As filed with
the Securities and Exchange Commission on November 10,
2010
Registration
No. 333-168785
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Amendment No. 2
to
Form S-1
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
IMPERIAL HOLDINGS,
INC.
(to be converted from Imperial Holdings, LLC)
(Exact name of registrant as
specified in its charter)
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Florida
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6199
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77-0666377
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(State or other jurisdiction
of
Incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification No.)
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701 Park of Commerce
Boulevard Suite 301
Boca Raton, Florida 33487
(561) 995-4200
(Address, including
zip code, and telephone number, including area code, of
registrants principal executive offices)
Jonathan Neuman
President and Chief Operating Officer
701 Park of Commerce Boulevard Suite 301
Boca Raton, Florida 33487
(561) 995-4200
(Address, including
zip code, and telephone number, including area code, of agent
for service)
Copies to:
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Michael B. Kirwan
John J. Wolfel, Jr.
Foley & Lardner LLP
One Independent Drive, Suite 1300
Jacksonville, Florida 32202
(904) 359-2000
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J. Brett Pritchard
Locke Lord Bissell & Liddell LLP
111 South Wacker Drive
Chicago, Illinois 60606
(312) 443-0700
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Approximate date of commencement of proposed sale to the
public:
As soon as practicable after the
Registration Statement becomes effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, check the
following
box.
o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering.
o
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large
accelerated
filer
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Accelerated
filer
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Non-accelerated
filer
þ
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Smaller reporting
company
o
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(Do not check if a smaller
reporting company)
CALCULATION
OF REGISTRATION FEE
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Proposed Maximum
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Amount of
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Title of Each Class of
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Aggregate
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Registration
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Securities to be Registered
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Offering Price(1)(2)
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Fee(3)
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Common Stock, par value $0.01 per share
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$
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287,500,000
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$
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20,498.75
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(1)
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Includes amount attributable to
shares of common stock issuable upon the exercise of the
underwriters over-allotment option.
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(2)
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Estimated solely for the purpose of
calculating the amount of the registration fee in accordance
with Rule 457(o) under the Securities Act of 1933, as
amended.
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(3)
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The registration fee was previously
paid on August 11, 2010.
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The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
The
information in this prospectus is not complete and may be
changed. These securities may not be sold until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and is not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not
permitted.
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SUBJECT TO COMPLETION, DATED
NOVEMBER 10, 2010
PRELIMINARY PROSPECTUS
[ ] Shares
IMPERIAL HOLDINGS,
INC.
Common Stock
We are a specialty finance company with a focus on providing
premium financing for individual life insurance policies and
purchasing structured settlements.
This is our initial public offering. We are offering
[ ] shares
of our common stock in this firm commitment underwritten public
offering. We anticipate that the initial public offering price
of our common stock will be between
$[ ] and
$[ ] per share.
Prior to this offering, there has been no public market for our
common stock, and our common stock is not currently listed on
any national exchange or market system. We have been approved to
list our common stock on the New York Stock Exchange, subject to
official notice of issuance, under the symbol IFT.
Investing in our common stock involves risks. See Risk
Factors beginning on page 13 of this prospectus to
read about the risks you should consider before buying our
common stock.
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Per Share
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Total
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Price to public
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$
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$
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Discounts and commissions to underwriters*
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$
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$
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Net proceeds (before expenses) to us
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$
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$
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*
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See Underwriting on page 132 of this prospectus
for a description of the underwriters compensation.
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We have granted the underwriters the right to purchase up to
[ ]
additional shares of our common stock at the public offering
price, less the underwriting discounts, solely to cover
over-allotments, if any. The underwriters can exercise this
right at any time within 30 days after the date of our
underwriting agreement with them.
Neither the Securities and Exchange Commission nor any state
securities commission or other regulatory body has approved or
disapproved of these securities or determined if this prospectus
is truthful or complete. Any representation to the contrary is a
criminal offense.
The underwriters expect to deliver the shares of our common
stock to purchasers against payment on or about
[ ],
2010.
FBR
Capital Markets
The
date of this prospectus is
[ ],
2010.
You should rely only on the information contained in this
prospectus. We have not, and the underwriters have not,
authorized any other person to provide you with information that
is different from that contained in this prospectus. If anyone
provides you with different or inconsistent information, you
should not rely on it. We and the underwriters are offering to
sell and seeking offers to buy these securities only in
jurisdictions where offers and sales are permitted. You should
assume that the information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of
the time of delivery of this prospectus or of any sale of common
stock. Our business, financial condition, results of operations
and prospects may have changed since that date.
TABLE OF
CONTENTS
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Page
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ii
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1
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13
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31
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32
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33
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34
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36
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38
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40
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45
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77
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94
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100
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113
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114
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120
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124
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130
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132
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136
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136
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136
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F-1
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i
CERTAIN
IMPORTANT INFORMATION
For your convenience we have included below definitions of
terms used in this prospectus.
In this prospectus references to:
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borrower refer to the entity or individual executing
the note in a premium finance transaction. In nearly all
instances, the borrower is an irrevocable life insurance trust
established for estate planning purposes by the insured which is
both the legal owner and beneficiary of a life insurance policy
serving as collateral for a premium finance loan.
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carrying value of the loan refer to the loan
principal balance, accrued interest and accreted origination
fees excluding any impairment valuation adjustment.
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Imperial, Company, we,
us, or our refer to Imperial Holdings,
LLC and its consolidated subsidiaries prior to the corporate
conversion as described in this prospectus and to Imperial
Holdings, Inc. and its consolidated subsidiaries after the
corporate conversion, unless the context suggests otherwise.
Unless otherwise stated, in this prospectus all references to
us, our shares and our shareholders assume that the corporate
conversion has already occurred. Our conversion from a limited
liability company to a corporation is described under
Corporate Conversion. The corporate conversion will
be completed prior to the closing of this offering.
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financing cost refer to the aggregate cost
attributable to credit facility interest, other lender charges
and, where applicable, obtaining lender protection insurance on
our premium finance loans.
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net carrying value of the loan refer to the loan
principal balance, accrued interest and accreted origination
fees, net of any impairment valuation adjustment.
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principal balance of the loan refer to the principal
amount loaned by us in a premium finance transaction without
including origination fees or interest.
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premium finance refer to a financial transaction in
which a policyholder obtains a loan, predominately through an
irrevocable life insurance trust established by the insured, to
pay life insurance premiums, with the loan being collateralized
by the underlying policy.
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structured settlement refer to a transaction in
which the recipient of a deferred payment stream (usually
obtained by a plaintiff in a personal injury, product liability
or medical malpractice lawsuit in exchange for an agreement to
settle the lawsuit) sells a certain number of fixed, scheduled
future settlement payments on a discounted basis in exchange for
a single lump sum payment.
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Unless otherwise stated, in this prospectus all references to
the number of shares of our common stock outstanding before and
after this offering assume:
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an initial public offering price that is the midpoint of the
price range on the cover of this prospectus;
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no exercise of the underwriters over-allotment option;
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the consummation of the corporate conversion, pursuant to which
all outstanding common and preferred limited liability company
units of Imperial Holdings, LLC (including all accrued and
unpaid dividends thereon) and all principal and accrued and
unpaid interest outstanding under our promissory note in favor
of IMPEX Enterprises, Ltd. will be converted
into shares of our common
stock;
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the issuance of shares of
common stock to two employees pursuant to the terms of each of
their respective phantom stock agreements; and
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the conversion, immediately prior to the closing of this
offering, of a $30.0 million debenture into shares of our
common stock as described under Corporate Conversion.
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ii
PROSPECTUS
SUMMARY
This summary highlights information contained elsewhere in
this prospectus. Before making a decision to purchase our common
stock, you should read the entire prospectus carefully,
including the Risk Factors and Forward-Looking
Statements sections and our consolidated financial
statements and the notes to those financial statements. Except
as otherwise noted, all information in this prospectus assumes
that all of the shares of common stock offered hereby will be
sold and that the underwriters will not exercise their
over-allotment option.
Prior to the closing of the offering described in this
prospectus, we will complete a reorganization in which Imperial
Holdings, Inc. will succeed to the business of Imperial
Holdings, LLC and the members of Imperial Holdings, LLC will
become shareholders of Imperial Holdings, Inc. In this
prospectus, we refer to this reorganization as the corporate
conversion. Unless otherwise stated, in this prospectus all
references to us, our shares and our shareholders assume that
the corporate conversion has already occurred.
Overview
We are a specialty finance company founded in December 2006 with
a focus on providing premium financing for individual life
insurance policies issued by insurance companies generally rated
A+ or better by Standard & Poors or
A or better by A.M. Best Company and purchasing
structured settlements backed by annuities issued by insurance
companies or their affiliates generally rated
A− or better from Moodys Investors
Services or Standard & Poors.
In our premium finance business we earn revenue from interest
charged on loans, loan origination fees and fees from referring
agents. We have historically relied on debt financing to operate
this business. Since 2007, the United States capital
markets have experienced extensive distress and dislocation due
to the global economic downturn and credit crisis. Lenders in
the premium finance market generally exited the market or
increased their lending rates and required more assurances such
as additional collateral support and third-party guarantees. As
a result, our financing cost for a premium finance transaction
increased significantly. For the nine months ended
September 30, 2010, our financing cost was approximately
31.1% per annum of the principal balance of the loans compared
to 14.5% per annum for the twelve months ended December 31,
2007. With the net proceeds of this offering we intend to fund
our future premium finance transactions with equity financing
instead of debt financing. Over time we expect that this will
significantly reduce our cost of financing and help to generate
higher returns for our shareholders.
In our structured settlement business we purchase structured
settlements at a discounted rate and sell such assets to, or
finance such assets with, third parties. For the nine months
ended September 30, 2010 and the year ended
December 31, 2009, we purchased structured settlements at
weighted average discount rates of 19.3% and 16.3%,
respectively. We plan to use a portion of the net proceeds of
this offering to purchase structured settlements and retain such
amounts on our balance sheet.
During the nine months ended September 30, 2010 and the
year ended December 31, 2009, we had revenue of
$60.4 million and $96.6 million, respectively, and a
net loss of $16.4 million and $8.6 million,
respectively. During the nine months ended September 30,
2010 and the year ended December 31, 2009, 88.8% and 95.9%,
respectively, of our revenue was generated from our premium
finance segment and 11.2% and 4.1%, respectively, of our revenue
was generated from our structured settlement segment. As of
September 30, 2010, we had total assets of
$181.0 million.
Our
Services and Products
Premium
Finance Transactions
A premium finance transaction is a transaction in which a life
insurance policyholder obtains a loan to pay insurance premiums
for a fixed period of time, which allows a policyholder to
maintain coverage without having to make premium payments during
the term of the loan. Since our inception, we have originated
premium finance transactions collateralized by life insurance
policies with an aggregate death benefit in excess of
$4.0 billion.
As of September 30, 2010, the average principal balance of
the loans we have originated since inception is approximately
$213,000. The life insurance policies that serve as collateral
for our premium finance loans
1
are predominately universal life policies that have an average
death benefit of approximately $4 million and insure
persons over age 65.
Our typical premium finance loan is approximately two years in
duration and is collateralized by the underlying life insurance
policy. We generate revenue from our premium finance business in
the form of agency fees from referring agents, interest income
and origination fees as follows:
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Agency Fees
We charge the referring agent an
agency fee for services related to premium finance loans. Agency
fees as a percentage of the principal balance of the loans
originated during the nine months ended September 30,
2010 and year ended December 31, 2009 were 49.9% and 50.6%,
respectively. These agency fees are charged when the loan is
funded and collected on average within 47 days thereafter.
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Interest Income
Substantially all of the
interest rates we charge on our premium finance loans are
floating rates that are calculated at the one-month LIBOR rate
plus an applicable margin. In addition, our premium finance
loans have a floor interest rate and are capped at 16.0% per
annum. For loans with floating rates, each month the interest
rate is recalculated to equal one-month LIBOR plus the
applicable margin, and then, if necessary, adjusted so as to
remain at or above the stated floor rate and not to exceed the
capped rate of 16.0% per annum. The weighted average per annum
interest rate for premium finance loans outstanding as of
September 30, 2010 and December 31, 2009 was 11.3% and
10.9%, respectively.
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Origination Fees
On each premium finance loan
we charge a loan origination fee that is added to the loan and
is due upon the date of maturity or upon repayment of the loan.
Origination fees as a percentage of the principal balance of the
loans originated during the nine ended September 30, 2010
and the year ended December 31, 2009 were 41.7% and 44.7%,
respectively.
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The policyholder is not required to make any payment on the loan
until maturity. At the end of the loan term, the policyholder
either repays the loan in full (including all interest and
origination fees) or defaults under the loan. In the event of
default, subject to policy terms and conditions, the borrower
typically relinquishes to us control of the policy serving as
collateral for the loan, after which we may either seek to sell
the policy, hold it for investment, or, if the loan is insured,
we are paid a claim equal to the insured value of the policy,
which may be equal to or less than the amount we are owed under
the loan. As of September 30, 2010, 94.6% of our
outstanding loans have collateral whose value is insured. With
the net proceeds from this offering, we expect to have the
option to retain for investment a number of the policies
relinquished to us upon a default. When we choose to retain the
policy for investment, we are responsible for all future premium
payments needed to keep the policy in effect. We have developed
proprietary systems and processes that, among other things,
determine the minimum monthly premium outlay required to
maintain each retained life insurance policy. We use strict loan
underwriting guidelines that we believe have been effective in
mitigating fraud-related risks.
Structured
Settlements
Structured settlements refer to a contract between a plaintiff
and defendant whereby the plaintiff agrees to settle a lawsuit
(usually a personal injury, product liability or medical
malpractice claim) in exchange for periodic payments over time.
A defendants payment obligation with respect to a
structured settlement is usually assumed by a casualty insurance
company. This payment obligation is then satisfied by the
casualty insurer through the purchase of an annuity from a
highly rated life insurance company which provides a high credit
quality stream of payments to the plaintiff.
Recipients of structured settlements are permitted to sell their
deferred payment streams pursuant to state statutes that require
certain disclosures, notice to the obligors and state court
approval. Through such sales, we purchase a certain number of
fixed, scheduled future settlement payments on a discounted
basis in exchange for a single lump sum payment, thereby serving
the liquidity needs of structured settlement holders.
We use national television marketing to generate in-bound
telephone and internet inquiries. As of September 30, 2010,
we had a database of over 30,000 structured settlement leads. We
believe our database provides a strong pipeline of purchasing
opportunities. As our database has grown and we have completed
more transactions, the average marketing cost per structured
settlement transaction has decreased.
2
The following table shows the number of structured settlement
transactions, the face value of undiscounted payments purchased,
the weighted average purchase discount rate, the number of
transactions sold, the weighted average discount rate at which
the assets were sold and the average marketing cost per
transaction (dollars in thousands):
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Nine Months
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Ended
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Year Ended December 31,
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September 30,
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2007
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2008
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2009
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2009
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2010
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Number of transactions
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10
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276
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396
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275
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385
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Face value of undiscounted future payments purchased
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$
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701
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$
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18,295
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$
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28,877
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$
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20,460
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$
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33,713
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Weighted average purchase discount rate
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11.0
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%
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12.0
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%
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16.3
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%
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16.1
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%
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19.3
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%
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Number of transactions sold
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226
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439
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96
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291
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Weighted average sale discount rate
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10.8
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%
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11.5
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%
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11.1
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%
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9.1
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%
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Average marketing cost per transaction
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$
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205.6
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$
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19.2
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$
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11.3
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$
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12.7
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$
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9.3
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We believe that we have various funding alternatives for the
purchase of structured settlements. In addition to available
cash, on September 24, 2010 we entered into an arrangement
to provide us up to $50 million to finance the purchase of
structured settlements. We also have other parties to whom we
have sold structured settlement assets in the past, and to whom
we believe we can sell assets in the future. In the future, we
will continue to evaluate alternative financing arrangements,
which could include selling pools of structured settlements to
third parties and securing a warehouse line of credit that would
allow us to aggregate structured settlements. The majority of
our revenue in this line of business currently is earned in cash
from the gain on sale of structured settlements that we
originate.
Dislocations
in the Capital Markets
Since 2007, the United States capital markets have
experienced extensive distress and dislocation due to the global
economic downturn and credit crisis. As a result of the
dislocation in the capital markets, our borrowing costs
increased dramatically in our premium finance business and we
were unable to access traditional sources of capital to finance
the acquisition and sale of structured settlements. At certain
points, we were unable to obtain any debt financing. With the
net proceeds of this offering, we intend to operate our premium
finance business without relying on debt financing.
Premium Finance.
Market conditions have forced
us, and we believe many of our competitors, to pay higher
interest rates on borrowed capital since the beginning of 2008.
However, because we were a relatively new company with few
maturing debt obligations, the credit crisis presented an
opportunity for us to gain market share and create brand
recognition while we believe many of our competitors experienced
financial distress.
Every credit facility we have entered into since December 2007
for our premium finance business has required us to obtain
lender protection insurance for each loan originated under such
credit facility. We have obtained lender protection insurance
from Lexington Insurance Company (Lexington), whom
we also refer to as our lender protection insurer, a subsidiary
of American International Group, Inc. (AIG). This
coverage provides insurance on the value of the life insurance
policy serving as collateral underlying the loan should our
borrower default. Subject to the terms and conditions of the
lender protection insurance policy, after a payment default by
the borrower, our lender protection insurer has the right to
direct control or take beneficial ownership of the life
insurance policy serving as collateral underlying the loan and
we are paid a claim equal to the insured value of such life
insurance policy. The cost of lender protection insurance has
generally ranged from 8% to 11% per annum of the principal
balance of the loans. While lender protection insurance provides
us with liquidity, it prevents us from realizing the
appreciation, if any, of the underlying policy when a borrower
relinquishes ownership of the policy upon default. Currently, we
are only originating premium finance loans with lender
protection insurance. Following the earlier of the completion of
this offering or December 31, 2010, we do not expect to
originate premium finance loans with lender protection insurance.
We have experienced two adverse consequences from our high
financing costs: reduced profitability and decreased loan
originations. While the use of lender protection insurance
allows us to access debt financing to
3
support our premium finance business, the cost of lender
protection insurance substantially reduces our profitability.
Additionally, there are coverage limitations related to our use
of lender protection insurance that have reduced the number of
otherwise viable premium finance transactions that we could
originate. We believe that the net proceeds from this offering
will allow us to increase the profitability and number of new
premium finance loans by eliminating the cost of debt financing
and lender protection insurance and the limitations on loan
originations that our lender protection insurance imposes.
The following table shows our total financing cost per annum for
funding our premium finance loans as a percentage of the
principal balance of the loans originated during the following
periods:
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Year Ended December 31,
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Nine Months Ended September 30,
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2007
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2008
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2009
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2009
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2010
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Lender protection insurance cost
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8.5
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%
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10.9
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%
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11.0
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%
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10.4
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%
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Interest cost and other lender funding charges under credit
facilities
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14.5
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%
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13.7
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%
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18.2
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%
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18.5
|
%
|
|
|
20.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financing cost
|
|
|
14.5
|
%
|
|
|
22.2
|
%
|
|
|
29.1
|
%
|
|
|
29.5
|
%
|
|
|
31.1
|
%
|
Structured Settlements.
During 2008 and 2009,
market conditions required us to offer discount rates as high as
12% in order to complete sales of structured settlements. During
this period, we continued to invest heavily in our structured
settlement infrastructure. This investment is benefiting us
today because we have found that some structured settlement
recipients sell portions of their future payment streams in
multiple transactions. As our business matures and grows, our
structured settlement business has been, and should continue to
be, bolstered by additional transactions with existing customers
and additional purchases of structured settlements with new
customers. Purchases from past customers increase overall
transaction volume and also decrease average transaction costs.
Competitive
Strengths
We believe our competitive strengths are:
|
|
|
|
|
Complementary mix of business lines.
Unlike
many of our competitors who are focused on either structured
settlements or premium financings, we operate in both lines of
business. This diversification provides us with a complementary
mix of business lines as the revenues generated by our
structured settlement business are generally short-term cash
receipts in comparison to the revenue from our premium financing
business which is collected over time.
|
|
|
|
Scalable and cost-effective infrastructure.
We
have created an efficient, cost-effective, scalable
infrastructure that complements our businesses. We have
developed proprietary systems and models that allow for
cost-effective review of both premium finance and structured
settlement transactions that utilize our underwriting standards
and guidelines. Our systems allow us to efficiently process
transactions while maintaining our underwriting standards. As a
result of our investments in our infrastructure, we have
developed a structured settlement business model that we believe
has sufficient scalability to permit our structured settlement
business to continue to grow efficiently.
|
|
|
|
Barriers to entry.
We believe that there are
significant barriers to entry into the premium financing and
structured settlement businesses. With respect to premium
finance, obtaining the requisite state licenses and developing a
network of referring agents is time intensive and expensive.
With respect to structured settlements, the various state
regulations require special knowledge as well as a network of
attorneys experienced in obtaining court approval of these
transactions. Our management and key personnel from our premium
finance and structured settlement businesses are experienced in
these specialized businesses and, in many cases, have more than
half a decade of experience working together at Imperial and at
prior employers. Our management team has significant experience
operating in this highly regulated industry.
|
|
|
|
Strength and financial commitment of management team with
proven track record
. Our senior management team
is experienced in the premium finance and structured settlement
industries. In the mid-1990s, several members of our management
team worked together at Singer Asset Finance, where
|
4
|
|
|
|
|
they were early entrants in structured settlement asset
classes. After Singer was acquired in 1997 by Enhance Financial
Services Group Inc., several members of our senior management
team joined Peach Holdings, Inc. At Peach Holdings, they held
senior positions, including Chief Operating Officer, Head of
Life Finance and Head of Structured Settlements. In addition,
Antony Mitchell, our chief executive officer, and Jonathan
Neuman, our president and chief operating officer, each have
over $7 million of their own capital invested in our
company. This financial commitment aligns the interests of our
principal executive officers with those of our shareholders.
|
Strategy
Guided by our experienced management team, with the net proceeds
from this offering, we intend to pursue the following strategies
in order to increase our revenues and generate net profits:
|
|
|
|
|
Reduce or eliminate the use of debt financing in our premium
finance business
. The capital generated by this
offering will enable us to fund new premium finance loans and
provide us with the option to retain investments in life
insurance policies that we acquire upon relinquishment by our
borrowers without the need for additional debt financing. In
contrast to our existing leveraged business model that has made
us reliant on third-party financing that is often unavailable or
expensive, we intend to use equity capital from this offering to
engage in premium finance transactions at profit margins
significantly greater than what we have historically
experienced. In the future, we expect to consider debt financing
for our premium finance transactions and structured settlement
purchases only if such financing is available on attractive
terms.
|
|
|
|
Eliminate the use of lender protection
insurance.
With the proceeds of this offering, we
will no longer require debt financing and lender protection
insurance for new premium finance business. As a result, we
expect to experience considerable cost savings, and in addition
expect to be able to originate more premium finance loans
because we will not be subject to coverage limitations imposed
by our lender protection insurer that have reduced the number of
loans that we can originate.
|
|
|
|
|
|
Continue to develop structured settlement
database.
We intend to increase our marketing
budget and grow our sales staff in order to increase the number
of leads in our structured settlement database and to originate
more structured settlement transactions. As our database of
structured settlements grows, we expect that our sales staff
will be able to increase our transaction volume due in part to
repeat transactions from our existing customers.
|
Our
Organization and Corporate Conversion
Imperial Holdings, LLC was organized on December 15, 2006.
Our principal executive offices are located at 701 Park of
Commerce Boulevard, Suite 301, Boca Raton, Florida 33487
and our telephone number is
(561) 995-4200.
Our website address is
www.imprl.com
. The information on
or accessible through our website is not part of this prospectus.
Prior to closing this offering, Imperial Holdings, LLC will
convert from a Florida limited liability company to a Florida
corporation. In connection with the corporate conversion, each
class of limited liability company interest (including all
accrued and unpaid dividends thereon) of Imperial Holdings, LLC
and all principal and accrued and unpaid interest outstanding
under our promissory note in favor of IMPEX Enterprises, Ltd.
will be converted into shares of common stock of Imperial
Holdings, Inc. Following the corporate conversion and
immediately prior to the closing of this offering, a $30.0
million debenture will be converted into shares of our common
stock. See Corporate Conversion on page 34 for
further information regarding the corporate conversion.
5
The principal subsidiaries that comprise our corporate
structure, giving effect to the corporate conversion, are as
follows:
|
|
|
|
|
Imperial Premium Finance, LLC is a licensed insurance premium
financer that originates and services our premium finance
transactions.
|
|
|
|
Imperial Life and Annuity Services, LLC is a licensed insurance
agency that receives agency fees from referring life insurance
agents in connection with our premium finance transactions.
|
|
|
|
Imperial Life Settlements, LLC is a licensed life/viatical
settlement provider.
|
|
|
|
Imperial Finance & Trading, LLC employs all of our
staff and provides services to each of our other operating
subsidiaries.
|
|
|
|
Washington Square Financial, LLC originates and services our
structured settlement transactions.
|
6
The
Offering
|
|
|
Shares of common stock offered by us
|
|
[ ] shares.
|
|
Over-allotment shares of common stock offered by us
|
|
[ ] shares.
|
|
Shares of common stock to be outstanding after the offering
|
|
[ ] shares.
|
|
Use of proceeds
|
|
We estimate that our net proceeds from this offering will be
approximately $[ ], after deducting
the estimated underwriting discounts and commissions and our
estimated offering expenses, and, if the underwriters exercise
their over-allotment in-full, we estimate that our net proceeds
will be approximately $[ ]. We
intend to use approximately $[ ] of
the net proceeds to support our premium finance transactions,
approximately $[ ] of the net
proceeds to support our structured settlement activities and any
remaining proceeds for general corporate purposes. See Use
of Proceeds.
|
|
Dividend policy
|
|
We do not expect to pay any cash dividends on our common stock
for the foreseeable future. We currently intend to retain any
future earnings to finance our operations and growth. Any future
determination to pay cash dividends on our common stock will be
at the discretion of our board of directors and will be
dependent on our earnings, financial condition, operating
results, capital requirements, any contractual, regulatory and
other restrictions on the payment of dividends by us or by our
subsidiaries to us, and other factors that our board of
directors deems relevant.
|
|
|
|
Exchange listing
|
|
We have been approved to list our common stock on the New York
Stock Exchange, subject to official notice of issuance, under
the symbol IFT.
|
The number of shares of our common stock outstanding after this
offering:
|
|
|
|
|
reflects the consummation of the corporate conversion, pursuant
to which all outstanding common and preferred limited liability
company units (including all accrued and unpaid dividends
thereon) and all principal and accrued and unpaid interest
outstanding under our promissory note in favor of IMPEX
Enterprises, Ltd. will be converted
into shares
of our common stock;
|
|
|
|
|
|
reflects the conversion, immediately prior to the closing of
this offering, of a $30.0 million debenture
into shares of our common
stock at the midpoint of the price range on the cover of this
prospectus as described under Corporate Conversion;
|
|
|
|
|
|
reflects the issuance
of shares
of common stock to two of our employees pursuant to the terms of
each of their respective phantom stock agreements;
|
|
|
|
|
|
excludes up
to shares
of common stock that may be issued pursuant to the
underwriters over-allotment option;
|
|
|
|
|
|
excludes shares
of common stock issuable upon the exercise of warrants that will
be issued to our existing shareholders prior to the closing of
this offering as described in Description of Capital
Stock Warrants; and
|
|
|
|
|
|
excludes
additional shares of common stock available for future issuance
under our 2010 Omnibus Incentive Plan (the Omnibus
Plan).
|
7
Summary
Historical and Unaudited
Pro Forma Consolidated and Combined Financial and Operating
Data
The following tables set forth summary historical and unaudited
pro forma consolidated and combined financial and operating data
of Imperial Holdings, LLC (to be converted into Imperial
Holdings, Inc. prior to the closing of this offering) on or as
of the dates and for the periods indicated. The summary
unaudited pro forma financial data for the year ended
December 31, 2009 and the nine-month period ended
September 30, 2010 give pro forma effect to the corporate
conversion and conversion of promissory notes as if they had
occurred on the first day of the periods presented. The summary
unaudited pro forma financial and operating data set forth below
are presented for information purposes only, should not be
considered indicative of actual results of operations that would
have been achieved had the corporate conversion been consummated
on the dates indicated, and do not purport to be indicative of
balance sheet data or income statement data as of any future
date or future period. The summary historical and unaudited pro
forma consolidated financial and operating data presented below
should be read together with the other information contained in
this prospectus, including Selected Historical and
Unaudited Pro Forma Consolidated and Combined Financial and
Operating Data, Managements Discussion and
Analysis of Financial Condition and Results of Operations
and our consolidated and combined financial statements,
including notes to those consolidated and combined financial
statements appearing elsewhere in this prospectus.
We have derived the summary historical financial data as of
December 31, 2009, 2008 and 2007, from the historical
audited consolidated and combined financial statements of
Imperial Holdings, LLC included elsewhere in this prospectus.
The summary historical financial data for the nine-month periods
ended September 30, 2010 and 2009 were derived from the
unaudited consolidated and combined financial statements of
Imperial Holdings, LLC included elsewhere in this prospectus.
The historical results for Imperial Holdings, LLC for any prior
period are not necessarily indicative of the results to be
expected in any future period.
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine
|
|
|
|
|
|
|
|
|
|
Year
|
|
|
Months
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
Years Ended December 31,
|
|
|
September 30,
|
|
|
Dec. 31,
|
|
|
September 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
(In thousands, except share data)
|
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency fee income
|
|
$
|
24,515
|
|
|
$
|
48,004
|
|
|
$
|
26,114
|
|
|
$
|
20,216
|
|
|
$
|
9,099
|
|
|
$
|
26,114
|
|
|
$
|
9,099
|
|
Interest income
|
|
|
4,888
|
|
|
|
11,914
|
|
|
|
21,483
|
|
|
|
15,843
|
|
|
|
15,795
|
|
|
|
21,483
|
|
|
|
15,795
|
|
Origination fee income
|
|
|
526
|
|
|
|
9,399
|
|
|
|
29,853
|
|
|
|
21,865
|
|
|
|
16,728
|
|
|
|
29,853
|
|
|
|
16,728
|
|
Gain on sale of structured settlements
|
|
|
|
|
|
|
443
|
|
|
|
2,684
|
|
|
|
499
|
|
|
|
4,848
|
|
|
|
2,684
|
|
|
|
4,848
|
|
Gain on forgiveness of debt
|
|
|
|
|
|
|
|
|
|
|
16,410
|
|
|
|
14,886
|
|
|
|
6,968
|
|
|
|
16,410
|
|
|
|
6,968
|
|
Gain on sale of life settlements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,954
|
|
|
|
|
|
|
|
1,954
|
|
Change in fair value of life settlements and structured
settlement receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,805
|
|
|
|
|
|
|
|
4,805
|
|
Other income
|
|
|
2
|
|
|
|
47
|
|
|
|
71
|
|
|
|
53
|
|
|
|
195
|
|
|
|
71
|
|
|
|
195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income
|
|
|
29,931
|
|
|
|
69,807
|
|
|
|
96,615
|
|
|
|
73,362
|
|
|
|
60,392
|
|
|
|
96,615
|
|
|
|
60,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense(3)
|
|
|
1,343
|
|
|
|
12,752
|
|
|
|
33,755
|
|
|
|
24,710
|
|
|
|
24,244
|
|
|
|
30,793
|
(1)
|
|
|
22,022
|
(1)
|
Provision for losses on loans receivable
|
|
|
2,332
|
|
|
|
10,768
|
|
|
|
9,830
|
|
|
|
6,705
|
|
|
|
3,514
|
|
|
|
9,830
|
|
|
|
3,514
|
|
Loss (gain) on loan payoffs and settlements, net
|
|
|
(225
|
)
|
|
|
2,738
|
|
|
|
12,058
|
|
|
|
11,279
|
|
|
|
4,320
|
|
|
|
12,058
|
|
|
|
4,320
|
|
Amortization of deferred costs
|
|
|
126
|
|
|
|
7,569
|
|
|
|
18,339
|
|
|
|
13,101
|
|
|
|
22,601
|
|
|
|
18,339
|
|
|
|
22,601
|
|
Selling, general and administrative expenses(3)
|
|
|
24,335
|
|
|
|
41,566
|
|
|
|
31,269
|
|
|
|
22,997
|
|
|
|
22,118
|
|
|
|
31,269
|
|
|
|
22,118
|
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
|
|
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
27,911
|
|
|
|
75,393
|
|
|
|
105,251
|
|
|
|
78,792
|
|
|
|
76,797
|
|
|
|
102,289
|
|
|
|
74,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
2,020
|
|
|
$
|
(5,586
|
)
|
|
$
|
(8,636
|
)
|
|
$
|
(5,430
|
)
|
|
$
|
(16,405
|
)
|
|
$
|
(5,674
|
)
|
|
$
|
(14,183
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Common Shares Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Reflects a reduction of interest expense of $3.0 million
for the year ended December 31, 2009 and $2.2 million
for the nine months ended September 30, 2010, due to the
conversion of our promissory note in favor of IMPEX Enterprises,
Ltd. into shares of our common stock, which will occur prior to
the closing of this offering, and the conversion of our
promissory note in favor of Branch Office of Skarbonka Sp. z o.o
into a $30.0 million debenture, and the conversion of that
$30.0 million debenture into shares of our common stock,
which will occur immediately prior to the closing of this
offering.
|
|
|
|
(2)
|
|
The results of the Company being treated for the pro forma
presentation as a C corporation resulted in no
impact to the consolidated and combined balance sheet or
statements of operations for the pro forma periods presented.
The primary reasons for this are that the losses produce no
current benefit and any net operating losses generated and other
deferred tax assets (net of deferred tax liabilities) would be
fully reserved due to historical operating losses. The Company,
therefore, has not recorded any pro forma tax provision.
|
|
|
|
(3)
|
|
Includes amounts for related parties. Refer to our consolidated
and combined financial statements for detail.
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
|
|
|
December 31, 2009
|
|
|
As of September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma As
|
|
|
|
Actual
|
|
|
Actual
|
|
|
Pro Forma
|
|
|
Adjusted(3)
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
(In thousands, except share data)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
15,891
|
|
|
$
|
3,685
|
|
|
$
|
8,685
|
(1)
|
|
$
|
|
|
Restricted cash
|
|
|
|
|
|
|
643
|
|
|
|
643
|
|
|
|
|
|
Certificate of deposit restricted
|
|
|
670
|
|
|
|
877
|
|
|
|
877
|
|
|
|
|
|
Agency fees receivable, net of allowance for doubtful accounts
|
|
|
2,165
|
|
|
|
736
|
|
|
|
736
|
|
|
|
|
|
Deferred costs, net
|
|
|
26,323
|
|
|
|
11,455
|
|
|
|
11,455
|
|
|
|
|
|
Interest receivable, net
|
|
|
21,034
|
|
|
|
17,175
|
|
|
|
17,175
|
|
|
|
|
|
Loans receivable, net
|
|
|
189,111
|
|
|
|
121,564
|
|
|
|
121,564
|
|
|
|
|
|
Structured settlements receivables, net
|
|
|
152
|
|
|
|
10,554
|
|
|
|
10,554
|
|
|
|
|
|
Investment in life settlements, at estimated fair value
|
|
|
4,306
|
|
|
|
8,846
|
|
|
|
8,846
|
|
|
|
|
|
Investment in life settlement fund
|
|
|
542
|
|
|
|
1,270
|
|
|
|
1,270
|
|
|
|
|
|
Prepaid expenses and other assets
|
|
|
3,526
|
|
|
|
4,163
|
|
|
|
4,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
263,720
|
|
|
$
|
180,968
|
|
|
$
|
185,968
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses(4)
|
|
$
|
3,170
|
|
|
$
|
4,210
|
|
|
$
|
4,210
|
|
|
|
|
|
Payable for purchase of structured settlements
|
|
|
|
|
|
|
7,094
|
|
|
|
7,094
|
|
|
|
|
|
Lender protection insurance claim received in advance
|
|
|
|
|
|
|
60,645
|
|
|
|
60,645
|
|
|
$
|
|
|
Interest payable(4)
|
|
|
12,627
|
|
|
|
16,172
|
|
|
|
12,811
|
(2)
|
|
|
|
|
Notes payable(4)
|
|
|
231,064
|
|
|
|
82,393
|
|
|
|
62,539
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
246,861
|
|
|
$
|
170,514
|
|
|
$
|
147,299
|
|
|
$
|
|
|
Member units preferred (500,000 authorized in the
aggregate)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Member units Series A preferred (90,796 issued
and outstanding, actual; 0 issued and outstanding, pro forma and
pro forma as adjusted)
|
|
|
4,035
|
|
|
|
4,035
|
|
|
|
|
(1)
|
|
|
|
|
Member units Series B preferred (50,000 issued
and outstanding, actual; 0 issued and outstanding, pro forma and
pro forma as adjusted)
|
|
|
5,000
|
|
|
|
5,000
|
|
|
|
|
(1)
|
|
|
|
|
Member units Series C preferred (70,000 issued
and outstanding, actual; 0 issued and outstanding, pro forma and
pro forma as adjusted)
|
|
|
|
|
|
|
7,000
|
|
|
|
|
(1)
|
|
|
|
|
Member units Series D preferred (7,000 issued
and outstanding, actual; 0 issued and outstanding, pro forma and
pro forma as adjusted)
|
|
|
|
|
|
|
700
|
|
|
|
|
(1)
|
|
|
|
|
Member units Series E preferred (73,000 issued
and outstanding, actual; 0 issued and outstanding, pro forma and
pro forma as adjusted)
|
|
|
|
|
|
|
7,300
|
|
|
|
|
(1)
|
|
|
|
|
Subscription receivable
|
|
|
|
|
|
|
(5,000
|
)
|
|
|
|
(1)
|
|
|
|
|
Member units common (500,000 authorized; 450,000
issued and outstanding, actual; 0 issued and outstanding, pro
forma and pro forma as adjusted)
|
|
|
19,924
|
|
|
|
19,924
|
|
|
|
|
(1)
|
|
|
|
|
Common stock
|
|
|
|
|
|
|
|
|
|
|
[ ]
|
(1)(2)
|
|
|
|
|
Paid-in capital
|
|
|
|
|
|
|
|
|
|
|
[67,174]
|
(1)(2)
|
|
|
|
|
Retained earnings (accumulated deficit)
|
|
|
(12,100
|
)
|
|
|
(28,505
|
)
|
|
|
(28,505
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total members/stockholders equity
|
|
|
16,859
|
|
|
|
10,454
|
|
|
|
38,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and members/stockholders equity
|
|
$
|
263,720
|
|
|
$
|
180,968
|
|
|
$
|
185,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Reflects the conversion of all
common and preferred limited liability company units of Imperial
Holdings, LLC into shares of our common stock. Also reflects the
cash received in October, 2010 of $5.0 million related to a
subscription receivable for the September 2010 sale of 50,000
Series E preferred units, which will also be converted into
shares of our common stock as a result of the corporate
conversion.
|
|
(2)
|
|
Reflects the issuance and
conversion of a $30.0 million debenture into shares of our
common stock immediately prior to the closing of this offering.
Also reflects the conversion of all principal and accrued
interest outstanding under our promissory note in favor of IMPEX
Enterprises, Ltd. into shares of common stock of Imperial
Holdings, Inc. as a result of the corporate conversion.
|
|
(3)
|
|
Reflects our sale of
[ ] shares
of common stock at an initial public offering price of
$[ ] per share, which is the
midpoint of the price range on the cover of this prospectus,
after the deduction of the underwriting discounts and
commissions and the estimated offering expenses payable by us.
|
|
(4)
|
|
Includes amounts payable to related
parties. Refer to our consolidated and combined financial
statements for detail.
|
10
Premium
Finance Segment Selected Operating Data (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
Year Ended December 31,
|
|
September 30,
|
|
September 30,
|
|
|
2007
|
|
2008
|
|
2009
|
|
2009
|
|
2010
|
|
2009
|
|
2010
|
|
Period Originations
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of loans originated
|
|
|
196
|
|
|
|
499
|
|
|
|
194
|
|
|
|
23
|
|
|
|
15
|
|
|
|
145
|
|
|
|
86
|
|
Principal balance of loans originated
|
|
$
|
44,501
|
|
|
$
|
97,559
|
|
|
$
|
51,573
|
|
|
$
|
7,385
|
|
|
$
|
2,788
|
|
|
$
|
39,030
|
|
|
$
|
18,245
|
|
Aggregate death benefit of policies underlying loans originated
|
|
$
|
794,517
|
|
|
$
|
2,283,223
|
|
|
$
|
942,312
|
|
|
$
|
130,600
|
|
|
$
|
62,500
|
|
|
$
|
708,910
|
|
|
$
|
417,275
|
|
Selling general and administrative expenses
|
|
$
|
15,082
|
|
|
$
|
21,744
|
|
|
$
|
13,742
|
|
|
$
|
2,623
|
|
|
$
|
2,495
|
|
|
$
|
11,165
|
|
|
$
|
7,234
|
|
Average Per Origination During Period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Age of insured at origination
|
|
|
75.5
|
|
|
|
74.9
|
|
|
|
74.9
|
|
|
|
74.1
|
|
|
|
75.0
|
|
|
|
74.7
|
|
|
|
74.0
|
|
Life expectancy of insured (years)
|
|
|
12.9
|
|
|
|
13.2
|
|
|
|
13.2
|
|
|
|
13.2
|
|
|
|
14.1
|
|
|
|
13.4
|
|
|
|
14.1
|
|
Monthly premium (year after origination)
|
|
$
|
14.0
|
|
|
$
|
14.9
|
|
|
$
|
16.0
|
|
|
$
|
18.8
|
|
|
$
|
13.1
|
|
|
$
|
16.3
|
|
|
$
|
13.9
|
|
Death benefit of policies underlying loans originated
|
|
$
|
4,053.7
|
|
|
$
|
4,575.6
|
|
|
$
|
4,857.3
|
|
|
$
|
5,678.3
|
|
|
$
|
4,166.7
|
|
|
$
|
4,889.0
|
|
|
$
|
4,852.0
|
|
Principal balance of the loan
|
|
$
|
227.0
|
|
|
$
|
195.5
|
|
|
$
|
265.8
|
|
|
$
|
321.1
|
|
|
$
|
185.8
|
|
|
$
|
269.2
|
|
|
$
|
212.1
|
|
Interest rate charged
|
|
|
10.5
|
%
|
|
|
10.8
|
%
|
|
|
11.4
|
%
|
|
|
11.5
|
%
|
|
|
11.5
|
%
|
|
|
11.5
|
%
|
|
|
11.5
|
%
|
Agency fee
|
|
$
|
125.1
|
|
|
$
|
96.2
|
|
|
$
|
134.6
|
|
|
$
|
153.4
|
|
|
$
|
92.1
|
|
|
$
|
139.4
|
|
|
$
|
105.8
|
|
Agency fee as % of principal balance
|
|
|
55.1
|
%
|
|
|
49.2
|
%
|
|
|
50.6
|
%
|
|
|
47.8
|
%
|
|
|
49.6
|
%
|
|
|
51.8
|
%
|
|
|
49.9
|
%
|
Origination fee
|
|
$
|
45.8
|
|
|
$
|
77.9
|
|
|
$
|
118.9
|
|
|
$
|
138.4
|
|
|
$
|
76.5
|
|
|
$
|
114.7
|
|
|
$
|
88.5
|
|
Origination fee as % of principal balance
|
|
|
20.2
|
%
|
|
|
39.9
|
%
|
|
|
44.7
|
%
|
|
|
43.1
|
%
|
|
|
41.1
|
%
|
|
|
42.6
|
%
|
|
|
41.7
|
%
|
End of Period Loan Portfolio
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable, net
|
|
$
|
43,650
|
|
|
$
|
148,744
|
|
|
$
|
189,111
|
|
|
$
|
187,330
|
|
|
$
|
121,564
|
|
|
$
|
187,330
|
|
|
$
|
121,564
|
|
Number of policies underlying loans receivable
|
|
|
240
|
|
|
|
702
|
|
|
|
692
|
|
|
|
706
|
|
|
|
426
|
|
|
|
706
|
|
|
|
426
|
|
Aggregate death benefit of policies underlying loans receivable
|
|
$
|
1,065,870
|
|
|
$
|
2,895,780
|
|
|
$
|
3,091,099
|
|
|
$
|
3,296,937
|
|
|
$
|
2,120,587
|
|
|
$
|
3,296,937
|
|
|
$
|
2,120,587
|
|
Number of loans with insurance protection
|
|
|
|
|
|
|
494
|
|
|
|
631
|
|
|
|
613
|
|
|
|
399
|
|
|
|
613
|
|
|
|
399
|
|
Aggregate insured value of loans
|
|
$
|
|
|
|
$
|
116,345
|
|
|
$
|
156,162
|
|
|
$
|
152,504
|
|
|
$
|
97,945
|
|
|
$
|
152,504
|
|
|
$
|
97,945
|
|
Average Per Loan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Age of insured in loans receivable
|
|
|
76.3
|
|
|
|
75.3
|
|
|
|
75.4
|
|
|
|
75.5
|
|
|
|
74.3
|
|
|
|
75.5
|
|
|
|
74.3
|
|
Life expectancy of insured (years)
|
|
|
12.4
|
|
|
|
13.9
|
|
|
|
14.5
|
|
|
|
14.2
|
|
|
|
15.1
|
|
|
|
14.2
|
|
|
|
15.1
|
|
Monthly premium
|
|
$
|
7.7
|
|
|
$
|
9.1
|
|
|
$
|
8.5
|
|
|
$
|
8.3
|
|
|
$
|
6.7
|
|
|
$
|
8.3
|
|
|
$
|
6.7
|
|
Loan receivable, net
|
|
$
|
181.9
|
|
|
$
|
211.9
|
|
|
$
|
273.3
|
|
|
$
|
265.3
|
|
|
$
|
143.0
|
|
|
$
|
265.3
|
|
|
$
|
143.0
|
|
Interest rate
|
|
|
10.2
|
%
|
|
|
10.4
|
%
|
|
|
10.9
|
%
|
|
|
10.7
|
%
|
|
|
11.3
|
%
|
|
|
11.2
|
%
|
|
|
11.3
|
%
|
End of Period Policies Owned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of policies owned
|
|
|
|
|
|
|
|
|
|
|
27
|
|
|
|
20
|
|
|
|
31
|
|
|
|
20
|
|
|
|
31
|
|
Aggregate fair value
|
|
$
|
|
|
|
$
|
|
|
|
$
|
4,306
|
|
|
$
|
1,711
|
|
|
$
|
8,846
|
|
|
$
|
1,711
|
|
|
$
|
8,846
|
|
Monthly premium average per loan
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2.8
|
|
|
$
|
2.2
|
|
|
$
|
5.2
|
|
|
$
|
2.2
|
|
|
$
|
5.2
|
|
11
Structured
Settlements Segment Selected Operating Data (dollars
in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
Year Ended December 31,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
Period Originations
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of transactions
|
|
|
10
|
|
|
|
276
|
|
|
|
396
|
|
|
|
102
|
|
|
|
138
|
|
|
|
275
|
|
|
|
385
|
|
Number of transactions from repeat customers
|
|
|
|
|
|
|
23
|
|
|
|
52
|
|
|
|
10
|
|
|
|
48
|
|
|
|
32
|
|
|
|
96
|
|
Weighted average purchase discount rate
|
|
|
11.0
|
%
|
|
|
12.0
|
%
|
|
|
16.3
|
%
|
|
|
17.1
|
%
|
|
|
20.1
|
%
|
|
|
16.1
|
%
|
|
|
19.3
|
%
|
Face value of undiscounted future payments purchased
|
|
$
|
701
|
|
|
$
|
18,295
|
|
|
$
|
28,877
|
|
|
$
|
8,094
|
|
|
$
|
13,458
|
|
|
$
|
20,460
|
|
|
$
|
33,713
|
|
Amount paid for settlements purchased
|
|
$
|
369
|
|
|
$
|
8,010
|
|
|
$
|
10,947
|
|
|
$
|
2,908
|
|
|
$
|
2,959
|
|
|
$
|
7,894
|
|
|
$
|
9,099
|
|
Marketing costs
|
|
$
|
2,056
|
|
|
$
|
5,295
|
|
|
$
|
4,460
|
|
|
$
|
1,087
|
|
|
$
|
1,168
|
|
|
$
|
3,479
|
|
|
$
|
3,561
|
|
Selling, general and administrative (excluding marketing costs)
|
|
$
|
666
|
|
|
$
|
4,475
|
|
|
$
|
5,015
|
|
|
$
|
1,298
|
|
|
$
|
1,957
|
|
|
$
|
3,257
|
|
|
$
|
5,294
|
|
Average Per Origination During Period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Face value of undiscounted future payments purchased
|
|
$
|
70.1
|
|
|
$
|
66.3
|
|
|
$
|
72.9
|
|
|
$
|
79.4
|
|
|
$
|
97.5
|
|
|
$
|
74.4
|
|
|
$
|
87.6
|
|
Amount paid for settlement purchased
|
|
$
|
36.9
|
|
|
$
|
29.0
|
|
|
$
|
27.6
|
|
|
$
|
28.5
|
|
|
$
|
21.4
|
|
|
$
|
28.7
|
|
|
$
|
23.6
|
|
Time from funding to maturity (months)
|
|
|
80.3
|
|
|
|
113.8
|
|
|
|
109.7
|
|
|
|
113.4
|
|
|
|
147.3
|
|
|
|
109.2
|
|
|
|
134.3
|
|
Marketing cost per transaction
|
|
$
|
205.6
|
|
|
$
|
19.2
|
|
|
$
|
11.3
|
|
|
$
|
10.7
|
|
|
$
|
8.5
|
|
|
$
|
12.7
|
|
|
$
|
9.2
|
|
Segment selling, general and administrative (excluding marketing
costs) per transaction
|
|
$
|
66.6
|
|
|
$
|
16.2
|
|
|
$
|
12.7
|
|
|
$
|
12.7
|
|
|
$
|
14.2
|
|
|
$
|
11.8
|
|
|
$
|
13.8
|
|
Period Sales
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of transactions sold
|
|
|
|
|
|
|
226
|
|
|
|
439
|
|
|
|
|
|
|
|
72
|
|
|
|
96
|
|
|
|
291
|
|
Gain on sale of structured settlements
|
|
$
|
|
|
|
$
|
443
|
|
|
$
|
2,684
|
|
|
$
|
24
|
|
|
$
|
1,585
|
|
|
$
|
499
|
|
|
$
|
4,848
|
|
Average sale discount rate
|
|
|
|
|
|
|
10.8
|
%
|
|
|
11.5
|
%
|
|
|
0.0
|
%
|
|
|
9.6
|
%
|
|
|
11.1
|
%
|
|
|
9.1
|
%
|
12
RISK
FACTORS
An investment in our common stock involves a number of risks.
Before making a decision to purchase our common stock, you
should carefully consider the following information about these
risks, together with the other information contained in this
prospectus. Many factors, including the risks described below,
could result in a significant or material adverse effect on our
business, financial condition and results of operations. If this
were to happen, the price of our common stock could decline
significantly and you could lose all or part of your
investment.
Risk
Factor Relating to the Dislocations in the Capital
Markets
Difficult
conditions in the credit and equity markets have adversely
affected and may continue to adversely affect the growth of our
business, our financial condition and results of
operations.
Since 2007, the United States capital markets have
experienced extensive distress and dislocation due to the global
economic downturn and credit crisis. As a result of this
dislocation in the capital markets, our borrowing costs
increased dramatically in our premium finance business, and we
were unable to access traditional sources of capital to finance
the acquisition and sale of structured settlements. At certain
points, we were unable to obtain any debt financing.
Furthermore, such market conditions forced us to obtain lender
protection insurance for our premium finance loans. The cost of
this insurance, together with our credit facility interest rate
costs, has resulted in total average financing costs of
approximately 31.1% per annum of the principal balance of the
loans as of September 30, 2010. Our ability to grow
depends, in part, on our ability to increase transaction volume
in each of our businesses, while successfully managing our
growth, and on our ability to access sufficient capital or enter
into financing arrangements on favorable terms. With the net
proceeds from this offering, we expect to rely on equity
financing and our existing debt financing arrangements to fund
our business going forward. However, should additional financing
be needed in the future, continued or future dislocations in the
capital markets may adversely affect our ability to obtain debt
or equity financing. In addition, the future availability of
lender protection insurance may affect our ability to obtain
debt financing for our premium finance business should
additional debt financing be needed. Our current provider of
lender protection insurance has informed us that it will cease
providing us with lender protection insurance upon the earlier
of (i) the completion of this offering or
(ii) December 31, 2010. If we are unable to access
sufficient capital or enter into financing arrangements on
favorable terms in the future, the growth of our business, our
financial condition and results of operations may be materially
adversely affected.
Risk
Factors Related to Premium Finance Transactions
Uncertainty
in valuing the life insurance policies collateralizing our
premium finance loans can affect the fair value of the
collateral and if the fair value of the collateral decreases, we
will incur losses.
We evaluate all of our premium finance loans for impairment, on
a monthly basis, based on the fair value of the underlying life
insurance policies, as the collectability is primarily dependent
on the fair value of the policy serving as collateral. For loans
without lender protection insurance, the fair value of the
policy is determined using our valuation model, which is a
Level 3 fair value measurement. See Managements
Discussion and Analysis Critical Accounting
Policies Fair Value Measurement Guidance. For
loans with lender protection insurance, the insured value is
also considered when determining the fair value of the life
insurance policy. The lender protection insurer limits the
amount of coverage to an amount equal to or less than its
determination of the value of the life insurance policy
underlying our premium finance loan based on the lender
protection insurers own models and assumptions. For all
loans, the amount of impairment, if any, is calculated as the
difference in the fair value of the life insurance policy and
the carrying value of the loan. A loan impairment valuation is
established as losses on our loans are estimated and charged to
the provision for losses on loans receivable, and the provision
is charged to earnings. Once established, the loan impairment
valuation cannot be reversed to earnings.
In the ordinary course of business, a large portion of our
borrowers may default by not paying off the loan and relinquish
beneficial ownership of the life insurance policy to us in
exchange for our release of the underlying loan. When this
occurs, we record the investment in the policy at fair value. At
the end of each
13
reporting period, we re-value the life insurance policies we
own. If the calculation results in an adjustment to the fair
value of the policy, we record this as a change in fair value of
our investment in life insurance policies.
This evaluation of the fair value of life insurance policies is
inherently subjective as it requires estimates that are
susceptible to significant revision as more information becomes
available. Using our valuation model, we determine the fair
value of life insurance policies using a discounted cash flow
basis, incorporating current life expectancy assumptions. The
discount rate incorporates current information about market
interest rates, the credit exposure to the insurance company
that issued the life insurance policy and our estimate of the
risk margin an investor in the policy would require. To
determine the life expectancy of an insured, we utilize medical
reviews from four different medical underwriters. The health of
the insured is summarized by the medical underwriters into a
life assessment which is based on the review of historical and
current medical records. The medical underwriter assesses the
characteristics and health risks of the insured in order to
quantify the health into a mortality rating that represents
their life expectancy. The probability of mortality for an
insured is then calculated by applying the life expectancy
estimate to an actuarial table.
Insurable interest concerns regarding a life insurance policy
can also adversely impact its fair value. A claim or the
perceived potential for a claim for rescission by an insurance
company or by persons with an insurable interest in the insured
of a portion of or all of the policy death benefit can
negatively impact the fair value of a life insurance policy.
If the calculation of fair value results in a decrease in value,
we record this reduction as a loss. As and when loan impairment
valuations are established due to the decline in the fair value
of the policies collateralizing our loans, our net income will
be reduced by the amount of such impairment valuations in the
period in which the valuations are established, and as a result
our business, financial condition and results of operations may
be materially adversely affected.
Our
success in operating our premium finance business using equity
financing, and the amount of cash reserves we will need to
continue to pay premiums, depends on our assumptions about life
expectancies being accurate.
With the net proceeds of this offering, we intend to fund our
new premium finance business with equity financing instead of
relying on debt financing and lender protection insurance.
Without lender protection insurance on our loans, we expect to
have the option to retain a number of life insurance policies
that we expect borrowers will relinquish to us in the event of
default, instead of taking the direction of our lender
protection insurer with respect to the disposition of such life
insurance policies. If we retain a life insurance policy, we
will be responsible for paying all premiums necessary to keep
the policy in force. Therefore, our cash flows and the required
amount of our cash reserves to pay premiums will become
dependent on our assumptions about life expectancies being
accurate.
Life expectancies are estimates of the expected longevity or
mortality of an insured and are inherently uncertain. A life
expectancy obtained on an insured for a life insurance policy
may not be predictive of the future longevity or mortality of
the insured. Inaccurate forecasting of an insureds life
expectancy could result from, among other things:
(i) advances in medical treatment (e.g., new cancer
treatments) resulting in deaths occurring later than forecasted;
(ii) inaccurate diagnosis or prognosis; (iii) changes to
life style habits or the individuals ability to fight
disease, resulting in improved health; (iv) reliance on
outdated or incomplete age or health information about the
insured, or on information that is inaccurate (whether or not
due to fraud or misrepresentation by the insured); or
(v) improper or flawed methodology or assumptions in terms
of modeling or crediting of medical conditions. In forecasting
estimated life expectancies, we utilize third party medical
underwriters to evaluate the medical condition and life
expectancy of each insured. The firms that provide health
assessments and life expectancy information may depend on, among
other things, actuarial tables and model inputs for insureds and
third-party information from independent physicians who, in
turn, may not have personally performed a physical examination
of any of the insureds and may have relied solely on reports
provided to them by attending physicians with whom they were
authorized to communicate. The accuracy of this information has
not been and will not be independently verified by us or our
service providers.
14
If these life expectancy valuations underestimate the longevity
of the insureds, the actual maturity date of the life insurance
policies may therefore be longer than projected. Consequently,
we may not have sufficient reserves for payment of insurance
premiums and we may allow the policies to lapse, resulting in a
loss of our investment in those policies, or if we continue to
fund premium payments, the time period within which we could
expect to receive a return of our investment in such life
insurance policies may be extended, either of which could have a
material adverse effect on our business, financial condition and
results of operation.
The
premium finance business is highly regulated; changes in
regulation could materially adversely affect our ability to
conduct our business.
The making, enforcement and collection of premium finance loans
is extensively regulated by the laws and regulations of many
states and other applicable jurisdictions. These laws and
regulations vary widely, but often:
|
|
|
|
|
require that premium finance lenders be licensed by the
applicable jurisdiction;
|
|
|
|
|
|
require certain disclosure agreements and strictly govern the
content thereof;
|
|
|
|
|
|
regulate the amount of late fees and finance charges that may be
charged if a borrower is delinquent on its payments; and/or
|
|
|
|
|
|
allow imposition of potentially significant penalties on lenders
for violations of such jurisdictions applicable insurance
premium finance laws.
|
In addition, our premium finance transactions are subject to
state usury laws, which limit the interest rate that can be
charged. While we attempt to structure these transactions to
avoid being deemed in violation of usury laws, we cannot assure
you that we will be successful in doing so. Loans found to be at
usurious interest rates may be voided, which would mean the loss
of our principal and interest.
To the extent that more restrictive regulations or more
stringent interpretations of existing regulations are adopted in
the future, the future costs of compliance with such changes in
regulations could be significant and our ability to conduct our
business may be materially adversely affected. There is
additional regulatory risk with respect to the acquisition of a
life insurance policy in the event of a payment default when we
are otherwise unable to sell the policy collateralizing our
premium finance loan. For example, if a state insurance
regulator were to take the position that our premium finance
loans or the acquisition of life insurance policies serving as
collateral for such loans should be characterized as life
settlement transactions subject to applicable regulations, we
could be issued a cease and desist order effectively requiring
us to suspend premium finance transactions for an indefinite
period, and be subject to fines and other penalties.
Our
success in our premium finance business depends on maintaining
relationships within our referral networks.
We rely primarily upon agents and brokers to refer potential
premium finance customers to us. These relationships are
essential to our operations and we must maintain these
relationships to be successful. We do not have fixed contractual
arrangements with the referring agents and brokers and they are
free to do business with our competitors. Our ability to build
and maintain relationships with our agents and brokers depends
upon the amount of agency fees we charge and the value of the
services we provide. For the nine months ended
September 30, 2010, our top ten agents and brokers referred
to us approximately 33.9% and 50.1%, respectively, of our
premium finance business, based upon the loan maturity balances
of the loans originated during such period. The loss of any of
our top-referring agents and brokers could have a material
adverse effect on our business, financial condition and results
of operations.
15
If a
regulator or court decides that trusts that are formed to own
many of the life insurance policies that serve as collateral for
our premium finance loans do not have an insurable interest in
the life of the insured, such determination could have a
material adverse effect on our business, financial condition and
results of operations.
All states require that the initial purchaser of a new life
insurance policy insuring the life of an individual have an
insurable interest in such individuals life at the time of
original issuance of the policy. Whether an insurable interest
exists in the context of the purchase of a life insurance policy
is critical because, in the absence of a valid insurable
interest, life insurance policies are unenforceable under most
states laws. Where a life insurance policy has been issued
to a policyholder without an insurable interest in the life of
the individual who is insured, the life insurance company may be
able to void or rescind the policy, but must repay to the owner
of the policy all premium payments, usually without interest.
Even if the insurance company cannot void or rescind the policy,
however, the insurable interest laws of a number of states
provide that persons with an insurable interest on the life of
the insured may have the right to recover a portion or all of
the death benefit payable under a policy from a person who has
no insurable interest on the life of the insured. These claims
can generally only be brought if the policy was originally
issued to a person without an insurable interest in the life of
the insured. However, some states may require that this
insurable interest not only exist at the time that a life
insurance policy was issued, but also at any later time that the
policy is transferred.
Generally, there are two forms of insurable interests in the
life of an individual, familial and financial. Additionally, an
individual is deemed to have an insurable interest in his or her
own life. It is also a common practice for an individual, as a
grantor or settlor, to form an irrevocable trust to purchase and
own a life insurance policy insuring the life of the grantor or
settlor, where the beneficiaries of the trust are persons who
themselves, by virtue of certain familial relationships with the
grantor or settlor, also have an insurable interest in the life
of the insured. In the event of a payment default on our premium
finance loans when we are otherwise unable to sell the
underlying policy, we will acquire life insurance policies owned
by trusts (or the beneficial interests in the trust itself) that
we believe had an insurable interest in the life of the related
insureds. However, a state insurance regulatory authority or a
court may determine that the trust does not have an insurable
interest in the life of the insured. Any such determination
could result in our being unable to receive the proceeds of the
life insurance policy, which could lead to a total loss of all
amounts loaned in the premium finance transaction. Any such loss
or losses could have a material adverse effect on our business,
financial condition and results of operations.
Premium
finance loan originations are susceptible to practices which can
invalidate the underlying life insurance policy and subject us
to material fines or license suspension or
revocation.
Many states in which we do business have laws which define and
prohibit stranger-originated life insurance (STOLI)
practices, which in general involve the issuance of life
insurance policies as part of or in connection with a practice
or plan to initiate life insurance policies for the benefit of a
third party investor who, at the time of the policy issuance,
lacked a valid insurable interest in the life of the insured.
Most of these statutes expressly provide that premium finance
loans that only advance life insurance premiums and certain
permissible expenses are not STOLI practices or transactions.
Under these statutes, a premium finance loan, as well as any
life insurance policy collateralizing such loan, must meet
certain criteria or such policy can be invalidated, or deemed
unenforceable, in its entirety. We cannot control whether a
state regulator or borrower will assert that any of our loans
should be treated as STOLI transactions or that the loans do not
meet the criteria required under the statutes.
The legality and merit of investor-initiated
leveraged life insurance products have been questioned by
members of the industry, certain life insurance providers and
certain regulators. As an illustration, the New York
Department of Insurance issued a General Counsels opinion
in 2005 concluding that arrangements intended to facilitate the
procurement of life insurance policies for resale violated New
Yorks insurable interest statute and may also constitute a
violation of New York states prohibition against premium
rebates/free insurance.
16
The premium finance industry has been tainted by lawsuits based
on allegations of fraud and misconduct. These lawsuits involve
allegations of fraud, breaches of fiduciary duty and other
misconduct by industry participants. Some of these cases are
brought by life insurance companies attacking the original
issuance of the policies on insurable interest and fraud
grounds. Notwithstanding the litigation in this industry, there
is a lack of judicial certainty in the legal standards used to
determine the validity of insurable interest supporting a life
insurance policy or the existence of STOLI practices. Lawsuits
sometimes focus on transfers of equity interests of the
policyholder (e.g., beneficial interests of an irrevocable trust
holding a policy) that occur very shortly after or
contemporaneously with the issuance of the policy or
arrangements whereby the premium finance lender, the life
insurance agent and the insured agree to transfer the policy to
the premium finance lender or another third party shortly after
the policy issuance or the contestability period.
The contestability period is a period of time,
usually two years, after which the policy cannot be contested by
the issuing life insurance company under the terms of the policy
other than for the nonpayment of premiums. Some states have
adopted exceptions to such limitation for fraud or other similar
malfeasance by the policyholder.
While our loan underwriting guidelines are designed to lessen
the risks of our participation in STOLI or other business that
originates life insurance policies not supported by a valid
insurable interest, a regulators or carriers
assertion to the contrary and subsequent successful enforcement
could have a material adverse effect on the fair value of the
policies collateralizing our premium finance loans and our
ability to originate business going forward. In particular, the
closer the origination date of a premium finance loan
transaction is to the life insurance policy issuance date, there
is increasing risk that a life insurance policy may be subject
to contest or rescission on the basis that such policy was
issued on the basis of a misrepresentation regarding premium
financing, as part of STOLI practices or was not supported by a
valid insurable interest. As of September 30, 2010, 10.4%,
52.5%, 80.7%, 96.2%, and 99.6%, respectively, of our premium
finance loans outstanding were originated within one month,
three months, six months, one year and two years, respectively,
of the issuance of the underlying life insurance policy.
Regulatory, legislative or judicial changes in these areas could
materially and adversely affect our ability to participate in
the premium finance business and could significantly increase
the costs of compliance, resulting in lower revenue or a
complete cessation of our premium finance business. In addition,
in this arena, regulatory action for statutory or regulatory
infractions could involve fines or license suspension or
revocation. We may be unable to obtain or maintain the licenses
necessary for us to conduct our premium finance business.
The
life insurance policies securing our premium finance loans may
be subject to contest, rescission
and/or
non-cooperation by the issuing life insurance company, which may
have a material adverse effect on our business, financial
condition and results of operations.
Our premium finance loans are secured by the underlying life
insurance policy. If the underlying policy is subject to contest
or rescission, the fair value of the collateral could be reduced
to zero. Life insurance policies may generally be contested or
rescinded by the issuing life insurance company within the
contestability period and sometimes beyond the contestability
period, depending on the grounds for rescission and applicable
law. Misrepresentations, fraud, omissions or lack of insurable
interest can, in some instances, form the basis of loss of right
to payment under a life insurance policy for many years beyond
the contestability period. Whether or not there exists a
reasonable legal basis for a contest or rescission, it can
result in a cloud on the title or collectability of the policy.
Contestation can be based upon any material misrepresentation or
omission made in the life insurance policy application, even if
unintentional. Misleading or incomplete answers by the insured
to any questions asked by the insurance carrier regarding the
financing of premiums, the policyholders net worth or the
insureds health and medical history and condition as well
as to any other questions on a life insurance policy
application, can lead to claims that a material
misrepresentation or omission was made and may give rise to the
insurance carriers right to void, contest or rescind the
policy. Lack of a valid insurable interest of the life insurance
policy owner in the insured also may give rise to the insurance
carriers right to void, contest or rescind the policy.
Although we obtain representations and warranties from the
insured, policyholders and referring agents, we may not know
whether the applicants for any of our policies have made any
material misrepresentations or omissions on the policy
applications, or whether the policy owner has a valid insurable
interest in the insured, and as such, the policies securing our
loans are subject to the risk of contestability or rescission.
In addition, some insurance carriers have contested policies as
STOLI
17
arrangements, specifically citing the existence of certain
nonrecourse premium financing arrangements as a basis to
challenge the validity of the policies used to collateralize the
financing. A policy may be voided or rescinded by the insurance
carrier if found to be a STOLI policy where a valid insurable
interest did not exist in the insured at policy inception. From
time to time, an insurance carrier has challenged the validity
of a policy securing one of our premium finance loans, but the
impact on our business from these challenges has not been
significant to date. Future challenges to the policies that we
own or hold as collateral for our premium finance loans may have
a material adverse effect on our business, financial condition
and results of operations.
If the insurance company successfully contests or rescinds a
policy, the policy will be declared void, and in such event, the
insurance companys liability would be limited to a refund
of all the insurance premiums paid for the policy without any
accrued interest. While defending an action to contest or
rescind a policy, premium payments may have to continue to be
made to the life insurance company. Furthermore, a life
insurance company may refuse to refund any of the premiums paid
and seek to retain them as an offset to damages it claims to
have suffered in connection with the issuance of the life
insurance policy. Additionally, the issuing insurance company
may refuse to cooperate with us by not providing information,
processing notices
and/or
paperwork required to document the transaction. Hence, in the
case of a contest or rescission, premiums paid to the carrier
(including those paid during the pendency of a contest or
rescission action) may not be refunded. If they are not, we may
suffer a complete loss with respect to this portion of the loan
amount which may adversely affect our business, financial
condition and results of operations.
Premium
financed life insurance policies are susceptible to a higher
risk of fraud and misrepresentation in life insurance
applications.
While fraud and misrepresentation by applicants and potential
insureds in completing life insurance applications (especially
with respect to the health and medical history and condition of
the potential insured as well as the applicants net worth)
exist generally in the life insurance industry, such risk of
fraud and misrepresentation is heightened in connection with
life insurance policies for which the premiums are financed
through premium finance loans. In particular, there is a
significant risk that applicants and potential insureds may not
answer truthfully or completely to any questions related to
whether the life insurance policy premiums will be financed
through a premium finance loan or otherwise, the
applicants purpose for purchasing the policy or the
applicants intention regarding the future sale or transfer
of the life insurance policy. Such risk may be further increased
to the extent life insurance agents communicate to applicants
and potential insureds regarding potential premium finance
arrangements or transfer of life insurance policies through
payment defaults under premium finance loans. In the ordinary
course of business, our sales team receives inquiries from life
insurance agents and brokers regarding the availability of
premium finance loans for their clients. However, any
communication between the life insurance agent and the potential
policyholder or insured is beyond our control and we may not
know whether a life insurance agent discussed with the potential
policyholder or the insured the possibility of a premium finance
loan by us or the subsequent transfer of the life insurance
policy in the event of a payment default under the loan.
Consequently, notwithstanding the representations and
certifications we obtain from the policyholders, insureds and
the life insurance agents, there is a risk that we may finance
premiums for policies subject to contest or rescission by the
insurance carrier based on fraud or misrepresentation in any
information provided to the life insurance company, including
the life insurance application.
Our
liquidity depends upon a secondary market for life insurance
policies.
With respect to a potential sale of a life insurance policy
owned by us, the fair value depends significantly on an active
secondary market for life insurance, which may contract or
disappear depending on the impact of potential government
regulation, future economic conditions
and/or
other
market variables. Many investors who invest in life insurance
policies are foreign investors who are attracted by potential
investment returns from life insurance policies issued by United
States life insurers with high ratings and financial strength as
well as by the view that such investments are non-correlated
assets meaning changes in the equity or debt markets
should not affect returns on such investments. Changes in the
value of the United States dollar as well
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as changes to the ratings of United States life insurers can
cause foreign investors to suffer a reduction in the value of
their United States dollar denominated investments and reduce
their demand for such products. Any of the above factors may
result in us selling a policy for less than its fair value,
resulting in a loss of profitability.
Delays
in payment and non-payment of life insurance policy proceeds may
have a material adverse effect on our business, financial
condition and results of operations.
A number of arguments may be made by former beneficiaries
(including but not limited to spouses, ex-spouses and
descendants of the insured) under a life insurance policy, by
the beneficiaries of the trust holding the policy, by the estate
or legal heirs of the insured or by the insurance company
issuing such policy, to deny or delay payment of proceeds
following the death of an insured, including arguments related
to lack of mental capacity of the insured, contestability or
suicide provisions in a policy. In addition, the insurable
interest and life settlement laws of certain states may prevent
or delay the liquidation of the life insurance policy serving as
collateral for a loan. Furthermore, if the death of an insured
cannot be verified and no death certificate can be produced, the
related insurance company may not pay the proceeds of the life
insurance policy until the passage of a statutory period
(usually five to seven years) for the presumption of death
without proof. Such delays in payment or non-payment of policy
proceeds may have a material adverse effect on our business,
financial condition and results of operations.
Bankruptcy
of the insured, a beneficiary of the trust owning the life
insurance policy or the trust itself could prevent a claim under
our lender protection insurance policy.
In many instances, individuals establish an irrevocable trust to
hold and own their life insurance policy for estate planning
reasons. In our premium finance business, the majority of the
premium finance borrowers are trusts owning life insurance
policies. A bankruptcy of the insured, a bankruptcy of a
beneficiary of a trust owning the life insurance policy or a
bankruptcy of the trust itself could prevent us from acquiring
the life insurance policy following an event of default under
the related premium finance loan unless consent of the
applicable bankruptcy court is obtained or it is determined that
the automatic stay generally arising following a bankruptcy
filing is not applicable. A failure to promptly obtain any
required bankruptcy court consent within one hundred twenty
(120) days following the maturity date of the related
premium finance loan could delay or prevent us from making a
claim under the lender protection insurance policy for any loss
sustained following a default under the premium finance loan.
Lender protection insurance insures us against certain risks of
loss associated with our premium finance loans, including
payment default by the borrower. If a premium finance loan is
not repaid, the lender protection insurer, subject to the lender
protection insurance policys terms and conditions, has the
right to direct control or take beneficial ownership of the
underlying life insurance policy and we are paid a claim equal
to the insured value of the life insurance policy. If we are
delayed or otherwise prevented from making a claim under the
lender protection insurance policy for any loss sustained
following a default under the premium finance loan, additional
premium payments will need to be made to keep the life insurance
policy in force. As a result, we may be forced to expend
additional funds, or borrow funds at unfavorable rates if such
financing is even available, in order to fund the premiums or,
if we are unable to obtain the necessary funds, we may be forced
to allow the policy to lapse, resulting in the loss of the
premiums we financed in the transaction. Such events could have
a material adverse effect on our business, financial condition
and results of operations.
Our
lender protection insurance policies have significant exclusions
and limitations.
Coverage under our lender protection insurance policies is not
comprehensive and each of these policies is subject to
significant exclusions, limitations and coverage gaps. In the
event that any of the exclusions or limitations to coverage set
forth in the lender protection insurance policies are applicable
or there is a coverage gap, there will be no coverage for any
losses we may suffer, which would have a material adverse effect
on
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our business, financial condition and results of operations. The
coverage exclusions include, but are not limited to:
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the lapse of the related life insurance policy due to the
failure to pay sufficient premiums during the term of the
applicable premium finance loan;
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certain losses relating to situations where the life insured has
died and there has been a bankruptcy or insolvency of the life
insurance company that issued the applicable policy;
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any loss caused by our fraudulent, illegal, criminal, malicious
or grossly negligent acts;
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a surrender of the related life insurance policy to the issuing
life insurance carrier or the sale of such policy or the
beneficial interest therein, in each case without the prior
written consent of the lender protection insurer;
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our failure to timely obtain necessary rights, free and clear of
any lien or encumbrance, with respect to the applicable life
insurance policy as required under the lender protection
insurance policy;
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our failure to timely submit a properly completed proof of loss
certificate to the lender protection insurance policy insurer;
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our failure to timely notify the lender protection insurance
policy insurer of:
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the occurrence of certain prohibited acts, as described in the
lender protection insurance policy, or
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material non-compliance of the related loan with applicable
laws, in each case after obtaining actual knowledge of such
events;
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our making of a claim under the lender protection insurance
policy knowing the same to be fraudulent; or
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the related life insurance policy being contested prior to the
effective date of the related coverage certificate issued under
the lender protection insurance policy and we have actual
knowledge of such contest.
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Failure
to perfect a security interest in the underlying life insurance
policy or the beneficial interests therein could result in our
interest being subordinated to other creditors.
Payment by the related premium finance loan borrower of amounts
owed pursuant to each loan is secured by the underlying life
insurance policy or by the beneficial interests in a trust
established to hold the insurance policy. If we fail to perfect
a security interest in such policy or beneficial interests, our
interest in such policy or beneficial interests may be
subordinated to those of other parties, including, in the event
of a bankruptcy or insolvency, a bankruptcy trustee, receiver or
conservator.
Some
life insurance companies are opposed to the financing of life
insurance policies.
Some United States life insurance companies and their trade
associations have voiced concerns about the life settlement and
premium finance industries generally and the transfer of life
insurance policies to investors. These life insurance companies
may oppose the transfer of a policy to, or honoring of a life
insurance policy held by, third parties unrelated to the
original insured/owner, especially when they may believe the
initial premiums for such life insurance policies might have
been financed, directly or indirectly, by investors that lacked
an insurable interest in the continuing life of the insured. If
the life insurance companies seek to contest or rescind life
insurance policies acquired by us based on such aversion to the
financing of life insurance policies, we may experience a
substantial loss with respect to the related premium finance
loans and the underlying life insurance policies, which could
have a material adverse effect on our business, financial
condition and results of operations. These life insurance
companies and their trade associations may also seek additional
state and federal regulation of the life settlement and premium
finance industries. If such additional regulations were adopted,
we may experience material adverse effects on our business,
financial condition and results of operations.
20
We are
dependent on the creditworthiness of the life insurance
companies that issue the policies serving as collateral for our
premium finance loans. If a life insurance company defaults on
its obligation to pay death benefits on a policy we own, we
would experience a loss of our investment, which would have a
material adverse effect on our business, financial condition and
results of operations.
We are dependent on the creditworthiness of the life insurance
companies that issue the policies serving as collateral for our
premium finance loans. We assume the credit risk associated with
life insurance policies issued by various life insurance
companies. Furthermore, there is a concentration of life
insurance companies that issue the policies that serve as
collateral for our premium finance loans. Over 50% of our
premium finance loans outstanding as of September 30, 2010
are secured by life insurance policies issued by four life
insurance companies. The failure or bankruptcy of any such life
insurance company or annuity company could have a material
adverse impact on our ability to achieve our investment
objectives. A life insurance companys business tends to
track general economic and market conditions that are beyond its
control, including extended economic recessions or interest rate
changes. Changes in investor perceptions regarding the strength
of insurers generally and the policies or annuities they offer
can adversely affect our ability to sell or finance our assets.
Adverse economic factors and volatility in the financial markets
may have a material adverse effect on a life insurance
companys business and credit rating, financial condition
and operating results, and an issuing life insurance company may
default on its obligation to pay death benefits on the life
insurance policies we acquired following a payment default on
our premium finance loans when we are otherwise unable to sell
the underlying policy. In such event, we would experience a loss
of our investment in such life insurance policies which would
have a material adverse effect on our business, financial
condition and results of operations.
If a
life insurance company is able to increase the premiums due on
life insurance policies that we own or finance, it will
adversely affect our returns on such life insurance
policies.
For any life insurance policies that we own or finance, we will
be responsible for paying insurance premiums due. If a life
insurance company is able to increase the cost of insurance
charged for any of the life insurance policies that we own or
finance, the amounts required to be paid for insurance premiums
due for these life insurance policies may increase, requiring us
to incur additional costs for the life insurance policies, which
may adversely affect returns on such life insurance policies and
consequently reduce the secondary market value of such life
insurance policies. Failure to pay premiums on the life
insurance policies when due will result in termination or
lapse of the life insurance policies. The insurer
may in a lapse situation view reinstatement of a
life insurance policy as tantamount to the issuance of a new
life insurance policy and may require the current owner to have
an insurable interest in the life of the insured as of the date
of the reinstatement. In such event, we would experience a loss
of our investment in such life insurance policy.
If an
insured reaches age 95 or 100, the policy may
terminate.
Some life insurance policies terminate if the insured lives to
the age of 100, or in some cases at age 95. Thus if the
insured under a policy acquired by us lives beyond that age, we
would receive nothing on such life insurance policy as the
insurer is relieved of its obligations thereunder. Such
termination of a life insurance policy would result in a loss of
investment return on such life insurance policy and eliminate
any potential proceeds realizable by us from the sale or the
maturation of such life insurance policy.
Failure
to protect our premium finance transaction clients
confidential information and privacy could adversely affect our
business.
Our premium finance business is subject to privacy regulations
and to confidentiality obligations. For example, the collection
and use of medical data is subject to national and state
legislation, including the Health Insurance Portability and
Accountability Act of 1996, or HIPAA. The actions we take to
protect such confidential information include, among other
things:
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training and educating our employees regarding our obligations
relating to confidential information;
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actively monitoring our record retention plans and any changes
in state or federal privacy and compliance requirements;
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maintaining secure storage facilities for tangible
records; and
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limiting access to electronic information.
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However, if we do not properly comply with privacy regulations
and protect confidential information, we could experience
adverse consequences, including regulatory sanctions, such as
penalties, fines and loss of licenses, as well as loss of
reputation and possible litigation.
Risk
Factors Related to Structured Settlements
We are
dependent on third parties to purchase our structured
settlements. Any inability to sell structured settlements or, in
the alternative, to access additional capital to purchase
structured settlements, may have a material adverse effect on
our ability to grow our business, our financial condition and
results of operations.
We are dependent on third parties to purchase our structured
settlements. Our ability to grow our business depends upon our
ability to sell our structured settlements at favorable discount
rates and to establish alternative financing arrangements. Third
party purchasers or other financing may not be available to us
in the future on favorable terms or at all. If such other third
party purchasers or other financing are not available, then we
may be required to seek additional equity financing, if
available, which would dilute the interests of shareholders who
purchase common stock in this offering.
We may not be able to continue to sell our structured
settlements to third parties at favorable discount rates or
obtain financing through borrowings or other means on acceptable
terms to satisfy our cash requirements, either of which could
have a material adverse effect on our ability to grow our
business.
Any
change in current tax law could have a material adverse effect
on our business, financial condition and results of
operations.
The use of structured settlements is largely the result of the
favorable federal income tax treatment of such transactions. In
1979, the Internal Revenue Service issued revenue rulings that
the income tax exclusion of personal injury settlements applied
to related periodic payments. Thus, claimants receiving
installment payments as compensation for a personal injury were
exempt from all federal income taxation, provided certain
conditions were met. This ruling, and its subsequent
codification into federal tax law in 1982, resulted in the
proliferation of structured settlements as a means of settling
personal injury lawsuits. Changes to tax policies that eliminate
this exemption of structured settlements from federal taxation
could have a material adverse effect on our future
profitability. If the tax treatment for structured settlements
were changed adversely by a statutory change or a change in
interpretation, the dollar volume of structured settlements
could be reduced significantly which would also reduce the level
of our structured settlement business. In addition, if there
were a change in the federal tax code that would result in
adverse tax consequences for the assignment or transfer of
structured settlements, such change could have a material
adverse effect on our business, financial condition and results
of operations.
Fluctuations
in discount rates or interest rates may decrease our yield on
structured settlement transactions.
Our profitability is directly affected by levels of and
fluctuations in interest rates. Such profitability is largely
determined by the difference, or spread, between the
discount rate at which we purchase the structured settlements
and the discount rate at which we can resell these assets or the
interest rate at which we can finance those assets. We may not
be able to continue to purchase structured settlements at
current or historical discount rates. Structured settlements are
purchased at effective yields which are fixed, while rates at
which structured settlements are sold, with the exception of
forward purchase arrangements, are generally a function of the
prevailing market rates for short-term borrowings. As a result,
decreases in the discount rate at which we purchase structured
settlements or increases in prevailing market interest
rates after structured settlements are acquired could have a
material adverse effect on our yield on structured settlement
transactions, which could have a material adverse effect on our
business, financial condition and results of operations.
22
The
insolvency of a holder of a structured settlement could have an
adverse effect on our business, financial condition and results
of operations.
Our rights to scheduled payments in structured settlement
transactions will be adversely affected if any holder of a
structured settlement, the special purpose vehicle to which an
insurance company assigns its obligations to make payments under
the settlement (the Assumption Party) or the annuity
provider becomes insolvent
and/or
becomes a debtor in a case under the Bankruptcy Code.
If a holder of a structured settlement were to become a debtor
in a case under the Bankruptcy Code, a court could hold that the
scheduled payments transferred by the holder under the
applicable settlement purchase agreement would not constitute
property of the estate of the claimant under the Bankruptcy
Code. If, however, a trustee in bankruptcy or other receiver
were to assert a contrary position, such as by requiring us (or
any securitization vehicle) to establish our right to those
payments under federal bankruptcy law or by persuading courts to
recharacterize the transaction as secured loans, such result
could have a material adverse effect on our business. If the
rights to receive the scheduled payments are deemed to be
property of the bankruptcy estate of the claimant, the trustee
may be able to avoid assignment of the receivable to us.
Furthermore, a general creditor or representative of the
creditors (such as a trustee in bankruptcy) of an Assumption
Party could make the argument that the payments due from the
annuity provider are the property of the estate of such
Assumption Party (as the named owner thereof). To the extent
that a court would accept this argument, the resulting delays or
reductions in payments on our receivables could have a material
adverse effect on our business, financial condition and results
of operations.
If the
identities of structured settlement holders become readily
available, it could have an adverse effect on our structured
settlement business, financial condition and results of
operations.
We do not believe that there are any readily available lists of
holders of structured settlements, which makes brand awareness
critical to growing market share. We use national television
marketing to generate
in-bound
telephone and internet inquiries and we have built a proprietary
database of clients and prospective clients. As of
September 30, 2010, we had a database of over 30,000
structured settlement leads. If the identities of structured
settlement holders were to become readily available to our
competitors or to the general public, we could face increased
competition and the value of our proprietary database would be
diminished, which would have a negative effect on our structured
settlement business, financial condition and results of
operations.
Adverse
judicial developments could have an adverse effect on our
business, financial condition and results of
operations.
Adverse judicial developments have occasionally occurred in the
structured settlement industry, especially with regard to
anti-assignment concerns and issues associated with
non-disclosure of material facts and associated misconduct. For
example, in the 2008 case of
321 Henderson Receivables,
LLC v. Tomahawk
, the California County Superior Court
(Fresno County, Case No. 08CECG00797 July 2008
Order (unreported)) ruled that (i) certain structured
settlement sales were barred by anti-assignment provisions in
the settlement documents, (ii) the transfers were loans,
not sales, that violated Californias usury laws and
(iii) for similar reasons numerous other court-approved
structured settlement sales may be void. Although the
Tomahawk
decision was subsequently reversed by the
California Court of Appeal, the Superior Court decision had a
negative effect on the structured settlement industry by casting
doubt on the ability of a structured settlement recipient to
sell portions of the payment streams. Any similar adverse
judicial developments calling into doubt such laws and
regulations could materially and adversely affect our
investments in structured settlements
23
Risk
Factors Relating to Our General Business
Changes
to statutory, licensing and regulatory regimes governing premium
financing or structured settlements, including the means by
which we conduct such business, could have a material adverse
effect on our activities and revenues.
Changes to statutory, licensing and regulatory regimes could
result in the enforcement of stricter compliance measures or
adoption of additional measures on us or on the insurance
companies or annuity providers that stand behind the insurance
policies that collateralize our premium finance loans and the
structured settlements that we purchase, either of which could
have a material adverse impact on our business activities and
revenues. Any change to the regulatory regime covering the
resale of any of these asset classes, including any change
specifically applicable to our activities or to investor
eligibility, could restrict our ability to finance, acquire or
sell these assets or could lead to significantly increased
compliance costs.
Traditionally, the U.S. federal government has not directly
regulated the insurance business. Congress recently passed and
the President signed into law the Dodd-Frank Wall Street Reform
and Consumer Protection Act, which we refer to in this
prospectus as the Dodd-Frank Act, providing for the
enhanced federal supervision of financial institutions,
including insurance companies in certain circumstances, and
financial activities that represent a systemic risk to financial
stability or the U.S. economy. Under the Dodd-Frank Act,
the Federal Insurance Office will be established within the
U.S. Treasury Department to monitor all aspects of the
insurance industry. Notwithstanding the creation of the Federal
Insurance Office, the Dodd-Frank Act provides that state
insurance regulators will remain the primary regulatory
authority over insurance and expressly withholds from the
Federal Insurance Office and the U.S. Treasury Department
general supervisory or regulatory authority over the business of
insurance. At this time, we cannot assess whether any other
proposed legislation or regulatory changes will be adopted, or
what impact, if any, the Dodd-Frank Act or any other legislation
or changes could have on our results of operations, financial
condition or liquidity.
In addition, we are subject to various federal and state
regulations regarding the solicitation of customers. The Federal
Communications Commission and Federal Trade Commission have
issued rules that provide for a national do not call
registry. Under these rules, companies are prohibited from
contacting any individual who requests to have his or her phone
number added to the registry, except in certain limited
instances. We are required to continually review the national
do not call registry to ensure that we do not
contact anyone on that registry. In February 2009, we received a
citation for violating these rules. In the event we violate
these rules in the future, we could be subject to a fine of up
to $16,000 per violation or each day of a continuing violation,
which could have a material adverse effect on our business,
financial condition and results of operations.
Regulation
of life settlement transactions as securities under the federal
securities laws could lead to increased compliance costs and
could adversely affect our ability to acquire or sell life
insurance policies.
The Securities and Exchange Commission, or the SEC, recently
issued a report recommending that sales of life insurance
policies in life settlement transactions be regulated as
securities for purposes of the federal securities laws. Although
to date we have never purchased a policy directly from a policy
owner, any legislation implementing such regulatory change or a
change in the transactions that are characterized as life
settlement transactions could lead to increased compliance costs
and adversely affect our ability to acquire or sell life
insurance policies in the future, which could have an adverse
effect on our business, financial condition and results of
operations.
Negative
press from media or consumer advocacy groups and as a result of
litigation involving industry participants could have a material
adverse effect on our business, financial condition and results
of operations.
The premium finance and structured settlement industries
periodically receive negative press from the media and consumer
advocacy groups and as a result of litigation involving industry
participants. A sustained campaign of negative press resulting
from media or consumer advocacy groups, industry litigation or
other factors could adversely affect the publics
perception of these industries as a whole, and lead to
reluctance to
24
sell assets to us or to provide us with third party financing.
We also have received negative press from competitors. Any such
negative press could have a material adverse effect on our
business, financial condition and results of operations.
We
have limited operating experience.
Our business operations began in December 2006. Consequently,
while certain of our management are very experienced in the
premium finance and structured settlement businesses, we have
limited operating history in both of our business segments. With
the net proceeds of this offering, we expect to have the option
to retain a number of life insurance policies that we expect
borrowers will relinquish to us in the event of default, instead
of taking the direction of our lender protection insurer with
respect to the disposition of such life insurance policies.
However, since our inception, we have had limited experience
managing and dealing in life insurance policies owned by us.
Therefore, the historical performance of our operations may be
of limited relevance in predicting future performance.
The
loss of any of our key personnel could have a material adverse
effect on our business, financial condition and results of
operations.
Our success depends to a significant degree upon the continuing
contributions of our key executive officers including Antony
Mitchell, our chief executive officer, and Jonathan Neuman, our
president and chief operating officer. These officers have
significant experience operating businesses in structured
settlements and premium finance transactions, which are highly
regulated industries. In connection with this offering, we have
entered into employment agreements with each of these executive
officers. We do not maintain key man life insurance with respect
to any of our executives.
Mr. Mitchell is a citizen of the United Kingdom who is
working in the United States as a lawful permanent resident on a
conditional basis. In order to retain his lawful permanent
residency, Mr. Mitchell will need to apply to have the
conditions on his permanent resident status removed prior to
March 31, 2011. Although Mr. Mitchell intends to apply
to have the conditions on his lawful permanent residency
removed, he may not satisfy the requirements to have the
conditions removed, or his application to do so may not be
approved. The failure to remove the conditions on his permanent
residency could result in Mr. Mitchell having to leave the
United States or cause him to seek an alternative immigration
status in the United States.
The loss of Mr. Mitchell or Mr. Neuman or other
executive officers or key personnel could have a material
adverse effect on our business, financial condition and results
of operations.
We
compete with a number of other finance companies and may
encounter additional competition.
There are a number of finance companies that compete with us.
Many are significantly larger and possess considerably greater
financial, marketing, management and other resources than we do.
The premium finance business and structured settlement business
could also prove attractive to new entrants. As a consequence,
competition in these sectors may increase. In addition, existing
competitors may increase their market penetration and purchasing
activities in one or more of the sectors in which we
participate. The availability of the type of insurance policies
that meet our actuarial and underwriting standards for our
premium finance transactions is limited and sought by many of
our competitors. Also, we rely on life insurance agents and
brokers to refer premium finance transactions to us, and our
competitors may offer better terms and conditions to such life
insurance agents and brokers. Increased competition could result
in reduced origination volume, reduced discount rates
and/or
other
fees, each of which could materially adversely affect our
revenue, which would have a material adverse effect on our
business, financial condition and results of operations.
25
Risks
Related to Our Common Stock and This Offering
There
has been no prior public market for our common stock, and,
therefore, you cannot be certain that an active trading market
or a specific share price will be established.
Currently, there is no public trading market for our common
stock, and it is possible that an active trading market will not
develop upon completion of this offering or that the market
price of our common stock will decline below the initial public
offering price. We have been approved to list our common stock
on the New York Stock Exchange, subject to official notice of
issuance, under the symbol IFT. The initial public
offering price per share will be determined by negotiation among
us and the underwriters and may not be indicative of the market
price of our common stock after completion of this offering.
The
trading price of our common stock may decline after this
offering.
The trading price of our common stock may decline after this
offering for many reasons, some of which are beyond our control,
including, among others:
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our results of operations;
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changes in expectations as to our future results of operations,
including financial estimates and projections by securities
analysts and investors;
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changes in laws and regulations applicable to structured
settlements or premium finance transactions;
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increased competition for premium finance lending or the
acquisition of structured settlements;
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our ability to secure credit facilities on favorable terms or at
all;
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results of operations that vary from those expected by
securities analysts and investors;
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future sales of our common stock;
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fluctuations in interest rates, inflationary pressures and other
changes in the investment environment that affect returns on
invested assets; and
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volatile and unpredictable developments, including man-made,
weather-related and other natural catastrophes or terrorist
attacks.
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In addition, the stock market in general has experienced
significant volatility that often has been unrelated to the
operating performance of companies whose shares are traded.
These market fluctuations could adversely affect the trading
price of our common stock, regardless of our actual operating
performance. As a result, the trading price of our common stock
may be less than the initial public offering price, and you may
not be able to sell your shares at or above the price you pay to
purchase them.
If
securities or industry analysts do not publish research or
publish inaccurate or unfavorable research about our business,
our stock price and trading volume could decline.
The trading market for our common stock will depend in part on
the research and reports that securities or industry analysts
publish about us or our business. We do not currently have and
may never obtain research coverage by securities and industry
analysts. Additionally, since we do not believe that there are
other similar public companies involved in both the premium
finance business and the structured settlement business as we
are, the risk that we may never obtain research coverage by
securities and industry analysts is heightened. If no securities
or industry analysts commence coverage of us, the trading price
for our stock would be negatively impacted. If we obtain
securities or industry analyst coverage and if one or more of
the analysts who covers us downgrades our stock or publishes
inaccurate or unfavorable research about our business, our stock
price would likely decline. If one or more of these analysts
ceases coverage of us or fails to publish reports on us
regularly, demand for our stock could decrease, which could
cause our stock price and trading volume to decline.
26
Public
investors will suffer immediate and substantial dilution as a
result of this offering.
The initial public offering price per share is significantly
higher than our pro forma net tangible book value per share of
our common stock. Accordingly, if you purchase shares in this
offering, you will suffer immediate and substantial dilution of
your investment. Based upon the issuance and sale of
[ ] shares
of our common stock at an assumed initial offering price of
$[ ] per share, which is the
midpoint of the price range on the cover of this prospectus,
less an amount equal to the underwriting discounts and
commissions, you will incur immediate dilution of approximately
$[ ] in the pro forma net tangible
book value per share if you purchase common stock in this
offering. In addition, investors in this offering will:
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pay a price per share that substantially exceeds the pro forma
net tangible book value of our assets after subtracting
liabilities; and
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contribute [ ]% of the total amount
invested to date to fund us based on an assumed initial offering
price to the public of $[ ] per
share, which is the midpoint of the price range on the cover of
this prospectus, but will own only
[ ]% of the shares of common stock
outstanding after completion of this offering.
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Future
sales of our common stock may affect the trading price of our
common stock and the future exercise of options may lower the
price of our common stock.
We cannot predict what effect, if any, future sales of our
common stock, or the availability of shares for future sale,
will have on the trading price of our common stock. Sales of a
substantial number of shares of our common stock in the public
market after completion of this offering, or the perception that
such sales could occur, may adversely affect the trading price
of our common stock and may make it more difficult for you to
sell your shares at a time and price that you determine
appropriate. Upon completion of this offering, after giving
effect to (i) the corporate conversion, pursuant to which
all outstanding common and preferred limited liability company
units of Imperial Holdings, LLC (including all accrued and
unpaid dividends thereon) and all principal and accrued and
unpaid interest outstanding under our promissory note in favor
of IMPEX Enterprises, Ltd. will be converted
into shares
of our common stock; (ii) the issuance
of shares
of common stock to two of our employees pursuant to the terms of
each of their respective phantom stock agreements;
(iii) the conversion of a $30.0 million debenture
into shares of our common
stock at the midpoint of the price range on the cover of this
prospectus as described under Corporate Conversion;
and (iv) the sale of
[ ] shares
in this offering, there will be
[ ] shares
of our common stock outstanding. Up to an
additional shares
of common stock will be issuable upon the exercise of warrants
issued to our existing members prior to the completion of this
offering.
Moreover,
additional shares of our common stock are available for future
issuance under our Omnibus Plan. Following completion of this
offering, we intend to register all of
the shares
issuable or reserved for issuance under the Omnibus Plan. See
Description of Capital Stock and Executive
Compensation. We and our current directors, executive
officers and shareholders have entered into
180-day
lock-up
agreements. The
lock-up
agreements are described in Shares Eligible for
Future Sale
Lock-Up
Agreements. An aggregate
of shares
of our common stock will be subject to these
lock-up
agreements upon completion of this offering.
Being
a public company will increase our expenses and administrative
workload and will expose us to risks relating to evaluation of
our internal controls over financial reporting required by
Section 404 of the Sarbanes-Oxley Act of
2002.
As a public company, we will need to comply with additional laws
and regulations, including the Sarbanes-Oxley Act of 2002, the
Dodd-Frank Act, and related rules of the SEC and requirements of
the New York Stock Exchange. We were not required to comply with
these laws and requirements as a private company. Complying with
these laws and regulations will require the time and attention
of our board of directors and management and will increase our
expenses. Among other things, we will need to: design,
establish, evaluate and maintain a system of internal controls
over financial reporting in compliance with the requirements of
Section 404 of the Sarbanes-Oxley Act and the related rules
and regulations of the SEC and
27
the Public Company Accounting Oversight Board; prepare and
distribute periodic reports in compliance with our obligations
under the federal securities laws; establish new internal
policies, principally those relating to disclosure controls and
procedures and corporate governance; institute a more
comprehensive compliance function; and involve to a greater
degree our outside legal counsel and accountants in the above
activities.
In addition, we also expect that being a public company will
make it more expensive for us to obtain director and officer
liability insurance. We may be required to accept reduced
coverage or incur substantially higher costs to obtain this
coverage. These factors could also make it more difficult for us
to attract and retain qualified executives and members of our
board of directors, particularly directors willing to serve on
our audit committee.
We are in the process of evaluating our internal control systems
to allow management to report on, and our independent auditors
to assess, our internal controls over financial reporting. We
plan to perform the system and process evaluation and testing
(and any necessary remediation) required to comply with the
management certification and auditor attestation requirements of
Section 404 of the Sarbanes-Oxley Act. We are required to
comply with Section 404 in our annual report for the year
ending December 31, 2011.
However, we cannot be certain as to the timing of completion of
our evaluation, testing and remediation actions or the impact of
the same on our operations. Furthermore, upon completion of this
process, we may identify control deficiencies of varying degrees
of severity under applicable SEC and Public Company Accounting
Oversight Board rules and regulations that remain unremediated.
If we fail to implement the requirements of Section 404 in
a timely manner, we might be subject to sanctions or
investigation by regulatory agencies such as the SEC. In
addition, failure to comply with Section 404 or the report
by us of a material weakness may cause investors to lose
confidence in our financial statements or the trading price of
our common stock to decline. If we fail to remediate any
material weakness, our financial statements may be inaccurate,
our access to the capital markets may be restricted and the
trading price of our common stock may decline.
As a public company, we will be required to report, among other
things, control deficiencies that constitute a material
weakness or changes in internal controls that materially
affect, or are reasonably likely to materially affect, internal
controls over financial reporting. A control
deficiency exists when the design or operation of a
control does not allow management or employees, in the normal
course of performing their assigned functions, to prevent or
detect misstatements on a timely basis. A significant
deficiency is a control deficiency, or combination of
control deficiencies, that adversely affects the ability to
initiate, authorize, record, process or report financial data
reliably in accordance with generally accepted accounting
principles that results in more than a remote likelihood that a
misstatement of financial statements that is more than
inconsequential will not be prevented or detected. A
material weakness is a significant deficiency, or a
combination of significant deficiencies, that results in more
than a remote likelihood that a material misstatement of the
annual or interim financial statements will not be prevented or
detected.
Our
independent registered public accounting firm has in the past
identified certain deficiencies in our internal controls that it
considered to be control deficiencies and material weaknesses.
If we fail to remediate these internal control deficiencies and
material weaknesses and maintain an effective system of internal
controls over financial reporting, we may not be able to
accurately report our financial results.
During their audit of our financial statements for the years
ended December 31, 2008 and 2007, Grant Thornton LLP, our
independent registered public accounting firm, identified
certain deficiencies in our internal controls, including
deficiencies that they considered to be significant deficiencies
and material weaknesses. Specifically, in their audit of our
financial statements for the year ended December 31, 2008,
our independent auditors identified a material weakness relating
to the number of adjustments recorded to reconcile differences
and to correct accounts improperly booked relating to the
year-end closing and reporting process. In their audit of our
financial statements for the year ended December 31, 2007,
our independent auditors identified material weaknesses relating
to (i) the incorrect recordation of agency fees,
(ii) a reversal of capital contributions entry due to
inaccuracies in the timing of the payments and
(iii) inaccuracies in the input of maturity dates of loans.
Additionally, the audit identified a significant control
deficiency with respect to the number of adjusting journal
entries as a result of us having a limited accounting staff.
28
In response, we initiated corrective actions to remediate these
control deficiencies and material weaknesses. Although no
material deficiencies were identified during the audit of our
financial statements for the period ended December 31,
2009, it is possible that we or our independent auditors may
identify significant deficiencies or material weaknesses in our
internal control over financial reporting in the future. Any
failure or difficulties in implementing and maintaining these
controls could cause us to fail to meet the periodic reporting
obligations that we will become subject to after this offering
or result in material misstatements in our financial statements.
The existence of a material weakness could result in errors to
our financial statements requiring a restatement of our
financial statements, cause us to fail to meet our reporting
obligations and cause investors to lose confidence in our
reported financial information, which could lead to a decline in
our stock price.
Due to
the concentration of our capital stock ownership with certain of
our executive officers, they may be able to influence
shareholder decisions, which may conflict with your interests as
a shareholder.
Immediately upon completion of this offering Antony Mitchell,
our chief executive officer, and Jonathan Neuman, our chief
operating officer, directly and through corporations that they
control, will each beneficially own shares representing
approximately % of the voting power of our common
stock. As a result, these executive officers may have the
ability to significantly influence matters requiring shareholder
approval, including, without limitation, the election or removal
of directors, mergers, acquisitions, changes of control of our
company and sales of all or substantially all of our assets.
Your interests as a shareholder may conflict with their
interests, and the trading price of shares of our common stock
could be adversely affected.
We
have agreed to indemnify Slate Capital LLC and Lexington for any
liability incurred in connection with the registration statement
of which this prospectus is a part.
In connection with our arrangements with Slate Capital LLC
(Slate) and Lexington as described in the
registration statement of which this prospectus is a part, we
have agreed to indemnify Slate and Lexington and each of their
respective affiliates against any and all liability, loss,
damage or expense incurred by such entities in connection with
any investigation, inquiry, action, suit, demand or claim for
sums of money brought or made against any such entity relating
to the registration statement or any amendment or supplement
thereto, for any actual or alleged violations of state or
federal securities laws with respect to any untrue statement or
alleged untrue statement of a material fact contained in the
registration statement or any supplement or amendment thereto or
any omission or alleged omission to state therein a material
fact necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not
misleading. Any indemnification claim that we are required to
pay to such entities could have a material adverse effect on our
business, financial condition and results of operations.
Provisions
in our executive officers employment agreements could
impede an attempt to replace or remove our directors or
otherwise effect a change of control, which could diminish the
price of our common stock.
We have entered into employment agreements with our executive
officers as described in the section titled Executive
Compensation Employment Agreements. The
agreements for our Chief Executive Officer and President provide
for substantial payments in the event of a material change in
the geographic location where such officers perform their duties
or upon a material diminution of their base salaries or
responsibilities. For Messrs. Mitchell and Neuman, these
payments are equal to three times the sum of base salary and the
average of the three years annual cash bonus, unless the
triggering event occurs during the first three years of their
respective employment agreements, in which case the payments are
equal to six times base salary. These payments may deter any
transaction that would result in a change in control, which
could diminish the price of our common stock.
Provisions
in our articles of incorporation and bylaws could impede an
attempt to replace or remove our directors or otherwise effect a
change of control, which could diminish the price of our common
stock.
Our articles of incorporation and bylaws contain provisions that
may entrench directors and make it more difficult for
shareholders to replace directors even if the shareholders
consider it beneficial to do so. In particular, shareholders are
required to provide us with advance notice of shareholder
nominations and proposals to be brought before any annual
meeting of shareholders, which could discourage or deter a third
party from
29
conducting a solicitation of proxies to elect its own slate of
directors or to introduce a proposal. In addition, our articles
of incorporation eliminate our shareholders ability to act
without a meeting and require the holders of not less than 50%
of the voting power of our common stock to call a special
meeting of shareholders.
These provisions could delay or prevent a change of control that
a shareholder might consider favorable. For example, these
provisions may prevent a shareholder from receiving the benefit
from any premium over the market price of our common stock
offered by a bidder in a potential takeover. Even in the absence
of an attempt to effect a change in management or a takeover
attempt, these provisions may adversely affect the prevailing
market price of our common stock if they are viewed as
discouraging changes in management and takeover attempts in the
future. Furthermore, our articles of incorporation and our
bylaws provide that the number of directors shall be fixed from
time to time by our board of directors, provided that the board
shall consist of at least three and no more than fifteen members.
Certain
laws of the State of Florida could impede an attempt to replace
or remove our directors or otherwise effect a change of control,
which could diminish the price of our common
stock.
As a Florida corporation, we are subject to the Florida Business
Corporation Act, which provides that a person who acquires
shares in an issuing public corporation, as defined
in the statute, in excess of certain specified thresholds
generally will not have any voting rights with respect to such
shares unless such voting rights are approved by the holders of
a majority of the votes of each class of securities entitled to
vote separately, excluding shares held or controlled by the
acquiring person. The Florida Business Corporation Act also
contains a statute which provides that an affiliated transaction
with an interested shareholder generally must be approved by
(i) the affirmative vote of the holders of two-thirds of
our voting shares, other than the shares beneficially owned by
the interested shareholder, or (ii) a majority of the
disinterested directors.
Additionally, one of our subsidiaries, Imperial Life
Settlements, LLC, a Delaware limited liability company, is
licensed as a viatical settlement provider and is regulated by
the Florida Office of Insurance Regulation. As a Florida
viatical settlement provider, Imperial Life Settlements, LLC is
subject to regulation as a specialty insurer under certain
provisions of the Florida Insurance Code. Under applicable
Florida law, no person can finally acquire, directly or
indirectly, 10% or more of the voting securities of a viatical
settlement provider or its controlling company without the
written approval of the Florida Office of Insurance Regulation.
Accordingly, any person who acquires beneficial ownership of 10%
or more of our voting securities will be required by law to
notify the Florida Office of Insurance Regulation no later than
five days after any form of tender offer or exchange offer is
proposed, or no later than five days after the acquisition of
securities or ownership interest if no tender offer or exchange
offer is involved. Such person will also be required to file
with the Florida Office of Insurance Regulation an application
for approval of the acquisition no later than 30 days after
the same date that triggers the
5-day
notice
requirement.
The Florida Office of Insurance Regulation may disapprove the
acquisition of 10% or more of our voting securities by any
person who refuses to apply for and obtain regulatory approval
of such acquisition. In addition, if the Florida Office of
Insurance Regulation determines that any person has acquired 10%
or more of our voting securities without obtaining its
regulatory approval, it may order that person to cease the
acquisition and divest itself of any shares of our voting
securities which may have been acquired in violation of the
applicable Florida law. Due to the requirement to file an
application with and obtain approval from the Florida Office of
Insurance Regulation, purchasers of 10% or more of our voting
securities may incur additional expenses in connection with
preparing, filing and obtaining approval of the application, and
the effectiveness of the acquisition will be delayed pending
receipt of approval from the Florida Office of Insurance
Regulation.
The Florida Office of Insurance Regulation may also take
disciplinary action against Imperial Life Settlements,
LLCs license if it finds that an acquisition of our voting
securities is made in violation of the applicable Florida law
and would render the further transaction of business hazardous
to our customers, creditors, shareholders or the public.
30
FORWARD-LOOKING
STATEMENTS
Some of the statements under the captions Prospectus
Summary, Risk Factors, Managements
Discussion and Analysis of Financial Condition and Results of
Operations, Business, and elsewhere in this
prospectus may include forward-looking statements. These
statements reflect the current views of our management with
respect to future events and our financial performance. These
statements include forward-looking statements with respect to
our business and the insurance industry in general. Statements
that include the words expect, intend,
plan, believe, project,
estimate, may, should,
anticipate and similar statements of a future or
forward-looking nature identify forward-looking statements for
purposes of the federal securities laws or otherwise.
Forward-looking statements address matters that involve risks
and uncertainties. Accordingly, there are or will be important
factors that could cause our actual results to differ materially
from those indicated in these statements. We believe that these
factors include, but are not limited to, the following:
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our results of operations;
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our ability to continue to grow our businesses;
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our ability to obtain financing on favorable terms or at all;
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changes in laws and regulations applicable to premium finance
transactions or structured settlements;
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changes in mortality rates and the accuracy of our assumptions
about life expectancies;
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increased competition for premium finance lending or for the
acquisition of structured settlements;
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adverse developments in capital markets;
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loss of the services of any of our executive officers;
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the effects of United States involvement in hostilities with
other countries and large-scale acts of terrorism, or the threat
of hostilities or terrorist acts; and
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changes in general economic conditions, including inflation,
changes in interest rates and other factors.
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The foregoing factors should not be construed as exhaustive and
should be read together with the other cautionary statements
included in this prospectus, including in particular the risks
described under Risk Factors beginning on
page 13 of this prospectus. If one or more of these or
other risks or uncertainties materialize, or if our underlying
assumptions prove to be incorrect, actual results may differ
materially from what we anticipate. Any forward-looking
statements you read in this prospectus reflect our views as of
the date of this prospectus with respect to future events and
are subject to these and other risks, uncertainties and
assumptions relating to our operations, results of operations,
growth strategy and liquidity. Before making a decision to
purchase our common stock, you should carefully consider all of
the factors identified in this prospectus that could cause
actual results to differ.
31
USE OF
PROCEEDS
We estimate that our net proceeds from this offering, based on
the sale of
[ ] shares
of our common stock at an assumed initial public offering price
of $[ ] per share, which is the
midpoint of the price range set forth on the cover of this
prospectus, after deducting the underwriting discounts and
commissions and our estimated offering expenses, will be
approximately $[ ]. We estimate
that our net proceeds from this offering will be
$[ ] if the underwriters exercise
their over-allotment option in full.
We intend to use approximately $[ ]
of the net proceeds in our premium financing lending activities
and approximately $[ ] in our
structured settlement activities. We intend to use any remaining
proceeds for general corporate purposes.
Pending the use of the net proceeds from this offering, we may
invest some of the proceeds in short-term investment-grade
instruments.
32
DIVIDEND
POLICY
We do not expect to pay any cash dividends on our common stock
for the foreseeable future. We currently intend to retain any
future earnings to finance our operations and growth. Any future
determination to pay cash dividends on our common stock will be
at the discretion of our board of directors and will be
dependent on our earnings, financial condition, operating
results, capital requirements, any contractual, regulatory and
other restrictions on the payment of dividends by us or by our
subsidiaries to us, and other factors that our board of
directors deems relevant.
Imperial is a holding company and has no direct operations. Our
ability to pay dividends in the future depends on the ability of
our operating subsidiaries to pay dividends to us. Our existing
debt facilities restrict the ability of certain of our special
purpose subsidiaries to pay dividends. In addition, future debt
arrangements may contain certain prohibitions or limitations on
the payment of dividends.
33
CORPORATE
CONVERSION
In connection with this offering, we will complete a
reorganization in which Imperial Holdings, Inc., a Florida
corporation, will succeed to the business of Imperial Holdings,
LLC, a Florida limited liability company, and the members of
Imperial Holdings, LLC will become shareholders of Imperial
Holdings, Inc. We refer to this reorganization as the corporate
conversion. In order to consummate the corporate conversion, a
certificate of conversion will be filed with the Florida
Secretary of State prior to the closing of this offering. In
connection with the corporate conversion, all of our outstanding
common and preferred limited liability company units will be
converted into shares of common stock of Imperial Holdings, Inc.
The plan of conversion which describes the corporate conversion
as well as other transactions and agreements by the parties with
an interest in our equity reflects an agreement among our
shareholders. Thus, there is no formula that may be used to
describe the conversion of a common unit or a Series A, B,
C, D and E preferred unit into common stock.
On November 1, 2010, Premium Funding, Inc. and Branch
Office of Skarbonka Sp. z o.o. (Skarbonka) agreed to
exchange the 112,500 common units and the 25,000 preferred units
owned by Premium Funding, Inc. and the promissory note issued to
Skarbonka for a $30.0 million debenture that matures
October 4, 2011. The debenture was issued to Skarbonka as
holder and agent for Premium Funding. Premium Funding and
Skarbonka are related parties. The debenture is automatically
convertible into shares of our common stock immediately prior to
the closing of this offering.
Pursuant to the plan of conversion, all of our outstanding
common units and preferred units and all principal and accrued
and unpaid interest outstanding under our promissory note in
favor of IMPEX Enterprises, Ltd. will be converted
into shares
of our common stock at an assumed initial public offering price
equal to the midpoint of the price range on the cover of this
prospectus.
