shall have reasonably
concluded, and so notified the Corporation, that there is an actual conflict of interest between
the Corporation and Agent in the conduct of the defense of such action or (iii) the Corporation
shall not in fact have employed counsel to assume the

3.

 

defense of such action, in each of which
cases the fees and expenses of Agent’s separate counsel shall be at the expense of the Corporation.
The Corporation shall not be entitled to assume the defense of any action, suit or
proceeding brought by or on behalf of the Corporation or as to which Agent shall have made the
conclusion provided for in clause (ii) above; and

          (c) the Corporation shall not be liable to indemnify Agent under this Agreement for any
amounts paid in settlement of any action or claim effected without its written consent, which shall
not be unreasonably withheld. The Corporation shall be permitted to settle any action except that
it shall not settle any action or claim in any manner which would impose any penalty or limitation
on Agent without Agent’s written consent, which may be given or withheld in Agent’s sole
discretion.

     8. Expenses. The Corporation shall advance, prior to the final disposition of any proceeding,
promptly following request therefor, all expenses incurred by Agent in connection with such
proceeding upon receipt of an undertaking by or on behalf of Agent to repay said amounts if it
shall be determined ultimately that Agent is not entitled to be indemnified under the provisions of
this Agreement, the Bylaws, the Code or otherwise.

     9. Enforcement. Any right to indemnification or advances granted by this Agreement to Agent
shall be enforceable by or on behalf of Agent in any court of competent jurisdiction if (i) the
claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of
such claim is made within ninety (90) days of request therefor. Agent, in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting his
claim. It shall be a defense to any action for which a claim for indemnification is made under
Section 3 hereof (other than an action brought to enforce a claim for expenses pursuant to Section
8 hereof, provided that the required undertaking has been tendered to the Corporation) that Agent
is not entitled to indemnification because of the limitations set forth in Section 4 hereof.
Neither the failure of the Corporation (including its Board of Directors or its stockholders) to
have made a determination prior to the commencement of such enforcement action that indemnification
of Agent is proper in the circumstances, nor an actual determination by the Corporation (including
its Board of Directors or its stockholders) that such indemnification is improper shall be a
defense to the action or create a presumption that Agent is not entitled to indemnification under
this Agreement or otherwise.

     10. Subrogation. In the event of payment under this Agreement, the Corporation shall be
subrogated to the extent of such payment to all of the rights of recovery of Agent, who shall
execute all documents required and shall do all acts that may be necessary to secure such rights
and to enable the Corporation effectively to bring suit to enforce such rights.

     11. Non-Exclusivity of Rights. The rights conferred on Agent by this Agreement shall not be
exclusive of any other right which Agent may have or hereafter acquire under any statute, provision
of the Corporation’s Certificate of Incorporation or Bylaws, agreement, vote of stockholders or
directors, or otherwise, both as to action in his official capacity and as to action in another
capacity while holding office.

     12. Survival of Rights.

          (a) The rights conferred on Agent by this Agreement shall continue after Agent has ceased to
be a director, officer, employee or other agent of the Corporation or to serve

4.

 

at the request of the Corporation as a director, officer, employee or other agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise and shall inure to the
benefit of Agent’s heirs, executors and administrators.

          (b) The Corporation shall require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business or assets of the
Corporation, expressly to assume and agree to perform this Agreement in the same manner and to the
same extent that the Corporation would be required to perform if no such succession had taken
place.

     13. Separability. Each of the provisions of this Agreement is a separate and distinct
agreement and independent of the others, so that if any provision hereof shall be held to be
invalid for any reason, such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof. Furthermore, if this Agreement shall be invalidated
in its entirety on any ground, then the Corporation shall nevertheless indemnify Agent to the
fullest extent provided by the Bylaws, the Code or any other applicable law.

     14. Governing Law. This Agreement shall be interpreted and enforced in accordance with the
laws of the State of Delaware.

     15. Amendment and Termination. No amendment, modification, termination or cancellation of
this Agreement shall be effective unless in writing signed by both parties hereto.

     16. Identical Counterparts. This Agreement may be executed in one or more counterparts, each
of which shall for all purposes be deemed to be an original but all of which together shall
constitute but one and the same Agreement. Only one such counterpart need be produced to evidence
the existence of this Agreement.

     17. Headings. The headings of the sections of this Agreement are inserted for convenience
only and shall not be deemed to constitute part of this Agreement or to affect the construction
hereof.

     18. Notices. All notices, requests, demands and other communications hereunder shall be in
writing and shall be deemed to have been duly given (i) upon delivery if delivered by hand to the
party to whom such communication was directed or (ii) upon the third business day after the date on
which such communication was mailed if mailed by certified or registered mail with postage prepaid:

	 	(a)	 	If to Agent, at the address indicated on the signature page hereof.
	 
	 	(b)	 	If to the Corporation, to:

IXYS Corporation

           
            
    
   

           
            
   
    

or to such other address as may have been furnished to Agent by the Corporation.

5.

 

     In Witness Whereof, the parties hereto have executed this Agreement on and as of the
day and year first above written.

IXYS Corporation

By:

Title:

Agent

6.

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