Immediately after the corporate conversion and prior to the
conversion of the Skarbonka debenture and the closing of this
offering, our shareholders will consist of two Florida
corporations and one Florida limited liability company. These
three shareholders will reorganize so that their beneficial
owners who are listed under Principal Shareholders,
including Messrs. Mitchell and Neuman, will receive the
same number of shares of common stock of Imperial Holdings, Inc.
issuable to the members of Imperial Holdings, LLC in the
corporate conversion. We do not expect any of the prior losses
which the members of Imperial Holdings, LLC have accumulated to
carry forward into Imperial Holdings, Inc. as a result of the
corporate conversion.
Following the corporate conversion and immediately prior to the
closing of this offering, Skarbonkas $30.0 million
debenture will convert into the number of shares of our common
stock determined by dividing the principal amount of the
debenture by the greater of (i) the midpoint of the price
range on the cover of this prospectus or (ii) the initial
public offering price per share. In the event the initial public
offering price per share is greater than the midpoint of the
price range on the cover of this prospectus, Skarbonka will
receive fewer shares (the share differential) than
it would have if the initial public offering price had been
equal to the midpoint of the price range, and a number of
additional shares of our common stock equal to the share
differential will be issued to Messrs. Mitchell and Neuman,
with each receiving half of such additional shares. In such
event, the number of additional shares to be issued will be
determined pursuant to the following formula:
Q = (R * (IPO Price Midpoint)) / IPO Price
where,
Q equals the total number of additional shares to be issued;
R equals the number of shares of common issuable to Skarbonka
based on the midpoint of the price range on the cover of this
prospectus;
IPO Price means the initial public offering price per share at
which the common stock is sold in this offering; and
Midpoint means the midpoint of the price range on the cover of
this prospectus.
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For example, if the initial public offering price per share is
$ per share so that the difference
between that price and the midpoint of the price range on the
cover of this prospectus is [$ ],
[ ]
additional shares will be issued to each of
Messrs. Mitchell and Neuman.
If the initial public offering price is less than or equal to
the midpoint of the price range on the cover of this prospectus,
no additional shares will be issued to Messrs. Mitchell and
Neuman.
In addition, in the event that the initial public offering price
per share is greater than the midpoint of the price range on the
cover of this prospectus, a portion of the shares of common
stock issued to Pine Trading, Ltd. shall be proportionately
re-allocated to Messrs. Mitchell and Neuman, with each
receiving one-half of such re-allocated shares. In such event,
the number of shares to be re-allocated will be determined
pursuant to the following formula:
Z = (X * (IPO Price Midpoint)) / IPO Price
where,
Z equals the total number of shares to be re-allocated;
X equals the number of shares of common stock initially owned by
Pine Trading, Ltd. immediately after the corporate conversion;
and
IPO Price and Midpoint have the meaning set forth above.
For example, if the initial public offering price per share is
$ per share so that the difference
between that price and the mid-point of the price range on the
cover of this prospectus is [$ ],
[ ] shares
will be re-allocated from Pine Trading, Ltd. and each of
Messrs. Mitchell and Neuman will receive
[ ]
of such re-allocated shares.
If the initial public offering price is less than or equal to
the midpoint of the price range on the cover of this prospectus,
no re-allocation of shares will occur.
We have phantom stock agreements with two employees. After the
corporate conversion and prior to the closing of this offering,
these phantom stock agreements will terminate and the two
employees will receive an aggregate
of shares
of common stock.
In addition, following the corporate conversion and upon the
closing of this offering, our three current shareholders will
receive warrants that may be exercised for up
to shares
of common stock, as described elsewhere herein under the
subsection Warrants in the section titled
Description of Capital Stock.
35
CAPITALIZATION
The following table sets forth our capitalization as of
September 30, 2010:
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on an actual basis;
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on a pro forma basis to give effect to (i) the consummation
of the corporate conversion, pursuant to which all outstanding
common and preferred limited liability company units (including
all accrued and unpaid dividends thereon) and all principal and
accrued and unpaid interest outstanding under our promissory
note in favor of IMPEX Enterprises, Ltd. will be converted
into shares
of our common stock; (ii) the issuance
of shares
of common stock to two of our employees pursuant to the terms of
each of their respective phantom stock agreements; and
(iii) the issuance and conversion of a $30.0 million
debenture into
[ ] shares
of our common stock based on an assumed initial public offering
price of $[ ] per share, which is
the midpoint of the price range on the cover of this prospectus,
as described under Corporate Conversion; and
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on a pro forma as adjusted basis to give effect to the above and
our sale of
[ ] shares
of common stock at an assumed initial public offering price of
$[ ] per share, which is the
midpoint of the price range on the cover of this prospectus,
after the deduction of the underwriting discounts and
commissions and the estimated offering expenses payable by us.
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You should read this table in conjunction with the Use of
Proceeds, Selected Historical and Unaudited Pro
Forma Consolidated and Combined Financial Data and
Managements Discussion and Analysis of Financial
Condition and Results of Operations sections of this
prospectus and our financial statements and related notes
included in the back of this prospectus.
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As of September 30, 2010
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Pro Forma As
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Actual
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Pro Forma
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Adjusted
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(In thousands)
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Debt Outstanding:
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Notes payable
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$
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82,393
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$
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62,539
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Total liabilities
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$
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82,393
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$
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62,539
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Members equity:
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|
|
|
|
|
|
|
|
Member units preferred (500,000 authorized in the
aggregate)
|
|
|
|
|
|
|
|
|
|
|
|
|
Member units Series A preferred (90,769 issued
and outstanding, actual; 0 issued and outstanding, pro forma and
pro forma as adjusted)
|
|
|
4,035
|
|
|
|
|
|
|
|
|
|
Member units Series B preferred (50,000 issued
and outstanding, actual; 0 issued and outstanding, pro forma and
pro forma as adjusted)
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
Member units Series C preferred (70,000 issued
and outstanding, actual; 0 issued and outstanding, pro forma and
pro forma as adjusted)
|
|
|
7,000
|
|
|
|
|
|
|
|
|
|
Member units Series D preferred (7,000 issued
and outstanding, actual; 0 issued and outstanding, pro forma and
pro forma as adjusted)
|
|
|
700
|
|
|
|
|
|
|
|
|
|
Member units Series E preferred (73,000 issued
and outstanding, actual; 0 issued and outstanding, pro forma and
pro forma as adjusted)
|
|
|
7,300
|
|
|
|
|
|
|
|
|
|
Subscription receivable
|
|
|
(5,000
|
)
|
|
|
|
|
|
|
|
|
Member units common (500,000 authorized; 450,000
issued and outstanding, actual; 0 issued and outstanding, pro
forma and pro forma as adjusted)
|
|
|
19,924
|
|
|
|
|
|
|
|
|
|
Accumulated deficit
|
|
|
(28,505
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Members equity
|
|
$
|
10,454
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2010
|
|
|
|
|
|
|
|
|
|
Pro Forma As
|
|
|
|
Actual
|
|
|
Pro Forma
|
|
|
Adjusted
|
|
|
|
(In thousands)
|
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, par value $0.01 per share; 80,000,000 shares
authorized, no shares issued and outstanding, actual; and
[ ] shares
issued and outstanding, pro forma
|
|
|
|
|
|
|
[]
|
|
|
|
|
|
Additional paid in capital
|
|
|
|
|
|
|
[67,174]
|
|
|
|
|
|
Accumulated deficit
|
|
|
|
|
|
|
(28,505
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
|
|
|
|
38,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
92,847
|
|
|
$
|
101,208
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The number of shares of common stock shown to be outstanding
upon the completion of this offering excludes:
|
|
|
|
|
up to
[ ] shares
of common stock that may be issued pursuant to the
underwriters over-allotment option;
|
|
|
|
shares
of common stock issuable upon the exercise of warrants that will
be issued to our existing shareholders prior to the closing of
this offering; and
|
|
|
|
additional shares available for future issuance under our
Omnibus Plan.
|
37
DILUTION
Our net tangible book value as of September 30, 2010, on a
pro forma basis, was approximately
$[ ] million, or
$[ ] per share of our common stock.
Pro forma net tangible book value per share represents our total
tangible assets reduced by our total liabilities and divided by
the number of shares of common stock outstanding after giving
effect to:
|
|
|
|
|
the consummation of the corporate conversion, pursuant to which
all of our outstanding common and preferred limited liability
company units (including all accrued and unpaid dividends
thereon) and all principal and accrued and unpaid interest
outstanding under our promissory note in favor of IMPEX
Enterprises, Ltd. will be converted
into shares
of our common stock;
|
|
|
|
|
|
the issuance
of shares
of common stock to two of our employees pursuant to the terms of
each of their respective phantom stock agreements; and
|
|
|
|
|
|
the issuance and conversion of a $30.0 million debenture
into
[ ] shares
of our common stock based on an assumed initial public offering
price of $[ ] per share, which is
the midpoint of the price range on the cover of this prospectus,
as described under Corporate Conversion.
|
Dilution in pro forma net tangible book value per share
represents the difference between the amount per share that you
will pay in this offering and the net tangible book value per
share immediately after this offering.
After giving effect to our receipt of approximately
$[ ] million of estimated net
proceeds (after deducting underwriting discounts and commissions
and estimated offering expenses payable by us) from our sale of
common stock in this offering based on an assumed initial public
offering price of $[ ] per share,
which is the midpoint of the price range on the cover of this
prospectus, our pro forma net tangible book value as of
September 30, 2010 would have been approximately
$[ ] million, or
$[ ] per share of common stock.
This amount represents an immediate increase in pro forma net
tangible book value of $[ ] per
share of our common stock to existing shareholders and an
immediate dilution of $[ ] per
share of our common stock to new investors purchasing shares of
common stock in this offering at the assumed initial public
offering price. The following table illustrates the dilution:
|
|
|
|
|
|
|
|
|
Assumed initial public offering price per share
|
|
|
|
|
|
$
|
[ ]
|
|
Pro forma net tangible book value per share as of
September 30, 2010
|
|
$
|
[ ]
|
|
|
|
|
|
Increase in pro forma net tangible book value per share
attributable to this offering
|
|
|
[ ]
|
|
|
|
|
|
Pro forma net tangible book value per share after this offering
|
|
|
|
|
|
|
[ ]
|
|
Dilution per share to new investors
|
|
|
|
|
|
$
|
[ ]
|
|
If the underwriters exercise their over-allotment option in
full, the pro forma net tangible book value per share after
giving effect to the offering would be
$[ ] per share. This represents an
increase in pro forma net tangible book value of
$[ ] per share to existing
shareholders and dilution in pro forma net tangible book value
of $[ ] per share to new investors.
A $1.00 increase (decrease) in the assumed initial public
offering of $[ ] per share would
increase (decrease) our pro forma net tangible book value per
share after this offering and decrease (increase) dilution to
new investors by $[ ], assuming the
number of shares offered by us, as set forth on the cover page
of this prospectus, remains the same and after deducting the
underwriting discounts and commissions and estimated offering
expenses payable by us.
38
The following table summarizes, as of September 30, 2010,
the differences between the number of shares issued to, the
total consideration paid, and the average price per share paid
by existing shareholders and by new investors in this offering,
after giving effect to (i) the issuance
of shares
of our common stock to our shareholders upon the consummation of
the corporate conversion, (ii) the issuance
of shares
of common stock to two of our employees pursuant to the terms of
each of their respective phantom stock agreements;
(iii) the conversion of a $30.0 million debenture
into shares
of our common stock based on the assumed initial public offering
price of $[ ] per share, which is
the midpoint of the price range on the cover of this prospectus,
as described under Corporate Conversion; and
(iv) the issuance of
[ ] shares
of common stock in this offering at the assumed initial public
offering price of $[ ] per share,
which is the midpoint of the price range on the cover of this
prospectus, and excluding underwriter discounts and commissions
and estimated offering expenses payable by us. The table below
assumes an initial public offering price of
$[ ] per share, which is the
midpoint of the price range on the cover of this prospectus, for
shares purchased in this offering and excludes underwriting
discounts and commissions and estimated offering expenses
payable by us:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Issued
|
|
Total Consideration
|
|
Average Price
|
|
|
Number
|
|
Percent
|
|
Amount
|
|
Percent
|
|
per Share
|
|
Existing shareholders
|
|
|
[ ]
|
|
|
|
[ ]
|
%
|
|
$
|
[ ]
|
|
|
|
[ ]
|
%
|
|
$
|
[ ]
|
|
New investors
|
|
|
[ ]
|
|
|
|
[ ]
|
|
|
|
[ ]
|
|
|
|
[ ]
|
|
|
|
[ ]
|
|
Total
|
|
|
[ ]
|
|
|
|
100.0
|
%
|
|
$
|
[ ]
|
|
|
|
100.0
|
%
|
|
$
|
[ ]
|
|
This table does not give effect to:
|
|
|
|
|
up to
[ ] shares
of common stock that may be issued pursuant to the
underwriters over-allotment option;
|
|
|
|
shares
of common stock issuable upon the exercise of warrants that will
be issued to our existing shareholders prior to the closing of
this offering; and
|
|
|
|
additional shares available for future issuance under our
Omnibus Plan.
|
39
SELECTED
HISTORICAL AND UNAUDITED
PRO FORMA
CONSOLIDATED AND COMBINED FINANCIAL AND OPERATING DATA
The following table sets forth selected historical and unaudited
pro forma consolidated financial and operating data of Imperial
Holdings, LLC (to be converted into Imperial Holdings, Inc. in
connection with this offering) as of such dates and for such
periods indicated below. The selected unaudited pro forma
condensed consolidated financial data for the nine months ended
September 30, 2010 and the twelve months ended
December 31, 2009 give pro forma effect to the corporate
conversion and conversion of promissory notes as if they had
occurred on the first day of the periods presented. The selected
unaudited pro forma financial and operating data set forth below
are presented for information purposes only, should not be
considered indicative or actual results of operations that would
have been achieved had the corporate conversion been consummated
on the dates indicated, and do not purport to be indicative of
balance sheet data or income statement data as of any future
date or future period. These selected historical and unaudited
pro forma consolidated results are not necessarily indicative of
results to be expected in any future period. You should read the
following financial information together with the other
information contained in this prospectus, including
Managements Discussion and Analysis of Financial
Condition and Results of Operations and the financial
statements and related notes.
We have derived the selected historical income statement data
for the nine months ended September 30, 2010 and 2009 and
balance sheet data as of September 30, 2010 from our
unaudited consolidated financial statements included elsewhere
in this prospectus. Such unaudited financial statements include,
in the opinion of management, all adjustments, consisting only
of normal recurring adjustments, which we consider necessary for
a fair presentation of our financial position and results of
operations. The selected historical income statement data for
the years ended December 31, 2009, 2008 and 2007 and
balance sheet data as of December 31, 2009 and 2008 were
derived from our audited consolidated financial statements
included elsewhere in this prospectus. The income statement data
for the period from December 15, 2006 through
December 31, 2006 and balance sheet data for
December 31, 2007 and 2006 were derived from our audited
consolidated financial statements that are not included in this
prospectus.
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
|
|
|
Nine Months
|
|
|
|
Dec. 15, 2006 -
|
|
|
Years Ended December 31,
|
|
|
September 30,
|
|
|
Year Ended
|
|
|
Ended
|
|
|
|
Dec. 31, 2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
Dec. 31, 2009
|
|
|
September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
(In thousands, except share data)
|
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency fee income
|
|
$
|
678
|
|
|
$
|
24,515
|
|
|
$
|
48,004
|
|
|
$
|
26,114
|
|
|
$
|
20,216
|
|
|
$
|
9,099
|
|
|
$
|
26,114
|
|
|
$
|
9,099
|
|
Interest income
|
|
|
316
|
|
|
|
4,888
|
|
|
|
11,914
|
|
|
|
21,483
|
|
|
|
15,843
|
|
|
|
15,795
|
|
|
|
21,483
|
|
|
|
15,795
|
|
Origination fee income
|
|
|
|
|
|
|
526
|
|
|
|
9,399
|
|
|
|
29,853
|
|
|
|
21,865
|
|
|
|
16,728
|
|
|
|
29,853
|
|
|
|
16,728
|
|
Gain on sale of structured settlements
|
|
|
|
|
|
|
|
|
|
|
443
|
|
|
|
2,684
|
|
|
|
499
|
|
|
|
4,848
|
|
|
|
2,684
|
|
|
|
4,848
|
|
Gain on forgiveness of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,410
|
|
|
|
14,886
|
|
|
|
6,968
|
|
|
|
16,410
|
|
|
|
6,968
|
|
Gain on sale of life settlements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,954
|
|
|
|
|
|
|
|
1,954
|
|
Change in fair value of life settlements and structured
settlement receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,805
|
|
|
|
|
|
|
|
4,805
|
|
Other income
|
|
|
|
|
|
|
2
|
|
|
|
47
|
|
|
|
71
|
|
|
|
53
|
|
|
|
195
|
|
|
|
71
|
|
|
|
195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income
|
|
|
994
|
|
|
|
29,931
|
|
|
|
69,807
|
|
|
|
96,615
|
|
|
|
73,362
|
|
|
|
60,392
|
|
|
|
96,615
|
|
|
|
60,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense (3)
|
|
|
|
|
|
|
1,343
|
|
|
|
12,752
|
|
|
|
33,755
|
|
|
|
24,710
|
|
|
|
24,244
|
|
|
|
30,793
|
(1)
|
|
|
22,022
|
(1)
|
Provision for losses on loans receivable
|
|
|
|
|
|
|
2,332
|
|
|
|
10,768
|
|
|
|
9,830
|
|
|
|
6,705
|
|
|
|
3,514
|
|
|
|
9,830
|
|
|
|
3,514
|
|
Loss (gain) on loan payoffs and settlements, net
|
|
|
|
|
|
|
(225
|
)
|
|
|
2,738
|
|
|
|
12,058
|
|
|
|
11,279
|
|
|
|
4,320
|
|
|
|
12,058
|
|
|
|
4,320
|
|
Amortization of deferred costs
|
|
|
|
|
|
|
126
|
|
|
|
7,569
|
|
|
|
18,339
|
|
|
|
13,101
|
|
|
|
22,601
|
|
|
|
18,339
|
|
|
|
22,601
|
|
Selling, general and administrative expenses (3)
|
|
|
891
|
|
|
|
24,335
|
|
|
|
41,566
|
|
|
|
31,269
|
|
|
|
22,997
|
|
|
|
22,118
|
|
|
|
31,269
|
|
|
|
22,118
|
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
|
|
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
891
|
|
|
|
27,911
|
|
|
|
75,393
|
|
|
|
105,251
|
|
|
|
78,792
|
|
|
|
76,797
|
|
|
|
102,289
|
|
|
|
74,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (loss)
|
|
$
|
103
|
|
|
$
|
2,020
|
|
|
$
|
(5,586
|
)
|
|
$
|
(8,636
|
)
|
|
$
|
(5,430
|
)
|
|
$
|
(16,405
|
)
|
|
$
|
(5,674
|
)
|
|
$
|
(14,183
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Common
Shares Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Reflects a reduction of interest expense of $3.0 million
for the year ended December 31, 2009 and $2.2 million
for the nine months ended September 30, 2010, due to
the conversion of our promissory note in favor of IMPEX
Enterprises, Ltd. into shares of our common stock which will
occur prior to the closing of this offering, and the conversion
of our promissory note in favor of Branch Office of Skarbonka
Sp. z o.o into a $30.0 million debenture, and the
conversion of that $30.0 million debenture into shares of
our common stock, which will occur immediately prior to the
closing of this offering.
|
|
|
|
(2)
|
|
The results of the Company being treated for the pro forma
presentation as a C corporation resulted in no
impact to the consolidated and combined balance sheet or
statements of operations for the pro forma periods presented.
The primary reasons for this are that the losses produce no
current benefit and any net operating losses generated and other
deferred assets (net of liabilities) would be fully reserved due
to historical operating losses. The Company, therefore, has not
recorded any pro forma tax provision.
|
|
|
|
(3)
|
|
Includes amounts for related parties. Refer to our consolidated
and combined financial statements for detail.
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
|
Pro Forma
|
|
|
|
December 31,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
(In thousands, except share data)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
5,351
|
|
|
$
|
1,495
|
|
|
$
|
7,644
|
|
|
$
|
15,891
|
|
|
$
|
466
|
|
|
$
|
3,685
|
|
|
$
|
8,685
|
(1)
|
Restricted cash
|
|
|
|
|
|
|
1,675
|
|
|
|
2,221
|
|
|
|
|
|
|
|
|
|
|
|
643
|
|
|
|
643
|
|
Certificate of deposit restricted
|
|
|
|
|
|
|
562
|
|
|
|
659
|
|
|
|
670
|
|
|
|
666
|
|
|
|
877
|
|
|
|
877
|
|
Agency fees receivable, net of allowance for doubtful accounts
|
|
|
136
|
|
|
|
5,718
|
|
|
|
8,871
|
|
|
|
2,165
|
|
|
|
1,816
|
|
|
|
736
|
|
|
|
736
|
|
Deferred costs, net
|
|
|
|
|
|
|
672
|
|
|
|
26,650
|
|
|
|
26,323
|
|
|
|
26,963
|
|
|
|
11,455
|
|
|
|
11,455
|
|
Interest receivable, net
|
|
|
244
|
|
|
|
2,972
|
|
|
|
8,604
|
|
|
|
21,034
|
|
|
|
18,909
|
|
|
|
17,175
|
|
|
|
17,175
|
|
Loans receivable, net
|
|
|
3,909
|
|
|
|
43,650
|
|
|
|
148,744
|
|
|
|
189,111
|
|
|
|
187,330
|
|
|
|
121,564
|
|
|
|
121,564
|
|
Structured settlements receivables, net
|
|
|
|
|
|
|
377
|
|
|
|
1,141
|
|
|
|
152
|
|
|
|
6,969
|
|
|
|
10,554
|
|
|
|
10,554
|
|
Receivables from sales of structured Settlements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
320
|
|
|
|
|
|
|
|
528
|
|
|
|
528
|
|
Investment in life settlements, at estimated fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,306
|
|
|
|
1,711
|
|
|
|
8,846
|
|
|
|
8,846
|
|
Investment in life settlement fund
|
|
|
|
|
|
|
1,714
|
|
|
|
|
|
|
|
542
|
|
|
|
|
|
|
|
1,270
|
|
|
|
1,270
|
|
Fixed assets, net
|
|
|
756
|
|
|
|
1,875
|
|
|
|
1,850
|
|
|
|
1,337
|
|
|
|
1,514
|
|
|
|
919
|
|
|
|
919
|
|
Prepaid expenses and other assets
|
|
|
30
|
|
|
|
835
|
|
|
|
4,180
|
|
|
|
887
|
|
|
|
503
|
|
|
|
2,017
|
|
|
|
2,017
|
|
Deposits
|
|
|
37
|
|
|
|
456
|
|
|
|
476
|
|
|
|
982
|
|
|
|
487
|
|
|
|
699
|
|
|
|
699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
10,463
|
|
|
$
|
62,001
|
|
|
$
|
211,040
|
|
|
$
|
263,720
|
|
|
$
|
247,334
|
|
|
$
|
180,968
|
|
|
$
|
185,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses (3)
|
|
$
|
505
|
|
|
$
|
3,437
|
|
|
$
|
5,533
|
|
|
$
|
3,170
|
|
|
$
|
2,981
|
|
|
$
|
4,210
|
|
|
$
|
4,210
|
|
Payable for purchase of structured settlements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,094
|
|
|
|
7,094
|
|
Lender protection insurance claims received in advance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,645
|
|
|
|
60,645
|
|
Interest payable (3)
|
|
|
|
|
|
|
882
|
|
|
|
5,563
|
|
|
|
12,627
|
|
|
|
14,552
|
|
|
|
16,172
|
|
|
|
12,811
|
(2)
|
Notes payable (3)
|
|
|
|
|
|
|
35,559
|
|
|
|
183,462
|
|
|
|
231,064
|
|
|
|
214,737
|
|
|
|
82,393
|
|
|
|
62,539
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
505
|
|
|
$
|
39,878
|
|
|
$
|
194,558
|
|
|
$
|
246,861
|
|
|
$
|
232,270
|
|
|
$
|
170,514
|
|
|
$
|
147,299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Member units preferred (500,000 authorized in the
aggregate)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Member units Series A preferred (90,796 issued
and outstanding, actual; 0 issued and outstanding, pro forma)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,035
|
|
|
|
4,035
|
|
|
|
4,035
|
|
|
|
|
(1)
|
Member units Series B preferred (50,000 issued
and outstanding, actual; 0 issued and outstanding, pro forma)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
|
|
|
|
5,000
|
|
|
|
|
(1)
|
Member units Series C preferred (70,000 issued
and outstanding, actual; 0 issued and outstanding, pro forma)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,000
|
|
|
|
|
(1)
|
Member units Series D preferred (7,000 issued
and outstanding, actual; 0 issued and outstanding, pro forma)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
700
|
|
|
|
|
(1)
|
Member units Series E preferred (73,000 issued
and outstanding, actual; 0 issued and outstanding, pro forma and
pro forma as adjusted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,300
|
|
|
|
|
(1)
|
Subscription receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,000
|
)
|
|
|
|
|
Member units common (500,000 authorized; 450,000
issued and outstanding, actual; 0 issued and outstanding, pro
forma)
|
|
|
9,855
|
|
|
|
20,000
|
|
|
|
19,945
|
|
|
|
19,924
|
|
|
|
19,924
|
|
|
|
19,924
|
|
|
|
|
(1)
|
Common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[ ]
|
(1)(2)
|
Paid-in capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[67,174]
|
(1)(2)
|
Retained earnings (accumulated deficit)
|
|
|
103
|
|
|
|
2,123
|
|
|
|
(3,463
|
)
|
|
|
(12,100
|
)
|
|
|
(8,895
|
)
|
|
|
(28,505
|
)
|
|
|
(28,505
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total members equity
|
|
|
9,958
|
|
|
|
22,123
|
|
|
|
16,482
|
|
|
|
16,859
|
|
|
|
15,064
|
|
|
|
10,454
|
|
|
|
38,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and members equity
|
|
$
|
10,463
|
|
|
$
|
62,001
|
|
|
$
|
211,040
|
|
|
$
|
263,720
|
|
|
$
|
247,334
|
|
|
$
|
180,968
|
|
|
$
|
185,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Reflects the conversion of all
common and preferred limited liability company units of Imperial
Holdings, LLC into shares of our common stock. Also reflects the
cash received in October, 2010 of $5.0 million related to a
subscription receivable for the September 2010 sale of 50,000
Series E preferred units, which will also be converted into
shares of our common stock as a result of the corporate
conversion.
|
|
(2)
|
|
Reflects the issuance and
conversion of a $30.0 million debenture into shares of our
common stock immediately prior to the closing of this offering.
Also reflects the conversion of all principal and accrued
interest outstanding under our promissory note in favor of IMPEX
Enterprises, Ltd. into shares of common stock of Imperial
Holdings, Inc. as a result of the corporate conversion.
|
|
(3)
|
|
Includes amounts payable to related
parties. Refer to our consolidated and combined financial
statements for details.
|
42
Premium
Finance Segment Selected Operating Data (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
Year Ended December 31,
|
|
September 30,
|
|
September 30,
|
|
|
2007
|
|
2008
|
|
2009
|
|
2009
|
|
2010
|
|
2009
|
|
2010
|
|
Period Originations
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of loans originated
|
|
|
196
|
|
|
|
499
|
|
|
|
194
|
|
|
|
23
|
|
|
|
15
|
|
|
|
145
|
|
|
|
86
|
|
Principal balance of loans originated
|
|
$
|
44,501
|
|
|
$
|
97,559
|
|
|
$
|
51,573
|
|
|
$
|
7,385
|
|
|
$
|
2,788
|
|
|
$
|
39,030
|
|
|
$
|
18,245
|
|
Aggregate death benefit of policies underlying loans originated
|
|
$
|
794,517
|
|
|
$
|
2,283,223
|
|
|
$
|
942,312
|
|
|
$
|
130,600
|
|
|
$
|
62,500
|
|
|
$
|
708,910
|
|
|
$
|
417,275
|
|
Selling general and administrative expenses
|
|
$
|
15,082
|
|
|
$
|
21,744
|
|
|
$
|
13,742
|
|
|
$
|
2,623
|
|
|
$
|
2,495
|
|
|
$
|
11,165
|
|
|
$
|
7,234
|
|
Average Per Origination During Period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Age of insured at origination
|
|
|
75.5
|
|
|
|
74.9
|
|
|
|
74.9
|
|
|
|
74.1
|
|
|
|
75.0
|
|
|
|
74.7
|
|
|
|
74.0
|
|
Life expectancy of insured (years)
|
|
|
12.9
|
|
|
|
13.2
|
|
|
|
13.2
|
|
|
|
13.2
|
|
|
|
14.1
|
|
|
|
13.4
|
|
|
|
14.1
|
|
Monthly premium (year after origination)
|
|
$
|
14.0
|
|
|
$
|
14.9
|
|
|
$
|
16.0
|
|
|
$
|
18.8
|
|
|
$
|
13.1
|
|
|
$
|
16.3
|
|
|
$
|
13.9
|
|
Death benefit of policies underlying loans originated
|
|
$
|
4,053.7
|
|
|
$
|
4,575.6
|
|
|
$
|
4,857.3
|
|
|
$
|
5,678.3
|
|
|
$
|
4,166.7
|
|
|
$
|
4,889.0
|
|
|
$
|
4,852.0
|
|
Principal balance of the loan
|
|
$
|
227.0
|
|
|
$
|
195.5
|
|
|
$
|
265.8
|
|
|
$
|
321.1
|
|
|
$
|
185.8
|
|
|
$
|
269.2
|
|
|
$
|
212.1
|
|
Interest rate charged
|
|
|
10.5
|
%
|
|
|
10.8
|
%
|
|
|
11.4
|
%
|
|
|
11.5
|
%
|
|
|
11.5
|
%
|
|
|
11.5
|
%
|
|
|
11.5
|
%
|
Agency fee
|
|
$
|
125.1
|
|
|
$
|
96.2
|
|
|
$
|
134.6
|
|
|
$
|
153.4
|
|
|
$
|
92.1
|
|
|
$
|
139.4
|
|
|
$
|
105.8
|
|
Agency fee as % of principal balance
|
|
|
55.1
|
%
|
|
|
49.2
|
%
|
|
|
50.6
|
%
|
|
|
47.8
|
%
|
|
|
49.6
|
%
|
|
|
51.8
|
%
|
|
|
49.9
|
%
|
Origination fee
|
|
$
|
45.8
|
|
|
$
|
77.9
|
|
|
$
|
118.9
|
|
|
$
|
138.4
|
|
|
$
|
76.5
|
|
|
$
|
114.7
|
|
|
$
|
88.5
|
|
Origination fee as % of principal balance
|
|
|
20.2
|
%
|
|
|
39.9
|
%
|
|
|
44.7
|
%
|
|
|
43.1
|
%
|
|
|
41.1
|
%
|
|
|
42.6
|
%
|
|
|
41.7
|
%
|
End of Period Loan Portfolio
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable, net
|
|
$
|
43,650
|
|
|
$
|
148,744
|
|
|
$
|
189,111
|
|
|
$
|
187,330
|
|
|
$
|
121,564
|
|
|
$
|
187,330
|
|
|
$
|
121,564
|
|
Number of policies underlying loans receivable
|
|
|
240
|
|
|
|
702
|
|
|
|
692
|
|
|
|
706
|
|
|
|
426
|
|
|
|
706
|
|
|
|
426
|
|
Aggregate death benefit of policies underlying loans receivable
|
|
$
|
1,065,870
|
|
|
$
|
2,895,780
|
|
|
$
|
3,091,099
|
|
|
$
|
3,296,937
|
|
|
$
|
2,120,587
|
|
|
$
|
3,296,937
|
|
|
$
|
2,120,587
|
|
Number of loans with insurance protection
|
|
|
|
|
|
|
494
|
|
|
|
631
|
|
|
|
613
|
|
|
|
399
|
|
|
|
613
|
|
|
|
399
|
|
Aggregate insured value of loans
|
|
$
|
|
|
|
$
|
116,345
|
|
|
$
|
156,162
|
|
|
$
|
152,504
|
|
|
$
|
97,945
|
|
|
$
|
152,504
|
|
|
$
|
97,945
|
|
Average Per Loan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Age of insured in loans receivable
|
|
|
76.3
|
|
|
|
75.3
|
|
|
|
75.4
|
|
|
|
75.5
|
|
|
|
74.3
|
|
|
|
75.5
|
|
|
|
74.3
|
|
Life expectancy of insured (years)
|
|
|
12.4
|
|
|
|
13.9
|
|
|
|
14.5
|
|
|
|
14.2
|
|
|
|
15.1
|
|
|
|
14.2
|
|
|
|
15.1
|
|
Monthly premium
|
|
$
|
7.7
|
|
|
$
|
9.1
|
|
|
$
|
8.5
|
|
|
$
|
8.3
|
|
|
$
|
6.7
|
|
|
$
|
8.3
|
|
|
$
|
6.7
|
|
Loan receivable, net
|
|
$
|
181.9
|
|
|
$
|
211.9
|
|
|
$
|
273.3
|
|
|
$
|
265.3
|
|
|
$
|
143.0
|
|
|
$
|
265.3
|
|
|
$
|
143.0
|
|
Interest rate
|
|
|
10.2
|
%
|
|
|
10.4
|
%
|
|
|
10.9
|
%
|
|
|
10.7
|
%
|
|
|
11.3
|
%
|
|
|
11.2
|
%
|
|
|
11.3
|
%
|
End of Period Policies Owned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of policies owned
|
|
|
|
|
|
|
|
|
|
|
27
|
|
|
|
20
|
|
|
|
31
|
|
|
|
20
|
|
|
|
31
|
|
Aggregate fair value
|
|
$
|
|
|
|
$
|
|
|
|
$
|
4,306
|
|
|
$
|
1,711
|
|
|
$
|
8,846
|
|
|
$
|
1,711
|
|
|
$
|
8,846
|
|
Monthly premium average per loan
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2.8
|
|
|
$
|
2.2
|
|
|
$
|
5.2
|
|
|
$
|
2.2
|
|
|
$
|
5.2
|
|
43
Structured
Settlements Segment Selected Operating Data (dollars
in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
Year Ended December 31,
|
|
September 30,
|
|
September 30,
|
|
|
2007
|
|
2008
|
|
2009
|
|
2009
|
|
2010
|
|
2009
|
|
2010
|
|
Period Originations
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of transactions
|
|
|
10
|
|
|
|
276
|
|
|
|
396
|
|
|
|
102
|
|
|
|
138
|
|
|
|
275
|
|
|
|
385
|
|
Number of transactions from repeat customers
|
|
|
|
|
|
|
23
|
|
|
|
52
|
|
|
|
10
|
|
|
|
48
|
|
|
|
32
|
|
|
|
96
|
|
Weighted average purchase discount rate
|
|
|
11.0
|
%
|
|
|
12.0
|
%
|
|
|
16.3
|
%
|
|
|
17.1
|
%
|
|
|
20.1
|
%
|
|
|
16.1
|
%
|
|
|
19.3
|
%
|
Face value of undiscounted future payments purchased
|
|
$
|
701
|
|
|
$
|
18,295
|
|
|
$
|
28,877
|
|
|
$
|
8,094
|
|
|
$
|
13,458
|
|
|
$
|
20,460
|
|
|
$
|
33,713
|
|
Amount paid for settlements purchased
|
|
$
|
369
|
|
|
$
|
8,010
|
|
|
$
|
10,947
|
|
|
$
|
2,908
|
|
|
$
|
2,959
|
|
|
$
|
7,894
|
|
|
$
|
9,099
|
|
Marketing costs
|
|
$
|
2,056
|
|
|
$
|
5,295
|
|
|
$
|
4,460
|
|
|
$
|
1,087
|
|
|
$
|
1,168
|
|
|
$
|
3,479
|
|
|
$
|
3,561
|
|
Selling, general and administrative (excluding marketing costs)
|
|
$
|
666
|
|
|
$
|
4,475
|
|
|
$
|
5,015
|
|
|
$
|
1,298
|
|
|
$
|
1,957
|
|
|
$
|
3,257
|
|
|
$
|
5,294
|
|
Average Per Origination During Period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Face value of undiscounted future payments purchased
|
|
$
|
70.1
|
|
|
$
|
66.3
|
|
|
$
|
72.9
|
|
|
$
|
79.4
|
|
|
$
|
97.5
|
|
|
$
|
74.4
|
|
|
$
|
87.6
|
|
Amount paid for settlement purchased
|
|
$
|
36.9
|
|
|
$
|
29.0
|
|
|
$
|
27.6
|
|
|
$
|
28.5
|
|
|
$
|
21.4
|
|
|
$
|
28.7
|
|
|
$
|
23.6
|
|
Time from funding to maturity (months)
|
|
|
80.3
|
|
|
|
113.8
|
|
|
|
109.7
|
|
|
|
113.4
|
|
|
|
147.3
|
|
|
|
109.2
|
|
|
|
134.3
|
|
Marketing cost per transaction
|
|
$
|
205.6
|
|
|
$
|
19.2
|
|
|
$
|
11.3
|
|
|
$
|
10.7
|
|
|
$
|
8.5
|
|
|
$
|
12.7
|
|
|
$
|
9.2
|
|
Segment selling, general and administrative (excluding marketing
costs) per transaction
|
|
$
|
66.6
|
|
|
$
|
16.2
|
|
|
$
|
12.7
|
|
|
$
|
12.7
|
|
|
$
|
14.2
|
|
|
$
|
11.8
|
|
|
$
|
13.8
|
|
Period Sales
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of transactions sold
|
|
|
|
|
|
|
226
|
|
|
|
439
|
|
|
|
|
|
|
|
72
|
|
|
|
96
|
|
|
|
291
|
|
Gain on sale of structured settlements
|
|
$
|
|
|
|
$
|
443
|
|
|
$
|
2,684
|
|
|
$
|
24
|
|
|
$
|
1,585
|
|
|
$
|
499
|
|
|
$
|
4,848
|
|
Average sale discount rate
|
|
|
|
|
|
|
10.8
|
%
|
|
|
11.5
|
%
|
|
|
0.0
|
%
|
|
|
9.6
|
%
|
|
|
11.1
|
%
|
|
|
9.1
|
%
|
44
MANAGEMENTS
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with
the consolidated and combined financial statements and
accompanying notes and the information contained in other
sections of this prospectus, particularly under the headings
Risk Factors, Selected Historical and
Unaudited Pro Forma Consolidated and Combined Financial
Information and Business. This discussion and
analysis is based on the beliefs of our management, as well as
assumptions made by, and information currently available to, our
management. The statements in this discussion and analysis
concerning expectations regarding our future performance,
liquidity and capital resources, as well as other non-historical
statements in this discussion and analysis, are forward-looking
statements. See Forward-Looking Statements. These
forward-looking statements are subject to numerous risks and
uncertainties, including those described under Risk
Factors. Our actual results could differ materially from
those suggested or implied by any forward-looking statements.
Business
Overview
We are a specialty finance company with a focus on providing
premium financing for individual life insurance policies and
purchasing structured settlements. We manage these operations
through two business segments: premium finance and structured
settlements. In our premium finance business we earn revenue
from interest charged on loans, loan origination fees and agency
fees from referring agents. In our structured settlement
business, we purchase structured settlements at a discounted
rate and sell such assets to, or finance such assets with, third
parties.
Since 2007, the United States capital markets have
experienced extensive distress and dislocation due to the global
economic downturn and credit crisis. As a result of the
dislocation in the capital markets, our borrowing costs
increased dramatically in our premium finance business and we
were unable to access traditional sources of capital to finance
the acquisition and sale of structured settlements. At certain
points, we were unable to obtain any debt financing.
We expect that the net proceeds from this offering will be used
to finance and grow our premium finance and structured
settlement businesses. We intend to originate new premium
finance loans without relying on debt financing. We intend to
use a portion of the net proceeds from this offering, together
with debt financing, to continue to finance the acquisition and
sale of structured settlements.
Premium
Finance Business
A premium finance transaction is a transaction in which a life
insurance policyholder obtains a loan to pay insurance premiums
for a fixed period of time, which allows a policyholder to
maintain coverage without additional
out-of-pocket
costs. Our typical premium finance loan is approximately two
years in duration and is collateralized by the underlying life
insurance policy. The life insurance policies that serve as
collateral for our premium finance loans are predominately
universal life policies that have an average death benefit of
approximately $4 million and insure persons over
age 65.
We expect that, in the ordinary course of business, a large
portion of our borrowers may default on their loans and
relinquish beneficial ownership of their life insurance policy
to us. Our loans are secured by the underlying life insurance
policy and are usually non-recourse to the borrower. If the
borrower defaults on the obligation to repay the loan, we
generally have no recourse against any assets except for the
life insurance policy that collateralizes the loan.
Dislocations in the capital markets have forced us to pay higher
interest rates on borrowed capital since the beginning of 2008.
Every credit facility we have entered into since December 2007
for our premium finance business has required us to obtain
lender protection insurance for each loan originated under such
credit facility. This coverage provides insurance on the value
of the life insurance policy serving as collateral underlying
the loan should our borrower default. After a payment default by
the borrower, subject to the terms and conditions of the lender
protection insurance policy, our lender protection insurer has
the right to direct control or take beneficial ownership of the
life insurance policy, and we are paid a claim equal to the
insured
45
value of the policy. While lender protection insurance provides
us with liquidity, it prevents us from realizing the
appreciation, if any, of the underlying policy when a borrower
relinquishes ownership of the policy upon default. As of
September 30, 2010, 94.6% of our outstanding premium
finance loans have collateral whose value is insured. Currently,
we are only originating new premium finance loans with lender
protection insurance. Following the earlier of the completion of
this offering or December 31, 2010, we do not expect to
originate premium finance loans with lender protection insurance.
We have experienced two adverse consequences from our high
financing costs: reduced profitability and decreased loan
originations. While the use of lender protection insurance
allows us to access debt financing to support our premium
finance business, the cost of lender protection insurance
substantially reduces the earnings from our premium finance
segment. Additionally, there are coverage limitations related to
our use of lender protection insurance that have reduced the
number of otherwise viable premium finance transactions that we
could complete. During the nine months ended September 30,
2010, these coverage limitations became even stricter and
further reduced the number of loans we could originate. We
believe that the net proceeds from this offering will allow us
to increase the profitability and number of new premium finance
loans by eliminating the cost of debt financing and lender
protection insurance and the limitations on loan originations
that our lender protection insurance imposes.
The following table shows our total financing cost per annum for
funding premium finance loans as a percentage of the principal
balance of the loans originated during the following periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Year Ended December 31,
|
|
|
Ended September 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
Lender protection insurance cost
|
|
|
|
|
|
|
8.5
|
%
|
|
|
10.9
|
%
|
|
|
11.0
|
%
|
|
|
10.4
|
%
|
Interest cost and other lender funding charges under credit
facilities
|
|
|
14.5
|
%
|
|
|
13.7
|
%
|
|
|
18.2
|
%
|
|
|
18.5
|
%
|
|
|
20.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financing cost
|
|
|
14.5
|
%
|
|
|
22.2
|
%
|
|
|
29.1
|
%
|
|
|
29.5
|
%
|
|
|
31.1
|
%
|
In response to the large increase in our financing costs, in
2008 we implemented a policy to charge origination fees on all
premium finance loans and we increased the origination fees that
we charged.
We charge a referring insurance agent an agency fee for services
related to premium finance loans. Agency fees and origination
fee income have helped us to mitigate the cost of lender
protection insurance and our credit facilities. While
origination fee income and interest are earned over the life of
our premium finance loans, our agency fees are earned at the
time of funding. This results in our premium finance business
generating significant income during periods of high loan
originations but experiencing lower income during periods when
there are fewer loan originations.
Despite the use of lender protection insurance, we found it very
difficult to secure financing for our premium finance lending
business segment during 2008 and 2009. Traditional capital
providers such as commercial banks, investment banks, conduit
programs, hedge funds and private equity funds reduced their
lending commitments and raised their lending rates. There were
periods during 2008 and 2009 when our premium finance segment
was unable to originate loans due to our inability to access
capital. We were without credit and therefore unable to
originate premium finance loans for a total of 9 weeks in
2008 and for a total of 35 weeks in 2009. As a result, we
experienced a significant decline in premium finance loan
originations from 499 loans originated in 2008 to 194 loans
originated in 2009, a decrease of 61%. This also led to a
significant reduction in agency fees from $48.0 million in
2008 to $26.1 million in 2009.
The amount of losses on loan payoffs and settlements, net, and
the amount of gains on the forgiveness of debt that we have
recorded since inception within our premium finance business
segment have been impacted as a result of financial difficulties
experienced by one of our lenders, Acorn Capital Group
(Acorn). Beginning in July, 2008, Acorn stopped
funding under its credit facility with us without any advance
notice. Therefore, we did not have access to funds necessary to
pay the ongoing premiums on the policies serving as collateral
for our borrowers loans that were financed under the Acorn
facility. We did not incur liability with our borrowers because
the terms of the Acorn loans provide that we are only required
to fund future premiums
46
if our lender provides us with funds. Through September 30,
2010, a total of 101 policies financed under the Acorn facility
incurred losses primarily due to non-payment of premiums.
In May 2009, we entered a settlement agreement with Acorn
whereby all obligations under the credit agreement were
terminated. Acorn subsequently assigned its rights under the
settlement agreement to Asset Based Resource Group, LLC
(ABRG), an entity that is not related to us. As part
of the settlement agreement, we continue to service the original
loans and ABRG determines whether or not it will continue to
fund the loans. We believe that ABRG will elect to fund the loan
only if it believes there is value in the policy serving as
collateral for the loan. If ABRG chooses not to continue funding
a loan, we have the option to fund the loan or try to sell the
loan or related policy to another party. We elect to fund the
loan only if we believe there is value in the policy serving as
collateral for the loan after considering the costs of keeping
the policy in force. Regardless of whether we fund the loan or
sell the loan or related policy to another party, our debt under
the Acorn facility is forgiven and we record a gain on the
forgiveness of debt. If we fund the loan, it remains as an asset
on our balance sheet, otherwise it is written off and we record
the amount written off as a loss on loan payoffs and
settlements, net.
On the notes that were cancelled under the Acorn facility, we
had debt forgiven totaling $7.0 million and
$16.4 million for the nine months ended September 30,
2010 and for the year ended December 31, 2009,
respectively. We recorded these amounts as gain on forgiveness
of debt. Partially offsetting these gains, we had loan losses
totaling $5.2 million, $10.2 million and
$1.9 million during the nine months ended
September 30, 2010 and the years ended December 31,
2009 and 2008, respectively. We recorded these amounts as loss
on loan payoffs and settlements, net. As of September 30,
2010, only 18 loans out of 119 loans originally financed in the
Acorn facility remained outstanding.
The following table highlights the number of loans impacted by
the Acorn settlement during the periods indicated below (dollars
in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acorn Capital Facility
|
|
|
|
|
Nine Months
|
|
|
|
|
Year Ended December 31,
|
|
Ended September 30,
|
|
|
|
|
2007
|
|
2008
|
|
2009
|
|
2009
|
|
2010
|
|
Total
|
|
Number of loans held at end of period
|
|
|
90
|
|
|
|
112
|
|
|
|
49
|
|
|
|
60
|
|
|
|
18
|
|
|
|
N/A
|
|
Loans receivable, net, balance at end of period
|
|
$
|
15,468
|
|
|
$
|
21,073
|
|
|
$
|
9,601
|
|
|
$
|
12,330
|
|
|
$
|
4,416
|
|
|
|
N/A
|
|
Number of loans impacted during period
|
|
|
|
|
|
|
7
|
|
|
|
63
|
|
|
|
52
|
|
|
|
31
|
|
|
|
101
|
|
The following table highlights the impact of the Acorn
settlement on our financial statements during the periods
indicated below (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acorn Capital Facility
|
|
|
|
|
|
|
Nine Months
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Ended September 30,
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
Total
|
|
|
Gain on forgiveness of debt
|
|
$
|
|
|
|
$
|
|
|
|
$
|
16,410
|
|
|
$
|
14,886
|
|
|
$
|
6,968
|
|
|
$
|
23,378
|
|
Loss on loan payoffs and settlements, net
|
|
|
|
|
|
|
(1,868
|
)
|
|
|
(10,182
|
)
|
|
|
(8,442
|
)
|
|
|
(5,181
|
)
|
|
|
(17,231
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact on net income
|
|
$
|
|
|
|
$
|
(1,868
|
)
|
|
$
|
6,228
|
|
|
$
|
6,444
|
|
|
$
|
1,787
|
|
|
$
|
6,147
|
*
|
|
|
|
*
|
|
The $6.1 million impact on net income is due to 26 policies
on which we decided to continue to fund the premiums after ABRG
elected not to continue to fund the premiums. With respect to
the associated loans, we received a gain on forgiveness of debt
with no offsetting loss on loan payoffs and settlements, net.
|
Structured
Settlements
Structured settlements refer to a contract between a plaintiff
and defendant whereby the plaintiff agrees to settle a lawsuit
(usually a personal injury, product liability or medical
malpractice claim) in exchange for periodic payments over time.
Recipients of structured settlements are permitted to sell their
deferred payment
47
streams pursuant to state statutes that require certain
disclosures, notice to the obligors and state court approval.
Through such sales, we purchase a certain number of fixed,
scheduled future settlement payments on a discounted basis in
exchange for a single lump sum payment, thereby serving the
liquidity needs of structured settlement holders. During nine
months ended September 30, 2009 and 2010, this purchase
discount produced a yield that averaged 16.1% and 19.3%,
respectively. We generally sell our structured settlement assets
to institutional investors for cash and recognize a gain on the
sale.
Structured settlements are an attractive asset class for
institutional investors for several reasons. The majority of the
insurance companies that issue the structured settlements we
purchase carry financial strength ratings of
A− or better from Moodys Investors
Services or Standard & Poors. The periodic
payments that make up structured settlements can extend for
20 years or more. This long average life coupled with no
risk of prepayment and little credit risk result in a relatively
liquid financial asset that can be sold directly to
institutional investors such as insurance companies and pension
funds.
We believe that we have various funding alternatives for the
purchase of structured settlements. In addition to available
cash, on September 24, 2010, we entered into an arrangement
to provide us up to $50 million to finance the purchase of
structured settlements. We also have other parties to whom we
have sold settlement assets in the past, and to whom we believe
we can sell assets in the future. We will continue to evaluate
alternative financing arrangements, which could include selling
pools of structured settlements to third parties and securing a
warehouse line of credit that would allow us to aggregate
structured settlements.
During the capital markets dislocation in 2008 and 2009, in
order to sell portfolios of structured settlements to strategic
buyers, we were required to offer discount rates as high as
approximately 12.0%. During 2010, the discount rate for our sale
of structured settlements has decreased. During the nine months
ended September 30, 2010, our weighted average sale
discount rate for sales of structured settlements was 9.1%,
which includes the sale of both guaranteed (non life-contingent)
and life-contingent structured settlements. Life-contingent
structured settlements are deferred payment streams that
terminate upon the death of the structured settlement recipient.
Guaranteed (non life-contingent) structured settlements
terminate on a pre-determined date and do not cease upon the
recipients death.
During this period of dislocation, we continued to invest in our
structured settlements business. We did this with the
expectation that expenses would continue to exceed revenue while
we made investments in building the business and increasing our
capacity to originate new transactions. We originated 385
transactions during the nine months ended September 30,
2010 as compared to 275 transactions during the same period in
2009, an increase of 40%, and 396 transactions during 2009 as
compared to 276 transactions in 2008, an increase of 43%. We
incurred total expenses of $8.9 million during the nine
months ended September 30, 2010 as compared to
$6.7 million during the same period in 2009 and
$9.5 million during 2009 compared to $9.8 million in
2008. We believe that as a result of our investments, we
currently have a structured settlements business model in place
that has sufficient scalability to permit our structured
settlement business to continue to grow efficiently.
Accordingly, the historical operating our structured settlement
segment reflect our investment in the start up costs and the
initial growth of our structured settlement operations.
Our
Outlook
Reduced
or Eliminated Financing Costs; Option to Retain
Policies
We intend to use the net proceeds from this offering to fund new
premium finance business, thereby over time reducing or
eliminating our debt financing and lender protection insurance
costs. We expect that the net proceeds of this offering and the
elimination of the use of lender protection insurance will
provide us the option to retain for investment a number of
policies relinquished to us upon default. If we retain a life
insurance policy that is relinquished to us upon default, we
will be responsible for paying all premiums necessary to keep
the policy in force.
48
Corporate
Conversion
Immediately prior to this offering, we will convert from a
Florida limited liability company to a Florida corporation. As a
limited liability company, we were treated as a partnership for
United States federal and state income tax purposes and, as
such, we were not subject to taxation. For all periods
subsequent to such conversion, we will be subject to
corporate-level United States federal and state income
taxes. See Corporate Conversion.
Public
Company Expenses
Upon consummation of our initial public offering, we will become
a public company. As a result, we will need to comply with laws,
regulations and requirements with which we did not need to
comply as a private company, including certain provisions of the
Sarbanes-Oxley Act of 2002, related SEC regulations, and the
requirements of the New York Stock Exchange. Compliance with the
requirements of being a public company will require us to
increase our general and administrative expenses in order to pay
our employees, legal counsel, accountants, and other advisors to
assist us in, among other things, external reporting,
instituting and maintaining internal control over financial
reporting in accordance with Section 404 of the
Sarbanes-Oxley Act of 2002, and preparing and distributing
periodic public reports in compliance with our obligations under
the federal securities laws. In addition, being a public company
will make it more expensive for us to obtain director and
officer liability insurance.
Stock-Based
and Other Executive Compensation
We have established a stock option plan for our current and
future employees. We have reserved an aggregate of
[ ] shares
of common stock for issuance under our Omnibus Plan, of which
[ ] shares
are expected to be granted in the form of stock options to our
existing executive officers and other employees immediately
following the pricing of this offering at an exercise price
equal to the initial public offering price. In addition, prior
to the completion of this offering, we expect to issue warrants
that will be exercisable for up
[ ] shares
of our common stock subject to performance and time vesting
conditions.
We expect to incur non-cash, stock-based compensation expenses
in future periods for the issuance of the warrants in amounts
that will depend on our future performance. Additionally, we
expect to incur non-cash, stock-based compensation expenses for
the grant of options in connection with this offering of
approximately $[ ] per year over
the
[ ] year
term of the options. See Description of Capital
Stock.
Principal
Revenue and Expense Items
Components
of Revenue
Agency
Fee Income
In connection with our premium finance business, we earn agency
fees that are paid by the referring life insurance agents.
Because agency fees are not paid by the borrower, such fees do
not accrue over the term of the loan. We typically charge and
receive agency fees from the referring agent within
approximately 47 days of our funding the loan. Referring
insurance agents pay the agency fees to our subsidiary, Imperial
Life and Annuity Services, LLC, a licensed insurance agency, for
the due diligence performed in underwriting the premium finance
transaction. The amount of the agency fee paid by a referring
life insurance agent is negotiated with the referring agents
based on a number of factors, including the size of the policy
and the amount of premiums on the policy. Agency fees as a
percentage of the principal balance of loans originated during
the periods below are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Nine Months Ended September 30,
|
|
|
2007
|
|
2008
|
|
2009
|
|
2009
|
|
2010
|
|
Agency fees as a percentage of the principal balance of the
loans originated
|
|
|
55.1
|
%
|
|
|
49.2
|
%
|
|
|
50.6
|
%
|
|
|
51.8
|
%
|
|
|
49.9
|
%
|
49
Interest
Income
We receive interest income that accrues over the life of the
premium finance loan and is due upon the date of maturity or
upon repayment of the loan. Substantially all of the interest
rates we charge on our premium finance loans are floating rates
that are calculated at the one-month LIBOR rate plus an
applicable margin. In addition, our premium finance loans have a
floor interest rate and are capped at 16.0% per annum. For loans
with floating rates, each month the interest rate is
recalculated to equal one-month LIBOR plus the applicable
margin, and then, if necessary, adjusted so as to remain at or
above the stated floor rate and at or below the capped rate of
16.0% per annum.
The weighted average per annum interest rate for premium finance
loans outstanding as of the dates below is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
September 30,
|
|
|
2007
|
|
2008
|
|
2009
|
|
2009
|
|
2010
|
|
Weighted average per annum interest rate
|
|
|
10.2
|
%
|
|
|
10.4
|
%
|
|
|
10.9
|
%
|
|
|
11.2
|
%
|
|
|
11.3
|
%
|
Interest income also includes interest earned on structured
settlement receivables. Until we sell our structured settlement
receivables, the structured settlements are held on our balance
sheet. Purchase discounts are accreted into interest income
using the effective-interest method.
Origination
Fee Income
We charge our borrowers an origination fee as part of the
premium finance loan origination process. It is a one-time fee
that is added to the loan amount and is due upon the date of
maturity or upon repayment of the loan. Origination fees are
recognized on an effective-interest method over the term of the
loan.
Origination fees as a percentage of the principal balance of
loans originated during the periods below are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
Nine Months Ended September 30,
|
|
|
2007
|
|
2008
|
|
2009
|
|
2009
|
|
2010
|
|
Origination fees as a percentage of the principal balance of the
loans
|
|
|
20.2
|
%
|
|
|
39.9
|
%
|
|
|
44.7
|
%
|
|
|
42.6
|
%
|
|
|
41.7
|
%
|
Origination fees per annum as a percentage of the principal
balance of the loans
|
|
|
5.2
|
%
|
|
|
15.4
|
%
|
|
|
19.2
|
%
|
|
|
18.5
|
%
|
|
|
21.0
|
%
|
Gain on
Sale of Structured Settlements
We purchase a certain number of fixed, scheduled future
settlement payments on a discounted basis in exchange for a
single lump sum payment. We negotiate a purchase price that is
calculated as the present value of the future payments to be
purchased, discounted at a rate equal to our required investment
yield. From time to time, we sell portfolios of structured
settlements to institutional investors. The sale price is
calculated as the present value of the future payments to be
sold, discounted at a negotiated yield. We record any amounts of
sale proceeds in excess of our carrying value as a gain on sale.
Gain on
the Forgiveness of Debt
We entered into a settlement agreement with Acorn, as described
previously, whereby our borrowings under the Acorn credit
facility were cancelled, resulting in a gain on forgiveness of
debt. A gain on forgiveness of debt is recorded at the time at
which we are legally released from our borrowing obligations.
Change in
Fair Value of Life Settlements and Structured Settlement
Receivables.
We have elected to carry our investments in life settlements at
fair value. As of July 1, 2010, we elected to adopt the
fair value option, in accordance with ASC 825,
Financial
Instruments
, to record certain newly-
50
acquired structured settlement receivables at fair value. Any
change in fair value upon re-measurement of these investments is
recorded through our change in fair value of life settlement and
structured settlement receivables.
Gain on
Sale of Life Settlements
Gain on sale of life settlements includes gain from
company-owned life settlements and gains from sales on behalf of
third parties.
Components
of Expenses
Interest
Expense
Interest expense is interest accrued monthly on credit facility
borrowings that are used to fund premium finance loans and
promissory notes that were used to fund operations and corporate
expenses. Interest is generally compounded monthly and payable
as the collateralized loans mature.
Our weighted average interest rate for our credit facilities and
promissory notes outstanding as of the dates indicated below is
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
September 30,
|
|
|
2007
|
|
2008
|
|
2009
|
|
2009
|
|
2010
|
|
Weighted average interest rate under credit facilities
|
|
|
14.5
|
%
|
|
|
13.9
|
%
|
|
|
15.6
|
%
|
|
|
15.5
|
%
|
|
|
18.0
|
%
|
Weighted average interest rate under promissory notes
|
|
|
16.2
|
%
|
|
|
15.9
|
%
|
|
|
16.5
|
%
|
|
|
16.5
|
%
|
|
|
16.5
|
%
|
Total weighted average interest rate
|
|
|
15.5
|
%
|
|
|
14.2
|
%
|
|
|
15.7
|
%
|
|
|
14.9
|
%
|
|
|
17.6
|
%
|
Provision
for Losses on Loans Receivable
We specifically evaluate all loans for impairment, on a monthly
basis, based on the fair value of the underlying life insurance
policies as collectability is primarily collateral dependent.
The fair value of the life insurance policy is determined using
our valuation model, which is a Level 3 fair value
measurement. For loans with lender protection insurance, the
insured value is also considered when determining the fair value
of the life insurance policy. The insured value is not directly
correlated to any portion of the loan, such as principal,
accrued interest, accreted origination income, or other fees
which may be charged or incurred on these types of loans. The
insured value is the amount we would receive in the event that
we filed a lender protection insurance claim. The lender
protection insurer limits the insured value to an amount equal
to or less than its determination of the value of the life
insurance policy underlying our premium finance loan based on
its own models and assumptions, which may be equal to or less
than the carrying value of the loan receivable. For all loans,
the amount of loan impairment, if any, is calculated as the
difference in the fair value of the life insurance policy and
the carrying value of the loan receivable. Loan impairments are
charged to the provision for losses on loans receivable in our
consolidated and combined statement of operations.
In some instances, we make a loan to an insured whereby we
immediately record a loan impairment valuation adjustment
against the principal of the loan. Loans that experience an
immediate impairment are made when the transaction components
that are not included in the loan, such as agency fees, offset
or exceed the amount of the impairment.
For loans that matured during the nine months ended
September 30, 2010 and during the year ended
December 31, 2009, 97% and 85%, respectively, of such loans
were not repaid at maturity. In such events of default, the
borrower typically relinquishes beneficial ownership of the
policy to us in exchange for our release of the debt (or we
enforce our security interests in the beneficial interests in
the trust that owns the policy). For loans that have lender
protection insurance, we make a claim against the lender
protection insurance policy and, subject to policy terms and
conditions, the insurer has the right to direct control or take
beneficial ownership of the policy upon payment of our claim.
51
The following table provides information on the loans that were
not repaid at maturity as of the dates indicated below (dollars
in thousands):
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
Nine months ended
|
|
|
December 31, 2009
|
|
September 30, 2010
|
|
Loans not repaid at maturity
|
|
|
68
|
|
|
|
194
|
|
Claims submitted to lender protection insurer
|
|
|
68
|
|
|
|
194
|
|
Claims paid by lender protection insurer
|
|
|
68
|
|
|
|
194
|
|
Amount of claims paid
|
|
$
|
25,897
|
|
|
$
|
113,928
|
|
Percent of claims paid by lender protection insurer
|
|
|
100
|
%
|
|
|
100
|
%
|
The following table shows the percentage of the total number of
loans outstanding with lender protection insurance and the
percentage of our total loans receivable balance covered by
lender protection insurance as of the dates indicated below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
September 30,
|
|
|
2007
|
|
2008
|
|
2009
|
|
2009
|
|
2010
|
|
Percentage of total number of loans outstanding with lender
protection insurance
|
|
|
|
|
|
|
74.6
|
%
|
|
|
91.2
|
%
|
|
|
86.8
|
%
|
|
|
94.6
|
%
|
Percentage of total loans receivable balance covered by lender
protection insurance
|
|
|
|
|
|
|
78.6
|
%
|
|
|
93.1
|
%
|
|
|
90.0
|
%
|
|
|
95.2
|
%
|
We use a method to determine the loan impairment valuation
adjustment which assumes the worst case scenario for
the fair value of the collateral based on the insured coverage
amount. At the time of loan origination, we will record
impairment even though no loans are considered non-performing as
no payments are due by the borrower. Loans with insured
collateral represented over 90% of our loans as of
December 31, 2009 and September 30, 2010. We believe
that the amount of impairments recorded over the past
18 months is higher than normal due to the state of the
credit markets which negatively affected the fair value of the
collateral for the loans. During the past 18 months, the
insured value of the collateral has often been its highest
value. The higher amount of impairment experienced in the latter
part of 2009 and during 2010 reflects the realization of less
than the contractual amounts due under the terms of the loans
receivable. We believe that if the market for life insurance
policies improves, our realization rates for the contractual
amounts of interest income and origination income should improve
as well.
The following table shows the amount of impairment recorded on
loans outstanding with and without lender protection insurance
during each period (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended
|
|
|
|
2009
|
|
|
September 30, 2010
|
|
|
Provision for losses on loans receivable with lender protection
insurance
|
|
$
|
7,008
|
|
|
$
|
4,026
|
|
Provision (recoveries) for losses on loans receivable without
lender protection insurance
|
|
|
2,822
|
|
|
|
(512
|
)
|
|
|
|
|
|
|
|
|
|
Total provision for losses on loans receivable
|
|
$
|
9,830
|
|
|
$
|
3,514
|
|
Loss on
Loan Payoffs and Settlements, Net
When a premium finance loan matures, we record the difference
between the net carrying value of the loan receivable and the
cash received, or the fair value of the life insurance policy
that is obtained if there is a default and the policy is
relinquished, as a gain or loss on loan payoffs and settlements,
net. This account was significantly impacted by the Acorn
settlement, as discussed above, whereby we recorded a loss on
loan payoffs and settlements, net, of $5.2 million,
$10.2 million and $1.9 million during the nine months
ended September 30, 2010 and the years ended
December 31, 2009 and 2008, respectively, under the direct
write-off method, as opposed to charging our provision for
losses on loan receivables.
52
Amortization
of Deferred Costs
Deferred costs include premium payments made by us to our lender
protection insurer. These expenses are deferred and recognized
over the life of the note using the effective interest method.
Deferred costs also include credit facility closing costs such
as legal and professional fees associated with the establishment
of our credit facilities, which deferred costs are recognized
over the life of the debt. We expect our deferred costs to
decline over time as our portfolio of loans with lender
protection insurance matures.
Selling,
General and Administrative Expenses
Selling, general, and administrative expenses include salaries
and benefits, professional and consulting fees, marketing,
depreciation and amortization, bad debt expense, and other
related expenses to support our ongoing businesses.
Critical
Accounting Policies
Critical
Accountings Estimates
The preparation of the financial statements requires us to make
judgments, estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. We base our judgments, estimates
and assumptions on historical experience and on various other
factors that are believed to be reasonable under the
circumstances. Actual results could differ materially from these
estimates under different assumptions and conditions. We
evaluate our judgments, estimates and assumptions on a regular
basis and make changes accordingly. We believe that the
judgments, estimates and assumptions involved in the accounting
for the loan impairment valuation, allowance for doubtful
accounts, and the valuation of investments in life settlements
(life insurance policies) have the greatest potential impact on
our financial statements and accordingly believe these to be our
critical accounting estimates. Below we discuss the critical
accounting policies associated with the estimates as well as
selected other critical accounting policies. For further
information on our critical accounting policies, see the
discussion in Note 2 to our audited consolidated financial
statements.
Premium
Finance Loans Receivable
We report loans receivable acquired or originated by us at cost,
adjusted for any deferred fees or costs in accordance with
Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC)
310-20,
Receivables Nonrefundable Fees and Other
Costs
, discounts, and loan impairment valuation. All loans
are collateralized by life insurance policies. Interest income
is accrued on the unpaid principal balance on a monthly basis
based on the applicable rate of interest on the loans.
In accordance with ASC 310,
Receivables
, we
specifically evaluate all loans for impairment based on the fair
value of the underlying policies as collectability is primarily
collateral dependent. The loans are considered to be collateral
dependent as the repayment of the loans is expected to be
provided by the underlying insurance policies. In the event of
default, the borrower typically relinquishes beneficial
ownership of the policy to us in exchange for our release of the
debt (or we enforce our security interests in the beneficial
interests in the trust that owns the policy). For loans that
have lender protection insurance, we make a claim against the
lender protection insurance policy and, subject to terms and
conditions of the lender protection insurance policy, our lender
protection insurer has the right to direct control or take
beneficial ownership of the policy upon payment of our claim.
For loans without lender protection insurance, we have the
option of selling the policy or maintaining it on our balance
sheet for investment.
We evaluate the loan impairment valuation on a monthly basis
based on our periodic review of the estimated value of the
underlying collateral. This evaluation is inherently subjective
as it requires estimates that are susceptible to significant
revision as more information becomes available. The loan
impairment valuation is established as losses on loans are
estimated and the provision is charged to earnings. Once
established, the loan impairment valuation cannot be reversed to
earnings.
53
In order to originate premium finance transactions during the
recent dislocation in the capital markets, we procured lender
protection insurance. This lender protection insurance mitigates
our exposure to losses which may be caused by declines in the
fair value of the underlying policies. At the end of each
reporting period, for loans that have lender protection
insurance, a loan impairment valuation is established if the
carrying value of the loan receivable exceeds the amount of
coverage.
Ownership
of Life Insurance Policies
In the ordinary course of business, a large portion of our
borrowers may default by not paying off the loan and relinquish
beneficial ownership of the life insurance policy to us in
exchange for our release of the obligation to pay amounts due.
We account for life insurance policies we acquire upon
relinquishment by our borrowers as investments in life
settlements (life insurance policies) in accordance with
ASC 325-30,
Investments in Insurance Contracts, which requires us to use
either the investment method or the fair value method. The
election is made on an
instrument-by-instrument
basis and is irrevocable. Thus far, we have elected to account
for these life insurance policies as investments using the fair
value method.
We initially record investments in life settlements at the
transaction price. For policies acquired upon relinquishment by
our borrowers, we determine the transaction price based on fair
value of the acquired policies at the date of relinquishment.
The difference between the net carrying amount of the loan and
the transaction price is recorded as a gain (loss) on loan
payoffs and settlement. For policies acquired for cash, the
transaction price is the amount paid.
The fair value of the investment in insurance policies is
evaluated at the end of each reporting period. Changes in the
fair value of the investment based on evaluations are recorded
as change in fair value of life settlements in our consolidated
and combined statement of operations. The fair value is
determined on a discounted cash flow basis that incorporates
current life expectancy assumptions. The discount rate
incorporates current information about market interest rates,
the credit exposure to the insurance company that issued the
life insurance policy and our estimate of the risk premium an
investor in the policy would require. The discount rate at
September 30, 2010 was 15% and the fair value of our
investment in life insurance policies was $8.8 million.
Following this offering, our investment in life settlements
(life insurance policies) may increase over time as we begin to
make loans without lender protection insurance, as a result of
which we expect to have the option to retain a number of the
life insurance policies relinquished to us by our borrowers upon
default under those loans. Since the term of our premium finance
loans is typically 26 months, it will be at least
26 months from the closing of this offering before we are
likely to retain any appreciable number of policies relinquished
to us by our borrowers upon default.
Valuation
of Insurance Policies
Our valuation of insurance policies is a critical component of
our estimate for the loan impairment valuation and the fair
value of our investments in life settlements (life insurance
policies). We currently use a probabilistic method of valuing
life insurance policies, which we believe to be the preferred
valuation method in the industry. The most significant
assumptions which we estimate are the life expectancy of the
insured and the discount rate.
In determining the life expectancy estimate, we use medical
reviews from four different medical underwriters. The health of
the insured is summarized by the medical underwriters into a
life assessment which is based on the review of historical and
current medical records. The medical underwriting assesses the
characteristics and health risks of the insured in order to
quantify the health into a mortality rating that represents
their life expectancy.
The probability of mortality for an insured is then calculated
by applying the life expectancy estimate to a mortality table.
The mortality table is created based on the rates of death among
groups categorized by gender, age, and smoking status. By
measuring how many deaths occur before the start of each year,
the table allows for a calculation of the probability of death
in a given year for each category of insured people. The
54
probability of mortality for an insured is found by applying
their mortality rating from the life expectancy assessment to
the probability found in the actuarial table for the
insureds age, sex and smoking status.
The resulting mortality factor represents an indication as to
the degree to which the given life can be considered more or
less impaired than a standard life having similar
characteristics (i.e. gender, age, smoking, etc.). For example,
a standard insured (the average life for the given mortality
table) would carry a mortality rating of 100%. A similar but
impaired life bearing a mortality rating of 200% would be
considered to have twice the chance of dying earlier than the
standard life.
The mortality rating is used to create a range of possible
outcomes for the given life and assign a probability that each
of the possible outcomes might occur. This probability
represents a mathematical curve known as a mortality curve. This
curve is then used to generate a series of expected cash flows
over the remaining expected lifespan of the insured and the
corresponding policy. An internal rate of return calculation is
then used to determine the price of the policy. If the insured
dies earlier than expected, the return will be higher than if
the insured dies when expected or later than expected.
The calculation allows for the possibility that if the insured
dies earlier than expected, the premiums needed to keep the
policy in force will not have to be paid. Conversely, the
calculation also considers the possibility that if the insured
lives longer than expected, more premium payments will be
necessary. Based on these considerations, each possible outcome
is assigned a probability and the range of possible outcomes is
then used to create a price for the policy.
At the end of each reporting period we re-value the life
insurance policies using our valuation model in order to update
our loan impairment valuation for loans receivable and our
estimate of fair value for investments in policies held on our
balance sheet. This includes reviewing our assumptions for
discount rates and life expectancies as well as incorporating
current information for premium payments and the passage of time.
Fair
Value Measurement Guidance
We follow ASC 820,
Fair Value Measurements and
Disclosures
, which defines fair value as an exit price
representing the amount that would be received if an asset were
sold or that would be paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
As such, fair value is a market-based measurement that should be
determined based on assumptions that market participants would
use in pricing an asset or liability. As a basis for considering
such assumptions the guidance establishes a three-level fair
value hierarchy that prioritizes the inputs used to measure fair
value. Level 1 relates to quoted prices in active markets
for identical assets or liabilities. Level 2 relates to
observable inputs other than quoted prices included in
Level 1. Level 3 relates to unobservable inputs that
are supported by little or no market activity and that are
significant to the fair value of the assets or liabilities. Our
investments in life insurance policies and structured
settlements are considered Level 3 assets as there is
currently no active market where we are able to observe quoted
prices for identical assets and our valuation model incorporates
significant inputs that are not observable. The Companys
impaired loans are measured at fair value on a non-recurring
basis, as the carrying value is based on the fair value of the
underlying collateral. The method used to estimate the fair
value of impaired collateral-dependent loans depends on the
nature of the collateral. For collateral that has lender
protection insurance coverage, the fair value measurement is
considered to be Level 2 as the insured value is an
observable input and there are no material unobservable inputs.
For collateral that does not have lender protection insurance
coverage, the fair value measurement is considered to be
Level 3 as the estimated fair value is based on a model
whose significant inputs are the life expectancy of the insured
and the discount rate, which are not observable.
Fair
Value Option
As of July 1, 2010, we elected to adopt the fair value
option, in accordance with ASC 825,
Financial
Instruments
, to record certain newly-acquired structured
settlements at fair value. We have the option to measure
eligible financial assets, financial liabilities, and
commitments at fair value on an instrument-by-instrument basis.
This option is available when we first recognize a financial
asset or financial liability or enter
55
into a firm commitment. Subsequent changes in the fair value of
assets, liabilities, and commitments where we have elected the
fair value option are recorded in our consolidated and combined
statement of operations. We have made this election because it
is our intention to sell these assets within the next twelve
months, and we believe it significantly reduces the disparity
that exists between the GAAP carrying value of these structured
settlements and our estimate of their economic value.
Revenue
Recognition
Our primary sources of revenue are in the form of agency fees,
interest income, origination fee income and gains on sales of
structured settlements. Our revenue recognition policies for
these sources of revenue are as follows:
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|
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|
|
Agency Fees
Agency fees are paid by the
referring life insurance agents based on negotiations between
the parties and are recognized at the time a premium finance
loan is funded. Because agency fees are not paid by the
borrower, such fees do not accrue over the term of the loan. We
typically charge and receive agency fees from the referring
agent within approximately 47 days of our funding the loan.
A separate origination fee is charged to the borrower which is
amortized into income over the life of the loan.
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|
|
|
Interest Income
Interest income on premium
finance loans is recognized when it is realizable and earned, in
accordance with ASC 605,
Revenue Recognition
.
Discounts on structured settlement receivables are accreted over
the life of the settlement using the effective interest method.
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|
|
|
Origination Fee Income
Loans often include
origination fees which are fees payable to us on the date the
loan matures. The fees are negotiated at the inception of the
loan on a transaction by transaction basis. The fees are
accreted into income over the term of the loan using the
effective interest method.
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|
|
|
Gains on Sales of Structured Settlements
Gains on sales of structured settlements are recorded when the
structured settlements have been transferred to a third party
and we no longer have continuing involvement, in accordance with
ASC 860,
Transfers and Servicing
.
|
Interest and origination income on impaired loans is recognized
when it is realizable and earned in accordance with
ASC 605,
Revenue Recognition
. Persuasive evidence of
an arrangement exists through a loan agreement which is signed
by a borrower prior to funding and sets forth the agreed upon
terms of the interest and origination fees. Interest income and
origination income are earned over the term of the loan and are
accreted using the effective interest method. The interest and
origination fees are fixed and determinable based on the loan
agreement. For impaired loans, we do not recognize interest and
origination income which we believe is uncollectible. At the end
of the reporting period, we review the accrued interest and
accrued origination fees in conjunction with our loan impairment
analysis to determine our best estimate of uncollectible income
that is then reversed. We continually reassess whether the
interest and origination income are collectible as the fair
value of the collateral typically increases over the term of the
loan. Since our loans are due upon maturity, we cannot determine
whether a loan is performing or non-performing until maturity.
For impaired loans, our estimate of proceeds to be received upon
maturity of the loan is generally correlated to our current
estimate of fair value of the collateral, but also incorporates
expected increases in fair value of the collateral over the term
of the loan, trends in the market, sales activity for life
insurance policies, and our experience with loans payoffs.
Deferred
Costs
Deferred costs include costs incurred in connection with
acquiring and maintaining credit facilities and costs incurred
in connection with securing lender protection insurance. These
costs are amortized over the life of the related loan using the
effective interest method and are classified as amortization of
deferred costs in the accompanying consolidated and combined
statement of operations.
56
Loss
in Loan Payoffs and Settlements, Net
When a premium finance loan matures, we record the difference
between the net carrying value of the loan and the cash
received, or the fair value of the life insurance policy that is
obtained in the event of payment default, as a gain or loss on
loan payoffs and settlements, net. This account was
significantly impacted by the Acorn settlement, as discussed
above, whereby we recorded a loss on loan payoffs and
settlements, net, of $5.2 million, $10.2 million and
$1.9 million during the nine months ended
September 30, 2010 and the years ended December 31,
2009 and 2008, respectively, under the direct write-off method,
as opposed to charging our provision for losses on loan
receivables.
Income
Taxes
We account for income taxes in accordance with ASC 740,
Income Taxes
(ASC 740). Prior to the closing
of this offering, we will convert from a Florida limited
liability company to a Florida corporation. See also
Corporate Conversion. Under ASC 740, deferred
income taxes are determined based on the estimated future tax
effects of differences between the financial statement and tax
basis of assets and liabilities given the provisions of enacted
tax laws. Deferred income tax provisions and benefits are based
on changes to the assets or liabilities from year to year. In
providing for deferred taxes, we consider tax regulations of the
jurisdictions in which we operate, estimates of future taxable
income and available tax planning strategies. If tax
regulations, operating results or the ability to implement
tax-planning strategies varies adjustments to the carrying value
of the deferred tax assets and liabilities may be required.
Valuation allowances are based on the more likely than
not criteria of ASC 740.
The accounting for uncertain tax positions guidance under
ASC 740 requires that we recognize the financial statement
benefit of a tax position only after determining that the
relevant tax authority would more likely than not sustain the
position following an audit. For tax positions meeting the
more-likely-than-not threshold, the amount recognized in the
financial statements is the largest benefit that has a greater
than 50 percent likelihood of being realized upon ultimate
settlement with the relevant tax authority. We recognize
interest and penalties (if any) on uncertain tax positions as a
component of income tax expense.
Stock-Based
Compensation
Upon completion of this offering, we will adopt ASC 718,
Compensation Stock Compensation
(ASC
718). ASC 718 addresses accounting for share-based
awards, including stock options, with compensation expense
measured using fair value and recorded over the requisite
service or performance period of the award. The fair value of
equity instruments to be issued upon or after the closing of
this offering will be determined based on a valuation using an
option pricing model which takes into account various
assumptions that are subjective. Key assumptions used in the
valuation will include the expected term of the equity award
taking into account both the contractual term of the award, the
effects of expected exercise and post-vesting termination
behavior, expected volatility, expected dividends and the
risk-free interest rate for the expected term of the award.
Recent
Accounting Pronouncements
In July 2010, the FASB issued ASU
No. 2010-20,
Disclosures about the Credit Quality of Financing
Receivables and the Allowance for Credit Losses
(ASU
2010-20).
This guidance will require companies to provide additional
disclosures relating to the credit quality of their financing
receivables and the credit reserves held against them, including
the aging of past-due receivables, credit quality indicators,
and modifications of financing receivables. For public
companies, the disclosure requirements as of the end of a
reporting period are effective for periods ending on or after
December 15, 2010. The disclosure requirements for activity
occurring during a reporting period are effective for periods
beginning on or after December 15, 2010. We are currently
evaluating the possible effects of this guidance on our
financial statement disclosures.
57
Results
of Operations
The following is our analysis of the results of operations for
the periods indicated below. This analysis should be read in
conjunction with our financial statements, including the related
notes to the financial statements. Our results of operations are
discussed below in two parts: (i) our consolidated results
of operations and (ii) our results of operations by segment.
Consolidated
Results of Operations (in thousands)
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency fee income
|
|
$
|
24,515
|
|
|
$
|
48,004
|
|
|
$
|
26,114
|
|
|
$
|
20,216
|
|
|
$
|
9,099
|
|
Interest income
|
|
|
4,888
|
|
|
|
11,914
|
|
|
|
21,483
|
|
|
|
15,843
|
|
|
|
15,795
|
|
Origination fee income
|
|
|
526
|
|
|
|
9,399
|
|
|
|
29,853
|
|
|
|
21,865
|
|
|
|
16,728
|
|
Gain on sale of structured settlements
|
|
|
|
|
|
|
443
|
|
|
|
2,684
|
|
|
|
499
|
|
|
|
4,848
|
|
Gain on forgiveness of debt
|
|
|
|
|
|
|
|
|
|
|
16,410
|
|
|
|
14,886
|
|
|
|
6,968
|
|
Gain on sale of life settlements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,954
|
|
Change in fair value of life settlements and structured
receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,805
|
|
Other income
|
|
|
2
|
|
|
|
47
|
|
|
|
71
|
|
|
|
53
|
|
|
|
195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income
|
|
|
29,931
|
|
|
|
69,807
|
|
|
|
96,615
|
|
|
|
73,362
|
|
|
|
60,392
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
1,343
|
|
|
|
12,752
|
|
|
|
33,755
|
|
|
|
24,710
|
|
|
|
24,244
|
|
Provision for losses on loans receivable
|
|
|
2,332
|
|
|
|
10,768
|
|
|
|
9,830
|
|
|
|
6,705
|
|
|
|
3,514
|
|
Loss (gain) on loan payoffs and settlements, net
|
|
|
(225
|
)
|
|
|
2,738
|
|
|
|
12,058
|
|
|
|
11,279
|
|
|
|
4,320
|
|
Amortization of deferred costs
|
|
|
126
|
|
|
|
7,569
|
|
|
|
18,339
|
|
|
|
13,101
|
|
|
|
22,601
|
|
Selling, general and administrative expenses
|
|
|
24,335
|
|
|
|
41,566
|
|
|
|
31,269
|
|
|
|
22,997
|
|
|
|
22,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
27,911
|
|
|
|
75,393
|
|
|
|
105,251
|
|
|
|
78,792
|
|
|
|
76,797
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
2,020
|
|
|
$
|
(5,586
|
)
|
|
$
|
(8,636
|
)
|
|
$
|
(5,430
|
)
|
|
$
|
(16,405
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium
Finance Segment Results (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
Income
|
|
$
|
29,921
|
|
|
$
|
68,743
|
|
|
$
|
92,648
|
|
|
$
|
72,393
|
|
|
$
|
53,643
|
|
Expenses
|
|
|
18,092
|
|
|
|
52,733
|
|
|
|
82,435
|
|
|
|
63,118
|
|
|
|
59,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating income (loss)
|
|
$
|
11,829
|
|
|
$
|
16,010
|
|
|
$
|
10,213
|
|
|
$
|
9,275
|
|
|
$
|
(5,455
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58
Structured
Settlement Segment Results (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
Income
|
|
$
|
10
|
|
|
$
|
1,064
|
|
|
$
|
3,967
|
|
|
$
|
969
|
|
|
$
|
6,749
|
|
Expenses
|
|
|
2,722
|
|
|
|
9,770
|
|
|
|
9,475
|
|
|
|
6,736
|
|
|
|
8,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating loss
|
|
$
|
(2,712
|
)
|
|
$
|
(8,706
|
)
|
|
$
|
(5,508
|
)
|
|
$
|
(5,767
|
)
|
|
$
|
(2,106
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
of Segment Results to Consolidated Results (in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
Segment operating (loss) income
|
|
$
|
9,117
|
|
|
$
|
7,304
|
|
|
$
|
4,705
|
|
|
$
|
3,508
|
|
|
$
|
(7,561
|
)
|
Unallocated expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A expenses
|
|
|
6,531
|
|
|
|
10,052
|
|
|
|
8,052
|
|
|
|
5,097
|
|
|
|
5,950
|
|
Interest expense
|
|
|
566
|
|
|
|
2,838
|
|
|
|
5,289
|
|
|
|
3,841
|
|
|
|
2,894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
2,020
|
|
|
$
|
(5,586
|
)
|
|
$
|
(8,636
|
)
|
|
$
|
(5,430
|
)
|
|
$
|
(16,405
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine
Months Ended September 30, 2010 Compared to Nine Months
Ended September 30, 2009
Our results of operations for the nine months ended
September 30, 2010 have been impacted by the execution of a
settlement claims agreement. On September 8, 2010, the
lender protection insurance related to our credit facility with
Ableco Finance, LLC (Ableco) was terminated and
settled pursuant to a claims settlement agreement, resulting in
our receipt of an insurance claims settlement of approximately
$96.9 million. We used approximately $64.0 million of
the settlement proceeds to pay off the credit facility with
Ableco in full and the remainder was used to pay off almost all
of the amounts borrowed under the grid promissory note in favor
of CTL Holdings, LLC. As a result of this settlement
transaction, our subsidiary, Imperial PFC Financing, LLC, a
special purpose entity, agreed to reimburse the lender
protection insurer for certain loss payments and related
expenses by remitting to the lender protection insurer all
amounts received in the future in connection with the related
premium finance loans issued through the Ableco credit facility
and the life insurance policies collateralizing those loans
until such time as the lender protection insurer has been
reimbursed in full in respect of its loss payments and related
expenses. Those loss payments and related expenses include the
$96.9 million insurance claims settlement described above,
$77.0 million for loss payments previously made, any
additional advances made by the lender protection insurer to or
for the benefit of Imperial PFC Financing, LLC and interest on
such amounts. The reimbursement obligation is generally
non-recourse to us and our other subsidiaries except to the
extent of our equity interest in Imperial PFC Financing, LLC.
Messrs. Mitchell and Neuman each guaranteed the obligations
of Imperial PFC Financing, LLC for matters other than financial
performance. These guaranties are not unconditional sources of
credit support but are intended to protect against acts of
fraud, willful misconduct or a bankruptcy filing by Imperial PFC
Financing, LLC or Imperial Premium Finance, LLC. To the extent
recourse is sought against Messrs. Mitchell and Neuman for
such non-financial performance reasons, then our indemnification
obligations to Messrs. Mitchell and Neuman may require us
to indemnify them for losses they may incur under these
guaranties.
Under the lender protection program, we pay lender protection
insurance premiums at or about the time the coverage for a
particular loan becomes effective. We record this amount as a
deferred cost on our balance sheet, and then expense the
premiums over the life of the underlying premium finance loans
using the effective interest method. As of September 8,
2010, the deferred premium costs associated with the Ableco
facility totaled $5.4 million. Since these insurance claims
have been prepaid and Ableco has been repaid in full, we have
accelerated the expensing of these deferred costs and recorded
this $5.4 million expense as Amortization of Deferred
Costs. Also in connection with the termination of the Ableco
facility, we have accelerated the expensing of approximately
$980,000 of deferred costs which resulted from professional fees
related to the
59
creation of the Ableco facility. We recorded these charges as
Amortized Deferred Costs. In the aggregate, we accelerated the
expensing of $6.4 million in deferred costs as a result of
this one-time transaction.
The insurance claims settlement of $96.9 million was
recorded as lender protection insurance claims paid in advance
on our consolidated and combined balance sheet. As the premium
finance loans mature and in the event of default, the insurance
claim is applied against the premium finance loan. As of
September 30, 2010, we have approximately
$60.6 million remaining of lender protection insurance
claims paid in advance related to premium finance loans which
have not yet matured. The remaining premium finance loans will
mature by August 5, 2011.
Net loss for the nine months ended September 30, 2010 was
$16.4 million as compared to $5.4 million for the same
period in 2009. Of this $11.0 million net change,
$14.7 million occurred in our premium finance segment,
offset by improvements in our structured settlements segment of
$3.7 million. The change in the premium finance segment was
primarily caused by decreased agency fee income and origination
fee income. These declines were directly related to a reduction
in the number of otherwise viable premium finance transactions
that we could complete as we funded only 86 loans during the
nine months ended September 30, 2010, a 41% decrease
compared to the 145 funded during the same period of 2009. This
reduction in the number of loans originated was caused by
increased financing costs and stricter coverage limitations
provided by our lender protection insurer. As a result, we
experienced a decrease in agency fee income of
$11.1 million, or 55% and a decrease in origination fee
income of $5.1 million, or 23%. These decreases were
partially offset by an increase in gain on sale of structured
settlements of $4.3 million and an increase in the change
in fair value of investments of $4.8 million.
Amortization of deferred costs increased to $22.6 million
during the nine months ended September 30, 2010 as compared
to $13.1 million for the same period in 2009, an increase
of $9.5 million, or 73%. In connection with the full payoff
of the Ableco credit facility, we accelerated the expensing of
the remaining $5.4 million of associated deferred lender
protection insurance costs. We also accelerated the expensing of
approximately $980,000 of deferred costs related to fees
incurred in connection with the creation of the Ableco facility.
In total, lender protection insurance related costs accounted
for $19.4 million and $10.9 million of total
amortization of deferred costs during the nine months ended
September 30, 2010 and 2009, respectively.
Gain on forgiveness of debt decreased to $7.0 million
during the nine months ended September 30, 2010 compared to
$14.9 million for the same period in 2009, a decrease of
$7.9 million, or 53%. The reduced gain on forgiveness of
debt was offset by a reduction in loss on loan settlement and
payoffs, net of $7.0 million as a result of our writing off
of fewer loans that were originated under the Acorn facility.
Gain on sale of structured settlements was $4.8 million
during the nine months ended September 30, 2010 compared to
$499,000 for the same period in 2009.
2009
Compared to 2008
Net loss for 2009 was $8.6 million compared to
$5.6 million in 2008. We were without funding and,
therefore, unable to originate premium finance loans for a total
of 35 weeks in 2009 compared to a total of 9 weeks in
2008. As a result, we experienced a significant decline in
premium finance loan originations from 499 loans originated in
2008 to 194 loans originated in 2009, a decrease of 61%. As
agency fee income is earned solely as a function of originating
loans, we also experienced a decrease in agency fee income to
$26.1 million in 2009 from $48.0 million in 2008, a
decrease of $21.9 million, or 46%.
The reduction in agency fees was largely offset by an increase
in origination fee income to $29.9 million in 2009 compared
to $9.4 million in 2008, an increase of $20.5 million,
or 218%, primarily due to the increase in the aggregate
principal amount of the loans receivable and an increase in
origination fees charged. Additionally, our selling, general and
administrative expenses decreased to $31.3 million in 2009
compared to $41.6 million in 2008, a decrease of
$10.3 million, or 25%. Given the difficult economic
environment, we made staff reductions which resulted in a
$2.4 million decrease in payroll expenses. We also reduced
our
60
television and radio expenditures in our structured settlement
segment which led to an $835,000 decrease in marketing expenses.
Additionally, we incurred $2.6 million less in professional
fees.
Interest income was $21.5 million in 2009 compared to
$11.9 million in 2008, an increase of $9.6 million, or
81%, primarily due to the increase in the aggregate principal
amount of the loans receivable and the compounding of interest
on the loan receivable balance that continues to grow until the
loan matures.
Interest expense was $33.8 million in 2009 compared to
$12.8 million in 2008, an increase of $21.0 million,
or 165%, primarily due to higher note payable balances as well
as higher interest rates. Amortization of deferred costs was
$18.3 million in 2009 compared to $7.6 million in
2008, an increase of $10.7 million, or 141%. Lender
protection insurance related costs accounted for
$16.1 million and $6.2 million of total amortization
of deferred costs during 2009 and 2008, respectively.
During 2009, we continued to invest in our structured
settlements business. We did this with the expectation that
expenses would continue to exceed revenue while we made
investments in building the business and increasing our capacity
to purchase new transactions. We originated 396 transactions
with an undiscounted face value of $28.9 million during
2009 as compared to 276 transactions with an undiscounted face
value of $18.3 million in 2008, an increase in the number
of transactions of 43% and an increase in the undiscounted face
value of 58%. We incurred selling, general and administrative
expenses in our structured settlements segment of
$9.5 million during 2009 compared to $9.8 million in
2008, a decrease of $295,000, or 3%. Gain on sale of structured
settlements was $2.7 million in 2009 compared to $443,000
in 2008, an increase of $2.3 million, or 506%. The increase
in gain on sale was a result of more sales of structured
settlements and a higher percentage of gain on the sales.
2008
Compared to 2007
Net loss for 2008 was $5.6 million compared to net income
of $2.0 million in 2007. We experienced difficulty
obtaining financing in 2008 due to the dislocations in the
capital markets. In July, 2008, Acorn stopped funding under its
credit facility with us. We were without funding and, therefore,
unable to originate premium finance loans for a total of
9 weeks in 2008. In order to originate premium finance
business during 2008, we commenced the lender protection
insurance program resulting in increased financing costs. We
also incurred increased overhead expenses in 2008 as we
continued to invest in our businesses.
Agency fee income was $48.0 million in 2008 compared to
$24.5 million in 2007, an increase of $23.5 million,
or 96%. The increase in agency fee income was due to the 155%
increase in the number of loans originated compared to 2007.
Additionally, in order to offset our increased financing costs,
we began charging origination fees on all premium finance loans.
Origination fee income was $9.4 million in 2008 compared to
$526,000 in 2007, an increase of $8.9 million, or 1,692%.
Interest expense was $12.8 million in 2008 compared to
$1.3 million in 2007, an increase of $11.5 million, or
885%, primarily due to higher note payable balances. We had a
notes payable balance of $183.5 million at
December 31, 2008 compared to $35.6 million at
December 31, 2007, an increase of $147.9 million, or
415%, as a result of increased borrowings to fund premium
finance loans. Amortization of deferred costs was
$7.6 million in 2008 compared to $126,000 in 2007, an
increase of $7.5 million, or 5,952%. Lender protection
insurance related costs accounted for $6.2 million and $0
of total amortization of deferred costs during 2008 and 2007,
respectively.
Selling, general and administrative expenses increased from
$24.3 million in 2007 to $41.6 million in 2008, an
increase of $17.3 million, or 71%. The increase was
primarily due to increasing the total number of our employees in
2008 from 16 to 98 as we continued to make investments in our
business which exceeded our revenue growth. We also spent an
additional $3.2 million on marketing to grow our structured
settlement business and $3.2 million on professional fees
primarily related to our effort to obtain credit facilities.
Beginning in July 2007 and continuing through the year ended
December 31, 2008, we began making significant investments
in our structured settlements business and increased the number
of full-time employees in this business unit from 3 to 20.
61
Segment
Information
We operate our business through two reportable segments: premium
finance and structured settlements. Our segment data discussed
below may not be indicative of our future operations.
Premium
Finance Business
Our results of operations for our premium finance segment for
the periods indicated are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency fee income
|
|
$
|
24,515
|
|
|
$
|
48,004
|
|
|
$
|
26,114
|
|
|
$
|
20,216
|
|
|
$
|
9,099
|
|
Interest income
|
|
|
4,880
|
|
|
|
11,340
|
|
|
|
20,271
|
|
|
|
15,426
|
|
|
|
15,482
|
|
Origination fee income
|
|
|
526
|
|
|
|
9,399
|
|
|
|
29,853
|
|
|
|
21,865
|
|
|
|
16,728
|
|
Gain on forgiveness of debt
|
|
|
|
|
|
|
|
|
|
|
16,410
|
|
|
|
14,886
|
|
|
|
6,968
|
|
Change in fair value of life settlements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,300
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,921
|
|
|
|
68,743
|
|
|
|
92,648
|
|
|
|
72,393
|
|
|
|
53,643
|
|
Direct segment expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
777
|
|
|
|
9,914
|
|
|
|
28,466
|
|
|
|
20,869
|
|
|
|
21,350
|
|
Provision for losses
|
|
|
2,332
|
|
|
|
10,768
|
|
|
|
9,830
|
|
|
|
6,705
|
|
|
|
3,514
|
|
Loss (gain) on loan payoff and settlements, net
|
|
|
(225
|
)
|
|
|
2,738
|
|
|
|
12,058
|
|
|
|
11,278
|
|
|
|
4,320
|
|
Amortization of deferred costs
|
|
|
126
|
|
|
|
7,569
|
|
|
|
18,339
|
|
|
|
13,101
|
|
|
|
22,601
|
|
SG&A expense
|
|
|
15,082
|
|
|
|
21,744
|
|
|
|
13,742
|
|
|
|
11,165
|
|
|
|
7,313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,092
|
|
|
|
52,733
|
|
|
|
82,435
|
|
|
|
63,118
|
|
|
|
59,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating income (loss)
|
|
$
|
11,829
|
|
|
$
|
16,010
|
|
|
$
|
10,213
|
|
|
$
|
9,275
|
|
|
$
|
(5,455
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine
Months Ended September 30, 2010 Compared to Nine Months
Ended September 30, 2009
Income
Agency Fee Income.
Agency fee income was
$9.1 million for the nine months ended September 30,
2010 compared to $20.2 million for the same period in 2009,
a decrease of $11.1 million, or 55%. Agency fee income is
earned solely as a function of originating loans. We funded only
86 loans during the nine months ended September 30, 2010, a
41% decrease compared to the 145 loans funded during the same
period of 2009. This reduction in the number of loans originated
was caused by increased financing costs and stricter coverage
limitations provided by our lender protection insurer.
Agency fees as a percentage of the principal balance of the
loans originated during each period was as follows (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
2009
|
|
2010
|
|
Principal balance of loans originated
|
|
|
39,030
|
|
|
|
18,245
|
|
Number of transactions originated
|
|
|
145
|
|
|
|
86
|
|
Agency fees
|
|
|
20,216
|
|
|
|
9,099
|
|
Agency fees as a percentage of the principal balance of loans
originated
|
|
|
51.8
|
%
|
|
|
49.9
|
%
|
62
Interest Income.
Interest income was
$15.5 million for the nine months ended September 30,
2010 compared to $15.4 million for the same period in 2009,
an increase of $56,000 or 0.3%. Interest income was comparable
due to a decline in interest income as the average balance of
loans receivable, net decreased, partially offset by additional
interest received on loans that matured during the period but
continued to accrue interest past the maturity date until the
lender protection insurance claim was received. The balance of
loans receivable, net, increased from $148.7 million to
$187.3 million during the nine months ended
September 30, 2009, as we originated a significant number
of new loans. The balance of loans receivable, net, decreased
from $189.1 million to $121.6 million during the nine
months ended September 30, 2010 due to significant loan
maturities. There were no significant changes in interest rates.
The weighted average per annum interest rate for premium finance
loans outstanding as of September 30, 2010 and 2009 was
11.3% and 11.2%, respectively.
Origination Fee Income.
Origination fee income
was $16.7 million for the nine months ended
September 30, 2010 compared to $21.9 million for the
same period in 2009, a decrease of $5.2 million, or 23%.
Origination fee income decreased due to a decline in the average
balance of loans receivable, net, as noted above. Origination
fees as a percentage of the principal balance of the loans
originated was 41.7% during the nine months ended
September 30, 2010 compared to 42.6% for the same period in
2009.
Gain on Forgiveness of Debt.
Gain on
forgiveness of debt was $7.0 million for the nine months
ended September 30, 2010 compared to $14.9 million for
the same period in 2009, a decrease of $7.9 million, or
53%. These gains arise out of the Acorn settlement as described
previously and include $1.9 million related to loans
written off in December 2008, but the corresponding gain on
forgiveness of debt was not recognized until 2009 at the time
the Acorn settlement was finalized. Only 18 loans out of 119
loans financed in this facility remained outstanding as of
September 30, 2010. The gains were substantially offset by
a loss on loan payoffs of the associated loans of
$5.2 million and $8.4 million during the nine months
ended September 30, 2010, and 2009, respectively.
Change in Fair Value of Life
Settlements.
Change in fair value of life
settlements was $3.3 million for the nine months ended
September 30, 2010 compared to $0 for the same period in
2009. During the period, we acquired life insurance policies
that were relinquished to us upon default of loans secured by
such policies. We also acquired life insurance policies directly
from third parties. We initially record these investments at the
transaction price, which is the fair value of the policy for
those acquired upon relinquishment or the amount paid for
policies acquired for cash. We recorded change in fair value
gains of approximately $3.3 million during the nine months
ended September 30, 2010 due primarily to the evaluation of
the fair value of these policies at the end of the reporting
period. In several instances there were increases in fair value
due to declines in life expectancies of the insured.
Other.
Other income was $2.1 million for
the nine months ended September 30, 2010 compared to $0 for
the same period in 2009. Other income arose primarily from gain
on sales of life settlements. This included sales of life
settlements for our own account as well as fees earned on life
settlements sold on behalf of others. We had no such sales of
life settlements during the nine months ended September 30,
2009.
Expenses
Interest Expense.
Interest expense was
$21.3 million for the nine months ended September 30,
2010 compared to $20.9 million for the same period in 2009,
an increase of $481,000, or 2%. The increase in interest expense
is due to the accruing of interest on the loans payable balance
that continues to grow until the loans mature.
Provision for Losses on Loans
Receivable.
Provision for losses on loans
receivable was $3.5 million for the nine months ended
September 30, 2010 compared to $6.7 million for the
same period in 2009, a decrease of $3.2 million, or 48%.
The decrease in the provision during the nine months ended
September 30, 2010 as compared to the nine months ended
September 30, 2009 was due to less loan impairments
recorded on existing loans in order to adjust the carrying value
of the loan receivable to the fair value of the underlying
policy and a decrease in loan impairment related to new loans
originated, as there were fewer new loans originated during the
nine months ended September 30, 2010 as compared to
the same period in 2009. The loan impairment valuation was 5.8%
and 5.3% of the carrying value of the loan receivables as of
September 30, 2010 and 2009, respectively.
63
Loss on Loan Payoffs and Settlements,
Net.
Loss on loan payoffs and settlements, net,
was $4.3 million for the nine months ended
September 30, 2010 compared to $11.3 million for the
same period in 2009, a decrease of $7.0 million, or 62%.
The decline in loss on loan payoffs and settlements, net, was
due to the reduction of loans written off in the first half of
2010 as a result of the Acorn settlement. In the first nine
months of 2010, we wrote off only 31 loans compared to 52 loans
written off in the first nine months of 2009. Excluding the
impact of the Acorn settlements, we had a gain on loan payoffs
and settlements, net, of $2.5 million and gain on loan
payoffs and settlements, net, of $1.7 million for the nine
months ended September 30, 2010, and 2009, respectively.
Amortization of Deferred Costs.
Amortization
of deferred costs was $22.6 million during the nine months
ended September 30, 2010 as compared to $13.1 million
for the same period in 2009, an increase of $9.5 million,
or 73%. In connection with the full payoff of the Ableco credit
facility, we accelerated the expensing of the remaining
$5.4 million of associated deferred lender protection
insurance costs. We also accelerated the expensing of
approximately $980,000 of deferred costs related to fees
incurred in connection with the creation of the Ableco facility.
In total, lender protection insurance related costs accounted
for $19.4 million and $10.9 million of total
amortization of deferred costs during the nine months ended
September 30, 2010 and 2009, respectively.
Selling, General and Administrative
Expenses.
Selling, general and administrative
expenses were $7.3 million for the nine months ended
September 30, 2010 compared to $11.2 million for the
same period in 2009, a decrease of $3.9 million, or 35%.
Bad debt decreased by $890,000, legal fees decreased by
$780,000, life expectancy evaluation expenses decreased by
$533,000 and other operating expenses decreased by $479,000.
Adjustments to our allowance for doubtful accounts for past due
agency fees are charged to bad debt expense. Our determination
of the allowance is based on an evaluation of the agency fee
receivable, prior collection history, current economic
conditions and other inherent risks. We review agency fees
receivable aging on a regular basis to determine if any of the
receivables are past due. We write off all uncollectible agency
fee receivable balances against our allowance. The aging of our
agency fees receivable as of the dates below is as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
2009
|
|
|
2010
|
|
|
30 days or less from loan funding
|
|
$
|
1,671
|
|
|
$
|
635
|
|
31 60 days from loan funding
|
|
|
|
|
|
|
85
|
|
61 90 days from loan funding
|
|
|
|
|
|
|
|
|
91 120 days from loan funding
|
|
|
|
|
|
|
|
|
Over 120 days from loan funding
|
|
|
1,851
|
|
|
|
202
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,522
|
|
|
$
|
922
|
|
Allowance for doubtful accounts
|
|
|
(1,706
|
)
|
|
|
(186
|
)
|
|
|
|
|
|
|
|
|
|
Agency fees receivable, net
|
|
$
|
1,816
|
|
|
$
|
736
|
|
An analysis of the changes in the allowance for doubtful
accounts for past due agency fees during the nine months ended
September 30, 2009 and 2010 is as follows (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2010
|
|
|
Balance at beginning of period
|
|
$
|
769
|
|
|
$
|
120
|
|
Bad debt expense
|
|
|
957
|
|
|
|
66
|
|
Write-offs
|
|
|
(20
|
)
|
|
|
|
|
Recoveries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
1,706
|
|
|
$
|
186
|
|
64
The allowance for doubtful accounts for past due agency fees as
of September 30, 2010 was $186,000 as compared to
$1.7 million as of September 30, 2009. The decrease
was primarily attributable to approximately $1.9 million of
write-offs recorded during the fourth quarter of 2009.
Throughout 2009, we continued to evaluate the collectability of
agency fee receivables and recorded approximately $957,000 in
bad debt expense during the nine months ended September 30,
2009. We made improvements to our collection process and in our
selection of agents which we work with and our allowance and bad
debt expense have returned to what we consider normal levels in
2010.
2009
Compared to 2008
Income
Agency Fee Income.
Agency fee income was
$26.1 million in 2009 compared to $48.0 in 2008, a decrease
of $21.9 million, or 46%. Agency fee income is earned
solely as a function of originating loans. Due to the increases
in our financing costs and our inability to access financing
during periods in 2009, we experienced a significant decline in
premium finance loan originations from 499 loans originated in
2008 to 194 loans originated in 2009, a decrease of 61%.
Agency fees as a percentage of the principal balance of the
loans originated during each period was as follows (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2008
|
|
2009
|
|
Principal balance of loans originated
|
|
$
|
97,559
|
|
|
$
|
51,573
|
|
Number of transactions originated
|
|
|
499
|
|
|
|
194
|
|
Agency fees
|
|
$
|
48,004
|
|
|
$
|
26,114
|
|
Agency fees as a percentage of the principal balance of loans
originated
|
|
|
49.2
|
%
|
|
|
50.6
|
%
|
Interest Income.
Interest income was
$20.3 million in 2009 compared to $11.3 million in
2008, an increase of $9.0 million, or 79%. The increase in
interest was due to an increase in the aggregate principal
amount of the loans receivable and the compounding of interest
on the loan receivable balance that continues to grow until the
loan matures. Loans receivable, net, net was $189.1 million in
2009 compared to $148.7 million in 2008. The weighted
average per annum interest rate for premium finance loans
outstanding as of December 31, 2009 and 2008 was 10.9% and
10.4%, respectively.
Origination Fee Income.
Origination fee income
was $29.9 million in 2009 compared to $9.4 million in
2008, an increase of $20.5 million, or 218%. The increase
was attributable to an increase in the aggregate principal
amount of the loans receivable and an increase in the
origination fee charged. Origination fees as a percentage of the
principal balance of the loans originated was 44.7% during 2009
compared to 39.9% in 2008.
Gain on Forgiveness of Debt.
Gain on
forgiveness of debt was $16.4 million in 2009 compared to
$0 in 2008. The gain on forgiveness of debt was attributable to
the Acorn settlement. We wrote off 63 loans in 2009 when Acorn
stopped funding premiums and the underlying life insurance
policies lapsed. This resulted in an offsetting loss on loan
payoffs and settlements, net, of $10.2 million during 2009.
In turn, we were released from the corresponding loans payable
to Acorn and we recorded a gain on the forgiveness of debt of
$16.4 million, which included $1.9 million related to
loans written off in December 2008, but the corresponding gain
on forgiveness of debt was not recognized until 2009 at the time
the Acorn settlement was finalized.
Expenses
Interest Expense.
Interest expense was
$28.5 million in 2009 compared to $9.9 million in
2008, an increase of $18.6 million, or 187%. Interest
expense increased due to the increase in borrowings under credit
facilities used to fund premium finance loans during the period.
Borrowings under credit facilities used to fund premium finance
loans were $193.5 million and $154.6 million as of
December 31, 2009 and 2008,
65
respectively. The weighted average interest rate per annum under
our credit facilities used to fund premium finance loans
increased from 13.9% as of December 31, 2008 to 15.6% as of
December 31, 2009.
Provision for Losses on Loans
Receivable.
Provision for losses on loans
receivable was $9.8 million in 2009 compared to
$10.8 million in 2008, a decrease of $1.0 million, or
9%. The decrease in the provision was due to lower loan
impairments related to new loans as there were fewer new loans
originated during the period, partially offset by higher
additional loan impairments recorded on existing loans in order
to adjust the carrying value of the loan receivable to the fair
value of the underlying policy. The loan impairment valuation
was 5.5% and 5.6% of the carrying value of the loan receivables,
as of December 31, 2009 and 2008, respectively.
Loss on Loan Payoffs and Settlements,
Net.
Loss on loan payoffs and settlements, net,
was $12.1 million in 2009 compared to $2.7 million in
2008, an increase of $9.4 million, or 349%. The increase in
2009 was largely due to the 63 loans written off as part of the
settlement with Acorn, resulting in losses of $10.2 million
during 2009, compared to 7 loans written off resulting in losses
of $1.9 million during 2008. Excluding the impact of the
Acorn settlement, loss on loan payoffs and settlements, net, was
$1.9 million and $870,000 in 2009 and 2008, respectively.
The increased loss during 2009 was primarily due to policies
that we let lapse rather than continue to fund future premiums
based on our assessment of the lack of value of these policies.
Amortization of Deferred Costs.
Amortization
of deferred costs was $18.3 million in 2009 compared to
$7.6 million in 2008, an increase of $10.7 million, or
141%. The increase was due to an increase in the balance of the
costs that are being amortized, particularly costs related to
obtaining lender protection insurance, which comprise the
majority of this balance. Lender protection insurance related
costs accounted for $16.1 million and $6.2 million of
total amortization of deferred costs during the year ended
December 31, 2009 and 2008, respectively. Additionally, as
these costs are amortized using the effective interest method
over the term of the loan, the amortization of deferred costs is
accelerating as the loans get closer to maturity.
Selling, General and Administrative
Expenses.
Selling, general and administrative
expenses were $13.7 million in 2009 compared to
$21.7 million in 2008, a decrease of $8.0 million, or
37%. Given the decline in new originations resulting from our
inability to access adequate capital, we made significant
reductions in costs. We reduced payroll from $7.8 million
in 2008 to $4.7 million in 2009, a decrease of
$3.1 million, or 39%. Legal and professional fees were
reduced from $4.0 million in 2008 to $3.0 million in
2009, a decrease of $1.0 million. Our bad debt expense was
$1.3 million in 2009 compared to $1.0 million in 2008,
an increase of $243,000, or 23%.
The aging of our agency fees receivable as of the dates below
are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
30 days or less from loan funding
|
|
$
|
6,946
|
|
|
$
|
2,018
|
|
31 60 days from loan funding
|
|
|
1,338
|
|
|
|
|
|
61 90 days from loan funding
|
|
|
592
|
|
|
|
32
|
|
91 120 days from loan funding
|
|
|
251
|
|
|
|
214
|
|
Over 120 days from loan funding
|
|
|
513
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
9,640
|
|
|
$
|
2,285
|
|
Allowance for doubtful accounts
|
|
|
(769
|
)
|
|
|
(120
|
)
|
|
|
|
|
|
|
|
|
|
Agency fees receivable, net
|
|
$
|
8,871
|
|
|
$
|
2,165
|
|
66
An analysis of the changes in the allowance for doubtful
accounts for past due agency fees during the years ended
December 31, 2008 and 2009 is as follows (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
Balance at beginning of period
|
|
$
|
288
|
|
|
$
|
769
|
|
Bad debt expense
|
|
|
536
|
|
|
|
1,290
|
|
Write-offs
|
|
|
(55
|
)
|
|
|
(1,939
|
)
|
Recoveries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
769
|
|
|
$
|
120
|
|
The decrease in the allowance for doubtful accounts for past due
agency fees is due to approximately $1.9 million of
write-offs during the fourth quarter of 2009. Throughout 2009,
we continued to evaluate the collectability of agency fee
receivables and recorded approximately $1.3 million in bad
debt expense during 2009. We made improvements to our collection
process and in our selection of agents which we work with and
our allowance returned to what we considered a normal level as
of December 31, 2009.
2008
Compared to 2007
Income
Agency Fee Income.
Agency fee income was
$48.0 million in 2008 compared to $24.5 million in
2007, an increase of $23.5 million, or 96%. Agency fee
income is earned solely as a function of originating loans.
Accordingly, in 2008, the increase in agency fee income was due
to the 155% increase in the number of loans originated compared
to 2007.
Agency fees as a percentage of the principal balance of the
loans originated during each period was as follows (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2007
|
|
2008
|
|
Principal balance of loans originated
|
|
$
|
44,501
|
|
|
$
|
97,559
|
|
Number of transactions originated
|
|
|
196
|
|
|
|
499
|
|
Agency fees
|
|
$
|
24,515
|
|
|
$
|
48,004
|
|
Agency fees as a percentage of the principal balance of loans
originated
|
|
|
55.1
|
%
|
|
|
49.2
|
%
|
Interest Income.
Interest income was
$11.3 million in 2008 compared to $4.9 million in
2007, an increase of $6.4 million, or 132%. The increase in
interest was due to an increase in the aggregate principal
amount of the loans receivable and the accretion of origination
fee income on the loan receivable balance that continues to grow
until the loan matures. Loans receivable, net, net was
$148.7 million and $43.7 million as of
December 31, 2008 and 2007, respectively. The weighted
average per annum interest rate for premium finance loans
outstanding as of December 31, 2008 and 2007 was 10.4% and
10.2%, respectively.
Origination Fee Income.
Origination fee income
was $9.4 million in 2008 compared to $526,000 in 2007, an
increase of $8.9 million, or 1687%. The increase was due to
an increase in the aggregate principal amount of the loans
receivable and an increase in the origination fee charged. We
charged an origination fee on all of the 499 loans originated in
2008. The origination fee as a percentage of the principal
balance of the loans originated was 39.9% in 2008 compared to
20.2% in 2007.
Expenses
Interest Expense.
Interest expense was
$9.9 million in 2008 compared to $777,000 in 2007, an
increase of $9.1 million, or 1176%. In 2008, we drew down
$131.8 million under our credit facilities in order to
originate 499 loans. We had borrowings under credit facilities
used to fund premium finance loans of $159.1 million at
December 31, 2008 compared to $15.8 million at
December 31, 2007, an increase of
67
$143.3 million, or 905%. The weighted average interest rate
per annum under our credit facilities used to fund premium
finance loans was 13.9% as of December 31, 2008 as compared
to 14.5% as of December 31, 2007.
Provision for Losses on Loans
Receivable.
Provision for losses on loans
receivable was $10.8 million in 2008 compared to
$2.3 million in 2007, an increase of $8.5 million, or
362%. The increase in the provision was due to the significant
number of new loans originated during 2008, whereby we recorded
loan impairments at the inception of the loan in order to adjust
the carrying value of the loan receivable to the fair value of
the underlying policy. The loan impairment valuation was 5.6%
and 4.8% of the carrying value of the loan receivables as of
December 31, 2008 and 2007, respectively.
Loss (Gain) on Loan Payoffs and Settlements,
Net.
Loss on loan payoffs and settlements, net,
was $2.7 million in 2008 compared to a gain of $225,000 in
2007. During 2008, we let 18 life insurance policies lapse
rather than continue to fund future premiums based on our
assessment of the lack of value in the policies. We recorded a
loss of $1.2 million on the loans receivable related to
these 18 policies. We also recorded a loss of $1.8 million
in 2008 on 7 loans financed under the Acorn facility when the
underlying policies lapsed.
Amortization of Deferred Costs.
Amortization
of deferred costs was $7.6 million in 2008 compared to
$126,000 in 2007, an increase of $7.5 million. The increase
was due to an increase in the balance of the costs that are
being amortized, particularly costs related to obtaining lender
protection insurance which comprise the majority of this
balance. Lender protection insurance related costs accounted for
$6.2 million and $0 of total amortization of deferred costs
during 2008 and 2007, respectively.
Selling, General and Administrative
Expenses.
Selling, general and administrative
expenses were $21.7 million in 2008 compared to
$15.1 million in 2007, an increase of $6.6 million, or
44%. We increased payroll by $3.5 million in 2008 as we
hired additional employees to grow our business. Legal and
professional fees increased by $3.0 million as we completed
work on various credit facilities, secured lender protection
insurance for our lenders and pursued legal action against
Acorn, as described previously. Our bad debt expense was
$1.0 million in 2008 compared to $288,000 in 2007, an
increase of $758,000, or 263%.
The aging of our agency fees receivable as of the dates below
are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
30 days or less from loan funding
|
|
$
|
3,542
|
|
|
$
|
6,946
|
|
31 60 days from loan funding
|
|
|
1,910
|
|
|
|
1,338
|
|
61 90 days from loan funding
|
|
|
248
|
|
|
|
592
|
|
91 120 days from loan funding
|
|
|
12
|
|
|
|
251
|
|
Over 120 days from loan funding
|
|
|
293
|
|
|
|
513
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,005
|
|
|
$
|
9,640
|
|
Allowance for doubtful accounts
|
|
|
(287
|
)
|
|
|
(769
|
)
|
|
|
|
|
|
|
|
|
|
Agency fees receivable, net
|
|
$
|
5,718
|
|
|
$
|
8,871
|
|
An analysis of the changes in the allowance for doubtful
accounts for past due agency fees during the years ended
December 31, 2007 and 2008 is as follows (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
Balance at beginning of period
|
|
|
|
|
|
$
|
288
|
|
Bad debt expense
|
|
$
|
288
|
|
|
|
536
|
|
Write-offs
|
|
|
|
|
|
|
(55
|
)
|
Recoveries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
288
|
|
|
$
|
769
|
|
68
The increase in the allowance for doubtful accounts for past due
agency fees was due to significant increase in agency fee
revenue from approximately $24.5 million in 2007 to
$48.0 million in 2008 as a result of an increase in the
number of loans originated in 2008 as compared to 2007.
Structured
Settlements
Our results of operations for our structured settlement business
segment for the periods indicated are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of structured settlements
|
|
$
|
|
|
|
$
|
443
|
|
|
$
|
2,684
|
|
|
$
|
499
|
|
|
$
|
4,848
|
|
Interest income
|
|
|
8
|
|
|
|
574
|
|
|
|
1,212
|
|
|
|
417
|
|
|
|
313
|
|
Change in fair value of structured settlement receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,505
|
|
Other income
|
|
|
2
|
|
|
|
47
|
|
|
|
71
|
|
|
|
53
|
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
1,064
|
|
|
|
3,967
|
|
|
|
969
|
|
|
|
6,749
|
|
Direct segment expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A expenses
|
|
|
2,722
|
|
|
|
9,770
|
|
|
|
9,475
|
|
|
|
6,736
|
|
|
|
8,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating loss
|
|
$
|
(2,712
|
)
|
|
$
|
(8,706
|
)
|
|
$
|
(5,508
|
)
|
|
$
|
(5,767
|
)
|
|
$
|
(2,106
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine
Months Ended September 30, 2010 Compared to Nine Months
Ended September 30, 2009
Income
Interest Income.
Interest income was $313,000
for the nine months ended September 30, 2010 compared to
$417,000 for the same period in 2009, a decrease of $104,000, or
25%. The decrease was due to a lower average balance of
structured settlements held on our balance sheet during the nine
months ended September 30, 2010.
Gain on Sale of Structured Settlements.
Gain
on sale of structured settlements was $4.8 million for the
nine months ended September 30, 2010 compared to $499,000
for the same period of 2009, an increase of $4.3 million or
860%. The increase was primarily due to sales of structured
settlements under our sale arrangement with Slate during the
second quarter of 2010. During the nine-month period ending
September 30, 2010, we sold 291 structured settlements for
a gain of $4.8 million, a 40% gain as a percentage of the
purchase price of $12.1 million.
Change in Fair Value of Structured Settlement
Receivables.
Change in fair value of investments
and structured receivables was $1.5 million for the nine
months ended September 30, 2010 compared to $0 for the same
period in 2009. As of July 1, 2010, we elected to adopt the
fair value option, in accordance with ASC 825,
Financial
Instruments
, to record certain newly-acquired structured
settlements at fair value. For the three months ended
September 30, 2010, changes in the fair value of structured
settlements resulted in income of $1.5 million.
Expenses
Selling, General and Administrative
Expenses.
Selling, general and administrative
expenses were $8.9 million for the nine months ended
September 30, 2010 compared to $6.7 million for the
same period of 2009, an increase of $2.1 million, or 31%.
This increase was due primarily to increased legal fees of
$679,000, which are largely attributable to securing a sale
arrangement and an increase in transaction expenses resulting
from increased originations during the period, which increased
to 385 in the nine months ended
69
September 30, 2010 from 275 during the same period in
2009. Additionally, payroll increased by $800,000 due to hiring
additional employees.
2009
Compared to 2008
Income
Interest Income.
Interest income was
$1.2 million in 2009 compared to $574,000 in 2008, an
increase of $637,000, or 111%. The increase was due to a higher
number of structured settlements purchased and a higher average
balance of structured settlements held on our balance sheet. In
2009 we originated 396 transactions as compared to 276
transactions during the same period in 2008.
Gain on Sale of Structured Settlements.
Gain
on sale of structured settlements was $2.7 million in 2009
compared to $443,000 in 2008, an increase of $2.3 million,
or 506%. The gain on sale in 2009 represents a 25% gain as a
percentage of the purchase price compared to a 6% gain as a
percentage of the purchase price in 2008. The increase in gain
on sale was due to more sales of structured settlements and a
higher percentage of gain on the sales. During 2009 we sold 439
structured settlements as compared to 226 during 2008.
Expenses
Selling, General and Administrative
Expenses.
Selling, general and administrative
expenses were $9.5 million for the year ending
December 31, 2009 compared to $9.8 million for the
same period of 2008, a decrease of $295,000, or 3%. This
decrease was primarily due to a decrease in television and radio
marketing expenses of $835,000. This was partially offset by an
increase in payroll of $108,000 and an increase in allocated
corporate expenses due to growth in this segment, such as an
increase in rent of $102,000, an increase in insurance costs of
$143,000, and an increase in depreciation expense of $161,000.
2008
Compared to 2007
Income
Interest Income.
Interest income was $574,000
in 2008 compared to $8,000 in 2007, an increase of $566,000, or
709%. The increase was due to a higher number of structured
settlements purchased. We originated 276 transactions in 2008
compared to 10 in 2007.
Gain on Sale of Structured Settlements.
Gain
on sale of structured settlements was $443,000 in 2008, a 7%
gain as a percentage of the purchase price, compared to $0 in
2007. In December 2008, we sold a portfolio of 226 structured
settlements to an institutional investor. We sold no structured
settlements in 2007.
Expenses
Selling, General and Administrative
Expenses.
Selling, general and administrative
expenses were $9.8 million in 2008 compared to
$2.7 million in 2007, an increase of $7.1 million, or
260%. The increase was due primarily to an increase in marketing
expense of $3.2 million, an increase in payroll of
$2.4 million, and an increase of $1.5 million in other
operating expenses due to growth in our structured settlements
business.
Liquidity
and Capital Resources
Historically, we have funded operations primarily from cash
flows from operations and various forms of debt financing.
Currently, we fund new premium finance loans through a credit
facility with Cedar Lane Capital, LLC (Cedar Lane).
We believe that we have various funding alternatives for the
purchase of structured settlements. In addition to available
cash, on September 24, 2010 we entered into an arrangement
to provide us up to $50 million to finance the purchase of
structured settlements.
We are required to procure lender protection insurance for our
premium finance loans funded under the Cedar Lane facility. We
originated our first loan with proceeds from this credit
facility in December 2009. As of September 30, 2010, we
have borrowed $32.1 million with a weighted average
interest rate payable of
70
15.6%. As of September 30, 2010, we believe we have
approximately $31.3 million of additional borrowing
capacity under this credit facility based upon Cedar Lanes
subscriptions from its investors, however, our lender protection
insurer has informed us that it will cease providing us with
lender protection insurance under this credit facility upon the
earlier of (i) the completion of this offering or
(ii) December 31, 2010. As a result, we do not expect
to borrow under the Cedar Lane facility after the earlier of
(i) the completion of this offering or
(ii) December 31, 2010. We plan to replace this source
of capital with the net proceeds from this offering to fund our
premium finance loans. Over time we expect that this will
significantly reduce our cost of financing and help to generate
higher returns for our shareholders.
We recently formed Imperial Settlements Financing 2010, LLC
(ISF 2010) as a subsidiary of Washington Square
Financial, LLC (Washington Square) to serve as a new
special purpose financing entity to allow us to borrow against
certain of our structured settlements and assignable annuities,
which we refer to as receivables, to provide us liquidity. On
September 24, 2010, we entered into an arrangement to
provide us up to $50 million in financing. Under this
arrangement, a subsidiary of Partner Re, Ltd. (the
noteholder) became the initial holder of ISF
2010s 8.39% Fixed Rate Asset Backed Variable Funding Note
issued under a master trust indenture and related indenture
supplement (collectively, the indenture) pursuant to
which the noteholder has committed to advance up to
$50 million upon the terms and conditions set forth in the
indenture. The note is secured by the receivables that ISF 2010
acquires from Washington Square from time to time. The note is
due and payable on or before January 1, 2057, but principal
and interest must be repaid pursuant to a schedule of fixed
payments from the receivables that secure the notes. The
arrangement generally has a concentration limit of 15% for the
providers of the receivables that secure the notes. As of
November 1, 2010, $0 was outstanding under this
arrangement. Wilmington Trust is the collateral trustee.
Our liquidity needs for the next two years are expected to be
met primarily through cash flows from operations, the net
proceeds from this offering and our $50 million commitment
to finance the purchase of structured settlements. See further
discussion of cash flows below. Capital expenditures have
historically not been material and we do not anticipate making
material capital expenditures in 2010 or 2011.
Debt
Financings Summary
We had the following debt outstanding as of September 30,
2010, which includes both the credit facilities used in our
premium finance business as well as the promissory notes which
are general corporate debt (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
|
Accrued
|
|
|
Total Principal
|
|
|
|
Principal
|
|
|
Interest
|
|
|
and Interest
|
|
|
Credit Facilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Acorn
|
|
$
|
4,215
|
|
|
$
|
1,258
|
|
|
$
|
5,473
|
|
CTL
*
|
|
|
24
|
|
|
|
|
|
|
|
24
|
|
White Oak
|
|
|
26,179
|
|
|
|
8,539
|
|
|
|
34,718
|
|
Cedar Lane
|
|
|
32,121
|
|
|
|
3,014
|
|
|
|
35,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62,539
|
|
|
|
12,811
|
|
|
|
75,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Promissory Notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Skarbonka
|
|
|
16,102
|
|
|
|
2,012
|
|
|
|
18,114
|
|
IMPEX
|
|
|
3,752
|
|
|
|
1,349
|
|
|
|
5,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,854
|
|
|
|
3,361
|
|
|
|
23,215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
82,393
|
|
|
$
|
16,172
|
|
|
$
|
98,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Represents the balance remaining under our $30 million grid
promissory note in favor of CTL Holdings. See Description
of Certain Indebtedness.
|
As of September 30, 2010, we had total debt outstanding of
$82.4 million of which $62.5 million, or 75.8%, is
owed by our special purpose entities which were established for
the purpose of obtaining debt
71
financing to fund our premium finance loans. Debt owed by these
special purpose entities is generally non-recourse to us and our
other subsidiaries. This debt is collateralized by life
insurance policies with lender protection insurance underlying
premium finance loans that we have assigned, or in which we have
sold participations rights, to our special purpose entities. One
exception is the Cedar Lane facility where we have guaranteed 5%
of the applicable special purpose entitys obligations.
Messrs. Mitchell and Neuman made certain guaranties to
lenders for the benefit of the special purpose entities for
matters other than financial performance. These guaranties are
not unconditional sources of credit support but are intended to
protect the lenders against acts of fraud, willful misconduct or
a borrower commencing a bankruptcy filing. To the extent lenders
sought recourse against Messrs. Mitchell and Neuman for
such non-financial performance reasons, then our indemnification
obligations to Messrs. Mitchell and Neuman may require us
to indemnify them for losses they may incur under these
guaranties.
With the exception of the Acorn facility, the credit facilities
are expected to be repaid with the proceeds from loan
maturities. We expect the lender protection insurance, subject
to its terms and conditions, to ensure liquidity at the time of
loan maturity and, therefore, we do not anticipate significant,
if any, additional cash outflows at the time of debt maturities
in excess of the amounts to be received by the loan payoffs or
lender protection insurance claims. If loans remaining under the
Acorn credit facility do not payoff at the time of maturity,
ABRG will assume possession of the insurance policies that
collateralize the premium finance loans and the related debt
will be forgiven.
As of September 30, 2010, promissory notes that will be
converted into shares of our common stock prior to the closing
of this offering had an outstanding principal balance of
$19.8 million or 24% of our total outstanding debt and
$3.4 million of related accrued interest.
The following table summarizes the maturities of principal and
interest outstanding as of September 30, 2010 for our
credit facilities used to fund premium finance loans (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Principal
|
|
|
Principal and Interest Payable
|
|
|
|
Average
|
|
|
and Interest
|
|
|
Three Months
|
|
|
Year
|
|
|
|
|
|
|
|
Credit
|
|
Interest
|
|
|
Outstanding
|
|
|
Ending
|
|
|
Ending
|
|
|
Year Ending
|
|
|
Year Ending
|
|
Facilities
|
|
Rate
|
|
|
at 9/30/2010
|
|
|
12/31/2010
|
|
|
12/31/2011
|
|
|
12/31/2012
|
|
|
12/31/2013
|
|
|
Acorn
|
|
|
14.5
|
%
|
|
$
|
5,473
|
|
|
$
|
5,473
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
CTL*
|
|
|
10.5
|
%
|
|
|
24
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
White Oak
|
|
|
21.5
|
%
|
|
|
34,718
|
|
|
|
8,106
|
|
|
|
26,612
|
|
|
|
|
|
|
|
|
|
Cedar Lane
|
|
|
15.6
|
%
|
|
|
35,135
|
|
|
|
2,675
|
|
|
|
17,657
|
|
|
|
14,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
|
|
|
$
|
75,350
|
|
|
$
|
16,278
|
|
|
$
|
44,269
|
|
|
$
|
14,803
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average interest rate
|
|
|
|
|
|
|
18.00
|
%
|
|
|
18.60
|
%
|
|
|
21.50
|
%
|
|
|
15.60
|
%
|
|
|
|
|
|
|
|
*
|
|
Represents the balance remaining under our $30 million grid
promissory note in favor of CTL Holdings. See Description
of Certain Indebtedness.
|
As of September 30, 2010, we also had promissory notes
payable, which have been used to fund corporate expenses and
operations, with principal outstanding of $19.9 million and
accrued interest of $3.4 million. These notes are
structured as revolving credit facilities and the amount
outstanding will rise and fall over time as we draw and repay.
The promissory notes carry an interest rate of 16.5% and mature
in August 2011. Unlike the credit facilities described in the
table above, borrowings under these revolving facilities are
with full recourse to us. These promissory notes will be
converted into shares of our common stock in connection with our
corporate conversion prior to this offering so they will not be
a source of liquidity for us after our corporate conversion. See
Corporate Conversion.
See Description of Certain Indebtedness for a
description of the principal terms of our outstanding credit
facilities and promissory notes.
72
Premium
Finance Loan Maturities
The following table summarizes the maturities of our premium
finance loans outstanding as of September 30, 2010 (dollars
in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal and Origination Fee Maturity
|
|
|
|
|
Three Months
|
|
|
|
|
|
|
|
|
Total at
|
|
Ending
|
|
Year Ending
|
|
Year Ending
|
|
Year Ending
|
|
|
9/30/2010
|
|
12/31/2010
|
|
12/31/2011
|
|
12/31/2012
|
|
12/31/2013
|
|
Carrying value (loan principal balance, accreted origination
fees, and accrued interest receivable)
|
|
$
|
149,222
|
|
|
$
|
51,418
|
|
|
$
|
76,733
|
|
|
$
|
20,524
|
|
|
$
|
547
|
|
Weighted average per annum interest rate
|
|
|
11.50
|
%
|
|
|
11.20
|
%
|
|
|
11.00
|
%
|
|
|
10.30
|
%
|
|
|
10.90
|
%
|
Per annum origination fee as a percentage of the principal
balance of the loan at origination
|
|
|
17.90
|
%
|
|
|
16.30
|
%
|
|
|
18.50
|
%
|
|
|
17.60
|
%
|
|
|
8.30
|
%
|
Cash
Flows
The following table summarizes our cash flows from operating,
investing and financing activities for the years ended
December 31, 2007, 2008, and 2009 and the nine months ended
September 30, 2009 and 2010 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
Statement of Cash Flows Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
(4,804
|
)
|
|
$
|
(2,157
|
)
|
|
$
|
(12,631
|
)
|
|
$
|
(12,037
|
)
|
|
$
|
(31,763
|
)
|
Investing activities
|
|
|
(39,410
|
)
|
|
|
(102,814
|
)
|
|
|
(29,315
|
)
|
|
|
(28,857
|
)
|
|
|
96,720
|
|
Financing activities
|
|
|
40,358
|
|
|
|
111,119
|
|
|
|
50,193
|
|
|
|
33,716
|
|
|
|
(77,163
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
$
|
(3,856
|
)
|
|
$
|
6,148
|
|
|
$
|
8,247
|
|
|
$
|
(7,178
|
)
|
|
$
|
(12,206
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Activities
Net cash used in operating activities for the nine months ended
September 30, 2010 was $31.8 million, an increase of
$19.7 million from $12.0 million of cash used in
operating activities for the same period in 2009. This increase
was primarily due to an $11.1 million decrease in agency
fee income and a decrease of $4.7 million in the change in
agency fees receivable due to lower collections of receivables
during the period.
Net cash used in operating activities in 2009 was
$12.6 million, an increase of $10.4 million from
$2.2 million of cash used in operating activities in 2008.
This increase was primarily due to a $21.9 million decrease
in agency fee income due to our origination of fewer premium
finance loans, and a $12.3 million increase in cash paid
for interest during the period due to an increase in loan
maturities during the period. These increases were partially
offset by a decrease in selling, general and administrative
expenses of $10.3 million due primarily to efforts to
reduce operating expenses, and certain changes in assets on our
balance sheet due to timing of cash receipts including a
decrease in the change in agency fees receivable of
$9.6 million and a decrease in the change in structured
settlement receivables of $5.4 million.
Net cash used in operating activities in 2008 was
$2.2 million, a decrease of $2.6 million from
$4.8 million of cash used in operating activities in 2007.
This decrease was primarily due to a $23.5 million increase
in agency fee income as we originated more loans. This increase
was partially offset by a
73
$17.2 million increase in selling, general and
administrative expenses as we grew our business, as discussed
further above, and excluding increases of $1.1 million
related non-cash charges for depreciation and provision for
doubtful accounts, and an increase of $7.5 million in cash
paid for interest.
Investing
Activities
Net cash provided by investing activities for the nine months
ended September 30, 2010 was $96.7 million, an
increase of $125.6 million from $28.9 million of cash
used in investing activities for the same period in 2009. The
increase was primarily due to a $96.5 million increase in
proceeds from loan payoffs, offset by a $27.6 million
decrease in cash used to purchase notes receivables.
Net cash used in investing activities in 2009 was
$29.3 million, a decrease of $73.5 million from
$102.8 million of cash used in investing activities in
2008. The decrease was primarily due to a $43.2 million decrease
in cash used for origination of loans receivable and a
$32.6 million increase in proceeds from loan payoffs.
Net cash used in investing activities in 2008 was
$102.8 million, an increase of $63.4 million from
$39.4 million of cash used in investing activities in 2007.
The increase was primarily due to a $69.8 million increase
in cash used for origination of loans receivable.
Financing
Activities
Net cash used in financing activities for the nine months ended
September 30, 2010 was $77.2 million, an increase of
$110.9 million from $33.7 million of cash provided by
investing activities for the same period in 2009. The increase
was primarily due to an increase of $129.4 million in
repayments of borrowings from credit facilities and affiliates,
net of additional borrowings, partially offset by a decrease of
$10.7 million in payment of financing fees and an increase
of $10.0 million in member contributions.
Net cash provided by financing activities in 2009 was
$50.2 million, a decrease of $60.9 million from
$111.1 million of cash provided by financing activities in
2008. The decrease was primarily due to a decrease of
$73.1 million in borrowing from credit facilities and
affiliates, net of repayments, partially offset by a decrease of
$5.4 million in payment of financing fees and an increase
of $4.7 million in member contributions.
Net cash provided by financing activities in 2008 was
$111.1 million, an increase of $70.7 million from
$40.4 million of cash provided by financing activities in
2007. The increase was primarily due to a increase of
$98.4 million in borrowing from credit facilities and
affiliates, net of repayments, partially offset by an increase
of $21.9 million in payment of financing fees and a
decrease of $6.8 million in member contributions.
Contractual
Obligations
The following table summarizes our contractual obligations as of
December 31, 2009 (in thousands):
Contractual
Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due in Less
|
|
|
Due
|
|
|
Due
|
|
|
More than
|
|
|
|
Total
|
|
|
than 1 Year
|
|
|
1-3 Years
|
|
|
3-5 Years
|
|
|
5 Years
|
|
|
Credit facilities(1)
|
|
$
|
193,498
|
|
|
$
|
40,152
|
|
|
$
|
153,346
|
|
|
$
|
|
|
|
$
|
|
|
Expected interest payments(2)
|
|
|
37,389
|
|
|
|
27,874
|
|
|
|
9,515
|
|
|
|
|
|
|
|
|
|
Operating leases
|
|
|
1,222
|
|
|
|
550
|
|
|
|
672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
232,109
|
|
|
$
|
68,576
|
|
|
$
|
163,533
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Credit facilities include principal outstanding related to
facilities that were used to fund premium finance loans. This
excludes promissory notes, which had principal of
$37.6 million outstanding as of
|
74
|
|
|
|
|
December 31, 2009, and which will be converted to shares of
our common stock upon the closing of this offering.
|
|
(2)
|
|
Expected interest payments are calculated based on outstanding
balances of our credit facilities as of December 31, 2009
and assumes repayment of principal and interest at the maturity
date of the related premium finance loan, which may be prior to
the final maturity of the credit facility.
|
Inflation
Our assets and liabilities are, and will be in the future,
interest-rate sensitive in nature. As a result, interest rates
may influence our performance far more than does inflation.
Changes in interest rates do not necessarily correlate with
inflation or changes in inflation rates. We do not believe that
inflation had any material impact on our results of operations
in the periods presented in our financial statements.
Off-Balance
Sheet Arrangements
There are no off-balance sheet arrangements between us and any
other entity that have, or are reasonably likely to have, a
current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources
that is material to stockholders.
Quantitative
and Qualitative Disclosure about Market Risk
Market risk is the risk of potential economic loss principally
arising from adverse changes in the fair value of financial
instruments. The major components of market risk are credit
risk, interest rate risk and foreign currency risk. We have no
exposure in our operations to foreign currency risk.
Credit
Risk
In our premium finance business segment, with respect to life
insurance policies collateralizing our loans or that we acquire
upon relinquishment, credit risk consists primarily of the
potential loss arising from adverse changes in the fair value of
the policy and, to a lesser extent, the financial condition of
the issuers of the life insurance policies. We manage our credit
risk related to these life insurance policy issuers by generally
only funding premium finance loans for policies issued by
companies that have a credit rating of at least A+
by Standard & Poors, at least A3 by
Moodys, at least A by A.M. Best Company
or at least A+ by Fitch. At September 30, 2010,
95.6% of our loan collateral was for policies issued by
companies rated investment grade (credit ratings of
AAA to BBB-) by Standard &
Poors.
The following table shows the percentage of the total number of
loans outstanding with lender protection insurance and the
percentage of our total loans receivable balance covered by
lender protection insurance as of the dates indicated below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
September 30,
|
|
|
2007
|
|
2008
|
|
2009
|
|
2009
|
|
2010
|
|
Percentage of total number of loans outstanding with lender
protection insurance
|
|
|
|
|
|
|
74.6
|
%
|
|
|
91.2
|
%
|
|
|
86.8
|
%
|
|
|
94.6
|
%
|
Percentage of total loans receivable balance covered by lender
protection insurance
|
|
|
|
|
|
|
78.6
|
%
|
|
|
93.1
|
%
|
|
|
90.0
|
%
|
|
|
95.2
|
%
|
For the loans that had lender protection insurance and that
matured during the nine months ended September 30, 2010 and
the year ended December 31, 2009, the lender protection
insurance claims paid to us were 94.6% and 93.5%, respectively,
of the carrying value of the insured loans.
Our premium finance loans are originated with borrowers residing
throughout the United States. We do not believe there are any
geographic concentrations of loans that would cause them to be
similarly impacted by economic or other conditions. However,
there is concentration in the life insurance carriers that
issued these life insurance policies that serve as our loan
collateral. The following table provides information about the
life
75
insurance issuer concentrations that exceed 10% of total death
benefit and 10% of outstanding loan balance as of
September 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
Percentage of
|
|
|
|
|
|
|
Total Outstanding
|
|
Total Death
|
|
Moodys
|
|
S&P
|
Carrier
|
|
Loan Balance
|
|
Benefit
|
|
Rating
|
|
Rating
|
|
Lincoln National Life Insurance Company
|
|
|
25.7
|
%
|
|
|
29.1
|
%
|
|
|
A2
|
|
|
|
AA-
|
|
Lincoln Benefit Life Company
|
|
|
10.5
|
%
|
|
|
|
|
|
|
A1
|
|
|
|
AA-
|
|
Principal Life Insurance Company
|
|
|
|
|
|
|
10.4
|
%
|
|
|
Aa3
|
|
|
|
A
|
|
As of September 1, 2010, our lender protection insurer,
Lexington, had a financial strength rating of A+
with a negative outlook by Standard & Poors.
In our structured settlements segment, credit risk consists of
the potential loss arising principally from adverse changes in
the financial condition of the issuers of the annuities that
arise from a structured settlement. Although certain purchasers
of structured settlements may require higher credit ratings, we
manage our credit risk related to the obligors of our structured
settlements by generally requiring that they have a credit
rating of A− or better by Standard &
Poors. The risk of default in our structured settlement
portfolio is mitigated by the relatively short period of time
that we hold structured settlements as investments. We have not
experienced any credit losses in this segment and we believe
such risk is minimal.
Interest
Rate Risk
In our premium finance segment, most of our credit facilities
and promissory notes provide us with fixed-rate financing.
Therefore, fluctuations in interest rates currently have minimal
impact, if any, on our interest expense under these facilities.
However, increases in interest rates may impact the rates at
which we are able to obtain financing in the future.
We earn revenue from interest charged on loans, loan origination
fees and fees from referring agents. We receive interest income
that accrues over the life of the premium finance loan and is
due at maturity. Substantially all of the interest rates we
charge on our premium finance loans are floating rates that are
calculated at the one-month LIBOR rate plus an applicable
margin. In addition, our premium finance loans have a floor
interest rate and are capped at 16.0% per annum. For loans with
floating rates, each month the interest rate is recalculated to
equal one-month LIBOR plus the applicable margin, and then, if
necessary, adjusted so as to remain at or above the stated floor
rate and at or below the capped rate of 16.0% per annum. While
the floor and cap interest rates mitigate our exposure to
changes in interest rates, our interest income may nonetheless
be impacted by changes in interest rates. Origination fees are
fixed and are therefore not subject to changes based on
movements in interest rates, although we do charge interest on
origination fees.
As of September 30, 2010, we owned investments in life
settlements (life insurance policies) in the amount of
$8.8 million. A rise in interest rates could potentially
have an adverse impact on the sale price if we were to sell some
or all of these assets. There are several factors that affect
the market value of life settlements (life insurance policies),
including the age and health of the insured, investors
demand, available liquidity in the marketplace, duration and
longevity of the policy, and interest rates. We currently do not
view the risk of a decline in the sale price of life settlements
(life insurance policies) due to normal changes in interest
rates as a material risk.
In our structured settlements segment, our profitability is
affected by levels of and fluctuations in interest rates. Such
profitability is largely determined by the difference, or
spread, between the discount rate at which we
purchase the structured settlements and the discount rate at
which we can resell these assets or the interest rate at which
we can finance those assets. Structured settlements are
purchased at effective yields which are fixed, while rates at
which structured settlements are sold, with the exception of
forward purchase arrangements, are generally a function of the
prevailing market rates for short-term borrowings. As a result,
increases in prevailing market interest rates after structured
settlements are acquired could have an adverse effect on our
yield on structured settlement transactions.
76
BUSINESS
Overview
We are a specialty finance company with a focus on providing
premium financing for individual life insurance policies issued
by insurance companies generally rated A+ or better
by Standard & Poors or A or better
by A.M. Best Company at the time of the financing and
purchasing structured settlements backed by annuities issued by
insurance companies or their affiliates generally rated
A− or better from Moodys Investors
Services or Standard & Poors. We were founded in
December 2006 as a Florida limited liability company.
In our premium finance business we earn revenue from interest
charged on loans, loan origination fees and fees from referring
agents. We have historically relied on debt financing to operate
this business. Since 2007, the United States capital
markets have experienced extensive distress and dislocation due
to the global economic downturn and credit crisis. Lenders in
the premium finance market generally exited the market or
increased their lending rates and required more assurances such
as additional collateral support and third-party guarantees. As
a result, our financing cost for a premium finance transaction
increased significantly. For the nine months ended
September 30, 2010, our financing cost was approximately
31.1% per annum of the principal balance of the loans compared
to 14.5% per annum for the twelve months ended December 31,
2007. With the net proceeds of this offering, we intend to fund
our future premium finance transactions with equity financing
instead of debt financing. Over time we expect that this will
significantly reduce our cost of financing and help to generate
higher returns for our shareholders.
In our structured settlement business, we purchase structured
settlements at a discounted rate and sell such assets to, or
finance such assets with, third parties. For the nine months
ended September 30, 2010 and year ended December 31,
2009, we purchased structured settlements at weighted average
discount rates of 19.3% and 16.3%, respectively.
During the nine months ended September 30, 2010 and the
year ended December 31, 2009, we had revenue of
$60.4 million and $96.6 million, respectively, and a
net loss of $16.4 million and $8.6 million,
respectively. During the nine months ended September 30,
2010 and the year ended December 31, 2009, 88.8% and 95.9%,
respectively, of our revenue was generated from our premium
finance segment and 11.2% and 4.1%, respectively, of our revenue
was generated from our structured settlement segment. As of
September 30, 2010, we had total assets of
$181.0 million. For our financial results by segment, see
Managements Discussion and Analysis of Financial Condition
and Results of Operations Segment Information,
Note 15 in the Notes to the Consolidated and Combined
Audited Financial Statements and Note 9 in the Notes to the
Consolidated and Combined Unaudited Financial Statements.
Premium
Finance Business
Overview
A premium finance transaction is a transaction in which a life
insurance policyholder obtains a loan, predominately through an
irrevocable life insurance trust established by the insured, to
pay insurance premiums for a fixed period of time, allowing a
policyholder to maintain coverage under the policy without
having to make premium payments during the term of the loan. A
premium finance transaction also benefits life insurance agents
by preventing a life insurance policy from lapsing, which could
require the agent to repay a portion of the commission earned in
connection with the issuance of the policy. Since our inception,
we have originated premium finance transactions collateralized
by life insurance policies with an aggregate death benefit in
excess of $4.0 billion.
As of September 30, 2010, the average principal balance of
the loans we have originated since inception is approximately
$213,000. The life insurance policies that serve as collateral
for our premium finance loans are predominately universal life
policies that have an average death benefit of approximately
$4 million and insure persons over age 65. We
currently make loans to borrowers in 9 states with the
insureds residing in any of the 50 states.
77
Our typical premium finance loan is approximately two years in
duration and is collateralized by the underlying life insurance
policy. We generate revenue from our premium finance business in
the form of agency fees from referring agents, interest income
and origination fees as follows:
|
|
|
|
|
Agency Fees
We charge the referring agent an
agency fee for services related to premium finance loans. Agency
fees as a percentage of the principal balance of the loans
originated during the nine months ended September 30,
2010 and year ended December 31, 2009 were 49.9% and 50.6%,
respectively. These agency fees are charged when the loan is
funded and collected on average within 47 days thereafter.
|
|
|
|
Interest Income
Substantially all of the
interest rates we charge on our premium finance loans are
floating rates that are calculated at the one-month LIBOR rate
plus an applicable margin. In addition, our premium finance
loans have a floor interest rate and are capped at 16.0% per
annum. For loans with floating rates, each month the interest
rate is recalculated to equal one-month LIBOR plus the
applicable margin, and then, if necessary, adjusted so as to
remain at or above the stated floor rate and not to exceed the
capped rate of 16.0% per annum. The weighted average per annum
interest rate for premium finance loans outstanding as of
September 30, 2010 and December 31, 2009 was 11.3% and
10.9%, respectively.
|
|
|
|
Origination Fees
On each premium finance loan
we charge a loan origination fee that is added to the loan and
is due upon the date of maturity or upon repayment of the loan.
Origination fees as a percentage of the principal balance of the
loans originated during the nine ended September 30, 2010
and the year ended December 31, 2009 were 41.7% and 44.7%,
respectively.
|
The policyholder is not required to make any payment on the loan
until maturity. At the end of the loan term, the policyholder
either repays the loan in full (including all interest and fees)
or, defaults under the loan. In the event of default, subject to
policy terms and conditions, the borrower typically relinquishes
to us control of the policy serving as collateral for the loan,
after which we may either seek to sell the policy, hold it for
investment, or, if the loan is insured, we are paid a claim
equal to the insured value of the policy, which may be equal to
or less than the amount we are owed under the loan. As of
September 30, 2010, 94.6% of our outstanding loans have
collateral whose value is insured. With the net proceeds from
this offering, we expect to have the option to retain for
investment a number of the policies relinquished to us upon a
default. When we choose to retain the policy for investment, we
are responsible for all future premium payments needed to keep
the policy in effect. We have developed proprietary systems and
processes that, among other things, determine the minimum
monthly premium outlay required to maintain each retained life
insurance policy.
Our premium finance borrowers are currently referred to us
through independent insurance agents and brokers licensed under
state law. Prior to January 2009, we originated premium finance
loans that were sold by life insurance agents that we employed.
Once a potential borrower has been referred to us, we assess the
borrowers creditworthiness and the fair value of the life
insurance policy to serve as collateral. We further support our
loan origination efforts with specialized sales teams that guide
agents and brokers through the lending process. Our transaction
processing and servicing processes and systems allow us to
process a high volume of applications while maintaining the
ability to structure complex negotiated transactions and apply
our strict underwriting standards. Our existing technology
infrastructure allows us to service our current loan volume
efficiently, and is designed to permit us to service the
increased loan volume that we expect to generate with the net
proceeds of this offering.
To help protect against fraud and to seek profitable
transactions, we perform extensive underwriting before entering
into a transaction. We use strict loan underwriting guidelines
that, among other things, require:
|
|
|
|
|
the use of third party medical underwriters to evaluate the
medical condition and life expectancy of each insured;
|
|
|
|
the use of actuarial tables published by the American Society of
Actuaries;
|
|
|
|
the subject policy be issued by an insurance company with a high
financial strength rating from A.M. Best,
Standard & Poors or other recognized rating
agencies;
|
78
|
|
|
|
|
a review of each loan for compliance with our internal
guidelines as well as applicable laws and regulations; and
|
|
|
|
the use of a personal guaranty to further support our
underwriting efforts to protect against losses resulting from
the issuing insurance company voiding a policy due to fraud or
misrepresentations in the application process to obtain the life
insurance policy.
|
We believe that our underwriting guidelines have been effective
in mitigating fraud-related risks.
When we approve a premium finance loan, the borrower executes a
loan agreement and other related documents, which contain
representations, warranties and guaranties from the insured and
representations and warranties from the referring agent or
broker in regard to the accuracy of the information provided to
us and the issuing life insurance company. After execution of
the loan documents, we fund the loan, with amounts required for
the payment of premiums not yet due typically placed in escrow.
The borrower then uses the funds not in escrow for the payment
of premiums coming due, trustee fees or to apply against
premiums previously paid.
Sources
of Revenue
During the nine months ended September 30, 2010 and the
year ended December 31, 2009, 88.8% and 95.9%,
respectively, of our revenue was generated from our premium
finance segment. We generate revenue from our premium finance
business in the form of agency fees from the referring insurance
agent, interest income and origination fees as follows:
|
|
|
|
|
Agency fees.
For each premium finance loan,
Imperial Life and Annuity Services, LLC (Imperial Life and
Annuity), a licensed insurance agency and our wholly-owned
subsidiary, receives an agency fee from the referring insurance
agent. Imperial Life and Annuity typically charges and receives
agency fees from the referring agent within approximately
47 days of our funding the loan. Referring insurance agents
pay the agency fees to Imperial Life and Annuity for the due
diligence performed in underwriting the premium finance
transaction. The amount of the agency fee paid by a referring
life insurance agent is negotiated with the referring agents
based on a number of factors, including the size of the policy
and the amount of premiums on the policy. Agency fees as a
percentage of the principal balance of the loans originated
during the nine months ended September 30, 2010 and
year ended December 31, 2009 were 49.9% and 50.6%,
respectively. During the nine months ended September 30,
2010 and the year ended December 31, 2009, 17.0% and 28.2%,
respectively, of our revenue from our premium finance segment
was from agency fees.
|
|
|
|
Interest income.
We receive interest income
that accrues over the life of the loan and is due upon the date
of maturity or upon repayment of the loan. The interest rates
are typically floating rates that are calculated at the
one-month LIBOR rate plus an applicable margin. In addition, our
premium finance loans have a floor interest rate and are capped
at 16.0% per annum. For loans with floating rates, each month
the interest rate is recalculated to equal one-month LIBOR plus
the applicable margin, and then, if necessary, adjusted so as to
remain at or above the stated floor rate and at or below the
capped rate of 16.0% per annum. The weighted average per annum
interest rate for premium finance loans outstanding as of
September 30, 2010 and December 31, 2009 were 11.3%
and 10.9%, respectively. During the nine months ended
September 30, 2010 and the year ended December 31,
2009, 28.9% and 21.9%, respectively, of our revenue from our
premium finance segment was from interest income.
|
|
|
|
Origination fees.
We charge a loan origination
fee on each premium finance loan we fund. The origination fee
accrues over the term of the loan and is due upon the date of
maturity or upon repayment of the loan. For the nine months
ended September 30, 2010 and for the twelve months ended
December 31, 2009, origination fees as a percentage of the
principal balance of the loans originated during such periods
were 41.7% and 44.7%, respectively. During the nine months ended
September 30,
|
79
|
|
|
|
|
2010 and the year ended December 31, 2009, the per annum
origination fee as a percentage of the principal balance of the
loans originated was 21.0% and 19.2%, respectively. During the
nine months ended September 30, 2010 and the year ended
December 31, 2009, 31.2% and 32.2%, respectively, of our
revenue from our premium finance segment was from origination
fees.
|
We are repaid our principal as well as our origination fees and
interest income in one of the following three ways:
|
|
|
|
|
the borrower or family member of the insured repays the loan
upon maturity;
|
|
|
|
the insured passes away prior to the loan maturity and the death
benefit is used to repay the loan, with the remainder being paid
to the borrower for the benefit of its beneficiaries; or
|
|
|
|
upon default, we typically enter into an agreement with the
borrower and the life insurance policy beneficiaries whereby
they relinquish ownership of the life insurance policy and all
interests therein to us in exchange for a release of the
obligation to pay amounts due. Following relinquishment, if the
loan is insured pursuant to lender protection insurance, then,
subject to terms and conditions of the lender protection
insurance policy, our lender protection insurer has the right to
direct control or take beneficial ownership of the life
insurance policy and we are paid a claim equal to the insured
value of the life insurance policy serving as collateral
underlying the loan. If the loan is not insured, we seek to sell
the life insurance policy in the secondary market. In the
future, with the net proceeds from this offering, we expect to
have the option to retain for investment a number of the
policies relinquished to us upon a default. When we retain for
investment policies relinquished to us upon default, we will
receive the death benefit of the policy upon the death of the
insured as long as we continue to pay the premiums required to
keep the policy in force and the policy is not contested.
|
Since we were founded in December 2006, nearly all of our loan
maturities have occurred during a time of dislocations in the
capital markets and, as a result, our historical methods of
repayment may not be indicative of future performance. The
following table shows the method of repayment for loans maturing
during the following periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
Year Ended December 31,
|
|
|
September 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
Repaid by the borrower
|
|
|
0
|
|
|
|
2
|
|
|
|
12
|
|
|
|
10
|
|
|
|
5
|
|
Repaid from death benefit during term of loan
|
|
|
0
|
|
|
|
3
|
|
|
|
2
|
|
|
|
1
|
|
|
|
1
|
|
Repaid from lender protection insurance claim
|
|
|
0
|
|
|
|
4
|
|
|
|
86
|
|
|
|
45
|
|
|
|
328
|
|
Cost
of Financing
In our premium finance business, we have historically relied
heavily on debt financing. Debt financing has become
prohibitively expensive for our business. Every credit facility
we have entered into since December 2007 for our premium finance
business has required us to obtain lender protection insurance
for each loan originated under such credit facility. This
coverage provides insurance on the value of the underlying life
insurance policy serving as collateral underlying the loan
should our borrower default. Subject to the terms and conditions
of the lender protection insurance policy, in the event of a
payment default by the borrower, our lender protection insurer
has the right to direct control or take beneficial ownership of
the life insurance policy and we are paid a claim equal to the
insured value of the life insurance policy serving as collateral
underlying the loan. We also pay a premium to a contingent
lender protection insurer for each of our loans originated under
our White Oak and Cedar Lane credit facilities. Our cost for
contingent lender protection insurance has been included as part
of our cost for lender protection insurance. The cost for lender
protection insurance generally has ranged from 8% to 11% per
annum of the principal balance of the loan. While lender
protection insurance provides us with liquidity, it prevents us
from realizing the appreciation, if any, of the underlying life
insurance policy when a borrower relinquishes ownership of such
life insurance policy upon default. As of September 30,
2010, 94.6% of our outstanding premium finance loans have
collateral whose value is insured. By procuring lender
protection insurance, we have been able to borrow at interest
rates ranging from approximately 14.0% to 16.0%.
80
The following table shows our total financing cost per annum as
a percentage of the principal balance of the loans originated
during the following periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
Lender protection insurance cost
|
|
|
|
|
|
|
8.5
|
%
|
|
|
10.9
|
%
|
|
|
11.0
|
%
|
|
|
10.4
|
%
|
Interest cost and other lender funding charges under credit
facilities
|
|
|
14.5
|
%
|
|
|
13.7
|
%
|
|
|
18.2
|
%
|
|
|
18.5
|
%
|
|
|
20.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financing cost
|
|
|
14.5
|
%
|
|
|
22.2
|
%
|
|
|
29.1
|
%
|
|
|
29.5
|
%
|
|
|
31.1
|
%
|
With the net proceeds of this offering, we intend to change our
premium finance business model to rely on equity financing
instead of debt financing for new premium finance loans.
As of September 30, 2010, we had total debt outstanding of
$82.4 million of which $58.3 million, or 70.8%, is
owed by our special purpose entities which were established for
the purpose of obtaining debt financing to fund premium finance
loans. This debt is collateralized by life insurance policies
underlying premium finance loans that we have assigned, or in
which we have sold participation rights, to our special purpose
entities. We have obtained lender protection insurance for
nearly all of these premium finance loans. Debt owned by these
special purpose entities is generally non-recourse to us and our
other subsidiaries except to the extent of our equity interest
in these special purpose entities. One exception is the Cedar
Lane facility where we have guaranteed 5% of the applicable
special purpose entitys obligations. Messrs. Mitchell
and Neuman made certain guaranties to lenders for the benefit of
the special purpose entities for matters other than financial
performance. These guaranties are not unconditional sources of
credit support but are intended to protect the lenders against
acts of fraud, willful misconduct or a borrower commencing a
bankruptcy filing. To the extent lenders sought recourse against
Messrs. Mitchell and Neuman for such non-financial
performance reasons, then our indemnification obligations to
Messrs. Mitchell and Neuman may require us to indemnify
them for losses they may incur under these guaranties.
As of September 30, 2010, promissory notes that will be
converted into shares of our common stock upon the closing of
this offering had an outstanding principal balance of
$19.9 million or 24.1% of our total outstanding debt and
$3.4 million of related accrued interest.
81
The following table shows our total outstanding debt by facility
as well as the portion of the outstanding debt that is secured
by life insurance policies and for which we have purchased
lender protection insurance in dollars and that is non-recourse
beyond our special purpose entities (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
|
Year Ended December 31,
|
|
|
September 30,
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
Credit Facilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Acorn
|
|
$
|
22,440
|
|
|
$
|
9,179
|
|
|
$
|
4,215
|
|
CTL*
|
|
|
60,581
|
|
|
|
49,744
|
|
|
|
24
|
|
White Oak
|
|
|
|
|
|
|
26,595
|
|
|
|
26,179
|
|
Cedar Lane
|
|
|
|
|
|
|
11,806
|
|
|
|
32,121
|
|
Ableco
|
|
|
71,594
|
|
|
|
96,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total credit facilities
|
|
|
154,615
|
|
|
|
193,498
|
|
|
|
62,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Promissory Notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amalgamated
|
|
|
9,060
|
|
|
|
9,627
|
|
|
|
|
|
Skarbonka
|
|
|
|
|
|
|
17,615
|
|
|
|
16,102
|
|
IMPEX
|
|
|
|
|
|
|
10,324
|
|
|
|
3,752
|
|
Jasmund LTD.
|
|
|
6,600
|
|
|
|
|
|
|
|
|
|
Cedarmount Trading
|
|
|
8,900
|
|
|
|
|
|
|
|
|
|
Red Oak
|
|
|
2,512
|
|
|
|
|
|
|
|
|
|
IFS Holdings
|
|
|
1,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total promissory notes
|
|
|
28,847
|
|
|
|
37,566
|
|
|
|
19,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Debt
|
|
$
|
183,462
|
|
|
$
|
231,064
|
|
|
$
|
82,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Total Debt secured by loans with lender protection
insurance that are non-recourse to Imperial
|
|
$
|
132,175
|
|
|
$
|
184,319
|
|
|
$
|
58,324
|
|
% of Total Debt secured by loans with lender protection
insurance that are non-recourse to Imperial
|
|
|
72.0
|
%
|
|
|
79.8
|
%
|
|
|
70.8
|
%
|
|
|
|
*
|
|
Represents the balance remaining under our $30 million grid
promissory note in favor of CTL Holdings. See Description
of Certain Indebtedness.
|
In 2009 and 2008, we financed subsequent premiums to keep the
underlying insurance policies in force on 485 and 284 loans
receivable with aggregate principal balances of approximately
$15.7 million and $8.4 million, respectively. These
balances included approximately $6.2 million and
$3.4 million of loans financed from our credit facilities
and approximately $9.5 million and $5.0 million of
loans financed with cash received from affiliated companies,
respectively. During 2009 and 2008, 110 and 10 of our loans were
paid off with proceeds totaling approximately $36.1 million
and $3.5 million, respectively, of which approximately
$27.9 million and $3.0 million was for the principal
of the loans and approximately $3.8 million and $476,000
was for accrued interest, respectively. The loans had aggregate
discount balances at the time of repayment totaling
approximately $60,000 and $391,000, respectively. We recognized
losses of approximately $73,000 and $441,000 on these
transactions, respectively.
82
Premium
Finance Transaction Process
A typical premium finance transaction is processed by us in
accordance with the steps outlined below:
|
|
|
Step 1: Sales
|
|
Work with agents and brokers to obtain
necessary information regarding a life insurance policy.
|
|
|
Sales team manages the process and is
the point of contact for the referring agent or broker.
|
|
|
|
Step 2: Loan Underwriting
|
|
Provide financial analysis to assist the
sales and management teams by using our proprietary models to
determine fair value of the policy.
|
|
|
Review transactions for adherence to our
internal guidelines.
|
|
|
|
Step 3: Legal/Compliance
|
|
Conduct multiple reviews to ensure
transactions comply with all legal, lender, lender protection
insurer and carrier requirements.
|
|
|
Complete compliance checklist of over
200 items by multiple departments.
|
|
|
Maintain and distribute all documents
necessary for compliance with HIPAA, legal and internal
standards.
|
|
|
|
Step 4: Funding
|
|
Conduct independent review of each file
and verify that compliance, legal and pricing processes have
been completed.
|
|
|
Obtain authorized signatures on requests
for transaction funding.
|
|
|
Update files with completed
documentation.
|
|
|
|
Step 5: Servicing
|
|
Prepare and monitor internal and
external reporting to accounting, lenders and others.
|
|
|
Verify premiums are paid and correctly
applied.
|
|
|
Handle medical history, ongoing premiums
and policy relinquishment procedures.
|
Underwriting
Procedures
We consider and analyze a variety of factors in evaluating each
potential premium financing transaction. Our underwriting
procedures require that the policyholder provide documentation
confirming that the policyholder has a bona fide insurable
interest in the life of the insured. We will not finance
premiums for a policyholder if we determine that the
policyholder has been paid or promised an inducement at any
time. Since June 2008, our guidelines have required that every
borrower have an existing, in-force, life insurance policy and
provide proof of at least one prior premium payments from their
own funds prior to our funding of a loan. With respect to our
premium finance transactions in which we loan money for premiums
previously paid by the policyholder, we do not fund loans with
proceeds to the policyholder that are in excess of the premiums
previously paid and future premiums due on the policy.
Typically,
15-20%
of
the principal balance of the loan is for premiums already paid
by the policyholder and
80-85%
is
for future premiums. Each applicant is required to sign an
unconditional personal guaranty as to various matters related to
the funding of the loan, including as to the accuracy of the
information provided in the life insurance policy application,
as further support for our underwriting procedures, including
our assessment of whether the applicant is engaged in a STOLI
transaction. In the event of a default under the guaranty, the
guarantor guarantees the payment of all outstanding principal
and accrued and unpaid interest under the premium finance loan,
any early termination fees, costs and expenses payable
(including, but not limited to, reasonable attorneys fees)
as well as any and all costs and expenses to enforce the
guaranty (including, but not limited to, reasonable
attorneys fees). To date, we have never collected on a
personal guaranty. Our in-house staff attorneys review every
application and assess the validity of the applicants
insurable interest in the life of the insured before a loan is
funded. We believe our business practices are designed to
minimize the risk of our financing any STOLI policy.
83
Our underwriting procedures require that we use third-party
medical underwriters to evaluate the medical condition and life
expectancy of each insured. We only enter into transactions
which meet certain credit and financial standards, including
concentration limits for carrier credit, medical impairment and
expected mortality. We use medical reviews from at least two and
as many as four different medical underwriters and then we
select a conservative view of the insureds health
the healthiest outlook. These procedures reduce our
risk that the insureds life span is longer than expected.
Since our inception in December 2006, we have received over
24,000 life expectancy evaluations. These evaluations have
provided us with an extensive exposure to each of the major life
expectancy underwriters. Using those evaluations for comparative
analysis, we assess which underwriters are generally the most
conservative and which are most aggressive, and what biases each
underwriter employs in their analysis. In our experience,
certain underwriters trend more conservatively for certain
sexes, some more for certain ages, and different underwriters
have different levels of risk assigned to different medical
conditions. We record this data for every underwriting
evaluation we receive. We identify not only underwriter biases
and sensitivities, strengths and weaknesses but also trends over
time, which allows us to better identify the fair value of life
insurance policies using our proprietary models.
We review potential premium finance transactions for the
creditworthiness and ratings of each insurance carrier. In
addition to our internal review of the creditworthiness of an
insurance carrier, our general guideline for approval of an
insurance carrier is a rating of at least A+ by
Standard & Poors, at least A3 by
Moodys, at least A by A.M. Best Company
or at least A+ by Fitch. The issuing insurance
carriers claims paying ability generally must satisfy the
applicable ratings of at least two of the foregoing rating
agencies as a condition to our funding a premium finance loan.
However, based upon our own credit determination, we may provide
financing for life insurance policies issued by domestic
insurers that are unrated but have a highly-rated parent or
affiliate as well as unrated foreign insurers. As of the date of
this prospectus, we have not experienced any insurer default.
Servicing
Our servicing department administers all necessary premium
payments, loan satisfaction and policy relinquishment processes.
They maintain contact with insureds, trustees and referring
agents or brokers to obtain current information on policy
status. Our servicing department also updates the medical
histories of insureds. They request updated medical records from
physicians and also contact each insured to obtain updated
health information. During the term of a loan, when our
servicing department learns of a material health impairment, key
personnel in our sales team and management are alerted and our
records are updated accordingly.
With respect to the administration of the policy relinquishment
processes, our servicing department sends notices approximately
sixty and thirty days prior to the loan maturity date alerting
the borrower that the loan is maturing. In the event of a
default, our servicing department will send an agreement to the
borrower and its beneficiaries requesting that they agree to
relinquish ownership of the policy and all interests therein to
us in exchange for a release of the obligation to pay amounts
due. If we are unable to come to an agreement with the borrower
regarding the relinquishment of the policy, we may enforce our
security interests in the beneficial interests in the trust that
owns the policy pursuant to which we can exercise control over
the trust holding the policy in order to direct disposition of
the policy.
Our
Proprietary Systems and Processes
We have developed proprietary systems and processes that allow
us to, among other things:
|
|
|
|
|
Store all of our data electronically, including policy
information, premium schedules, past mortality experience,
underwriting information, mortality probabilities and other data;
|
|
|
|
Use our electronic data to generate financial models and
analysis for an individual or group of life insurance policies;
|
|
|
|
Create internal and external reports of our underwriting and
policy valuation;
|
84
|
|
|
|
|
Perform a comparative analysis of life insurance products based
on a particular insureds age, gender, health information
and life expectancy; and
|
|
|
|
Identify the fair value of the life insurance policies that
underlie our premium finance loans.
|
We use a customized application service provider to capture data
and manage process flow that is frequently updated by the vendor
and avoids the restraints of legacy systems. This system
captures all the information necessary to manage, document,
report and analyze the sales, underwriting, compliance, funding
and servicing components of the premium finance business without
the need for a large information technology staff. Compliance
reviews have been implemented into our system enabling us to
quickly verify the compliance status of every transaction we
process.
There are numerous insurance companies that meet our ratings
guidelines that offer life insurance to high net worth seniors.
Each of these companies offers a variety of different life
insurance policies with different features and limitations for
the insured. New policy types are introduced regularly and
existing policy types are modified for new applicants. We have
developed proprietary models to assist us in analyzing the fair
value of a life insurance policy. In order to determine which
policies we believe are the most valuable, we analyze the legal
and financial terms of each policy and product type, as well as
the health, sex and age of the insured. Based on these and other
inputs, we calculate loan balances, policy values and summaries
of the cash flows and yields of a potential transaction.
Furthermore, we are able to run these models based on life
expectancies from a number of different medical underwriters,
which allows us to determine the collateral value we believe
exists in a policy. Furthermore, the life expectancy evaluations
we receive allow us to assess which underwriters are generally
the most conservative and which are most aggressive, as well as
the biases each underwriter employs in their analysis. These
models allow us to evaluate and immediately rank and score the
policies based on value and volatility, which, in turn, allows
us to determine which premium finance transactions provide us
with the best value.
Our proprietary models also allow us to enter data to produce
the minimum premium schedule that is required to keep the death
benefit in force
year-over-year
until policy maturity. This minimizes the cash outflows required
to pay premiums on a policy. Our premium optimizer model takes
into account the complex aspects of the individual product
structure, such as no-lapse guarantees, policy endorsements,
sub-accounts
and shadow accounts.
Structured
Settlements Business
Overview
Structured settlements refer to a contract between a plaintiff
and defendant whereby the plaintiff agrees to settle a lawsuit
(usually a personal injury, product liability or medical
malpractice claim) in exchange for periodic payments over time.
A defendants payment obligation with respect to a
structured settlement is usually assumed by a casualty insurance
company. This payment obligation is then satisfied by the
casualty insurer through the purchase of an annuity from a
highly rated life insurance company, which provides a high
credit quality stream of payments to the plaintiff.
Recipients of structured settlements are permitted to sell their
deferred payment streams to a structured settlement purchaser
pursuant to state statutes that require certain disclosures,
notice to the obligors and state court approval. Through such
sales, we purchase a certain number of fixed, scheduled future
settlement payments on a discounted basis in exchange for a
single lump sum payment, thereby serving the liquidity needs of
structured settlement holders.
According to Standard & Poors, the structured
settlement industry has been in existence for more than
20 years. In 2008, Standard & Poors
estimated that there were more than 500,000 structured
settlement contracts outstanding in the United States with an
average maturity of 15 years. However, Standard &
Poors has estimated that only one quarter of these
settlements are likely available for purchase.
We use national television marketing to generate in-bound
telephone and internet inquiries. As of September 30, 2010,
we had a database of over 30,000 structured settlement leads. We
believe our database
85
provides a strong pipeline of purchasing opportunities. As our
database has grown and we have completed more transactions, the
average marketing cost per structured settlement transaction,
which is one of our key expense metrics, has decreased.
As of September 30, 2010, we had 52 employees
dedicated to the purchase or underwriting of structured
settlements. Our purchasing team is trained to work with a
prospective client to review the transaction documentation and
to assess a clients needs. Our underwriting group is
responsible for reviewing all proposed purchases and performing
a detailed analysis of the associated documentation. We have
also developed a cost-effective nationwide network of law firms
to represent us in the required court approval process for
structured settlements. As of September 30, 2010, the
average cycle time starting from submission of the paper work to
funding the transaction was 70 days. This cycle includes
the evaluation and structuring of the transaction, an economic
review, pricing and coordination of the court process. Our
underwriting procedures and process timeline for structured
settlement transactions are described below.
We believe that we have various funding alternatives for the
purchase of structured settlements. On September 24, 2010,
we entered into an arrangement to provide us up to
$50 million to finance the purchase of structured
settlements. We also have other parties to whom we have sold
settlement assets in the past, and to whom we believe we can
sell assets in the future. We will continue to evaluate
alternative financing arrangements, which could include securing
a warehouse line of credit that would allow us to purchase
structured settlements.
Marketing
We do not believe that there are any readily available lists of
holders of structured settlements, which makes brand awareness
critical to growing market share. We have a primary target
market consisting of individuals 18 to 49 years of age with
middle class income or lower.
Our primary marketing medium, which has been developed and
refined by our experienced management team, is nationwide direct
response television marketing to solicit inbound calls to our
call center. Our direct response television campaign consists of
nationally placed 15 or 30 second commercials that air during
our call center hours on several syndicated and cable networks.
Each advertisement campaign is assigned a unique toll free
number so we can track the effectiveness of each marketing slot.
Typically, we experience a high volume of calls immediately
after we air a television advertisement. Therefore, we attempt
to space our advertisements to maintain a steady stream of
inbound calls that our purchasing team is able to process. In
addition to our direct response television campaign, we buy
marketing on Internet search engines such as Google and Yahoo.
These advertisements produce leads with contact information that
are quickly routed to our purchasing staff for
follow-up.
We also send letters monthly to most of the leads in our
database containing information about us and our services.
We use our software to efficiently capture all inbound calls. We
have built a proprietary database of clients and prospective
clients. As of September 30, 2010, we had a database of
over 30,000 structured settlement leads. Based on our experience
in the structured settlement industry, we generally expect that
many of our clients will complete two or more transactions over
time. Since inception, we have purchased a total of 171
structured settlements from existing customers in repeat
transactions. The percentage of repeat transactions has grown
from 5% in the three months ended March 31, 2008 to 34% in
the three months ended September 30, 2010. Therefore, we
believe our database provides us with a strong pipeline of
potential purchasing opportunities with low incremental
acquisition cost. When our call center staff is not answering
inbound calls, they call contacts in the database to generate
business. As our database and pool of customers grow, we expect
to complete more transactions and our cost of marketing per
transaction should decrease. We have made a significant
investment to obtain the information for our database and
believe it would be time-consuming and expensive for a
competitor to replicate.
86
The following table shows the number of transactions we have
completed and our average marketing cost per transaction
(dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
Year Ended December 31,
|
|
September 30,
|
|
|
2007
|
|
2008
|
|
2009
|
|
2009
|
|
2010
|
|
Number of transactions originated
|
|
|
10
|
|
|
|
276
|
|
|
|
396
|
|
|
|
275
|
|
|
|
385
|
|
Average marketing cost per transaction
|
|
$
|
205.6
|
|
|
$
|
19.2
|
|
|
$
|
11.3
|
|
|
$
|
12.7
|
|
|
$
|
9.3
|
|
We believe this cost per transaction will continue to trend down
over time. Additionally, our transactions with repeat customers
are more profitable than with new customers due to the reduction
in transaction costs. As our database grows, it provides more
purchasing opportunities. The following table shows the number
and percentage of our total structured settlement transactions
completed with repeat customers for the three-month periods
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Mar 31,
|
|
June 30,
|
|
Sep 30,
|
|
Dec 31,
|
|
Mar 31,
|
|
June 30,
|
|
Sep 30,
|
|
Dec 31,
|
|
Mar 31,
|
|
June 30,
|
|
Sep 30,
|
|
|
2008
|
|
2008
|
|
2008
|
|
2008
|
|
2009
|
|
2009
|
|
2009
|
|
2009
|
|
2010
|
|
2010
|
|
2010
|
|
Number of transactions with repeat customers
|
|
|
2
|
|
|
|
4
|
|
|
|
5
|
|
|
|
12
|
|
|
|
10
|
|
|
|
12
|
|
|
|
10
|
|
|
|
20
|
|
|
|
23
|
|
|
|
25
|
|
|
|
48
|
|
Percentage of total transactions
|
|
|
5
|
%
|
|
|
7
|
%
|
|
|
7
|
%
|
|
|
11
|
%
|
|
|
13
|
%
|
|
|
13
|
%
|
|
|
10
|
%
|
|
|
17
|
%
|
|
|
22
|
%
|
|
|
18
|
%
|
|
|
34
|
%
|
As we grow our experienced sales staff, we intend to air more
television advertisements to increase our volume of inbound
calls. We believe that there are a substantial number of
broadcasts viewed by our primary target market, which presents
an opportunity to expand our marketing efforts. We also plan to
expand our Internet marketing.
Funding
We believe that we have various funding options for the purchase
of structured settlements.
|
|
|
|
|
Strategic sale.
We have sold pools of
structured settlements we acquired in the past. We recently
entered into an arrangement to provide us up to $50 million
to finance the purchase of structured settlements. We also have
other parties to whom we have sold structured settlement assets
in the past and to whom we believe we can sell such assets in
the future.
|
|
|
|
|
|
Balance sheet.
We may purchase structured
settlements and we may hold them for investment, servicing the
asset and collecting the periodic payments or we may finance
such assets through our $50 million arrangement described
above. Although we have not used debt financing to fund the cost
of acquisition of structured settlements as of the date of this
offering, we will continue to evaluate alternative financing
arrangements such as a warehouse line of credit.
|
Sources
of Revenue
During the nine months ended September 30, 2010 and the
year ended December 31, 2009, 11.2% and 4.1%, respectively,
of our revenue was generated from our structured settlement
segment. Most of our revenue from structured settlements
currently is earned from the sale of structured settlements that
we originate. When we sell assets, the revenue consists of the
difference between the sale proceeds and our purchase price. If
we retain structured settlements on our balance sheet, we earn
interest income over the life of the asset based on the discount
rate used to determine the purchase price. During the nine
months ended September 30, 2010 and the year ended
December 31, 2009, 94.1% and 67.7%, respectively, of our
revenue from our structured settlement segment was generated
from the sale of structured settlements and mark-to-market
adjustments and 4.6% and 30.6%, respectively, was generated from
interest income. The following table shows the number of
transactions we have originated, the face value of undiscounted
future payments purchased, the weighted
87
average purchase discount rate, the number of transactions sold
and the weighted average discount rate at which the assets were
sold (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
|
Ended
|
|
|
Year Ended December 31,
|
|
September 30,
|
|
|
2007
|
|
2008
|
|
2009
|
|
2009
|
|
2010
|
|
Number of transactions originated
|
|
|
10
|
|
|
|
276
|
|
|
|
396
|
|
|
|
275
|
|
|
|
385
|
|
Face value of undiscounted future payments purchased
|
|
$
|
701
|
|
|
$
|
18,295
|
|
|
$
|
28,877
|
|
|
$
|
20,460
|
|
|
$
|
33,713
|
|
Weighted average purchase discount rate
|
|
|
11.0
|
%
|
|
|
12.0
|
%
|
|
|
16.3
|
%
|
|
|
16.1
|
%
|
|
|
19.3
|
%
|
Number of transactions sold
|
|
|
|
|
|
|
226
|
|
|
|
439
|
|
|
|
96
|
|
|
|
291
|
|
Weighted average sale discount rate
|
|
|
|
|
|
|
10.8
|
%
|
|
|
11.5
|
%
|
|
|
11.1
|
%
|
|
|
9.1
|
%
|
The discount rate at which we acquire structured settlements
payment has increased from 2007 to 2010. As our purchasing team
gains experience, we are able to improve duration and yield
objectives. Furthermore, as we complete more transactions with
repeat customers who are familiar with members of our purchasing
team, these transactions are driven more by relationship than
price.
Underwriting
Procedures, Transaction Timeline and Process
Our underwriting team is responsible for reviewing all proposed
structured settlement transactions and performing a detailed
analysis of the transaction documentation. The team identifies
any statutory requirements, as well as any issues that could
affect the structured settlement receivables, such as liens,
judgments or bankruptcy filings. The team confirms the existence
and value of the structured settlement receivables, that the
purchase will conform to our established internal credit
guidelines, that all applicable statutory requirements are
complied with and confirms that the asset is free from
encumbrances. In addition, the underwriting team administers the
transaction from the creation of the transaction documentation
through the court approval process, and then approves a
transaction for funding.
Each structured settlement transaction requires a court order
approving the transaction. The individual court hearings are
administered by a team of outside attorneys that we have
selected and developed relationships with. Outside counsel are
able to access our origination systems via a secure portal to
update records, creating process efficiencies.
As of September 30, 2010, our typical structured settlement
transaction was completed in an average of 70 days from the
date of initial contact by the client, as illustrated by the
sample timeline below:
|
|
|
Day 1
|
|
The individual who has a structured settlement contacts us
seeking a lump-sum payment based on the settlement.
|
Day 14
|
|
After analyzing the settlement structure, we offer to provide a
lump-sum amount to the individual in exchange for a set number
of payments.
|
Day 40
|
|
We complete our underwriting process. Upon satisfactory review,
our counsel secures a court date and notifies interested
parties, including any beneficiaries, owners and issuers of the
pending transaction.
|
Day 69
|
|
A court hearing is held and the judge approves or denies the
motion to sell and assign to us the agreed-upon portion of the
individuals structured settlement.
|
Day 70
|
|
Final review of the court-approved transaction takes place and
we fund the payment to the individual.
|
Dislocations
in the Capital Markets
Since 2007, the United States capital markets have
experienced extensive distress and dislocation due to the global
economic downturn and credit crisis. As a result of the
dislocation in the capital markets, our borrowing costs
increased dramatically in our premium finance business and we
were unable to access traditional sources of capital to finance
the acquisition and sale of structured settlements. At certain
points, we
88
were unable to obtain any debt financing. With the net proceeds
of this offering, we intend to operate our premium finance
business without relying on debt financing.
Premium Finance.
Market conditions have forced
us, and we believe many of our competitors, to pay higher
interest rates on borrowed capital since the beginning of 2008.
However, because we were a relatively new company with few
maturing debt obligations, the credit crisis presented an
opportunity for us to gain market share and create brand
recognition while many of our competitors experienced financial
distress.
Every credit facility we have entered into since December 2007
for our premium finance business required us to obtain lender
protection insurance for each loan originated under such credit
facility. This coverage provides insurance on the value of the
life insurance policy serving as collateral underlying the loan
should our borrower default. After a payment default by the
borrower, subject to the terms and conditions of the lender
protection insurance policy, our lender protection insurer has
the right to direct control or take beneficial ownership of the
life insurance policy and we are paid a claim equal to the
insured value of such policy. While lender protection insurance
provides us with liquidity, it prevents us from realizing the
appreciation, if any, of the underlying policy when a borrower
relinquishes ownership of the policy upon default. As of
September 30, 2010, 94.6% of our outstanding premium
finance loans have collateral whose value is insured. Currently,
we are only originating premium finance loans with lender
protection insurance. Following the earlier of the completion of
this offering or December 31, 2010, we do not expect to
originate premium finance loans with lender protection insurance.
We have experienced two adverse consequences from our high
financing costs: reduced profitability and decreased loan
originations. While the use of lender protection insurance
allows us to access debt financing to support our premium
finance business, the costs substantially reduced our
profitability. Additionally, there are coverage limitations
related to our use of lender protection insurance that have
reduced the number of otherwise viable premium finance
transactions that we could originate. We believe that the net
proceeds from this offering will allow us to increase the
profitability and number of new premium finance loans by
eliminating the cost of debt financing and lender protection
insurance and the limitations on loan origination that our
lender protection insurance imposes.
Structured Settlements.
During 2008 and 2009,
market conditions required us to offer discount rates as high as
12% in order to complete sales of portfolios of structured
settlements. During this period, we continued to invest heavily
in our structured settlement infrastructure. This investment is
benefiting us today because we have found that some structured
settlement recipients sell portions of their future payment
streams in multiple transactions. As our business matures and
grows, our structured settlement business has been, and should
continue to be, bolstered by additional transactions with
existing customers and additional purchases of structured
settlements with new customers. Purchases from past customers
increase overall transaction volume and also decrease average
transaction costs.
Our
Competitive Strengths
We believe our competitive strengths are:
|
|
|
|
|
Complementary mix of business lines.
Unlike
many of our competitors who are focused on either structured
settlements or premium financings, we operate in both lines of
business. This diversification provides us with a complementary
mix of business lines as the revenues generated by our
structured settlement business are generally short-term cash
receipts in comparison to the revenue from our premium financing
business which is collected over time.
|
|
|
|
|
|
Scalable and cost-effective infrastructure.
We
have created an efficient, cost-effective, scalable
infrastructure that complements our businesses. We have
developed proprietary systems and models that allow for
cost-effective review of both premium finance and structured
settlement transactions that utilize our underwriting standards
and guidelines. Our systems allow us to efficiently process
transactions while maintaining our underwriting standards. As a
result of our investments in our infrastructure, we have
developed a structured settlement business model that we believe
has significant scalability to permit our structured settlement
business to continue to grow efficiently.
|
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|
|
|
|
|
Barriers to entry.
We believe that there are
significant barriers to entry into the premium financing and
structured settlement businesses. With respect to premium
finance, obtaining the requisite state licenses and developing a
network of referring agents is time intensive and expensive.
With respect to structured settlements, the various state
regulations require special knowledge as well as a network of
attorneys experienced in obtaining court approval of these
transactions. Our management and key personnel from our premium
finance and structured settlement businesses are experienced in
these specialized businesses and, in many cases, have more than
half a decade of experience working together at Imperial and at
prior employers. Our management team has significant experience
operating in this highly regulated industry.
|
|
|
|
Strength and financial commitment of management team with
proven track record.
Our senior management team
is experienced in the premium finance and structured settlement
industries. In the mid-1990s, several members of our management
team worked together at Singer Asset Finance, where they were
early entrants in structured settlement asset classes. After
Singer was acquired in 1997 by Enhance Financial Services Group
Inc., several members of our senior management team joined Peach
Holdings, Inc. At Peach Holdings, they held senior positions,
including Chief Operating Officer, Head of Life Finance and Head
of Structured Settlements. In addition, Antony Mitchell, our
chief executive officer, and Jonathan Neuman, our president and
chief operating officer, each have over $7 million of their
own capital invested in our company. This financial commitment
aligns the interests of our principal executive officers with
those of our shareholders.
|
Business
Strategy
Guided by our experienced management team, with the net proceeds
from this offering, we intend to pursue the following strategies
in order to increase our revenues and generate net profits:
|
|
|
|
|
Reduce or eliminate the use of debt financing in our premium
finance business.
The capital generated by this
offering will enable us to fund our premium finance loans and
provide us with the option to retain our investments in life
insurance policies that we acquire upon relinquishment by our
borrowers without the need for additional debt financing. In
contrast to our existing leveraged business model that has made
us reliant on third-party financing that is often unavailable or
expensive, we intend to use equity capital from this offering to
engage in premium finance transactions at profit margins
significantly greater than what we have historically
experienced. In the future, we expect to consider debt financing
for our premium finance transactions and structured settlement
purchases only if such financing is available on attractive
terms.
|
|
|
|
Eliminate the use of lender protection
insurance.
With the proceeds of this offering, we
will no longer require debt financing and lender protection
insurance for new premium finance business. As a result, we
expect to experience considerable cost savings, and in addition
expect to be able to originate more premium finance loans
because we will not be subject to coverage limitations imposed
by our lender protection insurer that have reduced the number of
loans that we can originate.
|
|
|
|
Continue to develop structured settlement
database.
We intend to increase our marketing
budget and grow our sales staff in order to increase the number
of leads in our structured settlement database and to originate
more structured settlement transactions. As our database of
structured settlements grows, we expect that our sales staff
will be able to increase our transaction volume due in part to
repeat transactions from our existing customers.
|
Regulation
Premium
Financing Transactions
The making, enforcement and collection of premium finance loans
is subject to extensive regulation. These regulations vary
widely, but often:
|
|
|
|
|
require that premium finance lenders be licensed by the
applicable jurisdiction;
|
90
|
|
|
|
|
require certain disclosures to insureds;
|
|
|
|
regulate the amount of late fees and finance charges that may be
charged if a borrower is delinquent on its payments; or
|
|
|
|
allow imposition of potentially significant penalties on lenders
for violations of that jurisdictions insurance premium
finance laws.
|
Furthermore, the enforcement and collection of premium finance
loans may be directly or indirectly affected by the laws and
regulations applicable to the life insurance policies that
collateralize the premium finance loans. We are also subject to
various state and federal regulations governing lending,
including usury laws. In addition, our premium financing
programs must comply with insurable interest, usury, life
settlement, life finance, rebating, or other insurance and
consumer protection laws.
The sale and solicitation of life insurance is highly regulated
by the laws and regulations of individual states and other
applicable jurisdictions. The purchase of a policy directly from
a policy owner, which is referred to as a life settlement, is a
business we are currently able to conduct in 35 states;
however, as of the date of this offering, we have not engaged in
the business of purchasing policies directly from policy owners.
Regulation of life settlements (life insurance policies) is done
on a state-by-state basis. We currently maintain licenses to
transact life settlements (life insurance policies) in 23 of the
38 states that currently require a license. A majority of
the state laws and regulations concerning life settlements (life
insurance policies) are based on the Model Act and Model
Regulation adopted by the National Association of Insurance
Commissioners (NAIC) and the Model Act adopted by the National
Conference of Insurance Legislators (NCOIL). The NAIC and NCOIL
models include provisions which relate to: (i) provider and
broker licensing requirements; (ii) reporting requirements;
(iii) required contract provisions and disclosures;
(iv) privacy requirements; (v) fraud prevention
measures such as STOLI; (vi) criminal and civil remedies;
(vii) marketing requirements; (viii) the time period
in which policies cannot be sold in life settlement
transactions; and (viii) other rules governing the
relationship between policy owners, insured persons, insurer,
and others.
Traditionally, the U.S. federal government has not directly
regulated the insurance business. Congress recently passed and
the President signed into law the Dodd-Frank Act, providing for
the enhanced federal supervision of financial institutions,
including insurance companies in certain circumstances, and
financial activities that represent a systemic risk to financial
stability of the U.S. economy. Under the Dodd-Frank Act,
the Federal Insurance Office will be established within the
U.S. Treasury Department to monitor all aspects of the
insurance industry. The director of the Federal Insurance Office
will have the ability to recommend that an insurance company or
insurance holding company be subject to heightened prudential
standards by the Federal Reserve, if it is determined that
financial distress at the company could pose a threat to the
financial stability of the U.S. economy. Notwithstanding
the creation of the Federal Insurance Office, the Dodd-Frank Act
provides that state insurance regulators will remain the primary
regulatory authority over insurance and expressly withholds from
the Federal Insurance Office and the U.S. Treasury
Department general supervisory or regulatory authority over the
business of insurance.
Structured
Settlements
Each structured settlement transaction requires a court order
approving the transaction. These transfer petitions,
as they are known, are brought pursuant to specific, state
structured settlement protection acts (SSPAs). These SSPAs
vary somewhat but generally require (i) that the seller
receive detailed disclosure statements regarding all key
transaction terms; (ii) a three to ten day
cooling-off period before which the seller cannot
sign an agreement to sell their structured settlement payments;
and (iii) a requirement that the entire transaction be
reviewed and approved by a state court judge. The parties to the
transaction must satisfy the court that the proposed transfer is
in the best interests of the seller, taking into consideration
the welfare and support of his dependants. Once an order
approving the sale is issued, the payments from the annuity
provider are made directly to the purchaser of the structured
settlement pursuant to the terms of the order.
The National Association of Settlement Purchasers and the
National Structured Settlements Trade Association are the
principal structured settlement trade organizations which have
developed and promoted model legislation regarding transfers of
settlements, referred to as the Structured Settlement Model Act.
While
91
most SSPAs are similar to the Structured Settlement Model Act,
any SSPA may place fewer or additional affirmative obligations
(such as notice or additional disclosure requirements) on the
purchaser, require more extensive or less extensive findings on
the part of the court issuing the transfer order, contain
additional prohibitions on the actions of the purchaser or the
provisions of a settlement purchase agreement, have different
effective dates, require shorter or longer notice periods and
otherwise vary in substance from the Model Act.
Competition
Premium
Finance
The market for premium finance is very competitive. A
policyholder has a number of ways to pay insurance premiums
which include using available cash, borrowing from traditional
lenders such as banks, credit unions and finance companies, as
well as more specialized premium finance companies like us.
Competition among premium finance companies is based upon many
factors, including price, valuation of the underlying insurance
policy, underwriting practices, marketing and referrals. Our
principal competitors within the premium finance industry are
CMS, Inc., Insurative Premium Finance Ltd. and Madison One as
well as smaller, less well known companies. Life settlement
companies that compete with our premium finance business by
providing liquidity to policyholders through the sale of life
insurance policies include Coventry First LLC, Life Partners
Holdings, Inc. and ViaSource Funding Group, LLC, as well as
smaller, less well known companies. It is possible that a number
of our competitors may be substantially larger and may have
greater market share and capital resources than we have.
Structured
Settlements
There are a number of competitors in the structured settlement
market. Competition in the structured settlement market is
primarily based upon marketing, referrals and quality of
customer service. Based on our industry knowledge, we believe
that we are one of the larger acquirers of structured
settlements in the United States. Our main competitors are
J.G. Wentworth & Company, Inc., Peachtree Settlement
Funding, Novation Capital LLC (a subsidiary of Encore Financial
Services), Settlement Capital and Stone Street Capital.
Pre-Settlement
Funding Business
As a result of our marketing for structured settlements, we
receive a number of inquiries from plaintiffs, whose cases have
not yet settled or otherwise been disposed of, seeking
pre-settlement funding. Pre-settlement funding provides personal
injury plaintiffs with a payment in exchange for an assignment
of a portion of the proceeds of their pending case. Accident
victims often are unable to work for a prolonged period of time
and therefore incur high expenses which they find difficult to
meet. As a result, accident victims often look to obtain prompt
settlements. The pre-settlement funding payment provides a
victim and their attorney with the flexibility to continue
litigating a case by satisfying the victims immediate need
for funds.
In May 2010, we entered an agreement with Plaintiff Funding
Holding, Inc., doing business under the name LawCash. Pursuant
to this agreement, we are required to exclusively forward all
pre-settlement leads to LawCash, which will screen leads,
provide underwriting, funding, servicing and collection
services. At funding for a transaction generated from one of our
leads, we receive commission of 5% of the actual funded amount.
Upon repayment by the plaintiff, we receive 25% of the net
profit, which is the difference between (a) the funding
advance and LawCashs costs and (b) the payoff amount,
from LawCash. The typical transaction size is approximately
$2,500. The agreement with LawCash is terminable by either party
for convenience upon 30 days prior written notice.
Employees
As of September 30, 2010, we had 118 employees, each
of which are employed by Imperial Finance & Trading,
LLC. None of our employees is subject to any collective
bargaining agreement. We believe that our employee relations are
good.
92
Properties
Our principal executive offices are located at 701 Park of
Commerce Boulevard, Boca Raton, Florida 33487 and consist of
approximately 21,000 square feet of leased office space. We
also lease office space in Atlanta, Georgia and Chicago,
Illinois, which consist of approximately 176 and 150 square
feet, respectively. We consider our facilities to be adequate
for our current operations.
Legal
Proceedings
We are party to various legal proceedings which arise in the
ordinary course of business. We are not currently a party to any
litigation nor, to our knowledge, is any litigation threatened
against us, the outcome of which would, in our judgment based on
information currently available to us, have a material adverse
effect on our financial position or results of operations.
Change of
Control and Stock Ownership Restrictions
One of our subsidiaries, Imperial Life Settlements, LLC, a
Delaware limited liability company, is licensed as a viatical
settlement provider and regulated by the Florida Office of
Insurance Regulation. As a Florida viatical settlement provider,
Imperial Life Settlements, LLC is subject to regulation as a
specialty insurer under certain provisions of the Florida
Insurance Code. Under applicable Florida law, no person can
acquire, directly or indirectly, 10% or more of the voting
securities of a viatical settlement provider or its controlling
company, including Imperial Holdings, Inc., without the written
approval of the Florida Office of Insurance Regulation.
Accordingly, any person who acquires, directly or indirectly,
10% or more of our common stock, must first file an application
to acquire control of a specialty insurer or its controlling
company, and obtain the prior written approval of the Florida
Office of Insurance Regulation.
The Florida Office of Insurance Regulation may disapprove an
acquisition of beneficial ownership of 10% or more of our voting
securities by any person who refuses to apply for and obtain
regulatory approval of such acquisition. In addition, if the
Florida Office of Insurance Regulation determines that any
person has acquired 10% or more of our voting securities without
obtaining regulatory approval, it may order that person to cease
the acquisition and divest itself of any shares of such voting
securities which may have been acquired in violation of the
applicable Florida law. The Florida Office of Insurance
Regulation may also take disciplinary action against Imperial
Life Settlements, LLCs license if it finds that an
acquisition of our voting stock is made in violation of the
applicable Florida law would render the further transaction of
its business hazardous to its customers, creditors, shareholders
or the public.
93
MANAGEMENT
Directors
and Executive Officers
The table below provides information about our directors,
director nominees and executive officers. Each director serves
for a one-year term and until their successors are elected and
qualified. Executive officers serve at the request of our board
of directors.
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Executive Officers and Directors
|
|
|
|
|
|
|
Antony Mitchell
|
|
|
45
|
|
|
Chief Executive Officer and Chair of the Board
|
Jonathan Neuman
|
|
|
37
|
|
|
President, Chief Operating Officer and Director
|
Richard S. OConnell, Jr.
|
|
|
53
|
|
|
Chief Financial Officer and Chief Credit Officer
|
Deborah Benaim
|
|
|
54
|
|
|
Senior Vice President
|
David A. Buzen
|
|
|
51
|
|
|
Director Nominee
|
Michael A. Crow
|
|
|
48
|
|
|
Director Nominee
|
Walter M. Higgins III
|
|
|
66
|
|
|
Director Nominee
|
Robert Rosenberg
|
|
|
65
|
|
|
Director Nominee
|
A. Penn Hill Wyrough
|
|
|
52
|
|
|
Director Nominee
|
Our chief executive officer, Antony Mitchell, will be the chair
of the board. Our board will designate an independent director
as our lead director who will preside at meetings of the
independent directors.
Set forth below is a brief description of the business
experience of each of our directors, director nominees and
executive officers, as well as certain specific experiences,
qualifications and skills that led to the board of
directors conclusion that each of the directors and
director nominees set forth below is qualified to serve as a
director.
Antony
Mitchell
Antony Mitchell has served as our Chief Executive Officer since
February of 2007. He is also one of our equity members. He has
16 years of experience in the financial industry. From 2001
to January 2007, Mr. Mitchell was Chief Operating Officer
and Executive Director of Peach Holdings, Inc., a holding
company which, through its subsidiaries, was a provider of
specialty factoring services. Peach Holdings completed its
initial public offering in March 2006 and was subsequently
acquired by an affiliate of Credit Suisse in November 2006.
Mr. Mitchell was also a co-founder of Singer Asset Finance
Company, LLC (a subsidiary of Enhance Financial Services Group
Inc.) in 1993, which was involved in acquiring insurance
policies, structured settlements and other types of receivables.
From June 2009 to November 2009, Mr. Mitchell was the Chair
of the Board of Polaris Geothermal, Inc., which focuses on the
generation of renewable energy projects. Since 2007,
Mr. Mitchell has served as a director (being appointed
Executive Chair of the Board of Directors in 2010) of Ram Power,
a renewable energy company listed on the Toronto Stock Exchange.
Mr. Mitchells qualifications to serve on our board
include his knowledge of our company and the specialty finance
industry and his years of leadership at our company.
Jonathan
Neuman
Jonathan Neuman has been our President and Chief Operating
Officer since our inception in December 2006. He is also one of
our equity members. From June 2004 to December 2006,
Mr. Neuman was a director of the Life Finance business unit
of Peach Holdings, Inc. From 2000 to June 2004, he was President
of CY Financial, a premium finance company. From 2001 to
2004 he acted as a consultant for Tandem Management Group, Inc.,
a management consulting firm. From 1999 to 2000, Mr. Neuman
was the head of lottery receivables originations for Singer
Asset Finance Company, LLC (a subsidiary of Enhance Financial
Services Group Inc.). From 1997 to 1999, he was Chief Operating
Officer of Peoples Lottery, a purchaser of
94
lottery prize receivables. Mr. Neumans qualifications
to serve on our board include his knowledge of our company and
the specialty finance industry and his years of leadership at
our company.
Richard
OConnell, Jr.
Richard OConnell has served as our Chief Financial Officer
since April 2010 and Chief Credit Officer since January 2010.
Prior to joining us, from January 2006 through December 2009,
Mr. OConnell was Chief Financial Officer of
RapidAdvance, LLC, a specialty finance company. From January
2002 through September 2005 he served as Chief Operating Officer
of Insurent Agency Corporation, a provider of tenant rent
guaranties to apartment REITs. From March 2000 to December 2001,
Mr. OConnell acted as Securitization Consultant to
the Industrial Bank of Japan. From January 1999 to January 2000,
Mr. OConnell served as president of Telomere Capital,
LLC, a life settlement company. From December 1988 through 1998
he served in various senior capacities for Enhance Financial
Services Group Inc., including as President and Chief Operating
Officer of Singer Asset Finance Company (a subsidiary of Enhance
Financial Services Group Inc.) from
1995-1998
and Senior Vice President and Treasurer of Enhance Financial
Services Group Inc. from 1989 through 1996.
Deborah
Benaim
Deborah Benaim has been our Senior Vice President since July
2007. Since September 2009, she has headed our structured
settlement division. From 2003 to March 2007, Ms. Benaim
was a Managing Director of the Structured Settlement Division of
Peach Holdings, Inc. From 1991 to 2002, she was a Senior Vice
President of Grand Court Lifestyles, Inc., which was involved in
the servicing, acquisition, development, and management of
senior living communities. Ms. Benaim is also a former vice
president of the energy futures trading division at
Prudential-Bache Securities NYC and former Executive Board
member of the American Senior Housing Association.
David
A. Buzen
David A. Buzen is expected to become a member of our board of
directors upon the consummation of this offering. Mr. Buzen
is the President and Chief Financial Officer of CIFG Holding
Inc., an international financial guaranty insurance group, which
he joined in August 2009. From April 2007 through August 2009,
prior to joining CIFG Holding Inc., Mr. Buzen was the Chief
Financial Officer of Churchill Financial LLC, a commercial
finance and asset management company which provides senior and
subordinate financing to middle market companies. From April
2005 through April 2007, he was a Managing Director of the New
York branch of Depfa Bank plc., a public finance bank which in
October 2007 became a wholly-owned subsidiary of Hypo Real
Estate Bank. Mr. Buzen serves as Chairman of the Business
School Deans Advisory Board and a member of the Advisory
Council for the Center for Financial Markets Regulation at the
University of Albany. We believe that Mr. Buzen is
qualified to serve on our board of directors because of his
long-term experience in the financial guaranty insurance
industry.
Michael
A. Crow
Michael A. Crow is expected to become a member of our board of
directors upon the consummation of this offering. Mr. Crow
is President and Chief Executive Officer of Ability Reinsurance
(Bermuda) Limited, a life reinsurance company he founded in 2007
concentrating on long-term care and disability reinsurance.
Since June 2008, Mr. Crow has also served as Vice President
of Proverian Capital which underwrites life settlements. From
June 1998 to March 2003, Mr. Crow served as Vice President
and Senior Vice President at Centre Group in Hamilton, Bermuda,
with respect to its life reinsurance and life settlement
business and continued until May 2005 as an actuarial consultant
advising Centre Group. We believe that Mr. Crow is
qualified to serve on our board of directors because of his
experience in the life insurance and life settlement industry as
well as his prior work as an actuarial consultant.
95
Walter
M. Higgins III
Walter M. Higgins III is expected to become a member of our
board of directors upon the consummation of this offering. In
2008, Mr. Higgins retired from NV Energy, Inc. (formerly
Sierra Pacific Resources), an energy and gas company listed on
the New York Stock Exchange, where he served as Chairman of the
Board, President and Chief Executive Officer from 1993 until
January 1998 and from August 2000 until July 2007 (Chairman of
the Board until July 2008). Prior to rejoining Sierra Pacific
Resources in August 2000, he served as Chairman, President and
Chief Executive Officer of AGL Resources, Inc. in Atlanta,
Georgia, a natural gas utility and energy services holding
company listed on the New York Stock Exchange and the holding
company of Atlanta Gas Light Company. Mr. Higgins currently
serves as a director of South Jersey Industries, a public
utility holding company listed on the New York Stock Exchange,
where he serves as a member of the audit and compensation
committees (a former member of the governance committee), Ram
Power Corporation, a geothermal power company listed on the
Toronto Stock Exchange, where he is chair of the compensation
committee, Aegis Insurance Services, an insurance company
servicing the energy industry, Landis+Gyr, LLC, an energy
management company where he serves on the executive advisory
board, and TAS Energy, a manufacturer of industrial
refrigeration equipment where he serves as a member of the audit
committee and is the chair of the governance committee. We
believe that Mr. Higgins is qualified to serve on our board
of directors because of his prior public company experience both
as a chief executive officer and director.
Robert
Rosenberg
Mr. Robert Rosenberg is expected to become a member of our
board of directors upon the consummation of this offering. From
April 2003 to the present, Mr. Rosenberg has been
President, Chief Executive Officer, Chief Financial Officer and
a director of Insurent Agency Corporation and President and a
director of its sister company, RS Reinsurance, both of which
are subsidiaries of RS Holdings Corp., a Bahamas-based holding
company in which Mr. Rosenberg is a shareholder and
director. From March 2001 to March 2003, prior to his
involvement with RS Holdings Corp., Mr. Rosenberg was Chief
Financial Officer and Executive Vice President of Firebrand
Financial Group, Inc., a company listed on the
Over-the-Counter
Bulletin Board, which provides investment banking, merchant
banking, securities brokerage and asset services. From 1986 to
1997, Mr. Rosenberg served as Executive Vice President
(Senior Vice President until 1990) and Chief Financial Officer
of Enhance Financial Services Group Inc., a New York Stock
Exchange listed company providing financial guaranty insurance
and reinsurance. We believe that Mr. Rosenberg is qualified
to serve on our board of directors because of his prior business
experience, including his experience as a chief financial
officer of a public company.
A.
Penn Hill Wyrough
A. Penn Hill Wyrough is expected to become a member of our
board of directors upon consummation of this offering.
Mr. Wyrough is currently self employed as a consultant
providing strategic financial advice to international companies
with respect to business and investment transactions in the
United States and elsewhere. From 2008 to 2009,
Mr. Wyrough was Managing Director, equity capital markets,
for JPMorgan Chase. From 1987 to 2008, Mr. Wyrough was
Senior Managing Director, investment banking for Bear,
Stearns & Co., Inc. Mr. Wyrough is a trustee and
treasurer of The Masters School, Dobbs Ferry, New York. We
believe that Mr. Wyrough is qualified to serve on our board
of directors because of his extensive experience in finance and
the capital markets.
Board
Composition
After the corporate conversion, we will be managed under the
direction of our board of directors. We expect that our board
will consist of 7 directors upon completion of this
offering, 5 of whom will not be current or former employees of
our company and will not have any other relations with us that
would result in their being considered other than independent
under applicable federal securities laws and the current listing
requirements of the New York Stock Exchange. We have determined
that Messrs. Buzen, Crow, Higgins, Rosenberg and Wyrough
are independent directors under the applicable rules of the New
York Stock Exchange
96
and as such term is defined in
Rule 10A-3(b)(1)
under the Exchange Act. There are no family relationships among
any of our current directors, director nominees or executive
officers.
Following the completion of this offering, copies of our
Corporate Governance Guidelines and Code of Business Conduct and
Ethics for all of our directors, officers and employees will be
available on our website (
www.imprl.com
) and upon written
request by our shareholders at no cost.
Number of
Directors; Removal; Vacancies
Our articles of incorporation and our bylaws provide that the
number of directors shall be fixed from time to time by our
board of directors, provided that the board shall consist of at
least three and no more than fifteen members. Each director will
serve a one-year term. Pursuant to our bylaws, each director
will serve until such directors successor is elected and
qualified or until such directors earlier death,
resignation, disqualification or removal. Our bylaws also
provide that any director may be removed with or without cause,
at any meeting of shareholders called for that purpose, by the
affirmative vote of the holders entitled to vote for the
election of directors.
Our bylaws further provide that vacancies and newly created
directorships in our board may be filled by an affirmative vote
of the majority of the directors then in office, although less
than a quorum, or by the shareholders at a special meeting.
Majority
Voting Policy
Directors will be elected by a plurality of votes cast by shares
entitled to vote at each annual meeting. However, we expect that
our board will adopt a majority vote policy. Under
this policy, any nominee for director in an uncontested election
who receives a greater number of votes withheld from
his or her election than votes for such election, is
required to tender his or her resignation following
certification of the shareholder vote. The corporate governance
and nominating committee will promptly consider the tendered
resignation and make a recommendation to the board whether to
accept or reject the resignation. The board will act on the
committees recommendation within 60 days following
certification of the shareholder vote.
Factors that the committee and board will consider under this
policy include:
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the stated reasons why votes were withheld from the director and
whether those reasons can be cured;
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the directors length of service, qualifications and
contributions as a director;
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New York Stock Exchange listing requirements, and
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our corporate governance guidelines.
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Any director who tenders his or her resignation under this
policy will not participate in the committee recommendation or
board action regarding whether to accept the resignation offer.
If all of the members of the corporate governance and nominating
committee receive a majority withheld vote at the same election,
then the independent directors who do not receive a majority
withheld vote will appoint a committee from among themselves to
consider the resignation offers and recommend to the board
whether to accept such resignations.
Board
Committees
Prior to the completion of this offering, our board of directors
will establish an audit committee, a compensation committee and
a nominating and corporate governance committee.
Audit Committee.
The audit committee, which
will be established in accordance with Section 3(a)(58)(A)
of the Securities Exchange Act, will oversee our accounting and
financial reporting processes and the audits of our financial
statements. The functions and responsibilities of the audit
committee will be established in the audit committee charter and
include:
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establishing, monitoring and assessing our policies and
procedures with respect to business practices, including the
adequacy of our internal controls over accounting and financial
reporting;
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97
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retaining our independent auditors and conducting an annual
review of the independence of our independent auditors;
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pre-approving any non-audit services to be performed by our
independent auditors;
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reviewing the annual audited financial statements and quarterly
financial information with management and the independent
auditors;
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reviewing with the independent auditors the scope and the
planning of the annual audit;
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reviewing the findings and recommendations of the independent
auditors and managements response to the recommendations
of the independent auditors;
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overseeing compliance with applicable legal and regulatory
requirements, including ethical business standards;
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approving related party transactions;
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discussing policies with respect to risk assessment and risk
management;
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preparing the audit committee report to be included in our
annual proxy statement;
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establishing procedures for the receipt, retention and treatment
of complaints received by us regarding accounting, internal
accounting controls or auditing matters;
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establishing procedures for the confidential, anonymous
submission by our employees of concerns regarding questionable
accounting or auditing matters; and
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reviewing the committees performance and the adequacy of
the audit committee charter on an annual basis.
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Our independent auditors will report directly to the audit
committee. Each member of the audit committee will have the
ability to read and understand fundamental financial statements.
We will provide for appropriate funding, as determined by the
audit committee, for payment of compensation to our independent
auditors, any independent counsel or other advisors engaged by
the audit committee and for administrative expenses of the audit
committee that are necessary or appropriate in carrying out its
duties.
Compensation Committee.
The compensation
committee will establish, administer and review our policies,
programs and procedures for compensating our executive officers
and directors. The functions and responsibilities of the
compensation committee will be established in the compensation
committee charter and include:
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evaluating the performance of and determining the compensation
for our executive officers, including our chief executive
officer;
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administering and making recommendations to our board with
respect to our equity incentive plans;
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overseeing regulatory compliance with respect to compensation
matters;
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reviewing and approving employment or severance arrangements
with senior management;
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reviewing our director compensation policies and making
recommendations to our board;
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taking the required actions with respect to the compensation
discussion and analysis to be included in our annual proxy
statement;
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reviewing and approving the compensation committee report to be
included in our annual proxy statement; and
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reviewing the committees performance and the adequacy of
the compensation committee charter on an annual basis.
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98
Corporate Governance and Nominating
Committee.
The functions and responsibilities of
the corporate governance and nominating committee will be
established in the corporate governance and nominating committee
charter and include:
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developing and recommending corporate governance principles and
procedures applicable to our board and employees;
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recommending committee composition and assignments;
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overseeing periodic self-evaluations by the board, its
committees, individual directors and management with respect to
their respective performance;
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identifying individuals qualified to become directors;
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recommending director nominees;
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assisting in succession planning;
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recommending whether incumbent directors should be nominated for
re-election to our board; and
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reviewing the committees performance and the adequacy of
the corporate governance and nominating committee charter on an
annual basis.
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Compensation
Committee Interlocks and Insider Participation
None of the members of our compensation committee will be, or
will have been, employed by us. None of our executive officers
currently serves, or in the past three years has served, as a
member of the board of directors, compensation committee or
other board committee performing equivalent functions of another
entity that has one or more executive officers serving on our
board or compensation committee.
99
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
Overview
This compensation discussion and analysis describes the key
elements of our executive compensation program for 2009. For our
2009 fiscal year, our named executive officers were:
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Antony Mitchell, our chief executive officer;
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Robert Grobstein, our former chief financial and accounting
officer;
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Jonathan Neuman, our president and chief operating officer;
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Deborah Benaim, our senior vice president; and
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Anne Dufour Zuckerman, our former general counsel.
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Mr. Grobstein left the Company on May 4, 2010 and has
been replaced by Richard OConnell. Ms. Zuckerman left
the Company on November 8, 2010.
This compensation discussion and analysis, as well as the
compensation tables and accompanying narratives below, contain
forward-looking statements that are based on our current plans
and expectations regarding our future compensation. Actual
compensation programs that we adopt may differ materially from
the programs summarized below.
Compensation
Objective
The primary objective of our compensation programs and policies
is to attract, retain and motivate executives whose knowledge,
skills and performance are critical to our success. We believe
that compensation is unique to each individual and should be
determined based on discretionary and subjective factors
relevant to the particular named executive officer based on the
objectives listed above.
Compensation
Determination Process
Prior to this offering, we have been a private company with a
relatively small number of shareholders. We have not been
subject to exchange listing requirements requiring us to have a
majority independent board or to exchange or SEC rules relating
to the formation and functioning of board committees, including
audit, nominating, and compensation committees. As such, most,
if not all, of our compensation policies, and determinations
applicable to our named executive officers, have been the
product of negotiation between our named executive officers, our
chief executive officer and chief operating officer, subject to
the input of our board of managers, when requested. Each of
Antony Mitchell, our chief executive officer, and Jonathan
Neuman, our chief operating officer, had input in setting each
of the named executive officers compensation, including
their own, as their compensation was a product of negotiation
with our board of managers. None of the other named executive
officers had input in setting any other named executive
officers compensation. During 2009, we did not retain the
services of a compensation consultant. Following this offering,
we will have a compensation committee comprised entirely of
independent directors that will be responsible for making all
such compensation determinations.
In the past, we took into account a number of variables, both
quantitative and qualitative, in making determinations regarding
the appropriate level of compensation. Generally, our named
executive officers compensation was determined based on
our chief executive officers and chief operating
officers assessment of our overall performance and the
individual performance of the named executive officer, as well
as our chief executive officers and chief operating
officers experience and general market knowledge regarding
compensation of executive officers in comparable positions.
These quantitative and qualitative variables were also
considered by our board of managers when negotiating the
compensation for our chief executive officer and chief operating
officer.
100
Antony Mitchell, our chief executive officer, is the owner of
Warburg Investment Corporation (Warburg).
Mr. Mitchell is currently not an employee of the Company.
Pursuant to an oral arrangement between us and Warburg,
Mr. Mitchell serves as our chief executive officer and we
provide Warburg with (i) office space; (ii) office
equipment; and (iii) personnel. We pay Warburg for
Mr. Mitchells service and Mr. Mitchell is paid
by Warburg. Mr. Mitchell is a citizen of the United Kingdom
and, prior to his status as a lawful permanent resident of the
United States on a conditional basis, was a lawful resident of
the United States under an
E-2
visa.
Pursuant to the
E-2
visa
requirements, Mr. Mitchell was restricted to being a
Warburg employee. Mr. Mitchell is now authorized to be
employed by the Company and we will enter into a written
employment agreement with Mr. Mitchell that will become
effective upon the closing of this offering. At that time, the
arrangement with Warburg will terminate. This agreement is
described elsewhere in this prospectus under Certain
Relationships and Related Transactions Related Party
Transaction Policy and Procedure Other
Transactions.
Following the completion of this offering, we expect our
compensation committee to review, and potentially engage a
compensation consultant to assist it in evaluating, all aspects
of our executive compensation program. In addition, we intend to
make awards of stock options to our employees, including our
named executive officers, under the Omnibus Plan. We have
reserved an aggregate
of shares
of common stock under our Omnibus Plan of which an aggregate of
[ ] shares
of common stock will remain available for future awards after
giving effect to the issuance of options to purchase an
aggregate of
[ ] shares
of common stock which we expect to grant to our existing
employees and named executive officers immediately following the
pricing of this offering at an exercise price equal to the
initial public offering price. These options will be subject to
vesting over
[ ] years.
See Omnibus Plan. In addition, upon the closing of
this offering, Antony Mitchell and Jonathan Neuman, two of our
current shareholders and named executive officers, will each
receive warrants that may be exercised for up
to shares
of our common stock. These warrants vest over four years,
subject to satisfaction of certain performance hurdles. See
Description of Capital Stock Warrants.
Compensation
Elements
We provide different elements of compensation to our named
executive officers in a way that we believe best promotes our
compensation objectives. Accordingly, we provide compensation to
our named executive officers through a combination of base
salary, annual discretionary bonus and other various benefits.
Prior to this offering, we have not issued equity-based
incentives and have compensated our chief executive officer
pursuant to the Warburg agreement. Each element of compensation
is discussed in detail below.
Base Salaries.
Annual base salaries reflect
the compensation for an executives ongoing contribution to
the performance of his or her functional area of responsibility
with us. We believe that base salaries must be competitive based
upon the executive officers scope of responsibilities and
the market compensation of similarly situated executives. Other
factors such as internal consistency and comparability are
considered when establishing a base salary for a given
executive. Prior salaries paid by former employers are also
considered for new hires. Our chief executive officer and chief
operating officer used their experience, market knowledge and
insight in evaluating the competitiveness of current salary
levels. Historically, executives have been entitled to annual
reviews and raises at the discretion of our chief executive
officer and chief operating officer.
Annual Discretionary Cash Bonus
Compensation.
In the discretion of our chief
executive officer and chief operating officer, our named
executive officers are eligible for an annual discretionary cash
bonus. We currently do not follow a formal bonus plan tied to
specific financial and non-financial objectives. The
determination of the bonus payment amounts, if any, is subject
to the discretion of our chief executive officer and chief
operating officer after considering the individual executive
officers individual performance, as well as our chief
executive officers and chief operating officers
assessment of our past and future performance, including, but
not limited to, subjective assessments of our operational
performance during the year and our position for the achievement
of acceptable financial performance in the subsequent year. Our
chief executive officer and chief operating officer also
consider market practices in determining whether our annual
discretionary bonus compensation is competitive. Due to our
operating performance in 2009, none of our executive officers
received a discretionary bonus except Deborah Benaim.
Ms. Benaim received $200,000 in recognition of her
dedication to improving results in our premium finance business
segment.
101
Retirement Benefits.
Substantially all of the
salaried employees, including our named executive officers, are
eligible to participate in our 401(k) savings plan. We have
historically not made any contributions or otherwise matched any
employee contributions.
Other Benefits and Executive Perquisites.
We
also provide certain other customary benefits to our employees,
including the named executive officers, which are intended to be
part of a competitive compensation program. These benefits which
are offered to all full-time employees include medical, dental,
life and disability insurance as well as paid leave during the
year.
Employment Agreement.
We do not have any
general policies regarding the use of employment agreements, but
may, from time to time, enter into such a written agreement to
reflect the terms and conditions of employment of a particular
named executive officer, whether at the time of hire or
thereafter. We expect to enter into written employment
agreements with each of our named executive officers that will
become effective upon the closing of this offering.
Accounting
and Tax Implications
The accounting and tax treatment of particular forms of
compensation have not, to date, materially affected our
compensation decisions. However, following this offering, we
plan to evaluate the effect of such accounting and tax treatment
on an ongoing basis and will make appropriate modifications to
compensation policies where appropriate. For instance,
Section 162(m) of the Internal Revenue Code of 1986, as
amended (the Code), generally disallows a tax
deduction to public companies for certain compensation in excess
of $1.0 million paid in any taxable year to our chief
executive officer or any of our three other most highly
compensated executive officers other than the chief financial
officer. However, certain compensation, including qualified
performance-based compensation, is not subject to the deduction
limitation if certain requirements are met. In addition, under a
transition rule for new public companies, the deduction limits
under Section 162(m) do not apply to any compensation paid
pursuant to a compensation plan or agreement that existed during
the period in which the securities of the corporation were not
publicly held, to the extent that the prospectus relating to the
initial public offering disclosed information concerning these
plans or agreements that satisfied all applicable securities
laws then in effect. We believe that we can rely on this
transition rule to exempt awards made under our Omnibus Plan
until our 2013 annual meeting of shareholders. We intend to
review the potential effect of Section 162(m) of the Code
periodically and use our judgment to authorize compensation
payments that may be subject to the limit when we believe such
payments are appropriate and in our best interests after taking
into consideration changing business conditions and the
performance of our executive officers.
Hiring
of New Chief Financial Officer
On January 4, 2010, we hired Richard A. OConnell to
serve as our chief credit officer. Mr. OConnell began
transitioning into the chief financial officer role in February
2010 and became our chief financial officer in April 2010. We
expect to enter into an employment agreement with
Mr. OConnell that will become effective upon the
closing of this offering.
102
Executive
Compensation
The following table summarizes the compensation of our chief
executive officer, our former chief financial officer and each
of our other named executive officers for the year ended
December 31, 2009.
Summary
Compensation Table for 2009
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Change in
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Pension Value
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and Non-
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Non-Equity
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Qualified
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Incentive
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Deferred
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Name and Principal
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Stock
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Option
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Plan
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Compensation
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All Other
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Position
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Year
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Salary
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Bonus
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Awards
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Awards
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Compensation
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Earnings
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Compensation(1)
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Total
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Antony Mitchell
Chief Executive Officer
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2009
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$
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$
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$
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$
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$
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$
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$
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926,000
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(1)
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$
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926,000
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Jonathan Neuman
President and Chief Operating Officer
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2009
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$
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725,341
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$
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$
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$
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$
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$
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$
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$
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725,341
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Deborah Benaim
Senior Vice President
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2009
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$
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312,184
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$
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200,000
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$
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$
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$
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$
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$
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$
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512,184
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Anne Dufour Zuckerman(2)
General Counsel
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2009
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$
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347,757
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$
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$
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$
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$
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$
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$
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$
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347,757
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Robert Grobstein(3)
Former Chief Financial Officer
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2009
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$
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249,001
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$
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$
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$
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$
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$
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$
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$
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249,001
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(1)
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In 2009, Mr. Mitchell did not serve as a company employee
and did not receive a salary. Mr. Mitchell provided
services to the Company pursuant to the consulting arrangement
with Warburg. Mr. Mitchell was paid these amounts by
Warburg as described in more detail in our Compensation
Discussion and Analysis. $76,000 of the $926,000 paid to Warburg
was for expense reimbursements.
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(2)
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Ms. Zuckerman served as our general counsel until her
departure from Imperial on November 8, 2010.
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(3)
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Mr. Grobstein served as our chief financial officer until
his departure from Imperial on May 4, 2010.
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Employment
Agreements and Potential Payments Upon Termination or
Change-in-Control
In September and November, 2010, we entered into employment
agreements with each of our named executive officers that become
effective upon the closing of this offering. These employment
agreements establish key employment terms (including reporting
responsibilities, base salary, target performance bonus
opportunity and other benefits), provide for severance benefits
in certain situations, and contain non-competition,
non-solicitation and confidentiality covenants.
Mr. Mitchell and Mr. Neumans employment
agreements also include indemnification provisions. The
employment agreements modified certain elements of compensation
of some of our executive officers. Under his employment
agreement, Mr. Mitchells base salary was set at
$525,000, a $325,000 reduction, excluding expense
reimbursements, over the aggregate 2009 fee that was paid to
Mr. Mitchells corporation, Warburg, because we now
pay Mr. Mitchell directly. With respect to our other named
executive officers, the base salaries of Mr. Neuman,
Mr. OConnell and Ms. Benaim were set at
$525,000, $310,000 and $325,000, respectively. Other than
Mr. Neuman, whose base salary reflects a $200,000 reduction
from his salary in 2009, the other named executive
officers salaries are comparable to their 2009 salaries.
In determining the base salaries, our chief executive officer
and chief operating officer considered the increased
responsibilities in growing the company and the work involved in
transitioning it to a publicly-held company. The employment
agreements for our named executive officers provide that they
will participate in the annual and long-term incentive plans
established by us from time to time, although the agreements for
Mr. Mitchell and Mr. Neuman also provide that in each
of our 2011, 2012 and 2013 fiscal years, the named executive
officer will receive an annual bonus equal to 0.6% of our
pre-tax income for such year, provided specified thresholds are
met and provided further that the maximum annual bonus payable
for any year to Mr. Mitchell or Mr. Neuman shall not
exceed three times his base salary on the last day of such year.
During these three years, Mr. Mitchell and Mr. Neuman
will not otherwise participate in any annual
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bonus plan we establish for our executive officers.
Mr. OConnells employment agreement also
provides for a one time success fee of $100,000
payable to Mr. OConnell upon the successful
conclusion of this offering.
All of the employment agreements provide that if a named
executive officers employment is terminated for any reason
other than cause, then we will pay the named executive officer,
in addition to his or her accrued base salary and other earned
amounts to which the officer is otherwise entitled, a pro rata
portion of the annual incentive bonus, if any, payable with
respect to the year in which the termination occurs. In
addition, the employment agreements provide for severance
payments to our named executive officers upon the termination of
their employment by us without cause. The employment agreements
for each of Messrs. Mitchell and Neuman also provide for
severance payments if such name executive officer terminates his
employment for good reason. Payment and benefit levels were
determined based on a variety of factors including the position
held by the individual receiving the termination benefits and
current trends in the marketplace regarding such benefits.
The employment agreements for the named executive officers
permit us to terminate them for cause if the named
executive officer (i) commits a willful, intentional or
grossly negligent act having the effect of materially injuring
our business, or (ii) is convicted of or pleads no
contest to a felony involving moral turpitude, fraud,
theft or dishonesty, or (iii) misappropriates or embezzles
any of our or our affiliates property. The employment
agreements for the named executive officers, other than
Messrs. Mitchell and Neuman, also permit us to terminate
them for cause if the named executive officer: (i) fails,
neglects or refuses to perform his or her employment duties; or
(ii) commits a willful, intentional or grossly negligent
act having the effect of materially injuring our reputation or
interests; or (iii) violates or fails to comply with our
rules, regulations or policies; or (iv) commits a felony or
misdemeanor involving moral turpitude, fraud, theft or
dishonesty; or (v) breaches any material provision of the
employment agreement or any other applicable confidentiality,
non-compete, non-solicit, general release, covenant-not-to-sue
or other agreement in effect with us. The employment agreements
for Messrs. Mitchell and Neuman permit such named executive
officer to terminate employment for good reason if we:
(i) materially diminish such named executive officers
base salary; or (ii) materially diminish the named
executive officers authority, duty or responsibilities or
the authority, duties or responsibilities of the supervisor to
whom the named executive officer is required to report; or
(iii) require the named executive officer to relocate a
material distance from his primary work location; or
(iv) breach any our material obligations under the
employment agreement.
If Messrs. Mitchell and Neuman become entitled to severance
payments, we will pay such named executive officer a severance
payment equal to three times the sum of his base salary and the
average of the prior three years annual cash bonus,
provided, however, that if such named executive officer is
terminated from employment prior to the first three years his
Employment Agreement is in effect, then the severance payment
will be equal to six times his base salary. The severance
payment shall be paid over a twenty-four month period. If
Mr. OConnell becomes entitled to severance payments,
we will continue to pay his base salary for a period equal to
four months, plus one month for each complete three months of
service completed with us, subject to a maximum of twelve months
of severance payments. If Ms. Benaim becomes entitled to
severance payments, we will continue to pay her base salary for
a period of eighteen weeks. Each named executive officer is
required to execute a release of all claims he or she may have
against us as a condition to the receipt of the severance
payments. All of the named executive officers are subject to
non-competition, confidentiality and non-solicitation covenants
that expire eighteen to twenty-four months after termination of
employment. Messrs. Mitchell and Neuman, however, are only
subject to such covenants if they receive severance payments.
However, with respect to Messrs. Mitchell and Neuman, if
the severance payments are not otherwise payable, we can elect
to pay such severance payments in exchange for the named
executive officers agreement to comply with the
non-competition, confidentiality and non-solicitation covenants
contained in his Employment Agreement.
The employment agreements for Messrs. Mitchell and Neuman
also provide that we will reimburse them for any legal costs
they incur in enforcing their rights under the employment
agreement, regardless of the outcome of such legal contest, as
well as interest at the prime rate on any payments under the
employment agreements that are determined to be past due, unless
prohibited by law.
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All of the employment agreements for the named executive
officers include a provision that allows us to reduce their
severance payments and any other payments to which the executive
becomes entitled as a result of our change in control to the
extent needed for the executive to avoid paying an excise tax
under Internal Revenue Code Section 280G, unless, with
respect to Messrs. Mitchell and Neuman, the named executive
officer is better off, on an after-tax basis, receiving such
payments and paying the excise taxes due.
Risk
Considerations in our Compensation Program
We believe that our compensation policies and practices for our
employees are reasonable and properly align our employees
interests with those of our shareholders. We believe that risks
arising from our compensation policies and practices for our
employees are not reasonably likely to have a material adverse
effect on the company. Although certain of our employees who are
not executive officers are compensated by the number of
transactions they complete, our extensive underwriting process
is designed to prevent us from entering into transactions that
deviate from our underwriting standards. Furthermore, following
this offering, we intend to incentivize our employees and
executive officers with stock options, thereby aligning the
interests of our employees with those of our shareholders.
Omnibus
Plan
Imperial
Holdings 2010 Omnibus Incentive Plan
Our board of directors will adopt, and our members will approve,
the Imperial Holdings 2010 Omnibus Incentive Plan (the
Omnibus Plan). The following description of the
Omnibus Plan is qualified in its entirety by the full text of
the Omnibus Plan, which will be filed with the SEC as an exhibit
to the registration statement of which this prospectus is a part.
Purpose of the Plan.
The purpose of the
Omnibus Plan is to attract, retain and motivate participating
employees and to attract and retain well-qualified individuals
to serve as members of the board of directors, consultants and
advisors through the use of incentives based upon the value of
our common stock. The Omnibus Plan provides a direct link
between shareholder value and compensation awards by authorizing
awards of shares of our common stock, monetary payments based on
the value of our common stock and other incentive compensation
awards that are based on our financial performance and
individual performance. Awards under the Omnibus Plan will be
determined by the compensation committee of the board of
directors, and may be made to our or our affiliates
employees, consultants and advisors and our non-employee
directors.
Administration and Eligibility.
The Omnibus
Plan will be administered by our compensation committee, which
will have the authority to interpret the provisions of the
Omnibus Plan; make, change and rescind rules and regulations
relating to the Omnibus Plan; and make changes to, or reconcile
any inconsistency in the Omnibus Plan, any award or any award
agreement. The compensation committee may designate any of the
following as a participant under the Omnibus Plan: any officer
or other of our employees or employees of our affiliates,
consultants who provide services to us or our affiliates and our
non-employee directors.
Types of Awards.
Awards under the Omnibus Plan
may consist of incentive awards, stock options, stock
appreciation rights, performance shares, performance units,
shares of common stock, restricted stock, restricted stock units
or other stock-based awards as determined by the compensation
committee. The compensation committee may grant any type of
award to any participant it selects, but only our employees or
employees of our subsidiaries may receive grants of incentive
stock options. Awards may be granted alone or in addition to, in
tandem with, or in substitution for any other award (or any
other award granted under another plan of ours or our
affiliates). In addition, the compensation committee is
authorized to provide or make awards in a manner that complies
with the requirements of Section 409A of the Internal
Revenue Code of 1986, as amended (the Code), so that
the awards will avoid a plan failure as described in
Section 409A(a)(1). The compensation committees
authorization includes the authority to defer payments or wait
for specified distribution events, as provided in
Section 409A(a)(2).
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Shares Reserved under the Omnibus
Plan.
The Omnibus Plan provides that an aggregate
of shares
of common stock are reserved for issuance under the Omnibus
Plan, subject to adjustment as described below. The number of
shares reserved for issuance will be depleted on the grant date
of an award by the maximum number of shares of common stock, if
any, with respect to which such award is granted.
We expect that our board of directors will approve grants of
options to our executive officers, certain employees and certain
directors to purchase an aggregate of
[ ] shares
of our common stock subject to completion of this offering. The
following table sets forth certain information regarding these
stock options:
In general, (a) if an award granted under the Omnibus Plan
lapses, expires, terminates or is cancelled without the issuance
of shares under, or the payment of other compensation with
respect to shares covered by, the award, (b) if it is
determined during or at the conclusion of the term of an award
that all or some portion of the shares with respect to which the
award was granted will not be issuable, or that other
compensation with respect to shares covered by the award will
not be payable, (c) if shares are forfeited under an award,
(d) if shares are issued under any award and we reacquire
them pursuant to rights reserved by us upon the issuance of the
shares, or (e) if shares are tendered or withheld to
satisfy federal, state or local tax withholding obligations,
then such shares may again be used for new awards under the
Omnibus Plan. Shares that are purchased by us using proceeds
from option exercises, or shares tendered or withheld in payment
of the exercise price of options or as a result of the net
settlement of stock appreciation rights may never be made
available for issuance under the Omnibus Plan.
No participant may be granted awards under the Omnibus Plan that
could result in such participant:
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receiving options
and/or
stock
appreciations rights for more than 120,000 shares of common
stock during any fiscal year;
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receiving awards of restricted stock
and/or
restricted stock units relating to more than 120,000 shares
of common stock during any fiscal year;
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receiving, with respect to an award of performance shares
and/or
an
award of performance units the value of which is based on the
fair market value of a share of common stock, payment of more
than 120,000 shares of common stock in respect of any
fiscal year;
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receiving, with respect to an annual incentive award in respect
of any of single fiscal year, a cash payment of more than
$2,000,000;
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receiving, with respect to a long-term incentive award
and/or
an
award of performance units the value of which is not based on
the fair market value of a share of common stock, a cash payment
of more than $3,000,000 in respect of any period of two
consecutive fiscal years or of more than $4,000,000 in respect
of any period of three consecutive fiscal years; or
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receiving other stock-based awards relating to more than
120,000 shares of common stock during any of our fiscal
years.
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Each of these limitations is subject to adjustment as described
below.
Options and Stock Appreciation Rights
(SARs).
The compensation committee has the
authority to grant stock options or SARs and to determine all
terms and conditions of each such award. Stock options and SARs
will be granted to participants at such time as the compensation
committee will determine. The compensation committee will also
determine the number of options or SARs granted, whether an
option is to be an incentive stock option or non-qualified stock
option and the grant date for the option or SAR, which may not
be any date prior to the date that the compensation committee
approves the grant. The compensation committee will
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fix the option price per share of common stock and the grant
price per SAR, which may never be less than the fair market
value of a share of common stock on the date of grant. The
compensation committee will determine the expiration date of
each option and SAR except that the expiration date may not be
later than ten years after the date of grant. Options and SARs
will be exercisable at such times and be subject to such
restrictions and conditions as the compensation committee deems
necessary or advisable. Under the Omnibus Plan, participants do
not have a right to receive dividend payments or dividend
equivalent payments with respect to shares of common stock
subject to an outstanding stock option or SAR award. Subject to
adjustment as described below, no more
than shares
may be issued pursuant to the exercise of incentive stock
options under the Omnibus Plan.
Performance and Stock Awards.
The compensation
committee has the authority to grant awards of shares of common
stock, restricted stock, restricted stock units, performance
shares or performance units. Restricted stock means shares of
common stock that are subject to a risk of forfeiture
and/or
restrictions on transfer, which may lapse upon the achievement
or partial achievement of corporate, subsidiary or business unit
performance goals established by the compensation committee
and/or
upon
the completion of a period of service
and/or
upon
the occurrence of specified events. Restricted stock unit means
the right to receive cash
and/or
shares of common stock the value of which is equal to the fair
market value of one share to the extent corporate, subsidiary or
business unit performance goals established by the compensation
committee are achieved
and/or
upon
the completion of a period of service
and/or
upon
the occurrence of specified events. Performance shares means the
right to receive shares of common stock to the extent corporate,
subsidiary or business unit performance goals established by the
compensation committee are achieved. Performance units means the
right to receive cash
and/or
shares of common stock valued in relation to a unit that has a
designated dollar value or the value of which is equal to the
fair market value of one or more shares of common stock, to the
extent corporate, subsidiary or business unit performance goals
established by the compensation committee are achieved.
The compensation committee will determine all terms and
conditions of the awards including (i) the number of shares
of common stock
and/or
units
to which such award relates, (ii) whether performance goals
must be achieved for the participant to realize any portion of
the benefit provided under the award, (iii) the length of
the vesting
and/or
performance period and, if different, the date that payment of
the benefit will be made, (iv) with respect to performance
units, whether to measure the value of each unit in relation to
a designated dollar value or the fair market value of one or
more shares of common stock, and (v) with respect to
performance units and restricted stock units, whether the awards
will settle in cash, in shares of common stock, or in a
combination of the two. Under the Omnibus Plan, participants do
not have a right to receive dividend payments or dividend
equivalent payments with respect to unearned shares of common
stock under a performance share, performance unit or restricted
stock unit award.
Other Stock-Based Awards.
The compensation
committee has the authority to grant other types of awards,
which may be denominated or payable in, valued in whole or in
part by reference to, or otherwise based on, shares of common
stock, either alone or in addition to or in conjunction with
other awards, and payable in shares of common stock or cash.
Such awards may include shares of unrestricted common stock,
which may be awarded as a bonus, in payment of director fees, in
lieu of cash compensation, in exchange for cancellation of a
compensation right, or upon the attainment of performance goals
or otherwise, or rights to acquire shares of common stock from
us. The compensation committee will determine all terms and
conditions of the award, including the time or times at which
such award will be made and the number of shares of common stock
to be granted pursuant to such award or to which such award will
relate. Any award that provides for purchase rights must be
priced at 100% of the fair market value of a share of common
stock on the date of the award.
Incentive Awards.
The compensation committee
has the authority to grant annual and long-term incentive
awards. An incentive award is the right to receive a cash
payment to the extent performance goals are achieved. The
compensation committee will determine all terms and conditions
of an annual or long-term incentive award, including the
performance goals, performance period, the potential amount
payable, the type of payment and the timing of payment. The
compensation committee must require that payment of all or any
portion of the amount subject to the incentive award is
contingent on the achievement or partial achievement
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of one or more performance goals during the period the
compensation committee specifies. The compensation committee may
specify that performance goals subject to an award are deemed
achieved upon a participants death, disability or change
in control, or, in the case of awards that the compensation
committee determines will not be considered performance-based
compensation under Code Section 162(m), retirement or such
other circumstances as the compensation committee may specify.
The performance period for an annual incentive award must relate
to a period of at least one of our fiscal years, and the
performance period for a long-term incentive award must relate
to a period of more than one of our fiscal years, except in each
case, if the award is made at the time of commencement of
employment with us or on the occasion of a promotion, then the
award may relate to a shorter period. Payment of an incentive
award will be in cash except to the extent the compensation
committee determines that payment will be in shares of common
stock or restricted stock, either on a mandatory basis or at the
election of the participant receiving the award, having a fair
market value at the time of the payment equal to the amount
payable according to the terms of the incentive award.
Performance Goals.
For purposes of the Omnibus
Plan, performance goals mean any goals the compensation
committee establishes that relate to one or more of the
following with respect to us or any one or more of our
subsidiaries, affiliates or other business units: net income;
operating income; income from continuing operations; net sales;
cost of sales; revenue; gross income; earnings (including before
taxes,
and/or
interest
and/or
depreciation and amortization); net earnings per share
(including diluted earnings per share); Fair Market Value; cash
flow; net cash provided by operating activities; net cash
provided by operating activities less net cash used in investing
activities; net operating profit; pre-tax profit; ratio of debt
to debt plus equity; return on shareholder equity; total
shareholder return; return on capital; return on assets; return
on equity; return on investment; return on revenues; operating
working capital; working capital as a percentage of net sales;
cost of capital; average accounts receivable; economic value
added; performance value added; customer satisfaction; customer
loyalty
and/or
retention; market share; cost structure reduction; cost savings;
operating goals; operating margin; profit margin; sales
performance; and internal revenue growth. In addition, in the
case of awards that the compensation committee determines will
not be considered performance-based compensation
under Code Section 162(m), the compensation committee may
establish other performance goals not listed in the Omnibus Plan.
As to each performance goal, the relevant measurement of
performance shall be computed in accordance with generally
accepted accounting principles, but, unless otherwise determined
by the compensation committee and to the extent consistent with
Code Section 162(m), will exclude the effects of the
following: (i) charges for reorganizing and restructuring;
(ii) discontinued operations; (iii) asset write-downs;
(iv) gains or losses on the disposition of an asset;
(v) mergers, acquisitions or dispositions; and
(vi) extraordinary, unusual
and/or
non-recurring items of gain or loss, that in all of the
foregoing we identify in our audited financial statements,
including notes to the financial statements, or the
Managements Discussion and Analysis section of our annual
report. In addition, to the extent consistent with Code
Section 162(m), the compensation committee may also adjust
performance to exclude the effects of (i) litigation,
claims, judgments or settlements; (ii) change in laws or
regulations affecting reported results; and (iii) accruals
for payments to be made under the Omnibus Plan or other
specified compensation arrangements.
Amendment of Minimum Vesting and Performance
Periods.
Notwithstanding the requirements for
minimum vesting
and/or
performance period for an award included in the Omnibus Plan,
the Omnibus Plan provides that the compensation committee may
impose, at the time an award is granted or any later date, a
shorter vesting
and/or
performance period to take into account a participants
hire or promotion, or may accelerate the vesting or deem an
award earned, in whole or in part, on a participants
termination of employment, to the extent consistent with Code
Section 162(m) or a change in control.
Change in Control.
The compensation committee
may specify in an award agreement the effect of our change in
control on such award. In the absence of such a provision, in
the event of our change in control, the compensation committee
may determine that all outstanding awards are vested in full or
deemed earned in full (as if the maximum performance goals had
been met). If, with respect to any particular outstanding award,
the successor in the change in control transaction does not
agree to assume the award or grant a substitute award, then the
compensation committee may cancel such award in exchange for a
cash payment to the award holder
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on the date of the change in control. Under the Omnibus Plan, a
change in control is generally deemed to have
occurred if:
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any person is or becomes the beneficial owner of securities
representing 50% or more of the combined voting power of our
outstanding voting securities;
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during any twelve month period, the majority of our board of
directors are replaced by persons whose appointment or election
is not endorsed by a majority of the board; or
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during any twelve month period, there is a change in the
ownership of a substantial portion of our assets (other than
certain transfers to shareholders or controlling groups)
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Transferability.
Awards are not transferable
other than by will or the laws of descent and distribution,
unless the compensation committee allows a participant to
(i) designate a beneficiary to exercise the award or
receive payment under the award after the participants
death, (ii) transfer an award to the former spouse of the
participant as required by a domestic relations order incident
to a divorce, or (iii) transfer an award without receiving
consideration for such a transfer.
Adjustments.
If (i) we are involved in a
merger or other transaction in which shares of common stock are
changed or exchanged, (ii) we subdivide or combine shares
of common stock or declare a dividend payable in shares of
common stock, other securities or other property, (iii) we
effect a cash dividend that exceeds 10% of the trading price of
the shares of common stock or any other dividend or distribution
in the form of cash or a repurchase of shares of common stock
that the board determines is special or extraordinary or that is
in connection with a recapitalization or reorganization, or
(iv) any other event shall occur that in the judgment of
the compensation committee requires an adjustment to prevent
dilution or enlargement of the benefits intended to be made
available under the Omnibus Plan, then the compensation
committee will, in a manner it deems equitable, adjust any or
all of (A) the number and type of shares of common stock
subject to the Omnibus Plan and which may, after the event, be
made the subject of awards; (B) the number and type of
shares of common stock subject to outstanding awards;
(C) the grant, purchase or exercise price with respect to
any award; and (D) to the extent such discretion does not
cause an award that is intended to qualify as performance-based
compensation under Code Section 162(m) to lose its status
as such, the performance goals of an award. In any such case,
the compensation committee may also provide for a cash payment
to the holder of an outstanding award in exchange for the
cancellation of all or a portion of the award.
The compensation committee may, in connection with any merger,
consolidation, acquisition of property or stock, or
reorganization, and without affecting the number of shares of
common stock otherwise reserved or available under the Omnibus
Plan, authorize the issuance or assumption of awards upon terms
it deems appropriate.
Term of Plan.
Unless earlier terminated by the
board of directors, the Omnibus Plan will remain in effect until
the earlier of (i) the tenth anniversary of the effective
date of the plan or (ii) the date all shares reserved for
issuance have been issued.
Termination and Amendment.
The board of
directors or the compensation committee may amend, alter,
suspend, discontinue or terminate the Omnibus Plan at any time,
subject to the following limitations:
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the board must approve any amendment to the Omnibus Plan if we
determine such approval is required by prior action of the
board, applicable corporate law or any other applicable law;
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shareholders must approve any amendment to the Omnibus Plan if
we determine that such approval is required by Section 16
of the Securities Exchange Act of 1934, the Code, the listing
requirements of any principal securities exchange or market on
which the shares are then traded or any other applicable
law; and
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shareholders must approve any amendment to the Omnibus Plan that
materially increases the number of shares of common stock
reserved under the Omnibus Plan or the limitations stated in the
Omnibus Plan on the number of shares of common stock that
participants may receive through an award or that amends the
provisions relating to the prohibition on repricing of
outstanding options or SARs.
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The compensation committee may modify or amend any award, or
waive any restrictions or conditions applicable to any award or
the exercise of the award, or amend, modify or cancel any terms
and conditions applicable to any award, in each case by mutual
agreement of the compensation committee and the award holder.
The compensation committee need not obtain the award
holders consent for any such action that is permitted by
the adjustment or change in control provisions of the Omnibus
Plan or for any such action to the extent the compensation
committee (i) deems such action necessary to comply with
any applicable law or the listing requirements of any principal
securities exchange or market on which the common stock is then
traded or to preserve favorable accounting or tax treatment of
any award for us; or (ii) determines that such action does
not materially and adversely affect the value of an award or
that such action is in the best interest of the award holder.
The authority of the board and the compensation committee to
modify the Omnibus Plan or awards, and to otherwise administer
the Omnibus Plan, will extend beyond the termination date of the
Omnibus Plan, although no new awards may be granted after the
date of the termination of the Omnibus Plan. In addition,
termination of the Omnibus Plan will not affect the rights of
participants with respect to awards previously granted to them,
and all unexpired awards will continue in force and effect after
termination of the Omnibus Plan except as they may lapse or be
terminated by their own terms and conditions.
Repricing Prohibited.
Except for the
adjustments provided for in the Omnibus Plan, neither the
compensation committee nor any other person may decrease the
exercise price for any outstanding stock option or decrease the
grant price for any SAR after the date of grant, cancel an
outstanding stock option or SAR in exchange for cash (other than
cash equal to the excess of the fair market value of the shares
subject to such stock option or SAR at the time of cancellation
over the exercise or grant price for such shares), or allow a
participant to surrender an outstanding stock option or SAR to
us as consideration for the grant of a new stock option or SAR
with a lower exercise price or grant price.
Certain United States Federal Income Tax
Consequences.
The following summarizes certain
United States federal income tax consequences relating to the
Omnibus Plan under current tax law.
Stock Options.
The grant of a stock option
will create no income tax consequences to us or the participant.
A participant who is granted a non-qualified stock option will
generally recognize ordinary compensation income at the time of
exercise in an amount equal to the excess of the fair market
value of the common stock at such time over the exercise price.
We will generally be entitled to a deduction in the same amount
and at the same time as ordinary income is recognized by the
participant. Upon the participants subsequent disposition
of the shares of common stock received with respect to such
stock option, the participant will recognize a capital gain or
loss (long-term or short-term, depending on the holding period)
to the extent the amount realized from the sale differs from the
tax basis, i.e., the fair market value of the common stock on
the exercise date.
In general, a participant will recognize no income or gain as a
result of exercise of an incentive stock option, except that the
alternative minimum tax may apply. Except as described below,
the participant will recognize a long-term capital gain or loss
on the disposition of the common stock acquired pursuant to the
exercise of an incentive stock option and we will not be allowed
a deduction. If the participant fails to hold the shares of
common stock acquired pursuant to the exercise of an incentive
stock option for at least two years from the grant date of the
incentive stock option and one year from the exercise date, then
the participant will recognize ordinary compensation income at
the time of the disposition equal to the lesser of (a) the
gain realized on the disposition, or (b) the excess of the
fair market value of the shares of common stock on the exercise
date over the exercise price. We will generally be entitled to a
deduction in the same amount and at the same time as ordinary
income is recognized by the participant. Any additional gain
realized by the participant over the fair market value at the
time of exercise will be treated as a capital gain.
Stock Appreciation Rights (SARs).
The grant of
an SAR will create no income tax consequences to us or the
recipient. A participant will generally recognize ordinary
compensation income at the time of exercise of the SAR in an
amount equal to the excess of the fair market value of the
common stock at such time over the grant price. We will
generally be entitled to a deduction in the same amount and at
the same time as ordinary income is recognized by the
participant. If the SAR is settled in whole or part in shares,
upon the participants
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subsequent disposition of the shares of common stock received
with respect to such SAR, the participant will recognize a
capital gain or loss (long-term or short-term, depending on the
holding period) to the extent the amount realized from the sale
differs from the tax basis, i.e., the fair market value of the
common stock on the exercise date.
Restricted Stock.
Generally, a participant
will not recognize income and we will not be entitled to a
deduction at the time an award of restricted stock is made,
unless the participant makes the election described below. A
participant who has not made such an election will recognize
ordinary income at the time the restrictions on the stock lapse
in an amount equal to the fair market value of the restricted
stock at such time (less the amount, if any, the participant
paid for such restricted stock). We will generally be entitled
to a corresponding deduction in the same amount and at the same
time as the participant recognizes income. Any otherwise taxable
disposition of the restricted stock after the time the
restrictions lapse will result in a capital gain or loss
(long-term or short-term, depending on the holding period) to
the extent the amount realized from the sale differs from the
tax basis, i.e., the fair market value of the common stock on
the date the restrictions lapse. Dividends paid in cash and
received by a participant prior to the time the restrictions
lapse will constitute ordinary income to the participant in the
year paid and we will generally be entitled to a corresponding
deduction for such dividends. Any dividends paid in stock will
be treated as an award of additional restricted stock subject to
the tax treatment described herein.
A participant may, within 30 days after the date of the
award of restricted stock, elect to recognize ordinary income as
of the date of the award in an amount equal to the fair market
value of such restricted stock on the date of the award (less
the amount, if any, the participant paid for such restricted
stock). If the participant makes such an election, then we will
generally be entitled to a corresponding deduction in the same
amount and at the same time as the participant recognizes
income. If the participant makes the election, then any cash
dividends the participant receives with respect to the
restricted stock will be treated as dividend income to the
participant in the year of payment and will not be deductible by
us. Any otherwise taxable disposition of the restricted stock
(other than by forfeiture) will result in a capital gain or
loss. If the participant who has made an election subsequently
forfeits the restricted stock, then the participant will not be
entitled to deduct any loss. In addition, we would then be
required to include as ordinary income the amount of any
deduction we originally claimed with respect to such shares.
Performance Shares.
The grant of performance
shares will create no income tax consequences for us or the
participant. Upon the participants receipt of shares at
the end of the applicable performance period, the participant
will recognize ordinary income equal to the fair market value of
the shares received, except that if the participant receives
shares of restricted stock in payment of performance shares,
recognition of income may be deferred in accordance with the
rules applicable to restricted stock as described above. We will
generally be entitled to a deduction in the same amount and at
the same time as income is recognized by the participant. Upon
the participants subsequent disposition of the shares, the
participant will recognize capital gain or loss (long-term or
short-term, depending on the holding period) to the extent the
amount realized from the disposition differs from the
shares tax basis, i.e., the fair market value of the
shares on the date the participant received the shares.
Performance Units and Restricted Stock
Units.
The grant of a performance unit or
restricted stock unit will create no income tax consequences to
us or the participant. Upon the participants receipt of
cash
and/or
shares at the end of the applicable performance or vesting
period, the participant will recognize ordinary income equal to
the amount of cash
and/or
the
fair market value of the shares received, and we will be
entitled to a corresponding deduction in the same amount and at
the same time. If performance units are settled in whole or in
part in shares, upon the participants subsequent
disposition of the shares the participant will recognize a
capital gain or loss (long-term or short-term, depending on the
holding period) to the extent the amount realized upon
disposition differs from the shares tax basis, i.e., the
fair market value of the shares on the date the employee
received the shares.
Incentive Awards.
A participant who is paid an
incentive award will recognize ordinary income equal to the
amount of cash paid
and/or
the
fair market value of the shares issued, and we will be entitled
to a corresponding deduction in the same amount and at the same
time.
111
Withholding.
In the event we are required to
withhold any federal, state or local taxes or other amounts in
respect of any income recognized by a participant as a result of
the grant, vesting, payment or settlement of an award or
disposition of any shares of common stock acquired under an
award, we may deduct from any payments of any kind otherwise due
the participant cash, or with the consent of the compensation
committee, shares of common stock otherwise deliverable or
vesting under an award, to satisfy such tax obligations.
Alternatively, we may require such participant to pay to us or
make other arrangements satisfactory to us regarding the payment
to us of the aggregate amount of any such taxes and other
amounts. If shares of common stock are deliverable on exercise
or payment of an award, then the compensation committee may
permit a participant to satisfy all or a portion of the federal,
state and local withholding tax obligations arising in
connection with such award by electing to (i) have us
withhold shares otherwise issuable under the award,
(ii) tender back shares received in connection with such
award, or (iii) deliver other previously owned shares, in
each case having a fair market value equal to the amount to be
withheld. However, the amount to be withheld may not exceed the
total minimum tax withholding obligations associated with the
transaction to the extent needed for us to avoid an accounting
charge.
Additional Taxes Under Section 409A.
If
an award under the Omnibus Plan is considered non-qualified
deferred compensation and such award is neither exempt from nor
compliant with the requirements of Code Section 409A, then
the participant will be subject to an additional 20% income tax
on the value of the award when it is no longer subject to a
substantial risk of forfeiture, as well as interest on the
income taxes that were owed from the date of vesting to the date
such taxes are paid.
No Guarantee of Tax Treatment.
Notwithstanding
any provision of the Omnibus Plan, we do not guarantee that
(i) any award intended to be exempt from Code
Section 409A is so exempt, (ii) any award intended to
comply with Code Section 409A or intended to qualify as an
incentive stock option under Code Section 422 does so
comply, or (iii) any award will otherwise receive a
specific tax treatment under any other applicable tax law, nor
in any such case will we or any of our affiliates indemnify,
defend or hold harmless any individual with respect to the tax
consequences of any award.
Section 162(m) Limit on Deductibility of
Compensation.
Code Section 162(m) limits the
deduction we can take for compensation we pay to our chief
executive officer and the three other highest paid officers
other than the chief financial officer (determined as of the end
of each year) to $1 million per year per individual.
However, certain performance-based compensation that meets the
requirements of Code Section 162(m) does not have to be
included when determining whether the $1 million limit has
been met. The Omnibus Plan is designed so that awards granted to
the covered individuals may meet the Code Section 162(m)
requirements for performance-based compensation.
Director
Compensation
Prior to this offering, we have never provided compensation to
our non-employee members of our board of managers for their
services on our board. Following this offering, we intend to
compensate our non-employee directors with an annual cash
payment of $40,000. In addition, we plan to pay an additional
annual retainer of $5,000 for service on the audit committee and
an additional annual retainer of $2,000 for service on the
compensation committee or the corporate governance and
nominating committee. We also plan to pay our audit committee
chair an annual retainer of $30,000 and the chairs of the
compensation committee and the corporate governance and
nominating committee an annual retainer of $5,000. We also
intend to provide our non-employee directors with equity
incentives in amounts to be determined.
112
PRINCIPAL
SHAREHOLDERS
The table below contains information about the beneficial
ownership of our outstanding common stock before and after the
offering (after giving effect to the corporate conversion) by:
(i) each of our directors and director nominees,
(ii) each of our named executive officers, (iii) all
of our directors, director nominees and executive officers as a
group, and (iv) each beneficial owner of more than five
percent of our common stock. As of November 2, 2010, our
outstanding securities consisted of 337,500 common units and
265,796 preferred units and, after giving effect to the
corporate conversion, the issuance of shares upon termination of
the phantom stock agreements and the conversion of the $30.0
million debenture based on an assumed initial public offering
price per share of $[ ], which is
the midpoint of the price range on the cover of this prospectus,
we would have had
outstanding shares
of common stock.
Beneficial ownership of our common stock is determined in
accordance with the rules of the SEC, and generally includes
voting power or investment power with respect to securities held
and also includes options and warrants to purchase shares
currently exercisable or exercisable within 60 days after
November 2, 2010. Except as indicated and subject to
applicable community property laws, to our knowledge the persons
named in the table below have sole voting and investment power
with respect to all shares of common stock shown as beneficially
owned by them.
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Shares of Common Stock
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Shares of Common Stock
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Shares of
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Beneficially Owned
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Beneficially Owned
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Common Stock
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Following Offering
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Following Offering Assuming
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Beneficially Owned
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Assuming No Exercise of
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Exercise of Underwriters
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Prior to Offering
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Underwriters Option
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Option in Full
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Amount
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Percent
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Amount
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Percent
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Amount
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Percent
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Branch Office of Skarbonka
Sp. z o.o.(1)
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Pine Trading, Ltd.(2)
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Antony Mitchell(1)(2)
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Jonathan Neuman(1)(2)
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Deborah Benaim
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Richard S. OConnell, Jr.
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David A. Buzen
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Michael A. Crow
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Walter M. Higgins III
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Robert Rosenberg
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A. Penn Hill Wyrough
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All directors, director nominees and executive officers as a
group (9 individuals)
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1,276,736
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30.6
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%
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1,276,736
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1,276,736
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(1)
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Branch Office of Skarbonka Sp. z o.o. is a company organized in
Poland whose business address is 58, rue Charles Martel, L-2134
Luxembourg. Branch Office of Skarbonka Sp. z o.o. is controlled
by Joseph Lewis. To the extent that the initial public
offering price is in excess of the midpoint of the price range
on the cover of this prospectus, Messrs. Mitchell and
Neuman will each receive 50% of the additional shares that would
have been paid to Skarbonka had the initial public offering
price actually been the midpoint of the price range on the cover
of this prospectus. See Corporate Conversion for
additional details.
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(2)
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Pine Trading, Ltd. is a Bahamas international business
corporation whose business address is Charlotte House, Shirley
Street 1st floor, P.O. Box N-7529,
Nassau, Bahamas. Pine Trading, Ltd. is controlled by David
Haring. Pine Trading, Ltd. has agreed that in the event that the
initial public offering price per share is greater than the
midpoint of the price range on the cover of this prospectus, a
portion of the shares of common stock owned by Pine Trading,
Ltd. shall be proportionately re-allocated to
Messrs. Mitchell and Neuman, with each receiving one-half
of such re-allocated shares. See Corporate
Conversion for additional details.
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113
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Related
Party Transactions Policy and Procedure
The audit committee will adopt written policies and procedures
for the committee to review and approve or ratify related party
transactions involving us, any of our executive officers,
directors or 5% or more shareholders or any of their family
members. These transactions will include:
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transactions that must be disclosed in proxy statements under
SEC rules; and
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transactions that could potentially cause a non-employee
director to cease to qualify as independent under New York Stock
Exchange listing requirements.
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Certain transactions will generally be deemed pre-approved under
these written policies and procedures, including transactions
with a company with which the sole relationship with the other
company is as a non-employee director and the total amount
involved does not exceed 1% of the other companys total
annual revenues.
Criteria for audit committee approval or ratification of related
party transactions will include:
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whether the transaction is on terms no less favorable to us than
terms generally available from an unrelated third party;
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the extent of the related partys interest in the
transaction;
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whether the transaction would interfere with the performance of
the officers or directors duties to us;
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in the case of a transaction involving a non-employee director,
whether the transaction would disqualify the director from being
deemed independent under New York Stock Exchange listing
requirements; and
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such other factors that the audit committee deems appropriate
under the circumstances.
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Since January 1, 2007, there have been no transactions of
more than $120,000 between us and any 5% or more shareholder,
director or executive officer or any of their family members
other than the transactions listed in this section. Prior to
this offering, as a private company we did not have separate
procedures or criteria for approving related party transactions.
However, following this offering, we will follow the procedures
described above in reviewing the related party transactions
described below as the agreements for such transactions come up
for renewal.
114
The following table describes the entities involved in these
transactions and how they are owned or controlled by a related
party.
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Entity
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Relationship
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Branch Office of Skarbonka Sp. z o.o.
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Controlled by Joseph Lewis, beneficial owner of more than 5% of
our common stock.
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Cedarmount Trading, Ltd.
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Controlled by Joseph Lewis and David Haring, beneficial owner of
more than 5% of our common stock.
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CTL Holdings, LLC
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Controlled by Joseph Lewis and David Haring.
Christopher Mangum, president and sole director of Premium
Funding, Inc., a member of our board of managers, is the manager
of CTL Holdings, LLC.
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CTL Holdings II, LLC
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Controlled by Antony Mitchell, our chief executive officer, a
director and beneficial owner of more than 5% of our common
stock.
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CY Financial, Inc.
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Controlled by Jonathan Neuman, our president, a director and
beneficial owner of more than 5% of our common stock.
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IFS Holdings, Inc.
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Controlled by Antony Mitchell.
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Imex Settlement Corporation
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Controlled by Antony Mitchell and David Haring.
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Imperial Life Financing, LLC
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Controlled by Antony Mitchell and Jonathan Neuman.
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IMPEX Enterprises, Ltd.
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Controlled by David Haring.
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Jasmund, Ltd.
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Controlled by Joseph Lewis. Christopher Mangum is sole director,
president and secretary of Jasmund, Ltd.
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Londo Ventures, Inc.
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Controlled by David Haring.
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Monte Carlo Securities, Ltd.
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Controlled by Joseph Lewis and David Haring.
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Premium Funding, Inc.
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Controlled by Christopher Mangum and Joseph Lewis.
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Red Oak Finance, LLC
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Controlled by Jonathan Neuman.
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Stone Brook Partners
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Antony Mitchell is a general partner of Stone Brook Partners.
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Warburg Investment Corporation
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Controlled by Antony Mitchell.
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Wertheim Group
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Controlled by Carl Neuman, the father of Jonathan L. Neuman (as
to 50%).
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Certain
Indebtedness
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On January 1, 2008, we entered into a Consolidated, Amended
and Restated Revolving Balloon Promissory Note in the amount of
$25.0 million with Amalgamated International Holdings, S.A.
(Amalgamated), at an interest rate of 16.5%, which
note consolidated seven notes previously executed by us in favor
of Amalgamated in the aggregate amount of $19.5 million. This
note was later cancelled and replaced effective as of
August 31, 2009 with a new $25.0 million revolving
note in favor of Amalgamated (the Amalgamated Note).
The Amalgamated Note matures on August 1, 2011 and bears an
interest rate of 16.5% per annum. The Amalgamated Note is
cross-defaulted with our other indebtedness and indebtedness of
certain of our related parties Monte Carlo
Securities, Ltd., CTL Holdings, LLC (CTL
Holdings) and Imperial Life Financing, LLC. The largest
aggregate amount of principal outstanding on the Amalgamated
Note since its issuance was $19.5 million. As of
September 30, 2010 and December 31, 2009, the
outstanding principal balance on the Amalgamated Note was
$0 million and $9.6 million, respectively, with
accrued interest of $0 and $469,000, respectively. The amount of
principal paid under the Amalgamated Note during the nine months
ended September 30, 2010 and year ended December 31,
2009 was $10.3 million and $49.8 million, respectively
and the amount of interest paid during the nine months ended
September 30, 2010 and year ended December 31, 2009
was $566,000 and $0, respectively. During the year ended 2009,
$8.4 million of principal and $1.2 million of accrued
interest of the Amalgamated Note was sold by
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115
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Amalgamated to one of our related parties Branch
Office of Skarbonka Sp. z o.o (Skarbonka). The
entire principal and interest balances under the Amalgamated
Note have been paid in full.
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On June 5, 2008 and on August 8, 2008, we executed two
balloon promissory notes in favor of Jasmund, Ltd., in the
original principal amount of $5.0 million and
$1.6 million, respectively, and each at an interest rate of
16.5% per annum. On December 3, 2008 and February 5,
2009, the notes were replaced by notes in the amount of
$5.4 million and $1.7 million, respectively, each in
favor of Jasmund, Ltd. These notes were then consolidated,
amended, restated and replaced by a May 22, 2009 note in
favor Skarbonka, in the principal amount of $7.6 million at
an interest rate of 16.5%. The May 22, 2009 note and
$8.4 million of principal and $1.2 million of accrued
interest of the Amalgamated Note sold to Skarbonka were
subsequently consolidated into an August 31, 2009 revolving
promissory note in favor of Skarbonka in the principal amount of
$17.6 million, together with interest on the principal
balance from time to time outstanding at a rate of 16.5% per
annum. The August 31, 2009 note matures on August 1,
2011. The note is cross-defaulted with our other indebtedness
and indebtedness of Monte Carlo Securities, Ltd., CTL Holdings
and Imperial Life Financing, LLC. The largest aggregate amount
of principal outstanding on the August 31, 2009 note since
its issuance was $17.6 million. As of September 30,
2010 and December 31, 2009, respectively, the outstanding
principal balance on the August 31, 2009 note was
$16.1 million and $17.6 million, respectively, with
accrued interest of $2.0 million and $940,000,
respectively. The amount of principal paid under the note during
the nine months ended September 30, 2010 and year ended
December 31, 2009 was $1.5 million and $0,
respectively, and the amount of interest paid was $985,000 and
$0, respectively. On November 1, 2010, the note was
exchanged along with the common units and Series B
preferred units owned by Premium Funding, Inc. for a
$30.0 million debenture that matures October 4, 2011.
The debenture will have an interest rate of 0%. Immediately
prior to the closing of this offering, the debenture will be
converted into shares of our common stock as described under
Corporate Conversion.
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On October 3 and October 8, 2008, we executed two balloon
promissory notes in favor of Cedarmount Trading, Ltd.
(Cedarmount), each in the original principal amount
of $4,450,000 at an interest rate of 16.5% per annum. On
August 31, 2009, the notes were assigned by Cedarmount to
IMPEX Enterprises, Ltd. (IMPEX). Also effective as
of August 31, 2009, the notes were consolidated, amended,
restated and replaced by a new revolving promissory note which
we executed in favor of IMPEX for a principal amount of
$10.3 million with interest on the principal balance from
time to time outstanding at a rate of 16.5% per annum. The
August 31, 2009 note matures on August 1, 2011. The
note is cross-defaulted with our other indebtedness and
indebtedness of Monte Carlo Securities, Ltd., CTL Holdings and
Imperial Life Financing, LLC. The largest aggregate amount of
principal outstanding on the August 31, 2009 note since
issuance was $10.3 million. As of September 30, 2010
and December 31, 2009 the outstanding principal balance was
$3.8 million and $10.3 million, respectively, with
accrued interest of $1.3 million and $569,000,
respectively. The amount of principal paid under the note during
the nine months ended September 30, 2010 and year ended
December 31, 2009 was $14.4 million and $0,
respectively. As of September 30, 2010, we have not paid
any interest on the note. As part of the corporate conversion,
the note as well as the common units and Series B, C, D and
E preferred units owned by Imex Settlement Corporation will be
converted into 880,000 shares of common stock.
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On December 27, 2007, Imperial Life Financing, LLC
(Life Financing), entered into a $50.0 million
loan agreement with CTL Holdings. The proceeds of this loan were
used by Life Financing to fund our origination of premium
finance loans in exchange for participation interests in such
loans. In April 2008, CTL Holdings entered into a participation
agreement with Perella Weinberg Partners Asset Based Value
Master Fund II, L.P. (Perella), in connection with
which we executed a guaranty, whereby Perella contributed
$10.0 million for a participation interest in CTL
Holdings loans to Life Financing. In connection with
Perellas purchase of the participation interest, we agreed
to reimburse CTL Holdings sole owner, Cedarmount, for any
amounts paid or allocated to Perella under the participation
agreement which cause Cedarmounts rate of return paid by
Life Financing to be less than 10.0% per annum on the funds
Cedarmount advanced to CTL Holdings to make loans to us or cause
Cedarmount
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116
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not to recover its invested capital. In April 2008, the CTL
Holdings loan agreement was amended and the authorized
borrowings were increased from $50.0 million to
$100.0 million. The first $50.0 million tranche
(Tranche A) was restricted such that no further
advances could be made with the exception of funding second year
premiums. All new advances are made under the second
$50.0 million tranche (Tranche B). The loans are
payable as the corresponding premium finance loans mature and as
of June 30, 2010, bear a weighted average annual interest
rate of 10.3%. The agreement requires that each loan originated
under the facility be covered by lender protection insurance.
The agreement does not include any financial covenants but does
contain certain nonfinancial covenants and restrictions. All of
the assets of Life Financing serve as collateral under the
credit facility. The largest aggregate amount of principal
outstanding on the facility since issuance was
$61.2 million. As of September 30, 2010 and
December 31, 2009, the outstanding principal balance on the
facility was $0 million and $21.9 million,
respectively, with accrued interest of $0 and $46,000,
respectively. As of September 30, 2010, we had a receivable
balance of approximately $1.0 million from CTL Holdings,
LLC which relates to lender protection insurance claims that
were remitted directly by our lender protection insurer to CTL
Holdings, LLC. The proceeds of these claims should have been
paid directly to the Company rather than CTL Holdings, LLC. The
amount of principal paid under the facility during the nine
months ended September 30, 2010 and year ended
December 31, 2009 was $22.3 million and
$16.5 million, respectively, and the amount of interest
paid under the facility was $0.8 million and
$2.4 million, respectively.
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On November 15, 2008, Life Financing executed a grid
promissory note in favor of CTL Holdings, in the original
principal amount equal to the lesser of $30.0 million or
the amount outstanding from
time-to-time
a fixed interest rate per advance. The weighted average interest
rate as of September 30, 2010 was 10.5%. The largest
aggregate amount of principal outstanding on the note since
issuance was $36.7 million. As of September 30, 2010
and December 31, 2009, the outstanding principal balance on
the note was approximately $24,000 and $25.9 million,
respectively, with accrued interest of $135 and
$2.8 million, respectively. The amount of principal paid
under the facility during the nine months ended
September 30, 2010 and the year ended December 31,
2009 was $36.7 million and $0, respectively, and the amount
of accrued interest paid was $5.2 million and $0,
respectively.
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On March 13, 2009, Imperial Life Financing II, LLC, a
special purpose entity and wholly-owned subsidiary, entered into
a financing agreement with CTL Holdings II, LLC to borrow funds
to finance its purchase of premium finance loans originated by
us or the participation interests therein. On July 23,
2009, White Oak Global Advisors, LLC replaced CTL Holdings II,
LLC as the administrative agent and collateral agent with
respect to this facility. The original financing agreement
provided for up to $15.0 million of multi-draw term loans.
In September 2009, this financing agreement was amended to
increase the commitment by $12.0 million to a total
commitment of $27.0 million. The interest rate for each
borrowing made under the agreement varies and the weighted
average interest rate for the loans under this facility as of
September 30, 2010 was 21.5%. The loans are payable as the
corresponding premium finance loans mature. The agreement
requires that each loan originated under the facility be covered
by lender protection insurance. The agreement does not include
any financial covenants but does contain certain nonfinancial
covenants and restrictions. All of the assets of Imperial Life
Financing II, LLC serve as collateral under this facility.
The obligations of Imperial Life Financing II, LLC have
been guaranteed by Imperial Premium Finance, LLC; however,
except for certain expenses, the obligations are generally
non-recourse to us except to the extent of Imperial Premium
Finance, LLCs equity interest in Imperial Life
Financing II, LLC. The largest aggregate amount of
principal outstanding on the facility since issuance was
$27.0 million. As of September 30, 2010 and
December 31, 2009, the outstanding principal balance on the
note was $26.2 million and $26.6 million,
respectively, with accrued interest of $8.5 million and
$3.9 million, respectively. The amount of principal paid
under the note during the nine months ended September 30,
2010 and the year ended December 31, 2009 was $416,000 and
$391,000, respectively and the amount of interest paid under the
facility was $68,000 and $61,000, respectively.
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In November 2009, we obtained a loan from Stone Brook Partners,
a general partnership, in the principal amount of
$1.1 million. We repaid the loan in full in December 2009.
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Antony Mitchell, our chief executive officer and a director, and
Jonathan Neuman, our chief operating officer, president and a
director, have each individually guaranteed obligations under
the Acorn Capital Group, LLC credit facility, the CTL Holdings,
LLC credit facility, the Ableco Finance LLC credit facility, the
White Oak Global Advisors, LLC credit facility, the Cedar Lane
Capital LLC credit facility and the claims settlement agreement
with our lender protection insurer. These guaranties are not
unconditional sources of credit support but are intended to
protect against acts of fraud, willful misconduct or the special
purpose entity commencing a bankruptcy filing. To the extent
recourse is sought against Messrs. Mitchell and Neuman for
such non-financial performance reasons, then our indemnification
obligations to Messrs. Mitchell and Neuman may require us
to indemnify them for losses they may incur under these
guaranties.
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Conversion
of Notes to Series A Preferred Units
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We issued a series of notes, dated December 19, 2007,
January 10, 2008, April 8, 2008, October 10, 2008
and December 24, 2008, in favor of Red Oak Finance, LLC, a
Florida limited liability company (Red Oak). The
notes were in the original principal amounts of $1,000,000,
$500,000, $500,000, $62,500 and $450,000, respectively, each at
a 10.0% per annum interest rate. The largest aggregate amount of
principal outstanding on the notes since issuance was
$2.5 million. Since issuance of the notes, the amount of
principal paid under the notes was $253,000, the amount of
interest paid under the notes was $319,000. On June 30,
2009, we converted $2,260,000 of these notes into 50,855
Series A Preferred Units. The Series A Preferred Units
are non-voting and can be redeemed at any time by us for an
amount equal to the applicable unreturned preferred capital
amount allocable to the Series A Preferred Units sought to
be redeemed, plus any accrued and unpaid preferred return. The
cumulative rate of preferred return is equal to 16.5% of the
outstanding units, per annum. The dividends payable at
September 30, 2010 and December 31, 2009 were $523,000
and $189,000, respectively.
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We issued a series of notes, dated August 1, 2008,
August 6, 2008, December 23, 2008 and
December 30, 2008, in favor of IFS Holdings, Inc., a
Florida corporation. The notes were in the original principal
amounts of $200,000, $75,000, $750,000 and $750,000,
respectively, each at a 16.0% per annum interest rate. The
largest aggregate amount of principal outstanding on the notes
since issuance was $1.8 million. Since issuance of the
notes, the amount of principal paid under the notes was $0, the
amount of interest paid under the notes was $163,000. On
June 30, 2009, we converted $1,775,000 of these notes into
39,941 Series A Preferred Units. The Series A
Preferred Units are non-voting and can be redeemed at any time
by us for an amount equal to the applicable unreturned preferred
capital amount allocable to the Series A Preferred Units
sought to be redeemed, plus any accrued and unpaid preferred
return. The cumulative rate of preferred return is equal to
16.5% of the outstanding units, per annum. The dividends payable
at September 30, 2010 and December 31, 2009 were
$410,000 and $155,000, respectively.
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Issuance
of Series B, C, D and E Preferred Units
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In December 2009, Premium Funding, Inc. and Imex Settlement
Corporation each contributed $2.5 million to us in
consideration for the issuance of 25,000 Series B Preferred
Units. The Series B Preferred Units are non-voting and can
be redeemed at any time by us for an amount equal to the
applicable unreturned preferred capital amount allocable to the
Series B Preferred Units sought to be redeemed, plus any
accrued and unpaid preferred return. The cumulative rate of
preferred return is equal to 16.0% of the outstanding units, per
annum. The dividends payable at September 30, 2010 and
December 31, 2009 were $647,000 and $4,000, respectively.
On November 1, 2010, the Series B Preferred Units
owned by Premium Funding, Inc. were exchanged along with the
common units owned by Premium Funding, Inc. and a promissory
note issued to Skarbonka for $30.0 million debenture that
matures October 4, 2011. The debenture will have an
interest rate of 0%. Immediately prior to the closing of this
offering, the debenture will be converted into shares of our
common stock.
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In March 2010, Imex Settlement Corporation contributed
$7.0 million to us in consideration for the issuance of
70,000 Series C Preferred Units. The Series C
Preferred Units are non-voting and can be
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redeemed at any time by us for an amount equal to the applicable
unreturned preferred capital amount allocable to the
Series C Preferred Units sought to be redeemed, plus any
accrued and unpaid preferred return. The cumulative rate of
preferred return is equal to 16.0% of the outstanding units, per
annum. The dividends payable at September 30, 2010 were
$589,000.
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In June 2010, Imex Settlement Corporation purchased from us
7,000 Series D Preferred Units for an aggregate purchase
price of $700,000. The Series D Preferred Units are
non-voting and can be redeemed at any time by us for an amount
equal to the applicable unreturned preferred capital amount
allocable to the Series D Preferred Units sought to be
redeemed, plus any accrued and unpaid preferred return. The
cumulative rate of preferred return is equal to 16.0% of the
outstanding units, per annum. The dividends payable at
September 30, 2010 were $29,000.
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Effective September 30, 2010, Imex Settlement Corporation
purchased from us 73,000 Series E Preferred Units for an
aggregate purchase price of $7,300,000. The Series E
Preferred Units are non-voting and can be redeemed at any time
by us for an amount equal to the applicable unreturned preferred
capital amount allocable to the Series E Preferred Units
sought to be redeemed, plus any accrued and unpaid preferred
return. The cumulative rate of preferred return is equal to
16.0% of the outstanding units, per annum.
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Other
Transactions
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We entered into a consulting agreement with Londo Ventures,
Inc., a Bahamas corporation, on March 31, 2009, under which
Londo Ventures agreed to provide management and financial
consulting services related to our premium finance and
structured settlement business. The agreement was effective as
of January 1, 2008. We incurred a consulting fee in 2009 of
$2,000,000 pursuant to this arrangement for services provided in
2008. This agreement has been terminated.
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Antony Mitchell, our chief executive officer, is the owner of
Warburg. Pursuant to an oral arrangement between us and Warburg,
Antony L. Mitchell serves as our chief executive officer and we
provide Warburg with (i) office space; (ii) equipment;
and (iii) personnel. During the year ended December 1,
2009 and 2008, we incurred fees of $926,000 and $1,082,000,
respectively, under this arrangement. We will enter into a
written employment agreement with Mr. Mitchell that will
become effective upon the closing of this offering. At that
time, the arrangement with Warburg will terminate.
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We have originated premium finance loans referred to us by the
Wertheim Group, an entity that is in the business of referring
individuals to premium finance lenders. Wertheim Group is owned
50.0% by the father of Jonathan L. Neuman, our president and
chief operating officer. We originated 14 premium finance loans
referred to us by the Wertheim Group in 2007 and 11 in 2008 on
which we sold the underlying life insurance policies and
received commissions from the issuing life insurance company of
$4.5 million and $4.5 million, respectively. There
were no originations of premium finance loans referred to us by
the Wertheim Group in 2009. In 2007 and 2008, we paid
$1.7 million and $1.5 million, respectively, of the
commissions we received to Wertheim for the premium finance loan
referrals.
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We have previously engaged Greenberg Traurig, LLP to provide us
with legal services. The spouse of Anne Dufour Zuckerman, our
former general counsel, is a shareholder of Greenberg Traurig,
LLP, although Mr. Zuckerman does not receive any direct
benefit from the relationship with us. We have paid Greenberg
Traurig, LLP $15,000, $1,062,000 and $1,595,000 during the years
ended December 31, 2007, 2008 and 2009, respectively, for
legal services.
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In November 2008, we purchased two loans from CY Financial, Inc.
for $811,000. At the time these loans were purchased, they had
an unpaid principal balance of $725,000. The purchase price
included $691,000 for the loans and $120,000 for purchased
interest resulting in a discount of $34,000.
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DESCRIPTION
OF CERTAIN INDEBTEDNESS
The credit facilities, promissory notes, debenture and
structured settlement purchase arrangements that we have
outstanding as of the date of this prospectus are described
below. The promissory notes that are going to be converted into
shares of our common stock upon the closing of this offering are
also described below.
Acorn
Capital Group, LLC Facility
In April 2007, our wholly-owned subsidiaries Imperial Premium
Finance, LLC (IPF) and Sovereign Life Financing, LLC
(Sovereign), a special purpose entity, entered into
a credit agreement with Acorn pursuant to which Acorn agreed to
make revolving loans to Sovereign up to an aggregate principal
amount of $50.0 million in order for Sovereign to make
loans to IPF to finance premium finance loans made by IPF.
In June 2008, Acorn breached the credit facility by not funding
the loans to be used for premium payments as required under the
credit facility, and we filed a complaint against Acorn in the
Supreme Court of the State of New York.
In May 2009, we entered into a settlement agreement with Acorn.
The settlement agreement terminated the credit agreement and all
other prior agreements between us and Acorn. Pursuant to the
settlement agreement, we issued new notes with each note
corresponding to a loan previously made by Acorn to enable us to
pay premiums due on a particular policy. Each note is secured by
the underlying premium finance loan documents and our rights in
and to the related policy. The notes have an annual interest
rate of 14.5% per annum and as of May 19, 2009, the
aggregate outstanding principal balance on the notes was
approximately $12.7 million.
Acorn subsequently assigned all of its rights and obligations
under the settlement agreement to ABRG. Pursuant to the
settlement agreement, when a premium payment upon a particular
policy is coming due, ABRG must advise us whether it will fund
such premium payment. If ABRG funds the premium payment, this
additional funding is evidenced by a new note, with an annual
interest rate of 14.5% per annum, which is due and payable by us
thirteen (13) months following the advance. If ABRG does
not fund the premium payment, we may elect to fund the premium
payment ourselves, sell the underlying premium finance loan or
related policy to another party or arrange for the sale of our
note to another party. If we elect not to fund the premium
payment ourselves, and are unable to find a purchaser or if ABRG
does not consent to a proposed sale, ABRG must arrange a sale of
the underlying premium finance loan or our related note. In
either case, in the event we elect to fund the premium payment
or upon any sale, our related note is cancelled. As of
December 31, 2009, an aggregate of $13.8 million of
outstanding principal indebtedness and interest of approximately
$2.6 million had been forgiven.
As of September 30, 2010 and December 31, 2009, we had
an aggregate of $4.2 million and $9.2 million of
outstanding principal indebtedness under this facility,
respectively, and accrued interest was approximately
$1.3 million and $2.4 million, respectively.
CTL
Holdings, LLC Grid Note
On November 15, 2008, Imperial Life Financing, LLC executed
a grid promissory note in favor of CTL Holdings, in the
original principal amount equal to the lesser of
$30.0 million or the amount outstanding from
time-to-time
at a fixed interest rate per advance. The weighted average
interest rate as of September 30, 2010 was 10.5%. The
outstanding principal at September 30, 2010 and
December 31, 2009 was approximately $24,000 and
$27.8 million, respectively and accrued interest was
approximately $135 and $2.8 million, respectively.
White Oak
Global Advisors, LLC Facility
On March 13, 2009, Imperial Life Financing II, LLC, a
special purpose entity and wholly-owned subsidiary, entered into
a financing agreement with CTL Holdings II, LLC to borrow funds
to finance its purchase of premium finance loans originated by
us or the participation interests therein. White Oak Global
Advisors, LLC subsequently replaced CTL Holdings II, LLC as the
administrative agent and collateral agent
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with respect to this facility. The original financing agreement
provided for up to $15.0 million of multi-draw term loans.
In September 2009, this financing agreement was amended to
increase the commitment by $12.0 million to a total
commitment of $27.0 million. The interest rate for each
borrowing made under the agreement varies and the weighted
average interest rate for the loans under this facility as of
September 30, 2010 was 21.5%. The loans are payable as the
corresponding premium finance loans mature. The agreement
requires that each loan originated under the facility be covered
by lender protection insurance. All of the assets of Imperial
Life Financing II, LLC serve as collateral under this facility.
In addition, the obligations of Imperial Life Financing II, LLC
have been guaranteed by Imperial Premium Finance, LLC; however,
except for certain expenses, the obligations are generally
non-recourse to us except to the extent of Imperial Premium
Finance, LLCs equity interest in Imperial Life Financing
II, LLC.
The outstanding principal under this facility at
September 30, 2010 and December 31, 2009 was
approximately $26.2 million and $26.6 million,
respectively, and accrued interest was approximately
$8.5 million and $3.9 million, respectively.
We are subject to several restrictive covenants under the
facility. The restrictive covenants include that Imperial Life
Financing II, LLC cannot: (i) create, incur, assume or
permit to exist any lien on or with respect to any property,
(ii) incur, assume, guarantee or permit to exist any
additional indebtedness (other than subordinated indebtedness),
(iii) declare or pay any dividend or other distribution on
account of any equity interests of Imperial Life Financing II,
LLC, (iv) make any repurchase, redemption, retirement,
defeasance, sinking fund or similar payment, or acquisition for
value of any equity interests of Imperial Life Financing II, LLC
or its parent (direct or indirect), (v) issue or sell or
enter into any agreement or arrangement for the issuance and
sale of any shares of its equity interests, any securities
convertible into or exchangeable for its equity interests or any
warrants, or (vi) finance with funds (other than the
proceeds of the loan under the financing agreement) any
insurance premium loan made by Imperial Premium Finance, LLC or
any interest therein.
Cedar
Lane Capital LLC Facility
On March 12, 2010, Imperial PFC Financing II, LLC, a
special purpose entity and wholly-owned subsidiary, entered into
an amended and restated financing agreement with Cedar Lane
Capital, LLC, to enable Imperial PFC Financing II, LLC to
purchase premium finance loans originated by us or participation
interests therein. The financing agreement provides for a
$15.0 million multi-draw term loan commitment. The term
loan commitment is for a
1-year
term
and the borrowings bear an annual interest rate of 14.0%, 15.0%
or 16.0%, depending on the tranche of loans as designated by
Cedar Lane Capital, LLC and are compounded monthly. All of the
assets of Imperial PFC Financing II, LLC serve as collateral
under this credit facility. In addition, the obligations of
Imperial PFC Financing II, LLC have been guaranteed by Imperial
Premium Finance, LLC; however, except for certain expenses, the
obligations are generally non-recourse to us except to the
extent of Imperial Premium Finance, LLCs equity interest
in Imperial PFC Financing II, LLC.
As of September 30, 2010, Cedar Lane has made term loans in
excess of the $15.0 million term loan commitment. The
outstanding principal under this facility at September 30,
2010 and December 31, 2009 was approximately
$32.1 million and $11.8 million, respectively, and
accrued interest was approximately $3.0 million and
$0.1 million, respectively. We are required to procure
lender protection insurance for our premium finance loans funded
under the Cedar Lane facility. We originated our first loan with
proceeds from this credit facility in December 2009. As of
September 30, 2010, we have borrowed $32.1 million
with a weighted average interest rate payable of 15.6%. As of
September 30, 2010, we believe we have approximately
$31.3 million of additional borrowing capacity under this
credit facility based upon Cedar Lanes subscriptions from
its investors, however, our lender protection insurer has
informed us that it will cease providing us with lender
protection insurance under this credit facility upon the earlier
of (i) the completion of this offering or
(ii) December 31, 2010. As a result, we do not expect
to borrow under the Cedar Lane facility after the earlier of
(i) the completion of this offering or
(ii) December 31, 2010.
We are subject to several restrictive covenants under the
facility. The restrictive covenants include that Imperial PFC
Financing II, LLC cannot: (i) create, incur, assume or
permit to exist any lien on or with respect
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to any property, (ii) create, incur, assume, guarantee or
permit to exist any additional indebtedness (other than certain
types of subordinated indebtedness), (iii) declare or pay
any dividend or other distribution on account of any equity
interests of Imperial PFC Financing II, LLC, (iv) make any
repurchase, redemption, retirement, defeasance, sinking fund or
similar payment, or acquisition for value of any equity
interests of Imperial PFC Financing II, LLC or its parent
(direct or indirect), or (v) issue or sell or enter into
any agreement or arrangement for the issuance and sale of any
shares of its equity interests, any securities convertible into
or exchangeable for its equity interests or any warrants.
Imperial Holdings has executed a guaranty of payment for 5.0% of
amounts outstanding under the facility.
Debenture
and Promissory Note Converting Into Common Stock Upon Closing of
this Offering
Branch
Office of Skarbonka Sp. z o.o. Debenture
On August 31, 2009, we executed a revolving promissory note
in favor of Branch Office of Skarbonka Sp. z o.o. in the
principal amount of $17.6 million, together with interest
on the principal balance from time to time outstanding at a rate
of 16.5% per annum. The note matures on August 1, 2011 (to
be extended automatically for additional sixty (60) day
periods absent written notice from the lender to the contrary).
There is no collateral pledged to secure the note but it is
cross-defaulted with our other indebtedness and indebtedness of
Monte Carlo Securities, Ltd., CTL Holdings, LLC, and Imperial
Life Financing, LLC. As of September 30, 2010 and
December 31, 2009, respectively, the outstanding principal
balance on the note was approximately $16.1 million and
$17.6 million, respectively, with accrued interest of
approximately $2.0 million and $980,000, respectively. On
November 1, 2010, the note was exchanged along with the
common units and Series B preferred units owned by Premium
Funding, Inc. for a $30.0 million debenture that matures
October 4, 2011. The debenture will have an interest rate
of 0%. Immediately prior to the closing of this offering, the
debenture will be converted into shares of our common stock as
described under Corporate Conversion.
IMPEX
Enterprises, Ltd. Promissory Note
On August 31, 2009, we executed a revolving promissory note
in favor of IMPEX Enterprises, Ltd., for a principal amount of
$10.3 million, together with interest on the principal
balance from time to time outstanding at a rate of 16.5% per
annum. The note matures on August 1, 2011 (to be extended
automatically for additional sixty (60) day periods absent
written notice from the lender to the contrary). There is no
collateral pledged to secure the note but it is cross-defaulted
with our other indebtedness and the indebtedness of Monte Carlo
Securities, Ltd., CTL Holdings, LLC, and Imperial Life
Financing, LLC. As of September 30, 2010 and
December 31, 2009, respectively, the outstanding principal
balance on the note was approximately $3.8 million and
$10.3 million, respectively, with accrued interest of
approximately $1.3 million and $569,000, respectively. As
part of the corporate conversion, the note as well as the common
units and Series B, C, D and E preferred units owned by
Imex Settlement Corporation will be converted into
880,000 shares of common stock.
Structured
Settlement Purchase Arrangements
8.39%
Fixed Rate Asset Backed Variable Funding Notes
We recently formed Imperial Settlements Financing 2010, LLC
(ISF 2010) as a subsidiary of Washington Square
Financial, LLC (Washington Square) to serve as a new
special purpose financing entity to allow us to borrow against
certain of our structured settlements and assignable annuities,
which we refer to as receivables, to provide us liquidity. On
September 24, 2010, we entered into an arrangement to
provide us up to $50 million in financing. Under this
arrangement, a subsidiary of Partner Re, Ltd. (the
noteholder) became the initial holder of ISF
2010s 8.39% Fixed Rate Asset Backed Variable Funding Note
issued under a master trust indenture and related indenture
supplement (collectively, the indenture) pursuant to
which the noteholder has committed to advance up to
$50 million upon the terms and conditions set forth in the
indenture. The note is secured by the receivables that ISF 2010
acquires from Washington Square from time to time. The note is
due and payable on or before January 1, 2057, but principal
and interest must be repaid pursuant to a schedule of fixed
payments from the receivables that secure the notes. The
arrangement generally
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has a concentration limit of 15% for the providers of the
receivables that secure the notes. As of November 1, 2010,
$0 was outstanding under this arrangement. Wilmington Trust is
the collateral trustee.
Upon the occurrence of certain events of default under the
indenture, all amounts due under the note are automatically
accelerated. ISF 2010 is subject to several restrictive
covenants under the terms of the indenture. The restrictive
covenants include that ISF 2010 cannot: (i) create, incur,
assume or permit to exist any lien on or with respect to any
assets other than certain permitted liens, (ii) create,
incur, assume, guarantee or permit to exist any additional
indebtedness, (iii) declare or pay any dividend or other
distribution on account of any equity interests of ISF 2010
other than certain permitted distributions from available cash,
(iv) make any repurchase or redemption of any equity
interests of ISF 2010 other than certain permitted repurchases
or redemptions from available cash, (v) enter into any
transactions with affiliates other than the transactions
contemplated by the indenture, or (vi) liquidate or
dissolve.
Slate
Capital LLC
In February 2010, Haverhill Receivables, LLC
(Haverhill), a wholly owned subsidiary, entered into
a sale arrangement with Slate under which, subject to certain
conditions, we were obligated to sell, and Slate is obligated to
purchase, structured settlements at pre-determined prices
pursuant to pre-determined criteria. Sales of structured
settlements pursuant to the sale arrangement with Slate are
intended to be absolute and irrevocable sales and are not
intended to be characterized as secured loans or another form of
indebtedness.
On September 30, 2010, we entered into a wind down
agreement with Slate, whereby as of December 31, 2010, we
will cease selling structured settlements to Slate. Under the
wind down agreement, which amends our existing arrangement with
Slate, we will continue submitting structured settlements to
Slate through November 15, 2010 for purchase by
December 31, 2010. The wind down agreement provides that
these purchases generally will be on the same terms and
conditions under the sale arrangement as were in effect prior to
the entry into the wind down agreement. In addition, the wind
down agreement, among other things, (i) eliminated all
exclusivity provisions with respect to our sales of structured
settlements to Slate as of September 30, 2010;
(ii) terminates the requirement for us to maintain a
minimum net worth as of January 1, 2011; and
(iii) eliminates the requirement to pay a termination fee
to Slate upon the occurrence of a termination event as of
September 30, 2010. Certain other obligations, including
confidentiality and our indemnification of Slate, continue
indefinitely. We were not required to pay a termination fee to
Slate in connection with the entry into the wind down agreement.
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DESCRIPTION
OF CAPITAL STOCK
The following description of our capital stock and provisions
of our articles of incorporation and our bylaws are summaries
and are qualified by reference to the articles of incorporation
and the bylaws that will be in effect upon the closing of this
offering. We will file copies of these documents with the SEC as
exhibits to our registration statement of which this prospectus
forms a part. The descriptions of the common stock and preferred
stock reflect changes to our capital structure that will occur
in connection with this offering.
General
Upon the closing of this offering, our authorized capital stock
will consist of 80,000,000 shares of common stock, par
value $0.01 per share, and 40,000,000 shares of
undesignated preferred stock, par value $0.01 per share, the
rights and preferences of which may be established from time to
time by our board of directors.
As of October 27, 2010, we had issued and outstanding
337,500 common units held by three holders of record and 265,796
preferred units held by three holders of record. Since
inception, no dividends have accrued or been paid on shares of
our common stock or on our common units that were issued prior
to our corporate conversion.
Prior to the closing of this offering, we will consummate the
corporate conversion. As part of the corporate conversion, all
of our outstanding common and preferred limited liability
company units (including accrued and unpaid dividends thereon)
and all principal and accrued and unpaid interest outstanding
under our promissory note in favor of IMPEX Enterprises, Ltd.
will be converted into shares
of our common stock.
Following the corporate conversion and upon the closing of this
offering, our three current shareholders will receive warrants
that may be exercised for up
to shares of our common stock.
In addition, immediately prior the closing of this offering, a
$30.0 million debenture will be converted into shares of
our common stock as described under Corporate
Conversion.
The following description summarizes the terms of our capital
stock. Because it is only a summary, it does not contain all the
information that may be important to you. For a complete
description, you should refer to our articles of incorporation
and bylaws, as in effect immediately following the closing of
this offering, forms of which have been filed as exhibits to the
registration statement of which this prospectus is a part.
Common
Stock
Each holder of our common stock is entitled to one vote for each
share held by such holder on all matters to be voted upon by our
shareholders, and there are no cumulative voting rights. Holders
of our common stock are entitled to receive ratably the
dividends, if any, as may be declared from time to time by our
board of directors out of funds legally available therefor. See
Dividend Policy. If there is a liquidation,
dissolution or winding up of the Company, holders of our common
stock would be entitled to share in our assets remaining after
the payment of liabilities. Holders of our common stock have no
preemptive or conversion rights or other subscription rights,
and there are no redemption or sinking fund provisions
applicable to our common stock. All shares of our common stock
to be issued in this offering will be, when issued and sold in
accordance with the terms of this offering, fully paid and
non-assessable.
Preferred
Stock
Our certificate of incorporation authorizes the issuance of
shares of blank check preferred stock with such designation,
rights and preferences as may be determined from time to time by
our board of directors. No shares of preferred stock are being
issued or registered in this offering. Accordingly, our board of
directors is empowered, without shareholder approval, to issue
preferred stock with dividend, liquidation, conversion, voting
or other rights which could adversely affect the voting power or
other rights of the holders of common stock. The preferred stock
could be utilized as a method of discouraging, delaying or
preventing a change in
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control of us. Although we do not currently intend to issue any
shares of preferred stock, there can be no assurance that we
will not do so in the future.
Warrants
Prior to the closing of this offering, we plan to issue warrants
to purchase a total of up
to shares of our common stock
to Antony Mitchell, Jonathan Neuman and Pine Trading, Ltd. The
following description of the warrants is qualified in its
entirety by the form of warrant, which will be filed with the
SEC as an exhibit to the registration statement of which this
prospectus is a part. One half of the warrants will have an
exercise price equal to the price of the common stock sold in
this offering and one half of the warrants will have an exercise
price equal to 120% of the price of the common stock sold in
this offering. The warrants will
expire years after the date
of issuance and will vest over four measurement periods, subject
to Imperials achievement of certain financial metric
targets during such measurement periods as described below. The
measurement periods are:
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First measurement period: the first four fiscal quarters
following the completion of the offering.
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Second measurement period: the fifth, sixth, seventh and eight
fiscal quarters following completion of the offering.
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Third measurement period: the ninth, tenth, eleventh and twelfth
fiscal quarters following completion of the offering.
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Fourth measurement period: the thirteenth, fourteenth, fifteenth
and sixteenth fiscal quarters following completion of the
offering.
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At the end of the first measurement period, 19% of the warrants
will vest only if (i) the pre-tax earnings for the first
measurement period equals or exceeds
$
and (ii) the pre-tax return on equity as defined as pre-tax
income divided by the average equity for the first measurement
period equals or exceeds 20%.
At the end of the second measurement period, 27% of the warrants
will vest only if (i) the pre-tax earnings for the second
measurement period equals or exceeds
$ ,
(ii) the combined pre-tax earnings for the first and second
measurement periods equals or exceeds
$
and (iii) the pre-tax return on equity as defined as
pre-tax income divided by the average equity for the second
measurement period equals or exceeds 20%.
At the end of the third measurement period, 27% of the warrants
will vest only if (i) the pre-tax earnings for the third
measurement period equals or exceeds
$ ,
(ii) the combined pre-tax earnings for the first, second
and third measurement periods equals or exceeds
$
and (iii) the pre-tax return on equity as defined as
pre-tax income divided by the average equity for the third
measurement period equals or exceeds 20%.
At the end of the fourth measurement period, 27% of the warrants
will vest only if (i) the pre-tax earnings for the fourth
measurement period equals or exceeds
$ ,
(ii) the combined pre-tax earnings for the first, second, third
and fourth measurement periods equals or exceeds
$
and (iii) the pre-tax return on equity as defined as
pre-tax income divided by the average equity for the fourth
measurement period equals or exceeds 20%.
Further, at each measurement period, a reduced vesting schedule
will apply if any of the target metrics are not met, based on
the metric that is the furthest from meeting the applicable
target: if 75% of the target (but less than 100%) is met, 50% of
the subject warrants will vest; and if 60% of the target (but
less than 75%) is met, then 25% of the warrants will vest. In
the event that any metric does not meet at least 60% of the
applicable target, then all of the warrants subject to vesting
at such measurement period will be cancelled.
For each vesting period, any vested warrants will be split
evenly between those that have an exercise price equal to the
price of this offering and those that have an exercise price
equal to 120% of the price of this offering.
In the event of a change of control all of the unvested warrants
will vest.
125
The exercise price may be paid in cash, or through a cashless
exercise by reducing the number of shares otherwise issuable to
the holder, based on the closing price of our common stock on
the last business day before the exercise date.
Anti-Takeover
Effects of Florida Law and Our Articles of Incorporation and
Bylaws
Certain provisions of Florida law, our articles of incorporation
and our bylaws contain provisions that could have the effect of
delaying, deferring or discouraging another party from acquiring
control of us. These provisions, which are summarized below, are
expected to discourage coercive takeover practices and
inadequate takeover bids. These provisions are also designed to
encourage persons seeking to acquire control of us to first
negotiate with our board of directors. We believe that the
benefits of increased protection of our potential ability to
negotiate with an unfriendly or unsolicited acquiror outweigh
the disadvantages of discouraging a proposal to acquire us
because negotiation of these proposals could result in an
improvement of their terms.
Requirements
for Advance Notification of Shareholder Nominations and
Proposals
Our bylaws establish advance notice procedures with respect to
shareholder proposals and the nomination of candidates for
election as directors, other than nominations made by or at the
direction of the board of directors or a committee of the board
of directors. The bylaws do not give the board of directors the
power to approve or disapprove shareholder nominations of
candidates or proposals regarding business to be conducted at a
special or annual meeting of the shareholders. However, our
bylaws may have the effect of precluding the conduct of certain
business at a meeting if the proper procedures are not followed.
Our articles of incorporation prohibit our shareholders from
acting without a meeting by written consent. Our articles
further require holders of not less than 50% of the voting power
of our common stock to call a special meeting of shareholders.
These provisions may discourage or deter a potential acquiror
from conducting a solicitation of proxies to elect the
acquirers own slate of directors or otherwise attempting
to obtain control of our company.
Certain
Provisions of Florida Law
We are subject to anti-takeover provisions that apply to public
corporations organized under Florida law unless the corporation
has elected to opt out of those provisions in its articles of
incorporation or its bylaws. We have not elected to opt out of
these provisions.
Control-Share Acquisitions.
The Florida
Business Corporation Act contains a control-share acquisition
statute which provides that a person who acquires shares in an
issuing public corporation, as defined in the
statute, in excess of certain specified thresholds generally
will not have any voting rights with respect to such shares
unless such voting rights are approved by the holders of a
majority of the votes of each class of securities entitled to
vote separately, excluding shares held or controlled by the
acquiring person. The thresholds specified in the Florida
Business Corporation Act are the acquisition of a number of
shares representing:
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one-fifth or more, but less than one-third, of all voting power
of the corporation;
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one-third or more, but less than a majority, of all voting power
of the corporation; or
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a majority or more of all voting power of the corporation.
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The statute does not apply if, among other things, the
acquisition:
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is approved by the corporations board of directors before
the acquisition; or
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is effected pursuant to a statutory merger or share exchange to
which the corporation is a party.
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Affiliated Transactions.
The Florida Business
Corporation Act provides that an affiliated
transaction of a Florida corporation with an
interested shareholder, as those terms are defined
in the statute and discussed more fully below, generally must be
approved by the affirmative vote of the holders of two-thirds of
the outstanding voting shares, other than the shares
beneficially owned by the interested shareholder. The Florida
126
Business Corporation Act defines an interested
shareholder as any person who is the beneficial owner of
10% or more of the outstanding voting shares of the corporation.
The affiliated transactions covered by the Florida Business
Corporation Act include, with specified exceptions:
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mergers and consolidations to which the corporation and the
interested shareholder are parties;
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sales or other dispositions of assets to the interested
shareholder representing 5% or more of the aggregate fair market
value of the corporations assets, outstanding shares,
earning power or net income to the interested shareholder;
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issuances by the corporation of 5% or more of the aggregate fair
market value of its outstanding shares to the interested
shareholder;
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the adoption of any plan for the liquidation or dissolution of
the corporation proposed by or pursuant to an arrangement with
the interested shareholder;
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any reclassification of the corporations securities,
recapitalization of the corporation, merger or consolidation, or
other transaction which has the effect of increasing by more
than 5% the percentage of the outstanding voting shares of the
corporation beneficially owned by the interested
shareholder; and
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the receipt by the interested shareholder of certain loans or
other financial assistance from the corporation.
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The foregoing transactions generally also include transactions
involving any affiliate or associate of the interested
shareholder and involving or affecting any direct or indirect
majority-owned subsidiary of the corporation.
The two-thirds shareholder approval requirement does not apply
if, among other things, subject to specified qualifications:
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the transaction has been approved by a majority of the
corporations disinterested directors;
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the interested shareholder has been the beneficial owner of at
least 80% of the corporations outstanding voting shares
for at least five years preceding the transaction;
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the interested shareholder is the beneficial owner of at least
90% of the outstanding voting shares; or
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specified fair price and procedural requirements are satisfied.
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Florida Insurance Code.
One of our
subsidiaries, Imperial Life Settlements, LLC, a Delaware limited
liability company, is licensed as a viatical settlement provider
and regulated by the Florida Office of Insurance Regulation. As
a Florida viatical settlement provider, Imperial Life
Settlements, LLC is subject to regulation as a specialty insurer
under certain provisions of the Florida Insurance Code. Under
applicable Florida law, no person can acquire, directly or
indirectly, 10% or more of the voting securities of a viatical
settlement provider or its controlling company, including
Imperial Holdings, Inc., without the written approval of the
Florida Office of Insurance Regulation. Accordingly, any person
who acquires, directly or indirectly, 10% or more of our common
stock, must first file an application to acquire control of a
specialty insurer or its controlling company, and obtain the
prior written approval of the Florida Office of Insurance
Regulation.
The Florida Office of Insurance Regulation may disapprove an
acquisition of beneficial ownership of 10% or more of our voting
securities by any person who refuses to apply for and obtain
regulatory approval of such acquisition. In addition, if the
Florida Office of Insurance Regulation determines that any
person has acquired 10% or more of our voting securities without
obtaining regulatory approval, it may order that person to cease
the acquisition and divest itself of any shares of such voting
securities which may have been acquired in violation of the
applicable Florida law. The Florida Office of Insurance
Regulation may also take disciplinary action against Imperial
Life Settlements, LLCs license if it finds that an
acquisition of our voting securities was made in violation of
the applicable Florida law and would render the further
transaction of its business hazardous to its customers,
creditors, shareholders or the public.
127
Indemnification
and Limitation of Liability
The Florida Business Corporation Act authorizes Florida
corporations to indemnify any person who was or is a party to
any proceeding other than an action by, or in the right of, the
corporation, by reason of the fact that he or she is or was a
director, officer, employee, or agent of the corporation. The
indemnity also applies to any person who is or was serving at
the request of the corporation as a director, officer, employee,
or agent of another corporation or other entity. The
indemnification applies against liability incurred in connection
with such a proceeding, including any appeal, if the person
acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the
corporation. To be eligible for indemnity with respect to any
criminal action or proceeding, the person must have had no
reasonable cause to believe his or her conduct was unlawful.
In the case of an action by or on behalf of a corporation,
indemnification may not be made if the person seeking
indemnification is found liable, unless the court in which the
action was brought determines that such person is fairly and
reasonably entitled to indemnification.
The indemnification provisions of the Florida Business
Corporation Act require indemnification if a director, officer,
employee or agent has been successful in defending any action,
suit or proceeding to which he or she was a party by reason of
the fact that he or she is or was a director, officer, employee
or agent of the corporation or is or was serving at the request
of the corporation as a director, officer, employee or agent of
another corporation or other entity. The indemnity covers
expenses actually and reasonably incurred in defending the
action.
The indemnification authorized under Florida law is not
exclusive and is in addition to any other rights granted to
officers, directors and employees under the articles of
incorporation or bylaws of the corporation or any agreement
between officers and directors and the corporation. Each of
Mr. Mitchell and Mr. Neuman, two of our executive
officers, has signed an employment agreement that provides for
indemnification and advancement of expenses to the fullest
extent permitted by Florida law. The officer must repay such
expenses if it is subsequently found that the officer is not
entitled to indemnification. Exceptions to this additional
indemnification include criminal violations by the officer,
transactions involving an improper personal benefit to the
officer and willful misconduct or conscious and reckless
disregard for our best interests.
Our bylaws provide for the indemnification of directors,
officers, employees and agents and for the advancement of
expenses incurred in connection with the defense of any
proceeding that the director, officer, employee or agent was a
party to by reason of the fact that he or she is or was a
director, officer, employee or agent of our corporation, or at
our request, a director, officer, employee or agent of another
corporation. Our bylaws also provide that we may purchase and
maintain insurance on behalf of any director, officer, employee
or agent against liability asserted against the director,
officer, employee or agent in such capacity.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to our directors,
officers and controlling persons pursuant to the foregoing
provisions, or otherwise, we have been advised that in the
opinion of the SEC such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by us of
expenses incurred or paid by a director, officer or controlling
person in the successful defense of any action, suit or
proceeding) is asserted by a director, officer or controlling
person in connection with the securities being registered, we
will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by us is against public policy as expressed in
the Securities Act of 1933 and will be governed by the final
adjudication of this issue.
Under the Florida Business Corporation Act, a director is not
personally liable for monetary damages to us or to any other
person for acts or omissions in his or her capacity as a
director except in certain limited circumstances. Those
circumstances include violations of criminal law (unless the
director had reasonable cause to believe that such conduct was
lawful or had no reasonable cause to believe such conduct was
unlawful), transactions in which the director derived an
improper personal benefit, transactions involving unlawful
distributions, and conscious disregard for the best interest of
the corporation or willful misconduct
128
(only if the proceeding is by or in the right of the
corporation). As a result, shareholders may be unable to recover
monetary damages against directors for actions taken by them
which constitute negligence or gross negligence or which are in
violation of their fiduciary duties, although injunctive or
other equitable relief may be available.
Transfer
Agent and Registrar
The transfer agent and registrar for our common stock is
American Stock Transfer & Trust Company, LLC.
Listing
We have been approved to list our common stock on the New York
Stock Exchange, subject to official notice of issuance, under
the symbol IFT.
129
SHARES ELIGIBLE
FOR FUTURE SALE
Upon completion of this offering, after giving effect to
(i) the corporate conversion, pursuant to which all
outstanding common and preferred limited liability company units
of Imperial Holdings, LLC (including all accrued and unpaid
dividends thereon) and all principal and accrued and unpaid
interest outstanding under our promissory note in favor of IMPEX
Enterprises, Ltd. will be converted
into shares
of our common stock; (ii) the issuance
of shares
of common stock to two of our employees pursuant to the terms of
each of their respective phantom stock agreements;
(iii) the conversion of a $30.0 million debenture
into shares of our common
stock based on an assumed initial public offering price of
$[ ] per share, which is the
midpoint of the price range on the cover of this prospectus as
described under Corporate Conversion; and
(iv) the sale of
[ ] shares
in this offering, there will be
[ ] shares
of our common stock outstanding.
Of these shares, the
[ ] shares
sold in this offering and any shares issued upon exercise of the
underwriters over-allotment option will be freely tradable
without restriction or further registration under the Securities
Act, unless the shares are held by any of our
affiliates as that term is defined in Rule 144
under the Securities Act, in which case they may only be sold in
compliance with the limitations described below. The remaining
shares were issued and sold by us in reliance on exemptions from
the registration requirements of the Securities Act and are
eligible for public sale if registered under the Securities Act
or sold in accordance with Rule 144 under the Securities
Act.
Upon completion of this
offering, shares
will be available for future issuance under our Omnibus Plan. In
addition, shares
of common stock will be issuable pursuant to warrants that will
become exercisable upon the achievement of certain performance
hurdles described elsewhere in this prospectus under
Description of Capital Stock Warrants.
Lock-Up
Agreements
We, all of our current executive officers and directors and each
of our existing shareholders have agreed that, without the prior
written consent of FBR Capital Markets & Co.
(FBR), as representative of the underwriters, we and
they will not, directly or indirectly:
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offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase or otherwise
dispose of or transfer (or enter into any transaction or device
which is designed to, or could be expected to, result in the
disposition by any person at any time in the future of) any
share of our common stock or any security convertible into,
exercisable for or exchangeable for any share of our common
stock (Other Securities), whether now owned or
acquired after the date of this prospectus;
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enter into any swap or any other arrangement or transaction that
transfers to another person, in whole or in part, any of the
economic consequences of ownership of our common stock, whether
any such swap or transaction described above is to be settled by
delivery of shares of our common stock or other securities, in
cash or otherwise;
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make any demand for or exercise any right (or, in the case of
us, file) or cause to be filed a registration statement (other
than the registration statement on
Form S-8
that is described in this prospectus) under the Securities Act,
including any amendment thereto, with respect to the
registration of any shares of our common stock or Other
Securities; or
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publicly disclose the intention to do any of the foregoing,
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in each case, for a
lock-up
period of 180 days after the date of the final prospectus
relating to this offering. The
lock-up
period described in the preceding sentence will be extended if:
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during the last 17 days of the
lock-up
period, we issue an earnings release or material news or a
material event relating to us occurs; or
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prior to the expiration of the
lock-up
period, we announce that we will release earnings results during
the
16-day
period beginning on the last day of the
lock-up
period;
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130
in which case the restrictions described in the preceding
sentence will continue to apply until the expiration of the
18-day
period beginning on the issuance of the earnings release or the
announcement of the material news or material event, unless such
extension is waived in writing by FBR.
Subject to applicable securities laws, our directors, executive
officers and shareholders may transfer their shares of our
common stock or Other Securities (i) as a bona fide gift or
gifts, provided that prior to such transfer the donee or donees
thereof agree in writing to be bound by the same restrictions or
(ii) if such transfer occurs by operation of law (e.g.,
pursuant to the rules of descent and distribution, statutes
governing the effects of a merger or a qualified domestic
relations order), provided that prior to such transfer the
transferee executes an agreement stating that the transferee is
receiving and holding the shares subject to the same
restrictions. In addition, our directors, executive officers and
shareholders may transfer their shares of our common stock or
Other Securities to any trust, partnership, corporation or other
entity formed for the direct or indirect benefit of the
director, executive officer or shareholder or the immediate
family of the director, executive officer or shareholder,
provided that prior to such transfer the transferee agrees in
writing to be bound by the same restrictions and provided that
such transfer does not involve a disposition for value.
The restrictions contained in the
lock-up
agreements do not apply to any grant of options to purchase
shares of our common stock or issuances of shares of restricted
stock or other equity-based awards pursuant to the Omnibus Plan.
Rule 144
Sales by Affiliates
Our affiliates must comply with Rule 144 of the Securities
Act when they sell shares of our common stock. Under
Rule 144, affiliates who acquire shares of common stock,
other than in a public offering registered with the SEC, are
required to hold those shares for a period of (i) one year
if they desire to sell such shares 90 or fewer days after the
issuer becomes subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act or (ii) six
months if they desire to sell such shares more than 90 days
after the issuer becomes subject to the reporting requirements
of Section 13 or 15(d) of the Exchange Act. Shares acquired
in a registered public offering or held for more than the
applicable holding period may be sold by an affiliate subject to
certain conditions. An affiliate would generally be entitled to
sell within any three-month period a number of shares that does
not exceed the greater of:
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one percent of the number of shares of common stock then
outstanding (approximately
[ ] shares
immediately after the offering); and
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the average weekly trading volume of the common stock on the New
York Stock Exchange during the four calendar weeks preceding the
filing with the SEC of a notice on Form 144 with respect to the
sale.
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Sales by affiliates under Rule 144 are also subject to
other requirements regarding the manner of sale, notice and the
availability of current public information about us.
Rule 144(b)(1)
Under Rule 144(b)(1) of the Securities Act, a person who is
not, and has not been at any time during the three months
preceding a sale, one of our affiliates and who has beneficially
owned the shares proposed to be sold for at least one year is
entitled to sell the shares for such persons own account
without complying with any other requirements of Rule 144.
After giving effect to the corporate conversion, all of the
[ ] shares
of common stock outstanding as of the date of this prospectus
would be available to be sold pursuant to Rule 144 upon the
expiration of the
lock-up
agreements described above.
We intend to file a
Form S-8
registration statement following completion of this offering to
register shares of common stock issued or issuable under our
2010 Omnibus Incentive Plan. These shares will be
available-for-sale
in the public market, subject to Rule 144 volume
limitations applicable to affiliates.
131
UNDERWRITING
Subject to the terms and conditions set forth in the
underwriting agreement between us and the underwriters named
below, for whom FBR is acting as representative, we have agreed
to sell to the underwriters, and each underwriter has severally
agreed to purchase, at the public offering price less the
underwriting discounts and commissions shown on the cover page
of this prospectus, the number of shares of common stock listed
next to its name in the following table:
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Number of
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Underwriter
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Shares
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FBR Capital Markets & Co.
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Total
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Under the terms and conditions of the underwriting agreement,
the underwriters are committed to purchase all of the shares
offered by this prospectus (other than the shares subject to the
underwriters option to purchase additional shares), if the
underwriters buy any of such shares. We have agreed to indemnify
the underwriters against certain liabilities, including certain
liabilities under the Securities Act, or to contribute to
payments the underwriters may be required to make in respect of
such liabilities.
The underwriters initially propose to offer the common stock
directly to the public at the public offering price set forth on
the cover page of this prospectus and to certain dealers at such
offering price less a concession not to exceed
$[ ] per share. The underwriters
may allow, and such dealers may re-allow, a discount not to
exceed $[ ] per share to certain
other dealers. After the public offering of the shares of common
stock, the offering price and other selling terms may be changed
by the underwriters.
Over-Allotment Option.
We have granted to the
underwriters an option to purchase up to
[ ]
additional shares of our common stock at the same price per
share as they are paying for the shares shown in the table
above. The underwriters may exercise this option in whole or in
part at any time within 30 days after the date of the
underwriting agreement. To the extent the underwriters exercise
this option, each underwriter will be committed, so long as the
conditions of the underwriting agreement are satisfied, to
purchase a number of additional shares proportionate to that
underwriters initial commitment as indicated in the table
at the beginning of this section plus, in the event that any
underwriter defaults in its obligation to purchase shares under
the underwriting agreement, certain additional shares.
Discounts and Commissions.
The following table
shows the per share and total underwriting discounts and
commissions we will pay to the underwriters. These amounts are
shown assuming both no exercise and full exercise of the
underwriters option to purchase additional shares of our
common stock.
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No
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Full
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Exercise
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Exercise
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Per Share
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$
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$
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Total
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$
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$
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In addition to the underwriting discounts and commissions to be
paid by us, we have agreed to reimburse FBR for certain of its
out-of-pocket
expenses incurred in connection with this offering, including
road show costs and expenses incurred in connection with this
offering, and FBRs disbursements for the fees and expenses
of underwriters counsel up to $400,000. We have paid FBR a
$200,000 advance against its
out-of-pocket
expenses. We estimate that the total expenses of the offering
payable by us, excluding underwriting discounts and commissions,
will be approximately $[ ].
Listing.
We have been approved to list our
common stock on the New York Stock Exchange, subject to official
notice of issuance. We have reserved the trading symbol
IFT. In order to meet the requirements for listing
on that exchange, the underwriters intend to sell at least the
minimum number of shares to at least the minimum number of
beneficial owners as required by that exchange.
132
Stabilization.
In accordance with
Regulation M under the Exchange Act, the underwriters may
engage in activities that stabilize, maintain or otherwise
affect the price of our common stock, including short sales and
purchases to cover positions created by short positions,
stabilizing transactions, syndicate covering transactions,
penalty bids and passive market making.
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Short positions involve sales by the underwriters of shares in
excess of the number of shares the underwriters are obligated to
purchase, which creates a syndicate short position. The short
position may be either a covered short position or a naked short
position. In a covered short position, the number of shares
involved in the sales made by the underwriters in excess of the
number of shares they are obligated to purchase is not greater
than the number of shares that they may purchase by exercising
their option to purchase additional shares. In a naked short
position, the number of shares involved is greater than the
number of shares in their option to purchase additional shares.
The underwriters may close out any short position by either
exercising their option to purchase additional shares or
purchasing shares in the open market.
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Stabilizing transactions permit bids to purchase the underlying
security as long as the stabilizing bids do not exceed a
specific maximum price.
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Syndicate covering transactions involve purchases of our common
stock in the open market after the distribution has been
completed to cover syndicate short positions. In determining the
source of shares to close out the short position, the
underwriters will consider, among other things, the price of
shares available for purchase in the open market as compared to
the price at which they may purchase shares through the
underwriters option to purchase additional shares. If the
underwriters sell more shares than could be covered by
underwriters option to purchase additional shares, thereby
creating a naked short position, the position can only be closed
out by buying shares in the open market. A naked short position
is more likely to be created if the underwriters are concerned
that there could be downward pressure on the price of the shares
in the open market after pricing that could adversely affect
investors who purchase in the offering.
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Penalty bids permit the representative to reclaim a selling
concession from a syndicate member when the common stock
originally sold by the syndicate member is purchased in a
stabilizing or syndicate covering transaction to cover syndicate
short positions.
|
|
|
|
|
|
In passive market making, market makers in the common stock who
are underwriters or prospective underwriters may, subject to
limitations, make bids for or purchase shares of our common
stock until the time, if any, at which a stabilizing bid is made.
|
These activities may have the effect of raising or maintaining
the market price of our common stock or preventing or retarding
a decline in the market price of our common stock. As a result
of these activities, the price of our common stock may be higher
than the price that might otherwise exist in the open market.
These transactions may be effected on the New York Stock
Exchange or otherwise and, if commenced, may be discontinued at
any time.
Neither we nor any of the underwriters make any representation
or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of
our common stock. In addition, neither we nor any of the
underwriters make any representation that the representative of
the underwriters will engage in these stabilizing transactions
or that any transaction, once commenced, will not be
discontinued without notice.
Lock-Up
Agreements.
We, all of our current executive
officers and directors and each of our shareholders have agreed
that, without the prior written consent of FBR, we and they will
not, directly or indirectly:
|
|
|
|
|
offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase or otherwise
dispose of or transfer (or enter into any transaction or device
which is designed to, or could be expected to, result in the
|
133
|
|
|
|
|
disposition by any person at any time in the future of), any
share of our common stock or Other Securities, whether now owned
or acquired after the date of this prospectus;
|
|
|
|
|
|
enter into any swap or any other arrangement or transaction that
transfers to another person, in whole or in part, any of the
economic consequences of ownership of our common stock, whether
any such swap or transaction described above is to be settled by
delivery of shares of our common stock or other securities, in
cash or otherwise;
|
|
|
|
make any demand for or exercise any right (or, in the case of
us, file) or cause to be filed a registration statement (other
than the registration statement on
Form S-8
that is described in this prospectus) under the Securities Act,
including any amendment thereto, with respect to the
registration of any shares of our common stock or Other
Securities; or
|
|
|
|
publicly disclose the intention to do any of the foregoing,
|
in each case, for a
lock-up
period of 180 days after the date of the final prospectus
relating to this offering. The
lock-up
period described in the preceding sentence will be extended if:
|
|
|
|
|
during the last 17 days of the
lock-up
period, we issue an earnings release or material news or a
material event relating to us occurs; or
|
|
|
|
prior to the expiration of the
lock-up
period, we announce that we will release earnings results during
the
16-day
period beginning on the last day of the
lock-up
period;
|
in which case the restrictions described in the preceding
sentence will continue to apply until the expiration of the
18-day
period beginning on the issuance of the earnings release or the
announcement of the material news or material event, unless such
extension is waived in writing by FBR.
Subject to applicable securities laws, our directors, executive
officers and shareholders may transfer their shares of our
common stock or Other Securities (i) as a bona fide gift or
gifts, provided that prior to such transfer the donee or donees
thereof agree in writing to be bound by the same restrictions or
(ii) if such transfer occurs by operation of law (e.g.,
pursuant to the rules of descent and distribution, statutes
governing the effects of a merger or a qualified domestic
relations order), provided that prior to such transfer the
transferee executes an agreement stating that the transferee is
receiving and holding the shares subject to the same
restrictions. In addition, our directors, executive officers and
shareholders may transfer their shares of our common stock or
Other Securities to any trust, partnership, corporation or other
entity formed for the direct or indirect benefit of the
director, executive officer or shareholder or the immediate
family of the director, executive officer or shareholder,
provided that prior to such transfer the transferee agrees in
writing to be bound by the same restrictions and provided that
such transfer does not involve a disposition for value.
The restrictions contained in the
lock-up
agreements do not apply to any grant of options to purchase
shares of our common stock or issuances of shares of restricted
stock or other equity-based awards pursuant to the Omnibus Plan.
FBR does not intend to release any portion of the common stock
subject to the foregoing
lock-up
agreements; however FBR, in its sole discretion, may release any
of the common stock from the
lock-up
agreements prior to expiration of the
lock-up
period without notice. In considering a request to release
shares from a
lock-up
agreement, FBR will consider a number of factors, including the
impact that such a release would have on this offering and the
market for our common stock and the equitable considerations
underlying the request for releases.
Discretionary Accounts.
The underwriters have
informed us that they do not expect to make sales to accounts
over which they exercise discretionary authority in excess of 5%
of the shares of common stock being offered in this offering.
IPO Pricing.
Prior to the completion of this
offering, there has been no public market for our common stock.
The initial public offering price has been negotiated between us
and the representative. Among the factors to be considered in
these negotiations were: the history of, and prospects for, us
and the industry in which we compete; our past and present
financial performance; an assessment of our management; the
present
134
state of our development; the prospects for our future
earnings; the prevailing conditions of the applicable United
States securities market at the time of this offering; and
market valuations of publicly traded companies that we and the
representative believe to be comparable to us.
Certain Information and Fees.
A prospectus in
electronic format may be made available on the websites
maintained by one or more of the underwriters or selling group
members, if any, participating in the offering. The
representative may allocate a number of shares to the
underwriters and selling group members, if any, for sale to
their online brokerage account holders. Any such allocations for
online distributions will be made by the representative on the
same basis as other allocations.
Other than the prospectus in electronic format, the information
on any underwriters or selling group members website
and any information contained in any other website maintained by
any underwriter or selling group member is not part of this
prospectus or the registration statement of which this
prospectus forms a part, has not been approved or endorsed by us
or any underwriter in its capacity as underwriter or selling
group member and should not be relied upon by investors.
If you purchase shares of common stock offered in this
prospectus, you may be required to pay stamp taxes and other
charges under the laws and practices of the country of purchase,
in addition to the offering price listed on the cover page of
this prospectus.
Other Relationships.
FBR may in the future
provide us and our affiliates with investment banking and
financial advisory services for which FBR may in the future
receive customary fees. We have granted FBR a right of first
refusal under certain circumstances to act as (i) financial
advisor in connection with any purchase of sale of assets or a
business combination or other strategic transaction and
(ii) the sole book runner or sole placement agent in
connection with any subsequent public or private offering of
equity securities or other capital markets financing by us.
Subject to completion of this offering, this right of first
refusal extends for one year from the date of this offering. The
terms of any such engagement of FBR will be determined by
separate agreement.
135
LEGAL
MATTERS
Foley & Lardner LLP in Jacksonville, Florida, will
pass upon the validity of the shares of common stock offered by
this prospectus and certain other legal matters for us. Locke
Lord Bissell & Liddell LLP in Chicago, Illinois, will
pass upon certain legal matters for the underwriters.
EXPERTS
The consolidated and combined financial statements of Imperial
Holdings, LLC and its subsidiaries at December 31, 2009 and
2008 and for each of the years ended December 31, 2009,
2008 and 2007 included in this prospectus and in the related
registration statement have been audited by Grant Thornton LLP,
an independent registered public accounting firm, as indicated
in their report with respect thereto, and are included in this
prospectus in reliance upon the authority of such firm as
experts in auditing and accounting.
WHERE YOU
CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on
Form S-1
under the Securities Act with respect to the shares of our
common stock to be sold in this offering. This prospectus does
not contain all the information contained in the registration
statement. For further information with respect to us and the
shares to be sold in this offering, we refer you to the
registration statement, including the agreements, other
documents and schedules filed as exhibits to the registration
statement. Statements contained in this prospectus as to the
contents of any agreement or other document to which we make
reference are not necessarily complete. In each instance, we
refer you to the copy of the agreement or other document filed
as an exhibit to the registration statement, each statement
being qualified in all respects by reference to the agreement or
document to which it refers.
After completion of this offering, we will file annual,
quarterly and current reports, proxy statements and other
information with the SEC. We intend to make these filings
available on our website at
www.imprl.com
. Information on
our website is not incorporated by reference in this prospectus.
In addition, we will provide copies of our filings free of
charge to our shareholders upon request. Our SEC filings,
including the registration statement of which this prospectus is
a part, will also be available to you on the SECs Internet
site at
http://www.sec.gov.
You may read and copy all or any portion of the registration
statement or any reports, statements or other information we
file at the SECs public reference room at
100 F Street, N.E., Washington, D.C. 20549. You
may call the SEC at
1-800-SEC-0330
for further information on the operation of the public reference
room. You can receive copies of these documents upon payment of
a duplicating fee by writing to the SEC. We intend to furnish
our shareholders with annual reports containing consolidated
financial statements audited by an independent registered public
accounting firm.
136
INDEX TO
FINANCIAL STATEMENTS
|
|
|
|
|
Audited Consolidated and Combined Financial Statements as of
December 31, 2008 and 2009 and for each of the three years
in the period ended December 31, 2009 of Imperial Holdings,
LLC and its Subsidiaries
|
|
|
|
|
|
|
|
F-2
|
|
|
|
|
F-3
|
|
|
|
|
F-4
|
|
|
|
|
F-5
|
|
|
|
|
F-6
|
|
|
|
|
F-7
|
|
Unaudited Interim Consolidated Financial Statements as of
September 30, 2010 and for the nine month periods ended
September 30, 2009 and 2010 of Imperial Holdings, LLC and
its Subsidiaries
|
|
|
|
|
|
|
|
F-28
|
|
|
|
|
F-29
|
|
|
|
|
F-30
|
|
|
|
|
F-31
|
|
|
|
|
F-32
|
|
Imperial Holdings, Inc. will succeed to the business of Imperial
Holdings, LLC and its assets and liabilities pursuant to the
corporate conversion of Imperial Holdings, LLC immediately prior
to the closing of the offering as described in this prospectus.
F-1
Report of
Independent Registered Public Accounting Firm
To the Members
Imperial Holdings, LLC
We have audited the accompanying consolidated and combined
balance sheets of Imperial Holdings, LLC and subsidiaries
(the Company) as of December 31, 2009 and 2008
and the related consolidated and combined statements of
operations, members equity and cash flows for each of the
three years in the period ended December 31, 2009. These
consolidated financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. The Company is not required to
have, nor were we engaged to perform an audit of its internal
control over financial reporting. Our audits included
consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Companys internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated and combined financial
statements referred to above present fairly, in all material
respects, the financial position of Imperial Holdings, LLC and
subsidiaries as of December 31, 2009 and 2008, and the
results of their operations and their cash flows for each of the
three years in the period ended December 31, 2009 in
conformity with accounting principles generally accepted in the
United States of America.
Fort Lauderdale, Florida
August 11, 2010
F-2
Imperial
Holdings, LLC and Subsidiaries
December 31,
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
ASSETS
|
Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
7,643,528
|
|
|
$
|
15,890,799
|
|
Restricted cash
|
|
|
2,220,735
|
|
|
|
|
|
Certificate of deposit restricted
|
|
|
659,154
|
|
|
|
669,835
|
|
Agency fees receivable, net of allowance for doubtful accounts
|
|
|
8,870,949
|
|
|
|
2,165,087
|
|
Deferred costs, net
|
|
|
26,650,270
|
|
|
|
26,323,244
|
|
Prepaid expenses and other assets
|
|
|
4,180,383
|
|
|
|
885,985
|
|
Deposits
|
|
|
476,095
|
|
|
|
982,417
|
|
Interest receivable, net
|
|
|
8,604,456
|
|
|
|
21,033,687
|
|
Loans receivable, net
|
|
|
148,743,591
|
|
|
|
189,111,302
|
|
Structured settlements receivables, net
|
|
|
1,140,925
|
|
|
|
151,543
|
|
Receivables from sales of structured settlements
|
|
|
|
|
|
|
320,241
|
|
Investment in life settlements (life insurance policies), at
estimated fair value
|
|
|
|
|
|
|
4,306,280
|
|
Investment in life settlement fund
|
|
|
|
|
|
|
542,324
|
|
Fixed assets, net
|
|
|
1,850,338
|
|
|
|
1,337,344
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
211,040,424
|
|
|
$
|
263,720,088
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND MEMBERS EQUITY
|
Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
3,532,745
|
|
|
$
|
2,713,543
|
|
Accrued expenses related parties
|
|
|
2,000,000
|
|
|
|
455,485
|
|
Interest payable
|
|
|
4,968,858
|
|
|
|
8,251,023
|
|
Interest payable related parties
|
|
|
594,534
|
|
|
|
4,376,299
|
|
Notes payable
|
|
|
104,284,443
|
|
|
|
153,364,326
|
|
Notes payable related parties
|
|
|
79,177,405
|
|
|
|
77,700,155
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
194,557,985
|
|
|
|
246,860,831
|
|
Member units Series A preferred (500,000
authorized; 90,796 issued and outstanding as of
December 31, 2009)
|
|
|
|
|
|
|
4,035,000
|
|
Member units Series B preferred (50,000
authorized; 50,000 issued and outstanding as of
December 31, 2009)
|
|
|
|
|
|
|
5,000,000
|
|
Member units common (500,000 authorized; 450,000
issued and outstanding as of December 31, 2009 and 2008)
|
|
|
19,945,488
|
|
|
|
19,923,709
|
|
Accumulated deficit
|
|
|
(3,463,049
|
)
|
|
|
(12,099,452
|
)
|
|
|
|
|
|
|
|
|
|
Total members equity
|
|
|
16,482,439
|
|
|
|
16,859,257
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and members equity
|
|
$
|
211,040,424
|
|
|
$
|
263,720,088
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of this financial
statement.
F-3
Imperial
Holdings, LLC and Subsidiaries
For
the Years Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
Agency fee income
|
|
$
|
24,514,935
|
|
|
$
|
48,003,586
|
|
|
$
|
26,113,814
|
|
Interest income
|
|
|
4,887,404
|
|
|
|
11,914,251
|
|
|
|
21,482,837
|
|
Origination fee income
|
|
|
525,964
|
|
|
|
9,398,679
|
|
|
|
29,852,722
|
|
Gain on sale of structured settlements
|
|
|
|
|
|
|
442,771
|
|
|
|
2,684,328
|
|
Gain on forgiveness of debt
|
|
|
|
|
|
|
|
|
|
|
16,409,799
|
|
Other income
|
|
|
2,300
|
|
|
|
47,400
|
|
|
|
71,348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income
|
|
|
29,930,603
|
|
|
|
69,806,687
|
|
|
|
96,614,848
|
|
Interest expense
|
|
|
1,336,901
|
|
|
|
7,475,714
|
|
|
|
23,928,017
|
|
Interest expense related parties
|
|
|
6,168
|
|
|
|
5,276,600
|
|
|
|
9,826,781
|
|
Provision for losses on loans receivable
|
|
|
2,331,637
|
|
|
|
10,767,928
|
|
|
|
9,830,318
|
|
Loss (gain) on loan payoffs and settlements, net
|
|
|
(224,551
|
)
|
|
|
2,737,620
|
|
|
|
12,058,007
|
|
Amortization of deferred costs
|
|
|
125,909
|
|
|
|
7,568,541
|
|
|
|
18,339,220
|
|
Selling, general and administrative expenses
|
|
|
21,925,317
|
|
|
|
36,964,956
|
|
|
|
30,242,699
|
|
Selling, general and administrative related parties
|
|
|
2,409,148
|
|
|
|
4,601,454
|
|
|
|
1,026,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
27,910,529
|
|
|
|
75,392,813
|
|
|
|
105,251,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
2,020,074
|
|
|
$
|
(5,586,126
|
)
|
|
$
|
(8,636,403
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma basic and diluted loss per share (unaudited)
|
|
|
|
|
|
|
|
|
|
|
[ ]
|
|
Pro forma weighted average shares outstanding (unaudited)
|
|
|
|
|
|
|
|
|
|
|
[ ]
|
|
The accompanying notes are an integral part of this financial
statement.
F-4
Imperial
Holdings, LLC and Subsidiaries
For
the Years Ended December 31, 2007, 2008 and 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
|
|
|
|
|
|
|
Member Units
|
|
|
Member Units
|
|
|
Member Units
|
|
|
Earnings
|
|
|
|
|
|
|
Common
|
|
|
Preferred A
|
|
|
Preferred B
|
|
|
(Accumulated)
|
|
|
|
|
|
|
Units
|
|
|
Amounts
|
|
|
Units
|
|
|
Amounts
|
|
|
Units
|
|
|
Amounts
|
|
|
Deficit
|
|
|
Total
|
|
|
Balance, December 31, 2006
|
|
|
221,729
|
|
|
$
|
9,854,640
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
103,003
|
|
|
$
|
9,957,643
|
|
Member contributions
|
|
|
228,271
|
|
|
|
10,145,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,145,360
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,020,074
|
|
|
|
2,020,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2007
|
|
|
450,000
|
|
|
|
20,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,123,077
|
|
|
|
22,123,077
|
|
Member distributions
|
|
|
|
|
|
|
(54,512
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(54,512
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,586,126
|
)
|
|
|
(5,586,126
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2008
|
|
|
450,000
|
|
|
|
19,945,488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,463,049
|
)
|
|
|
16,482,439
|
|
Member distributions
|
|
|
|
|
|
|
(21,779
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21,779
|
)
|
Conversion of debt
|
|
|
|
|
|
|
|
|
|
|
90,796
|
|
|
|
4,035,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,035,000
|
|
Proceeds from sale of preferred units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
5,000,000
|
|
|
|
|
|
|
|
5,000,000
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,636,403
|
)
|
|
|
(8,636,403
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009
|
|
|
450,000
|
|
|
$
|
19,923,709
|
|
|
|
90,796
|
|
|
$
|
4,035,000
|
|
|
|
50,000
|
|
|
$
|
5,000,000
|
|
|
$
|
(12,099,452
|
)
|
|
$
|
16,859,257
|
|
The accompanying notes are an integral part of these financial
statements.
F-5
Imperial
Holdings, LLC and Subsidiaries
For
the Years Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
2,020,074
|
|
|
$
|
(5,586,126
|
)
|
|
$
|
(8,636,403
|
)
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
405,049
|
|
|
|
794,306
|
|
|
|
888,446
|
|
Provision for doubtful accounts
|
|
|
287,676
|
|
|
|
1,046,178
|
|
|
|
1,289,353
|
|
Provision for losses on loans receivable
|
|
|
2,331,637
|
|
|
|
10,767,928
|
|
|
|
9,830,318
|
|
Loss (gain) of loan payoffs and settlements, net
|
|
|
(224,551
|
)
|
|
|
2,737,620
|
|
|
|
12,058,007
|
|
Origination income
|
|
|
(525,964
|
)
|
|
|
(9,398,679
|
)
|
|
|
(29,852,722
|
)
|
Gain on sale of structured settlements
|
|
|
|
|
|
|
(442,771
|
)
|
|
|
(2,684,328
|
)
|
Gain on forgiveness of debt
|
|
|
|
|
|
|
|
|
|
|
(16,409,799
|
)
|
Interest income
|
|
|
(4,887,323
|
)
|
|
|
(11,914,251
|
)
|
|
|
(21,482,837
|
)
|
Amortization of deferred costs
|
|
|
125,909
|
|
|
|
7,568,541
|
|
|
|
18,339,220
|
|
Change in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificate of deposit
|
|
|
(561,698
|
)
|
|
|
(97,456
|
)
|
|
|
(10,681
|
)
|
Deposits
|
|
|
(419,248
|
)
|
|
|
(19,717
|
)
|
|
|
|
|
Agency fees receivable
|
|
|
(5,869,311
|
)
|
|
|
(4,199,501
|
)
|
|
|
5,416,509
|
|
Structured settlements receivables
|
|
|
(368,705
|
)
|
|
|
(704,720
|
)
|
|
|
4,658,300
|
|
Prepaid expenses and other assets
|
|
|
(930,953
|
)
|
|
|
(2,201,314
|
)
|
|
|
2,003,955
|
|
Accounts payable and accrued expenses
|
|
|
2,931,710
|
|
|
|
2,360,622
|
|
|
|
(536,823
|
)
|
Interest payable
|
|
|
881,927
|
|
|
|
7,132,789
|
|
|
|
12,498,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(4,803,771
|
)
|
|
|
(2,156,551
|
)
|
|
|
(12,631,183
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of fixed assets
|
|
|
(1,524,721
|
)
|
|
|
(769,328
|
)
|
|
|
(375,452
|
)
|
Collection (purchase) of investment
|
|
|
(1,714,216
|
)
|
|
|
1,714,216
|
|
|
|
(904,237
|
)
|
Proceeds from loan payoffs
|
|
|
1,357,607
|
|
|
|
3,543,032
|
|
|
|
36,108,662
|
|
Originations of loans receivable, net
|
|
|
(37,528,305
|
)
|
|
|
(107,301,524
|
)
|
|
|
(64,143,742
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(39,409,635
|
)
|
|
|
(102,813,604
|
)
|
|
|
(29,314,769
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Member contributions
|
|
|
7,145,360
|
|
|
|
349,000
|
|
|
|
5,000,000
|
|
Member distributions
|
|
|
|
|
|
|
(54,512
|
)
|
|
|
(21,779
|
)
|
Payments of cash pledged as restricted deposits
|
|
|
(1,674,570
|
)
|
|
|
(546,165
|
)
|
|
|
1,536,111
|
|
Payment of financing fees
|
|
|
(672,205
|
)
|
|
|
(22,608,882
|
)
|
|
|
(17,168,828
|
)
|
Repayment of borrowings under credit facilities
|
|
|
|
|
|
|
(15,289,740
|
)
|
|
|
(22,665,616
|
)
|
Repayment of borrowings from affiliates
|
|
|
|
|
|
|
(794,773
|
)
|
|
|
(2,826,418
|
)
|
Borrowings under credit facilities
|
|
|
35,559,122
|
|
|
|
131,823,862
|
|
|
|
73,402,645
|
|
Borrowings from affiliates
|
|
|
|
|
|
|
18,239,793
|
|
|
|
12,937,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
40,357,707
|
|
|
|
111,118,583
|
|
|
|
50,193,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
(3,855,699
|
)
|
|
|
6,148,428
|
|
|
|
8,247,271
|
|
Cash and cash equivalents, at beginning of year
|
|
|
5,350,799
|
|
|
|
1,495,100
|
|
|
|
7,643,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, at end of year
|
|
$
|
1,495,100
|
|
|
$
|
7,643,528
|
|
|
$
|
15,890,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of non-cash financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of debt to preferred member units
|
|
$
|
|
|
|
$
|
|
|
|
$
|
4,035,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred costs paid directly by credit facility
|
|
$
|
|
|
|
$
|
10,926,246
|
|
|
$
|
14,600,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes contributed from members
|
|
|
3,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest during the period
|
|
$
|
458,830
|
|
|
$
|
7,994,775
|
|
|
$
|
20,311,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial
statements.
F-6
Imperial
Holdings, LLC and Subsidiaries
December 31,
2007, 2008 and 2009
|
|
NOTE 1
|
ORGANIZATION
AND DESCRIPTION OF BUSINESS ACTIVITIES
|
Imperial Holdings, LLC (the Company) was formed
pursuant to an operating agreement dated December 15, 2006
between IFS Holdings, Inc., IMEX Settlement Corporation, Premium
Funding, Inc. and Red Oak Finance, LLC. The Company operates as
a limited liability company. The Company, operating through its
subsidiaries, is a specialty finance company with its corporate
office in Boca Raton, Florida. As a limited liability company,
each members liability is generally limited to the amounts
reflected in their respective capital accounts. The Company
operates in two reportable business segments: financing premiums
for individual life insurance policies and purchasing structured
settlements.
Premium
Finance
A premium finance transaction is a transaction in which a life
insurance policyholder obtains a loan, predominately through an
irrevocable life insurance trust established by the insured, to
pay insurance premiums for a fixed period of time. The
Companys typical premium finance loan is approximately two
years in duration and is collateralized by the underlying life
insurance policy. On each premium finance loan, the Company
charges a loan origination fee and charges interest on the loan.
In addition, the Company charges the referring agent an agency
fee.
Structured
Settlements
Washington Square Financial, LLC, a wholly owned subsidiary of
the Company, purchases structured settlements from individuals.
Structured settlements refer to a contract between a plaintiff
and defendant whereby the plaintiff agrees to settle a lawsuit
(usually a personal injury, product liability or medical
malpractice claim) in exchange for periodic payments over time.
A defendants payment obligation with respect to a
structured settlement is usually assumed by a casualty insurance
company. This payment obligation is then satisfied by the
casualty insurer through the purchase of an annuity from a
highly rated life insurance company, thereby providing a high
credit quality stream of payments to the plaintiff.
Recipients of structured settlements are permitted to sell their
deferred payment streams to a structured settlement purchaser
pursuant to state statutes that require certain disclosures,
notice to the obligors and state court approval. Through such
sales, the Company purchases a certain number of fixed,
scheduled future settlement payments on a discounted basis in
exchange for a single lump sum payment.
|
|
NOTE 2
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Principles
of Consolidation and Combination
The consolidated and combined financial statements include the
accounts of the Company, all of its wholly-owned subsidiaries
and its special purpose entities. The special purpose entities
have been created to fulfill specific objectives. Also included
in the consolidated and combined financial statements is
Imperial Life Financing, LLC which is owned by two members of
the Company and is combined with the Company for reporting
purposes. All significant intercompany balances and transactions
have been eliminated in consolidation.
Use
of Estimates
The preparation of these consolidated and combined financial
statements, in conformity with accounting principles generally
accepted in the United States of America, requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from
these estimates and such differences could be material.
Significant estimates made by management include the
F-7
IMPERIAL
HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS (Continued)
December 31,
2007, 2008 and 2009
loan impairment valuation, allowance for doubtful accounts, and
the valuation of investments in life settlements at
December 31, 2009 and 2008.
Cash
and Cash Equivalents
Cash and cash equivalents include cash on hand, investments and
all highly liquid instruments purchased with an original
maturity of three months or less.
Loans
Receivable
Loans receivable acquired or originated by the Company are
reported at cost, adjusted for any deferred fees or costs in
accordance with Financial Accounting Standards Board
(FASB) Accounting Standards Codification
(ASC)
310-20,
Receivables Nonrefundable Fees and Other
Costs
, discounts, and loan impairment valuation. All loans
are collateralized by life insurance policies. Interest income
is accrued on the unpaid principal balance on a monthly basis
based on the stated rate of interest on the loans. Discounts on
loans receivable are accreted to interest income over the life
of the loans using the effective interest method.
Loan
Impairment Valuation
In accordance with ASC 310,
Receivables
, the Company
specifically evaluates all loans for impairment based on the
fair value of the underlying policies as collectability is
primarily collateral dependent. The loans are considered to be
collateral dependent as the repayment of the loans is expected
to be provided by the underlying insurance policies. In the
event of default of a loan, the Company has the option to take
control of the underlying life insurance policy enabling it to
sell the policy or for those loans that are insured (see below),
collect the face value of the insurance certificate.
The loan impairment valuation is evaluated on a monthly basis by
management and is based on managements periodic review of
the fair value of the underlying collateral. This evaluation is
inherently subjective as it requires estimates that are
susceptible to significant revision as more information becomes
available. The loan impairment valuation is established when,
based on current information and events, it is probable that the
Company will be unable to collect the scheduled payments of
principal, interest, and origination fee due according to the
contractual terms of the loan agreement. Once established, the
impairment cannot be reversed to earnings.
The Company purchased lender protection insurance coverage on
loans that were sold to or participated by Imperial Life
Financing, LLC, Imperial PFC Financing, LLC, Imperial Life
Financing II, LLC, and Imperial PFC Financing II, LLC. This
insurance mitigates the Companys exposure to significant
losses which may be caused by declines in the value of the
underlying life insurance policies. For loans that have lender
protection insurance coverage, a loan impairment valuation
adjustment is established if the carrying value of the loan
exceeds the amount of coverage at the end of the period.
For the year ended December 31, 2009, the Company
recognized an impairment charge of approximately $8,616,000 and
$1,214,000 on the loans and related interest, respectively, and
is reflected as a component of the provision for losses on loans
receivable in the accompanying consolidated and combined
statement of operations. For the year ending December 31,
2008, the Company recognized an impairment charge of
approximately $9,346,000 and $1,422,000 related to impaired
loans and interest, respectively.
Agency
Fees Receivable
Agency fees are charged for services related to premium finance
transactions. Agency fees are due per the signed fee agreement.
Agency fees receivable are reported net of an allowance for
doubtful accounts.
F-8
IMPERIAL
HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS (Continued)
December 31,
2007, 2008 and 2009
Managements determination of the allowance for doubtful
accounts is based on an evaluation of the commission receivable,
prior collection history, current economic conditions, and other
inherent risks. The Company reviews agency fees receivable aging
on a regular basis to determine if any of the receivables are
past due. The Company writes off all uncollectible agency fee
receivable balances against its allowance. The allowance for
doubtful accounts was approximately $120,000 and $769,000 for
the years ended December 31, 2009 and 2008, respectively.
Deferred
Costs
Deferred costs include costs incurred in connection with
acquiring and maintaining credit facilities and costs incurred
in connection with securing lender protection insurance. These
costs are amortized over the life of the related loan using the
effective interest method and are classified as amortization of
deferred costs in the accompanying consolidated and combined
statement of operations.
Interest
Income and Origination Income
Interest income consists of interest earned on loans receivable,
income from accretion of discounts on purchased loans, and
accretion of discounts on purchased structured settlement
receivables. Interest income is recognized when it is realizable
and earned, in accordance with ASC 605,
Revenue
Recognition
. Discounts are accreted over the remaining life
of the loan using the effective interest method.
Loans often include origination fees which are fees payable to
the Company on the date the loan matures. The fees are
negotiated at the inception of the loan on a transaction by
transaction basis. The fees are accreted into income over the
term of the loan using the effective interest method.
Payments on loans are not due until maturity of the loan. As
such, we typically do not have non-performing loans or
non-accrual loans until post maturity of the loan. At maturity,
the loans stop accruing interest and origination income.
Interest and origination income on impaired loans is recognized
when it is realizable and earned accordance with ASC 605,
Revenue Recognition
. Persuasive evidence of an
arrangement exists through a loan agreement which is signed by a
borrower prior to funding and sets forth the agreed upon terms
of the interest and origination fees. Interest income and
origination income are earned over the term of the loan and are
accreted using the effective interest method. The interest and
origination fees are fixed and determinable based on the loan
agreement. For impaired loans, we continually reassess whether
the collectability of the interest income and origination income
is reasonably assured because the fair value of the collateral
typically increases over the term of the loan. Our assessment of
whether collectability of interest income and origination income
is probable is based on our estimate of proceeds to be received
upon maturity of the loan. Since our loans are due upon
maturity, we cannot determine whether a loan is performing or
non-performing until maturity. For impaired loans, our estimate
of proceeds to be received upon maturity of the loan is
generally correlated to our current estimate of fair value of
the insurance policy, which is the measure to which the loans
have been impaired, but also incorporates expected increases in
fair value of the insurance policy over the term of the loan,
trends in the market, and our experience with loan payoffs.
Fixed
Assets
Fixed assets are stated at cost less accumulated depreciation
and amortization. The Company provides for depreciation of fixed
assets on a straight-line basis over the estimated useful lives
of the assets which range from three to five years. Leasehold
improvements are amortized using the straight-line method over
the shorter of the expected life of the improvement or the
remaining lease term.
F-9
IMPERIAL
HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS (Continued)
December 31,
2007, 2008 and 2009
Agency
Fee Income
Agency fee income for the premium finance business is recognized
as the loan is funded.
Loss
in Loan Payoffs and Settlements, Net
When a premium finance loan matures, we record the difference
between the net carrying value of the loan and the cash
received, or the fair value of the life insurance policy that is
obtained in the event of payment default, as a gain or loss on
loan payoffs and settlements, net. This account was
significantly impacted by the Acorn settlement (see
Note 14) whereby the Company recorded a loss on loan
payoffs and settlements of $10,182,000 and $1,868,000 during the
years ended December 31, 2009 and 2008, respectively.
Marketing
Expense
Marketing costs are expensed as incurred and were approximately
$4,583,000, $6,053,000 and $2,298,000 for the years ended
December 31, 2009, 2008 and 2007, respectively. These costs
are included within selling, general and administrative expenses
in the consolidated and combined statement of operations.
Investment
in Life Settlements
When the Company becomes the owner of a life insurance policy
following a default on a premium finance loan, the life
insurance policy is accounted for as an investment in life
settlements. Investments in life settlements are accounted for
in accordance with
ASC 325-30,
Investments in Insurance Contracts
, which states that an
investor shall elect to account for its investments in life
settlement contracts using either the investment method or the
fair value method. The election is made on an
instrument-by-instrument
basis and is irrevocable. The Company has elected to account for
these investments using the fair value method.
Investment
in Other Companies
The Company uses the equity method of accounting to account for
its investment in other companies which the Company does not
control but over which it exerts significant influence;
generally this represents ownership interest of at least 20% and
not more than 50%. The Company considers whether the fair values
of any of its investments have declined below their carrying
values whenever adverse events or changes in circumstances
indicate that recorded values may not be recoverable. If the
Company considers any such decline to be other than temporary, a
write-down would be recorded to estimated fair value. As of
December 31, 2009, the Company has an investment in a life
settlement fund (see Note 12) and the Company has not
recorded any losses on this investment.
Fair
Value Measurements
The Company follows ASC 820,
Fair Value Measurements and
Disclosures
when required to measure fair value for
recognition or disclosure purposes. ASC 820 defines fair
value as the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between
market participants at the measurement date. ASC 820 also
establishes a three-level hierarchy for fair value measurements
which prioritizes and ranks the level of market price
observability used in measuring investments at fair value.
Investments measured and reported at fair value are classified
and disclosed in one of the following categories:
Level 1 Valuation is based on unadjusted quoted
prices in active markets for identical assets and liabilities
that are accessible at the reporting date. Since valuations are
based on quoted prices that are readily and regularly available
in an active market, valuation of these products does not entail
a significant degree of judgment.
F-10
IMPERIAL
HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS (Continued)
December 31,
2007, 2008 and 2009
Level 2 Valuation is determined from pricing
inputs that are other than quoted prices in active markets that
are either directly or indirectly observable as of the reporting
date. Observable inputs include quoted prices for similar assets
or liabilities in active markets, quoted prices for identical or
similar assets or liabilities in markets that are not active,
and interest rates and yield curves that are observable at
commonly quoted intervals.
Level 3 Valuation is based on inputs that are
both significant to the fair value measurement and unobservable.
Level 3 inputs include situations where there is little, if
any, market activity for the financial instrument. The inputs
into the determination of fair value generally require
significant management judgment or estimation.
The availability of valuation techniques and observable inputs
can vary from investment to investment and is affected by a wide
variety of factors including, the type of investment, whether
the investment is new and not yet established in the
marketplace, and other characteristics particular to the
transaction.
To the extent that valuation is based on models or inputs that
are less observable or unobservable in the market, the
determination of fair value requires more judgment. Those
estimated values do not necessarily represent the amounts that
may be ultimately realized due to the occurrence of future
circumstances that cannot be reasonably determined. Because of
the inherent uncertainty of valuation, those estimated values
may be materially higher or lower than the values that would
have been used had a ready market for the investments existed.
Accordingly, the degree of judgment exercised by the Company in
determining fair value of assets and liabilities is greatest for
items categorized in Level 3. In certain cases, the inputs
used to measure fair value may fall into different levels of the
fair value hierarchy. In such cases, for disclosure purposes,
the level in the fair value hierarchy within which the fair
value measurement in its entirety falls, is determined based on
the lowest level input that is significant to the fair value
measurement.
Fair value is a market-based measure considered from the
perspective of a market participant rather than an
entity-specific measure. Therefore, even when market assumptions
are not readily available, the Companys own assumptions
are set to reflect those that market participants would use in
pricing the asset or liability at the measurement date. The
Company uses prices and inputs that are current as of the
reporting date, including periods of market dislocation. In
periods of market dislocation, the observability of prices and
inputs may be reduced for many investments. This condition could
cause an investment to be reclassified to a lower level within
the fair value hierarchy. See Note 13 Fair
Value Measurements.
Income
Taxes
The Company operates as a limited liability company. As a
result, the income taxes on the earnings are payable by the
member. Accordingly, no provision or liability for income taxes
is reflected in the accompanying consolidated financial
statements.
Effective January 1, 2007, the Company adopted the
provisions of ASC 740,
Income Taxes
, related to
uncertain tax positions. As required by the uncertain tax
position guidance, the Company recognizes the financial
statement benefit of a tax position only after determining that
the relevant tax authority would more likely than not sustain
the position following an audit. For tax positions meeting the
more-likely-than-not threshold, the amount recognized in the
financial statements is the largest benefit that has a greater
than 50 percent likelihood of being realized upon ultimate
settlement with the relevant tax authority. At the adoption
date, the Company applied the uncertain tax position guidance to
all tax positions for which the statute of limitations remained
open. The Company is subject to filing tax returns in the United
States federal jurisdiction and various states. Tax regulations
within each jurisdiction are subject to the interpretation of
the related tax laws and regulations and require significant
judgment to apply. The Companys open tax years for United
States federal and state income tax examinations by tax
authorities are 2006 to 2009. The Companys
F-11
IMPERIAL
HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS (Continued)
December 31,
2007, 2008 and 2009
policy is to classify interest and penalties (if any) as
administrative expenses. The Company does not have any material
uncertain tax positions; therefore, there was no impact on the
Companys consolidated financial statements.
Restricted
Cash
Under the credit facility with Acorn, the Company was required
to pledge collateral of at least 15% of the aggregate amount of
loans held under the facility. As of December 31, 2008, the
Company had pledged cash of approximately $2,221,000, which was
classified as restricted cash. The restricted cash was released
as part of the Acorn settlements agreement (see Note 14).
Risks
and Uncertainties
In the normal course of business, the Company encounters
economic risk. There are three main components of economic risk:
credit risk, market risk and concentration of credit risk.
Credit risk is the risk of default on the Companys loan
portfolio that results from a borrowers inability or
unwillingness to make contractually required payments. Market
risk for the Company includes interest rate risk. Market risk
also reflects the risk of declines in valuation of the
Companys investments.
Reclassifications
Certain reclassifications and other immaterial adjustments have
been made to the previously issued amounts to conform their
treatment to the current presentation. These adjustments had no
impact on total assets or total equity. The impact on the
statement of operations was immaterial.
Recent
Accounting Pronouncements
In May 2009, the FASB issued authoritative guidance related to
ASC 855,
Subsequent Events
. The guidance provides
authoritative accounting literature related to evaluating
subsequent events that was previously addressed only in the
auditing literature. The guidance is similar to the current
guidance with some exceptions that are not intended to result in
significant change to current practice. This guidance is
effective for interim and annual periods ending after
June 15, 2009. We adopted the guidance and the adoption did
not have an impact on our financial position, results of
operations or cash flows.
In June 2009, the FASB issued authoritative guidance which
established the FASB Accounting Standards Codification
(Codification or ASC) as the source of
authoritative GAAP recognized by the FASB to be applied to
nongovernmental entities, and rules and interpretive releases of
the Securities and Exchange Commission (SEC) as authoritative
GAAP for SEC registrants. The codification supersedes all the
existing non-SEC accounting and reporting standards upon its
effective date and, subsequently, the FASB will not issue new
standards in the form of Statements, FASB Staff Positions or
Emerging Issues Task Force Abstracts. The guidance is not
intended to change or alter existing GAAP. This guidance is
effective for interim and annual periods ending after
September 15, 2009. The guidance did not have an impact on
our consolidated financial statements except that references to
accounting standards have been updated to reflect the
codification.
In August 2009 and September 2009, the FASB issued new guidance
impacting ASC 820,
Fair Value Measurement and
Disclosures
. The first guidance in August 2009 is intended
to reduce ambiguity in financial reporting when measuring the
fair value of liabilities. This guidance was effective for the
first reporting period (including interim periods) after its
issuance. The second guidance issued in September 2009 creates a
practical expedient to measure the fair value of an alternative
investment that does not have a readily determinable fair value.
This guidance also requires certain additional disclosures. This
guidance is effective
F-12
IMPERIAL
HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS (Continued)
December 31,
2007, 2008 and 2009
for interim and annual periods ending after December 15,
2009. The adoption of this guidance did not have a material
impact on our consolidated financial statements.
Pro
Forma Information (Unaudited)
The pro forma earnings per share for the year ended
December 31, 2009 gives effect to (i) the consummation
of the corporate conversion, pursuant to which all outstanding
common and preferred limited liability company units (including
all accrued but unpaid dividends thereon) and all principal and
accrued interest outstanding under our promissory note in favor
of IMPEX Enterprises, Ltd. will be converted into
[ ] shares of our common
stock; (ii) the issuance of shares of common stock to two
of our employees pursuant to the terms of each of their
respective phantom stock agreements; and (iii) the issuance
and conversion of a $30.0 million debenture into
[ ] shares of our common stock.
Unaudited pro forma net income attributable to common
stockholders per share is computed using the weighted-average
number of common shares outstanding, including the pro forma
effect of (i) to (iii) above, as if such conversion
occurred at the beginning of the period.
The following table sets forth the computation of pro forma
basic and diluted net loss per share:
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31, 2009
|
|
|
Numerator (basic and diluted):
|
|
|
|
|
Net loss
|
|
$
|
(8,636
|
)
|
|
|
|
|
|
Denominator (basic and diluted):
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
[
|
]
|
Add: Common shares from conversion of common units
|
|
|
[
|
]
|
Add: Common shares from conversion of preferred units
|
|
|
[
|
]
|
Add: Common shares from phantom stock agreements
|
|
|
[
|
]
|
|
|
|
|
|
Add: Common shares from conversion of $30.0 million
debenture
|
|
|
|
|
Pro forma weighted average common shares outstanding
|
|
|
[
|
]
|
|
|
|
|
|
Pro forma net loss per share:
|
|
|
|
|
Basic and diluted
|
|
$
|
[
|
]
|
|
|
|
|
|
The Company incurred an operating loss during 2009. The Company
plans to obtain additional financing from third party lenders to
continue to fund its operations. There can be no assurances that
the additional financing will be available, or that, if
available the financing will be obtainable on terms acceptable
to the Company. If the Company fails to obtain additional
financing, it may need to obtain additional financial support
from its owners.
During 2009, the Company paid $16,910,000 in lender protection
insurance premiums which are being capitalized and amortized
over the life of the loans using the effective interest method.
The balance of costs related to lender protection insurance
premium included in deferred costs in the accompanying balance
sheet at December 31, 2009 was approximately $21,001,000,
net of accumulated amortization of approximately $28,351,000.
The state surplus taxes on the lender protection insurance
premiums are 3.6% to 4.0% of the
F-13
IMPERIAL
HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS (Continued)
December 31,
2007, 2008 and 2009
premiums paid. The Company paid $647,000 in state surplus taxes
during 2009. These costs are being capitalized and amortized
over the life of the loans using the effective interest method.
The balance of costs related to state surplus taxes included in
deferred costs in the accompanying balance sheet at
December 31, 2009 was approximately $1,190,000, net of
accumulated amortization of approximately $590,000.
During 2009, the Company paid loan closing fees of approximately
$1,350,000 related to the closing of the financing agreement
with Cedar Lane Capital, LLC and approximately $629,000 related
to the closing of the financing agreement with White Oak Global
Advisors, LLC (see Note 14). These costs are being capitalized
and amortized over the life of the credit facilities using the
effective interest method. The balance of costs related to
securing credit facilities included in deferred costs in the
accompanying balance sheet at December 31, 2009 was
approximately $4,108,000, net of accumulated amortization of
approximately $2,995,000.
In May 2009, the Company settled its lawsuit with Acorn Capital
Group, a credit facility (see Note 14) and capitalized
legal fees related to the settlement for loans that continue per
the Settlement Agreement. The costs are being capitalized and
amortized over the life of the new agreement using the effective
interest method. The balance of these costs included in deferred
costs in the accompanying balance sheet at December 31,
2009 was approximately $24,000, net of accumulated amortization
of approximately $62,000.
In June 2007, the Company provided three $100,000 deposits to
various states as a requirement for applying for and obtaining
life settlement licenses in those states. The deposits are held
by the state or custodians of the state and bear interest at
market rates. Interest is generally distributed to the Company
on a quarterly basis. Interest income of approximately $2,000
has been recognized on these deposits for the year ended
December 31, 2009.
In June 2007, the Company purchased five surety bonds in various
amounts as a requirement for applying for and obtaining life
settlement licenses in certain states. The surety bonds were
backed by a letter of credit by a regional bank which was
collateralized by a certificate of deposit with the bank in the
amount of $550,000.
In February 2008, the Company obtained a new letter of credit
from a national bank which is collateralized by a certificate of
deposit with the bank in the amount of $100,000. The certificate
of deposit accrues interest at 2.23% per annum. The Company
renewed the certificate of deposit on February 14, 2010 and
it matures on February 14, 2011.
In May 2008, the Company redeemed the certificate of deposit
that was purchased in June 2007 and received approximately
$558,000 in cash, which included accrued interest. The Company
amended the $100,000 letter of credit with the national bank to
increase the letter of credit to $650,000. The Company purchased
an additional certificate of deposit with the bank in the amount
of $550,000. The certificate of deposit accrues interest at
1.00% per annum. The certificate of deposit was renewed on
May 15, 2010 and it matures on May 15, 2012. The
letter of credit expires on May 10, 2010.
The Company expects to continue to maintain the certificates of
deposit as collateral for the foreseeable future. The
certificates of deposit are recorded at cost in the balance
sheet and are restricted at year end. Interest income of
approximately $11,000 has been recognized as of
December 31, 2009.
F-14
IMPERIAL
HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS (Continued)
December 31,
2007, 2008 and 2009
Fixed assets at December 31, 2008 and 2009 are summarized
as follows:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
Computer software and equipment
|
|
$
|
1,644,636
|
|
|
$
|
1,885,904
|
|
Furniture, fixtures and equipment
|
|
|
957,717
|
|
|
|
1,025,841
|
|
Leasehold improvements
|
|
|
465,836
|
|
|
|
531,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,068,189
|
|
|
|
3,443,641
|
|
Less: Accumulated depreciation
|
|
|
1,217,851
|
|
|
|
2,106,297
|
|
|
|
|
|
|
|
|
|
|
Fixed assets, net
|
|
$
|
1,850,338
|
|
|
$
|
1,337,344
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense for the years ended December 31, 2009,
2008 and 2007 was approximately $888,000, $794,000 and $405,000,
respectively.
|
|
NOTE 7
|
LOANS
RECEIVABLE
|
A summary of loans receivables at December 31, 2008 and
2009 is as follows:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
Loan principal balance
|
|
$
|
147,937,524
|
|
|
$
|
167,691,534
|
|
Loan origination fees, net
|
|
|
11,021,018
|
|
|
|
33,044,935
|
|
Discount, net
|
|
|
(1,353,041
|
)
|
|
|
(26,403
|
)
|
Loan impairment valuation
|
|
|
(8,861,910
|
)
|
|
|
(11,598,764
|
)
|
|
|
|
|
|
|
|
|
|
Loans receivable, net
|
|
$
|
148,743,591
|
|
|
$
|
189,111,302
|
|
|
|
|
|
|
|
|
|
|
An analysis of the changes in loans receivable principal balance
during the years ended December 31, 2008 and 2009 is as
follows:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
Loan principal balance, beginning
|
|
|
44,792,648
|
|
|
|
147,937,524
|
|
Loan originations
|
|
|
97,558,515
|
|
|
|
51,572,637
|
|
Purchases from related party
|
|
|
724,876
|
|
|
|
|
|
Subsequent year premiums paid net of reimbursement
|
|
|
12,975,647
|
|
|
|
15,875,702
|
|
Loan write-offs
|
|
|
(5,163,552
|
)
|
|
|
(12,997,742
|
)
|
Loan payoffs
|
|
|
(2,950,610
|
)
|
|
|
(29,607,625
|
)
|
Loans transferred to investments in life settlements
|
|
|
|
|
|
|
(5,088,962
|
)
|
|
|
|
|
|
|
|
|
|
Loan principal balance, ending
|
|
|
147,937,524
|
|
|
|
167,691,534
|
|
|
|
|
|
|
|
|
|
|
Loan origination fees include origination fees which are payable
to the Company on the date the loan matures. The loan
origination fees are reduced by any direct costs that are
directly related to the creation of the loan receivable in
accordance with
ASC 310-20,
Receivables Nonrefundable Fees and Other
Costs
, and the net balance is accreted over the life of the
loan using the effective interest method. Discounts include
purchase discounts, net of accretion, which are attributable to
loans that were acquired from affiliated companies under common
ownership and control.
In accordance with ASC 310,
Receivables
, the Company
specifically evaluates all loans for impairment based on the
fair value of the underlying policies as foreclosure is
considered probable. The loans are
F-15
IMPERIAL
HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS (Continued)
December 31,
2007, 2008 and 2009
considered to be collateral dependent as the repayment of the
loans is expected to be provided by the underlying policies.
A summary of our investment in impaired loans at
December 31, 2008 and 2009 is as follows:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
Loan receivable, net
|
|
|
30,096,732
|
|
|
|
54,647,002
|
|
Interest receivable, net
|
|
|
798,466
|
|
|
|
6,439,733
|
|
|
|
|
|
|
|
|
|
|
Investment in impaired loans
|
|
|
30,895,198
|
|
|
|
61,096,031
|
|
|
|
|
|
|
|
|
|
|
The average investment in impaired loans during the years ended
December 31, 2008 and 2009 was approximately $16,452,000
and $45,996,000, respectively. The interest recognized on the
impaired loans was approximately $7,670,000 and $2,227,000 for
the year ended December 31, 2009 and 2008, respectively.
An analysis of the loan impairment valuation for the year ended
December 31, 2009 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
|
Interest
|
|
|
|
|
|
|
Receivable
|
|
|
Receivable
|
|
|
Total
|
|
|
Balance at beginning of period
|
|
$
|
8,861,910
|
|
|
$
|
1,441,552
|
|
|
$
|
10,303,462
|
|
Provision for loan losses
|
|
|
8,616,097
|
|
|
|
1,214,221
|
|
|
|
9,830,318
|
|
Charge-offs
|
|
|
(5,879,243
|
)
|
|
|
(867,229
|
)
|
|
|
(6,746,472
|
)
|
Recoveries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
11,598,764
|
|
|
$
|
1,788,544
|
|
|
$
|
13,387,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
An analysis of the loan impairment valuation for the year ended
December 31, 2008 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
|
Interest
|
|
|
|
|
|
|
Receivable
|
|
|
Receivable
|
|
|
Total
|
|
|
Balance at beginning of period
|
|
$
|
2,250,580
|
|
|
$
|
81,057
|
|
|
$
|
2,331,637
|
|
Provision for loan losses
|
|
|
8,927,947
|
|
|
|
1,839,981
|
|
|
|
10,767,928
|
|
Charge-offs
|
|
|
(2,316,617
|
)
|
|
|
(479,486
|
)
|
|
|
(2,796,103
|
)
|
Recoveries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
8,861,910
|
|
|
$
|
1,441,552
|
|
|
$
|
10,303,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009, the loan portfolio consisted of
loans due in the next 2 to 5 years with both fixed (8.5%
average interest rate among all fixed rate loans, compounded
monthly) and variable (10.7% average interest rate among all
variable rate loans) interest rates.
During 2009 and 2008, the Company originated 194 and 499 loans
receivable with a principal balance of approximately $51,227,000
and $99,557,000, respectively. The balances of these loans were
financed from the Companys credit facilities. All loans
were issued to finance insurance premiums. Loan interest
receivable at December 31, 2009 and 2008, was approximately
$21,030,000, and $8,604,000 net of impairment of
approximately $1,789,000 and $1,442,000, respectively. As of
December 31, 2009, there were 696 loans with the average
loan balance of approximately $246,000.
In November 2008, the Company acquired two loans from an
affiliated company under common ownership and control for cash.
These loans were purchased by the affiliated company and had an
unpaid principal balance at the date of purchase of
approximately $725,000 and were purchased for approximately
$811,000, which included approximately $691,000 for the loans
and approximately $120,000 for purchased
F-16
IMPERIAL
HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS (Continued)
December 31,
2007, 2008 and 2009
interest. The resulting discount at date of purchase was
approximately $34,000 and is accreted over the life of the loans.
In 2009 and 2008, the Company financed subsequent premiums to
keep the underlying insurance policies in force on 485 and 284
loans receivable with a principal balance of approximately
$15,718,000 and $8,354,000, respectively. This balance included
approximately $6,204,000 and $3,371,000 of loans financed from
the Companys credit facilities and approximately
$9,514,000 and $4,983,000 of loans financed with cash received
from affiliated companies, respectively.
During 2009 and 2008, 110 and 10 of the Companys loans
were paid off with proceeds totaling approximately $36,109,000
and $3,543,000, respectively, of which approximately $27,864,000
and $3,005,000 was for the principal of the loans and
approximately $3,775,000 and $476,000 was for accrued interest,
respectively. The loans had discount balances at the time of
repayment totaling approximately $60,000 and $391,000,
respectively. The Company recognized losses of approximately
$73,000 and $441,000 on these transactions, respectively.
The Company wrote off 94 and 18 loans during 2009 and 2008
respectively, because the collectability of the original loans
was unlikely and the underlying policies were allowed to lapse.
The principal amount written off was approximately $3,309,000
and $3,348,000 with accrued interest of approximately $572,000
and $552,000, respectively, and accreted origination fees of
approximately $153,000. The Company had an impairment associated
with these loans of approximately $1,471,000 and $2,605,000 and
incurred a loss on these loans of approximately $2,612,000 and
$1,245,000, respectively.
During 2009 and 2008, the Company wrote off 64 and 11 loans,
respectively related to the Acorn facility (see Note 14).
The principal amount written off was approximately $8,441,000
and $1,761,000 with accrued interest of approximately $1,031,000
and $192,000, and origination receivable of approximately
$559,000 and $52,000, respectively. The Company had an
impairment associated with these loans of approximately $584,000
and $137,000, and incurred a loss on these loans of
approximately $10,182,000 and $1,868,000, respectively.
|
|
NOTE 8
|
ORIGINATION
FEES
|
A summary of the balances of origination fees that are included
in loans receivable in the consolidated and balance sheet as of
December 31 is as follows:
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
Loan origination fees gross
|
|
$
|
46,124,533
|
|
|
$
|
57,641,266
|
|
Un-accreted origination fees
|
|
|
(36,257,855
|
)
|
|
|
(25,211,898
|
)
|
Amortized loan originations costs
|
|
|
1,154,340
|
|
|
|
615,567
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
11,021,018
|
|
|
$
|
33,044,935
|
|
|
|
|
|
|
|
|
|
|
Loan origination fees are fees payable to the Company on the
date of loan maturity or repayment. Loan origination costs are
deferred costs that are directly related to the creation of the
loan receivable.
|
|
NOTE 9
|
AGENCY
FEES RECEIVABLE
|
Agency fees receivable are agency fees due from insurance agents
related to premium finance loans. The balance of agency fees
receivable at December 31, 2009 and 2008 were approximately
$2,165,000 and $8,871,000 respectively, net of a reserve of
approximately $120,000 and $769,000, respectively. Bad debt
expense was approximately $1,289,000 and $1,046,000 at
December 31, 2009 and 2008, respectively, and is
F-17
IMPERIAL
HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS (Continued)
December 31,
2007, 2008 and 2009
included in selling, general and administrative expenses on the
consolidated and combined statement of operations.
An analysis of the changes in the allowance for doubtful
accounts for past due agency fees during the years ended
December 31, 2008 and 2009 is as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
Balance at beginning of period
|
|
$
|
287,676
|
|
|
$
|
768,806
|
|
Bad debt expense
|
|
|
536,490
|
|
|
|
1,290,241
|
|
Write-offs
|
|
|
(55,360
|
)
|
|
|
(1,939,161
|
)
|
Recoveries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
768,806
|
|
|
$
|
119,886
|
|
|
|
NOTE 10
|
STRUCTURED
SETTLEMENTS
|
Total income recognized on structured settlement transactions
for the year ended December 31, 2009 was approximately
$1,211,000 through accretion. The receivables at
December 31, 2009 were approximately $152,000, net of a
discount of approximately $153,000.
During 2009, the Company sold several structured settlements
with proceeds totaling approximately $15,344,000, of which
approximately $31,519,000 was for receivables, net of a discount
of approximately $18,539,000, and a holdback of approximately
$320,000. The Company recognized a gain of approximately
$2,684,000 on this transaction. The Company was also retained to
service the future collections on one of the sales and collected
approximately $90,000 at December 31, 2009 for future
servicing activity. This amount is reflected in the accounts
payable, accrued expenses, and other liabilities section of the
balance sheet.
The holdback is equal to the aggregate amount of payments due
and payable by the annuity holder within 90 days after the
date of sale. These amounts are held back in accordance with the
purchase agreement and will be released upon proof of collection
by the Company acting as servicer. Of the total holdback of
approximately $320,000 receivable at December 31, 2009,
approximately $102,000 was collected subsequent to year end. The
remaining $218,000 was received from the annuity issuers but the
holdback was not released to the Company until June, 2010. As
such, this amount was recorded as a receivable as of
December 31, 2009.
|
|
NOTE 11
|
INVESTMENT
IN LIFE SETTLEMENTS (LIFE INSURANCE POLICIES)
|
During 2009, the Company acquired certain life insurance
policies as a result of certain of the Companys borrowers
defaulting on premium finance loans and relinquishing the
underlying policy to the Company in exchange for being released
from further obligations under the loan. The Company elected to
account for these policies using the fair value method. The fair
value is determined on a discounted cash flow basis,
incorporating current life expectancy assumptions. The discount
rate incorporates current information about market interest
rates, the credit exposure to the insurance company that issued
the life settlement contracts and the Companys estimate of
the risk premium an investor in the policy would require.
F-18
IMPERIAL
HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS (Continued)
December 31,
2007, 2008 and 2009
During 2009, the Company recognized a gain of approximately
$843,000 which was recorded at the time of foreclosure related
to recording the policies acquired at the transaction price
(fair value of the policy) which is included in loss on loan
payoffs and settlements, net in the accompanying consolidated
and combined statement of operations. The following table
describes the Companys investment in life settlements as
of December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
Number of
|
|
|
|
|
|
|
|
Life Expectancy
|
|
Life Settlement
|
|
|
Fair
|
|
|
Face
|
|
(In Years)
|
|
Contracts
|
|
|
Value
|
|
|
Value
|
|
|
0-1
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
1-2
|
|
|
|
|
|
|
|
|
|
|
|
|
2-3
|
|
|
|
|
|
|
|
|
|
|
|
|
3-4
|
|
|
|
|
|
|
|
|
|
|
|
|
4-5
|
|
|
|
|
|
|
|
|
|
|
|
|
Thereafter
|
|
|
27
|
|
|
|
4,306,280
|
|
|
|
72,875,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
27
|
|
|
$
|
4,306,280
|
|
|
$
|
72,875,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums to be paid for each of the five succeeding fiscal years
to keep the life insurance policies in force as of
December 31, 2009, are as follows:
|
|
|
|
|
2010
|
|
$
|
1,523,016
|
|
2011
|
|
|
1,667,116
|
|
2012
|
|
|
1,689,947
|
|
2013
|
|
|
1,800,647
|
|
2014
|
|
|
1,954,147
|
|
Thereafter
|
|
|
23,899,310
|
|
|
|
|
|
|
|
|
$
|
32,534,183
|
|
|
|
|
|
|
|
|
NOTE 12
|
INVESTMENT
IN LIFE SETTLEMENT FUND
|
On September 3, 2009, the Company formed MXT Investments,
LLC (MXT Investments) as a wholly-owned subsidiary.
MXT Investments signed an agreement with Insurance Strategies
Fund, LLC (Insurance Strategies) whereby MXT
Investments would purchase an equity interest in Insurance
Strategies in exchange for providing financing for the
acquisition of life insurance policies. Insurance Strategies
would purchase life insurance policies from the Company and
other sources. During 2009, MXT Investments contributed
approximately $904,000 to Insurance Strategies and Insurance
Strategies purchased 5 insurance policies from the Company for
approximately $1,434,000. No gain was recognized on the
transaction due to the related equity contribution made by MXT
Investments into Insurance Strategies. As of December 31,
2009, MXT Investments had investments in Insurance Strategies of
$542,000, net of deferred gains of $362,000.
|
|
NOTE 13
|
FAIR
VALUE MEASUREMENTS
|
The balances of the Companys assets measured at fair value
on a recurring basis as of December 31, 2009, are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Fair Value
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in life settlements
|
|
$
|
|
|
|
$
|
|
|
|
$
|
4,306,280
|
|
|
$
|
4,306,280
|
|
F-19
IMPERIAL
HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS (Continued)
December 31,
2007, 2008 and 2009
The following table provides a roll-forward in the changes in
fair value for the year ended December 31, 2009, for all
assets for which the Company determines fair value using a
material level of unobservable (Level 3) inputs.
|
|
|
|
|
Balance, December 31, 2008
|
|
$
|
|
|
Change in unrealized appreciation
|
|
|
|
|
Acquisition of policies
|
|
|
4,306,280
|
|
|
|
|
|
|
Balance, December 31, 2009
|
|
$
|
4,306,280
|
|
|
|
|
|
|
Unrealized appreciation, December 31, 2009
|
|
$
|
|
|
|
|
|
|
|
Investments in insurance policies were acquired in conjunction
with the acquisition of life insurance policies upon
relinquishment by the borrower after default on premium finance
loans during September to December 2009. During this time there
were no significant changes in life expectancy assumptions,
market interest rates, credit exposure to insurance companies,
or estimated risk margins required by investors. As such, the
cost approximates the fair value and no unrealized appreciation
or depreciation occurred during the period.
The Companys impaired loans are measured at fair value on
a non-recurring basis, as the carrying value is based on the
fair value of the underlying collateral. The method used to
estimate the fair value of impaired collateral-dependent loans
depends on the nature of the collateral. For collateral that has
lender protection insurance coverage, the fair value measurement
is considered to be Level 2 as the insured value is an
observable input and there are no material unobservable inputs.
For collateral that does not have lender protection insurance
coverage, the fair value measurement is considered to be
Level 3 as the estimated fair value is based on a model
whose significant inputs into are the life expectancy of the
insured and the discount rate, which are not observable. As of
December 31, 2009 and 2008, the Company had insured
impaired loans (Level 2) with a net carrying value,
which includes principal, accrued interest, and accreted
origination fees, net of impairment, of approximately
$57,495,000 and $25,174,000, respectively. As of
December 31, 2009 and 2008, the Company had uninsured
impaired loans (Level 3) with a net carrying value of
approximately $3,601,000 and $5,721,000, respectively. The
provision for losses on loans receivable related to impaired
loans was approximately $9,830,000 and $10,768,000 for the years
ended December 31, 2009 and 2008, respectively.
A summary of the principal balances of notes payable included in
the consolidated and combined balance sheet as of
December 31, 2009 is as follows:
|
|
|
|
|
|
|
Total Notes
|
|
|
|
Payable
|
|
|
Acorn Capital Group
|
|
$
|
9,178,805
|
|
CTL Holdings, LLC
|
|
|
49,743,657
|
|
Ableco Finance
|
|
|
96,173,950
|
|
White Oak, Inc.
|
|
|
26,594,974
|
|
Cedar Lane
|
|
|
11,806,000
|
|
Other Note Payable
|
|
|
9,627,123
|
|
Related Party
|
|
|
27,939,972
|
|
|
|
|
|
|
Total
|
|
$
|
231,064,481
|
|
|
|
|
|
|
F-20
IMPERIAL
HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS (Continued)
December 31,
2007, 2008 and 2009
Acorn
Capital Group
A lender, Acorn Capital Group (Acorn), breached a
credit facility agreement with the Company by not funding
ongoing premiums on certain life insurance policies serving as
collateral for premium finance loans. The first time that they
failed to make scheduled premium payments was in July 2008 and
the Company had no forewarning that this lender was experiencing
financial difficulties. When they stopped funding under the
credit facility, the Company had no time to seek other financing
to fund the ongoing premiums. The result was that a total of 81
policies lapsed due to non-payment of premiums from
January 1, 2008 though March 31, 2010.
In May 2009, the Company entered a settlement agreement whereby
Acorn released us from our obligations related to the credit
agreement. Acorn subsequently assigned all of is rights and
obligations under the settlement agreement to Asset Based
Resource Group, LLC (ABRG). As part of the
settlement agreement, the Company continues to service the
original loans and ABRG determines whether or not it will
continue to fund the loans. If ABRG chooses not to continue
funding a loan, the Company has the option to fund the loan or
try to sell the loan or related policy to another party. If ABRG
funds the premium payment, this additional funding is evidenced
by a new note, with an annual interest rate of 14.5% per annum,
which is due and payable by the Company thirteen
(13) months following the advance. During 2008, the Company
recorded losses of approximately $1,868,000 related to policies
that lapsed where ABRG decided not to fund the second year
premium. Once the Company is legally released from their debt
obligation either judicially or by ABRG, the Company will record
a corresponding debt reduction. During 2009, the Company
recorded additional losses of approximately $10,182,000 related
to additional policies that lapsed.
As part of the settlement agreement, new notes were signed with
annual interest rates of 14.5% compounding annually and totaled
approximately $12,650,000 on May 19, 2009. On the notes
that were cancelled by ABRG, the Company was forgiven principal
totaling approximately $13,783,000 and interest of approximately
$2,627,000 in 2009. As of December 31, 2009 and 2008 the
Company owed approximately $9,179,000 and $22,440,000,
respectively, and accrued interest was approximately $2,412,000
and $3,214,000, respectively.
CTL
Holdings LLC
On December 27, 2007, Imperial Life Financing, LLC was
formed to enter into a $50,000,000 loan agreement with CTL
Holdings, LLC, an affiliated entity under common ownership and
control, Imperial Life Financing, LLC has used the proceeds of
the loan to fund our origination of premium finance loans in
exchange for a participation interest in the loans. There were
no borrowings under this arrangement during 2007.
In April 2008, CTL Holdings, LLC, entered into a participation
agreement with Perella Weinberg Partners Asset Based Value
Master Fund II, L.P. with Imperial Holdings, LLC as the
guarantor whereby Perella Weinberg Partners contributed
$10,000,000 for an interest in the participated notes with
Imperial Life Finance, LLC. In connection with Perellas
purchase of the participation interest, we agreed to reimburse
CTL Holdings sole owner, Cedarmount, for any amounts paid
or allocated to Perella under the participation agreement which
cause Cedarmounts rate of return paid by Imperial Life
Financing to be less than 10% per annum on the funds Cedarmount
advanced to CTL Holdings to make loans to us or cause Cedarmount
not to recover its invested capital.
In April 2008, the CTL Holdings, LLC loan agreement was amended
and the authorized borrowings were increased from $50,000,000 to
$100,000,000. The first $50,000,000 tranche
(Tranche A) was restricted such that no further
advances could be made with the exception of funding second year
premiums. All new
F-21
IMPERIAL
HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS (Continued)
December 31,
2007, 2008 and 2009
advances are made under the second $50,000,000 tranche
(Tranche B). The credit facility matures on
December 26, 2012.
The loans are payable as the corresponding premium finance loans
mature and as of March 31, 2010, bear a weighted average
annual interest rate of approximately 10.31% on average. The
Company is subject to several restrictive covenants under the
facility. The restrictive covenants include items such as
restrictions on the ability to pay dividends or incur additional
indebtedness by Imperial Life Financing, LLC. The Company
believes it is in compliance at December 31, 2009. All of
the assets of Imperial Life Financing, LLC serve as collateral
under the credit facility. The outstanding principal at
December 31, 2009 and 2008 was approximately $21,863,000
and $44,391,000, respectively and accrued interest was
approximately $46,000 and $32,000, respectively.
In November 2008, Imperial Life Financing, LLC entered into a
promissory note for $30,000,000 with CTL Holdings, LLC. The note
is due on December 26, 2012 and bears interest at a fixed
rate per advance. The average interest rate as of
December 31, 2009 is approximately 10.2%. The outstanding
principal at December 31, 2009 and 2008 was approximately
$27,881,000 and $16,190,000, respectively, and accrued interest
was approximately $2,820,000 and $100,000, respectively. There
are no financial or restrictive covenants under this promissory
note.
Ableco
Finance
On July 22, 2008, Imperial PFC Financing, LLC was formed to
enter into a loan agreement with Ableco Finance, LLC, so that
Imperial PFC Financing, LLC could purchase Imperial Premium
Finance notes for cash or a participation interest in the notes.
The loan agreement is for $100,000,000. In October 2009,
Imperial PFC Financing, LLC signed an amendment to the loan
agreement adding a revolving line of credit of $3,000,000 to
only be used to pay down interest. The agreement is for a term
of three years and the borrowings bear an annual interest rate
of 16.5% compounded monthly. The Company is subject to several
restrictive covenants under the facility. The restrictive
covenants include items such as restrictions on the ability to
pay dividends or incur additional indebtedness by Imperial PFC
Financing, LLC. The Company believes it is in compliance at
December 31, 2009. The notes are payable 26 months
from the date of issuance. All of the assets of Imperial PFC
Financing, LLC serve as collateral under this credit facility.
The loan matures February 7, 2011. The outstanding
principal at December 31, 2009 and 2008 was approximately
$96,174,000 and $71,594,000, respectively and accrued interest
was approximately $1,401,000 and $1,153,000, respectively.
White
Oak, Inc.
On February 5, 2009, Imperial Life Financing II, LLC, was
formed to enter into a loan agreement with White Oak Global
Advisors, LLC, so that Imperial Life Financing II, LLC could
purchase Imperial Premium Finance notes in exchange for cash or
a participation interest in the notes.
The loan agreement is for $15,000,000. The interest rate for
each borrowing made under the agreement varies and the weighted
average interest rate for the loans under this facility as of
December 31, 2009 was 22.0%. All of the assets of
Imperial Life Financing II, LLC serve as collateral under this
facility. The Company is subject to several restrictive
covenants under the facility. The restrictive covenants include
items such as restrictions on the ability to pay dividends or
incur additional indebtedness by Imperial Life
Financing II, LLC. The Company believes it is in compliance
at December 31, 2009. The notes are payable
6-26 months from issuance and the facility matures on
September 30, 2011.
In September 2009, the Imperial Life Financing II, LLC loan
agreement was amended to increase the commitment by $12,000,000
to a total commitment of $27,000,000. All of the assets of
Imperial Life
F-22
IMPERIAL
HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS (Continued)
December 31,
2007, 2008 and 2009
Financing II, LLC serve as collateral under this facility. The
notes are payable 6-26 months from issuance and the
facility matures on March 11, 2012. The outstanding
principal at December 31, 2009 was approximately
$26,595,000 and accrued interest was approximately $3,858,000.
Cedar
Lane
On December 2, 2009, Imperial PFC Financing II, LLC was
formed to enter into a financing agreement with Cedar Lane
Capital, LLC, so that Imperial PFC Financing II, LLC could
purchase Imperial Premium Finance notes for cash or a
participation interest in the notes. The financing agreement is
for a minimum of $5,000,000 to a maximum of $250,000,000. The
agreement is for a term of 28 months from the time of
borrowing and the borrowings bear an annual interest rate of
14%, 15% or 16%, depending on the class of lender and are
compounded monthly. The Company had available capacity under the
facility of approximately $238,194,000 at December 31,
2009. All of the assets of Imperial PFC Financing II, LLC serve
as collateral under this credit facility. The Company is subject
to several restrictive covenants under the facility. The
restrictive covenants include items such as restrictions on the
ability to pay dividends or incur additional indebtedness by
Imperial PFC Financing II, LLC. The Company believes it is in
compliance at December 31, 2009. The outstanding principal
at December 31, 2009 was approximately $11,806,000 and
accrued interest was approximately $111,000.
Other
Note Payable
On August 31, 2009, the Company extended its promissory
note, with an unrelated party, with a revolving line of credit
of $25,000,000. This note plus accrued interest are due and
payable in full in one lump sum on August 1, 2011, unless
the lender shall provide notice on or prior to the third
business day prior to the originally scheduled maturity date or
any extended maturity date demanding payment on such date, the
maturity date shall be extended automatically for an additional
60 days. This note bears an annual interest rate of 16.5%.
The available credit on this note as of December 31, 2009
was approximately $15,373,000.
There is no collateral pledged to secure this note. As of
December 31, 2009 and 2008, the balance of the note was
approximately $9,627,000 and $11,572,000, respectively, with
accrued interest of approximately $469,000 and $86,000,
respectively. There are no financial or restrictive covenants
contained in this promissory note.
Related
Party
As of December 31, 2008, the Company had a note with a
related party with principal and accrued interest of
approximately $2,513,000 and $16,000, respectively. During 2009,
this note was converted to preferred equity units (see
NOTE 18). There was no gain or loss recorded as a result of
this transaction as the fair value of the equity approximated
the fair value of the debt at the time of conversion.
In June 2008 and in August 2008, the Company entered into
balloon promissory note agreements with a related party where
money was borrowed to cover operating expenses of approximately
$5,000,000 and $1,600,000, respectively. The loan agreements are
unsecured, have terms of two years, and bear an annual interest
rate of 16.5% compounded monthly. In August 2009, the Company
paid off these notes with proceeds from a note issued with a new
debtor which bears an interest rate of 16.5% and matures on
August 1, 2011. The outstanding principal balance of this
new note at December 31, 2009 was approximately $17,616,000
and accrued interest was approximately $980,000. There are no
financial or restrictive covenants contained in this promissory
note.
In August 2008, the Company entered into balloon promissory note
agreements with a related party where money was borrowed to
cover operating expenses of approximately $2,049,000 of which
$274,000 was
F-23
IMPERIAL
HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS (Continued)
December 31,
2007, 2008 and 2009
repaid within two months, leaving a balance of approximately
$1,775,000. The loan agreements were for $1,500,000; $200,000;
and $75,000, are unsecured, have terms of two years, and bear an
annual interest rate of 16% compounded monthly. This note was
converted to preferred equity units during 2009 (see
Note 18). There was no gain or loss recorded as a result of
this transaction as the fair value of the equity approximated
the fair value of the debt at the time of conversion.
In October 2008, the Company entered into two balloon promissory
note agreements with a related party where money was borrowed to
cover operating expenses of approximately $8,900,000. The loan
agreements were for $4,450,000 each, are unsecured, have terms
of two years, and bear an annual interest rate of 16.5%
compounded monthly. On August 31, 2009, these notes were
assigned to another related party and consolidated into a new
revolving promissory note which bears an interest rate of 16.5%
and matures on August 1, 2011. The outstanding principal at
December 31, 2009 was approximately $10,324,000 and accrued
interest was approximately $569,000. There are no financial or
restrictive covenants contained in this promissory note.
Maturities
The aggregate maturities of notes payable subsequent to
December 31, 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related
|
|
|
|
|
|
|
Acorn
|
|
|
CTL
|
|
|
Ableco
|
|
|
White Oak
|
|
|
Cedar Lane
|
|
|
Other
|
|
|
Party
|
|
|
Total
|
|
|
2010
|
|
$
|
9,178,805
|
|
|
$
|
24,936,541
|
|
|
$
|
|
|
|
$
|
6,036,372
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
40,151,718
|
|
2011
|
|
|
|
|
|
|
21,481,589
|
|
|
|
96,173,950
|
|
|
|
20,558,602
|
|
|
|
|
|
|
|
9,627,123
|
|
|
|
27,939,972
|
|
|
|
175,781,236
|
|
2012
|
|
|
|
|
|
|
3,325,527
|
|
|
|
|
|
|
|
|
|
|
|
11,806,000
|
|
|
|
|
|
|
|
|
|
|
|
15,131,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,178,805
|
|
|
$
|
49,743,657
|
|
|
$
|
96,173,950
|
|
|
$
|
26,594,974
|
|
|
$
|
11,806,000
|
|
|
$
|
9,627,123
|
|
|
$
|
27,939,972
|
|
|
$
|
231,064,481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 15
|
SEGMENT
INFORMATION
|
The Company operates in two segments: financing premiums for
individual life insurance policies and purchasing structured
settlements. The premium finance segment provides financing in
the form of loans to trusts and individuals for the purchase of
life insurance policies and the loans are collateralized by the
life insurance policies. The structured settlements segment
purchases structured settlements from individuals.
Recipients of structured settlements are permitted to sell their
deferred payment streams to a structured settlement purchaser
pursuant to state statutes that require certain disclosures,
notice to the obligors and state court approval. Through such
sales, the Company purchases a certain number of fixed,
scheduled future settlement payments on a discounted basis in
exchange for a single lump sum payment.
The performance of the segments is evaluated on the segment
level by members of the Companys senior management team.
Cash and income taxes generally are managed centrally.
Performance of the segments is based on revenue and cost control.
F-24
IMPERIAL
HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS (Continued)
December 31,
2007, 2008 and 2009
Segment results and reconciliation to consolidated net income
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31
|
|
|
December 31
|
|
|
December 31
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
Premium finance
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency fee income
|
|
$
|
24,514,935
|
|
|
$
|
48,003,586
|
|
|
$
|
26,113,814
|
|
Origination income
|
|
|
525,964
|
|
|
|
9,398,679
|
|
|
|
29,852,722
|
|
Interest income
|
|
|
4,879,416
|
|
|
|
11,339,822
|
|
|
|
20,271,581
|
|
Gain on forgiveness of debt
|
|
|
|
|
|
|
|
|
|
|
16,409,799
|
|
Other income
|
|
|
|
|
|
|
|
|
|
|
398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,920,315
|
|
|
|
68,742,087
|
|
|
|
92,648,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct segment expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
776,621
|
|
|
|
9,913,856
|
|
|
|
28,466,092
|
|
Provision for losses
|
|
|
2,331,637
|
|
|
|
10,767,928
|
|
|
|
9,830,318
|
|
Loss (gain) on loans payoff and settlements, net
|
|
|
(224,551
|
)
|
|
|
2,737,620
|
|
|
|
12,058,007
|
|
Amortization of deferred costs
|
|
|
125,909
|
|
|
|
7,568,541
|
|
|
|
18,339,220
|
|
SG&A expense
|
|
|
15,081,517
|
|
|
|
21,744,468
|
|
|
|
13,741,737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,091,133
|
|
|
|
52,732,413
|
|
|
|
82,435,374
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating income
|
|
$
|
11,829,182
|
|
|
$
|
16,009,674
|
|
|
$
|
10,212,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Structured settlements
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of structured settlements
|
|
$
|
|
|
|
$
|
442,771
|
|
|
$
|
2,684,328
|
|
Interest income
|
|
|
7,988
|
|
|
|
574,429
|
|
|
|
1,211,256
|
|
Other income
|
|
|
2,300
|
|
|
|
47,400
|
|
|
|
70,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,288
|
|
|
|
1,064,600
|
|
|
|
3,966,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct segment expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A expenses
|
|
|
2,722,377
|
|
|
|
9,770,400
|
|
|
|
9,474,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating loss
|
|
$
|
(2,712,089
|
)
|
|
$
|
(8,705,800
|
)
|
|
$
|
(5,508,353
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating income
|
|
$
|
9,117,093
|
|
|
$
|
7,303,874
|
|
|
$
|
4,704,587
|
|
Unallocated expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A expenses
|
|
|
6,530,571
|
|
|
|
10,051,542
|
|
|
|
8,052,284
|
|
Interest expense
|
|
|
566,448
|
|
|
|
2,838,458
|
|
|
|
5,288,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,097,019
|
|
|
|
12,890,000
|
|
|
|
13,340,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
2,020,074
|
|
|
$
|
(5,586,126
|
)
|
|
$
|
(8,636,403
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-25
IMPERIAL
HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS (Continued)
December 31,
2007, 2008 and 2009
Segment assets and reconciliation to consolidated total assets
were as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
December 31
|
|
|
|
2008
|
|
|
2009
|
|
|
Direct segment assets
|
|
|
|
|
|
|
|
|
Premium finance
|
|
$
|
205,428,688
|
|
|
$
|
245,574,288
|
|
Structured settlements
|
|
|
2,299,720
|
|
|
|
9,201,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
207,728,408
|
|
|
|
254,775,305
|
|
Other unallocated assets
|
|
|
3,312,016
|
|
|
|
8,944,783
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
211,040,424
|
|
|
$
|
263,720,088
|
|
|
|
|
|
|
|
|
|
|
Amounts are attributed to the segment that holds the assets.
There are no intercompany sales and all intercompany account
balances are eliminated in segment reporting.
|
|
NOTE 16
|
RELATED
PARTY TRANSACTIONS
|
The Company obtained brokerage services from a related party.
The Company incurred expenses of approximately $1,521,000 for
the year ended December 31, 2008 for commissions related to
broker services provided by this related party. The Company owed
this broker $78,000 at December 31, 2008. There were no
services obtained from this broker for the year ended
December 31, 2009.
The Company incurred consulting fees of approximately $926,000
and $3,082,000 for the years ended December 31, 2009 and
2008, respectively, for services provided by parties related to
the Company. As of December 31, 2009 and 2008, there was
approximately $354,000 and $2,000,000 owed to these related
parties, respectively.
|
|
NOTE 17
|
COMMITMENTS
AND CONTINGENCIES
|
The Company leases office space under operating lease
agreements. The leases expire at various dates through 2012.
Some of these leases contain a provision for a 5% increase of
the base rent annually on the anniversary of the rent
commencement date.
Future minimum payments under operating leases for years
subsequent to December 31, 2009 are as follows:
|
|
|
|
|
Year Ending December 31,
|
|
|
|
|
2010
|
|
$
|
550,220
|
|
2011
|
|
|
557,087
|
|
2012
|
|
|
115,438
|
|
|
|
|
|
|
|
|
$
|
1,222,745
|
|
|
|
|
|
|
Rent expense under these leases was approximately $549,000,
$509,000 and $369,000 for the years ended December 31,
2009, 2008 and 2007, respectively. Rent expense is recorded on a
straight-line basis over the term of the lease. The difference
between actual rent payments and straight-line rent expense is
recorded as deferred rent. Deferred rent in the amount of
$77,000 and $66,000 at December 31, 2009 and 2008,
respectively, is included in accounts payable and accrued
expenses in the accompanying consolidated and combined balance
sheets.
F-26
IMPERIAL
HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO
CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS (Continued)
December 31,
2007, 2008 and 2009
|
|
NOTE 18
|
PREFERRED
EQUITY
|
On June 30, 2009, a related party converted outstanding
debt of $2,260,000 for 50,855 units of Series A
Preferred Units of equity with a face amount of $44.44 per unit.
Series A Preferred Units are non-voting, non-convertible,
can be redeemed at any time by the Company for an amount equal
to the applicable unreturned preferred capital amount allocable
to the Series A Preferred Units sought to be redeemed, plus
any accrued and unpaid preferred return, and shall be entitled
to priority rights in distribution and liquidations as set forth
in the Operating Agreement. The rate of preferred return is
16.5% per annum.
On June 30, 2009, a related party converted outstanding
debt of $1,775,000 for 39,941 units of Series A
Preferred Units of equity with a face amount of $44.44 per unit.
Dividends in arrears for all Series A Preferred Units at
December 31, 2009 were approximately $344,000.
On December 30, 2009, two related parties contributed
$5,000,000 for 50,000 units of Series B Preferred
Units of equity with a liquidating preference of $100.00 per
unit. Series B Preferred Units are non-voting,
non-convertible, can be redeemed at any time by the Company for
an amount equal to the applicable unreturned preferred capital
amount allocable to the Series B Preferred Units sought to
be redeemed, plus any accrued and unpaid preferred return, and
shall be entitled to priority rights in distribution and
liquidations as set forth in the operating agreement. The rate
of preferred return is 16.0% per annum. The dividends in arrears
for all Series B Preferred Units at December 31, 2009
were approximately $4,000.
|
|
NOTE 19
|
EMPLOYEE
BENEFIT PLAN
|
The Company has adopted a 401(k) plan that covers employees that
have reached 18 years of age and completed three months of
service. The plan provides for voluntary employee contributions
through salary reductions, as well as discretionary employer
contributions. For the year ended December 31, 2009 and
2008, there were no employer contributions made.
|
|
NOTE 20
|
SUBSEQUENT
EVENTS
|
On April 7, 2010, Imperial Premium Finance, LLC signed a
settlement agreement with Clearwater Consulting Concepts, LLP
and was relieved of an obligation of approximately $73,000
related to an agreement where Clearwater Consulting Concepts
referred clients to the Company. As part of the settlement, the
Company paid approximately $38,000 which was accrued for at
December 31, 2009.
To retain the life settlement license for the State of Utah for
2010, the Company was required to increase the surety bond from
$50,000 to $250,000. The Company increased its letter of credit
and certificate of deposit by $200,000 on January 29, 2010.
On March 31, 2010, one related party contributed $7,000,000
for 70,000 units of Series C Preferred Units with a
liquidating preference of $100.00 per unit. The rate of
preferred return is equal to 16.0% per annum.
On June 30, 2010, we sold to a related party
7,000 units of Series D Preferred Units with a
liquidating preference of $100.00 per unit for an aggregate
amount of $700,000. The rate of preferred return is equal to
16.0% per annum.
The Company is not aware of any other subsequent events which
would require recognition or disclosure in the financial
statements.
F-27
Imperial
Holdings, LLC and Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma
|
|
|
|
December 31,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2010
|
|
|
2010
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
ASSETS
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
15,890,799
|
|
|
$
|
3,684,847
|
|
|
|
|
|
Restricted cash
|
|
|
|
|
|
|
642,698
|
|
|
|
|
|
Certificate of deposit restricted
|
|
|
669,835
|
|
|
|
877,391
|
|
|
|
|
|
Agent fees receivable, net of allowance for doubtful accounts
|
|
|
2,165,087
|
|
|
|
736,469
|
|
|
|
|
|
Deferred costs, net
|
|
|
26,323,244
|
|
|
|
11,454,686
|
|
|
|
|
|
Prepaid expenses and other assets
|
|
|
885,985
|
|
|
|
1,010,051
|
|
|
|
|
|
Due from related party
|
|
|
|
|
|
|
1,007,030
|
|
|
|
|
|
Deposits
|
|
|
982,417
|
|
|
|
698,957
|
|
|
|
|
|
Interest receivable, net
|
|
|
21,033,687
|
|
|
|
17,175,216
|
|
|
|
|
|
Loans receivable, net
|
|
|
189,111,302
|
|
|
|
121,564,332
|
|
|
|
|
|
Structured settlement receivables, net
|
|
|
151,543
|
|
|
|
10,553,648
|
|
|
|
|
|
Receivables from sales of structured settlements
|
|
|
320,241
|
|
|
|
528,075
|
|
|
|
|
|
Investment in life settlements, at estimated fair value
|
|
|
4,306,280
|
|
|
|
8,846,149
|
|
|
|
|
|
Investment in life settlement fund
|
|
|
542,324
|
|
|
|
1,269,657
|
|
|
|
|
|
Fixed assets, net
|
|
|
1,337,344
|
|
|
|
918,889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
263,720,088
|
|
|
$
|
180,968,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND MEMBERS EQUITY
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
2,713,543
|
|
|
$
|
2,229,244
|
|
|
|
|
|
Accrued expenses related parties
|
|
|
455,485
|
|
|
|
70,833
|
|
|
|
|
|
Payable for purchase of structured settlements
|
|
|
|
|
|
|
7,093,576
|
|
|
|
|
|
Other liabilities
|
|
|
|
|
|
|
1,910,068
|
|
|
|
|
|
Lender protection insurance claims received in advance
|
|
|
|
|
|
|
60,645,099
|
|
|
|
|
|
Interest payable
|
|
|
8,251,023
|
|
|
|
12,811,040
|
|
|
|
|
|
Interest payable related parties
|
|
|
4,376,299
|
|
|
|
3,360,847
|
|
|
|
|
|
Notes payable
|
|
|
153,364,326
|
|
|
|
62,539,800
|
|
|
|
|
|
Notes payable related parties
|
|
|
77,700,155
|
|
|
|
19,853,647
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
246,860,831
|
|
|
|
170,514,154
|
|
|
|
|
|
Member units preferred (500,000 authorized in the
aggregate)
|
|
|
|
|
|
|
|
|
|
|
|
|
Member units Series A preferred (90,796 issued
and outstanding as of December 31, 2009 and
September 30, 2010)
|
|
|
4,035,000
|
|
|
|
4,035,000
|
|
|
|
|
|
Member units Series B preferred (50,000 issued
and outstanding as of December 31, 2009 and
September 30, 2010)
|
|
|
5,000,000
|
|
|
|
5,000,000
|
|
|
|
|
|
Member units Series C preferred (70,000 issued
and outstanding as of September 30, 2010)
|
|
|
|
|
|
|
7,000,000
|
|
|
|
|
|
Member units Series D preferred (7,000 issued
and outstanding as of September 30, 2010)
|
|
|
|
|
|
|
700,000
|
|
|
|
|
|
Member units Series E preferred (73,000 issued
and outstanding as of September 30, 2010)
|
|
|
|
|
|
|
7,300,000
|
|
|
|
|
|
Subscription receivable
|
|
|
|
|
|
|
(5,000,000
|
)
|
|
|
|
|
Member units common (500,000 authorized; 450,000
issued and outstanding as of December 31, 2009 and
September 30, 2010)
|
|
|
19,923,709
|
|
|
|
19,923,709
|
|
|
|
|
|
Accumulated deficit
|
|
|
(12,099,452
|
)
|
|
|
(28,504,768
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total members equity
|
|
|
16,859,257
|
|
|
|
10,453,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and members equity
|
|
$
|
263,720,088
|
|
|
$
|
180,968,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial
statements.
F-28
Imperial
Holdings, LLC and Subsidiaries
For
the Nine Months Ended September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended
|
|
|
|
September 30
|
|
|
|
2009
|
|
|
2010
|
|
|
Agency fee income
|
|
$
|
20,215,518
|
|
|
$
|
9,099,047
|
|
Interest income
|
|
|
15,842,555
|
|
|
|
15,794,962
|
|
Origination fee income
|
|
|
21,865,432
|
|
|
|
16,728,185
|
|
Gain on sale of structured settlements
|
|
|
499,410
|
|
|
|
4,847,649
|
|
Forgiveness of debt
|
|
|
14,885,912
|
|
|
|
6,967,828
|
|
Change in fair value of life settlements and structured
receivables
|
|
|
|
|
|
|
4,805,387
|
|
Gain on sale of life settlements
|
|
|
|
|
|
|
1,954,112
|
|
Other income
|
|
|
53,250
|
|
|
|
194,646
|
|
|
|
|
|
|
|
|
|
|
Total income
|
|
|
73,362,077
|
|
|
|
60,391,816
|
|
Interest expense
|
|
|
18,342,353
|
|
|
|
18,341,797
|
|
Interest expense related parties
|
|
|
6,367,949
|
|
|
|
5,901,939
|
|
Provision for losses on loans receivables
|
|
|
6,705,249
|
|
|
|
3,514,191
|
|
Loss on loan payoffs and settlements, net
|
|
|
11,278,543
|
|
|
|
4,320,219
|
|
Amortization of deferred costs
|
|
|
13,100,595
|
|
|
|
22,600,831
|
|
Selling, general and administrative expenses
|
|
|
22,224,687
|
|
|
|
21,401,216
|
|
Selling, general and administrative expenses related
parties
|
|
|
772,713
|
|
|
|
716,939
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
78,792,089
|
|
|
|
76,797,132
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(5,430,012
|
)
|
|
$
|
(16,405,316
|
)
|
|
|
|
|
|
|
|
|
|
Pro forma basic and diluted loss per share
|
|
|
|
|
|
|
[ ]
|
|
|
|
|
|
|
|
|
|
|
Pro forma fully diluted weighted average shares
|
|
|
|
|
|
|
[ ]
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial
statements.
F-29
Imperial
Holdings, LLC and Subsidiaries
For
the Nine Months Ended September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
Balance at December 31, 2009
|
|
|
Member Contributions
|
|
|
Subscription Receivable
|
|
|
Net Loss
|
|
|
September 30, 2010
|
|
|
|
Units
|
|
|
Amount
|
|
|
Units
|
|
|
Amount
|
|
|
Units
|
|
|
Amount
|
|
|
Units
|
|
|
Amount
|
|
|
Units
|
|
|
Amount
|
|
|
Member units-Series A Preferred
|
|
|
90,796
|
|
|
$
|
4,035,000
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,796
|
|
|
$
|
4,035,000
|
|
Member units-Series B Preferred
|
|
|
50,000
|
|
|
|
5,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
5,000,000
|
|
Member units-Series C Preferred
|
|
|
|
|
|
|
|
|
|
|
70,000
|
|
|
|
7,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,000
|
|
|
|
7,000,000
|
|
Member units-Series D Preferred
|
|
|
|
|
|
|
|
|
|
|
7,000
|
|
|
|
700,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,000
|
|
|
|
700,000
|
|
Member units-Series E Preferred
|
|
|
|
|
|
|
|
|
|
|
73,000
|
|
|
|
7,300,000
|
|
|
|
|
|
|
|
(5,000,000
|
)
|
|
|
|
|
|
|
|
|
|
|
73,000
|
|
|
|
2,300,000
|
|
Member units-Common
|
|
|
450,000
|
|
|
|
19,923,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
450,000
|
|
|
|
19,923,709
|
|
Accumulated Deficit
|
|
|
|
|
|
|
(12,099,452
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16,405,316
|
)
|
|
|
|
|
|
|
(28,504,768
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
590,796
|
|
|
$
|
16,859,257
|
|
|
|
150,000
|
|
|
$
|
15,000,000
|
|
|
|
|
|
|
$
|
(5,000,000
|
)
|
|
|
|
|
|
$
|
(16,405,316
|
)
|
|
|
740,796
|
|
|
$
|
10,453,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial
statements.
F-30
Imperial
Holdings, LLC and Subsidiaries
For
the Nine Months Ended
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2010
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(5,430,012
|
)
|
|
$
|
(16,405,316
|
)
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
668,612
|
|
|
|
560,814
|
|
Provision for doubtful accounts
|
|
|
980,813
|
|
|
|
105,047
|
|
Provision for losses on loans receivable
|
|
|
6,705,249
|
|
|
|
3,514,191
|
|
Loss of loan payoffs and settlements, net
|
|
|
11,278,543
|
|
|
|
4,320,219
|
|
Origination income
|
|
|
(21,865,432
|
)
|
|
|
(16,728,185
|
)
|
Gain on sale of structured settlements
|
|
|
(499,410
|
)
|
|
|
(4,847,649
|
)
|
Gain on sale of life settlements
|
|
|
|
|
|
|
(1,954,112
|
)
|
Change in fair value of investments
|
|
|
|
|
|
|
(4,805,387
|
)
|
Gain on forgiveness of debt
|
|
|
(14,885,912
|
)
|
|
|
(6,967,828
|
)
|
Interest income
|
|
|
(15,842,555
|
)
|
|
|
(15,794,962
|
)
|
Amortization of deferred costs
|
|
|
12,634,586
|
|
|
|
22,600,831
|
|
Change in assets and liabilities:
|
|
|
|
|
|
|
|
|
Purchase of certificate of deposit
|
|
|
|
|
|
|
(200,000
|
)
|
Deposits
|
|
|
(10,705
|
)
|
|
|
283,460
|
|
Restricted cash
|
|
|
684,624
|
|
|
|
|
|
Agency fees receivable
|
|
|
6,074,016
|
|
|
|
1,323,571
|
|
Structured settlements receivables
|
|
|
(4,548,613
|
)
|
|
|
(3,633,749
|
)
|
Prepaid expenses and other assets
|
|
|
5,589,261
|
|
|
|
(3,803,686
|
)
|
Due from related party
|
|
|
|
|
|
|
(1,007,030
|
)
|
Accounts payable, accrued expenses and other liabilities
|
|
|
(2,558,299
|
)
|
|
|
8,132,148
|
|
Interest payable
|
|
|
8,988,607
|
|
|
|
3,544,565
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(12,036,627
|
)
|
|
|
(31,763,058
|
)
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Purchases of fixed assets
|
|
|
(332,198
|
)
|
|
|
(142,360
|
)
|
Purchase of investments
|
|
|
|
|
|
|
(727,333
|
)
|
Proceeds from loan payoffs
|
|
|
22,579,535
|
|
|
|
119,065,842
|
|
Originations of loans receivable, net
|
|
|
(51,104,212
|
)
|
|
|
(23,546,748
|
)
|
Proceeds from sale of investments, net
|
|
|
|
|
|
|
2,070,494
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities
|
|
|
(28,856,875
|
)
|
|
|
96,719,895
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Member contributions
|
|
|
|
|
|
|
10,000,000
|
|
Member distributions
|
|
|
(21,807
|
)
|
|
|
|
|
Payments of cash pledged as restricted deposits
|
|
|
1,536,111
|
|
|
|
(642,698
|
)
|
Payment of financing fees
|
|
|
(16,141,397
|
)
|
|
|
(5,416,447
|
)
|
Repayment of borrowings under credit facilities
|
|
|
(41,342,500
|
)
|
|
|
(65,119,158
|
)
|
Repayment of borrowings from affiliates
|
|
|
(22,516,946
|
)
|
|
|
(60,518,397
|
)
|
Borrowings under credit facilities
|
|
|
100,721,701
|
|
|
|
35,249,406
|
|
Borrowings from affiliates
|
|
|
11,480,543
|
|
|
|
9,284,505
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
33,715,705
|
|
|
|
(77,162,789
|
)
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(7,177,797
|
)
|
|
|
(12,205,952
|
)
|
Cash and cash equivalents, at beginning of the period
|
|
|
7,643,528
|
|
|
|
15,890,799
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, at end of the period
|
|
$
|
465,731
|
|
|
$
|
3,684,847
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid for interest during the period
|
|
$
|
12,959,547
|
|
|
$
|
19,324,030
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of non-cash financing activities:
|
|
|
|
|
|
|
|
|
Deferred costs paid directly by credit facility
|
|
$
|
11,132,246
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Subscription to purchase Member units Series E
preferred
|
|
$
|
|
|
|
$
|
5,000,000
|
|
|
|
|
|
|
|
|
|
|
Conversion of debt to preferred member units
|
|
$
|
4,035,000
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of borrowings paid directly by our lender protection
|
|
|
|
|
|
|
|
|
Insurance carrier
|
|
$
|
|
|
|
$
|
63,967,983
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial
statements.
F-31
Imperial
Holdings, LLC and Subsidiaries
For the
Nine Month Ended September 30, 2009 and September 30,
2010
|
|
NOTE 1
|
ORGANIZATION
AND DESCRIPTION OF BUSINESS ACTIVITIES
|
Imperial Holdings, LLC (the Company) was formed
pursuant to an operating agreement dated December 15, 2006
between IFS Holdings, Inc, IMEX Settlement Corporation, Premium
Funding, Inc. and Red Oak Finance, LLC. The Company operates as
a Limited Liability Company. The Company, operating through its
subsidiaries, is a specialty finance company with its corporate
office in Boca Raton, Florida. As a limited liability company,
each members liability is generally limited to the amounts
reflected in their respective capital accounts. The
Companys operates in two reportable business segments:
financings premium for individual life insurance policies and
purchasing structured settlements.
Premium
Finance
A premium finance transaction is a transaction in which a life
insurance policyholder obtains a loan, predominately through an
irrevocable life insurance trust established by the insured, to
pay insurance premiums for a fixed period of time. The
Companys typical premium finance loan is approximately two
years in duration and is collateralized by the underlying life
insurance policy. On each premium finance loan, the Company
charges a loan originate fee and charges interest on the loan.
In addition, the Company charges the referring agent an agency
fee.
Structured
Settlements
Washington Square Financial, LLC, a wholly owned subsidiary of
the Company, purchases structured settlements from individuals.
Structured settlements refer to a contract between a plaintiff
and defendant whereby the plaintiff agrees to settle a lawsuit
(usually a personal injury, product liability or medical
malpractice claim) in exchange for periodic payments over time.
A defendants payment obligation with respect to a
structured settlement is usually assumed by a casualty insurance
company. This payment obligation is then satisfied by the
casualty insurer through the purchase of an annuity from a
highly rated life insurance company, thereby providing a high
credit quality stream of payments to the plaintiff.
Recipients of structured settlements are permitted to sell their
deferred payment streams to a structured settlement purchaser
pursuant to state statutes that require certain disclosures,
notice to the obligors and state court approval. Through such
sales, the Company purchases a certain number of fixed,
scheduled future settlement payments on a discounted basis in
exchange for a single lump sum payment.
|
|
NOTE 2
|
BASIS OF
PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
|
Basis
of Presentation
The accompanying unaudited interim consolidated financial
statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission
(SEC) for reporting of interim financial
information. Pursuant to such rules and regulations, certain
information and footnote disclosures normally included in
financial statements prepared in accordance with accounting
principles generally accepted in the United States of America
have been condensed or omitted.
In the opinion of management, the accompanying unaudited interim
consolidated financial statements of the Company contain all
adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the financial position of the
Company as of the dates and for the periods presented.
Accordingly, these statements should be read in conjunction with
the financial statements and notes thereto for the year ended
December 31, 2009. The results of operations for the nine
months ended September 30, 2010 are not necessarily
indicative of the results to be expected for any future period
or for the full 2010 fiscal year.
F-32
Imperial
Holdings, LLC and Subsidiaries
NOTES TO
CONSOLIDATED AND COMBINED UNAUDITED FINANCIAL
STATEMENTS (Continued)
For the
Nine Month Ended September 30, 2009 and September 30,
2010
Use
of Estimates
The preparation of these consolidated and combined financial
statements, in conformity with accounting principles generally
accepted in the United States of America, requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from
these estimates and such differences could be material.
Significant estimates made by management include the loan
impairment valuation, allowance for doubtful accounts, valuation
of structured settlements and the valuation of investments in
life settlements at September 30, 2010.
Gain
on Sale of Life Settlements
Gain on sale of life settlements includes gains from company
owned life settlements and gains from sales on behalf of third
parties.
Fair
Value Option
As of July 1, 2010, we elected to adopt the fair value
option, in accordance with ASC 825,
Financial
Instruments,
to record certain newly-acquired structured
settlements at fair value. We have the option to measure
eligible financial assets, financial liabilities, and
commitments at fair value on an
instrument-by-instrument
basis. This option is available when we first recognize a
financial asset or financial liability or enter into a firm
commitment. Subsequent changes in fair value of assets,
liabilities, and commitments where we have elected fair value
option are recorded in our consolidated and combined statement
of operations. We have made this election because it is our
intention to sell these assets within the next twelve months,
and we believe it significantly reduces the disparity that
exists between the GAAP carrying value of these structured
settlements and our estimate of their economic value. For the
nine months ended September 30, 2010, changes in the fair
value of structured settlements where we elected the fair value
option resulted in income of approximately $1,505,000.
Recent
Accounting Pronouncements
In June 2009, the FASB issued new guidance impacting
ASC 810,
Consolidation
. The changes relate to the
guidance governing the determination of whether an enterprise is
the primary beneficiary of a variable interest entity (VIE), and
is, therefore, required to consolidate an entity. The new
guidance requires a qualitative analysis rather than a
quantitative analysis. The qualitative analysis will include,
among other things, consideration of who has the power to direct
the activities of the entity that most significantly impact the
entitys economic performance and who has the obligation to
absorb losses or the right to receive benefits of the VIE that
could potentially be significant to the VIE. This guidance also
requires continuous reassessments of whether an enterprise is
the primary beneficiary of a VIE. The guidance also requires
enhanced disclosures about an enterprises involvement with
a VIE. The guidance is effective as of the beginning of interim
and annual reporting periods that begin after November 15,
2009. The adoption of this guidance is did not have a material
impact on our financial position, results of operations or cash
flows.
In June 2009, the FASB issued new guidance impacting
ASC 860,
Transfers and Serving
. The new guidance
requires more information about transfers of financial assets,
including securitization transactions, and where entities have
continuing exposure to the risks related to transferred
financial assets. It eliminates the concept of a
qualifying special-purpose entity, changes the
requirements for derecognizing financial assets, and requires
additional disclosures. It also enhances information reported to
users of financial statements by providing greater transparency
about transfers of financial assets and an entitys
continuing involvement in transferred financial assets. The
guidance is effective for fiscal years beginning after
November 15, 2009. The
F-33
Imperial
Holdings, LLC and Subsidiaries
NOTES TO
CONSOLIDATED AND COMBINED UNAUDITED FINANCIAL
STATEMENTS (Continued)
For the
Nine Month Ended September 30, 2009 and September 30,
2010
adoption of this guidance did not have a material impact on our
financial position, results of operations or cash flows.
In January 2010, the Financial Accounting Standards Board
(FASB) issued Accounting Standards Update
(ASU)
No. 2010-6,
Improving Disclosures about Fair Value
Measurements
(ASU
2010-6).
This update amended guidance and issued a clarification with
regard to disclosure requirements about fair market value
measurement. A reporting entity is required to disclose
separately the amounts of significant transfers in and out of
Level 1 and Level 2 fair value measurements and
describe the reasons for the transfers. In addition, for
measurement utilizing significant unobservable inputs, a
reporting entity should present separately information about
purchases, sales, issuances, and settlements. We adopted ASU
2010-6
on
January 1, 2010. There was no impact upon adoption of ASU
2010-6
to
our financial position or results of operations.
In February 2010, the FASB issues ASU
No. 2010-9,
Amendments
to Certain Recognition and Disclosure
Requirements
(ASU
2010-9).
This amendment removed the requirement for a Securities and
Exchange Commission (SEC) filer to disclose a date
through which subsequent events have been evaluated in both
issued and revised financial statements. This amendment is
effective upon issuance date of February 24, 2010. There
was no impact upon adoption of ASU
2010-9
to
our financial position or results of operations.
Restricted
Cash
The Cedar Lane credit facility requires the company to retain 2%
of the principal amount of each loan made to the borrower, for
the purposes of indemnifying the facility for any breaches of
representations, warranties or covenants of the borrower, as
well as to fund collection efforts, if required. As of
December 31, 2009 and September 30, 2010 the
Companys consolidated financial statements reflected
balances of approximately $149,000 included in deposits and
$643,000 included in restricted cash, respectively.
Agency
Fees Receivable
Agency fees are charged for services related to premium finance
transactions. Agency fees are due per the signed fee agreement.
Agency fees receivable are reported net of an allowance for
doubtful accounts. Managements determination of the
allowance for doubtful accounts is based on an evaluation of the
commission receivable, prior collection history, current
economic conditions, and other inherent risks. The Company
reviews agency fees receivable aging on a regular basis to
determine if any of the receivables are past due. The Company
writes off all uncollectible agency fee receivable balances
against its allowance. The allowance for doubtful accounts was
approximately $186,000 and $120,000 as of September 30,
2010 and December 31,2009, respectively.
An analysis of the changes in the allowance for doubtful
accounts for past due agency fees during the nine months ended
September 30, 2009 and 2010 is as follows:
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
2009
|
|
|
2010
|
|
|
Balance at beginning of period
|
|
$
|
768,806
|
|
|
$
|
119,886
|
|
Bad debt expense
|
|
|
957,340
|
|
|
|
66,027
|
|
Write-offs
|
|
|
(19,742
|
)
|
|
|
|
|
Recoveries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
1,706,404
|
|
|
$
|
185,913
|
|
F-34
Imperial
Holdings, LLC and Subsidiaries
NOTES TO
CONSOLIDATED AND COMBINED UNAUDITED FINANCIAL
STATEMENTS (Continued)
For the
Nine Month Ended September 30, 2009 and September 30,
2010
Pro
Forma Information (Unaudited)
The pro forma earnings per share for the nine months ended
September 30, 2010 gives effect to (i) the
consummation of the corporate conversion, pursuant to which all
outstanding common and preferred limited liability company units
(including all accrued but unpaid dividends thereon) and all
principal and accrued interest outstanding under our promissory
note in favor of IMPEX Enterprises, Ltd. will be converted into
[ ] shares of our common
stock; (ii) the issuance of shares of common stock to two
of our employees pursuant to the terms of each of their
respective phantom stock agreements; and (iii) the issuance
and conversion of a $30.0 million debenture into
[ ] shares of our common stock.
Unaudited pro forma net income attributable to common
stockholders per share is computed using the weighted-average
number of common shares outstanding, including the pro forma
effect of (i) to (iii) above, as if such conversion
occurred at the beginning of the period.
The following table sets forth the computation of pro forma
basic and diluted net loss per share:
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30, 2010
|
|
|
Numerator (basic and diluted):
|
|
|
|
|
Net loss
|
|
$
|
(16,405
|
)
|
|
|
|
|
|
Denominator (basic and diluted):
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
[
|
]
|
Add: Common shares from conversion of common units
|
|
|
[
|
]
|
Add: Common shares from conversion of preferred units
|
|
|
[
|
]
|
Add: Common shares from phantom stock agreements
|
|
|
[
|
]
|
Add: Common shares from conversion of $30.0 million
debenture
|
|
|
[
|
]
|
|
|
|
|
|
Pro forma weighted average common shares outstanding
|
|
|
[
|
]
|
|
|
|
|
|
Pro forma net loss per share:
|
|
|
|
|
Basic and diluted
|
|
$
|
[
|
]
|
|
|
|
|
|
Diluted
|
|
$
|
[
|
]
|
|
|
|
|
|
|
|
NOTE 3
|
LOANS
RECEIVABLE
|
An analysis of the changes in loans receivable principal balance
during the nine months ended September 30, 2010 is as
follows:
|
|
|
|
|
|
|
2010
|
|
|
Loan principal balance, beginning
|
|
$
|
167,691,523
|
|
Loan originations
|
|
|
18,244,655
|
|
Subsequent year premiums paid, net of reimbursements
|
|
|
5,302,093
|
|
Loan write-offs
|
|
|
(6,593,350
|
)
|
Loan payoffs
|
|
|
(80,847,708
|
)
|
|
|
|
|
|
Loan principal balance, ending
|
|
$
|
103,797,213
|
|
|
|
|
|
|
Loan origination fees include origination fees or maturity fees
which are payable to the Company on the date the loan matures.
The loan origination fees are reduced by any direct costs that
are directly related to the creation of the loan receivable in
accordance with
ASC 310-20,
Receivables Nonrefundable Fees and Other
F-35
Imperial
Holdings, LLC and Subsidiaries
NOTES TO
CONSOLIDATED AND COMBINED UNAUDITED FINANCIAL
STATEMENTS (Continued)
For the
Nine Month Ended September 30, 2009 and September 30,
2010
Costs
, and the net balance is accreted over the life of
the loan using the effective interest method. Discounts include
purchase discounts, net of accretion, which are attributable to
loans that were acquired from affiliated companies under common
ownership and control.
During the nine months ended September 30, 2010 and
September 30, 2009, the Company had 31 and 52 loans,
respectively, that were impacted by the Acorn facility
settlement. The Company incurred a loss on these loans of
approximately $5,181,000 and $8,442,000, respectively. The
Company also recorded gains related to the associated
forgiveness of debt of $6,968,000 and $14,886,000, respectively.
|
|
NOTE 4
|
LENDER
PROTECTION INSURANCE CLAIMS RECEIVED IN ADVANCE
|
On September 8, 2010, the lender protection insurance
related to our credit facility with Ableco Finance, LLC
(Ableco) was terminated and settled pursuant to a
claims settlement agreement, resulting in our receipt of an
insurance claims settlement of approximately $96.9 million.
We used approximately $64.0 million of the settlement
proceeds to pay off the credit facility with Ableco in full and
the remainder was used to pay off the amounts borrowed under the
grid promissory note in favor of CTL Holdings, LLC.
As a result of this settlement transaction, our subsidiary,
Imperial PFC Financing, LLC, a special purpose entity, agreed to
reimburse the lender protection insurer for certain loss
payments and related expenses by remitting to the lender
protection insurer all amounts received in the future in
connection with the related premium finance loans issued through
the Ableco credit facility and the life insurance policies
collateralizing those loans until such time as the lender
protection insurer has been reimbursed in full in respect of its
loss payments and related expenses. These loss payments and
related expenses include the $96.9 million insurance claims
settlement described above, $77.0 million for loss payments
previously made, any additional advances made by the lender
protection insurer to or for the benefit of Imperial PFC
Financing, LLC and interest on such amounts. The reimbursement
obligation is generally non-recourse to us and our other
subsidiaries except to the extent of our equity interest in
Imperial PFC Financing, LLC. Messrs. Mitchell and Neuman
each guaranteed the obligations of Imperial PFC Financing, LLC
for matters other than financial performance.
Under the lender protection program, we pay lender protection
insurance premiums at or about the time the coverage for a
particular loan becomes effective. We record this amount as a
deferred cost on our balance sheet, and then expense the
premiums over the life of the underlying premium finance loans
using the effective interest method. As of September 8,
2010, the deferred premium costs associated with the Ableco
facility totaled $5.4 million. Since these insurance claims
have been prepaid and Ableco has been repaid in full, we have
accelerated the expensing of these deferred costs and recorded
this $5.4 million expense as Amortization of Deferred
Costs. Also in connection with the termination of the Ableco
facility, we have accelerated the expensing of approximately
$980,000 of deferred costs which resulted from professional fees
related to the creation of the Ableco facility. We recorded
these charges as Amortized Deferred Costs. In the aggregate, we
accelerated the expensing of $6.4 million in deferred costs
as a result of this one-time transaction.
The insurance claim settlement of $96.9 million was
recorded as lender protection insurance claims paid in advance
on our consolidated and combined balance sheet. As the premium
finance loans mature and in the event of default, the insurance
claim is applied against the premium finance loan. As of
September 30, 2010, we have approximately
$60.6 million remaining of lender protection insurance
claims paid in advance related to premium finance loans which
have not yet matured. The remaining premium finance loans will
mature by August 5, 2011.
F-36
Imperial
Holdings, LLC and Subsidiaries
NOTES TO
CONSOLIDATED AND COMBINED UNAUDITED FINANCIAL
STATEMENTS (Continued)
For the
Nine Month Ended September 30, 2009 and September 30,
2010
|
|
NOTE 5
|
STRUCTURED
SETTLEMENTS
|
The balances of the Companys structured settlements are as
follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2010
|
|
|
Structured settlements at cost
|
|
$
|
151,543
|
|
|
$
|
1,170,862
|
|
Structured settlements at fair value
|
|
|
|
|
|
|
9,382,786
|
|
|
|
|
|
|
|
|
|
|
Structured settlements receivable, net
|
|
$
|
151,543
|
|
|
$
|
10,553,648
|
|
On February 1, 2010, the Company signed a purchase and sale
agreement with Slate Capital, LLC (Slate) whereby
the Company will originate and sell to them certain eligible
structured settlements and life contingent structured
settlements. The Companys subsidiary, Washington Square
Financial, LLC, also entered into a servicing agreement with
Slate to service the sold structured settlements. Under this
facility, transactions began funding in April, 2010. During the
nine months ended September 30, 2010, there were 139
transactions completed generating income of approximately
$3,125,000, which was recorded as a gain on sale of structured
settlements.
On September 30, 2010, we entered into a wind down
agreement with Slate whereby as of December 31, 2010, we
will cease selling structured settlements to Slate. Under the
wind down agreement, which amends our existing arrangement with
Slate, we will continue submitting structured settlements to
Slate through November 15, 2010 for purchase by
December 31, 2010.
In addition to our sales to Slate, during the nine months ended
September 30, 2010 the company sold 152 structured
settlements for proceeds totaling approximately $5,996,000. The
Company recognized a gain of approximately $1,723,000 on these
transactions and recorded a holdback of approximately $310,000,
which is included in accounts payable and accrued expenses in
the accompanying consolidated balance sheet and will be
recognized as income when cash is recorded.
Effective September 24, 2010, Imperial Settlements
Financing 2010, LLC, a wholly owned subsidiary of the Company,
entered into an agreement with Portfolio Financial Servicing
Company, the Master Servicer, Wilmington Trust Company, as
the Trustee and Collateral Trustee and ParterRe Principal
Finance, Inc. as the Purchaser. Beginning October, 2010, the
Company expects to originate and sell structured settlements and
life contingent structured settlements transactions under this
facility. This facility will include up to a $50 million
capacity under a 8.39% fixed rate asset backed variable funding
note,
series 2010-1.
|
|
NOTE 6
|
INVESTMENT
IN LIFE SETTLEMENT FUND
|
On September 3, 2009, the Company formed MXT Investments,
LLC (MXT Investments) as a wholly-owned subsidiary.
MXT Investments signed an agreement with Insurance Strategies
Fund, LLC (Insurance Strategies) whereby MXT
Investments would purchase an equity interest in Insurance
Strategies and Insurance Strategies would purchase life
settlement policies from the Company and other sources. During
the three months ending March 31, 2010, MXT Investments
contributed approximately $727,000 to Insurance Strategies and
Insurance Strategies purchased 5 settlement policies from
Imperial Premium for approximately $1,268,000. During the six
month period beginning April 1, 2010 and ending
September 30, 2010, no additional policies were purchased.
No gain was recognized on the transaction due to the related
equity contribution made by MXT Investments into Insurance
Strategies. As of September 30, 2010, MXT Investments had
investments in Insurance Strategies of $1,270,000, net of
deferred gains of $365,000.
F-37
Imperial
Holdings, LLC and Subsidiaries
NOTES TO
CONSOLIDATED AND COMBINED UNAUDITED FINANCIAL
STATEMENTS (Continued)
For the
Nine Month Ended September 30, 2009 and September 30,
2010
|
|
NOTE 7
|
FAIR
VALUE MEASUREMENTS
|
We carry investments in life and structured settlements at fair
value in the consolidated and combined balance sheets. Fair
value is defined as an exit price, representing the amount that
would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants
at the measurement date. As such, fair value is a market based
measurement that should be determined based on assumptions that
market participants would use in pricing an asset or liability.
Fair value measurements are classified based on the following
fair value hierarchy:
Level 1 Valuation is based on unadjusted quoted
prices in active markets for identical assets and liabilities
that are accessible at the reporting date. Since valuations are
based on quoted prices that are readily and regularly available
in an active market, valuation of these products does not entail
a significant degree of judgment.
Level 2 Valuation is determined from pricing
inputs that are other than quoted prices in active markets that
are either directly or indirectly observable as of the reporting
date. Observable inputs include quoted prices for similar assets
or liabilities in active markets, quoted prices for identical or
similar assets or liabilities in markets that are not active,
and interest rates and yield curves that are observable at
commonly quoted intervals.
Level 3 Valuation is based on inputs that are
both significant to the fair value measurement and unobservable.
Level 3 inputs include situations where there is little, if
any, market activity for the financial instrument. The inputs
into the determination of fair value generally require
significant management judgment or estimation.
The balances of the Companys assets measured at fair value
on a recurring basis as of September 30, 2010, are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Fair Value
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in life settlements
|
|
$
|
|
|
|
$
|
|
|
|
$
|
8,846,149
|
|
|
$
|
8,846,149
|
|
Structured settlement receivables
|
|
$
|
|
|
|
$
|
|
|
|
$
|
9,382,786
|
|
|
$
|
9,382,786
|
|
The balances of the Companys assets measured at fair value
on a recurring basis as of December 31, 2009, are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Fair Value
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in life settlements
|
|
$
|
|
|
|
$
|
|
|
|
$
|
4,306,280
|
|
|
$
|
4,306,280
|
|
Structured settlement receivables
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
F-38
Imperial
Holdings, LLC and Subsidiaries
NOTES TO
CONSOLIDATED AND COMBINED UNAUDITED FINANCIAL
STATEMENTS (Continued)
For the
Nine Month Ended September 30, 2009 and September 30,
2010
The following table provides a roll-forward in the changes in
fair value for the nine months ended September 30, 2010,
for all assets for which the Company determines fair value using
a material level of unobservable (Level 3) inputs.
|
|
|
|
|
|
|
|
|
Life Settlements:
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009
|
|
|
|
|
|
$
|
4,306,280
|
|
Purchase of policies
|
|
|
|
|
|
|
2,976,230
|
|
Change in unrealized appreciation
|
|
|
|
|
|
|
3,736,435
|
|
Realized change in fair value
|
|
|
|
|
|
|
(102,302
|
)
|
|
|
|
|
|
|
|
|
|
Sale of policies
|
|
|
|
|
|
|
(2,070,494
|
)
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2010
|
|
|
|
|
|
$
|
8,846,149
|
|
|
|
|
|
|
|
|
|
|
Unrealized appreciation, September 30, 2010
|
|
|
|
|
|
$
|
3,377,025
|
|
|
|
|
|
|
|
|
|
|
Structured Settlements:
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009
|
|
|
|
|
|
$
|
|
|
Transfers, July 1, 2010
|
|
|
|
|
|
|
1,735,729
|
|
Purchase of contracts
|
|
|
|
|
|
|
1,584,939
|
|
Change in unrealized appreciation
|
|
|
|
|
|
|
6,075,256
|
|
Collections
|
|
|
|
|
|
|
(13,138
|
)
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2010
|
|
|
|
|
|
$
|
9,382,786
|
|
|
|
|
|
|
|
|
|
|
Unrealized appreciation, September 30, 2010
|
|
|
|
|
|
$
|
6,075,256
|
|
|
|
|
|
|
|
|
|
|
The Companys impaired loans are measured at fair value on
a non-recurring basis, as the carrying value is based on the
fair value of the underlying collateral. The method used to
estimate the fair value of impaired collateral-dependent loans
depends on the nature of the collateral. For collateral that has
lender protection insurance coverage, the fair value measurement
is considered to be Level 2 as the insured value is an
observable input and there are no material unobservable inputs.
For collateral that does not have lender protection insurance
coverage, the fair value measurement is considered to be
Level 3 as the estimated fair value is based on a model
whose significant inputs into are the life expectancy of the
insured and the discount rate, which are not observable. As of
September 30, 2010 and December 31, 2009, the Company
had insured impaired loans (Level 2) with a net
carrying value, which includes principal, accrued interest, and
accreted origination fees, net of impairment, of approximately
56,816,000 and $57,495,000, respectively. As of
September 30, 2010 and December 31, 2009, the Company
had uninsured impaired loans (Level 3) with a net
carrying value of approximately $1,619,000 and $3,601,000,
respectively. The provision for losses on loans receivable
related to impaired loans was approximately $6,705,000 and
$3,514,000 for the nine months ended September 30, 2009 and
2010, respectively.
The Company may sell a life insurance policy on behalf of its
own account or for the benefit of another. In the case of such
sales, which are always sales of the whole policy and not
fractional interests, the Company recognizes a gain from the
excess of the sales price over carrying value. If the Company is
acting on behalf of a third party, the gain is the
Companys negotiated share of the resulting gain. Total
gains recognized were $1.9 million for the nine months
ended September 30, 2010. Policies owned by the Company and
sold in the nine months ended September 30, 2010 had a fair
value of $2.1 million.
F-39
Imperial
Holdings, LLC and Subsidiaries
NOTES TO
CONSOLIDATED AND COMBINED UNAUDITED FINANCIAL
STATEMENTS (Continued)
For the
Nine Month Ended September 30, 2009 and September 30,
2010
|
|
Note 8
|
Note
Payable Acorn Capital Group
|
A lender, Acorn Capital Group (Acorn), breached a
credit facility agreement with the Company by not funding
ongoing premiums on certain life insurance policies serving as
collateral for premium finance loans. The first time that Acorn
failed to make scheduled premium payments was in July 2008. The
Company had no forewarning and therefore did not have access to
funds necessary to pay ongoing premiums on the policies. The
Company did not incur liability with its borrowers because the
terms of the Acorn loans provided that the Company was only
required to fund future premium if the Companys lender
provided it with the funds necessary to advance the premiums.
Through September 30, 2010, a total of 101 policies under
the Acorn facility incurred losses primarily due to non-payment
of premiums.
In May 2009, the Company entered a settlement agreement with
Acorn whereby all obligations under the credit agreement were
terminated. Acorn subsequently assigned all of its rights and
obligations under the settlement agreement to Asset Based
Resource Group, LLC (ABRG). As part of the
settlement agreement, the Company continues to service the
original loans and ABRG determines whether or not it will
continue to fund the loans. The Company believes that ABRG will
elect to fund the loan only if it believes there is value in the
policy serving as collateral for the loan. If ABRG chooses not
to continue funding a loan, the Company has the option to fund
the loan or try to sell the loan or related policy to another
party. The Company elects to fund the loan only if it believes
there is value in the policy serving as collateral for the loan
after considering the costs of keeping the policy in force.
Regardless of whether the Company funds the loan or sells the
loan or related policy to another party, the Companys debt
under the Acorn facility is forgiven and it records a gain on
the forgiveness of debt. If the Company funds the loan, it
remains as an asset on the balance sheet, otherwise it is
written off and the Company records the amount written off as a
loss on loan payoffs and settlements, net.
On the notes that were cancelled under the Acorn facility, the
Company had debt forgiven totaling approximately $6,968,000 and
$16,410,000 for the nine months ended September 30, 2010
and for the year ended December 31, 2009, respectively. The
Company recorded these amounts as gain on forgiveness of debt.
Partially offsetting these gains, the Company had loan losses
totaling approximately $5,181,000, $10,182,000, and $1,868,000
during the nine months ended September 30, 2010 and the
years ended December 31, 2009 and 2008, respectively. The
Company recorded these amounts as loss on loan payoffs and
settlements, net. As of September 30, 2010, only 18 loans
out of 119 loans originally financed in the Acorn facility
remained outstanding. These notes have a carrying amount of
$4,416,000 which is included within loans receivable, net. These
notes mature within the next 12 months.
|
|
NOTE 9
|
RELATED
PARTY TRANSACTIONS
|
The Company incurred consulting fees of approximately $637,499
for the nine months ended September 30, 2010 for services
provided by a party related to the Company. As of
September 30, 2010, the Company owed approximately $70,833
to this related party.
Utilizing $32.2 million of the proceeds received as advance
payment of lender protection insurance claims, on
September 7, 2010, the Company paid down the notes payable
to CTL Holdings, LLC. As of September 30, 2010 there was a
balance of approximately $24,000 remaining due on this note.
In August 2009, the Company paid off notes with proceeds from
borrowings from two related party creditors which bear an
interest rate of 16.5% and mature on August 1, 2011. The
outstanding principal balance of these two notes at
September 30, 2010 was approximately $16,102,000 and
$3,752,000 and accrued interest was approximately $2,011,000 and
$1,349,000.
As of September 30, 2010, the Company had a receivable
balance of approximately $1,007,000 from CTL Holdings, LLC. This
receivable relates to lender protection insurance claims that
were remitted directly
F-40
Imperial
Holdings, LLC and Subsidiaries
NOTES TO
CONSOLIDATED AND COMBINED UNAUDITED FINANCIAL
STATEMENTS (Continued)
For the
Nine Month Ended September 30, 2009 and September 30,
2010
by our lender protection insurer to CTL Holdings, LLC. The
proceeds of these claims should have been paid directly to the
Company rather than CTL Holdings, LLC.
|
|
NOTE 10
|
PREFERRED
EQUITY
|
On September 27, 2010 we sold to a related party
23,000 units of Series E Preferred Units with a
liquidating preference of $100.00 per unit for an aggregate
amount of $2,300,000. The rate of preferred return is equal to
16.0% per annum.
On September 30, 2010, we sold to a related party
50,000 units of Series E Preferred Units with a
liquidating preference of $100.00 per unit for an aggregate
amount of $5,000,000. The rate of preferred return is equal to
16.0% per annum. The Company recorded a subscription receivable
of $5,000,000 as a component of members equity, as the
cash was not received until October, 2010.
The dividends in arrears for all preferred units at
September 30, 2010 were approximately $1,840,000.
|
|
NOTE 11
|
SEGMENT
INFORMATION
|
The Company operates in two reportable business segments:
financings premium for individual life insurance policies and
purchasing structured settlements. The premium finance segment
provides financing in the form of loans to trusts and
individuals for the purchase of life insurance policies and the
loans are collateralized by the life insurance policies. The
structured settlements segment purchases settlements from
individuals who are plaintiffs in lawsuits and the Company will
pay the plaintiff a lump sum at a negotiated discount and take
title to the settlement payments.
The performance of the segments is evaluated on the segment
level by members of the Companys senior management team.
Cash and income taxes generally are managed centrally.
Performance of the segments is based on revenue and cost control.
F-41
Imperial
Holdings, LLC and Subsidiaries
NOTES TO
CONSOLIDATED AND COMBINED UNAUDITED FINANCIAL
STATEMENTS (Continued)
For the
Nine Month Ended September 30, 2009 and September 30,
2010
Segment results and reconciliation to consolidated net income
were as follows:
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
2009
|
|
|
2010
|
|
|
Premium finance
|
|
|
|
|
|
|
|
|
Income
|
|
|
|
|
|
|
|
|
Agency fee income
|
|
$
|
20,215,518
|
|
|
$
|
9,099,047
|
|
Origination income
|
|
|
21,865,432
|
|
|
|
16,728,185
|
|
Interest income
|
|
|
15,426,584
|
|
|
|
15,482,339
|
|
Gain on forgiveness of debt
|
|
|
14,885,912
|
|
|
|
6,967,828
|
|
Change in fair value of investments
|
|
|
|
|
|
|
3,300,014
|
|
Other
|
|
|
|
|
|
|
2,065,679
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72,393,446
|
|
|
|
53,643,092
|
|
|
|
|
|
|
|
|
|
|
Direct segment expenses
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
20,868,766
|
|
|
|
21,349,549
|
|
Provision for losses
|
|
|
6,705,249
|
|
|
|
3,514,191
|
|
Loss on loans payoffs and settlements, net
|
|
|
11,278,543
|
|
|
|
4,320,219
|
|
Amortization of deferred costs
|
|
|
13,100,595
|
|
|
|
22,600,831
|
|
SG&A expense
|
|
|
11,164,673
|
|
|
|
7,312,839
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63,117,826
|
|
|
|
59,097,629
|
|
|
|
|
|
|
|
|
|
|
Segment operating income
|
|
$
|
9,275,620
|
|
|
$
|
(5,454,537
|
)
|
|
|
|
|
|
|
|
|
|
Structured settlements
|
|
|
|
|
|
|
|
|
Income
|
|
|
|
|
|
|
|
|
Gain on sale of structured settlements
|
|
$
|
499,410
|
|
|
$
|
4,847,649
|
|
Interest income
|
|
|
415,971
|
|
|
|
312,623
|
|
Change in fair value of investments
|
|
|
|
|
|
|
1,505,373
|
|
Other income
|
|
|
53,250
|
|
|
|
83,079
|
|
|
|
|
|
|
|
|
|
|
|
|
|
968,631
|
|
|
|
6,748,724
|
|
|
|
|
|
|
|
|
|
|
Direct segment expenses
|
|
|
|
|
|
|
|
|
SG&A expense
|
|
|
6,735,674
|
|
|
|
8,855,095
|
|
|
|
|
|
|
|
|
|
|
Segment operating loss
|
|
$
|
(5,767,043
|
)
|
|
$
|
(2,106,371
|
)
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
Segment operating (loss) income
|
|
|
3,508,577
|
|
|
|
(7,560,908
|
)
|
Unallocated expenses
|
|
|
|
|
|
|
|
|
SG&A expenses
|
|
|
5,097,053
|
|
|
|
5,950,221
|
|
Interest expense
|
|
|
3,841,536
|
|
|
|
2,894,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,938,589
|
|
|
|
8,844,408
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(5,430,012
|
)
|
|
$
|
(16,405,316
|
)
|
|
|
|
|
|
|
|
|
|
F-42
Imperial
Holdings, LLC and Subsidiaries
NOTES TO
CONSOLIDATED AND COMBINED UNAUDITED FINANCIAL
STATEMENTS (Continued)
For the
Nine Month Ended September 30, 2009 and September 30,
2010
Segment assets and reconciliation to consolidated total assets
were as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
September 30
|
|
|
|
2009
|
|
|
2010
|
|
|
Direct segment assets
|
|
|
|
|
|
|
|
|
Premium finance
|
|
$
|
245,574,288
|
|
|
$
|
164,517,923
|
|
Structured settlements
|
|
|
9,201,017
|
|
|
|
11,444,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
254,775,305
|
|
|
|
175,962,806
|
|
Other unallocated assets
|
|
|
8,944,783
|
|
|
|
5,005,289
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
263,720,088
|
|
|
$
|
180,968,095
|
|
|
|
|
|
|
|
|
|
|
Amounts are attributed to the segment that recognized the sale
and holds the assets. There are no intercompany sales and all
intercompany account balances are eliminated in segment
reporting.
|
|
NOTE 11
|
SUBSEQUENT
EVENTS
|
On September 30, 2010, the Company entered into an
agreement with a third party for the sale of structured
settlements. In accordance with the agreement, the transaction
was finalized upon the condition of the occurrence of certain
events, one of which was the receipt of the purchase amount. On
October 1, 2010, the third party remitted payment of
$6.1 million for the purchase of the structured settlements
and the Company recorded the corresponding gain on sale of
approximately $377,000 in the financial statements. As of
September 30, 2010, these assets were valued at estimated
fair value and recorded in the financial statements as
structured settlements.
On November 1, 2010, Premium Funding, Inc. and Branch
Office of Skarbonka Sp. z o.o. (Skarbonka) agreed to
exchange the common and preferred units owned by Premium
Funding, Inc. and the promissory note issued to Skarbonka for a
$30.0 million debenture that matures October 4, 2011.
The debenture was issued to Skarbonka. Premium Funding and
Skarbonka are related parties. The denture is automatically
convertible into shares of the Companys common stock
immediately prior to the closing of this offering.
F-43
Until
[ ],
2010 (25 days after the date of this prospectus), all
dealers that buy, sell or trade shares of our common stock,
whether or not participating in this offering, may be required
to deliver a prospectus. This requirement is in addition to the
dealers obligation to deliver a prospectus when acting as
underwriters and with respect to unsold allotments or
subscriptions.
[ ] Shares
Common Stock
PROSPECTUS
FBR
Capital
Markets
[ ],
2010
PART II
INFORMATION
NOT REQUIRED IN PROSPECTUS
|
|
Item 13.
|
Other
Expenses of Issuance and Distribution.
|
The table below sets forth the costs and expenses payable by
Imperial Holdings, Inc. in connection with the issuance and
distribution of the securities being registered (other than
underwriting discounts and commissions). All amounts are
estimated except the SEC registration fee. All costs and
expenses are payable by us.
|
|
|
|
|
SEC Registration Fee
|
|
$
|
20,498.75
|
|
FINRA Filing Fees
|
|
|
29,250.00
|
|
New York Stock Exchange Listing Fee
|
|
|
*
|
|
Legal Fees and Expenses
|
|
|
*
|
|
Underwriters Expense Reimbursement
|
|
|
*
|
|
Accounting Fees and Expenses
|
|
|
*
|
|
Transfer Agent and Registrar Fees
|
|
|
*
|
|
Printing and Engraving Expenses
|
|
|
*
|
|
Blue Sky Fees and Expenses
|
|
|
*
|
|
Miscellaneous Expenses
|
|
|
*
|
|
Total
|
|
$
|
*
|
|
|
|
|
*
|
|
to be provided by amendment
|
|
|
Item 14.
|
Indemnification
of Directors and Officers.
|
The Companys officers and directors are and will be
indemnified under Florida law, their employment agreements and
our articles of incorporation and bylaws.
The Florida Business Corporation Act, under which the Company is
organized, permits a Florida corporation to indemnify a present
or former director or officer of the corporation (and certain
other persons serving at the request of the corporation in
related capacities) for liabilities, including legal expenses,
arising by reason of service in such capacity if such person
shall have acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
corporation, and in any criminal proceeding if such person had
no reasonable cause to believe his conduct was unlawful.
However, in the case of actions brought by or in the right of
the corporation, no indemnification may be made with respect to
any matter as to which such director or officer shall have been
adjudged liable, except in certain limited circumstances.
Article 10 of the Companys bylaws provides that the
Company shall indemnify directors and executive officers to the
fullest extent now or hereafter permitted by the Florida
Business Corporation Act.
|
|
Item 15.
|
Recent
Sales of Unregistered Securities.
|
The following sets forth information regarding securities sold
by the registrant since inception:
|
|
|
|
|
On December 15, 2006, we issued 112,500 common units to IFS
Holdings, Inc. in exchange for an initial capital contribution
of $5,000,000.
|
|
|
|
On December 15, 2006, we issued 112,500 common units to
Premium Funding, Inc. in exchange for an initial capital
contribution of $5,000,000.
|
|
|
|
On December 15, 2006, we issued 112,500 common units to
IMEX Settlement Corporation in exchange for an initial capital
contribution of $5,000,000.
|
II-1
|
|
|
|
|
On December 15, 2006, we issued 112,500 common units to Red
Oak Finance, LLC in exchange for an initial capital contribution
of $5,000,000. Three Million Dollars of the capital contribution
was satisfied by a contribution of 28 premium finance loans
originated during 2006 with principal and accrued interest as of
the contribution date of $2,788,008.18 and $211,991.82,
respectively.
|
|
|
|
On February 2, 2007, we issued 1,184.21 and 2,337.66
phantom share units to James Purdy and Jonathan Moulton in
exchange for future contributions to us in their capacity as our
employees.
|
|
|
|
On December 19, 2007, we issued a note to Red Oak Finance,
LLC, a Florida limited liability company, in the original
principal amount of $1,000,000, at a ten (10%) per annum
interest rate, with a maturity date of February 18, 2008
(subject to extensions).
|
|
|
|
On January 10, 2008, we issued a note to Red Oak Finance,
LLC, a Florida limited liability company, in the original
principal amount of $500,000, at a ten (10%) per annum interest
rate, with a maturity date of March 10, 2008 (subject to
extensions).
|
|
|
|
On April 8, 2008, we issued a note to Red Oak Finance, LLC,
a Florida limited liability company, in the original principal
amount of $500,000, at a ten (10%) per annum interest rate, with
a maturity date of June 8, 2008 (subject to extensions).
|
|
|
|
On August 1, 2008, Imperial Premium Finance, LLC issued a
note to IFS Holdings, Inc., a Florida corporation, in the
original principal amount of $200,000, at a sixteen (16%) per
annum interest rate, with a maturity date of August 2, 2010
(subject to extensions).
|
|
|
|
On August 6, 2008, Imperial Finance & Trading,
LLC issued a note to IFS Holdings, Inc., a Florida corporation,
in the original principal amount of $75,000, at a sixteen (16%)
per annum interest rate, with a maturity date of August 7,
2010 (subject to extensions).
|
|
|
|
On October 10, 2008, we issued a note to Red Oak Finance,
LLC, a Florida limited liability company, in the original
principal amount of $62,500, at a ten (10%) per annum interest
rate, with a maturity date of December 10, 2008 (subject to
extensions).
|
|
|
|
On December 23, 2008, we issued a note to IFS Holdings,
Inc., a Florida corporation, in the original principal amount of
$750,000, at a sixteen (16%) per annum interest rate, with a
maturity date of December 24, 2010 (subject to extensions).
|
|
|
|
On December 24, 2008, we issued a note to Red Oak Finance,
LLC, a Florida limited liability company, in the original
principal amount of $450,000, at a ten (10%) per annum interest
rate, with a maturity date of February 24, 2009 (subject to
extensions).
|
|
|
|
On December 30, 2008, we issued a note to IFS Holdings,
Inc., a Florida corporation, in the original principal amount of
$750,000, at a sixteen (16%) per annum interest rate, with a
maturity date of December 30, 2010 (subject to extensions).
|
|
|
|
Effective June 30, 2009, we converted $2,260,000 in notes
from Red Oak Finance, LLC issued on December 19, 2007,
January 10, 2008, April 8, 2008, October 10, 2008
and December 24, 2008 into 50,855 Series A Preferred
Units held by Red Oak Finance, LLC.
|
|
|
|
Effective June 30, 2009, we converted $1,775,000 in notes
from IFS Holdings, Inc. issued on August 1, 2008,
August 6, 2008, December 23, 2008 and
December 30, 2008 into 39,941 Series A Preferred Units
held by IFS Holdings, Inc.
|
|
|
|
|
|
Effective December 30, 2009, we sold 25,000 16%
Series B Preferred Units to Imex Settlement Corporation for
a price of $2,500,000.
|
|
|
|
|
|
Effective December 30, 2009, we sold 25,000 16%
Series B Preferred Units to Premium Funding, Inc. for a
price of $2,500,000.
|
|
|
|
|
|
Effective March 31, 2010, we sold 70,000 16% Series C
Preferred Units to Imex Settlement Corporation for a price of
$7,000,000.
|
II-2
|
|
|
|
|
Effective June 30, 2010, we sold 7,000 Series D
Preferred Units to Imex Settlement Corporation for a price of
$700,000.
|
|
|
|
Effective September 30, 2010, we sold 73,000 Series E
Preferred Units to Imex Settlement Corporation for a price of
$7,300,000.
|
|
|
|
Effective November 1, 2010, we converted a
$16.1 million note plus accrued interest from Branch Office
of Skarbonka Sp. z o.o. and 112,500 common units and 25,000
Series B preferred units from Premium Funding, Inc. into a
$30.0 million debenture held by the Branch Office of
Skarbonka Sp. z o.o.
|
The issuance of securities described above were deemed to be
exempt from registration under the Securities Act in reliance on
Section 4(2) of the Securities Act with the exception of
the shares issuable under the phantom stock agreements, which
were issued pursuant to a transaction exempt from the
registration requirements of the Securities Act in reliance upon
Rule 701 of the Securities Act. The recipients of
securities in each transaction represented their intention to
acquire the securities for investment only and not with a view
to or for sale in connection with any distribution thereof, and
appropriate legends were affixed to any certificated shares and
other instruments issued in each such transaction. The sales of
these securities were made without general solicitation or
advertising and without the involvement of any underwriter.
|
|
Item 16.
|
Exhibits
and Financial Statement Schedules.
|
(a)
Exhibits.
The exhibits to the registration statement are listed in the
Exhibit Index to this registration statement and are
incorporated by reference herein.
The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting
agreement, certificates in such denominations and registered in
such names as required by the underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the Securities Act) may be
permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise,
the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act, the information omitted from the form of
prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities
Act shall be deemed to be part of this registration statement as
of the time it was declared effective.
(2) For purposes of determining any liability under the
Securities Act, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized in the City of Boca Raton, State of Florida, on
November 10, 2010.
IMPERIAL HOLDINGS, LLC*
Name: Antony Mitchell
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Title:
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Chief Executive Officer
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Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
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Signature
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Title
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Date
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/s/ Antony
Mitchell
Antony
Mitchell
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Chief Executive Officer
(Principal Executive Officer)
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November 10, 2010
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/s/ Richard
A. OConnell
Richard
A. OConnell
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Chief Financial Officer and
Chief Credit Officer
(Principal Financial Officer)
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November 10, 2010
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/s/ Jerome
A. Parsley
Jerome
A. Parsley
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Director of Finance and Accounting (Principal Accounting Officer)
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November 10, 2010
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/s/ Jonathan
Neuman
Jonathan
Neuman
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President and Chief Operating Officer
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November 10, 2010
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* to be converted to Imperial Holdings,
Inc.
II-4
Board of
Managers
IFS HOLDINGS, INC.
Date: November 10, 2010
Antony Mitchell
President, Secretary and Treasurer
Date: November 10, 2010
Antony Mitchell,
Sole Director
IMEX SETTLEMENT CORPORATION
Date: November 10, 2010
Antony Mitchell
President, Secretary and Treasurer
Date: November 10, 2010
Antony Mitchell, Sole Director
RED OAK FINANCE, LLC
Date: November 10, 2010
Jonathan Neuman
Manager
II-5
EXHIBIT INDEX
In reviewing the agreements included as exhibits to this
registration statement, please remember they are included to
provide you with information regarding their terms and are not
intended to provide any other factual or disclosure information
about us, our subsidiaries or other parties to the agreements.
The agreements contain representations and warranties by each of
the parties to the applicable agreement. These representations
and warranties have been made solely for the benefit of the
other parties to the applicable agreement and:
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should not in all instances be treated as categorical
statements of fact, but rather as a way of allocating the risk
to one of the parties if those statements prove to be
inaccurate;
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have been qualified by disclosures that were made to the
other party in connection with the negotiation of the applicable
agreement, which disclosures are not necessarily reflected in
the agreement;
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may apply standards of materiality in a way that is different
from what may be viewed as material to you or other investors;
and
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were made only as of the date of the applicable agreement or
such other date or dates as may be specified in the agreement
and are subject to more recent developments.
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Accordingly, these representations and warranties may not
describe the actual state of affairs as of the date they were
made or at any other time. We acknowledge that, notwithstanding
the inclusion of the foregoing cautionary statements, we are
responsible for considering whether additional specific
disclosures of material information regarding material
contractual provisions are required to make the statements in
this registration statement not misleading. Additional
information about us may be found elsewhere in the prospectus
included in this registration statement.
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Exhibit
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No.
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Description
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*1
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.1
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Underwriting Agreement
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*2
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.1
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Plan of Conversion
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***3
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.1
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Form of Articles of Incorporation of Registrant
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***3
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.2
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Form of Bylaws of Registrant
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4
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.1
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Form of Common Stock Certificate
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*4
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.2
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Form of Warrant to purchase common stock
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*5
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.1
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Opinion of Foley & Lardner LLP
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~
10
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.1
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Employment Agreement between the Registrant and Antony Mitchell
dated November 8, 2010
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***
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10
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.2
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Employment Agreement between the Registrant and Jonathan Neuman
dated September 29, 2010
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~
10
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.3
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Employment Agreement between the Registrant and Rory
OConnell dated November 4, 2010
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~
10
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.4
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Employment Agreement between the Registrant and Deborah Benaim
dated November 8, 2010
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10
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.5
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Reserved
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***
~
10
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.6
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Imperial Holdings 2010 Omnibus Incentive Plan
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***
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10
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.7
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2010 Omnibus Incentive Plan Form of Stock Option Award Agreement
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*+10
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.8
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Omnibus Claims Settlement Agreement dated as of
September 8, 2010 by and between Imperial PFC Financing,
LLC and Lexington Insurance Company
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*+10
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.9
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Pledge and Security Agreement dated September 8, 2010 by
Imperial Premium Finance, LLC
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10
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.10
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Guarantor Security Agreement dated November 2009 by Imperial
Premium Finance, LLC
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10
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.11
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Guarantor Security Agreement dated March 13, 2009 by
Imperial Premium Finance, LLC
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**10
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.12
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Settlement Agreement dated as of May 19, 2009 among Sovereign
Life Financing, LLC, Imperial Premium Finance, LLC and Acorn
Capital Group, LLC
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II-6
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Exhibit
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No.
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Description
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***10
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.12.1
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Assignment Agreement dated June 10, 2009 between Acorn Capital
Group, LLC and Asset Based Resource Group, LLC assigning rights
to the Settlement Agreement dated as of May 19, 2009 among
Sovereign Life Financing, LLC, Imperial Premium Finance, LLC and
Acorn Capital Group, LLC
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10
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.13
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Second Amended and Restated Financing Agreement dated as of
March 12, 2010 by and among Imperial PFC Financing II, LLC as
Borrower, Cedar Lane Capital LLC as Lender and EBC Asset
Management, Inc. as Administrative Agent and Collateral Agent
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*+10
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.14
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Letter Agreement dated September 14, 2009 among Imperial
Holdings, LLC, Lexington Insurance Company and National Fire
& Marine Insurance Company
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10
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.15
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Master Trust Indenture dated as of September 24, 2010 by and
among Imperial Settlements Financing 2010, LLC as the Issuer,
Portfolio Financial Servicing Company as the Initial Master
Servicer, and Wilmington Trust Company as the Trustee and
Collateral Trustee
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10
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.16
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Series 2010-1 Supplement dated as of September 24, 2010 to the
Master Trust Indenture dated as of September 24, 2010 by and
among Imperial Settlements Financing 2010, LLC as the Issuer,
Portfolio Financial Servicing Company as the Initial Servicer,
and Wilmington Trust Company as the Trustee and Collateral
Trustee
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10
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.17
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Oral agreement between Imperial Holdings, LLC and Warburg
Investment Corporation
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10
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.18
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Financing Agreement dated as of March 13, 2009 by and among
Imperial Life Financing II, LLC as Borrower, the Lenders from
time to time party thereto, and CTL Holdings II LLC as
Collateral Agent and Administrative Agent
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*+10
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.19
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Letter Agreement dated March 13, 2009 among Imperial Holdings,
LLC, Lexington Insurance Company and National Fire & Marine
Insurance Company
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***10
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.20
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First Amendment to Financing Agreement dated as of April 30,
2009 by and among Imperial Life Financing II, LLC as Borrower,
the Lenders from time to time party thereto, and CTL
Holdings II LLC as Collateral Agent and Administrative Agent
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***10
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.21
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Notice of Resignation and Appointment dated as of April 30, 2009
among CTL Holdings II LLC, White Oak Global Advisors, LLC
and the Lenders party to the Financing Agreement dated March 13,
2009
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***10
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.22
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Second Amendment to Financing Agreement dated as of July 23,
2009 among Imperial Life Financing II, LLC as Borrower, the
Lenders from time to time party thereto, and White Oak Global
Advisors, LLC as Collateral Agent and Administrative Agent
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***10
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.23
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Third Amendment and Consent to Financing Agreement dated as of
September 11, 2009 among Imperial Life Financing II, LLC as
Borrower, the Lenders from time to time party thereto, and White
Oak Global Advisors, LLC as Collateral Agent and Administrative
Agent
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***10
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.24
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Fourth Amendment to Financing Agreement dated as of December 1,
2009 among Imperial Life Financing II, LLC as Borrower, the
Lenders from time to time party thereto, and White Oak Global
Advisors, LLC as Collateral Agent and Administrative Agent
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***10
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.25
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Consent Letter dated September 30, 2010 by and among
Imperial Holdings, LLC and Lexington Insurance Company
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***10
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.26
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Consent Letter dated September 30, 2010 by and among
Imperial Holdings, LLC and Slate Capital LLC
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10
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.27
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Reserved
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**10
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.28
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Promissory Note effective as of August 31, 2009 in the principal
amount of $17,616,271 held by the Branch Office of Skarbonka Sp.
z o.o.
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**10
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.29
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Promissory Note effective as of August 31, 2009 in the principal
amount of $25,000,000 held by Amalgamated International
Holdings, S.A.
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**10
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.30
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Promissory Note effective as of August 31, 2009 in the principal
amount of $10,323,756 held by IMPEX Enterprises, Ltd.
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10
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.31
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Reserved
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II-7
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Exhibit
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No.
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Description
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10
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.32
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Consent Letter dated November 9, 2010 by and among Imperial
Holdings, LLC and Lexington Insurance Company
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10
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.33
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Consent Letter dated November 9, 2010 by and among Imperial
Holdings, LLC and Slate Capital LLC
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**10
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.34
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Marketing Agreement between Imperial Litigation Funding, LLC as
Originator and Plaintiff Funding Holding Inc d/b/a LawCash as
Funder
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**10
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.35
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Agreement dated November 13, 2009 among GWG Life Settlements,
LLC and Imperial Premium Finance, LLC as Selling Advisor
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10
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.36
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$30.0 million Unsecured Convertible Debenture issued on
November 1, 2010 by Imperial Holdings, LLC to Branch Office
of Skarbonka Sp. z o.o.
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10
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.37
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Note and Share Purchase Agreement effective as of
November 1, 2010 by and among Imperial Holdings, LLC,
Branch Office of Skarbonka sp. z o.o. and Premium Funding, Inc.
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***21
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.1
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Subsidiaries of the Registrant
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*23
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.1
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Consent of Foley & Lardner LLP (included as part of its
opinion to be filed as Exhibit 5.1 hereto)
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23
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.2
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Consent of Grant Thornton LLP
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**24
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.1
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Power of Attorney
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***99
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.1
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Consent of Director Nominees (Messrs. Crow, Higgins, Rosenberg
and Wyrough)
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99
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.2
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Consent of Director Nominee (Mr. Buzen)
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*
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To be filed by amendment.
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**
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Filed as exhibit to registration statement on
Form S-1
on August 12, 2010.
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***
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Filed as exhibit to amendment No. 1 to registration statement on
Form S-1 on October 1, 2010.
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~
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Compensatory plan or arrangement.
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+
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Confidential treatment to be requested.
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II-8
Exhibit 10.13
Execution Copy
SECOND AMENDED AND RESTATED
FINANCING AGREEMENT
Dated
as of March 12, 2010
by and among
IMPERIAL PFC FINANCING II, LLC,
as Borrower,
CEDAR LANE CAPITAL LLC (f/k/a, LoIC LLC),
as Lender,
and
EBC ASSET MANAGEMENT, INC.
as Administrative Agent and Collateral Agent
TABLE OF CONTENTS
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Page
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ARTICLE I DEFINITIONS; CERTAIN TERMS
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1
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Section 1.01 Definitions
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1
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Section 1.02 Terms Generally
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26
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Section 1.03 Accounting and Other Terms
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26
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Section 1.04 Time References
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27
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ARTICLE II THE LOANS
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27
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Section 2.01 Commitments
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27
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Section 2.02 Making the Loans
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27
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Section 2.03 Repayment of Loans; Evidence of Debt
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28
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Section 2.04 Interest
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29
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Section 2.05 Reduction of Commitment; Prepayment of Loans
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30
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Section 2.06 Applicable Prepayment Premium
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32
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Section 2.07 Securitization
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32
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Section 2.08 Taxes
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33
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Section 2.09 Increase in Term Loan Commitment; Extension of Term Loan Commitment
Termination Date
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35
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Section 2.10 Indemnity Escrow
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36
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ARTICLE III INTENTIONALLY OMITTED
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36
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ARTICLE IV FEES, PAYMENTS AND OTHER COMPENSATION
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37
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Section 4.01 Audit and Collateral Monitoring Fees
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37
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Section 4.02 Payments; Computations and Statements
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37
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Section 4.03 Sharing of Payments, Etc
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38
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Section 4.04 Apportionment of Payments
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38
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Section 4.05 Increased Costs and Reduced Return
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40
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ARTICLE V CONDITIONS TO LOANS
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41
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Section 5.01 Conditions Precedent to Effectiveness
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41
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Section 5.02 Conditions Precedent to All Loans
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44
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ARTICLE VI REPRESENTATIONS AND WARRANTIES
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47
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Section 6.01 Representations and Warranties
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47
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ARTICLE VII COVENANTS OF THE BORROWER
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53
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Section 7.01 Affirmative Covenants
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53
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Section 7.02 Negative Covenants
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63
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i
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Page
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ARTICLE VIII MANAGEMENT, COLLECTION AND STATUS OF COLLATERAL
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69
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Section 8.01 Collections; Management of Collateral
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69
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Section 8.02 Collateral Custodian
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72
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ARTICLE IX EVENTS OF DEFAULT
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72
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Section 9.01 Events of Default
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72
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ARTICLE X AGENTS
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77
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Section 10.01 Appointment
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77
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Section 10.02 Nature of Duties
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78
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Section 10.03 Rights, Exculpation, Etc
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78
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Section 10.04 Reliance
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79
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Section 10.05 Indemnification
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79
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Section 10.06 Agents Individually
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79
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Section 10.07 Successor Agent
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80
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Section 10.08 Collateral Matters
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80
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Section 10.09 Agency for Perfection
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81
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Section 10.10 No Reliance on any Agents Customer Identification Program
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82
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ARTICLE XI SERVICER TERMINATION EVENTS
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82
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Section 11.01 Servicer Termination Event
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82
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ARTICLE XII MISCELLANEOUS
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82
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Section 12.01 Notices, Etc
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82
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Section 12.02 Amendments, Etc
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84
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Section 12.03 No Waiver; Remedies, Etc
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85
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Section 12.04 Expenses; Taxes; Attorneys Fees
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86
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Section 12.05 Right of Set-off
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86
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Section 12.06 Severability
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87
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Section 12.07 Assignments and Participations
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87
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Section 12.08 Counterparts
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90
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Section 12.09 GOVERNING LAW
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90
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Section 12.10 CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE
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90
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Section 12.11 WAIVER OF JURY TRIAL, ETC
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91
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Section 12.12 Consent by the Agents and Lender
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91
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Section 12.13 No Party Deemed Drafter
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91
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Section 12.14 Reinstatement; Certain Payments
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91
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Section 12.15 Indemnification
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92
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Section 12.16 Records
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92
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Section 12.17 Binding Effect
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92
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Section 12.18 Interest
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93
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Section 12.19 Confidentiality
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94
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ii
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Page
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Section 12.20 Public Disclosure
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94
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Section 12.21 Integration
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95
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Section 12.22 USA PATRIOT Act
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95
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iii
SCHEDULE AND EXHIBITS
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Schedule 1.01(A)
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Lenders and Lenders Commitments
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Schedule 1.01(B)
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Applicable Non-Licensed States
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Schedule 1.01(C)
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Applicable Licensed States
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Schedule 1.01(D)
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Loan Schedule
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Schedule 1.01(E)
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Non-Corporate Trustee Insurance Premium Loans
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Schedule 5.02(e)
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Delivery of Documents
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Schedule 6.01(e)
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Capitalization
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Schedule 6.01(q)
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Insurance
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Schedule 6.01(t)
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Bank Accounts
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Schedule 6.01(u)
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Intellectual Property
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Schedule 6.01(v)
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Material Contracts
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Schedule 6.01(aa)
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Name; Jurisdiction of Organization; Organizational ID
Number; Chief Place of Business; Chief Executive Office;
FEIN
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Schedule 6.01(bb)
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Collateral Locations
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Schedule 8.01
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Cash Management Bank and Collection Account
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Exhibit A
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Form of Security Agreement
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Exhibit B
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Form of Notice of Borrowing
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Exhibit C
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Form of Assignment and Acceptance
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Exhibit D
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Form of Individual Guaranty
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Exhibit E
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Form of Guarantor Security Agreement
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Exhibit F
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Loan Document Package
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Exhibit G
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Form of Borrowing Base Certificate
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Exhibit H
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Form of Opinions of Foley & Lardner, LLP and Locke, Lord Bissell
& Liddell
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Exhibit I
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Form of Insurance Premium Loan Sale and Assignment Agreement
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Exhibit J
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Form of Master Participation Agreement
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Exhibit K
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Local Counsel Opinion Questions
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Exhibit L
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Form of Imperial Limited Guaranty
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iv
SECOND AMENDED AND RESTATED FINANCING AGREEMENT
Second Amended and Restated Financing Agreement, dated as of
___, 2010 (this
Agreement) by and among Imperial PFC Financing II, LLC, a Georgia limited liability company (the
Borrower
), Cedar Lane Capital LLC, a Delaware limited liability company (the Lender)
and EBC Asset Management, Inc., a New York corporation, as collateral agent for the Lender (in such
capacity, the
Collateral Agent
), and as administrative agent for the Lender (in such
capacity, the
Administrative Agent
and together with the Collateral Agent, each an
Agent
and collectively, the
Agents
).
RECITALS
This Agreement amends and restates that certain Financing Agreement, dated as of September 14,
2009, by and among the Borrower, the Lender, the Collateral Agent and the Administrative Agent, as
previously amended and restated on December 2, 2009.
The Borrower has asked the Lender to extend credit to the Borrower consisting of a multi-draw
term loan in the aggregate principal amount not to exceed Fifteen Million Dollars ($15,000,000).
The proceeds of the term loan shall be used to purchase 100% participations (the Participations)
in Eligible Insurance Premium Loans (as defined herein) pursuant to the Master Participation
Agreement (as defined herein), purchase Eligible Insurance Premium Loans pursuant to each Insurance
Premium Loan Sale and Assignment Agreement (as defined herein), and to pay fees and expenses
related to this Agreement. The Lender is willing to extend such credit to the Borrower subject to
the terms and conditions hereinafter set forth.
In consideration of the premises and the covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS; CERTAIN TERMS
Section 1.01
Definitions
. As used in this Agreement, the following terms shall have
the respective meanings indicated below, such meanings to be applicable equally to both the
singular and plural forms of such terms:
Action
has the meaning specified therefor in Section 12.12.
Additional Amount
has the meaning specified therefor in Section 2.08(a).
Administrative Agent
has the meaning specified therefor in the preamble hereto.
Administrative Agents Account
means an account at a bank designated by the
Administrative Agent from time to time as the account into which the Borrower shall make all
payments to the Administrative Agent for the benefit of the Agents and the Lender under this
Agreement and the other Loan Documents.
Affiliate
means, with respect to any Person, any other Person that directly or
indirectly through one or more intermediaries, controls, is controlled by, or is under common
control with, such Person. For purposes of this definition, control of a Person means the power,
directly or indirectly, either to (a) vote 10% or more of the Equity Interests having ordinary
voting power for the election of members of the Board of Directors of such Person or (b) direct or
cause the direction of the management and policies of such Person whether by contract or otherwise.
Notwithstanding anything herein to the contrary, in no event shall any Agent or any Lender be
considered an Affiliate of any Credit Party.
Agent
has the meaning specified therefor in the preamble hereto.
Aggregate Interest Amount
means the maximum amount of interest payable with respect
to a Covered Loan in accordance with the Collateral Value Policy.
Agreement
means this Amended and Restated Financing Agreement, including all
amendments, modifications and supplements and any exhibits or schedules to any of the foregoing,
and shall refer to the Agreement as the same may be in effect at the time such reference becomes
operative.
Anti-Terrorism Laws
means any laws relating to terrorism or money laundering,
including Executive Order No. 13224, the USA PATRIOT Act, the laws comprising or implementing the
Bank Secrecy Act, and the laws administered by the United States Treasury Departments Office of
Foreign Asset Control (as any of the foregoing laws may from time to time be amended, renewed,
extended, or replaced).
Applicable Interest Rate
with respect to any Sub-Tranche hereunder, shall mean 14%,
in the case of a 14% Sub-Tranche, 15% in the case of a 15% Sub-Tranche or 16% in the case of a 16%
Sub-Tranche.
Applicable Prepayment Premium
means, as of any date of determination, an amount
equal to 4.00% times the principal amount of any prepayment of the Term Loan on such date.
Applicable Licensed State
means each State within the United States wherein the
Originator is duly licensed and authorized by all applicable law to originate life insurance
premium finance loans and otherwise conduct the business and activities related thereto and as
contemplated by the Loan Documents and the Transaction Documents, as evidenced by a Local Counsel
Opinion delivered to the Collateral Agent. Each Applicable Licensed State on the Effective Date is
listed on Schedule 1.01(C) attached hereto.
Applicable Non-Licensed State
means each State within the United States wherein the
Originator is not required to be duly licensed and authorized by all applicable law to originate
life insurance premium finance loans and otherwise conduct the business and activities related
thereto and as contemplated by the Loan Documents and the Transaction Documents, as evidenced by a
Local Counsel Opinion delivered to the Collateral Agent. Each Applicable Non-Licensed State on the
Effective Date is listed on Schedule 1.01(B) attached hereto.
2
Assignment and Acceptance
means an assignment and acceptance entered into by an
assigning Lender and an assignee, and accepted by the Collateral Agent, in accordance with Section
12.07 hereof and substantially in the form of Exhibit C hereto or such other form acceptable to the
Collateral Agent.
Authorized Officer
means, with respect to any Person, the chief executive officer,
chief financial officer, or president of such Person.
Back-Up Servicer
means an institutional servicer or financial institution acceptable
to the Agents and which initially will be Portfolio Financial Servicing Company, a Delaware
corporation.
Back-Up Servicing Agreement
means the Back-Up Servicing Agreement, by and among the
Back-Up Servicer and the Borrower, in form and substance satisfactory to the Agents, as the same
may be amended, amended and restated, supplemented or otherwise modified from time to time in
accordance with this Agreement.
Bankruptcy Code
means the United States Bankruptcy Code (11 U.S.C. § 101, et seq.),
as amended, and any successor statute.
Blocked Person
has the meaning assigned to such term in Section 6.01(dd)(ii).
Board
means the Board of Governors of the Federal Reserve System of the United
States.
Board of Directors
means, (i) with respect to any corporation, the board of
directors of the corporation or any committee thereof duly authorized to act on behalf of such
board, (iii) with respect to a partnership, the board of directors of the general partner of the
partnership, (iii) with respect to a limited liability company, the managing member or members or
any controlling committee or board of directors of such company or the sole member or the managing
member thereof, and (iv) with respect to any other Person, the board or committee of such Person
serving a similar function.
Borrower
has the meaning specified therefor in the preamble hereto.
Borrowing Base
means, with respect to each Tranche and at any time of determination,
an amount equal to one hundred percent (100%) of the present value (utilizing the Weighted Average
Interest Rate for the Tranche as the discount rate) of the aggregate of: (i) the aggregate
outstanding principal balance of the Eligible Insurance Premium Loans owned actually, beneficially
or through a participation by the Borrower, financed by, and pledged as Collateral for, such
Tranche, plus (ii) without duplication, the sum of all financed Origination Fees with respect to
such Eligible Insurance Premium Loans, plus (iii) the aggregate of the Collateral Value Policy and
the Contingent Collateral Value Policy premium reimbursement amounts payable, directly or
indirectly, by the Premium Finance Borrowers to the Borrower in respect of such Eligible Insurance
Premium Loans, plus (iv) the amount of interest that is reasonably expected to be due on the
scheduled maturity dates of such Eligible Insurance Premium Loans; provided that, the Borrowing
Base shall not at any time exceed 100% of the sum of the present value (utilizing the Weighted
Average Interest Rate for the Tranche as the
3
discount rate) of the sum of (i) the aggregate of the Covered Loan Amount of the Eligible
Insurance Premium Loans owned (actually, beneficially or through a participation) by the Borrower
and pledged as Collateral for the related Tranche hereunder and under the Loan Documents and in
which the Collateral Agent has for the benefit of the Agents and the Lenders a perfected first
priority Lien, plus (ii) the Aggregate Interest Amount of each such Eligible Insurance Premium Loan
at the maturity date of each such Eligible Insurance Premium Loan (with the present values
determined on a Tranche by Tranche basis and then added together to determine this limitation).
Borrowing Base Certificate
means a certificate signed by an Authorized Officer of
the Borrower and setting forth the calculation of the Borrowing Base in compliance with Section
7.01(a)(vi), substantially in the form of Exhibit G.
Borrowing Base Deficit
means, with respect to a Tranche and at any time of
determination, the extent to which (a) the aggregate outstanding principal balance of such Tranche
at such time (excluding the PIK Interest Amount), exceeds (b) an amount equal to the sum of the
Borrowing Base, plus amounts then on deposit in the Collection Account relating to the Eligible
Insurance Premium Loans financed by such Tranche and available for application to the payment of
principal in respect of such Tranche at such time, plus amounts then on deposit in the Reserve
Account and available for application of the payment of principal in respect of such Tranche at
such time.
Business Day
means any day other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required to close.
Capital Expenditures
means, with respect to any Person for any period, the sum of
(i) the aggregate of all expenditures by such Person and its Subsidiaries during such period that
in accordance with GAAP are or should be included in property, plant and equipment or in a
similar fixed asset account on its balance sheet, whether such expenditures are paid in cash or
financed and including all Capitalized Lease Obligations paid or payable during such period, and
(ii) to the extent not covered by clause (i) above, the aggregate of all expenditures by such
Person and its Subsidiaries during such period to acquire by purchase or otherwise the business or
fixed assets of, or the Equity Interests of, any other Person.
Capitalized Lease
means, with respect to any Person, any lease of real or personal
property by such Person as lessee which is (i) required under GAAP to be capitalized on the balance
sheet of such Person or (ii) a transaction of a type commonly known as a synthetic lease (i.e. a
lease transaction that is treated as an operating lease for accounting purposes but with respect to
which payments of rent are intended to be treated as payments of principal and interest on a loan
for Federal income tax purposes).
Capitalized Lease Obligations
means, with respect to any Person, obligations of such
Person and its Subsidiaries under Capitalized Leases, and, for purposes hereof, the amount of any
such obligation shall be the capitalized amount thereof determined in accordance with GAAP.
4
Cash Management Agreement
means a deposit account control agreement, in form and
substance reasonably satisfactory to the Agents, among the Borrower, the Collateral Agent and the
Cash Management Bank.
Cash Management Bank
has the meaning specified therefor in Section 8.01(a).
Change in Law
has the meaning specified therefor in Section 4.05(a).
Change of Control
means each occurrence of any of the following:
(a) Imperial or Affiliates of Imperial cease beneficially and of record to own, directly or
indirectly, 100% of the aggregate outstanding voting power of the Equity Interests of the
Originator and Borrower free and clear of any Lien;
(b) any sale, exchange, lease or transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of the Borrower or the Originator;
(c) during any period of two consecutive years, individuals who at the beginning of such
period constituted the Board of Directors of the Borrower or the Originator (together with any new
directors whose election by such Board of Directors or whose nomination for election by the
equityholders of the Borrower or the Originator was approved by a vote of at least a majority of
the directors of the Borrower or the Originator then still in office who were either directors at
the beginning of such period, or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of Directors of the Borrower
or the Originator;
(d) (i) any of the Borrower or the Originator consolidates or amalgamates with or merges into
another entity, or (ii) any entity consolidates or amalgamates with or merges into any of the
Borrower or the Originator in a transaction pursuant to which the outstanding voting Equity
Interests of such Person is reclassified or changed into or exchanged for cash, securities or other
property, other than any such transaction described in this clause (ii) in which either (A) in the
case of any such transaction involving the Originator, no person or group (within the meaning of
Section 13(d)(3) of the Exchange Act) other than the Person holding a majority of the aggregate
outstanding voting Equity Interests of the Originator prior to such transaction has, directly or
indirectly, acquired beneficial ownership of more than a majority of the aggregate outstanding
voting Equity Interests of such Person or (B) in the case of any such transaction involving the
Borrower, Imperial has, or Affiliates of Imperial have, beneficial ownership of 100% of the
aggregate voting power of all Equity Interests of the resulting, surviving or transferee entity; or
(e) either Jonathan Neuman or Antony Mitchell shall cease to be involved in the day to day
operations and management of the business of the Originator and/or the Borrower, and a successor
reasonably acceptable to the Collateral Agent and the Lenders is not appointed on terms reasonably
acceptable to the Collateral Agent and the Lenders within 30 days of such cessation of involvement.
5
Collateral
means all of the property and assets and all interests therein and
proceeds thereof now owned or hereafter acquired by any Person upon which a Lien is granted or
purported to be granted by such Person as security for all or any part of the Obligations.
Collateral Agent
has the meaning specified therefor in the preamble hereto.
Collateral Agent Advances
has the meaning specified therefor in Section 10.08(a).
Collateral Agency Agreement
means the Collateral Agency Agreement, dated as of the
date hereof, among the Originator, the Borrower, the Insurance Collateral Agent and the Collateral
Agent, as such agreement may be amended, supplemented or otherwise modified from time to time in
accordance with this Agreement.
Collateral Value Insurer
means (i) Lexington Insurance Company or (ii) any other
insurance company organized and licensed in the United States or any State, in each case whose
claims paying ability is rated at least A- or the equivalent rating by any Rating Agency and that
is acceptable to the Agents and the Required Lenders.
Collateral Value Policy
means that certain Lender Protection Insurance Policy No.
7113491, dated September 14, 2009, issued by the Collateral Value Insurer with respect to the
Insurance Premium Loans, in form and substance satisfactory to the Agents, as the same may be
amended or supplemented, from time to time in accordance with the terms thereof and this Agreement,
and all Coverage Certificates and other documents executed in connection therewith and related
thereto.
Collection Account
means that certain bank account, referred to as the Imperial PFC
Financing II, LLC Collection Account and pledged pursuant to the Security Agreement, maintained at
the Cash Management Bank, for the purpose of receiving Collections and which is subject to a Cash
Management Agreement, or with respect to which a security interest has otherwise been created and
perfected in a manner acceptable to the Collateral Agent.
Collections
means, with respect to any Insurance Premium Loan, all funds (a) that
are received by the Servicer, the Originator, the Borrower and the Insurance Collateral Agent or
any other Person on their behalf, from or on behalf of the related Premium Finance Borrower in
payment or repayment of any amounts owed to the Borrower (including, without limitation, principal,
finance charges, interest, prepayment fees, termination fees, prepayments by any Premium Finance
Borrower and all other amounts and charges) in respect of such Insurance Premium Loan or the
related Life Insurance Policy, (b) applied to such amounts owed by such Premium Finance Borrower
(including, without limitation, as a result of the sale or other disposition of, or receipt of
death benefits in connection with, the related Life Insurance Policy securing such Insurance
Premium Loan or other collateral or property of the Premium Finance Borrower or any other party
directly or indirectly liable for payment of such Insurance Premium Loan and available to be
applied thereon), (c) that are received by Servicer, the Originator, the Borrower, the Insurance
Collateral Agent, any of their Affiliates or any other Person on their behalf, from or on behalf of
the related Premium Finance Borrower in payment of amounts refunded by the Insurance Provider in
respect of premiums, (d) received by the Borrower from
6
the Collateral Value Insurer under the Collateral Value Policy or from the Contingent
Collateral Value Insurer under the Contingent Collateral Value Policy, and (e) any and all other
collections or proceeds received on or in respect of the sale, disposition, repayment, prepayment,
or otherwise in connection with any such Insurance Premium Loan and/or the related Life Insurance
Policy (including, without limitation, all principal or interest payments, sale or purchase price
payments, and all broker, agent and other fees received by or payable to the Servicer, the
Originator, the Borrower, the Insurance Collateral Agent or any of their Affiliates, in connection
with such sale, disposition or otherwise, together with all amounts, if any, payable in respect
thereof and maintained in or distributed from any escrow or similar account).
Commitment
means, each Lenders Term Loan Commitment.
Contingent Collateral Value Insurer
means (i) National Fire & Marine Insurance
Company (National Fire) or (ii) any other insurance company organized and licensed in the United
States or any state whose claims paying ability is rated at least AA- by any Rating Agency and
that is acceptable to the Agents and the Required Lenders.
Contingent Collateral Value Policy
means that certain Contingent Lender Protection
Insurance Policy No. 92SRD102526, dated September 14, 2009, issued by the Contingent Collateral
Value Insurer with respect to the Insurance Premium Loans, in form and substance satisfactory to
the Agents, as the same may be amended or supplemented, from time to time in accordance with the
terms thereof and this Agreement and all documents executed in connection therewith and related
thereto.
Contingent Obligation
means, with respect to any Person, any obligation of such
Person guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other
obligations (primary obligations) of any other Person (the primary obligor) in any manner,
whether directly or indirectly, including, without limitation, (i) the direct or indirect guaranty,
endorsement (other than for collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of the obligation of a primary
obligor, (ii) the obligation to make take-or-pay or similar payments, if required, regardless of
nonperformance by any other party or parties to an agreement, (iii) any obligation of such Person,
whether or not contingent, (A) to purchase any such primary obligation or any property constituting
direct or indirect security therefor, (B) to advance or supply funds (1) for the purchase or
payment of any such primary obligation or (2) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (C) to
purchase property, assets, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make payment of such
primary obligation or (D) otherwise to assure or hold harmless the holder of such primary
obligation against loss in respect thereof;
provided
,
however
, that the term
Contingent Obligation shall not include any product warranties extended in the ordinary course of
business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation with respect to which such Contingent
Obligation is made (or, if less, the maximum amount of such primary obligation for which such
Person may be liable pursuant to the terms of the instrument evidencing such Contingent Obligation)
or, if not stated or determinable, the maximum reasonably anticipated
7
liability with respect thereto (assuming such Person is required to perform thereunder), as
determined by such Person in good faith.
Contractual Obligation
means, as to any Person, any provision of any security issued
by such Person or of any agreement, instrument or other undertaking to which such Person is a party
or by which it or any of its property is bound.
Coverage Certificate
means, with respect to any Covered Loan, the certificate issued
by the Collateral Value Insurer with respect thereto certifying coverage for such Covered Loan
under the terms of the Collateral Value Policy.
Covered Loan
means each Insurance Premium Loan owned by the Borrower (actually or
beneficially through a participation) which is specified by the Collateral Value Insurer as being
covered under the Collateral Value Policy as evidenced by a Coverage Certificate.
Covered Loan Amount
means with respect to each Covered Loan, the amount set forth as
such on the related Coverage Certificate; provided that the Covered Loan Amount for any Covered
Loan shall not include any portion of the proceeds of the related Insurance Premium Loan used to
pay the insurance premium on the related Life Insurance Policy for any period after the sixtieth
(60th) day after the related Insurance Premium Loan Maturity Date.
Covered Policy
means, for each Covered Loan, each life insurance policy that is
identified in the applicable Coverage Certificate by its policy number, which life insurance policy
shall be issued by a life insurance carrier to the applicable Premium Finance Borrower as owner
thereof.
Covered Portion of an Insurance Premium Loan
means the Covered Loan Amount of a
Covered Loan.
Credit Event
has the meaning assigned thereto in the Contingent Collateral Value
Policy.
Credit Party
means the Borrower, any Individual Guarantor and the Equity Guarantor.
Default
means an event which, with the giving of notice or the lapse of time or
both, would constitute an Event of Default.
Disposition
means any transaction, or series of related transactions, pursuant to
which any Person or any of its Subsidiaries sells, assigns, transfers or otherwise disposes of any
property or assets (whether now owned or hereafter acquired) to any other Person, in each case,
whether or not the consideration therefor consists of cash, securities or other assets owned by the
acquiring Person.
Document Custodian
means Portfolio Financial Servicing Company, a Delaware
corporation, in its capacity as document custodian under the Back-Up Servicing Agreement, together
with its successors and permitted assigns in such capacity.
8
Dollar,
Dollars
and the symbol
$
each means lawful money of the
United States of America.
Effective Date
means the date on which all of the conditions precedent set forth in
Section 5.01 are satisfied or waived or the initial Loans are made.
Eligible Insurance Premium Loan
means an Insurance Premium Loan:
(a) that (i) accrues interest at a
per
annum
rate of not less than 11%, (ii)
that has an Origination Fee of (x) not less than 0% and (y) not greater than 10% (in either case,
multiplied by the maximum principal balance of the Insurance Premium Loan), (iii) permits the
pass-through, directly or indirectly, of the premiums payable to the Collateral Value Insurer and
the Contingent Collateral Value Insurer in respect of such Insurance Premium Loan (for avoidance of
doubt, an indirect pass-through which includes adding the premiums to the amount of the Origination
Fee is permissible) and (iv) if repaid or prepaid prior to the applicable maturity thereof and not
as a result of the death of the Underlying Life, requires, to the extent permitted by applicable
law, the payment of a yield maintenance fee designed to capture the yield spread between the
interest rate payable under the Insurance Premium Loan (absent repayment or prepayment) and the
interest rate receivable on U.S. government obligations having maturities closely matching the
original maturity date of the related Insurance Premium Loan;
provided
, that such yield
maintenance fee does not result in the Premium Finance Borrower paying more than it would have paid
in full satisfaction of such Insurance Premium Loan at the original maturity date of such Insurance
Premium Loan;
(b) for which the Underlying Life is a United States resident or has a United States social
security number and is not an Affiliate or employee of the Originator, the Borrower or any of their
Affiliates;
(c) the assignment of which (or any interest therein) to the Borrower or the Lenders does not
contravene or conflict with any law, rule or regulation or any contractual or other restriction,
limitation or encumbrance, and the sale or assignment of which to the Borrower or the Lenders does
not require the consent of the Premium Finance Borrower thereof;
(d) that is denominated and payable only in Dollars;
(e) that is in full force and effect and constitutes the legal, valid and binding obligation
of the Premium Finance Borrower of such Insurance Premium Loan enforceable against such Premium
Finance Borrower in accordance with its terms and is not subject to any dispute, offset,
counterclaim or defense whatsoever;
(f) that does not, and the origination thereof did not, contravene any laws, rules or
regulations applicable thereto (including, without limitation, laws, rules and regulations relating
to insurable interests, usury, truth in lending, fair credit billing, fair credit reporting, equal
credit opportunity, fair debt collection practices and privacy) and with respect to which, no party
thereto is in violation of any such law, rule or regulation if such violation would impair the
collectibility of such Insurance Premium Loan or any related security (including the applicable
Life Insurance Policy);
9
(g) as to which the Insurance Collateral Agents and/or the Collateral Agents (in each case,
for the benefit of the Agents and the Lenders) first priority security interest in such Insurance
Premium Loan and all the Originators and the Borrowers rights in the related security, has been
perfected under the applicable UCC and other applicable laws;
(h) as to which the Insurance Collateral Agent shall be in possession of the original of such
Insurance Premium Loan and all other items in the Loan Documentation Package with respect thereto;
(i) the present value of the principal balance of which plus anticipated finance charges
through maturity, including origination fees discounted back at 15% from the scheduled maturity
date to the Effective Date, totals at least $25,000, but is not in excess of $1,000,000;
(j) that has a term to maturity of no greater than 48 calendar months from the date of
origination thereof;
provided
,
however
, that no Insurance Premium Loan or portion
thereof financed or to be financed hereunder shall have a maturity date later than sixty (60) days
prior to the Final Maturity Date specified in clause (i) of the definition of Final Maturity Date
with respect to the related Tranche;
provided
that no Insurance Premium Loan or portion
thereof shall be an Eligible Insurance Premium Loan for purposes hereof unless it is a Covered Loan
or a Covered Portion of an Insurance Premium Loan, as the case may be, at all times until its
maturity date;
(k) as to which the issuing insurance company of the related Life Insurance Policy is
organized in the United States or any State and licensed by the United States or any State and
whose claims paying ability is rated at least A+ by Standard & Poors, at least A3 by Moodys, at
least A by AM Best or at least A+ by Fitch;
provided
, that such issuing insurance companys
claims paying ability must satisfy the applicable ratings set forth in this clause (k) of at least
two of the rating agencies set forth herein;
(l) for which the original documents in the Loan Document Package are held by or for the
benefit of the Document Custodian under or pursuant to the Back-Up Servicing Agreement, as
evidenced by a receipt or other documentary confirmation from the Document Custodian;
(m) as to which all documents within the related Loan Document Package are, by their terms,
governed by the laws of one or more Applicable Licensed States or Applicable Non-Licensed States
and the related Premium Finance Borrower is, in each case, duly organized and existing under the
laws of one or more Applicable Licensed States or Applicable Non-Licensed States;
(n) which is evidenced by a Note and Security Agreement, collateral assignment and other
documents in the related Loan Document Package substantially in the form of Exhibit F, or in such
other form consented to in writing by the Agents;
(o) for which the grantor, settlor, or beneficiary of the related Premium Finance Borrower, or
the life covered by the insurance, or the spouse or beneficiary of such life, must be (i) an
Internal Revenue Code Section 501(c)(3) corporation or similar business trust or partnership with
assets in excess of $5 million and that is organized in an Applicable Licensed
10
State or Applicable Non-Licensed State, (ii) a natural person or spouses whose net worth
exceeds $1,000,000, or (iii) (a) a natural person whose net income exceeded $200,000 in the last
two years or (b) spouses with joint income exceeding $300,000 in the last two years, in either
case, with a reasonable expectation of reaching that level in the current year;
(p) as to which the aggregate face amounts of Life Insurance Policies securing such loan shall
be denominated and payable in Dollars and not be less than $500,000 and shall not exceed $50
million;
(q) for which the Insurance Collateral Agent shall have received either (1) a collateral
assignment of the related Life Insurance Policy (which assignment shall be made as contemplated by
the Loan Document Package and shall be free and clear of all adverse claims) or (2) a pledge of the
beneficial interests in the Premium Finance Borrower, and the related Premium Finance Borrower
and/or Insurance Provider shall have been instructed, and shall have agreed, to make payments with
respect thereto to the Collection Account;
(r) as to which the applicable insured, on the date of the issuance of the Life Insurance
Policy with respect to such Insurance Premium Loan, has a minimum net worth of at least $1,000,000
and must be at least 65 years old on the maturity date of the related Insurance Premium Loan;
(s) the related Life Insurance Policy with respect to such Insurance Premium Loan is any form
or blend of coverage provided that a term policy has a term conversion privilege;
(t) as to which pursuant to the express terms of the related contract for life insurance there
is at least a 30-day grace period from the date any premiums are due and the date such Life
Insurance Policy (and right to the related death benefit) expires, during which such Life Insurance
Policy will remain in full force and effect;
(u) that is, and at all times continues to be, a Covered Loan or the Covered Portion of an
Insurance Premium Loan under the Collateral Value Policy (or, following a Credit Event, under the
Contingent Collateral Value Policy), the Coverage Certificate with respect thereto has been
delivered to the Collateral Agent and the applicable Free Look Period (as defined in the Collateral
Value Policy) has expired;
(v) as to which the owner of the related Life Insurance Policy with respect to such Insurance
Premium Loan, the related Premium Finance Borrower and each beneficiary of the trust created by the
Trust Agreement had an insurable interest in the life of the applicable insured (A) at the time
such Life Insurance Policy was issued and delivered by the issuing insurance company and became
effective and (B) on the date such Insurance Premium Loan was made;
(w) for which that the Borrower, the Originator or any of their Affiliates have not previously
(i) provided an insurance premium loan or similar product to the Premium Finance Borrower or (ii)
financed a Life Insurance Policy on the same Underlying Life, except pursuant to a series of
related transactions on the same Underlying Life, but excluding any Insurance Premium Loan that
refinances another Insurance Premium Loan;
provided
, that an
11
Insurance Premium Loan that refinances another Insurance Premium Loan to the Premium Finance
Borrower shall be permitted under this clause (w) so long as (A) such Insurance Premium Loan being
refinanced was never a Covered Loan and (B) the Insurance Premium Loan Maturity Date of such new
Insurance Premium Loan is not later than the minimum maturity date required by the Collateral Value
Insurer for such Insurance Premium Loan to qualify as a Covered Loan;
(x) that has been made to the Insurance Premium Borrower prior to the date of the applicable
Tranche of Term Loan to be made under this Agreement, the proceeds of which will be used to
purchase by participation or assignment such Insurance Premium Loan;
(y) for which the related Premium Finance Borrower must be a trust that has either (i) an
institutional trustee or financial institution acceptable to the Agents or (ii) solely in the case
of a Non-Corporate Trustee Insurance Premium Loan, a Non-Corporate Trustee, in each case, as
trustee or co-trustee under the related Trust Agreement and such Trust Agreement has not been
amended, supplemented or otherwise modified after the making of the related Insurance Premium Loan
without the consent of the Agents;
(z) financed hereunder the payment obligations with respect to which, for any reason, have
been not disputed or are otherwise enforceable and for which coverage in an amount no less than the
sum of the Covered Loan Amount and the Aggregate Interest Amount is provided by the Collateral
Value Insurer and the Contingent Collateral Value Insurer;
(aa) for which the premium with respect to the related Life Insurance Policy shall have (i)
been paid to the applicable Insurance Provider and or (ii) placed into escrow under the Trust
Agreement pursuant to escrow arrangements satisfactory to the Agents, in each case, in an amount
sufficient to result in such Life Insurance Policy remaining continuously in effect through the
sixtieth (60
th
) day after the Insurance Premium Loan Maturity Date; provided, however,
that this condition shall be deemed to be satisfied if the aggregate amount of premium paid to the
applicable Insurance Provider with respect to the related Life Insurance Policy prior to the lapse
of such Life Insurance Policy equals the Total Life Insurance Premium set forth in the applicable
Coverage Certificate;
(bb) that satisfies all terms and conditions set forth in the Master Participation Agreement
and/or an Insurance Premium Loan Sale and Assignment Agreement; and
(cc) for which the Agents shall have received a duly executed certificate from the related
Premium Finance Borrower certifying that such Premium Finance Borrower has (i) no knowledge of the
commission of a Prohibited Act (as defined in the Collateral Value Policy) in connection with such
Insurance Premium Loan and (ii) not participated in any Prohibited Act in connection with such
Insurance Premium Loan.
Eligibility Certification
means the written certification of the Originator and the
Borrower stating that a specific Insurance Premium Loan satisfies the elements of the definition of
Eligible Insurance Premium Loan set forth herein.
Employee Plan
means an employee benefit plan (other than a Multiemployer Plan)
covered by Title IV of ERISA and maintained (or that was maintained at any time during
12
the six (6) calendar years preceding the date of any borrowing hereunder) for employees of the
Borrower.
Equity Guarantor
means Imperial Premium Finance, LLC, a Florida limited liability
company, which owns 100% of the Equity Interests of the Borrower.
Equity Interest
means (a) with respect to any Person that is a corporation, any and
all shares, interests, participations or other equivalents (however designated and whether or not
voting) of corporate stock, and (b) with respect to any Person that is not a corporation, any and
all partnership, membership or other equity interests of such Person.
Equity Issuance
means either (a) the sale or issuance by the Borrower of any shares
of its Equity Interests or (b) the receipt by the Borrower of any cash capital contributions.
ERISA
means the Employee Retirement Income Security Act of 1974, as amended, and any
successor statute of similar import, and regulations thereunder, in each case, as in effect from
time to time. References to sections of ERISA shall be construed also to refer to any successor
sections.
Escrow Agent
means the Escrow Agent under the Indemnity Escrow Agreement, which
shall be mutually selected and agreed to between the Borrower and the Agents, each acting in good
faith. For greater clarity, the law firm of Graubard Miller shall be deemed a mutually acceptable
Escrow Agent.
Escrow Agreement
means an Escrow Agreement, by and among a financial institution
reasonably acceptable to the Administrative Agent, a Premium Finance Borrower and the Originator,
in form and substance satisfactory to the Administrative Agent, as the same may be amended, amended
and restated, supplemented or otherwise modified from time to time in accordance with this
Agreement.
Event of Default
means any of the events set forth in Section 9.01.
Exchange Act
means the Securities Exchange Act of 1934, as amended.
Executive Order No. 13224
means the Executive Order No. 13224 on Terrorist
Financing, effective September 24, 2001, as the same has been, or shall hereafter be, renewed,
extended, amended or replaced.
Federal Funds Rate
means, for any period, a fluctuating interest rate per annum
equal to, for each day during such period, the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the quotations for
such day on such transactions received by the Administrative Agent from three Federal funds brokers
of recognized standing selected by it.
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14% Sub-Tranche
means any Sub-Tranche for which the Lender or the Administrative
Agent has delivered a written notice to the Borrower on or prior to the date of funding of a
proposed Sub-Tranche designating the Tranche as a 14% Sub-Tranche.
15% Sub-Tranche
means any Sub-Tranche for which the Lender or the Administrative
Agent has delivered a written notice to the Borrower on or prior to the date of funding of a
proposed Sub-Tranche designating the Sub-Tranche as a 15% Sub-Tranche.
16% Sub-Tranche
means any Sub-Tranche for which the Lender or the Administrative
Agent has delivered a written notice to the Borrower on or prior to the date of funding of a
proposed Sub-Tranche designating the Sub-Tranche as a 16% Sub-Tranche.
Final Maturity Date
means with respect to any Tranche and the Term Loan, as
applicable, the earliest of (i) twenty-eight (28) months from the date of borrowing of such Tranche
by the Borrower hereunder, (ii) the date on which all Loans hereunder shall become due and payable
in accordance with the terms of this Agreement, and (iii) the payment in full of all Obligations
and the termination of all Commitments.
Financial Statements
means (i) the audited consolidated balance sheet of Imperial
and its Subsidiaries for the Fiscal Year ended December 31, 2008, and the related consolidated
statement of operations, shareholders equity and cash flows for the Fiscal Year then ended, and
(ii) the unaudited consolidated balance sheet of Imperial and its Subsidiaries for the three (3)
months ended March 31, 2009, and the related consolidated statement of operations, shareholders
equity and cash flows for the same periods.
Fiscal Year
means the fiscal year of the Borrower ending on December 31st of each
year.
GAAP
means generally accepted accounting principles in effect from time to time in
the United States, applied on a consistent basis.
Governing Documents
means, (a) with respect to any corporation, the certificate or
articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with
respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the
certificate or articles of formation or organization, and the operating agreement; (c) with respect
to any partnership, joint venture, trust or other form of business entity, the partnership, joint
venture agreement, declaration or other applicable agreement or documentation evidencing or
otherwise relating to its formation or organization; and (d) with respect to any of the entities
described above, any other agreement, instrument, filing or notice with respect thereto filed in
connection with its formation or organization with the applicable Governmental Authority in the
jurisdiction of its formation or organization.
Governmental Authority
means any nation or government, any Federal, state, city,
town, municipality, county, local or other political subdivision thereof or thereto and any
department, commission, board, bureau, instrumentality, agency or other entity exercising
executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.
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Guarantor Security Agreement
means a pledge and security agreement made by the
Equity Guarantor in favor of the Collateral Agent for the benefit of the Agents and the Lenders,
substantially in the form of Exhibit E.
Hedging Agreement
means any interest rate, foreign currency, commodity or equity
swap, collar, cap, floor or forward rate agreement, or other agreement or arrangement designed to
protect against fluctuations in interest rates or currency, commodity or equity values (including,
without limitation, any option with respect to any of the foregoing and any combination of the
foregoing agreements or arrangements), and any confirmation executed in connection with any such
agreement or arrangement.
Highest Lawful Rate
means, with respect to any Agent or any Lender, the maximum
non-usurious interest rate, if any, that at any time or from time to time may be contracted for,
taken, reserved, charged or received on the Obligations under laws applicable to such Agent or such
Lender which are currently in effect or, to the extent allowed by law, under such applicable laws
which may hereafter be in effect and which allow a higher maximum non-usurious interest rate than
applicable laws now allow.
Holdout Lender
has the meaning specified therefor in Section 12.02(b).
Imperial
means Imperial Holdings, LLC, a Florida limited liability company.
Imperial Limited Guaranty
means the Guaranty, dated as of the date hereof, made by
Imperial in favor of the Lenders substantially in the form of Exhibit L hereof.
Indebtedness
means, with respect to any Person, without duplication, (i) all
indebtedness of such Person for borrowed money; (ii) all obligations of such Person for the
deferred purchase price of property or services (other than trade payables or other accounts
payable incurred in the ordinary course of such Persons business and not outstanding for more than
90 days after the date such payable was created); (iii) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments or upon which interest payments are
customarily made; (iv) all reimbursement, payment or other obligations and liabilities of such
Person created or arising under any conditional sales or other title retention agreement with
respect to property used and/or acquired by such Person, even though the rights and remedies of the
lessor, seller and/or lender thereunder may be limited to repossession or sale of such property;
(v) all Capitalized Lease Obligations of such Person; (vi) all obligations and liabilities,
contingent or otherwise, of such Person, in respect of letters of credit, acceptances and similar
facilities; (vii) all obligations and liabilities, calculated on a basis satisfactory to the
Collateral Agent and in accordance with accepted practice, of such Person under Hedging Agreements;
(viii) all monetary obligations under any receivables factoring, receivable sales or similar
transactions and all monetary obligations under any synthetic lease, tax ownership/operating lease,
off-balance sheet financing or similar financing; (ix) all Contingent Obligations; and (x) all
obligations referred to in clauses (i) through (ix) of this definition of another Person secured by
(or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) a Lien upon property owned by such Person, even though such Person has not assumed or
become liable for the payment of such Indebtedness. The
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Indebtedness of any Person shall include the Indebtedness of any partnership of or joint
venture in which such Person is a general partner or a joint venturer.
Indemnified Matters
has the meaning specified therefor in Section 12.15.
Indemnitees
has the meaning specified therefor in Section 12.15(a).
Indemnity Escrow
has the meaning specified therefor in Section 2.10.
Indemnity Escrow Agreement
means the Indemnity Escrow Agreement, by and among the
Escrow Agent, the Agents and the Borrower, in form and substance satisfactory to the Agent, as the
same may be amended, amended and restated, supplemented or otherwise modified from time to time in
accordance with this Agreement.
Indenture
means that certain Indenture between the Lender as Issuer and the
Indenture Trustee, as it may be modified, amended or supplemented from time to time.
Indenture Trustee
means Wilmington Trust Company and its successors and assigns.
Independent Manager
has the meaning specified therefor in Section 7.02(xi).
Initial Servicer
means Imperial Premium Finance, LLC, a Florida limited liability
company.
Initial Servicing Agreement
means the Servicing Agreement, dated as of the date
hereof, by and among the Initial Servicer and the Borrower, in form and substance satisfactory to
the Agents, as the same may be amended, amended and restated, supplemented or otherwise modified
from time to time in accordance with this Agreement.
Individual Guarantor
means each of Jonathan Neuman and Antony Mitchell.
Individual Guaranty
means each guaranty, substantially in the form of Exhibit D,
made by an Individual Guarantor in favor of the Collateral Agent for the benefit of the Agents and
the Lenders.
Insolvency Proceeding
means any proceeding commenced by or against any Person under
any provision of the Bankruptcy Code or under any other bankruptcy or insolvency law, assignments
for the benefit of creditors, formal or informal moratoria, compositions, or extensions generally
with creditors, or proceedings seeking reorganization, arrangement, or other similar relief.
Insurance Collateral Agent
means Portfolio Financial Servicing Company, a Delaware
corporation, in its capacity as collateral agent under the Collateral Agency Agreement, together
with its successors and permitted assigns in such capacity.
Insurance Premium Loan
means each loan made by the Originator in connection with the
transactions contemplated by the Transaction Documents, evidenced by a
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Note and Security Agreement and the other documents in the Loan Document Package (or other
documentation in form and substance satisfactory to the Agent) and secured by one or more Life
Insurance Policies or all of the beneficial interests in an entity which owns the Life Insurance
Policies.
Insurance Premium Loan Maturity Date
means, with respect to an Insurance Premium
Loan, the date specified in the related Note and Security Agreement as the date on which all
outstanding interest and principal thereon is due and payable from the Premium Finance Borrower to
the Originator and/or the Borrower (or its assigns).
Insurance Premium Loan Sale and Assignment Agreement
means each sale and assignment
agreement, dated as of the date of a drawing of a Term Loan, by and among the Originator and the
Borrower, in form and substance satisfactory to the Agents, pursuant to which the Borrower
purchases Eligible Insurance Premium Loans originated by the Originator in the Applicable
Non-Licensed States, substantially in the form of Exhibit I.
Insurance Provider
means, with respect to a Life Insurance Policy, the insurance
company providing such policy.
Internal Revenue Code
means the Internal Revenue Code of 1986, as amended (or any
successor statute thereto) and the regulations thereunder.
Lease
means any lease of real property to which the Borrower is a party as lessor or
lessee.
Lender
means Cedar Lane Capital LLC and its permitted assigns pursuant to Section
12.07 hereof (each a Lender and collectively, the Lenders).
Lien
means any mortgage, deed of trust, pledge, lien (statutory or otherwise),
security interest, charge or other encumbrance or security or preferential arrangement of any
nature, including, without limitation, any conditional sale or title retention arrangement, any
Capitalized Lease and any assignment, deposit arrangement or financing lease intended as, or having
the effect of, security.
Life Insurance Policy
means with respect to any Insurance Premium Loan, the life
insurance policy or policies financed by the related Premium Finance Borrower under the related
Note and Security Agreement.
Loan
means the aggregate Term Loans made to the Borrower pursuant to ARTICLE II
hereof.
Loan Account
means an account maintained hereunder by the Administrative Agent on
its books of account at the Payment Office, and with respect to the Borrower, in which the Borrower
will be charged with all Term Loans made to, and all other Obligations incurred by, the Borrower.
Loan Document
means this Agreement, any Individual Guaranty, any Imperial Limited
Guaranty, any Guarantor Security Agreement, any Security Agreement, any UCC Filing
17
Authorization Letter, the Collateral Agency Agreement, the Collateral Value Policy, the
Contingent Collateral Value Policy, any Cash Management Agreement, any Servicing Agreement, any
Coverage Certificate and any other agreement, instrument, and other document executed and delivered
pursuant hereto or thereto or otherwise evidencing or securing any Loan or any other Obligation.
Loan Documentation Package
means with respect to each Insurance Premium Loan, each
document, in form and substance substantially similar to the forms attached hereto as Exhibit F, or
otherwise acceptable to the Agents.
Loan Schedule
means the schedule, maintained by the Servicer and attached hereto as
Schedule 1.01(D) (as such schedule will be updated from time to time as new Insurance Premium Loans
are financed by the Borrower in accordance with the Loan Documents), of Insurance Premium Loans as
to which participations and/or assignments are purchased by the Borrower from time to time and
pledged to the Collateral Agent for the benefit of the Agents and the Lenders;
provided
that the entry of each Insurance Premium Loan on Schedule 1.01(D) shall, among other things,
identify all Insurance Premium Loans by the name of the Premium Finance Borrower thereof, and as to
each Insurance Premium Loan, set forth the amount financed, the related loan number, the applicable
interest rate and the applicable Insurance Premium Maturity Date.
Local Counsel Opinion
means a legal opinion or memorandum from outside local counsel
to the Originator or any Affiliate of the Originator qualified to practice in each jurisdiction in
which the Originator intends to make Eligible Insurance Premium Loans addressed to the Originator
or such Affiliate, which explicitly states that Lenders, the Agents and Early Bird Capital, Inc.
may rely thereon, and dated, with respect to a Local Counsel Opinion related to the first Eligible
Insurance Premium Loan to be issued in a particular jurisdiction, no earlier than sixty days prior
to the date on which the Originator first makes an Eligible Insurance Premium Loan, and which shall
be updated not less than once each year, addressing each of the questions set forth on Exhibit K
hereto pursuant to the laws, rules and regulations of such jurisdiction as in effect as of the date
of such Local Counsel Opinion.
Master Participation Agreement
means the Master Participation Agreement, dated as of
the date hereof, by and among the Originator and the Borrower, pursuant to which the Borrower
purchases participations in the Eligible Insurance Premium Loans originated in the Applicable
Licensed States as the same may be amended, amended and restated, supplemented or otherwise
modified from time to time in accordance with this Agreement, substantially in the form of Exhibit
J.
Material Adverse Effect
means a material adverse effect on any of (i) the
operations, business, assets, properties, condition (financial or otherwise) or prospects of the
any Subject Imperial Affiliate, (ii) the ability of any Subject Imperial Affiliate to perform any
of its obligations under any Loan Document or any Transaction Document to which it is a party,
(iii) the legality, validity or enforceability of this Agreement, any other Loan Document or any
Transaction Document (excluding any Transaction Documents evidencing Insurance Premium Loans not
exceeding more than 2% of the aggregate Maturity Principal Balance of all Eligible Insurance
Premium Loans of the Borrower), (iv) the rights and remedies of any Agent or any
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Lender under any Loan Document or any Transaction Document of which any of the Subject
Imperial Affiliates or any of their Affiliates is a party (excluding any Transaction Documents
evidencing Insurance Premium Loans not exceeding more than 2% of the aggregate Maturity Principal
Balance of all Eligible Insurance Premium Loans of the Borrower), (v) the validity, perfection or
priority of (A) a Lien in favor of the Collateral Agent for the benefit of the Agents and the
Lenders on any of the Collateral or (B) the Borrowers ownership interest in the Insurance Premium
Loans or Participations or (vi) the validity, enforceability or collectability of the
Participations or Insurance Premium Loans and related Collateral (including the applicable Life
Insurance Policies) (excluding any Transaction Documents evidencing Insurance Premium Loans not
exceeding more than 2% of the aggregate Maturity Principal Balance of all Eligible Insurance
Premium Loans of the Borrower).
Material Contract
means, with respect to any Person, (a) the Transaction Documents
and (b) all other contracts or agreements material to the business, operations, condition
(financial or otherwise), performance, prospects or properties of such Person.
Maturity Principal Balance
means with respect to any Insurance Premium Loan, at any
time of determination, the projected final principal balance of such Insurance Premium Loan on the
related maturity date therefore,
plus
all accrued interest and fees thereon.
Maximum Tranche Amount
means, at any time of determination and with respect to each
Tranche of a Term Loan on any date of delivery of a Notice of Borrowing, an amount not to exceed an
amount equal to one hundred percent (100%) of the present value of the sum of: (i) the aggregate
outstanding principal balance of each Eligible Insurance Premium Loan to be financed hereunder by
such requested Tranche, plus (ii) the Origination Fees with respect to each such Eligible Insurance
Premium Loan, plus (iii) the Collateral Value Policy and the Contingent Collateral Value Policy
premium reimbursement amounts payable, directly or indirectly, by the Premium Finance Borrower to
the Originator in respect of each such Eligible Insurance Premium Loan, plus (iv) the amount of
interest that is reasonably expected to be due on the scheduled maturity date of such Eligible
Insurance Premium Loan to be financed hereunder by such requested Tranche;
provided
however
, that the Maximum Tranche Amount with respect to such Eligible Insurance Premium
Loans shall at no time exceed one hundred percent (100%) of the present value of the sum of (i) the
Covered Loan Amount with respect to such Eligible Insurance Premium Loans to be financed by such
Tranche, and (ii) the Aggregate Interest Amounts of such Eligible Insurance Premium Loans at the
maturity date of such Eligible Insurance Premium Loans. For purposes of determining present value,
the Weighted Average Interest Rate for a Tranche shall be used as the discount rate.
Moodys
means Moodys Investors Service, Inc. and any successor thereto.
Multiemployer Plan
means a multiemployer plan as defined in Section 4001(a)(3) of
ERISA to which the Borrower has contributed to, or has been obligated to contribute, at any time
during the preceding six (6) years.
New Lending Office
has the meaning specified therefor in Section 2.08(d).
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Non-Corporate Trustee
means a law firm acceptable to the Agents that is licensed to
practice in an Applicable Non-Licensed State or an Applicable Licensed State that serves as the
trustee or co-trustee under a Trust Agreement; provided that at no time shall any Non-Corporate
Trustee act as trustee or co-trustee with respect to Eligible Insurance Premium Loans representing
in excess of $5,000,000 of Covered Loan Amount.
Non-Corporate Trustee Insurance Premium Loan
means an Eligible Insurance Premium
Loan (i) for which the related Premium Finance Borrower is a trust that has a Non-Corporate Trustee
as trustee or co-trustee under the related Trust Agreement, and (ii) is set forth on Schedule
1.01(E) (as such schedule may be revised from time to time in accordance with the provisions of
this Agreement).
Non-U.S. Lender
has the meaning specified therefor in Section 2.08(d).
Notice of Borrowing
has the meaning specified therefor in Section 2.02(a).
Note and Security Agreement
means, with respect to each Insurance Premium Loan, a
note and security agreement or similar agreement (however defined) between the Originator and the
Premium Finance Borrower evidencing the indebtedness of the Premium Finance Borrower to the
Originator.
Obligations
means all present and future indebtedness, obligations, and liabilities
of the Borrower to the Agents and the Lenders arising under or in connection with this Agreement or
any other Loan Document, whether or not the right of payment in respect of such claim is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal,
equitable, secured, unsecured, and whether or not such claim is discharged, stayed or otherwise
affected by any proceeding referred to in Section 9.01. Without limiting the generality of the
foregoing, the Obligations of the Borrower under the Loan Documents include (a) the obligation
(irrespective of whether a claim therefor is allowed in an Insolvency Proceeding) to pay principal,
interest (including the PIK Interest Amount), charges, expenses, fees, the Applicable Prepayment
Premium, attorneys fees and disbursements, indemnities and other amounts payable by such Person
under the Loan Documents, and (b) the obligation of such Person to reimburse any amount in respect
of any of the foregoing that any Agent or any Lender (in its sole discretion) may elect to pay or
advance on behalf of such Person.
Operating Account
means that certain deposit account established by the Borrower at
the Cash Management Bank and subject to a Cash Management Agreement.
Origination Fees
means those amounts payable by a Premium Finance Borrower to the
Originator in respect of origination, upfront or similar fees.
Originator
means Imperial Premium Finance, LLC, a Florida limited liability company,
as an originator and seller under the Master Participation Agreement and/or the Insurance Premium
Loan Sale and Assignment Agreements.
Other Taxes
has the meaning specified therefor in Section 2.08(b). Participant
Register has the meaning specified therefor in Section 12.07(g).
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Participations
has the meaning set forth in the Recitals hereto.
Payment Office
means the Administrative Agents office located at 275 Madison
Avenue, 27th Floor, New York, New York 10016, or at such other office or offices of the
Administrative Agent as may be designated in writing from time to time by the Administrative Agent
to the Collateral Agent and the Borrower.
Permitted Indebtedness
means:
(a) any Indebtedness owing to any Agent or any Lender under this Agreement and the other Loan
Documents; and
(b) Subordinated Indebtedness, provided that such Subordinated Indebtedness has a maturity
date after the latest of the maturity dates of the Term Loans.
Permitted Liens
means:
(a) Liens securing the Obligations; and
(b) Liens for taxes, assessments and governmental charges the payment of which is not required
under Section 7.01(c).
Person
means an individual, corporation, limited liability company, partnership,
association, joint-stock company, trust, unincorporated organization, joint venture or other
enterprise or entity or Governmental Authority.
PIK Interest Amount
means, as of any date of determination, the amount of all
interest accrued with respect to the Loan that has been paid in kind by being added to the balance
thereof in accordance with Section 2.04(a).
Plan
means any Employee Plan or Multiemployer Plan.
Premium Finance Borrower
means an insurance trust, with either (i) an institutional
trustee or financial institution acceptable to the Agents or (ii) a Non-Corporate Trustee, as a
trustee or co-trustee, obligated to make payments with respect to an Insurance Premium Loan.
Pro Rata Share
means:
(a) in the event there is more than one Lender hereunder, with respect to a Lenders
obligation to make a Term Loan and receive payments of interest, fees, and principal with respect
thereto, the percentage obtained by dividing (i) the sum of such Lenders Term Loan Commitment and
the unpaid principal amount of such Lenders portion of the Loan, by (ii) the sum of the Total Term
Loan Commitment and the aggregate unpaid principal amount of the Loan, provided that if the Total
Term Loan Commitment has been reduced to zero, the numerator shall be the aggregate unpaid
principal amount of such Lenders portion of the Loan and the denominator shall be the aggregate
unpaid principal amount of the Loan, and
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(b) in the event there is more than one Lender hereunder, with respect to all other matters
(including, without limitation, the indemnification obligations arising under Section 10.05), the
percentage obtained by dividing (i) the sum of such Lenders Term Loan Commitment and the unpaid
principal amount of such Lenders portion of the Loan, by (ii) the sum of the Total Term Loan
Commitment and the aggregate unpaid principal amount of the Loan, provided that if the Total Term
Loan Commitment has been reduced to zero, the numerator shall be the aggregate unpaid principal
amount of such Lenders portion of the Loan and the denominator shall be the aggregate unpaid
principal amount of the Loan.
Rating Agency
and
Rating Agencies
have the meanings specified therefor in
Section 2.07.
Register
has the meaning specified therefor in Section 12.07(d).
Registered Loans
has the meaning specified therefor in Section 12.07(d).
Regulation T
,
Regulation U
and
Regulation X
mean, respectively,
Regulations T, U and X of the Board or any successor, as the same may be amended or supplemented
from time to time.
Related Fund
means, with respect to any Person, an Affiliate of such Person, or a
fund or account managed by such Person or an Affiliate of such Person.
Replacement Funds
has the meaning specified therefor in Section 2.05(d).
Replacement Lender
has the meaning specified therefor in Section 12.02(b).
Required Lenders
means, in the event there is at such time more than one Lender
hereunder, Lenders whose Pro Rata Shares (calculated in accordance with clause (b) of the
definition thereof) aggregate at least 50.1%.
Requirements of Law
means, with respect to any Person, collectively, the common law
and all federal, state, provincial, local, foreign, multinational or international laws, statutes,
codes, treaties, standards, rules and regulations, guidelines, ordinances, orders, judgments,
writs, injunctions, decrees (including administrative or judicial precedents or authorities) and
the interpretation or administration thereof by, and other determinations, directives, requirements
or requests of, any Governmental Authority, in each case that are applicable to or binding upon
such Person or any of its property or to which such Person or any of its property is subject.
Reserve Account
means that certain deposit account established by the Borrower at
the Cash Management Bank and subject to a Cash Management Agreement.
Reserve Payment
has the meaning specified therefor in Section 2.05(d).
Salvage Collections
means, with respect to any Insurance Premium Loan, and solely to
the extent that the Collateral Value Insurer or the Contingent Collateral Value Insurer has paid a
claim to the Borrower with respect to such Insurance Premium Loan pursuant to the
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Collateral Value Policy or the Contingent Collateral Value Policy, all Collections received
from any Person with respect to such Insurance Premium Loan (or the related collateral) after the
Collateral Value Insurers or the Contingent Collateral Value Insurers payment in an amount equal
to the lesser of (a) such Collections with respect to such Insurance Premium Loan and (b) the
amount paid by the Collateral Value Insurer or the Contingent Collateral Value Insurer to the
Borrower in respect thereof under the Collateral Value Policy or the Contingent Collateral Value
Policy, plus the Collateral Value Insurers or the Contingent Collateral Value Insurers ratable
share (based on the amount of such expenses) of enforcement and subrogation-related expenses (to
the extent such amounts may be recovered under the applicable law) incurred by the Collateral Value
Insurer or the Contingent Collateral Value Insurer and interest on such payments and expenses at
the Loan Rate (as defined in the Collateral Value Policy) determined in accordance with the terms
for calculating such rate specified in the Collateral Value Policy from and including the date of
the Collateral Value Insurers or the Contingent Collateral Value Insurers payment to but
excluding the date on which such amounts are paid to the Collateral Value Insurer or the Contingent
Collateral Value Insurer.
SEC
means the Securities and Exchange Commission or any other similar or successor
agency of the Federal government administering the Securities Act.
Securities Act
means the Securities Act of 1933, as amended, or any similar Federal
statute, and the rules and regulations of the SEC thereunder, all as the same shall be in effect
from time to time.
Securitization
has the meaning specified therefor in Section 2.07.
Security Agreement
means a Pledge and Security Agreement made by the Borrower in
favor of the Collateral Agent for the benefit of the Agents and the Lenders, substantially in the
form of Exhibit A, securing the Obligations and delivered to the Collateral Agent.
Servicer
means (i) prior to the termination of the Initial Servicing Agreement, the
Initial Servicer and (ii) anytime thereafter, the Back-Up Servicer or any other servicer approved
in writing by the Agents.
Servicer Termination Event
means the occurrence of any of the following events: (i)
any report which the Servicer delivers under the terms of any Transaction Document shall be
incorrect in any material respect, (ii) the Servicer assigns to any other Person any of its duties
or obligations other than as otherwise permitted by the Servicing Agreement, (iii) the occurrence
of an Event of Default, or (iv) the occurrence of any event which, in the reasonable business
judgment of the Agents, could reasonably be expected to be adverse to the interests of the
Originator, the Borrower, the Agents and/or the Lender.
Servicing Agreement
means (i) prior to the termination of the Initial Servicing
Agreement, the Initial Servicing Agreement and (ii) anytime thereafter, the Back-Up Servicing
Agreement or any other servicing agreement in form and substance satisfactory to the Agents.
Solvent
means, with respect to any Person on a particular date, that on such date
(i) the fair value of the property of such Person is not less than the total amount of the
liabilities
23
of such Person, (ii) the present fair salable value of the assets of such Person is not less
than the amount that will be required to pay the probable liability of such Person on its existing
debts as they become absolute and matured, (iii) such Person is able to realize upon its assets and
pay its debts and other liabilities, contingent obligations and other commitments as they mature in
the normal course of business, (iv) such Person does not intend to, and does not believe that it
will, incur debts or liabilities beyond such Persons ability to pay as such debts and liabilities
mature, and (v) such Person is not engaged in business or a transaction, and is not about to engage
in business or a transaction, for which such Persons property would constitute unreasonably small
capital.
Standard & Poors
means Standard & Poors Ratings Services, a division of The
McGraw-Hill Companies, Inc. and any successor thereto.
Subject Imperial Affiliates
means the Borrower, Imperial, the Originator Imperial
Life and Annuity Services, LLC and Imperial Finance & Trading, LLC.
Subordinated Indebtedness
means Indebtedness of the Borrower the terms of which are
satisfactory to the Collateral Agent and the Required Lenders and which has been expressly
subordinated in right of payment to all Indebtedness of the Borrower under the Loan Documents (i)
by the execution and delivery of a subordination agreement, in form and substance satisfactory to
the Collateral Agent and the Required Lenders, or (ii) otherwise on terms and conditions
(including, without limitation, subordination provisions, payment terms, interest rates, covenants,
remedies, defaults and other material terms) satisfactory to the Collateral Agent and the Required
Lenders.
Subsidiary
means, with respect to any Person at any date, any corporation, limited
or general partnership, limited liability company, trust, estate, association, joint venture or
other business entity (i) the accounts of which would be consolidated with those of such Person in
such Persons consolidated financial statements if such financial statements were prepared in
accordance with GAAP or (ii) of which more than 50% of (A) the outstanding Equity Interests having
(in the absence of contingencies) ordinary voting power to elect a majority of the Board of
Directors of such Person, (B) in the case of a partnership or limited liability company, the
interest in the capital or profits of such partnership or limited liability company or (C) in the
case of a trust, estate, association, joint venture or other entity, the beneficial interest in
such trust, estate, association or other entity business is, at the time of determination, owned or
controlled directly or indirectly through one or more intermediaries, by such Person.
Sub-Tranche
means, without duplication, the portion of any Tranche designated with a
specific Applicable Interest Rate.
Tax Distributions
has the meaning specified therefor in Section 7.02(h).
Taxes
has the meaning specified therefor in Section 2.08(a).
Term Loan
means a loan made by the Lender to the Borrower pursuant to Section 2.01.
24
Term Loan Commitment
means, subject to the provisions of Section 5.02(i) hereof, the
commitment of a Lender to make a Term Loan to the Borrower in the amount set forth in Schedule
1.01(A) hereto, as the same may be increased or reduced from time to time or terminated in
accordance with the terms of this Agreement.
Term Loan Commitment Termination Date
means the earliest to occur of (i) the date
the Total Term Loan Commitment is permanently reduced to zero pursuant to Section 2.01(b), (ii) the
date of the termination of the Total Term Loan Commitment pursuant to Section 9.01, (iii) the date
which is one year from the Effective Date and (iv) the date of any change in law that makes it
illegal or imposes adverse conditions on Premium Finance Loans as contemplated by the Transaction
Documents.
Total Life Insurance Premium
means, for any Covered Policy, the amount set forth as
such on the applicable Coverage Certificate.
Total Term Loan Commitment
means, subject to the provisions of Section 5.02(i)
hereof, the sum of the amounts of the Lenders (if there is more than one Lender at such time
hereunder) Term Loan Commitments, but which shall in no event exceed Fifteen Million Dollars
($15,000,000).
Tranche
means, without duplication, all or any portion of any Term Loan the proceeds
of which are used to purchase or finance one or more specific Insurance Premium Loans (actually or
beneficially through a participation) in respect of this Agreement.
Transaction Documents
means the Master Participation Agreement, each Insurance
Premium Loan Sale and Assignment Agreement, any Servicing Agreement, any Escrow Agreement, the
Trust Agreements and such other instruments, certificates, agreements, reports and documents to be
executed and delivered under and or in connection with the Insurance Premium Loans acquired or to
be acquired by the Borrower (actually or beneficially through a participation) with proceeds from
the Loan (including each applicable Loan Document Package), as any of the foregoing may be amended,
amended and restate, supplemented or otherwise modified from time to time in accordance with this
Agreement.
Transferee
has the meaning specified therefor in Section 2.08(a).
Trust Agreement
means an irrevocable life insurance trust agreement entered into by
the Underlying Life and the Premium Finance Borrower, in form and substance satisfactory to the
Agents, pursuant to which either (i) an institutional trustee or financial institution acceptable
to the Agents or (ii) a Non-Corporate Trustee acts as the trustee or a co-trustee thereunder.
UCC Filing Authorization Letter
means a letter duly executed by each Credit Party
authorizing the Collateral Agent to file appropriate financing statements on Form UCC-1 without the
signature of such Credit Party in such office or offices as may be necessary or, in the opinion of
the Collateral Agent, desirable to perfect the security interests purported to be created by each
Security Agreement and each Guarantor Security Agreement.
25
Uncovered Portion of an Insurance Premium Loan
means that portion of a Covered
Loan in excess of the Covered Loan Amount.
Underlying Life
with respect to any Life Insurance Policy means the Person or
Persons whose life or lives are insured by such Life Insurance Policy.
Uniform Commercial Code
has the meaning specified therefor in Section 1.03.
USA PATRIOT Act
has the meaning specified therefor in Section 12.21.
Weighted Average Interest Rate
means the weighted average interest rate for a
Tranche based on the size of, and the Applicable Interest Rates for, the Sub-Tranches comprising
the Tranche.
Section 1.02
Terms Generally
. The definitions of terms herein shall apply equally to the singular
and plural forms of the terms defined. Whenever the context may require, any pronoun shall include
the corresponding masculine, feminine and neuter forms. The words include, includes and
including shall be deemed to be followed by the phrase without limitation. The word will
shall be construed to have the same meaning and effect as the word shall. Unless the context
requires otherwise, (a) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument or other document as
from time to time amended, supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference herein to any Person
shall be construed to include such Persons successors and assigns, (c) the words herein,
hereof and hereunder, and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (d) all references herein to
Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of,
and Exhibits and Schedules to, this Agreement and (e) the words asset and property shall be
construed to have the same meaning and effect and to refer to any right or interest in or to assets
and properties of any kind whatsoever, whether real, personal or mixed and whether tangible or
intangible. References in this Agreement to determination by any Agent include good faith
estimates by such Agent (in the case of quantitative determinations) and good faith beliefs by such
Agent (in the case of qualitative determinations).
Section 1.03
Accounting and Other Terms
. Unless otherwise expressly provided herein, each
accounting term used herein shall have the meaning given it under GAAP applied on a basis
consistent with those used in preparing the Financial Statements. All terms used in this Agreement
which are defined in Article 8 or Article 9 of the Uniform Commercial Code as in effect from time
to time in the State of New York (the
Uniform Commercial Code
) and which are not
otherwise defined herein shall have the same meanings herein as set forth therein, provided that
terms used herein which are defined in the Uniform Commercial Code as in effect in the State of New
York on the date hereof shall continue to have the same meaning notwithstanding any replacement or
amendment of such statute except as any Agent may otherwise determine.
26
Section 1.04
Time References
. Unless otherwise indicated herein, all references to time of day
refer to Eastern Standard Time or Eastern daylight saving time, as in effect in New York City on
such day. For purposes of the computation of a period of time from a specified date to a later
specified date, the word from means from and including and the words to and until each
means to but excluding;
provided
,
however
, that with respect to a computation of
fees or interest payable to any Agent or any Lender, such period shall in any event consist of at
least one full day.
ARTICLE II
THE LOANS
Section 2.01
Commitments
. (a) Subject to the terms and conditions and relying upon the
representations and warranties herein set forth, the Lender agrees to make one or more Term Loans
to the Borrower (i) on the Effective Date and (ii) prior to the Term Loan Commitment Termination
Date, proceeds of which shall be used by the Borrower in accordance with the provisions of Section
6.01(r) hereof, in an aggregate principal amount not to exceed the amount of the Lenders Total
Term Loan Commitment.
(b) Notwithstanding the foregoing, (i) the aggregate principal amount of any Tranche made on
any borrowing date shall not be less than Two Hundred and Fifty Thousand Dollars ($250,000), and
shall not exceed the lesser of the undrawn Total Term Loan Commitment at such time and the Maximum
Tranche Amount with respect to any applicable Insurance Premium Loans being acquired by the
Borrower with the proceeds of such Tranche, and (ii) the aggregate principal amount of all Tranches
made at any time pursuant to this Agreement shall not exceed the lesser of (x) the Total Term Loan
Commitment then in effect and (y) an amount which will not result in any Borrowing Base Deficit
existing at such time,
provided
,
that
, for purposes of this Section 2.01(b), the
related PIK Interest Amount shall not be included in the principal amount of such Tranche. Any
amounts paid directly or indirectly by the Agents and the Lender to the Collateral Value Insurer or
the Contingent Collateral Value Insurer for coverage under the Collateral Value Policy or the
Contingent Collateral Value Policy shall be deemed to be, and shall for all purposes of this
Agreement be treated as, Term Loans made to the Borrower hereunder. Any principal amount of the
Loan which is repaid or prepaid may not be reborrowed. The Total Term Loan Commitment shall be
permanently reduced immediately and without further action on the date of funding of each Term Loan
in an amount equal to such funded Term Loan. In the event there is more than one Lender hereunder,
each Lenders Term Loan Commitment shall be permanently reduced immediately and without further
action on the date of funding of each Term Loan in an amount equal to such Lenders Pro Rata Share
of such funded Term Loan. Each Lenders Term Loan Commitment shall terminate immediately and
without further action on the Term Loan Commitment Termination Date after giving effect to the
funding of such Lenders Term Loan Commitment, if any, on such date.
Section 2.02
Making the Loans
. (a) The Borrower shall give the Administrative Agent prior
telephonic notice (immediately confirmed in writing, in substantially the form of Exhibit B hereto
(a
Notice of Borrowing
)), not later than 12:00 noon (New York City time) on the date
which is three (3) Business Days prior to the date of the proposed Loan (or such shorter period as
the Administrative Agent is willing to accommodate from time to time, but in no event
27
later than 12:00 noon (New York City time) on the borrowing date of the proposed Loan). Such
Notice of Borrowing shall (i) be irrevocable, (ii) specify (A) the principal amount of the proposed
Loan, (B) the use of the proceeds of such proposed Loan, and (C) the proposed borrowing date, which
must be a Business Day and (iii) be delivered to the Administrative Agent together with the
documents required by Section 5.02(e). The Administrative Agent and the Lender may act without
liability upon the basis of written, telecopied or telephonic notice believed by the Administrative
Agent in good faith to be from the Borrower (or from any Authorized Officer thereof designated in
writing purportedly from the Borrower to the Administrative Agent). The Borrower hereby waives the
right to dispute the Administrative Agents record of the terms of any such telephonic Notice of
Borrowing. The Administrative Agent and the Lender shall be entitled to rely conclusively on any
Authorized Officers authority to request a Loan on behalf of the Borrower until the Administrative
Agent receives written notice to the contrary. The Administrative Agent and the Lender shall have
no duty to verify the authenticity of the signature appearing on any written Notice of Borrowing.
(b) Each Notice of Borrowing pursuant to this Section 2.02 shall be irrevocable and the
Borrower shall be bound to make a borrowing in accordance therewith.
(c) Except as otherwise provided in this subsection 2.02(c), to the extent there is more than
one Lender hereunder, all Loans under this Agreement shall be made by the Lenders simultaneously
and proportionately to their Pro Rata Shares of the Total Term Loan Commitment, it being understood
that no Lender shall be responsible for any default by any other Lender in that other Lenders
obligations to make a Loan requested hereunder, nor shall the Commitment of any Lender be increased
or decreased as a result of the default by any other Lender in that other Lenders obligation to
make a Loan requested hereunder, and each Lender shall be obligated to make the Loans required to
be made by it by the terms of this Agreement regardless of the failure by any other Lender.
(d) All Loans shall be made in same day available funds and sent by wire transfer to the
Operating Account.
Section
2.03
Repayment of Loans; Evidence of Debt
. (a) The outstanding principal of the Loan
(including the PIK Interest Amount payable with respect to each Tranche) shall be due and payable
on the Final Maturity Date.
(b) Each Lender (in the event there is more than one Lender hereunder) shall maintain in
accordance with its usual practice an account or accounts evidencing the Indebtedness of the
Borrower to such Lender resulting from the Loan made by such Lender, including the amounts of
principal and interest payable and paid to such Lender from time to time hereunder.
(c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount
of the Loan made hereunder, (ii) the amount of any principal or interest due and payable or to
become due and payable from the Borrower to the Lender hereunder (including PIK Interest Amounts),
(iii) the aggregate amount of each Tranche and the amount of, and the Applicable Interest Rate for,
each Sub-Tranche making up the Tranche and (iv) the amount of
28
any sum received by the Administrative Agent hereunder for the account of the Lender (and, in
the event there is more than one Lender hereunder, each Lenders share thereof).
(d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this
Section shall be
prima
facie
evidence of the existence and amounts of the
obligations recorded therein;
provided
that the failure of the Lender or the Administrative
Agent to maintain such accounts or any error therein shall not in any manner affect the obligation
of the Borrower to repay the Loan in accordance with the terms of this Agreement.
(e) Any Lender may request that the Loan made by it be evidenced by a promissory note. In such
event, the Borrower shall execute and deliver to such Lender a promissory note payable to the order
of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) in a
form furnished by the Collateral Agent and reasonably acceptable to the Borrower. Thereafter, the
Loan evidenced by such promissory note and interest thereon shall at all times (including after
assignment pursuant to Section 12.07) be represented by one or more promissory notes in such form
payable to the order of the payee named therein (or, if such promissory note is a registered note,
to such payee and its registered assigns).
(f) Prior to or contemporaneously with the funding of each Tranche, the Lender or the
Administrative Agent shall send written notice to the Borrower designating the amounts, Applicable
Interest Rate and designation of each Sub-Tranche making up the Tranche. The Lender and the
Administrative Agent agree that they shall base such designation solely upon its cost of funds,
with the intent and understanding that the interest rate for each Sub-Tranche shall match the
Lenders cost of funds rate. In the event that the Lenders cost of funds for the monies funded or
to be funded in the relevant advance is at more than one of the Applicable Interest Rates, the
parties hereto agree to split the Tranche into two or more Sub-Tranches, as appropriate, so that
each Sub-Tranche bears a 14%, 15% or 16% rate of interest and the Tranche bears a rate of interest
equal to the Weighted Average Interest Rate based on the amounts and the Applicable Interest Rates
for the Sub-Tranches. Unless the Lender or the Administrative Agent shall send written notice to
the Borrower on or before the date of funding a Tranche that it is designating the types of
Sub-Tranches comprising the Tranche, such Tranche shall be deemed to have been funded entirely with
a 14% Sub-Tranche. The parties agree to cooperate in setting these rates and administering Notices
of Borrowings to take into account these varying rates and the mechanics required to administer
them, including permitting amendments to Notices of Borrowings to accommodate the designation of
rates different than anticipated.
Section 2.04
Interest
. (a) Each Tranche of a Term Loan shall bear interest on the principal amount
thereof from time to time outstanding, from the date of such Tranche until such principal amount
becomes due, at a rate per annum equal to the Weighted Average Interest Rate for the Tranche based
on the Applicable Interest Rates for the Sub-Tranches;
provided
,
that
, subject to
paragraph (c) of this Section 2.04, all of such interest (the
PIK Interest Amount
) shall
be paid-in-kind by being added to the outstanding principal balance of such Tranche. Any interest
shall be capitalized on each annual anniversary date of the Tranche and added to the then
outstanding principal amount of such Tranche and, thereafter, shall bear interest as provided
hereunder as if it had originally been part of the outstanding principal of such Tranche.
29
(b)
Default Interest
. To the extent permitted by law and notwithstanding anything to
the contrary in this Section, upon the occurrence and during the continuance of an Event of
Default, the principal of, and all accrued and unpaid interest on, all Term Loans, fees,
indemnities or any other Obligations of the Borrower under this Agreement and the other Loan
Documents, shall bear interest, from the date such Event of Default occurred until the date such
Event of Default is cured or waived in writing in accordance herewith, at a rate per annum equal at
all times to 18%.
(c)
Interest Payment
. Notwithstanding paragraph (a) of this Section 2.04, interest on
each Term Loan shall be payable, without duplication:
(i) on each date Collections are received if sufficient Collections or other funds are
available hereunder for the payment of interest pursuant to Section 2.05(d); and
(ii) on the Final Maturity Date;
provided
, that interest payable pursuant to paragraph (b) of this Section 2.04 shall be
payable on demand. The Borrower hereby authorizes the Administrative Agent to, and the
Administrative Agent may, from time to time, charge the Loan Account pursuant to Section 4.02 with
the amount of any interest payment due hereunder.
(d)
General
. All interest payable hereunder shall be computed on the basis of a year
of 360 days for the actual number of days, including the first day but excluding the last day
elapsed and shall compound annually.
(e) It is intended by the parties hereto that all interest paid pursuant to this Agreement
shall constitute portfolio interest within the meaning of Sections 871(h) and 881(c) of the
Internal Revenue Code of 1986, as amended (the
Code
), and the Treasury Regulations
promulgated thereunder.
Section 2.05
Reduction of Commitment; Prepayment of Loans.
(a)
Reduction of Commitments
. The Total Term Loan Commitment shall terminate at 5:00
p.m. (New York City time) on the Term Loan Commitment Termination Date. In addition, the Total Term
Loan Commitment (and the Term Loan Commitment of each Lender if there is more than one Lender
hereunder) shall be reduced in accordance with Section 2.01(b).
(b)
Reserved.
(c)
Mandatory Prepayment
. (i) On each date on which Collections are received by the
Originator, the Borrower, the Servicer or the Insurance Collateral Agent or any other Person on
their behalf in respect of any Insurance Premium Loan (or related Life Insurance Policy) acquired
by the Borrower (actually or beneficially through a participation) with proceeds from a Tranche or
the Collateral Value Policy or the Contingent Collateral Value Policy, Borrower shall repay the
principal amount and the interest then due and payable thereon of the
30
related Tranche of the Term Loan, to the extent of Collections available therefor in
accordance with Section 2.05(d) hereof.
(ii) If on any day a Borrowing Base Deficit exists, on such date Borrower shall make a
prepayment of the principal amount of the related Tranche in an amount equal to such Borrowing Base
Deficit.
(d)
Application of Payments
. On each day that Collections (other than Salvage
Collections, but including all payments made by the Collateral Value Insurer or the Contingent
Collateral Value Insurer to the Borrower under the Collateral Value Policy or the Contingent
Collateral Value Policy) are received by the Servicer, the Originator, the Borrower, or the
Insurance Collateral Agent or any other Person on their behalf in respect of any Insurance Premium
Loan (or related Life Insurance Policy) financed hereunder or the Collateral Value Policy or the
Contingent Collateral Value Policy, the Borrower shall (or shall cause such other Person to) on the
Business Day of such receipt, transfer such amounts to the Collection Account for distribution in
accordance with this Section 2.05(d). On each such date, as long as no Default or Event of Default
has occurred and is continuing, the Borrower shall distribute (from such amounts so deposited in
the Collection Account with respect thereto) such Collections with respect to the Covered Portion
of an Insurance Premium Loan (other than Salvage Collections) in the following order of priority:
(i)
first
, to pay interest then due and payable in respect of the related Tranche
until paid in full,
(ii)
second
, to pay principal of the related Tranche until paid in full,
(iii)
third
, to replace in the Reserve Account any funds used for Reserve Payments on
the related Tranche (Replacement Funds), to the extent the funds used for such Reserve Payments
were originally deposited less than eighteen (18) months earlier than the date such Collections are
being distributed (it being understood that the date(s) of deposit of such Replacement Funds shall
be deemed to be the original date(s) of deposit of the funds used for such Reserve Payments), and
(iv)
fourth
, any remaining Collections with respect to the Covered Portion of an
Insurance Premium Loan on such date shall be paid to the Borrower, for its own account.
On each such date, after giving effect to the application of Collections with respect to the
Covered Portion of an Insurance Premium Loan set forth above, as long as no Default or Event of
Default has occurred and is continuing, the Borrower shall transfer (from such amounts so deposited
in the Collection Account with respect thereto) such Collections with respect to the Uncovered
Portion of an Insurance Premium Loan (other than Salvage Collections) into the Reserve Account.
Amounts placed in a Reserve Account shall be used (on a first in, first out basis),
first
,
to pay any amounts due on the related Tranche on or after the due date thereof to the extent such
Tranche is not otherwise satisfied from Collections with respect to the Covered Portion of
Insurance Premium Loans financed by such Tranche and,
second
, to pay, pro rata, any
31
amounts due on other Tranches on or after the due date thereof to the extent such Tranches are
not otherwise satisfied from Collections with respect to the Covered Portion of Insurance Premium
Loans financed by such Tranches (in either case, a Reserve Payment). Any amounts remaining in
the Reserve Account more than eighteen (18) months after they are deposited therein or if earlier,
the repayment of all amounts due and owing by the Borrower hereunder, shall be released by to the
Borrower, for its own account.
At any time a Default or Event of Default has occurred and is continuing, all Collections
shall be distributed and applied pursuant to Section 4.04(b).
(e)
Salvage Collections
. Notwithstanding the provisions of Section 2.05(d), Section
4.04(b) or any other provision of this Agreement, on each date which Collections are received with
respect to any Insurance Premium Loan for which there are Salvage Collections, the Borrower, the
Lenders or the Agents shall, to the extent received by them, distribute such Salvage Collections on
such date to the Collateral Value Insurer or the Contingent Collateral Value Insurer, as
applicable, that paid the claim to the Borrower.
(f)
Interest and Fees
. Any prepayment made pursuant to this Section 2.05 shall be
accompanied by accrued interest on the principal amount being prepaid to the date of prepayment,
the Applicable Prepayment Premium, if any, payable in connection with such prepayment and if such
prepayment would reduce the amount of the outstanding Loan to zero, such prepayment shall be
accompanied by the payment of all fees accrued to such date pursuant to Section 2.06.
(g)
Cumulative Prepayments
. Except as otherwise expressly provided in this Section
2.05, payments with respect to any subsection of this Section 2.05 are in addition to payments made
or required to be made under any other subsection of this Section 2.05.
Section 2.06
Applicable Prepayment Premium
. In the event of the termination of this Agreement and
repayment of the Obligations at any time prior to the second anniversary of the Effective Date, for
any reason, including (i) termination upon the election of the Lender to terminate after the
occurrence and during the continuation of an Event of Default, (ii) foreclosure and sale of
Collateral, (iii) sale of the Collateral in any Insolvency Proceeding, or (iv) restructure,
reorganization, or compromise of the Obligations by the confirmation of a plan of reorganization or
any other plan of compromise, restructure, or arrangement in any Insolvency Proceeding, then, in
view of the impracticability and extreme difficulty of ascertaining the actual amount of damages to
the Agents and the Lender or profits lost by the Agents and the Lender as a result of such early
termination, and by mutual agreement of the parties as to a reasonable estimation and calculation
of the lost profits or damages of the Agents and the Lenders, the Borrower shall pay to the
Administrative Agent, for the account of the Lender (or in the event there is more than one Lender,
in accordance with such Lenders Pro Rata Share), the Applicable Prepayment Premium, measured as of
the date of such termination.
Section 2.07
Securitization
. The Borrower hereby acknowledges that the Lender and its Affiliates
may sell or securitize the Loan (a
Securitization
) through the pledge of the Loan as
collateral security for loans to the Lenders or their Affiliates or through the sale of the Loan or
the issuance of direct or indirect interests in the Loan or through obligations of the
32
Lender secured by the Loan or portions thereof, which loans to the Lenders or their Affiliates
or direct or indirect interests or obligations of the Lender may be rated by Moodys Investors
Service, Inc., Standard & Poors Investors Rating Services or Fitch Ratings (each, a
Rating
Agency
and collectively, the
Rating Agencies
). The Borrower shall cooperate with the
Lender and its Affiliates to effect the Securitization including, without limitation, by (a)
amending this Agreement and the other Loan Documents, and executing such additional documents, as
reasonably requested by the Lender in connection with the Securitization,
provided
that
(i) any such amendment or additional documentation does not impose material additional
costs on the Borrower and (ii) any such amendment or additional documentation does not materially
adversely affect the rights, or materially increase the obligations, of the Borrower under the Loan
Documents or change or affect in a manner adverse to the Borrower the financial terms of the Loan
and (b) providing such information as may be reasonably requested by the Lender in connection with
the rating of the Loan or the Securitization.
Section 2.08
Taxes
. (a) Any and all payments by the Borrower hereunder or under any other Loan
Document shall be made free and clear of and without deduction for any and all present or future
taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding taxes imposed on the net income of any Agent, any Lender (or any transferee or
assignee thereof, including a participation holder (any such entity, a
Transferee
)) by
the jurisdiction in which such Person is organized or has its principal lending office (all such
nonexcluded taxes, levies, imposts, deductions, charges withholdings and liabilities, collectively
or individually,
Taxes
). If the Borrower shall be required to deduct any Taxes from or in
respect of any sum payable hereunder to any Agent, any Lender (or any Transferee), (i) the sum
payable shall be increased by the amount (an
Additional Amount
) necessary so that after
making all required deductions (including deductions applicable to additional sums payable under
this Section 2.08) such Agent, such Lender (or such Transferee) shall receive an amount equal to
the sum it would have received had no such deductions been made, (ii) the Borrower shall make such
deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law.
(b) In addition, the Borrower agrees to pay to the relevant Governmental Authority in
accordance with applicable law any present or future stamp or documentary taxes or any other excise
or property taxes, charges or similar levies that arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this Agreement or any other
Loan Document (
Other Taxes
). The Borrower shall deliver to each Agent and each Lender
official receipts in respect of any Taxes or Other Taxes payable hereunder promptly after payment
of such Taxes or Other Taxes.
(c) The Borrower hereby indemnifies and agrees to hold each Agent and each Lender harmless
from and against Taxes and Other Taxes (including, without limitation, Taxes and Other Taxes
imposed on any amounts payable under this Section 2.08) paid by such Person, whether or not such
Taxes or Other Taxes were correctly or legally asserted. Such indemnification shall be paid within
10 days from the date on which any such Person makes written demand therefore specifying in
reasonable detail the nature and amount of such Taxes or Other Taxes.
33
(d) Each Lender (or Transferee) that is organized under the laws of a jurisdiction outside the
United States (a
Non-U.S. Lender
) agrees that it shall, no later than the Effective Date
(or, in the case of a Lender which becomes a party hereto pursuant to Section 12.07 hereof after
the Effective Date, promptly after the date upon which such Lender becomes a party hereto) deliver
to the Agents one properly completed and duly executed copy of either U.S. Internal Revenue Service
Form W-8BEN, W-8ECI or W-8IMY or any subsequent versions thereof or successors thereto, in each
case claiming complete exemption from, or reduced rate of, U.S. Federal withholding tax and
payments of interest hereunder. In addition, in the case of a Non-U.S. Lender claiming exemption
from U.S. Federal withholding tax under Section 871(h) or 881(c) of the Internal Revenue Code, such
Non-U.S. Lender hereby represents to the Agents and the Borrower that such Non-U.S. Lender is not a
bank for purposes of Section 881(c) of the Internal Revenue Code, is not a 10-percent shareholder
(within the meaning of Section 871(h)(3)(B) of the Internal Revenue Code) of the Borrower and is
not a controlled foreign corporation related to the Borrower (within the meaning of Section
864(d)(4) of the Internal Revenue Code), and such Non-U.S. Lender agrees that it shall promptly
notify the Agents in the event any such representation is no longer accurate. Such forms shall be
delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement (or,
in the case of a Transferee that is a participation holder, on or before the date such
participation holder becomes a Transferee hereunder) and on or before the date, if any, such
Non-U.S. Lender changes its applicable lending office by designating a different lending office (a
New Lending Office
). In addition, such Non-U.S. Lender shall deliver such forms within 20
days after receipt of a written request therefor from any Agent, the assigning Lender or the Lender
granting a participation, as applicable. Notwithstanding any other provision of this Section 2.08,
a Non-U.S. Lender shall not be required to deliver any form pursuant to this Section 2.08(d) that
such Non-U.S. Lender is not legally able to deliver.
(e) The Borrower shall not be required to indemnify any Non-U.S. Lender, or pay any Additional
Amounts to any Non-U.S. Lender, in respect of United States Federal withholding tax pursuant to
this Section 2.08 to the extent that (i) the obligation to withhold amounts with respect to United
States Federal withholding tax existed on the date such Non-U.S. Lender became a party to this
Agreement (or, in the case of a Transferee that is a participation holder, on the date such
participation holder became a Transferee hereunder) or, with respect to payments to a New Lending
Office, the date such Non-U.S. Lender designated such New Lending Office with respect to a Loan;
provided
,
however
, that this clause (i) shall not apply to the extent the indemnity
payment or Additional Amounts any Transferee, or Lender (or Transferee) through a New Lending
Office, would be entitled to receive (without regard to this clause (i)) do not exceed the
indemnity payment or Additional Amounts that the Person making the assignment, participation or
transfer to such Transferee, or Lender (or Transferee) making the designation of such New Lending
Office, would have been entitled to receive in the absence of such assignment, participation,
transfer or designation, or (ii) the obligation to pay such Additional Amounts would not have
arisen but for a failure by such Non-U.S. Lender to comply with the provisions of clause (d) above.
(f) Any Agent or any Lender (or Transferee) claiming any indemnity payment or additional
payment amounts payable pursuant to this Section 2.08 shall use reasonable efforts (consistent with
legal and regulatory restrictions) to file any certificate or document reasonably requested in
writing by the Borrower or to change the jurisdiction of its
34
applicable lending office if the making of such a filing or change would avoid the need for or
reduce the amount of any such indemnity payment or additional amount that may thereafter accrue,
would not require such Agent or such Lender (or Transferee) to disclose any information such Agent
or such Lender (or Transferee) deems confidential and would not, in the sole determination of such
Agent or such Lender (or Transferee), be otherwise disadvantageous to such Agent or such Lender (or
Transferee).
(g) The obligations of the Borrower under this Section 2.08 shall survive the termination of
this Agreement and the payment of the Loans and all other amounts payable hereunder.
Section 2.09
Increase in Term Loan Commitment; Extension of Term Loan Commitment
Termination Date
(a)
Request for Increase
. Provided no Default or Event of Default then exists or
would arise therefrom, upon notice to the Administrative Agent (which shall promptly notify the
Lenders), the Borrower may, from time to time, request an increase in the Term Loan Commitment by
an amount not exceeding Two Hundred Thirty Five Million Dollars ($235,000,000) in the aggregate
(the
Commitment Increase
) and, if necessary, a suggested extension of the Term Loan
Commitment Termination Date; provided that any such request for a Commitment Increase shall be in a
minimum amount of One Million Dollars ($1,000,000). Following the delivery by the Borrower of the
request, the Administrative Agent and the Lenders shall, by notice to the Borrower given not more
than thirty (30) Business Days after the date of receipt of such notice, either accept the request
or reject the request, provided that, the Lenders shall have no obligation to accept any request.
(b)
Lender Elections to Increase
. Each Lender shall notify the Administrative Agent
within such time period whether or not it agrees to increase its Term Loan Commitment and, if so,
whether by an amount equal to, greater than, or less than its Pro Rata Share of such requested
Commitment Increase. Any Lender not responding within such time period shall be deemed to have
declined to increase its Term Loan Commitment.
(c)
Effective Date and Allocations
. If the Term Loan Commitment is increased in
accordance with this Section 2.09, the Administrative Agent shall determine the effective date (the
Increase Effective Date
), the period of time by which the Term Loan Commitment
Termination Date is extended and the final allocation of such Commitment Increase. The
Administrative Agent shall promptly notify the Borrower and the Lenders of the first allocation of
such Commitment Increase, the period of time by which the Term Loan Commitment Termination Date is
extended and the Increase Effective Date and, on the Increase Effective Date, (i) the Term Loan
Commitment under, and for all purposes of, this Agreement shall be increased by the aggregate
amount of such Commitment Increase, (ii) clause (iii) of the definition of Term Loan Commitment
Termination Date shall be extended by the period of time as notified by the Administrative Agent
and (iii) Schedule 1.01(A) shall be deemed modified, without further action, to reflect the revised
Term Loan Commitment of the Lenders.
(d)
Conditions to Effectiveness of Commitment Increase
. As a condition precedent to
such Commitment Increase: (i) the Borrower shall have delivered to the
35
Administrative Agent a certificate of each Credit Party dated as of the Increase Effective
Date (in sufficient copies for each Lender) signed by an Authorized Officer of such Credit Party
(A) certifying and attaching the resolutions adopted by such Credit Party approving or consenting
to such Commitment Increase, and (B) in the case of the Borrower, certifying that, before and after
giving effect so such Commitment Increase, the representations and warranties contained in Article
VI and the other Loan Documents are true and correct in all material respects on and as of the
Increase Effective Date, except to the extent that such representations and warranties specifically
refer to an earlier date, in which case they are true and correct in all material respects as of
such earlier date, in which case they are true and correct in all material respects as of such
earlier date, and except that for purposes of this Section 2.09, the representations and warranties
contained in subsections (g)(i) and (g)(ii) of Section 6.01 shall be deemed to refer to the most
recent statements furnished pursuant to subsections (a)(i) and (a)(ii), respectively, of Section
7.01; (ii) the Borrower shall have paid such fees and other compensation to the Agents and Lenders
as they require; (iii) the borrower shall have delivered to the Administrative Agent and the
lenders an opinion or opinions substantially similar to the opinions delivered on the Effective
Date from counsel to the Credit Parties reasonably satisfactory to the Administrative Agent and
dated such date; (iv) the Borrower shall have delivered such other instruments, documents and
agreements as the Administrative Agent may reasonably have requested including, without limitation,
an amendment to this Agreement and the other Loan Documents, if required by the Administrative
Agent; and (v) no Default or Event of Default shall have occurred and be continuing.
Section 2.10
Indemnity Escrow
. Within thirty (30) days of the Effective Date or if earlier, the
date that the Indemnity Escrow Agreement is executed and effective, the Borrower shall deposit into
the escrow account held under the Indemnity Escrow Agreement (the Indemnity Escrow) an amount
equal to two percent (2%) of all Term Loans under this Agreement. The amounts held under the
Indemnity Escrow Agreement shall at all times be under the exclusive dominion and control of the
Escrow Agent and neither the Borrower nor the Agents shall have any access thereto or right to make
any withdrawal therefrom, except that the Agents shall be permitted to have funds distributed to
them out of the Indemnity Escrow to the extent that any Indemnitee is entitled to any
indemnification under Section 12.15 hereof from the Borrower which is not timely paid, in which
case the Agents shall cause such distributions to be paid to such Indemnitees. In connection with
any Term Loans made prior to the execution and effectiveness of the Indemnity Escrow Agreement, the
Agent may withhold two percent (2%) of any Term Loans until the Indemnity Escrow Agreement is
executed and effective, at which time the Agents shall deposit such withheld funds with the Escrow
Agent to be held under such agreement (with such deposit credited against the Borrowers
obligations under the first sentence of this Section 2.10). When all outstanding Obligations under
this Agreement have been fully satisfied, any remaining funds held under the Indemnity Escrow
Agreement shall be distributed to the Borrower, for its own account.
ARTICLE III
INTENTIONALLY OMITTED
36
ARTICLE IV
FEES, PAYMENTS AND OTHER COMPENSATION
Section 4.01
Audit and Collateral Monitoring Fees
. The Borrower acknowledges that pursuant to
Section 7.01, representatives of the Agents may visit the Borrower and/or conduct audits,
inspections, valuations and/or field examinations of the Borrower at any time and from time to time
in a manner so as to not unduly disrupt the business of the Borrower. The Borrower agrees to pay
(i) $1,500 per day per examiner plus the examiners out-of-pocket costs and reasonable expenses
incurred in connection with all such visits, audits, inspections, appraisals, valuations and field
examinations and (ii) the cost of all visits, audits, inspections, appraisals, valuations and field
examinations conducted by a third party on behalf of the Agents.
Section 4.02
Payments; Computations and Statements
. (a) The Borrower will make each payment under
this Agreement not later than 12:00 noon (New York City time) on the day when due, in lawful money
of the United States of America and in immediately available funds, to the Collection Account. All
payments received by the Administrative Agent after 12:00 noon (New York City time) on any Business
Day will be credited to the Loan Account on the next succeeding Business Day. All payments shall be
made by the Borrower without set-off, counterclaim, deduction or other defense to the Agents and
the Lenders. Except as provided in Section 2.02, after receipt, the Administrative Agent will
promptly thereafter cause to be distributed like funds relating to the payment of principal to the
Lender (or if there is more than one Lender hereunder, ratably to the Lenders in accordance with
their Pro Rata Shares) and like funds relating to the payment of any other amount payable to any
Lender to such Lender, in each case to be applied in accordance with the terms of this Agreement,
provided that the Administrative Agent will cause to be distributed all interest and fees received
from or for the account of the Borrower not less than once each month and in any event promptly
after receipt thereof. The Lender and the Borrower hereby authorize the Administrative Agent to,
and the Administrative Agent may, from time to time, charge the Loan Account of the Borrower with
any amount due and payable by the Borrower under any Loan Document. Each of the Lender and the
Borrower agrees that the Administrative Agent shall have the right to make such charges whether or
not any Default or Event of Default shall have occurred and be continuing or whether any of the
conditions precedent in Section 5.02 have been satisfied. Any amount charged to the Loan Account of
the Borrower shall be deemed an Obligation hereunder, which shall bear interest at the rate
applicable to Term Loans. The Lender and the Borrower confirm that any charges which the
Administrative Agent may so make to the Loan Account of the Borrower as herein provided will be
made as an accommodation to the Borrower and solely at the Administrative Agents discretion,
provided that the Administrative Agent shall from time to time upon the request of the Collateral
Agent, charge the Loan Account of the Borrower with any amount due and payable under any Loan
Document. Whenever any payment to be made under any such Loan Document shall be stated to be due on
a day other than a Business Day, such payment shall be made on the next succeeding Business Day and
such extension of time shall in such case be included in the computation of interest or fees, as
the case may be. All computations of fees shall be made by the Administrative Agent on the basis of
a year of 360 days for the actual number of days (including the first day but excluding the last
day) occurring in the period for which such fees are payable. Each determination by the
Administrative Agent of
37
an interest rate or fees hereunder shall be conclusive and binding for all purposes in the
absence of manifest error.
(b) The Administrative Agent shall provide the Borrower, promptly after the end of each
calendar month, a summary statement (in the form from time to time used by the Administrative
Agent) of the opening and closing daily balances in the Loan Account of the Borrower during such
month, the amounts and dates of all Term Loans made to the Borrower during such month, the amounts
and dates of all payments on account of the Term Loans to the Borrower during such month and the
Term Loans to which such payments were applied, the amount of interest accrued on the Term Loans to
the Borrower during such month, and the amount and nature of any charges to the Loan Account made
during such month on account of fees, commissions, expenses and other Obligations. All entries on
any such statement shall be presumed to be correct and, thirty (30) days after the same is sent,
shall be final and conclusive absent manifest error.
Section 4.03
Sharing of Payments, Etc
. In the event there is more than one Lender hereunder, except
as provided in Section 2.02 hereof, if any Lender shall obtain any payment (whether voluntary,
involuntary, through the exercise of any right of set-off, or otherwise) on account of any
Obligation in excess of its ratable share of payments on account of similar obligations obtained by
all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in
such similar obligations held by them as shall be necessary to cause such purchasing Lender to
share the excess payment ratably with each of them;
provided
,
however
, that if all
or any portion of such excess payment is thereafter recovered from such purchasing Lender, such
purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender
the purchase price to the extent of such recovery together with an amount equal to such Lenders
ratable share (according to the proportion of (i) the amount of such Lenders required repayment to
(ii) the total amount so recovered from the purchasing Lender of any interest or other amount paid
by the purchasing Lender in respect of the total amount so recovered). The Borrower agrees that any
Lender so purchasing a participation from another Lender pursuant to this Section 4.03 may, to the
fullest extent permitted by law, exercise all of its rights (including the Lenders right of
set-off) with respect to such participation as fully as if such Lender were the direct creditor of
the Borrower in the amount of such participation.
Section 4.04
Apportionment of Payments
. Subject to Section 2.02 hereof:
(a) all payments of principal and interest in respect of outstanding Term Loans, all payments
of fees (other than the audit and collateral monitoring fee provided for in Section 4.01) and all
other payments in respect of any other Obligations, shall be paid to the Lender (or in the event
there is more than one Lender hereunder, shall be allocated by the Administrative Agent among such
of the Lenders as are entitled thereto, in proportion to their respective Pro Rata Shares or
otherwise as provided herein or, in respect of payments not made on account of Term Loans, as
designated by the Person making payment when the payment is made).
(b) After the occurrence and during the continuance of a Default or an Event of Default, the
Administrative Agent may, and upon the direction of the Lender (or in the
38
event there is more than one Lender hereunder, upon the direction of the Required Lenders)
shall, apply all proceeds of the Collateral (including all Collections other than Salvage
Collections), subject to the provisions of this Agreement, (i)
first
, to pay the Servicer
(other than the Initial Servicer) an amount equal to the accrued and unpaid Servicing Fees then due
and payable in accordance with the Transaction Documents until paid in full (to the extent not
covered by the Indemnity Escrow or otherwise); (ii)
second
, to pay the Obligations in
respect of any fees, expense reimbursements, indemnities and other amounts then due and payable to
the Agents until paid in full; (iii)
third
, to pay the Insurance Collateral Agent an amount
equal to any fees, expense reimbursements, indemnities and other amounts then due and payable to
the Insurance Collateral Agent in accordance with the Transaction Documents until paid in full (to
the extent not covered by the Indemnity Escrow or otherwise); (iv)
fourth
, to pay the
Obligations in respect of any fees (including the Applicable Prepayment Premium), expense
reimbursements, indemnities and other amounts then due and payable to the Lender (or Lenders if
there is more than one Lender hereunder) until paid in full; (v)
fifth
, to pay interest
then due and payable in respect of the Collateral Agent Advances until paid in full (to the extent
not covered by the Indemnity Escrow or otherwise); (vi)
sixth
, to pay principal of the
Collateral Agent Advances until paid in full (to the extent not covered by the Indemnity Escrow or
otherwise), (vii)
seventh
, to pay interest then due and payable in respect of the related
Tranche until paid in full, (viii)
eighth
, to pay principal of the related Tranche until
paid in full, (ix)
ninth
, to pay interest then due and payable in respect of all other
Tranches until paid in full, (x)
tenth
, to pay principal of all other Tranches until paid
in full, (xi)
eleventh
, to pay the Servicer if the Servicer is the Initial Servicer an
amount equal to the accrued and unpaid Servicing Fees then due and payable in accordance with the
Transaction Documents until paid in full (to the extent not covered by the Indemnity Escrow or
otherwise), (xii)
twelfth
, the payment of all other Obligations then due and payable (to
the extent not covered by the Indemnity Escrow or otherwise), and (xiii)
thirteenth
, any
remaining proceeds from the Collateral on such date shall be paid to the Borrower, for its own
account.
(c) In each instance, so long as no Event of Default has occurred and is continuing, Section
4.04(b) shall not be deemed to apply to any payment by the Borrower specified by the Borrower to
the Administrative Agent to be for the payment of the Obligations then due and payable under any
provision of this Agreement or the prepayment of all or part of the principal of a Tranche in
accordance with the terms and conditions of Section 2.05.
(d) For purposes of Section 4.04(b), paid in full means payment in cash of all amounts owing
under the Loan Documents and the Transaction Documents according to the terms thereof, including
loan fees, servicing fees, professional fees, interest (and specifically including interest accrued
after the commencement of any Insolvency Proceeding), default interest, interest on interest, and
expense reimbursements, whether or not same would be or is allowed or disallowed in whole or in
part in any Insolvency Proceeding.
(e) In the event of a direct conflict between the priority provisions of this Section 4.04 and
other provisions contained in any other Loan Document, it is the intention of the parties hereto
that both such priority provisions in such documents shall be read together and construed, to the
fullest extent possible, to be in concert with each other. In the event of any actual,
irreconcilable conflict that cannot be resolved as aforesaid, the terms and provisions of this
Section 4.04 shall control and govern.
39
Section 4.05
Increased Costs and Reduced Return
. (a) If any Lender or any Agent shall have
determined that the adoption or implementation of, or any change in, any law, rule, treaty or
regulation, or any policy, guideline or directive of, or any change in, the interpretation or
administration thereof by, any court, central bank or other administrative or Governmental
Authority, or compliance by any Lender or any Agent or any Person controlling any such Agent or any
such Lender with any directive of, or guideline from, any central bank or other Governmental
Authority or the introduction of, or change in, any accounting principles applicable to any Lender
or any Agent or any Person controlling any such Agent or any such Lender (in each case, whether or
not having the force of law) (each a
Change in Law
), shall (i) subject such Agent or any
Lender, or any Person controlling such Agent or any Lender to any tax, duty or other charge with
respect to this Agreement or any Loan made by such Agent or any Lender, or change the basis of
taxation of payments to such Agent or any Lender or any Person controlling such Agent or any Lender
of any amounts payable hereunder (except for taxes on the overall net income of such Agent or any
Lender or any Person controlling such Agent or any Lender), (ii) impose, modify or deem applicable
any reserve, special deposit or similar requirement against any Loan or against assets of or held
by, or deposits with or for the account of, or credit extended by, such Agent or any Lender or any
Person controlling such Agent or such Lender or (iii) impose on such Agent or such Lender or any
Person controlling such Agent or any Lender any other condition regarding this Agreement or any
Loan, and the result of any event referred to in clauses (i), (ii) or (iii) above shall be to
increase the cost to such Agent or the Lender of making any Loan or agreeing to make any Loan or to
reduce any amount received or receivable by such Agent or any Lender hereunder, then, upon demand
by such Agent or the Lender, the Borrower shall pay to such Agent or such Lender such additional
amounts as will compensate such Agent or such Lender for such increased costs or reductions in
amount.
(b) If any Agent or any Lender shall have determined that any Change in Law either (i) affects
or would affect the amount of capital required or expected to be maintained by such Agent or the
Lender or any Person controlling such Agent or such Lender, and such Agent or such Lender
determines that the amount of such capital is increased as a direct or indirect consequence of any
Term Loans made or maintained, such Agents or the Lenders or such other controlling Persons
other obligations hereunder, or (ii) has or would have the effect of reducing the rate of return on
such Agents or such Lenders such other controlling Persons capital to a level below that which
such Agent or such Lender or such controlling Person could have achieved but for such circumstances
as a consequence of any Loans made or maintained or any agreement to make Term Loans or such
Agents or such Lenders or such other controlling Persons other obligations hereunder (in each
case, taking into consideration, such Agents or the Lenders or such other controlling Persons
policies with respect to capital adequacy), then, upon demand by such Agent or the Lender, the
Borrower shall pay to such Agent or such Lender from time to time such additional amounts as will
compensate such Agent or such Lender for such cost of maintaining such increased capital or such
reduction in the rate of return on such Agents or such Lenders or such other controlling Persons
capital.
(c) All amounts payable under this Section 4.05 shall bear interest from the date that is ten
(10) days after the date of demand by any Agent or any Lender until payment in full to such Agent
or such Lender at an annual interest rate of 15%. A certificate of such Agent or the Lender
claiming compensation under this Section 4.05, specifying the event herein above described and the
nature of such event shall be submitted by such Agent or such
40
Lender to the Borrower, setting forth the additional amount due and an explanation of the
calculation thereof, and such Agents or such Lenders reasons for invoking the provisions of this
Section 4.05, and shall be final and conclusive absent manifest error.
ARTICLE V
CONDITIONS TO LOANS
Section 5.01
Conditions Precedent to Effectiveness
. This Agreement shall become effective as of the
Business Day (the
Effective Date
) when each of the following conditions precedent shall
have been satisfied in a manner satisfactory to the Agents:
(a)
Payment of Fees, Etc.
The Borrower shall have paid on or before the date of this
Agreement all fees, costs, expenses and taxes then payable pursuant to Section 12.04.
(b)
Representations and Warranties; No Event of Default
. The following statements
shall be true and correct: (i) the representations and warranties contained in ARTICLE VI and in
each other Loan Document, certificate or other writing delivered to any Agent or any Lender
pursuant hereto or thereto on or prior to the Effective Date are true and correct on and as of the
Effective Date as though made on and as of such date, except to the extent that any such
representation or warranty expressly relates solely to an earlier date (in which case such
representation or warranty shall be true and correct on and as of such earlier date) and (ii) no
Default or Event of Default shall have occurred and be continuing on the Effective Date or would
result from this Agreement or the other Loan Documents becoming effective in accordance with its or
their respective terms.
(c)
Legality
. The making of the initial Loans or the issuance of any Letters of Credit
shall not contravene any law, rule or regulation applicable to any Agent or any Lender.
(d)
Delivery of Documents
. The Collateral Agent shall have received on or before the
Effective Date (or such other date expressly specified below) the following, each in form and
substance satisfactory to the Collateral Agent and, unless indicated otherwise, dated the Effective
Date:
(i) a Security Agreement, duly executed by the Borrower;
(ii) the Guarantor Security Agreement, duly executed by the Equity Guarantor, together with
the original LLC membership certificates (if any) representing all of the membership interests of
the Borrower owned by the Equity Guarantor, accompanied by undated transfer powers executed in
blank and other proper instruments of transfer;
(iii) each Individual Guaranty, duly executed by the applicable Individual Guarantor;
(iv) a UCC Filing Authorization Letter, duly executed by the Borrower and the Equity
Guarantor, together with (A) appropriate financing statements on Form
41
UCC-1 duly filed in such office or offices as may be necessary or, in the opinion of the
Collateral Agent, desirable to perfect the security interests purported to be created by created by
the Security Agreement and the Guarantor Security Agreement and (B) evidence satisfactory to the
Collateral Agent of the filing of such UCC-1 financing statements;
(v) certified copies of request for copies of information on Form UCC-11, listing all
effective financing statements which name as debtor any Credit Party and the Originator and which
are filed in the offices referred to in paragraph (iv) above, together with copies of such
financing statements, none of which, except as otherwise agreed in writing by the Collateral Agent,
shall cover any of the Collateral and the results of searches for any tax Lien and judgment Lien
filed against such Person or its property, which results, except as otherwise agreed to in writing
by the Collateral Agent, shall not show any such Liens;
(vi) the Master Participation Agreement, duly executed by the Originator and the Borrower;
(vii) the Imperial Limited Guaranty, duly executed by Imperial;
(viii) Each of the Collateral Value Policy and the Contingent Collateral Value Policy, duly
executed by the Collateral Value Insurer and the Contingent Collateral Value Insurer, as
applicable, and each in full force and effect;
(ix) a copy of the resolutions of the Equity Guarantor, the Borrower and the Originator,
certified as of the Effective Date by an Authorized Officer thereof, authorizing (A) the borrowings
hereunder and the transactions contemplated by the Loan Documents and the Transaction Documents to
which such Person is or will be a party, and (B) the execution, delivery and performance by such
Person of each Loan Document and Transaction Document to which such Person is or will be a party
and the execution and delivery of the other documents to be delivered by such Person in connection
herewith and therewith;
(x) a certificate of an Authorized Officer of the Equity Guarantor, the Borrower and the
Originator, certifying the names and true signatures of the representatives of the Equity
Guarantor, the Borrower and the Originator authorized to sign each Loan Document and Transaction
Document to which such Person is or will be a party and the other documents to be executed and
delivered by such Person in connection herewith and therewith, together with evidence of the
incumbency of such authorized officers;
(xi) a certificate of the appropriate official(s) of the jurisdiction of organization and each
jurisdiction of foreign qualification of the Equity Guarantor, the Borrower and the Originator
certifying as of a recent date not more than 30 days prior to the Effective Date as to the
subsistence in good standing of the Equity Guarantor, the Borrower and the Originator in such
jurisdictions;
(xii) a true and complete copy of the charter, certificate of formation, certificate of
limited partnership or other publicly filed organizational document of the Equity Guarantor, the
Borrower and the Originator certified as of a recent date not more than 30 days prior to the
Effective Date by an appropriate official of the jurisdiction of organization of the Equity
Guarantor, the Borrower and the Originator which shall set forth the same complete
42
name of such Person as is set forth herein and the organizational number of such Person, if an
organizational number is issued in such jurisdiction;
(xiii) a copy of the Governing Documents of the Equity Guarantor, the Borrower and the
Originator, together with all amendments thereto, certified as of the Effective Date by an
Authorized Officer of the Equity Guarantor, the Borrower and the Originator;
(xiv) an opinion of Foley & Lardner, LLP substantially in the form of Exhibit H hereto and an
opinion of Locke, Lord Bissell & Liddell, each counsel to the Credit Parties and the Originator, in
form and substance satisfactory to the Agents, and as to such other matters as the Collateral Agent
may reasonably request, including, without limitation, non-consolidation, true sale and true
participation opinions;
(xv) Local Counsel Opinions in form and substance satisfactory to the Lender and Agents;
(xvi) a certificate of an Authorized Officer of the Equity Guarantor, the Borrower and the
Originator, certifying as to the matters set forth in subsection (b) of this Section 5.01;
(xvii) a copy of the Financial Statements;
(xviii) a certificate of the chief financial officer of the Borrower and the Originator,
certifying as to the solvency of the Borrower and the Originator, which certificate shall be
satisfactory in form and substance to the Collateral Agent;
(xix) evidence of the insurance coverage required by Section 7.01 and the terms of each
Security Agreement and such other insurance coverage with respect to the business and operations of
the Borrower as the Collateral Agent may reasonably request, in each case, where requested by the
Collateral Agent, with such endorsements as to the named insureds or loss payees thereunder as the
Collateral Agent may request and providing that such policy may be terminated or canceled (by the
insurer or the insured thereunder) only upon 30 days prior written notice to the Collateral Agent
and each such named insured or loss payee, together with evidence of the payment of all premiums
due in respect thereof for such period as the Collateral Agent may request;
(xx) a certificate of an Authorized Officer of the Equity Guarantor, the Borrower and the
Originator, certifying the names and true signatures of the persons that are authorized to provide
Notices of Borrowing and all other notices under this Agreement, the other Loan Documents and the
Transaction Documents;
(xxi) the Collateral Agency Agreement, duly executed by the Originator, the Borrower, the
Insurance Collateral Agent and the Collateral Agent;
(xxii) the Initial Servicing Agreement, duly executed by the Borrower and the Initial
Servicer;
43
(xxiii) copies of the Transaction Documents and the other Material Contracts as in effect on
the Effective Date, certified as true and correct copies thereof by an Authorized Officer of the
Borrower, together with a certificate of an Authorized Officer of the Borrower stating that such
agreements remain in full force and effect and that the Borrower has not breached or defaulted in
any of its obligations under such agreements;
(xxiv) such depository account, blocked account, lockbox account and similar agreements and
other documents, each in form and substance satisfactory to the Agents, as the Agents may request
with respect to the Borrowers cash management system; and
(xxv) such other agreements, instruments, approvals, opinions and other documents, each
satisfactory to the Collateral Agent in form and substance, as the Collateral Agent may reasonably
request.
(e)
Material Adverse Effect
. The Collateral Agent shall have determined, in its sole
judgment, that no event or development shall have occurred since December 31, 2007 which could
reasonably be expected to have a Material Adverse Effect.
(f)
Approvals
. All consents, authorizations and approvals of, and filings and
registrations with, and all other actions in respect of, any Governmental Authority or other Person
required in connection with the making of the Loan, the execution and performance of the
Transaction Documents or the conduct of the Borrowers business shall have been obtained and shall
be in full force and effect.
(g)
Proceedings; Receipt of Documents
. All proceedings in connection with the making
of the initial Loan and the other transactions contemplated by this Agreement, the other Loan
Documents and the Transaction Documents, and all documents incidental hereto and thereto, shall be
satisfactory to the Collateral Agent and its counsel, and the Collateral Agent and such counsel
shall have received all such information and such counterpart originals or certified or other
copies of such documents as the Collateral Agent or such counsel may reasonably request.
(h) Intentionally Omitted.
(i)
Due Diligence
. The Agents shall have completed their business, legal and
collateral due diligence with respect to Imperial, the Originator and the Borrower, including,
without limitation, (A) a review of Imperials and its Subsidiaries books and records, (B) a
review of Imperials and its Subsidiaries licenses to engage in making insurance premium finance
loans, and (C) review of all legislative issues effecting and regulating the premium finance
industry, in each case, the results thereof shall be acceptable to the Agents, in their sole and
absolute discretion.
Section 5.02
Conditions Precedent to All Loans
. The obligation of any Agent or any Lender to make
any Term Loan on or after the Effective Date is subject to the fulfillment, in a manner
satisfactory to the Administrative Agent, of each of the following conditions precedent:
44
(a)
Payment of Fees, Etc.
The Borrower shall have paid all fees, costs, expenses and
taxes then payable by the Borrower pursuant to this Agreement and the other Loan Documents,
including, without limitation, Section 12.04 hereof.
(b)
Representations and Warranties; No Event of Default
. The following statements
shall be true and correct in all material respects (except such materiality qualifier shall not be
applicable with respect to matters involving (i) the Collateral, (ii) the ability of the Agents and
the Lenders to realize upon the Collateral, or (iii) the ability of the Agents and the Lenders to
receive Collections from the Collateral), and the submission by the Borrower to the Administrative
Agent of a Notice of Borrowing with respect to each such Term Loan, and the Borrowers acceptance
of the proceeds of such Loan, shall each be deemed to be a representation and warranty by the
Borrower on the date of such Loan that: (i) the representations and warranties contained in ARTICLE
VI and in each other Loan Document, certificate or other writing delivered to any Agent or any
Lender pursuant hereto or thereto on or prior to the date of such Loan are true and correct in all
material respects on and as of such date as though made on and as of such date (except such
materiality qualifier shall not be applicable with respect to matters involving (i) the Collateral,
(ii) the ability of the Agents and the Lenders to realize upon the Collateral, or (iii) the ability
of the Agents and the Lenders to receive Collections from the Collateral), except to the extent
that any such representation or warranty expressly relates solely to an earlier date (in which case
such representation or warranty shall be true and correct on and as of such earlier date), (ii) at
the time of and after giving effect to the making of such Term Loan and the application of the
proceeds thereof, no Default or Event of Default has occurred and is continuing or would result
from the making of the Term Loan to be made, on such date and (iii) the conditions set forth in
this Section 5.02 have been satisfied as of the date of such request.
(c)
Legality
. The making of such Term Loan shall not contravene any law, rule or
regulation applicable to any Agent or any Lender.
(d)
Notices
. The Administrative Agent shall have received a Notice of Borrowing
pursuant to Section 2.02 hereof.
(e)
Delivery of Documents
. The Administrative Agent shall have received the following
items, as more fully set forth on Schedule 5.02(e) attached hereto, three (3) Business Days prior
to any borrowing date: (i) (A) a true and correct copy of an updated Loan Schedule identifying the
Eligible Insurance Premium Loans to be financed with the proceeds of such Loan, (B) the related
Life Insurance Policy and evidence of receipt by the insurance carrier of the related premium, (C)
the Eligibility Certification for the Insurance Premium Loans to be purchased, (D) the executed
Trust Agreement for each Insurance Premium Loan to be financed with the proceeds of such Term Loan,
which shall evidence that either (i) an institutional trustee or financial institution acceptable
to the Agents or (ii) a Non-Corporate Trustee is the trustee or co-trustee under such Trust
Agreement and that the premium with respect to the related Life Insurance Policy shall have either
been paid to the applicable Insurance Provider, or (y) placed into escrow under the Trust Agreement
pursuant to escrow arrangements satisfactory to the Administrative Agent, in each case, in an
amount sufficient to result in such Life Insurance Policy remaining continuously in effect through
the sixtieth (60
th
) day after the Insurance Premium Loan Maturity Date; provided,
however, that this condition
45
shall be deemed to be satisfied if the aggregate amount of premium paid to the applicable
Insurance Provider with respect to the related Life Insurance Policy prior to the lapse of such
Life Insurance Policy equals the Total Life Insurance Premium set forth in the applicable
Coverage Certificate, (E) a true and correct copy of the Borrowers completed internal compliance
checklist for each Eligible Insurance Premium Loan to be financed with the proceeds of such Term
Loan, (F) all other documents comprising the Loan Documentation Package for such Insurance Premium
Loan, and (G) a revised Non-Corporate Insurance Premium Loan Schedule, if necessary, (ii) the
related Coverage Certificate from the Collateral Value Insurer for the Eligible Insurance Premium
Loan or Participation being financed with the proceeds of a Term Loan, (iii) if an Insurance
Premium Loan is financed in an Applicable Non-Licensed State, a fully executed Insurance Premium
Loan Sale and Assignment Agreement, (iv) if an Insurance Premium Loan or portion thereof is
financed in an Applicable Licensed State, a fully executed participation certificate entered into
pursuant to the Master Participation Agreement, and (v) the Agents shall have received such other
agreements, instruments, approvals, opinions and other documents, each in form and substance
satisfactory to the Agents, as any Agent may reasonably request.
(f)
Proceedings; Receipt of Documents
. All proceedings in connection with the making
of such Loan and the other transactions contemplated by this Agreement and the other Loan
Documents, and all documents incidental hereto and thereto, shall be satisfactory to the Agents and
their counsel, and the Agents and such counsel shall have received all such information and such
counterpart originals or certified or other copies of such documents, in form and substance
satisfactory to the Agents, as the Agents or such counsel may reasonably request.
(g)
Performance by the Collateral Value Insurer and Contingent Collateral Value
Insurer
. The Collateral Value Insurer, or following the occurrence of a Credit Event, the
Contingent Collateral Value Insurer, shall not have failed to pay any claim properly submitted
under the Collateral Value Policy or the Contingent Collateral Value Policy, as applicable, within
the applicable time period, or pursuant to the procedures for paying claims, in either case, as set
forth therein (regardless of whether or not there are any defenses to any such payment). The claims
paying ability of the Contingent Collateral Value Insurer shall be rated as of the Effective Date
no lower than AAA by Standard & Poors Investors Rating Services and AAA by Fitch Ratings and
at no time thereafter shall fail to be rated at least AA- (or an equivalent rating) by at least
one Rating Agency.
(h)
Prohibited Acts
. An Agent or a Lender shall not have actual knowledge that either
(a) any Prohibited Act (as defined in the Collateral Value Policy) has been committed by any Person
or (b) any Covered Loan has failed at any time to comply in any material respect with any
applicable laws, statutes, rules or regulations unless such Covered Loan has been repurchased by
the Originator.
(i)
Sufficient Capital
. Lender shall have received capital contributions from its
members (which contributions may be made at such members sole discretion) and/or proceeds from the
sale of its notes issued pursuant to the Indenture or pursuant to other debt offerings (which offerings and placement of notes or other debt shall be at Lenders sole
discretion) in an amount sufficient to fund the requested Tranche.
46
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Section 6.01
Representations and Warranties
. The Borrower hereby represents and warrants to the
Agents and the Lenders as follows:
(a)
Organization, Good Standing, Etc.
Each of the Subject Imperial Affiliates (i) is a
limited liability company duly organized, validly existing and in good standing under the laws of
the state or jurisdiction of its organization, (ii) has all requisite power and authority to
conduct its business as now conducted and as presently contemplated and to make the borrowings
hereunder, and to execute and deliver each Loan Document to which it is a party, and to consummate
the transactions contemplated thereby, and (iii) is duly qualified to do business and is in good
standing in each jurisdiction in which the character of the properties owned or leased by it or in
which the transaction of its business makes such qualification necessary.
(b)
Authorization, Etc.
The execution, delivery and performance by the Subject
Imperial Affiliates of each Loan Document and each Transaction Document to which it is or will be a
party, (i) have been duly authorized by all necessary action, (ii) do not and will not contravene
any of its Governing Documents or any applicable Requirement of Law or any Contractual Obligation
binding on or otherwise affecting it or any of its properties, (iii) do not and will not result in
or require the creation of any Lien (other than pursuant to any Loan Document) upon or with respect
to any of its properties, and (iv) do not and will not result in any default, noncompliance,
suspension, revocation, impairment, forfeiture or nonrenewal of any permit, license, authorization
or approval applicable to its operations or any of its properties.
(c)
Governmental Approvals
. No authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority is required in connection with the due
execution, delivery and performance by the Subject Imperial Affiliates of any Loan Document or
Transaction Document to which it is or will be a party.
(d)
Enforceability of Loan Documents
. This Agreement is, and each other Loan Document
and Transaction Document to which a Subject Imperial Affiliate is or will be a party, when
delivered hereunder, will be, a legal, valid and binding obligation of such Person, enforceable
against such Person in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting
creditors rights generally.
(e)
Capitalization; Subsidiaries
. On the Effective Date, after giving effect to the
transactions contemplated hereby to occur on the Effective Date, the authorized Equity Interests of
the Borrower and the issued and outstanding Equity Interests of the Borrower are as set forth on
Schedule 6.01(e). All of the issued and outstanding Equity Interests of the Borrower have been
validly issued and are fully paid and nonassessable, and the holders thereof are not entitled to any preemptive, first refusal or other similar rights.. Except as
described on Schedule 6.01(e), as of the Effective Date, there are no outstanding debt or equity
securities of the Borrower and no outstanding obligations of the Borrower convertible into or exchangeable
47
for, or warrants, options or other rights for the purchase or acquisition from the
Borrower, or other obligations of the Borrower to issue, directly or indirectly, Equity Interests
of the Borrower. The Borrower has no Subsidiaries.
(f)
Litigation; Commercial Tort Claims
. There is no pending or, to the best knowledge
of any Subject Imperial Affiliate, threatened action, suit or proceeding affecting any Subject
Imperial Affiliate or any of its properties before any court or other Governmental Authority or any
arbitrator that (A) if adversely determined, could reasonably be expected to have a Material
Adverse Effect or (B) relates to this Agreement or any other Loan Document or any transaction
contemplated hereby or thereby and (ii) as of the Effective Date, the Borrower does not hold any
commercial tort claims in respect of which a claim has been filed in a court of law or a written
notice by an attorney has been given to a potential defendant.
(g)
Financial Condition
. The Financial Statements, copies of which have been delivered
to each Agent and each Lender, fairly present the consolidated financial condition of Imperial and
its Subsidiaries as at the respective dates thereof and the consolidated results of operations of
Imperial and its Subsidiaries for the fiscal periods ended on such respective dates, all in
accordance with GAAP, and since December 31, 2007 no event or development has occurred that has had
or could reasonably be expected to have a Material Adverse Effect.
(h)
Compliance with Law, Etc.
No Subject Imperial Affiliate is in violation of (i) any
of its Governing Documents, (ii) any domestic or foreign Requirement of Law, including, without
limitation, any statute, legislation or treaty, any guideline, directive, rule, standard,
requirement, policy, order, judgment, injunction, award or decree of any Governmental Authority, in
each case, applicable to it or any of its property or assets (including any insurance premium
financing laws), or (iii) any material term of any Contractual Obligation (including, without
limitation, any Material Contract) binding on or otherwise affecting it or any of its properties,
and no Default or Event of Default has occurred and is continuing.
(i)
ERISA
. The Borrower does not contribute to, sponsors, maintains or has an
obligation to contribute to or maintain any Multiemployer Plan or any defined benefit plan and has
not at any time prior to the date hereof established, sponsored or maintained, been a party to and
has not at any time prior to the date hereof contributed or been obligated to contribute to or
maintain any Multiemployer Plan or any defined benefit plan.
(j)
Taxes, Etc.
All Federal, state and local tax returns and other reports required by
applicable Requirements of Law to be filed by the Borrower have been filed, or extensions have been
obtained, and all taxes, assessments and other governmental charges imposed upon the Borrower or
any property of the Borrower and which have become due and payable on or prior to the date hereof
have been paid.
(k)
Regulations T, U and X
. The Borrower is not or will not be engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation T, U or X), and no proceeds of any Loan will be used
to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing
or carrying any margin stock.
48
(l)
Nature of Business
. The Borrower is not engaged in any business other than the
purchase or other acquisition of Eligible Insurance Premium Loans from the Originator.
(m)
Adverse Agreements, Etc.
None of the Subject Imperial Affiliates are a party to
any Contractual Obligation or subject to any restriction or limitation in any Governing Document or
any judgment, order, regulation, ruling or other requirement of a court or other Governmental
Authority, which (either individually or in the aggregate) has, or in the future could reasonably
be expected (either individually or in the aggregate) to have, a Material Adverse Effect.
(n)
Permits, Etc.
Each of the Subject Imperial Affiliates has, and is in compliance
with, all permits, licenses, authorizations, approvals, entitlements and accreditations required
for such Person lawfully to own, lease, manage or operate, or to acquire, each business currently
owned, leased, managed or operated, or to be acquired, by such Person (including, without
limitation, all insurance premium financing permits and licenses required in the Applicable
Licensed States). No condition exists or event has occurred which, in itself or with the giving of
notice or lapse of time or both, would result in the suspension, revocation, impairment, forfeiture
or non-renewal of any such permit, license, authorization, approval, entitlement or accreditation,
and there is no claim that any thereof is not in full force and effect.
(o)
Properties
. The Borrower has good and marketable title to, or valid participation
interests, in all of its property and assets, free and clear of all Liens, except Permitted Liens.
(p)
Full Disclosure
. Each Subject Imperial Affiliate has disclosed to the Agents all
agreements, instruments and corporate or other restrictions to which it is subject, and all other
matters known to it, that, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect. None of the other reports, financial statements, certificates or
other information furnished by or on behalf of any Subject Imperial Affiliate to the Agents in
connection with the negotiation of this Agreement or delivered hereunder (as modified or
supplemented by other information so furnished) contains any material misstatement of fact or omits
to state any material fact necessary to make the statements therein, in the light of the
circumstances under which it was made, not misleading;
provided
that, with respect to
projected financial information, the Borrower represents only that such information was prepared in
good faith based upon assumptions believed to be reasonable at the time prepared. There is no
contingent liability or fact that could reasonably be expected to have a Material Adverse Effect
which has not been set forth in a footnote included in the Financial Statements or a Schedule
hereto.
(q)
Insurance
. The Borrower keeps its property adequately insured and maintains (i)
insurance to such extent and against such risks, including fire, as is customary with companies in
the same or similar businesses, (ii) workmens compensation insurance in the amount required by applicable law, (iii) public liability insurance, which shall include
product liability insurance, in the amount customary with companies in the same or similar business
against claims for personal injury or death on properties owned, occupied or controlled by it, and
(iv) such other insurance as may be required by law or as may be reasonably required by the
49
Collateral Agent (including, without limitation, against larceny, embezzlement or other criminal
misappropriation). Schedule 6.01(q) sets forth a list of all insurance maintained by the Borrower
on the Effective Date.
(r)
Use of Proceeds
. Except as provided for in Section 2.10, the proceeds of the Loans
shall be used to purchase or otherwise acquire Eligible Insurance Premium Loans and Participations
from the Originator in accordance with and as contemplated by this Agreement, the Master
Participation Agreement, the Insurance Premium Loan Sale and Assignment Agreements and the other
Loan Documents and Transaction Documents.
(s)
Solvency
. After giving effect to the transactions contemplated by this Agreement
and before and after giving effect to each Loan, the Borrower is Solvent.
(t)
Location of Bank Accounts
. Schedule 6.01(t) sets forth a complete and accurate
list as of the Effective Date of all deposit, checking and other bank accounts, all securities and
other accounts maintained with any broker dealer and all other similar accounts maintained by the
Borrower, together with a description thereof (i.e., the bank or broker dealer at which such
deposit or other account is maintained and the account number and the purpose thereof).
(u)
Intellectual Property
. Set forth on Schedule 6.01(u) is a complete and accurate
list as of the Effective Date of all material licenses, permits, patents, patent applications,
trademarks, trademark applications, service marks, tradenames, copyrights, copyright applications,
franchises, authorizations, non-governmental licenses and permits and other intellectual property
rights of the Borrower.
(v)
Material Contracts
. Set forth on Schedule 6.01(v) is a complete and accurate list
as of the Effective Date of all Material Contracts of the Borrower, showing the parties and subject
matter thereof and amendments and modifications thereto. Each such Material Contract (i) is in full
force and effect and is binding upon and enforceable against the Borrower that is a party thereto
and, to the best knowledge of the Borrower, all other parties thereto in accordance with its terms,
(ii) has not been otherwise amended or modified, and (iii) is not in default due to the action of
the Borrower or, to the best knowledge of the Borrower, any other party thereto.
(w)
Investment Company Act
. The Borrower is not (i) an investment company or an
affiliated person or promoter of, or principal underwriter of or for, an investment
company, as such terms are defined in the Investment Company Act of 1940, as amended, or (ii)
subject to regulation under any Requirement of Law that limits in any respect its ability to incur
Indebtedness or which may otherwise render all or a portion of the Obligations unenforceable.
(x)
Bulk Sales Act
. No transaction contemplated by this Agreement or any of the other
Loan Documents or Transaction Documents requires compliance with, or will be subject to avoidance
under, any bulk sales act or similar law.
(y)
No Bankruptcy Filing
. None of the Subject Imperial Affiliates is contemplating
either an Insolvency Proceeding or the liquidation of all or a major portion of such
50
Persons assets or property, and none of the Subject Imperial Affiliates has any knowledge of any Person
contemplating an Insolvency Proceeding against it.
(z)
Separate Existence
.
(i) All customary formalities regarding the corporate existence of the Borrower has been at
all times since its formation and will continue to be observed.
(ii) The Borrower has at all times since its formation accurately maintained, and will
continue to accurately maintain, its financial statements, accounting records and other
organizational documents separate from those of any Affiliate of the Borrower and any other Person.
The Borrower has not at any time since its formation commingled, and will not commingle, its assets
with those of any of its Affiliates or any other Person. The Borrower has at all times since its
formation accurately maintained, and will continue to accurately maintain its own bank accounts and
separate books of account.
(iii) The Borrower has at all times since its formation paid, and will continue to pay, its
own liabilities from its own separate assets.
(iv) The Borrower has at all times since its formation identified itself, and will continue to
identify itself, in all dealings with the public, under its own name and as a separate and distinct
Person. The Borrower has not at any time since its formation identified itself, or will identify
itself, as being a division or a part of any other Person.
(aa)
Name; Jurisdiction of Organization; Organizational ID Number; Chief Place of
Business; Chief Executive Office; FEIN
. Schedule 6.01(aa) sets forth a complete and accurate
list as of the date hereof of (i) the exact legal name of the Borrower, (ii) the jurisdiction of
organization of the Borrower, (iii) the organizational identification number of the Borrower (or
indicates that the Borrower has no organizational identification number), (iv) each place of
business of the Borrower, (v) the chief executive office of the Borrower and (vi) the federal
employer identification number of the Borrower.
(bb)
Locations of Collateral
. There is no location at which the Borrower has any
Collateral other than those locations listed on Schedule 6.01(bb).
(cc)
Security Interests
. Each Security Agreement and Guarantor Security Agreement
creates in favor of the Collateral Agent, for the benefit of the Lenders, a legal, valid and
enforceable security interest in the Collateral secured thereby. Upon the filing of the UCC-1
financing statements described in Section 5.01(d)(iv), such security interests in and Liens on the
Collateral granted thereby shall be perfected, first priority security interests, and no further
recordings or filings are or will be required in connection with the creation, perfection or
enforcement of such security interests and Liens, other than the filing of continuation
statements in accordance with applicable law.
(dd)
Anti-Terrorism Laws
.
(i)
General
. Neither the Borrower nor or any Affiliate of the Borrower, is in
violation of any Anti-Terrorism Law or engages in or conspires to engage in any
51
transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the
prohibitions set forth in any Anti-Terrorism Law.
(ii)
Executive Order No. 13224
. Neither the Borrower, nor or any Affiliate of the
Borrower, or their respective agents acting or benefiting in any capacity in connection with the
Loans or other transactions hereunder, is any of the following (each, a
Blocked Person
):
(A) a Person that is listed in the annex to, or is otherwise subject to the provisions of, the
Executive Order No. 13224;
(B) a Person owned or controlled by, or acting for or on behalf of, any Person that is listed
in the annex to, or is otherwise subject to the provisions of, the Executive Order No. 13224;
(C) a Person or entity with which any Lender is prohibited from dealing or otherwise engaging
in any transaction by any Anti-Terrorism Law;
(D) a Person or entity that commits, threatens or conspires to commit or supports terrorism
as defined in the Executive Order No. 13224;
(E) a Person or entity that is named as a specially designated national on the most current
list published by the U.S. Treasury Department Office of Foreign Asset Control at its official
website or any replacement website or other replacement official publication of such list, or
(F) a Person or entity who is affiliated or associated with a person or entity listed above.
(iii) Neither the Borrower or to the knowledge of the Borrower, any of its agents acting in
any capacity in connection with the Loans or other transactions hereunder (i) conducts any business
or engages in making or receiving any contribution of funds, goods or services to or for the
benefit of any Blocked Person, or (ii) deals in, or otherwise engages in any transaction relating
to, any property or interests in property blocked pursuant to the Executive Order No. 13224.
(ee)
Loan Origination
. All Insurance Premium Loans acquired by the Borrower (actually
or beneficially through a participation) with proceeds from the Loan are originated in accordance
with facts and assumptions identified in the Local Counsel Opinions, the requirements of this
Agreement, the Collateral Value Policy, the Loan Documents, the Transactions Documents, all
Requirements of Law (including those identified in the Local Counsel Opinions), and the investment procedures and criteria of the Originator and the
Borrower consistent with past practices.
(ff)
Schedules
. All of the information which is required to be scheduled to this
Agreement is set forth on the Schedules attached hereto, is correct and accurate and does not omit
to state any information material thereto.
52
(gg)
Representations and Warranties in Documents; No Default
. All representations and
warranties set forth in this Agreement and the other Loan Documents are true and correct in all
material respects at the time as of which such representations were made and on the Effective Date
(except such materiality qualifier shall not be applicable with respect to matters involving (i)
the Collateral, (ii) the ability of the Agents and the Lenders to realize upon the Collateral, or
(iii) the ability of the Agents and the Lenders to receive Collections from the Collateral). No
Event of Default has occurred and is continuing and no condition exists which constitutes a Default
or an Event of Default.
ARTICLE VII
COVENANTS OF THE BORROWER
Section 7.01
Affirmative Covenants
. So long as any principal of or interest on any Loan or any
other Obligation (whether or not due) shall remain unpaid or the Lender shall have any Commitment
hereunder, the Borrower will, unless the Lender (or in the event there is more than one Lender
hereunder, the Required Lenders) shall otherwise consent in writing:
(a)
Reporting Requirements
. Furnish to each Agent and each Lender:
(i) as soon as available and in any event within 45 days after the end of each fiscal quarter
of Imperial and its Subsidiaries and the Borrower commencing with the first fiscal quarter of
Imperial and its Subsidiaries and the Borrower ending after the Effective Date, (A) consolidated
and consolidating balance sheets, consolidated and consolidating statements of operations and
retained earnings and consolidated and consolidating statements of cash flows of Imperial and its
Subsidiaries as at the end of such quarter and (B) balance sheets, statements of operations and
retained earnings and cash flows of the Borrower as at the end of such quarter, for the period
commencing at the end of the immediately preceding Fiscal Year and ending with the end of such
quarter, setting forth in each case in comparative form the figures for the corresponding date or
period set forth in the financial statements for the immediately preceding Fiscal Year, all in
reasonable detail and certified by an Authorized Officer of Imperial and the Borrower, as
applicable, as fairly presenting, in all material respects, the financial position of Imperial and
its Subsidiaries and the Borrower, as applicable, as of the end of such quarter and the results of
operations and cash flows of Imperial and its Subsidiaries for such quarter, in accordance with
GAAP applied in a manner consistent with that of the most recent audited financial statements of
Imperial and, its Subsidiaries and the Borrower, as applicable, furnished to the Agents and the
Lender, subject to the absence of footnotes and normal year-end adjustments;
(ii) (x) as soon as available, and in any event within (1) 150 days after the end of the 2009
Fiscal Year of the Borrower and (2) 150 days after the end of each other Fiscal Year of the
Borrower, balance sheets, statements of operations and retained earnings and cash flows of the
Borrower at the end of such Fiscal Year, setting forth in each case in comparative form the figures
for the corresponding date or period set forth in the financial statements for the immediately
preceding Fiscal Year, all in reasonable detail and prepared in accordance with GAAP, and
accompanied by a report and an unqualified opinion, prepared in accordance with generally accepted
auditing standards, of independent certified public
53
accountants of recognized standing selected by the Borrower and satisfactory to the Agents (which opinion shall be without (A) a going concern
or like qualification or exception, (B) any qualification or exception as to the scope of such
audit, or (C) any qualification which relates to the treatment or classification of any item and
which, as a condition to the removal of such qualification, would require an adjustment to such
item), together with a written statement of such accountants (1) to the effect that, in making the
examination necessary for their certification of such financial statements, they have not obtained
any knowledge of the existence of an Event of Default or a Default and (2) if such accountants
shall have obtained any knowledge of the existence of an Event of Default or such Default,
describing the nature thereof, and (y) as soon as available, and in any event within 240 days after
the end of each Fiscal Year of Imperial and its Subsidiaries, consolidated and consolidating
balance sheets, consolidated and consolidating statements of operations and retained earnings and
consolidated and consolidating statements of cash flows of Imperial and its Subsidiaries as at the
end of such Fiscal Year, setting forth in each case in comparative form the figures for the
corresponding date or period set forth in the financial statements for the immediately preceding
Fiscal Year, all in reasonable detail and prepared in accordance with GAAP, and accompanied by a
report and an unqualified opinion, prepared in accordance with generally accepted auditing
standards, of independent certified public accountants of recognized standing selected by Imperial
and satisfactory to the Agents (which opinion shall be without (A) a going concern or like
qualification or exception, (B) any qualification or exception as to the scope of such audit, or
(C) any qualification which relates to the treatment or classification of any item and which, as a
condition to the removal of such qualification, would require an adjustment to such item), together
with a written statement of such accountants (1) to the effect that, in making the examination
necessary for their certification of such financial statements, they have not obtained any
knowledge of the existence of an Event of Default or a Default and (2) if such accountants shall
have obtained any knowledge of the existence of an Event of Default or such Default, describing the
nature thereof;
(iii) as soon as available, and in any event within 30 days after the end of each fiscal month
of Imperial and its Subsidiaries and the Borrower commencing with the first fiscal month of
Imperial and its Subsidiaries and the Borrower ending after the Effective Date, (A) internally
prepared consolidated and consolidating balance sheets, consolidated and consolidating statements
of operations and retained earnings and consolidated and consolidating statements of cash flows of
Imperial and its Subsidiaries as at the end of such fiscal month and (B) internally prepared
consolidated and consolidating balance sheets, consolidated and consolidating statements of
operations and retained earnings and consolidated and consolidating statements of cash flows of the
Borrower as at the end of such fiscal month, and for the period commencing at the end of the
immediately preceding Fiscal Year and ending with the end of such fiscal month, all in reasonable
detail and certified by an Authorized Officer of Imperial and the Borrower, as applicable, as
fairly presenting, in all material respects, the financial position of Imperial and its Subsidiaries and the Borrower as at the end of such fiscal month and the
results of operations, retained earnings and cash flows of the Imperial and its Subsidiaries and
the Borrower for such fiscal month, in accordance with GAAP applied in a manner consistent with
that of the most recent audited financial statements furnished to the Agents and the Lender,
subject to the absence of footnotes and normal year-end adjustments;
(iv) simultaneously with the delivery of the financial statements of Imperial and its
Subsidiaries and the Borrower required by clauses (i), (ii) and (iii) of this
54
Section 7.01(a), a certificate of an Authorized Officer of Imperial and the Borrower, as applicable, stating that such
Authorized Officer has reviewed the provisions of this Agreement and the other Loan Documents and
has made or caused to be made under his or her supervision a review of the condition and operations
of Imperial and its Subsidiaries and the Borrower during the period covered by such financial
statements with a view to determining whether Imperial and its Subsidiaries and the Borrower were
in compliance with all of the provisions of this Agreement and such Loan Documents at the times
such compliance is required hereby and thereby, and that such review has not disclosed, and such
Authorized Officer has no knowledge of, the existence during such period of an Event of Default or
Default or, if an Event of Default or Default existed, describing the nature and period of
existence thereof and the action which Imperial and its Subsidiaries and the Borrower propose to
take or have taken with respect thereto;
(v) as soon as available and in any event within 10 days after the end of each fiscal month of
the Borrower commencing with the first fiscal month of the Borrower ending after the Effective
Date, a report in form and detail satisfactory to the Agents and certified by an Authorized Officer
of the Borrower as being accurate and complete (A) listing all Insurance Premium Loans owned by the
Borrower and identifying whether such Insurance Premium Loan is owned pursuant to the Master
Participation Agreement or an Insurance Premium Loan Sale and Assignment Agreement and (B)
attaching the most recently updated Loan Schedule, which shall include, without limitation, the
Insurance Premium Maturity Date and each insurance premium payment date, in each case, for the
applicable Insurance Premium Loan;
(vi) as soon as available and in any event within 3 Business Days after the end of each week
commencing with the first week ending after the Effective Date, a Borrowing Base Certificate,
current as of the close of business on the Friday of the immediately preceding week, supported by
schedules showing the derivation thereof and containing such detail and other information as any
Agent may request from time to time, provided that (A) the Borrowing Base set forth in the
Borrowing Base Certificate shall be effective from and including the date such Borrowing Base
Certificate is duly received by the Agents but not including the date on which a subsequent
Borrowing Base Certificate is received by the Agents, unless any Agent disputes the eligibility of
any property included in the calculation of the Borrowing Base or the valuation thereof by notice
of such dispute to the Borrower and (B) in the event of any dispute about the eligibility of any
property included in the calculation of the Borrowing Base or the valuation thereof, such Agents
good faith judgment shall control;
(vii) Intentionally Omitted;
(viii) promptly after submission to any Governmental Authority, all documents and information
furnished to such Governmental Authority in connection with any investigation of any Subject
Imperial Affiliate other than routine inquiries by such Governmental Authority;
(ix) as soon as possible, and in any event within 3 days after the occurrence of an Event of
Default or Default or the occurrence of any event or development that
55
could reasonably be expected to have a Material Adverse Effect, the written statement of an Authorized Officer of the Borrower
setting forth the details of such Event of Default or Default or other event or development having
a Material Adverse Effect and the action which the Borrower proposes to take with respect thereto;
(x) (A) promptly after the commencement thereof but in any event not later than 5 days after
service of process with respect thereto on, or the obtaining of knowledge thereof by, any Subject
Imperial Affiliate, notice of each action, suit or proceeding before any court or other
Governmental Authority or other regulatory body or any arbitrator which, if adversely determined,
could reasonably be expected have a Material Adverse Effect and (B) as soon as possible and in any
event within three Business Days of a Subject Imperial Affiliate Borrowers, notice of (x) material
litigation, investigation or proceeding related to the Imperial or any Affiliate of Imperial, and
in connection with its insurance premium or life settlement business, the Insurance Premium Loans
acquired by the Borrower (actually or beneficially through a participation) with proceeds from the
Loan or any of the Loan Documents or the Transaction Documents and in each case, not previously
disclosed to the Lender, and (y) any material adverse development in previously disclosed
litigation, investigation or proceeding relating to the Imperial or any of its Affiliates and in
connection with its insurance premium or life settlement business, the Insurance Premium Loans
acquired by the Borrower (actually or beneficially through a participation) with proceeds from the
Loan or any of the Loan Documents or the Transaction Documents;
(xi) as soon as possible and in any event within 5 days after execution, receipt or delivery
thereof, copies of any material notices that the Borrower executes or receives in connection with
any Material Contract;
(xii) as soon as possible and in any event within 5 days after the delivery thereof to the
Borrowers Board of Managers or Member Manager, as the case may be, copies of the monthly reports
so delivered;
(xiii) promptly upon receipt thereof, copies of all financial reports (including, without
limitation, management letters), if any, submitted to any Subject Imperial Affiliate by its
auditors in connection with any annual or interim audit of the books thereof;
(xiv) promptly upon receipt thereof, copies of all notices, reports and other information
received from the Originator pursuant to the Master Participation Agreement or from the escrow
agent under each Escrow Agreement;
(xv) promptly upon receipt thereof, copies of all notices, reports and other information from
the trustee under each Trust Agreement, of any such other event or circumstance to which such
Person has actual knowledge or notice that could reasonably be expected to materially and adversely
affect the validity, collectability or enforceability of any Life Insurance Policy, including,
without limitation, any notices from an Insurance Provider with respect to terminations,
exclusions, default notices and cancellations of such Life Insurance Policy;
56
(xvi) promptly upon receipt thereof, copies of all notices, reports and other information from
the Collateral Value Insurer and from the Contingent Collateral Value Insurer, of any such other
event or circumstance to which such Person has actual knowledge or notice that could reasonably be
expected to adversely affect the validity, collectability or enforceability of the Collateral Value
Policy or the Contingent Collateral Value Policy, as applicable, including, without limitation, any
notices from the Collateral Value Insurer or the Contingent Collateral Value Insurer, as
applicable, with respect to terminations, exclusions, default notices and cancellations of such
Collateral Value Policy or such Contingent Collateral Value Policy, as applicable, or the
commission of any Prohibited Act (as defined in the Collateral Value Policy);
(xvii) promptly upon receipt thereof, copies of all notices, reports and other information
from the Servicer of any such other event or circumstance to which such Person has actual knowledge
or notice that could reasonably be expected to materially and adversely affect the financing,
collectability or enforceability of any Insurance Premium Loan acquired by the Borrower (actually
or beneficially through a participation) with proceeds from the Loan, including without limitation,
by any fraudulent activity or Prohibited Acts (as defined in the Collateral Value Policy) on the
part of any insurance agent or broker related to the origination of the related Insurance Premium
Loan;
(xviii) promptly after becoming aware thereof, notice of any other event or circumstance
relating to the Borrower, the Originator or any their Affiliates, and in connection with its
insurance premium or life settlement business, the Insurance Premium Loans acquired by the Borrower
(actually or beneficially through a participation) with proceeds from the Loan, any of the
Transaction Documents, the Collateral Value Policy or the Contingent Collateral Value Policy that
could reasonably be expected to have a Material Adverse Effect (including any change in law with
respect to the origination, financing, acquisition of insurance premium loans and/or life insurance
policies in any Applicable Licensed State or Applicable Non-Licensed State otherwise);
(xix) on the Effective Date, Local Counsel Opinions with respect to each applicable
jurisdiction and updated Local Counsel Opinions at least annually thereafter;
(xx) as soon as available and in any event within 3 Business Days after the end of each week
commencing with the first week ending after the Effective Date, a report setting forth the details
of each Eligible Insurance Premium Loan acquired by the Borrower (actually or beneficially through
a participation) with proceeds from the Loan for which the related Premium Finance Borrower is a
trust that does not have an institutional trustee or financial institution acceptable to the Agents
as trustee or co-trustee under the related Trust Agreement, including, without limitation, the issuance date, maturity date and outstanding
principal amount of each such Eligible Insurance Premium Loan;
(xxi) promptly upon receipt thereof, a copy of (i) each amendment to a Trust Agreement to
replace the Non-Corporate Trustee with an institutional trustee or financial institution acceptable
to the Agents and (ii) the final order of a court of competent jurisdiction approving such
amendment;
57
(xxii) promptly upon receipt thereof, and in any event within five (5) days of the anniversary
thereof, a copy of each updated Local Counsel Opinion prepared by outside local counsel to the
Originator or any Affiliate of the Originator qualified to practice in each jurisdiction in which
the Originator intends to make Eligible Insurance Premium Loans;
(xxiii) promptly upon request, such other information concerning the condition or operations,
financial or otherwise, of the Borrower as any Agent may from time to time may reasonably request.
(xxiv) Promptly upon receipt thereof, copies of all notices, reports and other information
received by the Originator from the escrow agent under each Escrow Agreement.
(b) Intentionally Omitted.
(c)
Compliance with Laws, Etc.
Comply with, and cause the Subject Imperial Affiliates
to comply with, all Requirements of Law (including, without limitation, all those which relate to
the origination, financing, acquisition and/or transfer of Insurance Premium Loans), judgments and
awards (including any settlement of any claim that, if breached, could give rise to any of the
foregoing), such compliance to include, without limitation, (i) paying before the same become
delinquent all taxes, assessments and governmental charges or levies imposed upon it or upon its
income or profits or upon any of its properties, and (ii) paying all lawful claims which if unpaid
might become a Lien or charge upon any of its properties, except to the extent contested in good
faith by proper proceedings which stay the imposition of any penalty, fine or Lien resulting from
the non-payment thereof and with respect to which adequate reserves have been set aside for the
payment thereof in accordance with GAAP.
(d)
Preservation of Existence, Etc.
Maintain and preserve its existence, rights and
privileges, and become or remain duly qualified and in good standing in each jurisdiction in which
the character of the properties owned or leased by it or in which the transaction of its business
makes such qualification necessary.
(e)
Keeping of Records and Books of Account
. Keep adequate records and books of
account, with complete entries made to permit the preparation of financial statements in accordance
with GAAP. Cause the Servicer to maintain and implement administrative and operating procedures
(including, without limitation, an ability to re-create records evidencing the Insurance Premium
Loans owned by the Borrower (actually or beneficially through a participation) in the event of the
destruction of the originals thereof) and keep and maintain all documents, books, records and other
information reasonably necessary or advisable for the collection of all Insurance Premium Loans
owned by the Borrower (actually or beneficially through a participation) and related security (including the applicable Life
Insurance Policies).
(f)
Inspection Rights
. Permit the agents and representatives of any Agent at any time
and from time to time during normal business hours, at the expense of the Borrower, to examine and
make copies of and abstracts from its records and books of account (including, without limitation,
to review and obtain copies of or make abstracts of the items
58
comprising the Loan Documentation Packages, and discuss matters relating to the Insurance Premium Loans owned by the Borrower
(actually or beneficially through a participation) and Life Insurance Policies and the performance
by such Person of its duties hereunder and under the Transaction Documents to which it is a party),
to visit and inspect its properties, to verify materials, leases, notes, accounts receivable,
deposit accounts and its other assets, to conduct audits or examinations and to discuss its
affairs, finances and accounts with any of its directors, officers, managerial employees,
independent accountants or any of its other representatives. In furtherance of the foregoing, the
Borrower hereby authorizes its independent accountants to discuss the affairs, finances and
accounts of such Person (independently or together with representatives of such Person) with the
agents and representatives of any Agent in accordance with this Section 7.01(f).
(g)
Maintenance of Properties, Etc.
Maintain and preserve all of its properties which
are necessary or useful in the proper conduct of its business in good working order and condition,
ordinary wear and tear excepted, and comply at all times with the provisions of all leases to which
it is a party as lessee or under which it occupies property, so as to prevent any loss or
forfeiture thereof or thereunder.
(h)
Maintenance of Insurance
. Maintain insurance with responsible and reputable
insurance companies or associations (including, without limitation, comprehensive general
liability, hazard, rent and business interruption insurance) with respect to its properties
(including all real properties leased or owned by it) and business, in such amounts and covering
such risks as is required by any Governmental Authority having jurisdiction with respect thereto or
as is carried generally in accordance with sound business practice by companies in similar
businesses similarly situated and in any event in amount, adequacy and scope reasonably
satisfactory to the Collateral Agent. All policies covering the Collateral are to be made payable
to the Collateral Agent for the benefit of the Agents and the Lenders, as its interests may appear,
in case of loss, under a standard non-contributory lender or secured party clause and are to
contain such other provisions as the Collateral Agent may require to fully protect the Lenders
interest in the Collateral and to any payments to be made under such policies. All certificates of
insurance are to be delivered to the Collateral Agent and the policies are to be premium prepaid,
with the loss payable and additional insured endorsement in favor of the Collateral Agent and such
other Persons as the Collateral Agent may designate from time to time, and shall provide for not
less than 30 days prior written notice to the Collateral Agent of the exercise of any right of
cancellation. If the Borrower fails to maintain such insurance, the Collateral Agent may arrange
for such insurance, but at the Borrowers expense and without any responsibility on the Collateral
Agents part for obtaining the insurance, the solvency of the insurance companies, the adequacy of
the coverage, or the collection of claims. Upon the occurrence and during the continuance of an
Event of Default, the Collateral Agent shall have the sole right, in the name of the Lender, the
Borrower, to file claims under any insurance policies, to receive, receipt and give acquittance for any
payments that may be payable thereunder, and to execute any and all endorsements, receipts, releases, assignments, reassignments or other documents that may be
necessary to effect the collection, compromise or settlement of any claims under any such insurance
policies.
(i)
Obtaining of Permits, Etc.
Cause the Subject Imperial Affiliates to and to itself
obtain, maintain and preserve and take all necessary action to timely renew, all
59
permits, licenses, authorizations, approvals, entitlements and accreditations which are necessary or useful in the
proper conduct of its respective business.
(j)
Trust Agreement
. Cause the Originator to require that the Premium Finance Borrower
shall have either (i) paid to the applicable Insurance Provider or (ii) placed into escrow under
the Trust Agreement pursuant to escrow arrangements satisfactory to the Agents, insurance premium
payments in an amount sufficient to result in the applicable Life Insurance Policy remaining
continuously in effect through the sixtieth (60
th
) day after the Insurance Premium Loan
Maturity Date; provided, however, that this covenant shall be deemed to be satisfied if the
aggregate amount of premium paid to the applicable Insurance Provider with respect to the related
Life Insurance Policy prior to the lapse of such Life Insurance Policy equals the Total Life
Insurance Premium set forth in the applicable Coverage Certificate.
(k)
Further Assurances
. Take such action and execute, acknowledge and deliver to take
such action and execute, acknowledge and deliver, at its sole cost and expense, such agreements,
instruments or other documents as any Agent may require from time to time in order (i) to carry out
more effectively the purposes of this Agreement and the other Loan Documents and Transaction
Documents, (ii) to subject to valid and perfected first priority Liens any of the Collateral or any
other property of the Borrower, (iii) to establish and maintain the validity and effectiveness of
any of the Loan Documents and Transaction Documents and the validity, perfection and priority of
the Liens intended to be created thereby, and (iv) to better assure, convey, grant, assign,
transfer and confirm unto each Agent and each Lender the rights now or hereafter intended to be
granted to it under this Agreement or any other Loan Document or Transaction Document. In
furtherance of the foregoing, to the maximum extent permitted by applicable law, the Borrower (i)
authorizes each Agent to execute any such agreements, instruments or other documents in the
Borrowers name and to file such agreements, instruments or other documents in any appropriate
filing office, (ii) authorizes each Agent to file any financing statement required hereunder or
under any other Loan Document or Transaction Document, and any continuation statement or amendment
with respect thereto, in any appropriate filing office without the signature of the Borrower, and
(iii) ratifies the filing of any financing statement, and any continuation statement or amendment
with respect thereto, filed without the signature of the Borrower prior to the date hereof.
(l)
Change in Collateral; Collateral Records
. (i) Give the Collateral Agent not less
than 30 days prior written notice of any change in the location of any Collateral, other than to
locations set forth on Schedule 6.01(bb) and with respect to which the Collateral Agent has filed
financing statements and otherwise fully perfected its Liens thereon, (ii) advise the Collateral
Agent promptly, in sufficient detail, of any material adverse change relating to the type, quantity
or quality of the Collateral or the Lien granted thereon and (iii) execute and deliver to the
Collateral Agent for the benefit of the Agents and the Lenders from time to time, solely for
the Collateral Agents convenience in maintaining a record of Collateral, such written
statements and schedules as the Collateral Agent may reasonably require, designating, identifying
or describing the Collateral.
(m)
Subordination
. Cause all Indebtedness and other obligations now or hereafter owed
by it to any of its Affiliates, to be subordinated in right of payment and
60
security to the Indebtedness and other Obligations owing to the Agents and the Lenders in accordance with a
subordination agreement in form and substance satisfactory to the Agents.
(n)
Fiscal Year
. Cause the Fiscal Year of the Borrower to end on December 31st of each
calendar year unless the Agents consent to a change in such Fiscal Year (and appropriate related
changes to this Agreement).
(o)
Collections
.
(i) On the Business Day of such receipt, remit (or cause to be remitted) to the Collection
Account all Collections with respect to Insurance Premium Loans owned by the Borrower, the
Collateral Value Policy and the Contingent Collateral Value Policy, if any, received directly by
the Borrower, the Originator or the Servicer; and
(ii) cause the Servicer to include in the Loan Documentation Package an instruction that all
Premium Finance Borrowers and Insurance Providers will cause all payments and Collections in
respect of the Insurance Premium Loans to be deposited directly to the Collection Account.
(p)
Servicer
. Cause all Servicing Fees owing to the Servicer under the Servicing
Agreement to be timely paid when due and payable under the Servicing Agreement. Maintain the
Servicing Agreement in full force and effect.
(q)
Insurance Collateral Agent
. Cause all fees owing to the Insurance Collateral Agent
under the Collateral Agency Agreement to be timely paid when due and payable under the Collateral
Agency Agreement. Maintain the Collateral Agency Agreement in full force and effect.
(r)
Use of Proceeds/Purchase of Loans
. Except as provided for in Section 2.10, use the
proceeds of the Term Loans made hereunder solely to purchase or otherwise acquire Insurance Premium
Loans from the Originator in accordance with and as contemplated by the terms of the Master
Participation Agreement, the Insurance Premium Loan Sale and Assignment Agreements and the other
Loan Documents and Transaction Documents and, subject to Section 5.02
provided
,
however
, that the Borrower may not and shall not use the proceeds of any Term Loan herein
to acquire any Insurance Premium Loan unless such Insurance Premium Loan is an Eligible Insurance
Premium Loan and is a Covered Loan as evidenced by a Coverage Certificate in an amount equal to the
full amount of the Term Loan requested with respect thereto.
(s)
Separateness
. The Borrower shall (i) have the Servicer act as agent of the
Borrower solely through the Servicing Agreement or express agencies created by arms-length
agreement, as the case may be; provided that the Servicer fully discloses to any third party
the agency relationship with the Borrower; provided further that it receives fair compensation
or compensation consistent with regulatory requirements, as appropriate, from the Borrower for the
services provided;
61
(ii) allocate all overhead on the basis of actual use to the extent practicable and, to the
extent such allocation is not practicable, on a basis reasonably related to actual use;
(iii) ensure that all of its actions are duly authorized by its authorized personnel, as
appropriate and in accordance with its Governing Documents;
(iv) maintain the Borrowers books and records separately from those of any other Person, use
separate stationery bearing the name Imperial PFC Financing II, LLC in all correspondence and use
separate invoices and checks, as applicable;
(v) prepare financial statements for itself, and for itself on a consolidated basis, in each
case separate from the financial statements of any other Person;
(vi) at all times, act solely in its own name and through its duly authorized officers or
agents, in order to maintain an arms-length relationship with all other Persons and shall not
enter into any contract, agreement or arrangement with any other Person except (A) as contemplated
by or provided for under the terms of any of the Loan Documents, or (B) on terms and conditions at
least as favorable to the Borrower as would be obtainable by the Borrower at the relevant time in a
comparable arms-length transaction or series of transactions with a Person other than an Affiliate
thereof, as determined by the Borrower;
(vii) conduct its business solely in its own name so as to not mislead third parties as to the
identity of the entity with which such third parties are conducting business, and shall use all
reasonable efforts to avoid the appearance that it is conducting business on behalf of any other
Person or that the assets of the Borrower are directly available to pay the creditors of any other
Person;
(viii) maintain its assets in such a manner that it is not costly or difficult to segregate,
identify or ascertain such assets;
(ix) correct any misunderstanding known to it regarding its separate identity from any other
Person;
(x) as of the Effective Date and the date of delivery of any Notice of Borrowing, have
adequate capital in light of its then contemplated business operations and for the normal
obligations reasonably foreseeable in a business of its then size and character; and
(xi) observe strictly all organizational and procedural formalities required by this
Agreement, its Governing Documents, and any Requirement of Law, as the case may be.
(t)
Collateral Value Policy and Contingent Collateral Value Policy Payments
. Cause all
payments made by the Collateral Value Insurer under the Collateral Value Policy or by the
Contingent Collateral Value Insurer under the Contingent Collateral Value Policy to be directly
deposited in the Collection Account and be applied pursuant to Section 2.05(d) or Section 4.04(b),
as applicable.
62
(u)
Collateral Value Policy and Contingent Collateral Value Policy
. Take all actions
necessary or required by the Agents to maintain the Collateral Value Policy and the Contingent
Collateral Value Policy in full force and effect and receive timely payment from the Collateral
Value Insurer pursuant to the Collateral Value Policy or by the Contingent Collateral Value Insurer
under the Contingent Collateral Value Policy, including, without limitation, (i) filing each Proof
of Loss (as defined in the Collateral Value Policy) at the times and in the proper form required by
the Collateral Value Policy or the Contingent Collateral Value Policy, as applicable, (ii)
maintaining the related Life Insurance Policy with respect to the applicable Insurance Premium Loan
in full force and effect at all times required by the Collateral Value Policy or the Contingent
Collateral Value Policy, as applicable, (iii) notifying and instructing the Remarketing Agent (as
defined in the Collateral Value Policy) to sell or otherwise dispose of the related Life Insurance
Policy with respect to the applicable Insurance Premium Loan at the times required by the
Collateral Value Policy or the Contingent Collateral Value Policy, as applicable; and (iv)
delivering to the Collateral Value Insurer all notices required pursuant to the Collateral Value
Policy or the Contingent Collateral Value Policy, as applicable, each at the times required
thereunder, including without limitation, pursuant to Section VI of the Collateral Value Policy and
Section VIII of the Contingent Collateral Value Policy.
(v)
Projections
. Commencing on the first business day of the first week following the
effectiveness of this Agreement and the first business day of each week thereafter, Borrower will
provide the Administrative Agent with a rolling thirty (30) day projection of Borrowers purchases
of Participations and/or Eligible Insurance Premium Loans as contemplated by this Agreement, in
form and substance reasonably acceptable to Administrative Agent.
(w)
Back-Up Servicing Agreement
. The Borrower shall have entered into the Back-Up
Servicing Agreement with the Back-Up Servicer.
(x)
Indemnity Escrow Agreement
. Not later than thirty (30) days after the Effective
Date, the Borrower shall have entered into the Indemnity Escrow Agreement with the Escrow Agent and
Agents.
Section 7.02
Negative Covenants
. So long as any principal of or interest on any Loan or any other
Obligation (whether or not due) shall remain unpaid or the Lender shall have any Commitment
hereunder, the Borrower shall not, unless the Lender (of if there is more than one Lender
hereunder, the Required Lenders) shall otherwise consent in writing:
(a)
Liens, Etc.
Create, incur, assume or suffer to exist any Lien upon or with respect
to any of its properties, whether now owned or hereafter acquired; file or suffer to exist under
the Uniform Commercial Code or any Requirement of Law of any jurisdiction, a financing statement
(or the equivalent thereof) that names it as debtor; sign or suffer to exist any security agreement authorizing any secured party thereunder to file such financing statement
(or the equivalent thereof); sell any of its property or assets subject to an understanding or
agreement, contingent or otherwise, to repurchase such property or assets (including sales of
accounts receivable) with recourse to it or assign or otherwise transfer any account or other right
to receive income; other than, as to all of the above, Permitted Liens.
63
(b)
Indebtedness
. Create, incur, assume, guarantee or suffer to exist, or otherwise
become or remain liable with respect to any Indebtedness other than Permitted Indebtedness.
(c)
Fundamental Changes; Dispositions
. Wind-up, liquidate or dissolve, or merge,
consolidate or amalgamate with any Person, or convey, sell, lease or sublease, transfer or
otherwise dispose of, whether in one transaction or a series of related transactions, all or any
part of its business, property or assets, whether now owned or hereafter acquired (or agree to do
any of the foregoing), or purchase or otherwise acquire, whether in one transaction or a series of
related transactions, all or substantially all of the assets of any Person (or any division
thereof) (or agree to do any of the foregoing);
provided
,
however
, that the
Borrower may re-market and dispose of any Life Insurance Policy pursuant to the Transaction
Documents so long as (i) such disposition occurs within 60 days after the date of foreclosure of
such Life Insurance Policy and (ii) the proceeds from such disposition are paid to the
Administrative Agent for the benefit of the Agents and the Lenders pursuant to Section 2.05(c).
(d)
Change in Nature of Business
. Make any change in the nature of its business as
described in Section 6.01(1).
(e)
Loans, Advances, Investments, Etc.
Make or commit or agree to make any loan,
advance guarantee of obligations, other extension of credit or capital contributions to, or hold or
invest in or commit or agree to hold or invest in, or purchase or otherwise acquire or commit or
agree to purchase or otherwise acquire any shares of the Equity Interests, bonds, notes, debentures
or other securities of, or make or commit or agree to make any other investment in, any other
Person (other than the acquisition of any Insurance Premium Loans pursuant to the Transaction
Documents), or purchase or own any futures contract or otherwise become liable for the purchase or
sale of currency or other commodities at a future date in the nature of a futures contract.
(f)
Lease Obligations
. Create, incur or suffer to exist any obligations as lessee (i)
for the payment of rent for any real or personal property in connection with any sale and leaseback
transaction, or (ii) for the payment of rent for any real or personal property under leases or
agreements to lease.
(g)
Capital Expenditures
. Make or commit or agree to make any Capital Expenditure (by
purchase or Capitalized Lease).
(h)
Restricted Payments
. (i) Declare or pay any dividend or other distribution, direct
or indirect, on account of any Equity Interests of the Borrower, now or hereafter outstanding, (ii)
make any repurchase, redemption, retirement, defeasance, sinking fund or similar payment, purchase
or other acquisition for value, direct or indirect, of any Equity Interests of the Borrower or any direct or indirect parent of the Borrower, now or hereafter
outstanding, (iii) make any payment to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights for the purchase or acquisition of any Equity Interests of the
Borrower, now or hereafter outstanding, (iv) return any Equity Interests to any shareholders or
other equity holders of the Borrower, or make any other distribution of property, assets, Equity
Interests, warrants, rights, options, obligations or securities thereto as such or (v) pay any
64
management fees or any other fees or expenses (including the reimbursement thereof by the Borrower)
pursuant to any management, consulting or other services agreement to any of the shareholders or
other equityholders of the Borrower or other Affiliates or Affiliates of the Borrower;
provided
,
however
, (A) the Borrower may make tax distributions (
Tax
Distributions
) with respect to each Fiscal Year, in an aggregate amount equal to the amount of
income tax liability the Borrower would have had for such Fiscal Year if the Borrower were an
individual subject to Federal or state (in which its chief executive office or principal place of
business is located) income tax at the highest applicable marginal tax rates in effect in each
jurisdiction for such year and taking into account the deductibility of the state income taxes for
Federal purposes and the characterization of the income of the Borrower as ordinary income or
capital gains, as appropriate,
provided
that the Tax Distribution with respect to a Fiscal
Year of the Borrower is paid by the Borrower within 20 days of (x) the estimated tax payment date,
in the amount of the estimated tax due on such date calculated in accordance with this proviso, (y)
the date the tax return with respect to such taxes is due, or (z) the date the tax return with
respect to such tax issue is due taking into account valid extensions, in the amount of such taxes
less all prior Tax Distributions applicable to such Fiscal Year, provided, further, that at the
election of the Collateral Agent, which the Collateral Agent may and, upon the direction of the
Required Lenders, shall make by notice to the Borrower, no such payment shall be made if an Event
of Default shall have occurred and be continuing or would result from the making of any such
payment and (B) after giving effect to the application of Collections with respect to the Covered
Portion of Insurance Premium Loans in accordance with Section 2.05(d), so long as no Default or
Event of Default has occurred and is continuing or would result from the making of any such
payment, the Borrower may declare and pay dividends or distributions on account of any Equity
Interests of the Borrower with any Collections with respect to the Uncovered Portion of an
Insurance Premium Loan (other than Salvage Collections).
(i)
Federal Reserve Regulations
. Permit any Loan or the proceeds of any Loan under
this Agreement to be used for any purpose that would cause such Loan to be a margin loan under the
provisions of Regulation T, U or X of the Board.
(j)
Transactions with Affiliates
. Enter into, renew, extend or be a party to any
transaction or series of related transactions (including, without limitation, the purchase, sale,
lease, transfer or exchange of property or assets of any kind or the rendering of services of any
kind) with any Affiliate, except (i) in the ordinary course of business in a manner and to an
extent consistent with past practice and necessary or desirable for the prudent operation of its
business, for fair consideration and on terms no less favorable to it than would be obtainable in a
comparable arms length transaction with a Person that is not an Affiliate thereof, (ii) the
transactions contemplated by the Insurance Premium Loan Sale and Assignment Agreements and (iii)
the transactions contemplated by the Master Participation Agreement.
(k)
Limitation on Issuance of Equity Interests
. Issue or sell or enter into any
agreement or arrangement for the issuance and sale of any shares of its Equity Interests, any
securities convertible into or exchangeable for its Equity Interests or any warrants.
(l)
Modifications of Indebtedness, Organizational Documents and Certain Other Agreements;
Etc
. (i) Amend, modify or otherwise change (or permit the amendment, modification or other
change in any manner of) any of the provisions of any of its
65
Indebtedness or of any instrument or agreement (including, without limitation, any purchase agreement, indenture, loan agreement or
security agreement) relating to any such Indebtedness if such amendment, modification or change
would shorten the final maturity or average life to maturity of, or require any payment to be made
earlier than the date originally scheduled on, such Indebtedness, would increase the interest rate
applicable to such Indebtedness, would change the subordination provision, if any, of such
Indebtedness, or would otherwise be adverse to the Lender or the issuer of such Indebtedness in any
respect,
(i) except for the Obligations, make any voluntary or optional payment (including, without
limitation, any payment of interest in cash that, at the option of the issuer, may be paid in cash
or in kind), prepayment, redemption, defeasance, sinking fund payment or other acquisition for
value of any of its Indebtedness (including, without limitation, by way of depositing money or
securities with the trustee therefor before the date required for the purpose of paying any portion
of such Indebtedness when due), or refund, refinance, replace or exchange any other Indebtedness
for any such Indebtedness (except to the extent such Indebtedness is otherwise expressly permitted
by the definition of Permitted Indebtedness), make any payment, prepayment, redemption,
defeasance, sinking fund payment or repurchase of any Subordinated Indebtedness in violation of the
subordination provisions thereof or any subordination agreement with respect thereto, or make any
payment, prepayment, redemption, defeasance, sinking fund payment or repurchase of any Indebtedness
as a result of any asset sale, change of control, issuance and sale of debt or equity securities or
similar event, or give any. notice with respect to any of the foregoing.
(ii) amend, modify or otherwise change its name, jurisdiction of organization, organizational
identification number or FEIN;
(iii) amend, modify or otherwise change any of its Governing Documents, including, without
limitation, by the filing or modification of any certificate of designation, or any agreement or
arrangement entered into by it, with respect to any of its Equity Interests (including any
operating agreement), or enter into any new agreement with respect to any of its Equity Interests;
or
(iv) amend, modify or otherwise change any Transaction Document.
(m)
Investment Company Act of 1940
. Engage in any business, enter into any
transaction, use any securities or take any other action, that would cause it to become subject to
the registration requirements of the Investment Company Act of 1940,
as amended, by virtue of being an investment company or a company controlled by an investment company
not entitled to an exemption within the meaning of such Act.
(n)
Certain Agreements
. Agree to any material amendment or other material change to or
material waiver of any of its rights under any Material Contract.
(o)
Anti-Terrorism Laws
. Neither shall the Borrower or any of its Affiliates or agents
shall:
66
(i) conduct any business or engage in any transaction or dealing with any Blocked Person,
including the making or receiving any contribution of funds, goods or services to or for the
benefit of any Blocked Person,
(ii) deal in, or otherwise engage in any transaction relating to, any property or interests in
property blocked pursuant to the Executive Order No. 13224 or
(iii) engage in or conspire to engage in any transaction that evades or avoids, or has the
purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in the
Executive Order No. 13224, the USA PATRIOT Act or any other Anti-Terrorism Law.
The Borrower shall deliver to the Lender any certification or other evidence requested from time to
time by the Lender in its sole discretion, confirming the Borrowers compliance with this Section
7.02(o).
(p)
Amendments or Consents to Loan Document Package
. (i) Amend, supplement, amend and
restate, or otherwise modify, (ii) agree to any waiver of any provision contained in or (iii) to
the extent provided for or required therein, consent to or otherwise authorize or acknowledge, any
action or otherwise in respect of, in any such case described in clauses (i) through (iii), above,
any Loan Document Package with respect to any Insurance Premium Loan acquired by the Borrower
(actually or beneficially through a participation) with proceeds from the Loan, nor allow any other
Subject Imperial Affiliate to do so, except with the prior written consent of the Agents and the
Lender (or if there is more than one Lender party hereto, the Required Lenders).
(q) Intentionally Omitted.
(r)
Separateness
. The Borrower shall not:
(i) have any employees other than a single employee in Georgia;
provided
,
that
, the Borrower may enter into the Servicing Agreement with the Servicer to the effect
that the employees of such entity shall act on behalf of the Borrower; provided that such employees
shall at all times hold themselves out to third parties as representatives of the Borrower while
performing duties under such service agreement (including, without limitation, by means of
providing such persons with business or identification cards identifying such employees as agents
of the Borrower);
(ii) act as an agent for any other Person;
(iii) commingle its funds or other assets with those of any other Person and shall not
maintain bank accounts or other depository accounts to which any other Person is an account party,
into which any other Person makes deposits or from which any other Person has the power to make
withdrawals;
(iv) permit any other Person to pay any of the Borrowers operating expenses unless such
operating expenses are paid by such Person pursuant to an
67
agreement between the Borrower and such other Person providing for the allocation of such expenses and such expenses are reimbursed by the
Borrower out of the Borrowers own funds;
(v) consent to be liable for, or hold itself out to be responsible for any money borrowed by,
or any Indebtedness incurred by, any other Person;
(vi) assume, guarantee, become obligated for, pay, or hold itself out to be responsible for,
the debts or obligations of any other Person;
(vii) acquire obligations or securities of its Affiliates other than its acquisition of
participations in loans, as contemplated by this Agreement;
(viii) hold out its credit to any Person as available to satisfy the obligation of any other
Person;
(ix) pledge its assets for the benefit of any other entity or make any loans or advances to
any Person or entity except as provided in this Agreement and the other Loan Documents;
(x) buy or hold evidence of Indebtedness issued by any of its Affiliates;
(xi) permit less than one member of the Borrowers Board of Directors or Board of Managers
(the
Independent Manager
) to be an individual who has not been, (a) a direct or indirect
legal or beneficial owner in the Borrower or any of its Affiliates, (b) a creditor, supplier,
employee, officer, director, family member, manager or contractor of the Borrower or its
Affiliates, (b) a creditor, supplier, employee, officer, director, family member, manager or
contractor of the Borrower or its Affiliates (other than as an independent manager for such
entity), or (c) a Person who control (whether directly, indirectly, or otherwise) the Borrower or
its Affiliates (other than as an independent manager for such entity);
(xii) permit the Independent Manager at any time to serve as a trustee in bankruptcy for the
Borrower, the Service, the Originator or any Affiliate thereof;
(xiii) identify itself as a division of any other Person; or
(xiv) enter into agreements with its Affiliates or agreements with third parties that in the
aggregate would be material, if such agreements do not contain the provision that such Affiliates
or third parties, in their respective capacities as counterparties under such agreements, will not
seek to initiate bankruptcy or insolvency proceedings in respect of the Borrower. The Borrower
shall include the provision described in the preceding sentence (or a substantially similar provision) in all agreements with third parties, to the extent
practicable without interfering with the conduct of the business affairs of the Borrower, and take
into consideration the willingness of third parties to enter into agreements containing such
provision.
(s)
Deposits to the Collection Account
. Deposit or otherwise credit, or cause or
permit to be so deposited or credited by any Person, to the Collection Account cash or cash
proceeds other than Collections or proceeds of the Collateral.
68
(t)
Change in Business Policy
. Make, or permit the Originator to make, any change in
the character of its business or credit and collection policy which would impair in any material
respect the collectibility of any Insurance Premium Loan acquired by the Borrower (actually or
beneficially through a participation) with proceeds from the Loan or related security (including
any applicable Life Insurance Policy).
(u)
Change in Payment Instructions to the Collateral Value Insurer, the Contingent
Collateral Value Insurer and the Premium Finance Borrowers
. Make any change in its instructions
to the Collateral Value Insurer, the Contingent Collateral Value Insurer and/or the Premium Finance
Borrowers regarding Collections or payments to be made to the Collection Account, or allow any
Subject Imperial Affiliate to do so, unless (i) the Agents and the Servicer shall have received
notice of such change and (ii) the Agents previously shall have consented in writing to such
change.
(v)
Amendments or Consents to Collateral Value Policy and Contingent Collateral Value
Policy
. (i) Amend, supplement, amend and restate, or otherwise modify, (ii) agree to any waiver
of any provision contained in or (iii) to the extent provided for or required therein, consent to
or otherwise authorize or acknowledge, any action or otherwise in respect of, in any such case
described in clauses (i) through (iii), above, the Collateral Value Policy or the Contingent
Collateral Value Policy, or allow any other Subject Imperial Affiliate to do so, except with the
prior written consent of the Agents and the Lender (or if there is more than one Lender hereunder,
the Required Lenders).
ARTICLE VIII
MANAGEMENT, COLLECTION AND STATUS OF COLLATERAL
Section 8.01
Collections; Management of Collateral
. (a) The Borrower shall (i) establish and
maintain cash management services of a type and on terms reasonably satisfactory to the Agents at
the bank set forth on Schedule 8.01, the
Cash Management Bank
, and shall take such
reasonable steps to enforce, collect and receive all amounts owing on the Insurance Premium Loans
of the Borrower, and (ii) deposit or cause to be deposited promptly, and in any event no later than
the next Business Day after the date of receipt thereof, all proceeds in respect of any Collateral
and all Collections (of a nature susceptible to a deposit in a bank account) and other amounts
received by the Borrower (including payments made by any Premium Finance Borrower directly to the
Borrower) into the Collection Account.
(b) On or prior to the Effective Date, the Borrower shall, with respect to each of the
Operating Account, the Reserve Account and the Collection Account, deliver to the Collateral Agent
a Cash Management Agreement.
(c) All amounts received in the Collection Account shall at the Administrative Agents
direction be wired each Business Day into the Administrative Agents Account to be applied pursuant
to Section 2.05(d) or Section 4.04(b), as applicable.
(d) So long as no Default or Event of Default has occurred and is continuing, the Borrowers
may amend Schedule 8.01 to add or replace the Cash Management
69
Bank, the Collection Account, the Reserve Account or the Operating Account;
provided
,
however
, that (i) such
prospective Cash Management Bank shall be reasonably satisfactory to the Collateral Agent and the
Collateral Agent shall have consented in writing in advance to the opening of such Collection
Account, Reserve Account and the Operating Account with the prospective Cash Management Bank, and
(ii) prior to the time of the opening of such Collection Account, such Reserve Account and such
Operating Account, the Borrower and such prospective Cash Management Bank shall have executed and
delivered to the Collateral Agent a Cash Management Agreement with respect to each of the
Collection Account, the Reserve Account and the Operating Account. The Borrower shall close its
Collection Account, its Reserve Account and its Operating Account (and establish replacement cash
management accounts in accordance with the foregoing sentence) promptly and in any event within 30
days of notice from the Collateral Agent that the creditworthiness of any Cash Management Bank is
no longer acceptable in the Collateral Agents reasonable judgment, or that the operating
performance, funds transfer, or availability procedures or performance of such Cash Management Bank
with respect to the Collection Account, the Reserve Account or the Operating Account or the
Collateral Agents liability under any Cash Management Agreement with such Cash Management Bank is
no longer acceptable in the Collateral Agents reasonable judgment.
(e) The Collection Account and the Reserve Account shall each be a cash collateral account,
with all cash, checks and similar items of payment in such accounts securing payment of the
Obligations, and in which the Borrower is hereby deemed to have granted a Lien to Collateral Agent
for the benefit of the Agents and the Lenders. All checks, drafts, notes, money orders,
acceptances, cash and other evidences of Indebtedness received directly by the Borrower from any of
the Premium Finance Borrowers or any other Person, as proceeds from the Insurance Premium Loans
acquired by the Borrower (actually or beneficially through a participation) with proceeds from the
Loan or as proceeds of any other Collateral shall be held by the Borrower in trust for the Agents
and the Lenders and if of a nature susceptible to a deposit in a bank account, upon receipt be
deposited by the Borrower in original form and no later than the next Business Day after receipt
thereof into the Collection Account;
provided
,
however
, all Collections received
directly by the Borrower shall be held by the Borrower in trust for the Agents and the Lenders and
upon receipt be deposited by the Borrower in original form and no later than the next Business Day
after receipt thereof into the Administrative Agents Account. The Borrower shall not commingle
such collections with the proceeds of any assets not included in the Collateral. No checks, drafts
or other instrument received by the Administrative Agent shall constitute final payment to the
Administrative Agent unless and until such instruments have actually been collected.
(f) After the occurrence and during the continuance of an Event of Default, the Collateral
Agent may send a notice of assignment and/or notice of the Lenders security interest to any and
all Insurance Premium Borrowers, the Collateral Value Insurer, the Contingent Collateral Value
Insurer or third parties holding or otherwise concerned with any of the Collateral, and thereafter
the Collateral Agent or its designee shall have the sole right to collect the Insurance Premium
Loans acquired by the Borrower (actually or beneficially through a participation) with proceeds
from the Loan and/or take possession of the Collateral and the books and records relating thereto.
The Borrower shall not, without prior written consent of the Collateral Agent, grant any extension
of time of payment of any such Insurance Premium Loan or payments under the Collateral Value Policy
or the Contingent Collateral Value Policy,
70
compromise or settle any such Insurance Premium Loan for less than the full amount thereof, release, in whole or in part, any Person or property liable for
the payment thereof, or allow any credit or discount whatsoever thereon.
(g) The Borrower hereby appoints each Agent or its designee on behalf of such Agent as the
Borrowers attorney-in-fact with power exercisable during the continuance of an Event of Default to
endorse the Borrowers name upon any notes, acceptances, checks, drafts, money orders or other
evidences of payment relating to the Insurance Premium Loans acquired by the Borrower (actually or
beneficially through a participation) with proceeds from the Loan, the Collateral Value Policy and
the Contingent Collateral Value Policy, to sign the Borrowers name on any invoice or bill of
lading relating to any of such Insurance Premium Loans and the Collateral Value Policy and the
Contingent Collateral Value Policy, drafts against Insurance Premium Borrowers with respect to such
Insurance Premium Loans, the Collateral Value Policy and the Contingent Collateral Value Policy,
assignments and verifications of the such Insurance Premium Loans, the Collateral Value Policy and
the Contingent Collateral Value Policy and notices to Insurance Premium Borrowers with respect to
such Insurance Premium Loans, the Collateral Value Insurer with respect to the Collateral Value
Policy and the Contingent Collateral Value Insurer with respect to the Contingent Collateral Value
Policy, to send verification of such Insurance Premium Loans, the Collateral Value Policy and the
Contingent Collateral Value Policy, and to notify the Postal Service authorities to change the
address for delivery of mail addressed to the Borrower to such address as such Agent or its
designee may designate and to do all other acts and things necessary to carry out this Agreement.
All acts of said attorney or designee are hereby ratified and approved, and said attorney or
designee shall not be liable for any acts of omission or commission (other than acts of omission or
commission constituting gross negligence or willful misconduct as determined by a final judgment of
a court of competent jurisdiction), or for any error of judgment or mistake of fact or law; this
power being coupled with an interest is irrevocable until all of the Loans and other Obligations
under the Loan Documents are paid in full and all of the Loan Documents are terminated.
(h) Nothing herein contained shall be construed to constitute any Agent as agent of the
Borrower for any purpose whatsoever, and the Agents shall not be responsible or liable for any
shortage, discrepancy, damage, loss or destruction of any part of the Collateral wherever the same
may be located and regardless of the cause thereof (other than from acts of omission or commission
constituting gross negligence or willful misconduct as determined by a final judgment of a court of
competent jurisdiction). The Agents shall not, under any circumstance or in any event whatsoever,
have any liability for any error or omission or delay of any kind occurring in the settlement, collection or payment of any of the Insurance
Premium Loans acquired by the Borrower (actually or beneficially through a participation) with
proceeds from the Loan or any instrument received in payment thereof or for any damage resulting
therefrom (other than acts of omission or commission constituting gross negligence or willful
misconduct as determined by a final judgment of a court of competent jurisdiction). The Agents, by
anything herein or in any assignment or otherwise, do not assume any of the obligations under any
contract or agreement assigned to any Agent and shall not be responsible in any way for the
performance by the Borrower of any of the terms and conditions thereof.
71
(i) If any Insurance Premium Loan acquired by the Borrower (actually or beneficially through a
participation) with proceeds from the Loan includes a charge for any tax payable to any
Governmental Authority, each Agent is hereby authorized (but in no event obligated) in its
discretion to pay the amount thereof to the proper taxing authority for the Borrowers account and
to charge the Borrower therefor. The Borrower shall notify the Agents if any Insurance Premium Loan
acquired by the Borrower (actually or beneficially through a participation) with proceeds from the
Loan includes any taxes due to any such Governmental Authority and, in the absence of such notice,
the Agents shall have the right to retain the full proceeds of such Insurance Premium Loan and
shall not be liable for any taxes that may be due by reason of the sale and delivery creating such
Insurance Premium Loan.
(j) Notwithstanding any other terms set forth in the Loan Documents, the rights and remedies
of the Agents and the Lenders herein provided, and the obligations of the Borrower set forth
herein, are cumulative of, may be exercised singly or concurrently with, and are not exclusive of,
any other rights, remedies or obligations set forth in any other Loan Document or as provided by
law.
Section 8.02
Collateral Custodian
. Upon the occurrence and during the continuance of any Default or
Event of Default, the Collateral Agent or its designee may at any time and from time to time employ
and maintain on the premises of the Borrower a custodian selected by the Collateral Agent or its
designee who shall have full authority to do all acts necessary to protect the Agents and the
Lenders interests. The Borrower hereby agrees to cooperate with any such custodian and to do
whatever the Collateral Agent or its designee may reasonably request to preserve the Collateral.
All costs and expenses incurred by the Collateral Agent or its designee by reason of the employment
of the custodian shall be the responsibility of the Borrower and charged to the Loan Account.
ARTICLE IX
EVENTS OF DEFAULT
Section 9.01
Events of Default
. If any of the following Events of Default shall occur and be
continuing:
(a) the Borrower shall fail to pay any principal of or interest on any Loan, any Collateral
Agent Advance or any fee, indemnity or other amount payable under this Agreement or any other Loan
Document (including any fees, indemnities, or expenses payable to the Servicer and the Insurance Collateral Agent) when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) ;
(b) any representation or warranty made or deemed made by or on behalf of any Credit Party,
any Subject Imperial Affiliate, or by any officer of the foregoing under or in connection with any
Loan Document or Transaction Document or under or in connection with any report, certificate or
other document delivered to any Agent or any Lender pursuant to any Loan Document or Transaction
Document, which representation or warranty is subject to a materiality or a Material Adverse Effect
qualification, shall have been incorrect in any respect when made or deemed made; or any
representation or warranty made or deemed
72
made by or on behalf of any Credit Party, any Subject Imperial Affiliate or by any officer of the foregoing under or in connection with any Loan Document
or Transaction Document or under or in connection with any report, certificate or other document
delivered to any Agent or any Lender pursuant to any Loan Document or Transaction Document, which
representation or warranty is not subject to a materiality or a Material Adverse Effect
qualification, shall have been incorrect in any material respect when made or deemed made;
(c) any Credit Party or any Subject Imperial Affiliate shall fail to perform or comply with
any covenant or agreement contained in paragraphs (a)(vi), (viii-xii), (xiv-xviii), (xx) and
(xxiii), (c), (d), (f), (h), (j), (o), (p), (q), (r), (s), (t), (u), (v) or (w) of Section 7.01,
Section 7.02 or ARTICLE VIII, or any Credit Party shall fail to perform or comply with any covenant
or agreement contained in the Security Agreement to which it is a party or any Guarantor Security
Agreement to which it is a party;
(d) any Credit Party or any Subject Imperial Affiliate shall fail to perform or comply with
any term, covenant or agreement contained in Section 7.01 of this Agreement (to the extent not
otherwise provided in paragraph (c) of this Section 9.01) and such failure, if capable of being
remedied, shall remain unremedied for a period of 10 days after the earlier of the date a senior
officer of any Credit Party or any Subject Imperial Affiliate becomes aware of such failure and the
date written notice of such default shall have been given by any Agent to such Credit Party or
Subject Imperial Affiliate;
(e) any Credit Party, or Subject Imperial Affiliate shall fail to perform or comply with any
other term, covenant or agreement contained in any Loan Document or Transaction Document to be
performed or observed by it and, except as set forth in subsections (a), (b), (b) and (d) of this
Section 9.01, such failure, if capable of being remedied, shall remain unremedied for 15 days after
the earlier of the date a senior officer of any Credit Party, or Subject Imperial Affiliate becomes
aware of such failure and the date written notice of such default shall have been given by any
Agent to such Credit Party or Subject Imperial Affiliate; provided that, notwithstanding the
foregoing, the failure of the Servicer to perform or comply with any term, covenant or agreement
contained in any Transaction Document or any Loan Document shall not constitute an Event of Default
under this Section 9.01(e) so long as within thirty (30) days of the occurrence of any such
failure, the Servicer is replaced by a replacement servicer acceptable to the Agents;
provided
, that the Borrower shall use best efforts to replace the Servicer as soon as
possible after the occurrence of any such failure;
(f) the Borrower or the Originator shall fail to pay any of its Indebtedness (excluding
Indebtedness evidenced by this Agreement) in excess of $250,000, or any payment of principal,
interest or premium thereon, when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument relating to such Indebtedness, or any
other default under any agreement or instrument relating to any such Indebtedness, or any other
event, shall occur and shall continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such default or event is to accelerate, or to permit the
acceleration of, the maturity of such Indebtedness; or any such Indebtedness shall be declared to
be due and payable, or required to be prepaid (other than by a regularly scheduled required
prepayment), redeemed, purchased or defeased or an offer to
73
prepay, redeem, purchase or defease such Indebtedness shall be required to be made, in each case, prior to the stated maturity thereof;
(g) any Credit Party, any Subject Imperial Affiliate (i) shall institute any proceeding or
voluntary case seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution,
liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition
of it or its debts under any law relating to bankruptcy, insolvency, reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for any such Person or for any substantial part of its
property, (ii) shall be generally not paying its debts as such debts become due or shall admit in
writing its inability to pay its debts generally, (iii) shall make a general assignment for the
benefit of creditors, or (iv) shall take any action to authorize or effect any of the actions set
forth above in this subsection (g);
(h) any proceeding shall be instituted against any Credit Party, or any Subject Imperial
Affiliate seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar
official for any such Person or for any substantial part of its property, and either such
proceeding shall remain undismissed or unstayed for a period of 30 days or any of the actions
sought in such proceeding (including, without limitation, the entry of an order for relief against
any such Person or the appointment of a receiver, trustee, custodian or other similar official for
it or for any substantial part of its property) shall occur;
(i) any provision of any Loan Document or Transaction Document shall at any time for any
reason (other than pursuant to the express terms thereof) cease to be valid and binding on or
enforceable against any Credit Party or any Subject Imperial Affiliate intended to be a party
thereto, or the validity or enforceability thereof shall be contested by any party thereto
(excluding any Transaction Documents evidencing Insurance Premium Loans not exceeding more than 2%
of the aggregate Maturity Principal Balance of all Eligible Insurance Premium Loans of the
Borrower), or a proceeding shall be commenced by any Credit Party, the Originator or the Servicer
or any Governmental Authority having jurisdiction over any of them, seeking to establish the
invalidity or unenforceability thereof, or any Credit Party, the Originator or the Servicer shall
deny in writing that it has any liability or obligation purported to be created under any Loan
Document;
(j) any Security Agreement, any Guarantor Security Agreement or any other security document,
after delivery thereof pursuant hereto, shall for any reason fail or cease to create a valid and
perfected and, except to the extent permitted by the terms hereof or thereof, first priority Lien
in favor of the Collateral Agent for the benefit of the Agents and the Lender on any Collateral
purported to be covered thereby;
(k) any Cash Management Bank at which the Collection Account, the Reserve Account or the
Operating Account of the Borrower is maintained shall fail to comply with any of the terms of any
Cash Management Agreement to which such bank is a party or any securities intermediary, commodity
intermediary or other financial institution at any time in custody, control or possession of any
investment property of the Borrower shall fail to comply
74
with any of the terms of any investment property control agreement to which such Person is a party and such failure remains uncured for
five (5) days following delivery of written notice of such failure to such bank or securities
intermediary, commodity intermediary or other financial institution;
(l) one or more judgments, orders or awards (or any settlement of any claim that, if breached,
could result in a judgment, order or award) for the payment of money exceeding $250,000 in the
aggregate shall be rendered against the Borrower or the Originator and remain unsatisfied and
either (i) enforcement proceedings shall have been commenced by any creditor upon any such
judgment, order, award or settlement, (ii) there shall be a period of 10 consecutive days after
entry thereof during which a stay of enforcement of any such judgment, order, award or settlement,
by reason of a pending appeal or otherwise, shall not be in effect, or (iii) at any time during
which a stay of enforcement of any such judgment, order, award or settlement, by reason of a
pending appeal or otherwise, is in effect, such judgment, order, award or settlement is not bonded
in the full amount of such judgment, order, award or settlement;
provided
,
however
,
that any such judgment, order, award or settlement shall not give rise to an Event of Default under
this subsection (1) if and for so long as (A) the amount of such judgment, order, award or
settlement is covered by a valid and binding policy of insurance between the defendant and the
insurer covering full payment thereof and (B) such insurer has been notified, and has not disputed
the claim made for payment, of the amount of such judgment, order, award or settlement;
(m) any Subject Imperial Affiliate is enjoined, restrained or in any way prevented by the
order of any court or any Governmental Authority from conducting all or any material part of its
business for more than fifteen (15) days;
(n) any failure of the security interests created by the Security Agreement and Guarantor
Security Agreement to constitute legal, valid and enforceable first priority security interests in
the Collateral, any material loss or theft of any Collateral, whether or not insured, or any act of
God or public enemy, or other casualty which causes, for more than fifteen (15) consecutive days,
the cessation or substantial curtailment of revenue producing activities of the Borrower or the
Originator, if any such event or circumstance could reasonably be expected to have a Material
Adverse Effect;
(o) any cessation of a substantial part of the business of any Subject Imperial Affiliate for
a period which materially and adversely affects the ability of such Person to continue its business
on a profitable basis;
(p) the loss, suspension or revocation of, or failure to renew, any license or permit now held
or hereafter acquired by the any Subject Imperial Affiliate, if such loss, suspension, revocation
or failure to renew could reasonably be expected to have a Material Adverse Effect;
(q) the indictment, or the threatened indictment of any Credit Party or any Subject Imperial
Affiliate under any criminal statute, or commencement or threatened commencement of criminal or
civil proceedings against any Credit Party or any Subject Imperial Affiliate pursuant to which
statute or proceedings the penalties or remedies sought or available
75
include forfeiture to any Governmental Authority of any material portion of the property of such Person;
(r) a Change of Control shall have occurred;
(s) the Collateral Value Policy or, following the occurrence of a Credit Event, the Contingent
Collateral Value Policy, shall cease to be effective with respect to any portion of the Insurance
Premium Loans (or interests therein) acquired by the Borrower with the proceeds of any Term Loan
hereunder or cease to be the legally valid, binding and enforceable obligation of the Collateral
Value Insurer or the Contingent Collateral Value Insurer or the Collateral Value Insurer or the
Contingent Collateral Value Insurer shall contest, defend against or otherwise dispute, in any
manner, such effectiveness, validity, binding nature or enforceability, or otherwise assert any
defense to a claim made thereunder (including without limitation any defense, exception or
exclusion to payment permitted by the terms of such Collateral Value Policy or the Contingent
Collateral Value Policy);
(t) any event or circumstance shall have occurred that may reasonably be expected to cause any
Subject Imperial Affiliate to suffer materially adverse regulatory consequences (including as may
be applicable to its insurance premium finance, life settlement or related business);
(u) any event or circumstance under Section V.A or Section V.B of the Collateral Value Policy
shall have occurred or the Borrower, the Originator or any of their Affiliates commits a Prohibited
Act (as defined in the Collateral Value Policy); or
(v) an event or development occurs which could reasonably be expected to have a Material
Adverse Effect (including, without limitation, any change or proposed change in any relevant law,
rule or regulation, in any Applicable Non-Licensed State or Applicable Licensed State or otherwise,
which (i) makes the financing, origination or transfer of any Insurance Premium Loan or life
insurance policy in accordance with the transactions contemplated by the Loan Documents and/or the
Transaction Documents unlawful or economically or procedurally disadvantageous or (ii) limits,
alters or otherwise compromises, could be reasonably expected to compromise, the insurable interest
in the related Life Insurance Policy, as contemplated by the Loan Documents, the Transaction Documents and the Loan Document
Package);
(w) any default under the Imperial Limited Guaranty; or
(x) Borrower or the Servicer shall fail to submit a properly completed and duly executed Proof
of Loss (as defined in the Collateral Value Policy) to the insurer under the Collateral Value
Policy or, following the occurrence of a Credit Event, the Contingent Collateral Value Policy,
prior to the date by which a Proof of Loss must be submitted to the insurer to avoid a loss being
excluded from coverage under such policy.
then, and in any such event, the Collateral Agent may, and shall at the request of the
Required Lenders, by notice to the Borrower, (i) terminate or reduce all Commitments, whereupon all
Commitments shall immediately be so terminated or reduced, (ii) declare all or any portion of the
Loans then outstanding to be due and payable, whereupon all or such portion
76
of the aggregate principal of all Loans, all accrued and unpaid interest thereon, all fees and all other amounts
payable under this Agreement and the other Loan Documents shall become due and payable immediately
together with the payment of the Applicable Prepayment Premium (if any), without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly waived by the
Borrower and (iii) exercise any and all of its other rights and remedies under applicable law,
hereunder and under the other Loan Documents;
provided
,
however
, that upon the
occurrence of any Event of Default described in subsection (g) or (h) of this Section 9.01 with
respect to the Borrower, without any notice to the Borrower or any other Person or any act by any
Agent or any Lender, all Commitments shall automatically terminate and all Loans then outstanding,
together with all accrued and unpaid interest thereon, all fees and all other amounts due under
this Agreement and the other Loan Documents shall become due and payable automatically and
immediately, without presentment, demand, protest or notice of any kind, all of which are expressly
waived by the Borrower.
ARTICLE X
AGENTS
Section 10.01
Appointment
. The Lender (and each subsequent maker of any Loan by its making thereof)
hereby irrevocably appoints and authorizes the Administrative Agent and the Collateral Agent to
perform the duties of each such Agent as set forth in this Agreement including: (i) to receive on
behalf of the Lender any payment of principal of or interest on the Loans outstanding hereunder and
all other amounts accrued hereunder for the account of the Lender and paid to such Agent, and,
subject to Section 2.02 of this Agreement, to distribute promptly to the Lender (and if at the time
there is more than one Lender hereunder, to each Lender its Pro Rata Share) of all payments so
received; (ii) to distribute to the Lender copies of all material notices and agreements received
by such Agent and not required to be delivered to the Lender pursuant to the terms of this
Agreement, provided that the Agents shall not have any liability to the Lender for any Agents
inadvertent failure to distribute any such notices or agreements to the Lender; (iii) to maintain,
in accordance with its customary business practices, ledgers and records reflecting the status of
the Obligations, the Term Loans, and related matters and to maintain, in accordance with its
customary business practices, ledgers and records reflecting the status of the Collateral and related matters; (iv) to execute or file
any and all financing or similar statements or notices, amendments, renewals, supplements,
documents, instruments, proofs of claim, notices and other written agreements with respect to this
Agreement or any other Loan Document; (v) to make the Term Loans and Collateral Agent Advances, for
such Agent or on behalf of the Lender as provided in this Agreement or any other Loan Document;
(vi) to perform, exercise, and enforce any and all other rights and remedies of the Lender with
respect to the Borrower, the Obligations, or otherwise related to any of same to the extent
reasonably incidental to the exercise by such Agent of the rights and remedies specifically
authorized to be exercised by such Agent by the terms of this Agreement or any other Loan Document;
(vii) to incur and pay such fees necessary or appropriate for the performance and fulfillment of
its functions and powers pursuant to this Agreement or any other Loan Document; and (viii) subject
to Section 10.03 of this Agreement, to take such action as such Agent deems appropriate on its
behalf to administer the Loans and the Loan Documents and to exercise such other powers delegated
to such Agent by the terms hereof or the other Loan Documents (including, without limitation, the
power to give or to refuse to give notices, waivers,
77
consents, approvals and instructions and the power to make or to refuse to make determinations and calculations) together with such powers as
are reasonably incidental thereto to carry out the purposes hereof and thereof. As to any matters
not expressly provided for by this Agreement and the other Loan Documents (including, without
limitation, enforcement or collection of the Loans), the Agents shall not be required to exercise
any discretion or take any action, but shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the instructions of the
Lender (or if at the time there is more than one Lender hereunder, the Required Lenders), and such
instructions of the Lender (or the Required Lenders) shall be binding upon all Lenders and all
makers of Loans.
Section 10.02
Nature of Duties
. The Agents shall have no duties or responsibilities except those
expressly set forth in this Agreement or in the other Loan Documents. The duties of the Agents
shall be mechanical and administrative in nature. The Agents shall not have by reason of this
Agreement or any other Loan Document a fiduciary relationship in respect of the Lender. Nothing in
this Agreement or any other Loan Document, express or implied, is intended to or shall be construed
to impose upon the Agents any obligations in respect of this Agreement or any other Loan Document
except as expressly set forth herein or therein. The Lender shall make its own independent
investigation of the financial condition and affairs of the Borrower in connection with the making
and the continuance of the Loans hereunder and shall make its own appraisal of the creditworthiness
of the Borrower and the value of the Collateral, and the Agents shall have no duty or
responsibility, either initially or on a continuing basis, to provide the Lender with any credit or
other information with respect thereto, whether coming into their possession before the initial
Loan hereunder or at any time or times thereafter, provided that, upon the reasonable request of a
Lender, each Agent shall provide to the Lender any documents or reports delivered to such Agent by
the Borrower pursuant to the terms of this Agreement or any other Loan Document. If any Agent seeks
the consent or approval of the Lender (or the Required Lenders, as applicable) to the taking or
refraining from taking any action hereunder, such Agent shall send notice thereof to the Lender (or
all Lenders, as applicable). Each Agent shall promptly notify the Lender any time that the Lender
has instructed such Agent to act or refrain from acting pursuant hereto.
Section 10.03
Rights, Exculpation, Etc.
The Agents and their directors, officers, agents or
employees shall not be liable for any action taken or omitted to be taken by them under or in
connection with this Agreement or the other Loan Documents, except for their own gross negligence
or willful misconduct as determined by a final judgment of a court of competent jurisdiction.
Without limiting the generality of the foregoing, the Agents (i) may treat the payee of any Term
Loan as the owner thereof until the Collateral Agent receives written notice of the assignment or
transfer thereof, pursuant to Section 12.07 hereof, signed by such payee and in form satisfactory
to the Collateral Agent; (ii) may consult with legal counsel (including, without limitation,
counsel to any Agent or counsel to the Borrower), independent public accountants, and other experts
selected by any of them and shall not be liable for any action taken or omitted to be taken in good
faith by any of them in accordance with the advice of such counsel or experts; (iii) make no
warranty or representation to any Lender and shall not be responsible to any Lender for any
statements, certificates, warranties or representations made in or in connection with this
Agreement or the other Loan Documents; (iv) shall not have any duty to ascertain or to inquire as
to the performance or observance of any of the terms, covenants or conditions of this Agreement or
the other Loan Documents on the part of any Person, the
78
existence or possible existence of any Default or Event of Default, or to inspect the Collateral or other property (including, without
limitation, the books and records) of any Person; (v) shall not be responsible to the Lender for
the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement or the other Loan Documents or any other instrument or document furnished pursuant hereto
or thereto; and (vi) shall not be deemed to have made any representation or warranty regarding the
existence, value or collectibility of the Collateral, the existence, priority or perfection of the
Collateral Agents Lien thereon, or any certificate prepared by the Borrower in connection
therewith, nor shall the Agents be responsible or liable to the Lender for any failure to monitor
or maintain any portion of the Collateral. The Agents shall not be liable for any apportionment or
distribution of payments made in good faith pursuant to Section 4.04, and if any such apportionment
or distribution is subsequently determined to have been made in error the sole recourse of any
Lender to whom payment was due but not made, shall be to recover from other Lenders any payment in
excess of the amount which they are determined to be entitled. The Agents may at any time request
instructions from the Lender with respect to any actions or approvals which by the terms of this
Agreement or of any of the other Loan Documents the Agents are permitted or required to take or to
grant, and if such instructions are promptly requested, the Agents shall be absolutely entitled to
refrain from taking any action or to withhold any approval under any of the Loan Documents until
they shall have received such instructions from the Lender (or if at such time there is more than
one Lender hereunder, the Required Lenders). Without limiting the foregoing, no Lender shall have
any right of action whatsoever against any Agent as a result of such Agent acting or refraining
from acting under this Agreement or any of the other Loan Documents in accordance with the
instructions of the Lender (or if at such time there is more than one Lender hereunder, the
Required Lenders).
Section 10.04
Reliance
. Each Agent shall be entitled to rely upon any written notices, statements,
certificates, orders or other documents or any telephone message believed by it in good faith to be
genuine and correct and to have been signed, sent or made by the proper Person, and with respect to
all matters pertaining to this Agreement or any of the other Loan Documents and its duties
hereunder or thereunder, upon advice of counsel selected by it.
Section 10.05
Indemnification
. To the extent that any Agent is not reimbursed and indemnified by the
Borrower, the Lender will reimburse and indemnify such Agent from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses,
advances or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against such Agent in any way relating to or arising out of this Agreement or any of the
other Loan Documents or any action taken or omitted by such Agent under this Agreement or any of
the other Loan Documents, (in proportion to each Lenders Pro Rata Share if at such time there is
more than one Lender hereunder), including, without limitation, advances and disbursements made
pursuant to Section 10.08;
provided
,
however
, that no Lender shall be liable for
any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses, advances or disbursements for which there has been a final judicial
determination that such liability resulted from such Agents gross negligence or willful
misconduct. The obligation of the Lender under this Section 10.05 shall survive the payment in full
of the Loans and the termination of this Agreement.
Section 10.06
Agents Individually
. Each Agent and its Affiliates may accept deposits from, lend
money to, and generally engage in any kind of banking, trust or other
79
business with the Borrower as if it were not acting as an Agent pursuant hereto without any duty to account to the Lender.
Section 10.07
Successor Agent
. (a) Each Agent may resign from the performance of all its functions
and duties hereunder and under the other Loan Documents at any time by giving at least thirty (30)
Business Days prior written notice to the Borrower and the Lender. Such resignation shall take
effect upon the acceptance by a successor Agent of appointment pursuant to clauses (b) and (c)
below or as otherwise provided below.
(b) Upon any such notice of resignation, the Lender (or if at such time there is more than one
Lender hereunder, the Required Lenders) shall appoint a successor Agent. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed
to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and
the retiring Agent shall be discharged from its duties and obligations under this Agreement and the
other Loan Documents. After any Agents resignation hereunder as an Agent, the provisions of this
ARTICLE X shall inure to its benefit as to any actions taken or omitted to be taken by it while it
was an Agent under this Agreement and the other Loan Documents.
(c) If a successor Agent shall not have been so appointed within said thirty (30) Business Day
period, the retiring Agent, with the consent of the other Agent shall then appoint a successor
Agent who shall serve as an Agent until such time, if any, as the Lender (or if at such time there
are more than one Lender party hereto, Required Lenders) with the consent of the other Agent,
appoint a successor Agent as provided above.
Section 10.08
Collateral Matters.
(a) The Collateral Agent may from time to time make such disbursements and advances
(
Collateral Agent Advances
) which the Collateral Agent, in its sole discretion, deems
necessary or desirable to preserve, protect, prepare for sale or lease or dispose of the Collateral or any portion thereof, to enhance the likelihood or maximize the
amount of repayment by the Borrower of the Loans and other Obligations or to pay any other amount
chargeable to the Borrower pursuant to the terms of this Agreement, including, without limitation,
costs, fees and expenses as described in Section 12.04. Without limiting the foregoing, the
Collateral Agent shall be permitted at anytime to make Collateral Agent Advances to pay insurance
premiums due under the Life Insurance Policies. The Collateral Agent Advances shall be repayable on
demand and be secured by the Collateral. The Collateral Agent Advances shall constitute Obligations
hereunder which may be charged to the Loan Account in accordance with Section 4.02. The Collateral
Agent shall notify the Lender and the Borrower in writing of each such Collateral Agent Advance,
which notice shall include a description of the purpose of such Collateral Agent Advance. Without
limitation to its obligations pursuant to Section 10.05, the Lender agrees that it shall make
available to the Collateral Agent, upon the Collateral Agents demand, in Dollars in immediately
available funds, the amount of each such Collateral Agent Advance (or if there is more than one
Lender hereunder, such Lenders Pro Rata Share). If such funds are not made available to the
Collateral Agent by the Lender, the Collateral Agent shall be entitled to recover such funds on
demand from the Lender, together with interest thereon for each day from the date such payment was
due until the date such
80
amount is paid to the Collateral Agent, at the Federal Funds Rate for three
Business Days and thereafter at the Reference Rate.
(b) The Lenders hereby irrevocably authorize the Collateral Agent, at its option and in its
discretion, to release any Lien granted to or held by the Collateral Agent upon any Collateral upon
termination of the Total Commitment and payment and satisfaction of all Loans, Reimbursement
Obligations, Letter of Credit Obligations, and all other Obligations in accordance with the terms
hereof; or constituting property being sold or disposed of in the ordinary course of the Borrowers
business or otherwise in compliance with the terms of this Agreement and the other Loan Documents;
or constituting property in which the Borrower owned no interest at the time the Lien was granted
or at any time thereafter; or if approved, authorized or ratified in writing by the Lender. Upon
request by the Collateral Agent at any time, the Lender will confirm in writing the Collateral
Agents authority to release particular types or items of Collateral pursuant to this Section
10.08(b).
(c) Without in any manner limiting the Collateral Agents authority to act without any
specific or further authorization or consent by the Lender (as set forth in Section 10.08(b)), the
Lender agrees to confirm in writing, upon request by the Collateral Agent, the authority to release
Collateral conferred upon the Collateral Agent under Section 10.08(b). Upon receipt by the
Collateral Agent of confirmation from the Lender of its authority to release any particular item or
types of Collateral, and upon prior written request by the Borrower, the Collateral Agent shall
(and is hereby irrevocably authorized by the Lender to) execute such documents as may be necessary
to evidence the release of the Liens granted to the Collateral Agent for the benefit of the Agents
and the Lender upon such Collateral;
provided
,
however
, that (i) the Collateral
Agent shall not be required to execute any such document on terms which, in the Collateral Agents
opinion, would expose the Collateral Agent to liability or create any obligations or entail any
consequence other than the release of such Liens without recourse or warranty, and (ii) such
release shall not in any manner discharge, affect or impair the Obligations or any Lien upon (or
obligations of the Borrower in respect of) all interests in the Collateral retained by the
Borrower.
(d) The Collateral Agent shall have no obligation whatsoever to any Lender to assure that the
Collateral exists or is owned by the Borrower or is cared for, protected or insured or has been
encumbered or that the Lien granted to the Collateral Agent pursuant to this Agreement or any other
Loan Document has been properly or sufficiently or lawfully created, perfected, protected or
enforced or is entitled to any particular priority, or to exercise at all or in any particular
manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the
rights, authorities and powers granted or available to the Collateral Agent in this Section 10.08
or in any other Loan Document.
Section 10.09
Agency for Perfection
. Each Agent and the Lender hereby appoints each other Agent as
agent and bailee for the purpose of perfecting the security interests in and liens upon the
Collateral in assets which, in accordance with Article 9 of the Uniform Commercial Code, can be
perfected only by possession or control (or where the security interest of a secured party with
possession or control has priority over the security interest of another secured party) and each
Agent hereby acknowledges that it holds possession of or otherwise controls any such Collateral for
the benefit of the Agents and the Lender as secured party.
81
Should the Administrative Agent or any Lender obtain possession or control of any such Collateral, the Administrative Agent or such Lender
shall notify the Collateral Agent thereof, and, promptly upon the Collateral Agents request
therefor shall deliver such Collateral to the Collateral Agent or in accordance with the Collateral
Agents instructions. In addition, the Collateral Agent shall also have the power and authority
hereunder to appoint such other sub-agents as may be necessary or required under applicable state
law or otherwise to perform its duties and enforce its rights with respect to the Collateral and
under the Loan Documents. The Borrower by its execution and delivery of this Agreement hereby
consents to the foregoing.
Section 10.10
No Reliance on any Agents Customer Identification Program
. The Lender acknowledges
and agrees that neither the Lender, nor any of its Affiliates, participants or assignees, may rely
on any Agent to carry out the Lenders, Affiliates, participants or assignees customer
identification program, or other obligations required or imposed under or pursuant to the USA
PATRIOT Act or the regulations thereunder, including the regulations contained in 31 CFR 103.121
(as hereafter amended or replaced, the
CIP Regulations
), or any other Anti-Terrorism Law,
including any programs involving any of the following items relating to or in connection with the
Borrower, their Affiliates or their agents, the Loan Documents or the transactions hereunder or
contemplated hereby: (1) any identity verification procedures, (2) any recordkeeping, (3)
comparisons with government lists, (4) customer notices or (5) other procedures required under the
CIP Regulations or such other laws. The Lender, Affiliate, participant or assignee subject to
Section 326 of the USA PATRIOT Act will perform the measures necessary to satisfy its own
responsibilities under the CIP Regulations.
ARTICLE XI
SERVICER TERMINATION EVENTS
Section 11.01
Servicer Termination Event
. If a Servicer Termination Event has occurred and is
continuing, the Agents, by notice in writing to the Servicer and the Borrower, may terminate the
Servicing Agreement pursuant to the terms set forth in the Servicing Agreement. On and after the
effective time of any notice of termination, a replacement servicer approved in writing by the Agents shall be the successor Servicer, as more fully set forth in
a replacement servicing agreement in form and substance satisfactory to the Agents.
ARTICLE XII
MISCELLANEOUS
Section 12.01
Notices, Etc
. All notices and other communications provided for hereunder shall be in
writing and shall be mailed (certified mail, postage prepaid and return receipt requested),
telecopied or delivered by hand, Federal Express or other reputable overnight courier, if to the
Borrower, at the following address:
82
Imperial PFC Financing II, LLC
191 Peachtree Street, NE
Suite 3300
Atlanta, Georgia 30303
Attention: General Counsel
Telephone: 404-736-3630
Telecopier: 404-736-3620
with a copy to:
Folely & Lardner, LLP
One Independent Drive, Suite 1300
Jacksonville, Florida 32202
Attention: Robert S. Bernstein, Esq.
Telephone: 904-359-2000
Telecopier: 904-359-8700
if to the Administrative Agent, to it at the following address:
EBC Asset Management, Inc.
One Huntington Quadrangle, Suite 4C18
Melville, New York 11747
Attention: Eileen Moore
Telephone: 631-770-0650
Telecopier: 631-770-0641
if to the Collateral Agent, to it at the following address:
EBC Asset Management, Inc.
One Huntington Quadrangle, Suite 4C18
Melville, New York 11747
Attention: Eileen Moore
Telephone: 631-770-0650
Telecopier: 631-770-0641
83
in each case, with a copy to:
Graubard Miller
The Chrysler Building
405 Lexington Avenue
New York, NY 10174-1901
Attention: David A. Miller, Esq.
Telephone: 212-818-8800
Telecopier: 212-818-8881
or, as to each party, at such other address as shall be designated by such party in a written
notice to the other parties complying as to delivery with the terms of this Section 12.01. All such
notices and other communications shall be effective, (i) if mailed (certified mail, postage prepaid
and return receipt requested), when received or 3 days after deposited in the mails, whichever
occurs first, (ii) if telecopied, when transmitted and confirmation received, or (iii) if delivered
by hand, Federal Express or other reputable overnight courier, upon delivery, except that notices
to any Agent pursuant to ARTICLE II shall not be effective until received by such Agent.
Section 12.02
Amendments, Etc
. (a) No amendment or waiver of any provision of this Agreement or any
other Loan Document, and no consent to any departure by the Borrower therefrom, shall in any event
be effective unless the same shall be in writing and signed by the Lender (or in the event at the
time there is more than one Lender hereunder, the Required Lenders) or by the Collateral Agent with
the consent of the Lender (or in the event at the time there is more than one Lender hereunder, the
Required Lenders), and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given,
provided
,
however
, that no amendment,
waiver or consent shall (i) increase the Commitment of any Lender, reduce the principal of, or
interest on, the Term Loans payable to any Lender, reduce the amount of any fee payable for the
account of the Lender, or postpone or extend any scheduled date fixed for any payment of principal
of, or interest or fees on, the Term Loans payable to any Lender, in each case without the written
consent of any Lender affected thereby, (ii) increase the Total Term Loan Commitment without the
written consent of each Lender, (iii) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Term Loans that is required for the Lenders (if at such time there
is more than one Lender hereunder) or any of them to take any action hereunder without the written
consent of each Lender, (iv) amend the definition of Required Lenders or Pro Rata Share without
the written consent of each Lender, (v) release all or a substantial portion of the Collateral
(except as otherwise provided in this Agreement and the other Loan Documents), subordinate any Lien
granted in favor of the Collateral Agent for the benefit of the Agents and the Lenders, or release
the Borrower or any Guarantor without the written consent of each Lender, (vi) amend, modify or
waive Section 4.04 or this Section 12.02 of this Agreement without the written consent of each
Lender then party hereto, or (vii) amend the definition of Borrowing Base, Borrowing Base
Deficit, Collateral Value Policy, Contingent Collateral Value Policy, Collateral Value
Insurer, Contingent Collateral Value Insurer, Collections, Coverage Certificate, Covered
Loan Amount or Eligible Insurance Premium Loan, in each case, without the written consent of
each Lender then party hereto. Notwithstanding the foregoing, no
84
amendment, waiver or consent shall, unless in writing and signed by an Agent, affect the
rights or duties of such Agent under this Agreement or the other Loan Documents. Notwithstanding
the foregoing, the parties hereto hereby agree that any amendment, modification or waiver of, or
consent with respect to the definitions of Collateral Value Insurer, Collateral Value Policy,
Collections, Coverage Certificate, Person and Salvage Collections in Section 1.01, Section
2.05(e), Section 12.19 and the last three sentences in this Section 12.02(a) shall require the
written consent of the Collateral Value Insurer (prior to the occurrence of a Credit Event or the
written consent of the Contingent Collateral Value Insurer (following the occurrence of a Credit
Event) to be effective. In all events, copies of any amendments to this Agreement, any other Loan
Document or any Transaction Document shall be promptly provided by the Borrower to the Collateral
Value Insurer following execution thereof. Each of the parties hereto agrees that the Collateral
Value Insurer (prior to the occurrence of a Credit Event) or the Contingent Collateral Value
Insurer (following the occurrence of a Credit Event) is a third party beneficiary solely with
respect to Section 2.05(e), Section 12.19 and the last three sentences in Section 12.02(a) of this
Agreement.
(b) In the event there is more than one Lender, if any action to be taken by the Lenders
requires the unanimous consent, authorization, or agreement of all of the Lenders, and a Lender
(the
Holdout Lender
) fails to give its consent, authorization, or agreement, then the
Collateral Agent, upon at least 5 Business Days prior irrevocable notice to the Holdout Lender, may
permanently replace the Holdout Lender with one or more substitute Lenders (each, a
Replacement Lender
), and the Holdout Lender shall have no right to refuse to be replaced
hereunder. Such notice to replace the Holdout Lender shall specify an effective date for such
replacement, which date shall not be later than 15 Business Days after the date such notice is
given. Prior to the effective date of such replacement, the Holdout Lender and each Replacement
Lender shall execute and deliver an Assignment and Acceptance, subject only to the Holdout Lender
being repaid its share of the outstanding Obligations without any premium or penalty of any kind
whatsoever. If the Holdout Lender shall refuse or fail to execute and deliver any such Assignment
and Acceptance prior to the effective date of such replacement, the Holdout Lender shall be deemed
to have executed and delivered such Assignment and Acceptance. The replacement of any Holdout
Lender shall be made in accordance with the terms of Section 12.07(b). Until such time as the
Replacement Lenders shall have acquired all of the Obligations, the Commitments, and the other
rights and obligations of the Holdout Lender hereunder and under the other Loan Documents, the
Holdout Lender shall remain obligated to make its Pro Rata Share of Loans.
Section 12.03
No Waiver; Remedies, Etc
. No failure on the part of any Agent or the Lender to
exercise, and no delay in exercising, any right hereunder or under any other Loan Document shall
operate as a waiver thereof; nor shall any single or partial exercise of any right under any Loan
Document preclude any other or further exercise thereof or the exercise of any other right. The
rights and remedies of the Agents and the Lender provided herein and in the other Loan Documents
are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by
law. The rights of the Agents and the Lender under any Loan Document against any party thereto are
not conditional or contingent on any attempt by the Agents and the Lender to exercise any of their
rights under any other Loan Document against such party or against any other Person.
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Section 12.04
Expenses; Taxes; Attorneys Fees
. The Borrower will pay on demand, all costs and
expenses incurred by or on behalf of each Agent (and, in the case of clauses (b) through (m) below,
each Lender at such time party hereto), regardless of whether the transactions contemplated hereby
are consummated, including, without limitation, reasonable fees, costs, client charges and expenses
of counsel for each Agent (and, in the case of clauses (b) through (m) below, each Lender),
accounting, due diligence, periodic field audits, physical counts, valuations, investigations,
searches and filings, monitoring of assets, appraisals of Collateral and title searches,
miscellaneous disbursements, examination, travel, lodging and meals, arising from or relating to:
(a) the negotiation, preparation, execution, delivery, performance and administration of this
Agreement and the other Loan Documents (including, without limitation, the preparation of any
additional Loan Documents pursuant to Section 7.01(b) or the review of any of the agreements,
instruments and documents referred to in Section 7.01(0), (b) any requested amendments, waivers or
consents to this Agreement or the other Loan Documents whether or not such documents become
effective or are given, (c) the preservation and protection of the Agents or any of the Lenders
rights under this Agreement or the other Loan Documents, (d) the defense of any claim or action
asserted or brought against any Agent or any Lender by any Person that arises from or relates to
this Agreement, any other Loan Document, the Agents or the Lenders claims against the Borrower,
or any and all matters in connection therewith, (e) the commencement or defense of, or intervention
in, any court proceeding arising from or related to this Agreement or any other Loan Document, (f)
the filing of any petition, complaint, answer, motion or other pleading by any Agent or any Lender,
or the taking of any action in respect of the Collateral or other security, in connection with this
Agreement or any other Loan Document, (g) the protection, collection, lease, sale, taking
possession of or liquidation of, any Collateral or other security in connection with this Agreement
or any other Loan Document, (h) any attempt to enforce any Lien or security interest in any
Collateral or other security in connection with this Agreement or any other Loan Document, (i) any
attempt to collect from the Borrower, or (i) the receipt by any Agent or any Lender of any advice
from professionals with respect to any of the foregoing. Without limitation of the foregoing or any
other provision of any Loan Document: (x) the Borrower agrees to pay all stamp, document, transfer,
recording or filing taxes or fees and similar impositions now or hereafter determined by any Agent
or any Lender to be payable in connection with this Agreement or any other Loan Document, and the
Borrower agrees to save each Agent and each Lender harmless from and against any and all present or
future claims, liabilities or losses with respect to or resulting from any omission to pay or delay
in paying any such taxes, fees or impositions, (y) the Borrower agrees to pay all broker fees that
may become due in connection with the transactions contemplated by this Agreement and the other
Loan Documents, and (z) if the Borrower fails to perform any covenant or agreement contained herein
or in any other Loan Document, any Agent may itself perform or cause performance of such covenant
or agreement, and the expenses of such Agent incurred in connection therewith shall be reimbursed
on demand by the Borrower.
Section 12.05
Right of Set-off
. Upon the occurrence and during the continuance of any Event of
Default, any Agent or any Lender may, and is hereby authorized to, at any time and from time to
time, without notice to the Borrower (any such notice being expressly waived by the Borrower) and
to the fullest extent permitted by law, set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other Indebtedness at any time owing by
such Agent or such Lender to or for the credit or the account of the
86
Borrower against any and all obligations of the Borrower either now or hereafter existing
under any Loan Document, irrespective of whether or not such Agent or such Lender shall have made
any demand hereunder or thereunder and although such obligations may be contingent or unmatured.
Each Agent and each Lender agrees to notify the Borrower promptly after any such set-off and
application made by such Agent or such Lender provided that the failure to give such notice shall
not affect the validity of such set-off and application. The rights of the Agents and the Lenders
under this Section 12.05 are in addition to the other rights and remedies (including other rights
of set-off) which the Agents and the Lenders may have under this Agreement or any other Loan
Documents of law or otherwise.
Section 12.06
Severability
. Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining portions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
Section 12.07
Assignments and Participations
.
(a) This Agreement and the other Loan Documents shall be binding upon and inure to the benefit
of the Borrower and each Agent and the Lender and its respective successors and assigns;
provided
,
however
, that Borrower may not assign or transfer any of its rights
hereunder or under the other Loan Documents without the prior written consent of each Lender then
party hereto and any such assignment without such Lenders prior written consent shall be null and
void.
(b) Any Lender may with the written consent of the Collateral Agent, assign to one or more
other lenders or other entities all or a portion of its rights and obligations under this Agreement
with respect to all or a portion of its Term Loan Commitment and any Term Loan made by it, and (ii)
the parties to each such assignment shall execute and deliver to the Collateral Agent, for its
acceptance, an Assignment and Acceptance, together with any promissory note subject to such
assignment and such parties shall deliver to the Collateral Agent, for the benefit of the
Collateral Agent, a processing and recordation fee of $3,000 (except the payment of such fee shall
not be required in connection with an assignment by a Lender to a Lender, an Affiliate of such
Lender or a Related Fund of such Lender) and (iii) no written consent of the Collateral Agent shall
be required if such assignment is in connection with any merger, consolidation, sale, transfer, or
other disposition of all or any substantial portion of the business or loan portfolio of such
Lender. Upon such execution, delivery and acceptance, from and after the effective date specified
in each Assignment and Acceptance and recordation on the Register, which effective date shall be at
least 3 Business Days after the delivery thereof to the Collateral Agent (or such shorter period as
shall be agreed to by the Collateral Agent and the parties to such assignment), (A) the assignee
thereunder shall become a Lender hereunder and, in addition to the rights and obligations
hereunder held by it immediately prior to such effective date, have the rights and obligations
hereunder that have been assigned to it pursuant to such Assignment and Acceptance and (B) the
assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been
assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released
from its obligations under this Agreement (and, in the case of an Assignment and Acceptance
covering all or the remaining portion of an
87
assigning Lenders rights and obligations under this Agreement, such Lender shall cease to be
a party hereto).
(c) By executing and delivering an Assignment and Acceptance, the assigning Lender and the
assignee thereunder confirm to and agree with each other and the other parties hereto as follows:
(i) other than as provided in such Assignment and Acceptance, the assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any statements, warranties
or representations made in or in connection with this Agreement or any other Loan Document or the
execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement
or any other Loan Document furnished pursuant hereto; (ii) the assigning Lender makes no
representation or warranty and assumes no responsibility with respect to the financial condition of
the Borrower or the performance or observance by the Borrower of any of its obligations under this
Agreement or any other Loan Document furnished pursuant hereto; (iii) such assignee confirms that
it has received a copy of this Agreement and the other Loan Documents, together with such other
documents and information it has deemed appropriate to make its own credit analysis and decision to
enter into such Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the assigning Lender, any Agent or any Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Loan Documents; (v) such assignee
appoints and authorizes the Agents to take such action as agents on its behalf and to exercise such
powers under this Agreement and the other Loan Documents as are delegated to the Agents by the
terms hereof and thereof, together with such powers as are reasonably incidental hereto and
thereto; and (vi) such assignee agrees that it will perform in accordance with their terms all of
the obligations which by the terms of this Agreement and the other Loan Documents are required to
be performed by it as a Lender.
(d) The Administrative Agent shall, acting solely for this purpose as an agent of the
Borrower, maintain, or cause to be maintained at the Payment Office, a copy of each Assignment and
Acceptance delivered to and accepted by it and a register (the
Register
) for the
recordation of the names and addresses of the Lenders and the Commitments of, and the principal
amount of the Loans (and stated interest thereon) (the
Registered Loans
). The entries in
the Register shall be conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Agents and the Lenders may treat each Person whose name is recorded in the Register
as a Lender hereunder for all purposes of this Agreement. The Register shall be available for
inspection by the Borrower and any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(e) Upon receipt by the Administrative Agent of a completed Assignment and Acceptance, and
subject to any consent required from the Collateral Agent pursuant to Section 12.07(b) (which
consent of the Collateral Agent must be evidenced by the Collateral Agents execution of an
acceptance to such Assignment and Acceptance), the Administrative Agent shall accept such
assignment and record the information contained therein in the Register.
(f) A Registered Loan (and the registered note, if any, evidencing the same) may be assigned
or sold in whole or in part only by registration of such assignment or sale
88
on the Register (and each registered note shall expressly so provide). Any assignment or sale
of all or part of such Registered Loan (and the registered note, if any, evidencing the same) may
be effected only by registration of such assignment or sale on the Register, together with the
surrender of the registered note, if any, evidencing the same duly endorsed by (or accompanied by a
written instrument of assignment or sale duly executed by) the holder of such registered note,
whereupon, at the request of the designated assignee(s) or transferee(s), one or more new
registered notes in the same aggregate principal amount shall be issued to the designated
assignee(s) or transferee(s). Prior to the registration of assignment or sale of any Registered
Loan (and the registered note, if any, evidencing the same), the Agents shall treat the Person in
whose name such Registered Loan (and the registered note, if any, evidencing the same) is
registered on the Register as the owner thereof for the purpose of receiving all payments thereon,
notwithstanding notice to the contrary.
(g) In the event that any Lender sells participations in a Registered Loan, such Lender shall,
acting for this purpose as an agent on behalf of the Borrower, maintain, or cause to be maintained,
a register on which it enters the name of all participants in the Registered Loans held by it and
the principal amount (and stated interest thereon) of the portion of the Registered Loan that is
the subject of the participation (the
Participant Register
). A Registered Loan (and the
registered note, if any, evidencing the same) may be participated in whole or in part only by
registration of such participation on the Participant Register (and each registered note shall
expressly so provide). Any participation of such Registered Loan (and the registered note, if any,
evidencing the same) may be effected only by the registration of such participation on the
Participant Register. The Participant Register shall be available for inspection by the Borrower
and any Lender at any reasonable time and from time to time upon reasonable prior notice.
(h) Any Non-U.S. Lender who purchases or is assigned or participates in any portion of such
Registered Loan shall comply with Section 2.08(d).
(i) Any Lender may sell participations to one or more banks or other entities in or to all or
a portion of its rights and obligations under this Agreement and the other Loan Documents
(including, without limitation, all or a portion of its Commitments, the Loans made by it);
provided
,
that
(i) such Lenders obligations under this Agreement (including
without limitation, its Commitment hereunder) and the other Loan Documents shall remain unchanged;
(ii) such Lender shall remain solely responsible to the other parties hereto for the performance of
such obligations, and the Borrower and the Agents and any other Lenders shall continue to deal
solely and directly with such Lender in connection with the Lenders rights and obligations under
this Agreement and the other Loan Documents; and (iii) a participant shall not be entitled to
require such Lender to take or omit to take any action hereunder except (A) action directly
effecting an extension of the maturity dates or decrease in the principal amount of the Loans, (B)
action directly effecting an extension of the due dates or a decrease in the rate of interest
payable on the Loans or the fees payable under this Agreement, or (C) actions directly effecting a
release of all or a substantial portion of the Collateral or the Borrower (except as set forth in
Section 10.08 of this Agreement or any other Loan Document). The Borrower agrees that each
participant shall be entitled to the benefits of Section 2.08 and Section 4.05 of this Agreement
with respect to its participation in any portion of the Total Term Loan Commitment and the Loans as
if it was a Lender.
89
Section 12.08
Counterparts
. This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which shall be deemed to be an original,
but all of which taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of this Agreement by telefacsimile or electronic mail shall be equally as
effective as delivery of an original executed counterpart of this Agreement. Any party delivering
an executed counterpart of this Agreement by telefacsimile or electronic mail also shall deliver an
original executed counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of this Agreement.
The foregoing shall apply to each other Loan Document mutatis mutandis.
Section 12.09
GOVERNING LAW
. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY PROVIDED
TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH OTHER LOAN DOCUMENT) SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED IN THE STATE OF NEW YORK.
Section 12.10
CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE
. ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF NEW YORK IN THE COUNTY OF NEW YORK OR OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY
IRREVOCABLY ACCEPTS IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF
THE AFORESAID COURTS. THE BORROWER HEREBY IRREVOCABLY APPOINTS THE SECRETARY OF STATE OF THE STATE
OF NEW YORK AS ITS AGENT FOR SERVICE OF PROCESS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING AND
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS AND
IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE BORROWER AT ITS ADDRESS FOR NOTICES AS SET FORTH IN SECTION 12.01 AND TO
THE SECRETARY OF STATE OF THE STATE OF NEW YORK, SUCH SERVICE TO BECOME EFFECTIVE TEN (10) DAYS
AFTER SUCH MAILING. THE BORROWER AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY
OTHER MANNER PROVIDED BY LAW. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENTS AND THE LENDERS
TO SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST THE BORROWER IN ANY OTHER JURISDICTION. THE BORROWER HEREBY EXPRESSLY AND
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE JURISDICTION OR LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH
COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. TO THE EXTENT
90
THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR
FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT
IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS.
Section 12.11
WAIVER OF JURY TRIAL, ETC.
THE BORROWER, EACH AGENT AND THE LENDER HEREBY WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS, OR UNDER ANY AMENDMENT, WAIVER, CONSENT, INSTRUMENT,
DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION
THEREWITH, OR ARISING FROM ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT,
AND AGREES THAT ANY SUCH ACTION, PROCEEDINGS OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY. THE BORROWER CERTIFIES THAT NO OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
AGENT OR THE LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT ANY AGENT OR ANY LENDER WOULD
NOT, IN THE EVENT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING WAIVERS.
THE BORROWER HEREBY ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENTS AND
THE LENDER ENTERING INTO THIS AGREEMENT.
Section 12.12
Consent by the Agents and Lender
. Except as otherwise expressly set forth herein to
the contrary or in any other Loan Document, if the consent, approval, satisfaction, determination,
judgment, acceptance or similar action (an
Action
) of any Agent or any Lender shall be
permitted or required pursuant to any provision hereof or any provision of any other agreement to
which the Borrower is a party and to which any Agent or any Lender has succeeded thereto, such
Action shall be required to be in writing and may be withheld or denied by such Agent or such
Lender, in its sole discretion, with or without any reason, and without being subject to question
or challenge on the grounds that such Action was not taken in good faith.
Section 12.13
No Party Deemed Drafter
. Each of the parties hereto agrees that no party hereto shall
be deemed to be the drafter of this Agreement.
Section 12.14
Reinstatement; Certain Payments
. If any claim is ever made upon any Agent or any
Lender for repayment or recovery of any amount or amounts received by such Agent or such Lender in
payment or on account of any of the Obligations, such Agent or such Lender shall give prompt notice
of such claim to each other Agent and the Borrower, and if such Agent or such Lender repays all or
part of such amount by reason of (i) any judgment, decree or order of any court or administrative
body having jurisdiction over such Agent or such Lender or any of its property, or (ii) any good
faith settlement or compromise of any such claim effected by such Agent or such Lender with any
such claimant, then and in such event the Borrower agrees that (A) any such judgment, decree,
order, settlement or compromise shall be binding upon it
91
notwithstanding the cancellation of any Indebtedness hereunder or under the other Loan
Documents or the termination of this Agreement or the other Loan Documents, and (B) it shall be and
remain liable to such Agent or such Lender hereunder for the amount so repaid or recovered to the
same extent as if such amount had never originally been received by such Agent or such Lender.
Section 12.15
Indemnification
.
(a)
General Indemnity
. In addition to the Borrowers other Obligations under this
Agreement, the Borrower agrees to defend, protect, indemnify and hold harmless each Agent, each
Lender and all of their respective officers, directors, employees, attorneys, consultants and
agents (collectively called the
Indemnitees
) from and against any and all losses,
damages, liabilities, obligations, penalties, fees, reasonable costs and expenses (including,
without limitation, reasonable attorneys fees, costs and expenses) incurred by such Indemnitees,
whether prior to or from and after the Effective Date, whether direct, indirect or consequential,
as a result of or arising from or relating to or in connection with any of the following: (i) the
negotiation, preparation, execution or performance or enforcement of this Agreement, any other Loan
Document or of any other document executed in connection with the transactions contemplated by this
Agreement, (ii) any Agents or any Lenders furnishing of funds to the Borrower for the account of
the Borrower under this Agreement or the other Loan Documents, including, without limitation, the
management of any such Loans, (iii) any matter relating to the financing transactions contemplated
by this Agreement or the other Loan Documents or by any document executed in connection with the
transactions contemplated by this Agreement or the other Loan Documents, or (iv) any claim,
litigation, investigation or proceeding relating to any of the foregoing, whether or not any
Indemnitee is a party thereto (collectively, the
Indemnified Matters
);
provided
,
however
, that Borrower shall not have any obligation to any Indemnitee under this
subsection (a) for any Indemnified Matter caused by the gross negligence or willful misconduct of
such Indemnitee, as determined by a final judgment of a court of competent jurisdiction.
(b) To the extent that the undertaking to indemnify, pay and hold harmless set forth in this
Section 12.15 may be unenforceable because it is violative of any law or public policy, the
Borrower shall contribute the maximum portion which it is permitted to pay and satisfy under
applicable law, to the payment and satisfaction of all Indemnified Matters incurred by the
Indemnitees. The indemnities set forth in this Section 12.15 shall survive the repayment of the
Obligations and discharge of any Liens granted under the Loan Documents.
Section 12.16
Records
. The unpaid principal of and interest on the Loans, the interest rate or rates
applicable to such unpaid principal and interest, the duration of such applicability, the
Commitments, and the accrued and unpaid fees payable pursuant to Section 2.06 hereof, including,
without limitation, the Applicable Prepayment Premium, shall at all times be ascertained from the
records of the Agents, which shall be conclusive and binding absent manifest error.
Section 12.17
Binding Effect
. This Agreement shall become effective when it shall have been executed
by the Borrower, each Agent and the Lender and when the conditions precedent set forth in Section
5.01 hereof have been satisfied or waived in writing by the Agents,
92
and thereafter shall be binding upon and inure to the benefit of the Borrower, each Agent and
each Lender, and their respective successors and assigns, except that the Borrower shall not have
the right to assign their rights hereunder or any interest herein without the prior written consent
of each Agent and the Lender, and any assignment by any Lender shall be governed by Section 12.07
hereof.
Section 12.18
Interest
. It is the intention of the parties hereto that each Agent and each Lender
shall conform strictly to usury laws applicable to it. Accordingly, if the transactions
contemplated hereby or by any other Loan Document would be usurious as to any Agent or any Lender
under laws applicable to it (including the laws of the United States of America and the State of
New York or any other jurisdiction whose laws may be mandatorily applicable to such Agent or the
Lender notwithstanding the other provisions of this Agreement), then, in that event,
notwithstanding anything to the contrary in this Agreement or any other Loan Document or any
agreement entered into in connection with or as security for the Obligations, it is agreed as
follows: (i) the aggregate of all consideration which constitutes interest under law applicable to
any Agent or any Lender that is contracted for, taken, reserved, charged or received by such Agent
or such Lender under this Agreement or any other Loan Document or agreements or otherwise in
connection with the Obligations shall under no circumstances exceed the maximum amount allowed by
such applicable law, any excess shall be canceled automatically and if theretofore paid shall be
credited by such Agent or such Lender on the principal amount of the Obligations (or, to the extent
that the principal amount of the Obligations shall have been or would thereby be paid in full,
refunded by such Agent or such Lender, as applicable, to the Borrower); and (ii) in the event that
the maturity of the Obligations is accelerated by reason of any Event of Default under this
Agreement or otherwise, or in the event of any required or permitted prepayment, then such
consideration that constitutes interest under law applicable to any Agent or any Lender may never
include more than the maximum amount allowed by such applicable law, and excess interest, if any,
provided for in this Agreement or otherwise shall be canceled automatically by such Agent or such
Lender, as applicable, as of the date of such acceleration or prepayment and, if theretofore paid,
shall be credited by such Agent or such Lender, as applicable, on the principal amount of the
Obligations (or, to the extent that the principal amount of the Obligations shall have been or
would thereby be paid in full, refunded by such Agent or the Lender to the Borrower). All sums paid
or agreed to be paid to any Agent or any Lender for the use, forbearance or detention of sums due
hereunder shall, to the extent permitted by law applicable to such Agent or such Lender, be
amortized, prorated, allocated and spread throughout the full term of the Loans until payment in
full so that the rate or amount of interest on account of any Loans hereunder does not exceed the
maximum amount allowed by such applicable law. If at any time and from time to time (x) the amount
of interest payable to any Agent or any Lender on any date shall be computed at the Highest Lawful
Rate applicable to such Agent or such Lender pursuant to this Section 12.18 and (y) in respect of
any subsequent interest computation period the amount of interest otherwise payable to such Agent
or such Lender would be less than the amount of interest payable to such Agent or such Lender
computed at the Highest Lawful Rate applicable to such Agent or such Lender, then the amount of
interest payable to such Agent or such Lender in respect of such subsequent interest computation
period shall continue to be computed at the Highest Lawful Rate applicable to such Agent or such
Lender until the total amount of interest payable to such Agent or such Lender shall equal the
total amount of interest which would have been payable to such Agent or such
93
Lender if the total amount of interest had been computed without giving effect to this Section
12.18.
For purposes of this Section 12.18, the term applicable law shall mean that law in effect
from time to time and applicable to the loan transaction between the Borrower, on the one hand, and
the Agents and the Lenders, on the other, that lawfully permits the charging and collection of the
highest permissible, lawful non-usurious rate of interest on such loan transaction and this
Agreement, including laws of the State of New York and, to the extent controlling, laws of the
United States of America.
The right to accelerate the maturity of the Obligations does not include the right to
accelerate any interest that has not accrued as of the date of acceleration.
Section 12.19
Confidentiality
. Each Agent and the Lender agrees (on behalf of itself and each of its
affiliates, directors, officers, employees and representatives) to use reasonable precautions to
keep confidential, in accordance with its customary procedures for handling confidential
information of this nature and in accordance with safe and sound practices of comparable commercial
finance companies, any non-public information supplied to it by the Borrower pursuant to this
Agreement or the other Loan Documents which is identified in writing by the Borrower as being
confidential at the time the same is delivered to such Person (and which at the time is not, and
does not thereafter become, publicly available or available to such Person from another source not
known to be subject to a confidentiality obligation to such Person not to disclose such
information),
provided
that nothing herein shall limit the disclosure of any such
information (i) to the extent required by any Requirement of Law or judicial process or as
otherwise requested by any Governmental Authority, (ii) to counsel for any Agent or any Lender,
(iii) to examiners, auditors, accountants or Securitization parties;
provided
, that the
Agents and the Lenders shall not be entitled to disclose the identity of the Collateral Value
Insurer or the Contingent Collateral Value Insurer to the Rating Agencies or, except as provided
below, provide a copy of the Collateral Value Policy to the Rating Agencies, in each case, without
the prior written consent of the Collateral Value Insurer or the Contingent Collateral Value
Insurer, as applicable;
provided
,
further
, that the Agents and the Lenders shall be
permitted to disclose a copy of the Collateral Value Policy and the Contingent Collateral Value
Policy to the Rating Agencies and to investors (or prospective investors) and their counsel or
other advisors of any indebtedness issued by the Lender that relates to this Financing Agreement
and the Eligible Insurance Premium Loans financed hereunder so long as the identity of the
Collateral Value Insurer and the Contingent Collateral Value Insurer is redacted, (iv) in
connection with any litigation to which any Agent or the Lender is a party or (v) to any assignee
or participant (or prospective assignee or participant) so long as such assignee or participant (or
prospective assignee or participant) first agrees, in writing, to be bound by confidentiality
provisions similar in substance to this Section 12.19.
Section 12.20
Public Disclosure
. The Borrower agrees that neither it nor any of its Affiliates will
now or in the future issue any press release or other public disclosure using the name of an Agent,
the Lender or any of their respective Affiliates or referring to this Agreement or any other Loan
Document without the prior written consent of such Agent or such Lender, except to the extent that
the Borrower or such Affiliate is required to do so under applicable law (in which event, the
Borrower or such Affiliate will consult with such Agent or the Lender
94
before issuing such press release or other public disclosure). The Borrower hereby authorizes
each Agent and the Lender, after consultation with the Borrower, to advertise the closing of the
transactions contemplated by this Agreement, and to make appropriate announcements of the financial
arrangements entered into among the parties hereto, as such Agent or the Lender shall deem
appropriate, including, without limitation, announcements commonly known as tombstones, in such
trade publications, business journals, newspapers of general circulation and to such selected
parties as such Agent or the Lender shall deem appropriate.
Section 12.21
Integration
. This Agreement, together with the other Loan Documents, reflects the
entire understanding of the parties with respect to the transactions contemplated hereby and shall
not be contradicted or qualified by any other agreement, oral or written, before the date hereof.
Section 12.22
USA PATRIOT Act
. The Lender hereby notifies the Borrower that pursuant to the
requirements of the USA PATRIOT Act (Title 111 of Pub. L. 107-56 (signed into law October 26,
2001)) (as amended, the
USA PATRIOT Act
), a Lender may be required to obtain, verify and
record information that identifies the entities composing the Borrower, which information includes
the name and address of each such entity and other information that will allow the Lender to
identify the entities composing the Borrower in accordance with the USA PATRIOT Act. The Borrower
agrees to take such action and execute, acknowledge and deliver at its sole cost and expense, such
instruments and documents as any Lender may reasonably require from time to time in order to enable
such Lender to comply with the USA PATRIOT Act.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
95
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their
respective officers thereunto duly authorized, as of the date first above written.
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|
|
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BORROWER
:
IMPERIAL PFC FINANCING II, LLC
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|
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By:
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/s/ Carlos Cadena
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Name:
|
Carlos Cadena
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|
|
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Title:
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Vice President
|
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LENDER
:
Cedar Lane Capital LLC
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|
|
By:
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EBC Asset Management, Inc., its Sole Member
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|
|
|
|
|
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|
|
By:
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/s/ Eileen Moore
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|
|
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Name:
|
Eileen Moore
|
|
|
|
Title:
|
Chief Financial Officer
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COLLATERAL AGENT
:
EBC Asset Management, Inc.
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|
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By:
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/s/ Eileen Moore
|
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Name:
|
Eileen Moore
|
|
|
|
Title:
|
Chief Financial Officer
|
|
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ADMINISTRATIVE AGENT
:
EBC Asset Management, Inc.
|
|
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By:
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/s/ Eileen Moore
|
|
|
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Name:
|
Eileen Moore
|
|
|
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Title:
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Chief Financial Officer
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[SIGNATURE PAGE TO FINANCING AGREEMENT]
Schedule 1.01(A)
Lenders and Lenders Commitments
|
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Lender
|
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Commitment
|
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LoIC LLC
|
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$
|
15,000,000
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Total
|
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$
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15,000,000
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Schedule 1.01(B)
Applicable Non-Licensed States
1. Georgia
2. Utah
Schedule 1.01(C)
Applicable Licensed States
1. Mississippi
Schedule 1.01(D)
Loan Schedule
None
Schedule 1.01(E)
Non-Corporate Trustee Insurance Premium Loans
None
Schedule 5.02(e)
Delivery of Documents
1.
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Loan Schedule
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2.
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Life Insurance Policy and evidence of receipt by insurance carrier of the related premium
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3.
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Eligibility Certification
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4.
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Trust Agreement
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5.
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Completed compliance checklist for Insurance Premium Loan
|
|
6.
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Loan Documentation Package for Insurance Premium Loan
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7.
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Coverage Certificate
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|
8.
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Revised Non-Corporate Trustee Insurance Premium Loan Schedule, if necessary
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9.
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Insurance Premium Loan Assignment Agreement or Participation Certificate from Master
Participation Agreement
|
|
10.
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All other deliveries required by the Agents, including all documents and certificates
required for an Insurance Premium Loan to be an Eligible Insurance Premium Loan
|
Schedule 6.01(e)
Capitalization
100% of the issued and outstanding Equity Interests are owned by Imperial Premium Finance, LLC
Schedule 6.01(q)
Insurance
|
|
|
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Insurance Company
|
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Type
|
|
Policy Period
|
|
Limit of Liability
|
|
Policy #
|
American Intl.
Specialty Lines Ins.
Co.
|
|
Professional
Liability E&O
|
|
12/19/08 12/19/09
|
|
|
10,000,000.00
|
|
|
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013777922
|
|
Navigators Insurance Company
|
|
Directors &
Officers Liability
|
|
8/20/09 8/20/10
|
|
$
|
5,000,000.00
|
|
|
NY09D0L6014101V
|
Capital Specialty
Insurance Corp.
|
|
General Liability
|
|
11/10/09 1/10/10
|
|
$
|
2,000,000.00
|
|
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BR00357869
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Schedule 6.01(t)
Bank Accounts
|
|
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Bank
|
|
Wachovia Bank
|
Account Name
|
|
Imperial PFC Financing II, LLC
|
Type of Account
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|
Collection
|
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|
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Bank
|
|
Wachovia Bank
|
Account Name
|
|
Imperial PFC Financing II, LLC
|
Type of Account
|
|
Operating
|
|
|
|
Bank
|
|
Wachovia Bank
|
Account Name
|
|
Imperial PFC Financing II, LLC
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Type of Account
|
|
Reserve
|
Schedule 6.01(u)
Intellectual Property
None
Schedule 6.01(v)
Material Contracts
1.
|
|
Transaction Documents.
|
|
2.
|
|
Loan Documents to which Borrower is a party.
|
Schedule 6.01(aa)
Name; Jurisdiction of Organization; Organizational ID Number;
Chief Place of Business; Chief Executive Office; FEIN
|
|
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Name
|
|
Imperial PFC Financing II, LLC
|
Jurisdiction of Organization
|
|
Georgia
|
|
Organizational Identification Number
|
|
|
09008735
|
|
|
Place(s) of Business
|
|
191 Peachtree Street NE, Suite 3300
Atlanta, Georgia 30303;
701 Park of Commerce Blvd., Suite 301
Boca Raton, FL 33487
|
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Chief Executive Office
|
|
191 Peachtree Street NE, Suite 3300
Atlanta, Georgia 30303
|
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FEIN
|
|
|
|
|
Schedule 6.01(bb)
Collateral Locations
1.
|
|
701 Park of Commerce Blvd., Suite 301, Boca Raton FL 33487
|
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2.
|
|
191 Peachtree Street, NE, Suite 3300, Atlanta, GA 30303
|
Schedule 8.01
Cash Management Bank and Collection Account, Operating Account and Reserve Account
|
|
|
Bank
|
|
Wachovia Bank
|
Account Name
|
|
Imperial PFC Financing II, LLC
|
Type of Account
|
|
Collection
|
|
|
|
Bank
|
|
Wachovia Bank
|
Account Name
|
|
Imperial PFC Financing II, LLC
|
Type of Account
|
|
Operating
|
|
|
|
Bank
|
|
Wachovia Bank
|
Account Name
|
|
Imperial PFC Financing II, LLC
|
Type of Account
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Reserve
|
EXHIBIT A
FORM OF SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT, dated as of
, 2009 made by the Grantor referred to
below, in favor of LoIC LLC, a Delaware limited liability company (LoIC), in its capacity as
collateral agent for the Secured Parties referred to below (in such capacity, together with its
successors and assigns in such capacity, if any, the
Collateral Agent
).
W
I
T
N
E
S
S
E
T
H
:
WHEREAS, Imperial PFC Financing II, LLC, a Georgia limited liability company (the
Borrower
and the
Grantor
, the lenders from time to time party thereto (each a
Lender
and collectively, the
Lenders
), the Collateral Agent and LoIC, as
administrative agent for the Lenders (in such capacity, together with its successors and assigns in
such capacity, if any, the
Administrative Agent
and together with the Collateral Agent,
each an
Agent
and collectively, the
Agents
) are parties to a Financing
Agreement, dated as of
, 2009 (such agreement, as amended, restated, supplemented, modified or
otherwise changed from time to time, including any replacement agreement therefor, being
hereinafter referred to as the
Financing Agreement
);
WHEREAS, pursuant to the Financing Agreement, the Lenders have agreed to make term loans (each
a
Loan
and collectively, the
Loans
), to the Borrower in an aggregate principal
amount at any one time outstanding not to exceed the Total Term Loan Commitment (as defined in the
Financing Agreement);
WHEREAS, it is a condition precedent to the Lenders making any Loan to the Borrower pursuant
to the Financing Agreement that the Grantor shall have executed and delivered to the Collateral
Agent a pledge to the Collateral Agent, for the benefit of the Secured Parties, and the grant to
the Collateral Agent, for the benefit of the Secured Parties, of (a) a security interest in and
Lien on the outstanding shares of Equity Interests (as defined in the Financing Agreement) and
indebtedness from time to time owned by the Grantor of each Person now or hereafter existing and in
which the Grantor has any interest at any time, and (b) a security interest in all other personal
property and fixtures of the Grantor; and
WHEREAS, Grantor has determined that the execution, delivery and performance of this Agreement
directly benefit, and are in the best interest of, the Grantor;
NOW, THEREFORE, in consideration of the premises and the agreements herein and in order to
induce the Collateral Agent and the Lenders to make and maintain the Loans to the Borrower pursuant
to the Financing Agreement, the Grantor agrees with the Collateral Agent, for the benefit of the
Secured Parties, as follows:
SECTION 1.
Definitions
.
(a) Reference is hereby made to the Financing Agreement for a statement of the terms thereof.
All capitalized terms used in this Agreement and the recitals
Exh. A-1
hereto which are defined in the Financing Agreement or in Article 8 or 9 of the Uniform
Commercial Code as in effect from time to time in the State of New York (the
Code
) and
which are not otherwise defined herein shall have the same meanings herein as set forth therein;
provided that terms used herein which are defined in the Code as in effect in the State of New York
on the date hereof shall continue to have the same meaning notwithstanding any replacement or
amendment of such statute except as the Collateral Agent may otherwise determine.
(b) The following terms shall have the respective meanings provided for in the Code:
Accounts, Account Debtor, Cash Proceeds, Certificate of Title, Chattel Paper, Commercial
Tort Claim, Commodity Account, Commodity Contracts, Deposit Account, Documents,
Electronic Chattel Paper, Equipment, Fixtures, General Intangibles, Goods, Instruments,
Inventory, Investment Property, Letter-of-Credit Rights, Noncash Proceeds, Payment
Intangibles, Proceeds, Promissory Notes, Record, Security Account, Software, Supporting
Obligations and Tangible Chattel Paper.
(c) As used in this Agreement, the following terms shall have the respective meanings
indicated below, such meanings to be applicable equally to both the singular and plural forms of
such terms:
Additional Collateral
has the meaning specified therefor in Section 4(a)(i) hereof.
Certificated Entities
has the meaning specified therefor in Section 5(m) hereof.
Existing Issuer
has the meaning specified therefor in the definition of the term
Pledged Shares.
Intellectual Property
means all U.S and non-U.S. (i) published and unpublished works
of authorship (including, without limitation, computer software), copyrights therein and thereto,
and registrations and applications therefor, and all renewals, extensions, restorations and
reversions thereof, including, without limitation, all copyright registrations and applications
listed in Schedule II hereto (collectively,
Copyrights
); (ii) inventions, discoveries,
ideas and all patents, registrations, and applications therefor, including, without limitation,
divisions, continuations, continuations-in-part and renewal applications, and all renewals,
extensions and reissues, including, without limitation, all patents and patent applications listed
in Schedule II hereto (collectively,
Patents
); (iii) trademarks, service marks, brand
names, certification marks, collective marks, d/b/as, Internet domain names, logos, symbols, trade
dress, assumed names, fictitious names, trade names, and other indicia of origin, all applications
and registrations for all of the foregoing, and all goodwill associated therewith and symbolized
thereby, and all extensions, modifications and renewals of same, including, without limitation, all
trademark registrations and applications listed in Schedule II hereto (collectively,
Trademarks
); (iv) confidential and proprietary information, trade secrets and know-how,
including, without limitation, processes, schematics, databases, formulae, drawings, prototypes,
models, designs and customer lists (collectively,
Trade Secrets
); and (v) all other
intellectual property or proprietary rights and claims or causes of action arising out of or
related to any infringement,
Exh. A-2
misappropriation or other violation of any of the foregoing, including, without limitation,
rights to recover for past, present and future violations thereof (collectively,
Other
Proprietary Rights
).
Pledged Debt
means the indebtedness described in Schedule VII hereto and all
indebtedness from time to time owned or acquired by the Grantor, the promissory notes and other
Instruments evidencing any or all of such indebtedness, and all interest, cash, Instruments,
Investment Property, financial assets, securities, Equity Interests, other equity interests, stock
options and commodity contracts, notes, debentures, bonds, promissory notes or other evidences of
indebtedness and all other property from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of such indebtedness.
Pledged Interests
means, collectively, (a) the Pledged Debt, (b) the Pledged Shares
and (c) all security entitlements in any and all of the foregoing.
Pledged Issuer
has the meaning specified therefor in the definition of the term
Pledged Shares
.
Pledged Shares
means (a) the shares of Equity Interests described in Schedule VIII
hereto, whether or not evidenced or represented by any stock certificate, certificated security or
other Instrument, issued by the Persons described in such Schedule VIII (the
Existing
Issuers
), (b) the shares of Equity Interests at any time and from time to time acquired by the
Grantor of any and all Persons now or hereafter existing (such Persons, together with the Existing
Issuers, being hereinafter referred to collectively as the
Pledged Issuers
and each
individually as a
Pledged Issuer
), whether or not evidenced or represented by any stock
certificate, certificated security or other Instrument, and (c) the certificates representing such
shares of Equity Interests, all options and other rights, contractual or otherwise, in respect
thereof and all dividends, distributions, cash, Instruments, Investment Property, financial assets,
securities, Equity Interests, other equity interests, stock options and commodity contracts, notes,
debentures, bonds, promissory notes or other evidences of indebtedness and all other property
(including, without limitation, any stock dividend and any distribution in connection with a stock
split) from time to time received, receivable or otherwise distributed in respect of or in exchange
for any or all of such Equity Interests.
Secured Parties
means, collectively, the Agents and the Lenders.
Secured Obligations
has the meaning specified therefor in Section 3 hereof.
SECTION 2.
Grant of Security Interest
. As collateral security for the payment,
performance and observance of all of the Secured Obligations, the Grantor hereby pledges and
assigns to the Collateral Agent (and its agents and designees), and grants to the Collateral Agent
(and its agents and designees), for the benefit of the Secured Parties, a continuing security
interest in, all personal property and Fixtures of the Grantor, wherever located and whether now or
hereafter existing and whether now owned or hereafter acquired, of every kind and description,
tangible or intangible, including, without limitation, the following (all being collectively
referred to herein as the
Collateral
):
Exh. A-3
(a) all Accounts;
(b) all Chattel Paper (whether tangible or electronic);
(c) the Commercial Tort Claims specified on Schedule VI hereto;
(d) all Deposit Accounts, all cash, and all other property from time to time deposited therein
or otherwise credited thereto and the monies and property in the possession or under the control of
any Agent or any Lender or any affiliate, representative, agent or correspondent of any Agent or
any Lender;
(e) all Documents;
(f) all General Intangibles (including, without limitation, all Payment Intangibles and
Intellectual Property);
(g) all Goods, including, without limitation, all Equipment, Fixtures and Inventory;
(h) all Instruments (including, without limitation, Promissory Notes);
(i) all Investment Property;
(j) all Letter-of-Credit Rights;
(k) all Pledged Interests;
(l) all Supporting Obligations;
(m) all Insurance Premium Loans;
(n) all other tangible and intangible personal property of the Grantor (whether or not subject
to the Code), including, without limitation, all bank and other accounts and all cash and all
investments therein, all proceeds, products, offspring, accessions, rents, profits, income,
benefits, substitutions and replacements of and to any of the property of the Grantor described in
the preceding clauses of this Section 2 hereof (including, without limitation, any proceeds of
insurance thereon and all causes of action, claims and warranties now or hereafter held by the
Grantor in respect of any of the items listed above), and all books, correspondence, files and
other Records, including, without limitation, all tapes, disks, cards, Software, data and computer
programs in the possession or under the control of the Grantor or any other Person from time to
time acting for the Grantor that at any time evidence or contain information relating to any of the
property described in the preceding clauses of this Section 2 hereof or are otherwise necessary or
helpful in the collection or realization thereof; and
(o) all Proceeds, including all Cash Proceeds and Noncash Proceeds, and products of any and
all of the foregoing Collateral;
in each case howsoever the Grantors interest therein may arise or appear (whether by ownership,
security interest, claim or otherwise).
Exh. A-4
Notwithstanding anything herein to the contrary, the term Collateral shall not include, and the
Grantor is not pledging, nor granting a security interest hereunder in, any of the Grantors right,
title or interest in any license, contract or agreement to which the Grantor is a party as of the
date hereof or any of its right, title or interest thereunder to the extent, but only to the
extent, that such a grant would, under the express terms of such license, contract or agreement on
the date hereof result in a breach of the terms of, or constitute a default under, such license,
contract or agreement (other than to the extent that any such term (i) has been waived or (ii)
would be rendered ineffective pursuant to Sections 9-406, 9-408, 9-409 of the Code or other
applicable provisions of the Uniform Commercial Code of any relevant jurisdiction or any other
applicable law (including the Bankruptcy Code) or principles of equity);
provided
, that (x)
immediately upon the ineffectiveness, lapse, termination or waiver of any such provision, the
Collateral shall include, and the Grantor shall be deemed to have granted a security interest in,
all such right, title and interest as if such provision had never been in effect and (y) the
foregoing exclusion shall in no way be construed so as to limit, impair or otherwise affect the
Collateral Agents unconditional continuing security interest in and liens upon any rights or
interests of the Grantor in or to the proceeds of, or any monies due or to become due under, any
such license, contract or agreement.
SECTION 3.
Security for Secured Obligations
. The security interest created hereby in
the Collateral constitutes continuing collateral security for all of the following obligations,
whether now existing or hereafter incurred (the Secured Obligations):
(a) the prompt payment by the Grantor, as and when due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise), of all amounts from time to time
owing by it in respect of the Financing Agreement and/or the other Loan Documents, including,
without limitation, (i) all Obligations and (ii) all interest, fees, commissions, charges, expense
reimbursements, indemnifications and all other amounts due or to become due under any Loan Document
(including, without limitation, all interest, fees, commissions, charges, expense reimbursements,
indemnifications and other amounts that accrue after the commencement of any Insolvency Proceeding
of any Credit Party, whether or not the payment of such interest, fees, commissions, charges,
expense reimbursements, indemnifications and other amounts are unenforceable or are not allowable,
in whole or in part, due to the existence of such Insolvency Proceeding); and
(b) the due performance and observance by the Grantor of all of its other obligations from
time to time existing in respect of the Loan Documents.
SECTION 4.
Delivery of the Pledged Interests
.
(a) (i) All promissory notes currently evidencing the Pledged Debt and all certificates
currently representing the Pledged Shares shall be delivered to the Collateral Agent on or prior to
the execution and delivery of this Agreement. All other promissory notes, certificates and
Instruments constituting Pledged Interests from time to time required to be pledged to the
Collateral Agent pursuant to the terms of this Agreement or the Financing Agreement (the
Additional Collateral
) shall be delivered to the Agent promptly upon, but in any event
within five (5) days of, receipt thereof by or on behalf of the Grantor. All such promissory notes,
certificates and Instruments shall be held by or on behalf of the Collateral
Exh. A-5
Agent pursuant hereto and shall be delivered in suitable form for transfer by delivery or
shall be accompanied by duly executed instruments of transfer or assignment or undated stock powers
executed in blank, all in form and substance reasonably satisfactory to the Collateral Agent. If
any Pledged Interests consists of uncertificated securities, unless the immediately following
sentence is applicable thereto, the Grantor shall cause the Collateral Agent (or its designated
custodian or nominee) to become the registered holder thereof, or cause each issuer of such
securities to agree that it will comply with instructions originated by the Collateral Agent with
respect to such securities without further consent by the Grantor. If any Pledged Interests
consists of security entitlements, the Grantor shall transfer such security entitlements to the
Collateral Agent (or its custodian, nominee or other designee), or cause the applicable securities
intermediary to agree that it will comply with entitlement orders by the Collateral Agent without
further consent by the Grantor.
(ii) Within five (5) days of the receipt by the Grantor of any Additional Collateral, a Pledge
Amendment, duly executed by the Grantor, in substantially the form of Exhibit A hereto (a
Pledge Amendment
), shall be delivered to the Collateral Agent, in respect of the
Additional Collateral that must be pledged pursuant to this Agreement and the Financing Agreement.
The Pledge Amendment shall from and after delivery thereof constitute part of Schedules VII and
VIII hereto. The Grantor hereby authorizes the Collateral Agent to attach each Pledge Amendment to
this Agreement and agrees that all promissory notes, certificates or Instruments listed on any
Pledge Amendment delivered to the Collateral Agent shall for all purposes hereunder constitute
Pledged Interests and the Grantor shall be deemed upon delivery thereof to have made the
representations and warranties set forth in Section 5 hereof with respect to such Additional
Collateral.
(b) If the Grantor shall receive, by virtue of the Grantors being or having been an owner of
any Pledged Interests, any (i) stock certificate (including, without limitation, any certificate
representing a stock dividend or distribution in connection with any increase or reduction of
capital, reclassification, merger, consolidation, sale of assets, combination of shares, stock
split, spin-off or split-off), promissory note or other Instrument, (ii) option or right, whether
as an addition to, substitution for, or in exchange for, any Pledged Interests, or otherwise, (iii)
dividends payable in cash (except such dividends permitted to be retained by the Grantor pursuant
to Section 7 hereof) or in securities or other property or (iv) dividends, distributions, cash,
Instruments, Investment Property and other property in connection with a partial or total
liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in
surplus, the Grantor shall receive such stock certificate, promissory note, Instrument, option,
right, payment or distribution in trust for the benefit of the Collateral Agent, shall segregate it
from the Grantors other property and shall deliver it forthwith to the Collateral Agent, in the
exact form received, with any necessary indorsement and/or appropriate stock powers duly executed
in blank, to be held by the Collateral Agent as Pledged Interests and as further collateral
security for the Secured Obligations.
SECTION 5.
Representations and Warranties
. The Grantor represents and warrants as
follows:
(a) Schedule I hereto sets forth (i) the exact legal name of the Grantor, (ii) the state or
jurisdiction of organization of the Grantor, (iii) the type of organization of the
Exh. A-6
Grantor and (iv) the organizational identification number of the Grantor or states that no
such organizational identification number exists.
(b) This Agreement is, and each other Loan Document to which the Grantor is or will be a
party, when executed and delivered, will be, a legal, valid and binding obligation of the Grantor,
enforceable against the Grantor in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws and principles
of equity.
(c) There is no pending or, to the knowledge of the Grantor, threatened action, suit,
proceeding or claim before any court or other Governmental Authority or any arbitrator, or any
order, judgment or award by any court or other Governmental Authority or any arbitrator, that, if
adversely determined, may adversely affect the grant by the Grantor, or the perfection, of the
security interest purported to be created hereby in the Collateral, or the exercise by the
Collateral Agent of any of its rights or remedies hereunder.
(d) All Collateral now existing are, and all Collateral hereafter existing will be, located at
the addresses specified therefor in Schedule III hereto. The Grantors chief place of business and
chief executive office, the place where the Grantor keeps its Records concerning Accounts,
Insurance Premium Loans and all originals of all Chattel Paper are located at the addresses
specified therefor in Schedule III hereto (as amended, supplemented or otherwise modified from time
to time in accordance with the terms hereof). None of the Accounts is evidenced by Promissory Notes
or other Instruments. Set forth in Schedule IV hereto is a complete and accurate list, as of the
date of this Agreement, of each Deposit Account, Securities Account and Commodities Account of the
Grantor, together with the name and address of each institution at which each such Account is
maintained, the account number for each such Account and a description of the purpose of each such
Account. Set forth in Schedule II hereto is (i) a complete and correct list of each trade name used
by the Grantor and (ii) the name of, and each trade name used by, each Person from which the
Grantor has acquired any substantial part of the Collateral within five years of the date hereof.
(e) (i) The Grantor owns and controls, or otherwise possesses adequate rights to use, all
Intellectual Property necessary to conduct their business in substantially the same manner as
conducted as of the date hereof. Schedule II hereto sets forth a true and complete list of all
issued, registered, renewed, applied-for or otherwise material Intellectual Property owned or used
by the Grantor as of the date hereof. All such Intellectual Property is valid, subsisting and
enforceable, and none of such Intellectual Property has been abandoned in whole or in part and is
not subject to any outstanding order, judgment or decree restricting its use in any material
respect or adversely affecting the Grantors rights thereto in any material respect. Except as set
forth in Schedule II hereto, no such Intellectual Property is the subject of any licensing or
franchising agreement.
(ii) Grantor is not violating and Grantor has not received a written notice that it has
violated any Intellectual Property rights. There are no suits, actions, reissues, reexaminations,
public protests, interferences, arbitrations, mediations, oppositions, cancellations, Internet
domain name dispute resolutions or other proceedings (collectively,
Suits
) pending,
decided, to Grantors knowledge, threatened or asserted concerning any claim
Exh. A-7
or position that the Grantor or any of its indemnitees have violated any Intellectual Property
rights. There are no Suits or claims pending, decided, threatened or asserted concerning the
Intellectual Property owned or controlled by the Grantor, and, to the Grantors knowledge, no valid
basis for any such Suits or claims exists.
(f) The Existing Issuers set forth in Schedule VIII identified as a Subsidiary of the Grantor
are the Grantors only Subsidiaries existing on the date hereof. The Pledged Shares have been duly
authorized and validly issued and are fully paid and nonassessable and the holders thereof are not
entitled to any preemptive, first refusal or other similar rights. Except as noted in Schedule VIII
hereto, the Pledged Shares constitute 100% of the issued shares of Equity Interests of the Pledged
Issuers as of the date hereof. All other shares of Equity Interests constituting Pledged Interests
will be duly authorized and validly issued, fully paid and nonassessable.
(g) The promissory notes currently evidencing the Pledged Debt have been, and all other
promissory notes from time to time evidencing Pledged Debt, when executed and delivered, will have
been, duly authorized, executed and delivered by the respective makers thereof, and all such
promissory notes are or will be, as the case may be, legal, valid and binding obligations of such
makers, enforceable against such makers in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws and
principles of equity.
(h) The Grantor is and will be at all times the sole and exclusive owners of, or otherwise
have and will have adequate rights in, the Collateral free and clear of any Lien except for the
Permitted Liens. No effective financing statement or other instrument similar in effect covering
all or any part of the Collateral is on file in any recording or filing office except such as may
have been filed to perfect or protect any Permitted Lien.
(i) The exercise by the Collateral Agent of any of its rights and remedies hereunder will not
contravene any Requirement of Law or any contractual restriction binding on or otherwise affecting
the Grantor or any of its properties and will not result in, or require the creation of, any Lien
upon or with respect to any of its properties.
(j) No authorization or approval or other action by, and no notice to or filing with, any
Governmental Authority or other regulatory body, or any other Person, is required for (i) the due
execution, delivery and performance by the Grantor of this Agreement, (ii) the grant by the Grantor
of the security interest purported to be created hereby in the Collateral or (iii) the exercise by
the Collateral Agent of any of its rights and remedies hereunder, except, in the case of this
clause (iii), as may be required in connection with any sale of any Pledged Interests by laws
affecting the offering and sale of securities generally. No authorization or approval or other
action by, and no notice to or filing with, any Governmental Authority or any other Person, is
required for the perfection of the security interest purported to be created hereby in the
Collateral, except (A) for the filing under the Uniform Commercial Code as in effect in the
applicable jurisdiction of the financing statements described in Schedule V hereto, all of which
financing statements have been duly filed and are in full force and effect (B) with respect to any
action that may be necessary to obtain control of Collateral constituting Deposit Accounts,
Electronic Chattel Paper, Investment Property or Letter-of-Credit Rights, the
Exh. A-8
taking of such actions, and (C the Collateral Agents having possession of all Documents,
Chattel Paper, Instruments and cash constituting Collateral (subclauses (A), (B) and (C), each a
Perfection Requirement
and collectively, the
Perfection Requirements
).
(k) This Agreement creates a legal, valid and enforceable security interest in favor of the
Collateral Agent, for the benefit of the Secured Parties, in the Collateral, as security for the
Secured Obligations. The Perfection Requirements result in the perfection of such security
interests. Such security interests are, or in the case of Collateral in which the Grantor obtains
rights after the date hereof, will be, perfected, first priority security interests, subject in
priority only to the Permitted Liens that, pursuant to the definition of the term Permitted
Liens, are not prohibited from being prior to the Liens in favor of the Collateral Agent, for the
benefit of the Secured Parties, and the recording of such instruments of assignment described
above. Such Perfection Requirements and all other action necessary or desirable to perfect and
protect such security interest have been duly made or taken, except for (i) the Collateral Agents
having possession of all Instruments, Documents, Chattel Paper and cash constituting Collateral
after the date hereof, (ii) the Collateral Agents having control of all Deposit Accounts,
Electronic Chattel Paper, Investment Property or Letter-of-Credit Rights constituting Collateral
after the date hereof, and (iii) the other filings and recordations and actions described in
Section 5(j) hereof.
(l) As of the date hereof, the Grantor does not hold any Commercial Tort Claims or is not
aware of any such pending claims, except for such claims described in Schedule VI.
(m) The Grantor has irrevocably opted into Article 8 of the Uniform Commercial Code
(collectively, the
Certificated Entities
). Such interests are securities for purposes of
Article 8 of any relevant Uniform Commercial Code.
SECTION 6.
Covenants as to the Collateral
. So long as any of the Secured Obligations
(whether or not due) shall remain unpaid or any Lender shall have any Commitment under the
Financing Agreement, unless the Collateral Agent shall otherwise consent in writing:
(a)
Further Assurances
. The Grantor will at its expense, at any time and from time to
time, promptly execute and deliver all further instruments and documents and take all further
action that may be necessary or reasonably desirable or that the Collateral Agent may request in
order (i) to perfect and protect, or maintain the perfection of, the security interest and Lien
purported to be created hereby; (ii) to enable the Collateral Agent to exercise and enforce its
rights and remedies hereunder in respect of the Collateral; or (iii) otherwise to effect the
purposes of this Agreement, including, without limitation: (A) marking conspicuously all Chattel
Paper and Instruments and, at the request of the Collateral Agent, all of its Records pertaining to
the Collateral with a legend, in form and substance reasonably satisfactory to the Collateral
Agent, indicating that such Chattel Paper, Instrument or Collateral is subject to the security
interest created hereby, (B) if any Account shall be evidenced by a Promissory Note or other
Instrument or Chattel Paper, delivering and pledging to the Collateral Agent such Promissory Note,
other Instrument or Chattel Paper, duly endorsed and accompanied by executed instruments of
transfer or assignment, all in form and substance satisfactory to the Collateral Agent, (C)
executing and filing (to the extent, if any, that the Grantors signature is
Exh. A-9
required thereon) or authenticating the filing of, such financing or continuation statements,
or amendments thereto, (D) with respect to Intellectual Property hereafter existing and not covered
by an appropriate security interest grant, the executing and recording in the United States Patent
and Trademark Office or the United States Copyright Office, as applicable, appropriate instruments
granting a security interest, as may be necessary or desirable or that the Collateral Agent may
request in order to perfect and preserve the security interest purported to be created hereby, (E)
delivering to the Collateral Agent irrevocable proxies in respect of the Pledged Interests, (F)
furnishing to the Collateral Agent from time to time statements and schedules further identifying
and describing the Collateral and such other reports in connection with the Collateral as the
Collateral Agent may reasonably request, all in reasonable detail, (G) if any Collateral shall be
in the possession of a third party, notifying such Person of the Collateral Agents security
interest created hereby and obtaining a written agreement, in form and substance reasonably
satisfactory to the Collateral Agent, providing access to such Collateral in order to remove such
Collateral from such premises during an Event of Default and acknowledging that such Person holds
possession of the Collateral for the benefit of the Collateral Agent, (H) if at any time after the
date hereof, the Grantor acquires or holds any Commercial Tort Claim, immediately notifying the
Collateral Agent in a writing signed by the Grantor setting forth a brief description of such
Commercial Tort Claim and granting to the Collateral Agent a security interest therein and in the
proceeds thereof, which writing shall incorporate the provisions hereof and shall be in form and
substance reasonably satisfactory to the Collateral Agent, and (I) taking all actions required by
law in any relevant Uniform Commercial Code jurisdiction, or by other law as applicable in any
foreign jurisdiction. No Grantor shall take or fail to take any action which would in any manner
impair the validity or enforceability of the Collateral Agents security interest in and Lien on
any Collateral.
(b)
Taxes, Etc.
The Grantor agrees to pay promptly when due all property and other
taxes, assessments and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Collateral, except to the extent otherwise
provided in the Financing Agreement.
(c)
Insurance
. The Grantor will, at its own expense, maintain insurance with respect
to the Collateral in accordance with the terms of the Financing Agreement. The Grantor will, if so
requested by the Collateral Agent, deliver to the Collateral Agent original or duplicate insurance
policies and, as often as the Collateral Agent may reasonably request, a report of a reputable
insurance broker with respect to such insurance. The Grantor will also, at the request of the
Collateral Agent, execute and deliver instruments of assignment of such insurance policies and
cause the respective insurers to acknowledge notice of such assignment.
(d)
Provisions Concerning the Insurance Premium Loans
. The Grantor will, except as
otherwise provided in this subsection (d), continue to collect, at its own expense, all amounts due
or to become due under the Insurance Premium Loans. In connection with such collections, the
Grantor may (and, at the Collateral Agents direction, will) take such action as the Grantor (or,
if applicable, the Collateral Agent) may reasonably deem necessary or advisable to enforce
collection or performance of the Insurance Premium Loans;
provided
,
however
, that
the Collateral Agent shall have the right at any time, upon the occurrence and during the
continuance of an Event of Default, to notify the Premium Finance Borrower or obligors under
Exh. A-10
any Insurance Premium Loans of the assignment of such Insurance Premium Loans to the
Collateral Agent and to direct such Premium Finance Borrower or obligors to make payment of all
amounts due or to become due to the Grantor thereunder directly to the Collateral Agent or its
designated agent and, upon such notification and at the expense of the Grantor and to the extent
permitted by law, to enforce collection of any such Insurance Premium Loans and to adjust, settle
or compromise the amount or payment thereof, in the same manner and to the same extent as the
Grantor might have done. After receipt by the Grantor of a notice from the Collateral Agent that
the Collateral Agent has notified, intends to notify, or has enforced or intends to enforce the
Grantors rights against the Premium Finance Borrower or obligors under any Premium Finance
Borrower as referred to in the proviso to the immediately preceding sentence, (A) all amounts and
proceeds (including Instruments) received by the Grantor in respect of the Premium Finance Loans
shall be received in trust for the benefit of the Collateral Agent hereunder, shall be segregated
from other funds of the Grantor and shall be forthwith paid over to the Collateral Agent or its
designated agent in the same form as so received (with any necessary endorsement) to be held as
cash collateral and either (x) credited to the Loan Account so long as no Event of Default shall
have occurred and be continuing or (y) if any Event of Default shall have occurred and be
continuing, applied as specified in Section 9(d) hereof, and (B) the Grantor will not adjust,
settle or compromise the amount or payment of any Insurance Premium Loan or release wholly or
partly any Premium Finance Borrower or obligor thereof or allow any credit or discount thereon. The
Collateral Agent may (in its sole and absolute discretion) direct any or all of the banks and
financial institutions with which the Grantor either maintains a Deposit Account or a lockbox or
deposits the proceeds of any Insurance Premium Loan to send immediately to the Collateral Agent or
its designated agent by wire transfer (to such account as the Collateral Agent shall specify, or in
such other manner as the Collateral Agent shall direct) all or a portion of such securities, cash,
investments and other items held by such institution. Any such securities, cash, investments and
other items so received by the Collateral Agent or its designated agent shall (in the sole and
absolute discretion of the Collateral Agent) be held as additional Collateral for the Secured
Obligations or distributed in accordance with Section 9 hereof.
(e)
Provisions Concerning the Pledged Interests
. The Grantor will
(i) at the Grantors expense, promptly deliver to the Collateral Agent a copy of each notice
or other communication received by it in respect of the Pledged Interests;
(ii) at the Grantors expense, defend the Collateral Agents right, title and security
interest in and to the Pledged Interests against the claims of any Person;
(iii) not make or consent to any amendment or other modification or waiver with respect to any
Pledged Interests or enter into any agreement or permit to exist any restriction with respect to
any Pledged Interests other than pursuant to the Loan Documents; and
(iv) not permit the issuance of (A) any additional shares of any class of Equity Interests of
any Pledged Issuer, (B) any securities convertible voluntarily by the holder thereof or
automatically upon the occurrence or non-occurrence of any event or condition
Exh. A-11
into, or exchangeable for, any such shares of Equity Interests or (C) any warrants, options,
contracts or other commitments entitling any Person to purchase or otherwise acquire any such
shares of Equity Interests.
(f)
Transfers and Other Liens
.
(i) Except to the extent expressly permitted by Section 7.02(c) of the Financing Agreement,
the Grantor will not sell, assign (by operation of law or otherwise), lease, license, exchange or
otherwise transfer or dispose of any of the Collateral.
(ii) Except to the extent expressly permitted by Section 7.02(a) of the Financing Agreement,
the Grantor will not create, suffer to exist or grant any Lien upon or with respect to any
Collateral.
(g)
Intellectual Property
.
(i) The Grantor (either itself or through its licensees or its sublicensees) will, for each
Trademark used in the conduct of the Grantors business, (i) maintain such Trademark in full force
free from any claim of abandonment or invalidity for non-use, (ii) maintain the quality of products
and services offered under such Trademark, (iii) display such Trademark with notice of U.S. or
non-U.S. registration to the extent necessary to establish and preserve its rights under applicable
law, and (iv) not knowingly use or knowingly permit the use of such Trademark in violation of any
third party rights.
(ii) The Grantor shall notify the Collateral Agent promptly if it knows or has reason to know
that any Intellectual Property material to the conduct of its business may become abandoned, lost
or dedicated to the public, or of any final materially adverse determination (including the
institution of, or any such determination in, any proceeding in the United States Patent and
Trademark Office, United States Copyright Office or any court or similar office of any country)
regarding the Grantors ownership of any Intellectual Property, its right to register the same, or
its right to keep and maintain the same.
(iii) In the event that the Grantor (i) files an application or registration for any
Intellectual Property with the United States Patent and Trademark Office, United States Copyright
Office or any office or agency in any political subdivision of the United States or in any other
country or any political subdivision thereof, either itself or through any agent, employee,
licensee or designee or (ii) obtains rights to or develop any new Intellectual Property or any
reissue, division, continuation, renewal, extension or continuation-in-part of any existing
Intellectual Property, whether pursuant to any license or otherwise; the provisions of Section 2
hereof shall automatically apply thereto and the Grantor shall give to the Collateral Agent prompt
notice thereof, and, upon request of the Collateral Agent, execute and deliver any and all
agreements, instruments, documents and papers as the Collateral Agent may reasonably request to
evidence the Collateral Agents security interest in such Intellectual Property, and Grantor hereby
appoints the Collateral Agent as its attorney-in-fact to execute and file such writings for the
foregoing purposes, all acts of such attorney being hereby ratified and confirmed; such power,
being coupled with an interest, is irrevocable.
Exh. A-12
(iv) The Grantor will take all necessary steps that are consistent with the practice in any
proceeding before the United States Patent and Trademark Office, United States Copyright Office or
any office or agency in any political subdivision of the United States or in any other country or
any political subdivision thereof, to maintain and pursue each application relating to the
Intellectual Property of the Grantor (and to obtain the relevant grant or registration) and to
maintain each issued Patent and each registration of the Trademarks and Copyrights that is used in
the conduct of the Grantors business as conducted or proposed to be conducted, including timely
filings of applications for renewal, affidavits of use, affidavits of incontestability and payment
of maintenance fees, and, if consistent with good business judgment, to initiate opposition,
interference and cancellation proceedings against third parties.
(v) In the event that the Grantor has reason to believe that any Collateral consisting of
Intellectual Property used in the conduct of the Grantors business has been infringed,
misappropriated or diluted by a third party, the Grantor shall if consistent with good business
judgment, promptly sue for infringement, misappropriation or dilution and to recover any and all
damages for such infringement, misappropriation or dilution, and take such other actions as are
appropriate under the circumstances to protect such Collateral and promptly shall notify the
Collateral Agent of the initiation of such suit.
(vi) Upon and during the continuance of an Event of Default, (i) the Grantor shall not abandon
or otherwise permit any Intellectual Property to become invalid and (ii) the Grantor shall use
commercially reasonable efforts to obtain all requisite consents or approvals by the licensor of
each License that constitutes Collateral owned by the Grantor to effect the assignment of all the
Grantors right, title and interest thereunder to the Collateral Agent or its designee.
(vii) The Grantor shall execute, authenticate and deliver any and all assignments, agreements,
instruments, documents and papers as the Collateral Agent may reasonably request to evidence the
Collateral Agents security interest hereunder in such Intellectual Property and the General
Intangibles of the Grantor relating thereto or represented thereby, the Grantor hereby appoints the
Collateral Agent as its attorney-in-fact to execute and file such writings for the foregoing
purposes, all acts of such attorney being hereby ratified and confirmed; such power, being coupled
with an interest, is irrevocable.
(h)
Deposit, Commodities and Securities Accounts
. On or prior to the date hereof, the
Grantor shall cause each bank and other financial institution with an account referred to in
Schedule IV hereto to execute and deliver to the Collateral Agent (or its designee) a control
agreement, in form and substance satisfactory to the Collateral Agent, duly executed by the Grantor
and such bank or financial institution, or enter into other arrangements in form and substance
satisfactory to the Collateral Agent, pursuant to which such institution shall irrevocably agree,
among other things, that (i) it will comply at any time with the instructions originated by the
Collateral Agent (or its designee) to such bank or financial institution directing the disposition
of cash, Commodity Contracts, securities, Investment Property and other items from time to time
credited to such account, without further consent of the Grantor, (ii) all cash, Commodity
Contracts, securities, Investment Property and other items of the Grantor deposited with such
institution shall be subject to a perfected, first priority security interest in favor of the
Collateral Agent (or its designee), (iii) any right of set off, bankers Lien or other similar
Lien,
Exh. A-13
security interest or encumbrance shall be fully waived as against the Collateral Agent (or its
designee) and (iv) upon receipt of written notice from the Collateral Agent during the continuance
of an Event of Default, such bank or financial institution shall immediately send to the Collateral
Agent (or its designee) by wire transfer (to such account as the Collateral Agent (or its designee)
shall specify, or in such other manner as the Collateral Agent shall direct) all such cash, the
value of any Commodity Contracts, securities, Investment Property and other items held by it.
Without the prior written consent of the Collateral Agent, the Grantor shall not make or maintain
any Deposit Account, Commodity Account or Securities Account except for the accounts set forth in
Schedule IV hereto. The provisions of this Section 6(h) shall not apply to Deposit Accounts for
which the Collateral Agent is the depositary.
(i)
Control
. The Grantor hereby agrees to take any or all action that may be necessary
or desirable or that the Collateral Agent may request in order for the Collateral Agent to obtain
control in accordance with Sections 9-104, 9-105, 9-106, and 9-107 of the Code with respect to the
following Collateral: (i) Deposit Accounts, (ii) Electronic Chattel Paper and (iii) Investment
Property. The Grantor hereby acknowledges and agrees that any agent or designee of the Collateral
Agent shall be deemed to be a secured party with respect to the Collateral under the control of
such agent or designee for all purposes.
(j)
Records; Inspection and Reporting
.
(i) The Grantor shall keep reasonably adequate records concerning the Accounts, Insurance
Premium Loans, Chattel Paper and Pledged Interests. The Grantor shall permit any Agent or any
agents or representatives thereof or such professionals or other Persons as any Agent may designate
(A) unless an Event of Default has occurred and is continuing, upon reasonable prior notice and
during normal business hours, to examine and make copies of and abstracts from the Grantors books
and records, (B) unless an Event of Default has occurred and is continuing, upon reasonable prior
notice and during normal business hours, to visit and inspect its properties, (C) to verify
materials, leases, notes, Accounts, Insurance Premium Loans and other assets of the Grantor from
time to time, (D) to conduct audits, physical counts, appraisals and/or valuations or examinations
at the locations of the Grantor and (E) to discuss the Grantors affairs, finances and accounts
with any of its directors, officers, managerial employees, independent accountants or any of its
other representatives, in each case as provided in the Financing Agreement.
(ii) Except as otherwise expressly permitted by Section 7.02(m) of the Financing Agreement,
the Grantor shall not, without the prior written consent of the Collateral Agent, change (A) its
name, identity or organizational structure, (B) its jurisdiction of incorporation or organization
as set forth in Schedule I hereto or (C) its chief executive office as set forth in Schedule III
hereto. The Grantor shall immediately notify the Collateral Agent upon obtaining an organizational
identification number, if on the date hereof the Grantor did not have such identification number.
(k)
Partnership and Limited Liability Company Interest
. Each interest in any limited
liability company or partnership controlled by the Grantor and pledged hereunder shall be (i)
represented by a certificate, (ii) deemed a security within the meaning of Article 8 of the UCC
and (iii) shall be governed by Article 8 of the UCC.
Exh. A-14
SECTION 7.
Voting Rights, Dividends, Etc.
in Respect of the Pledged Interests.
(a) So long as no Event of Default shall have occurred and be continuing:
(i) the Grantor may exercise any and all voting and other consensual rights pertaining to any
Pledged Interests for any purpose not inconsistent with the terms of this Agreement, the Financing
Agreement or the other Loan Documents;
provided
,
however
, that (A) the Grantor will
give the Collateral Agent at least five (5) Business Days written notice of the manner in which it
intends to exercise, or the reasons for refraining from exercising, any such right that could
reasonably be expected to adversely affect in any material respect the value, liquidity or
marketability of any Collateral or the creation, perfection and priority of the Collateral Agents
Lien; and (B) the Grantor will not exercise or refrain from exercising any such right, as the case
may be, if the Collateral Agent gives the Grantor written notice that, in the Collateral Agents
reasonable business judgment, such action (or inaction) could reasonably be expected to adversely
affect in any material respect the value, liquidity or marketability of any Collateral or the
creation, perfection and priority of the Collateral Agents Lien; and
(ii) the Grantor may receive and retain any and all dividends, interest or other distributions
paid in respect of the Pledged Interests to the extent permitted by the Financing Agreement;
provided
,
however
, that any and all (A) dividends and interest paid or payable
other than in cash in respect of, and Instruments and other property received, receivable or
otherwise distributed in respect of or in exchange for, any Pledged Interests, (B) dividends and
other distributions paid or payable in cash in respect of any Pledged Interests in connection with
a partial or total liquidation or dissolution or in connection with a reduction of capital, capital
surplus or paid-in surplus, and (C) cash paid, payable or otherwise distributed in redemption of,
or in exchange for, any Pledged Interests, together with any dividend, interest or other
distribution or payment which at the time of such payment was not permitted by the Financing
Agreement, shall be, and shall forthwith be delivered to the Collateral Agent, to hold as, Pledged
Interests and shall, if received by the Grantor, be received in trust for the benefit of the
Collateral Agent, shall be segregated from the other property or funds of the Grantor, and shall be
forthwith delivered to the Collateral Agent in the exact form received with any necessary
indorsement and/or appropriate stock powers duly executed in blank, to be held by the Collateral
Agent as Pledged Interests and as further collateral security for the Secured Obligations; and
(iii) the Collateral Agent will execute and deliver (or cause to be executed and delivered) to
the Grantor all such proxies and other instruments as the Grantor may reasonably request for the
purpose of enabling the Grantor to exercise the voting and other rights which it is entitled to
exercise pursuant to Section 7(a)(i) hereof and to receive the dividends, interest and/or other
distributions which it is authorized to receive and retain pursuant to Section 7(a)(ii) hereof.
(b) Upon the occurrence and during the continuance of an Event of Default:
Exh. A-15
(i) all rights of the Grantor to exercise the voting and other consensual rights which it
would otherwise be entitled to exercise pursuant to Section 7(a)(i) hereof, and to receive the
dividends, distributions, interest and other payments that it would otherwise be authorized to
receive and retain pursuant to Section 7(a)(ii) hereof, shall cease, and all such rights shall
thereupon become vested in the Collateral Agent, which shall thereupon have the sole right to
exercise such voting and other consensual rights and to receive and hold as Pledged Interests such
dividends, distributions and interest payments;
(ii) the Collateral Agent is authorized to notify each debtor with respect to the Pledged Debt
to make payment directly to the Collateral Agent (or its designee) and may collect any and all
moneys due or to become due to the Grantor in respect of the Pledged Debt, and the Grantor hereby
authorizes each such debtor to make such payment directly to the Collateral Agent (or its designee)
without any duty of inquiry;
(iii) without limiting the generality of the foregoing, the Collateral Agent may at its option
exercise any and all rights of conversion, exchange, subscription or any other rights, privileges
or options pertaining to any of the Pledged Interests as if it were the absolute owner thereof,
including, without limitation, the right to exchange, in its discretion, any and all of the Pledged
Interests upon the merger, consolidation, reorganization, recapitalization or other adjustment of
any Pledged Issuer, or upon the exercise by any Pledged Issuer of any right, privilege or option
pertaining to any Pledged Interests, and, in connection therewith, to deposit and deliver any and
all of the Pledged Interests with any committee, depository, transfer agent, registrar or other
designated agent upon such terms and conditions as it may reasonably determine; and
(iv) all dividends, distributions, interest and other payments that are received by the
Grantor contrary to the provisions of Section 7(b)(i) hereof shall be received in trust for the
benefit of the Collateral Agent, shall be segregated from other funds of the Grantor, and shall be
forthwith paid over to the Collateral Agent as Pledged Interests in the exact form received with
any necessary indorsement and/or appropriate stock powers duly executed in blank, to be held by the
Collateral Agent as Pledged Interests and as further collateral security for the Secured
Obligations.
SECTION 8.
Additional Provisions Concerning the Collateral
.
(a) To the maximum extent permitted by applicable law, and for the purpose of taking any
action that the Collateral Agent may deem necessary or advisable to accomplish the purposes of this
Agreement, the Grantor hereby (i) authorizes the Collateral Agent to execute any such agreements,
instruments or other documents in the Grantors name and to file such agreements, instruments or
other documents in the Grantors name and in any appropriate filing office, (ii) authorizes the
Collateral Agent at any time and from time to time to file, one or more financing or continuation
statements and amendments thereto, relating to the Collateral (including, without limitation, any
such financing statements that (A) describe the Collateral as all assets or all personal
property (or words of similar effect) or that describe or identify the Collateral by type or in
any other manner as the Collateral Agent may determine, regardless of whether any particular asset
of the Grantor falls within the scope of Article 9 of the Uniform Commercial Code or whether any
particular asset of the Grantor constitutes part of the
Exh. A-16
Collateral, and (B) contain any other information required by Part 5 of Article 9 of the Code
for the sufficiency or filing office acceptance of any financing statement, continuation statement
or amendment, including, without limitation, whether the Grantor is an organization, the type of
organization and any organizational identification number issued to the Grantor) and (iii) ratifies
such authorization to the extent that the Collateral Agent has filed any such financing statements,
continuation statements, or amendments thereto, prior to the date hereof. A photocopy or other
reproduction of this Agreement or any financing statement covering the Collateral or any part
thereof shall be sufficient as a financing statement where permitted by law.
(b) The Grantor hereby irrevocably appoints the Collateral Agent as its attorney-in-fact and
proxy, with full authority in the place and stead of the Grantor and in the name of the Grantor or
otherwise, from time to time in the Collateral Agents discretion after the occurrence and during
the continuance of an Event of Default, to take any action and to execute any instrument that the
Collateral Agent may deem necessary or advisable to accomplish the purposes of this Agreement
(subject to the rights of the Grantor under Section 6 hereof and Section 7(a) hereof), including,
without limitation, (i) to obtain and adjust insurance required to be paid to the Collateral Agent
pursuant to the Financing Agreement, (ii) to ask, demand, collect, sue for, recover, compound,
receive and give acquittance and receipts for moneys due and to become due under or in respect of
any Collateral, (iii) to receive, endorse, and collect any drafts or other Instruments, Documents
and Chattel Paper in connection with clause (i) or (ii) above, (iv) to receive, indorse and collect
all Instruments made payable to the Grantor representing any dividend, interest payment or other
distribution in respect of any Pledged Interests and to give full discharge for the same, (v) to
file any claims or take any action or institute any proceedings which the Collateral Agent may deem
necessary or desirable for the collection of any Collateral or otherwise to enforce the rights of
the Collateral Agent and the Lenders with respect to any Collateral, (vi) to execute assignments,
licenses and other documents to enforce the rights of the Collateral Agent and the Lenders with
respect to any Collateral, (vii) to pay or discharge taxes or Liens levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the amounts necessary to
discharge the same to be determined by the Collateral Agent in its sole discretion, and such
payments made by the Collateral Agent to become Obligations of the Grantor to the Collateral Agent,
due and payable immediately without demand, and (viii) to sign and endorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts, assignments, verifications and
notices in connection with Accounts, Chattel Paper and other documents relating to the Collateral.
This power is coupled with an interest and is irrevocable until the date on which all of the
Secured Obligations have been indefeasibly paid in full in cash after the termination of each
Lenders Commitment and each of the Loan Documents.
(c) For the purpose of enabling the Collateral Agent to exercise rights and remedies
hereunder, at such time as the Collateral Agent shall be lawfully entitled to exercise such rights
and remedies, and for no other purpose, the Grantor hereby (i) grants to the Collateral Agent an
irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to
the Grantor) to use, assign, license or sublicense any Intellectual Property now or hereafter owned
by the Grantor, wherever the same may be located, including in such license reasonable access to
all media in which any of the licensed items may be recorded or stored and to all computer programs
used for the compilation or printout thereof; and (ii) assigns to the Collateral Agent, to the
extent assignable, all of its rights to any Intellectual Property now or hereafter licensed or used
by the Grantor. Notwithstanding anything contained
Exh. A-17
herein to the contrary, but subject to the provisions of the Financing Agreement that limit
the right of the Grantor to dispose of its property and Section 6(g) hereof, so long as no Event of
Default shall have occurred and be continuing, the Grantor may exploit, use, enjoy, protect,
license, sublicense, assign, sell, dispose of or take other actions with respect to the
Intellectual Property in the ordinary course of its business. In furtherance of the foregoing,
unless an Event of Default shall have occurred and be continuing, the Collateral Agent shall from
time to time, upon the request of the Grantor, execute and deliver any instruments, certificates or
other documents, in the form so requested, which the Grantor shall have certified are appropriate
(in the Grantors judgment) to allow it to take any action permitted above (including
relinquishment of the license provided pursuant to this clause (c) as to any Intellectual
Property). Further, upon the date on which all of the Secured Obligations have been indefeasibly
paid in full in cash after the termination of each Lenders Commitment and each of the Loan
Documents, the Collateral Agent (subject to Section 13(e) hereof) shall release and reassign to the
Grantor all of the Collateral Agents right, title and interest in and to the Intellectual
Property, all without recourse, representation or warranty whatsoever and at the Grantors sole
expense. The exercise of rights and remedies hereunder by the Collateral Agent shall not terminate
the rights of the holders of any licenses or sublicenses theretofore granted by the Grantor in
accordance with the second sentence of this clause (c). The Grantor hereby releases the Collateral
Agent from any claims, causes of action and demands at any time arising out of or with respect to
any actions taken or omitted to be taken by the Collateral Agent under the powers of attorney
granted herein other than actions taken or omitted to be taken through the Collateral Agents gross
negligence or willful misconduct, as determined by a final determination of a court of competent
jurisdiction.
(d) If the Grantor fails to perform any agreement or obligation contained herein, the
Collateral Agent may itself perform, or cause performance of, such agreement or obligation, in the
name of the Grantor or the Collateral Agent, and the expenses of the Collateral Agent incurred in
connection therewith shall be payable by the Grantor pursuant to Section 10 hereof and shall be
secured by the Collateral.
(e) The powers conferred on the Collateral Agent hereunder are solely to protect its interest
in the Collateral and shall not impose any duty upon it to exercise any such powers. Other than the
exercise of reasonable care to assure the safe custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Collateral Agent shall have no duty as
to any Collateral or as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral and shall be relieved of all
responsibility for any Collateral in its possession upon surrendering it or tendering surrender of
it to the Grantor (or whomsoever shall be lawfully entitled to receive the same or as a court of
competent jurisdiction shall direct). The Collateral Agent shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral in its possession if such
Collateral is accorded treatment substantially equal to that which the Collateral Agent accords its
own property, it being understood that the Collateral Agent shall not have responsibility for
ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or
other matters relating to any Collateral, whether or not the Collateral Agent has or is deemed to
have knowledge of such matters. The Collateral Agent shall not be liable or responsible for any
loss or damage to any of the Collateral, or for any diminution in the value thereof, by reason of
the act or omission of any warehouseman, carrier, forwarding agency, consignee or other agent or
bailee selected by the Collateral Agent in good faith.
Exh. A-18
(f) The Collateral Agent may at any time in its discretion (i) without notice to the Grantor,
transfer or register in the name of the Collateral Agent or any of its nominees any or all of the
Pledged Interests, subject only to the revocable rights of the Grantor under Section 7(a) hereof,
and (ii) exchange certificates or Instruments constituting Pledged Interests for certificates or
Instruments of smaller or larger denominations.
SECTION 9.
Remedies Upon Default
. If any Event of Default shall have occurred and be
continuing:
(a) The Collateral Agent may exercise in respect of the Collateral, in addition to any other
rights and remedies provided for herein or otherwise available to it, all of the rights and
remedies of a secured party upon default under the Code (whether or not the Code applies to the
affected Collateral), and also may (i) take absolute control of the Collateral, including, without
limitation, transfer into the Collateral Agents name or into the name of its nominee or nominees
(to the extent the Collateral Agent has not theretofore done so) and thereafter receive, for the
benefit of the Collateral Agent and the Lenders, all payments made thereon, give all consents,
waivers and ratifications in respect thereof and otherwise act with respect thereto as though it
were the outright owner thereof, (ii) require the Grantor to, and the Grantor hereby agrees that it
will at its expense and upon request of the Collateral Agent forthwith, assemble all or part of the
Collateral as directed by the Collateral Agent and make it available to the Collateral Agent at a
place or places to be designated by the Collateral Agent that is reasonably convenient to both
parties, and the Collateral Agent may enter into and occupy any premises owned or leased by the
Grantor where the Collateral or any part thereof is located or assembled for a reasonable period in
order to effectuate the Collateral Agents rights and remedies hereunder or under law, without
obligation to the Grantor in respect of such occupation, and (iii) without notice except as
specified below and without any obligation to prepare or process the Collateral for sale, (A) sell
the Collateral or any part thereof in one or more parcels at public or private sale, at any of the
Collateral Agents offices, at any exchange or brokers board or elsewhere, for cash, on credit or
for future delivery, and at such price or prices and upon such other terms as the Collateral Agent
may deem commercially reasonable and/or (B) lease, license or otherwise dispose of the Collateral
or any part thereof upon such terms as the Collateral Agent may deem commercially reasonable. The
Grantor agrees that, to the extent notice of sale or any other disposition of the Collateral shall
be required by law, at least five (5) Business Days prior written notice to the Grantor of the
time and place of any public sale or the time after which any private sale or other disposition of
the Collateral is to be made shall constitute reasonable notification. The Collateral Agent shall
not be obligated to make any sale or other disposition of Collateral regardless of notice of sale
having been given. The Collateral Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned. The Grantor hereby waives any claims
against the Collateral Agent and the Lenders arising by reason of the fact that the price at which
the Collateral may have been sold at a private sale was less than the price which might have been
obtained at a public sale or was less than the aggregate amount of the Secured Obligations, even if
the Collateral Agent accepts the first offer received and does not offer the Collateral to more
than one offeree, and waives all rights that the Grantor may have to require that all or any part
of the Collateral be marshaled upon any sale (public or private) thereof. The Grantor hereby
acknowledges that (i) any such sale of the Collateral by the Collateral Agent shall be made without
warranty, (ii) the
Exh. A-19
Collateral Agent may specifically disclaim any warranties of title, possession, quiet
enjoyment or the like, (iii) the Collateral Agent may bid (which bid may be, in whole or in part,
in the form of cancellation of indebtedness), if permitted by law, for the purchase, lease, license
or other disposition of the Collateral or any portion thereof for the account of the Collateral
Agent (on behalf of itself and the Lenders) and (iv) such actions set forth in clauses (i), (ii)
and (iii) above shall not adversely affect the commercial reasonableness of any such sale of the
Collateral. In addition to the foregoing, (i) upon written notice to the Grantor from the
Collateral Agent, the Grantor shall cease any use of the Intellectual Property or any trademark,
patent or copyright similar thereto for any purpose described in such notice; (ii) the Collateral
Agent may, at any time and from time to time, upon five (5) Business Days prior written notice to
the Grantor, license, whether general, special or otherwise, and whether on an exclusive or
non-exclusive basis, any of the Intellectual Property, throughout the universe for such term or
terms, on such conditions, and in such manner, as the Collateral Agent shall in its sole discretion
determine; and (iii) the Collateral Agent may, at any time, pursuant to the authority granted in
Section 8 hereof (such authority being effective upon the occurrence and during the continuance of
an Event of Default), execute and deliver on behalf of the Grantor, one or more instruments of
assignment of the Intellectual Property (or any application or registration thereof), in form
suitable for filing, recording or registration in any country.
(b) In the event that the Collateral Agent determines to exercise its right to sell all or any
part of the Pledged Interests pursuant to Section 9(a) hereof, the Grantor will, at the Grantors
expense and upon request by the Collateral Agent: (i) execute and deliver, and cause each issuer of
such Pledged Interests and the directors and officers thereof to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts and things, as may be
necessary or, in the reasonable opinion of the Collateral Agent, advisable to register such Pledged
Interests under the provisions of the Securities Act, and to cause the registration statement
relating thereto to become effective and to remain effective for such period as prospectuses are
required by law to be furnished, and to make all amendments and supplements thereto and to the
related prospectus which, in the reasonable opinion of the Collateral Agent, are necessary or
advisable, all in conformity with the requirements of the Securities Act and the rules and
regulations of the SEC applicable thereto, (ii) cause each issuer of such Pledged Interests to
qualify such Pledged Interests under the state securities or Blue Sky laws of each jurisdiction,
and to obtain all necessary governmental approvals for the sale of the Pledged Interests, as
requested by the Collateral Agent, (iii) cause each Pledged Issuer to make available to its
securityholders, as soon as practicable, an earnings statement which will satisfy the provisions of
Section 11(a) of the Securities Act, and (iv) do or cause to be done all such other acts and things
as may be necessary to make such sale of such Pledged Interests valid and binding and in compliance
with applicable law. The Grantor acknowledges the impossibility of ascertaining the amount of
damages which would be suffered by the Collateral Agent by reason of the failure by the Grantor to
perform any of the covenants contained in this Section 9(b) and, consequently, agrees that, if the
Grantor fails to perform any of such covenants, it shall pay, as liquidated damages and not as a
penalty, an amount equal to the value of the Pledged Interests on the date the Collateral Agent
demands compliance with this Section 9(b);
provided
,
however
, that the payment of
such amount shall not release the Grantor from any of its obligations under any of the other Loan
Documents.
Exh. A-20
(c) Notwithstanding the provisions of Section 9(b) hereof, the Grantor recognizes that the
Collateral Agent may deem it impracticable to effect a public sale of all or any part of the
Pledged Shares or any other securities constituting Pledged Interests and that the Collateral Agent
may, therefore, determine to make one or more private sales of any such securities to a restricted
group of purchasers who will be obligated to agree, among other things, to acquire such securities
for their own account, for investment and not with a view to the distribution or resale thereof.
The Grantor acknowledges that any such private sale may be at prices and on terms less favorable to
the seller than the prices and other terms which might have been obtained at a public sale and,
notwithstanding the foregoing, agrees that such private sales shall be deemed to have been made in
a commercially reasonable manner and that the Collateral Agent shall have no obligation to delay
the sale of any such securities for the period of time necessary to permit the issuer of such
securities to register such securities for public sale under the Securities Act. The Grantor
further acknowledges and agrees that any offer to sell such securities which has been (i) publicly
advertised on a bona fide basis in a newspaper or other publication of general circulation in the
financial community of New York, New York (to the extent that such an offer may be so advertised
without prior registration under the Securities Act) or (ii) made privately in the manner described
above to not less than fifteen
bona
fide
offerees shall be deemed to involve a
public disposition for the purposes of Section 9-610(c) of the Code (or any successor or similar,
applicable statutory provision) as then in effect in the State of New York, notwithstanding that
such sale may not constitute a public offering under the Securities Act, and that the Collateral
Agent may, in such event, bid for the purchase of such securities.
(d) Any cash held by the Collateral Agent (or its agent or designee) as Collateral and all
Cash Proceeds received by the Collateral Agent (or its agent or designee) in respect of any sale of
or collection from, or other realization upon, all or any part of the Collateral may, in the
discretion of the Collateral Agent, be held by the Collateral Agent (or its agent or designee) as
collateral for, and/or then or at any time thereafter applied (after payment of any amounts payable
to the Collateral Agent pursuant to Section 10 hereof) in whole or in part by the Collateral Agent
against, all or any part of the Secured Obligations in such order as the Collateral Agent shall
elect, consistent with the provisions of the Financing Agreement. Any surplus of such cash or Cash
Proceeds held by the Collateral Agent (or its agent or designee) and remaining after the date on
which all of the Secured Obligations have been indefeasibly paid in full in cash after the
termination of each Lenders Commitment and each of the Loan Documents, shall be paid over to
whomsoever shall be lawfully entitled to receive the same or as a court of competent jurisdiction
shall direct.
(e) In the event that the proceeds of any such sale, collection or realization are
insufficient to pay all amounts to which the Collateral Agent and the Lenders are legally entitled,
the Grantor shall be liable for the deficiency, together with interest thereon at the highest rate
specified in any applicable Loan Document for interest on overdue principal thereof or such other
rate as shall be fixed by applicable law, together with the costs of collection and the reasonable
fees, costs, expenses and other client charges of any attorneys employed by the Collateral Agent to
collect such deficiency.
(f) The Grantor hereby acknowledges that if the Collateral Agent complies with any applicable
requirements of law in connection with a disposition of the
Exh. A-21
Collateral, such compliance will not adversely affect the commercial reasonableness of any
sale or other disposition of the Collateral.
(g) The Collateral Agent shall not be required to marshal any present or future collateral
security (including, but not limited to, this Agreement and the Collateral) for, or other
assurances of payment of, the Secured Obligations or any of them or to resort to such collateral
security or other assurances of payment in any particular order, and all of the Collateral Agents
rights hereunder and in respect of such collateral security and other assurances of payment shall
be cumulative and in addition to all other rights, however existing or arising. To the extent that
the Grantor lawfully may, the Grantor hereby agrees that it will not invoke any law relating to the
marshalling of collateral which might cause delay in or impede the enforcement of the Collateral
Agents rights under this Agreement or under any other instrument creating or evidencing any of the
Secured Obligations or under which any of the Secured Obligations is outstanding or by which any of
the Secured Obligations is secured or payment thereof is otherwise assured, and, to the extent that
it lawfully may, the Grantor hereby irrevocably waives the benefits of all such laws.
SECTION 10.
Indemnity and Expenses
.
(a) The Grantor agrees to defend, protect, indemnify and hold harmless each Agent and each
other Indemnitee from and against any and all claims, losses, damages, liabilities, obligations,
penalties, fees, reasonable costs and expenses (including, without limitation, reasonable
attorneys fees, costs, expenses and disbursements) incurred by such Agent or such Indemnitee to
the extent that they arise out of or otherwise result from or relate to or are in connection with
this Agreement (including, without limitation, enforcement of this Agreement), except claims,
losses or liabilities resulting solely and directly from such Agents or any such Indemnitees
gross negligence or willful misconduct, as determined by a final judgment of a court of competent
jurisdiction.
(b) The Grantor agrees to pay to the Agents upon demand the amount of any and all costs and
expenses, including the reasonable fees, costs, expenses and disbursements of counsel for the
Agents and of any experts and agents (including, without limitation, any collateral trustee which
may act as agent of the Agents), which the Agents may incur in connection with (i) the preparation,
negotiation, execution, delivery, recordation, administration, amendment, waiver or other
modification or termination of this Agreement, (ii) the custody, preservation, use or operation of,
or the sale of, collection from, or other realization upon, any Collateral, (iii) the exercise or
enforcement of any of the rights of the Agents hereunder, or (iv) the failure by the Grantor to
perform or observe any of the provisions hereof.
SECTION 11.
Notices, Etc.
All notices and other communications provided for hereunder
shall be given in accordance with the notice provision of the Financing Agreement.
SECTION 12.
Security Interest Absolute; Joint and Several Obligations
.
(a) All rights of the Secured Parties, all Liens and all obligations of the Grantor hereunder
shall be absolute and unconditional irrespective of (i) any lack of validity or enforceability of
the Financing Agreement or any other Loan Document, (ii) any change in the
Exh. A-22
time, manner or place of payment of, or in any other term in respect of, all or any of the
Secured Obligations, or any other amendment or waiver of or consent to any departure from the
Financing Agreement or any other Loan Document, (iii) any exchange or release of, or non-perfection
of any Lien on any Collateral, or any release or amendment or waiver of or consent to departure
from any guaranty, for all or any of the Secured Obligations, or (iv) any other circumstance that
might otherwise constitute a defense available to, or a discharge of, the Grantor in respect of the
Secured Obligations. All authorizations and agencies contained herein with respect to any of the
Collateral are irrevocable and powers coupled with an interest.
(b) The Grantor hereby waives (i) promptness and diligence, (ii) notice of acceptance and
notice of the incurrence of any Obligation by any Borrower, (iii) notice of any actions taken by
any Agent, any Lender, any Guarantor or any other Person under any Loan Document or any other
agreement, document or instrument relating thereto, (iv) all other notices, demands and protests,
and all other formalities of every kind in connection with the enforcement of the Obligations, the
omission of or delay in which, but for the provisions of this subsection (b), might constitute
grounds for relieving the Grantor of any of Grantors obligations hereunder and (v) any requirement
that any Agent or any Lender protect, secure, perfect or insure any security interest or other lien
on any property subject thereto or exhaust any right or take any action against the Grantor or any
other Person or any collateral.
SECTION 13.
Miscellaneous
.
(a) No amendment of any provision of this Agreement (including any Schedule attached hereto)
shall be effective unless it is in writing and signed by the Grantor affected thereby and the
Collateral Agent, and no waiver of any provision of this Agreement, and no consent to any departure
by the Grantor therefrom, shall be effective unless it is in writing and signed by the Collateral
Agent, and then such waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
(b) No failure on the part of the Secured Parties to exercise, and no delay in exercising, any
right hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The rights and remedies of the Secured Parties provided herein and in
the other Loan Documents are cumulative and are in addition to, and not exclusive of, any rights or
remedies provided by law. The rights of the Secured Parties under any Loan Document against any
party thereto are not conditional or contingent on any attempt by such Person to exercise any of
its rights under any other Loan Document against such party or against any other Person, including
but not limited to, the Grantor.
(c) This Agreement shall create a continuing security interest in the Collateral and shall (i)
remain in full force and effect, subject to paragraph (e) below, until the date on which all of the
Secured Obligations have been indefeasibly paid in full in cash after the termination of each
Lenders Commitment and each of the Loan Documents and (ii) be binding on the Grantor all other
Persons who become bound as debtor to this Agreement in accordance with Section 9-203(d) of the
Code, and shall inure, together with all rights and remedies of the Secured Parties hereunder, to
the benefit of the Secured Parties and their respective successors, transferees and assigns.
Without limiting the generality of clause (ii) of the immediately
Exh. A-23
preceding sentence, the Secured Parties may assign or otherwise transfer their respective
rights and obligations under this Agreement and any other Loan Document to any other Person
pursuant to the terms of the Financing Agreement, and such other Person shall thereupon become
vested with all of the benefits in respect thereof granted to the Secured Parties and herein or
otherwise. Upon any such assignment or transfer, all references in this Agreement to any Secured
Party shall mean the assignee of any such Secured Party. None of the rights or obligations of the
Grantor hereunder may be assigned or otherwise transferred without the prior written consent of the
Collateral Agent, and any such assignment or transfer shall be null and void.
(d) Upon the date on which all of the Secured Obligations have been indefeasibly paid in full
in cash after the termination of each Lenders Commitment and each of the Loan Documents, (i)
subject to paragraph (e) below, this Agreement and the security interests and licenses created
hereby shall terminate and all rights to the Collateral shall revert to the Grantor and (ii) the
Collateral Agent will, upon the Grantors request and at the Grantors expense, without any
representation, warranty or recourse whatsoever, (A) return to the Grantor (or whomsoever shall be
lawfully entitled to receive the same or as a court of competent jurisdiction shall direct) such of
the Collateral as shall not have been sold or otherwise disposed of or applied pursuant to the
terms hereof and (B) execute and deliver to the Grantor such documents as the Grantor shall
reasonably request to evidence such termination.
(e) This Agreement shall remain in full force and effect and continue to be effective should
any petition be filed by or against the Grantor for liquidation or reorganization, should the
Grantor become insolvent or make an assignment for the benefit of any creditor or creditors or
should a receiver or trustee be appointed for all or any significant part of the Grantors assets,
and shall continue to be effective or be reinstated, as the case may be, if at any time payment or
performance of the Secured Obligations, or any part thereof, is, pursuant to applicable law,
rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the
Secured Obligations, whether as a voidable preference, fraudulent conveyance, or otherwise, all
as though such payment or performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Secured Obligations shall be reinstated
and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.
(f)
THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE
EXTENT THAT THE VALIDITY AND PERFECTION OR THE PERFECTION AND THE EFFECT OF PERFECTION OR
NON-PERFECTION OF THE SECURITY INTEREST CREATED HEREBY, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
(g) In addition to and without limitation of any of the foregoing, this Agreement shall be
deemed to be a Loan Document and shall otherwise be subject to all of terms and conditions
contained in Sections 12.10 and 12.11 of the Financing Agreement, mutatis mutandi.
Exh. A-24
(h) The Grantor irrevocably and unconditionally waives any right it may have to claim or
recover in any legal action, suit or proceeding with respect to this Agreement any special,
exemplary, punitive or consequential damages.
(i) Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining portions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
(j) Section headings herein are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
(k) This Agreement may be executed in any number of counterparts and by the different parties
hereto on separate counterparts, each of which shall be deemed an original, but all of such
counterparts taken together shall constitute one and the same agreement. Delivery of an executed
counterpart of this Agreement by facsimile or electronic mail shall be equally effective as
delivery of an original executed counterpart.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
Exh. A-25
IN WITNESS WHEREOF, the Grantor has caused this Agreement to be executed and delivered by its
officer thereunto duly authorized, as of the date first above written.
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GRANTOR
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IMPERIAL PFC FINANCING II, LLC
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By:
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Name:
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David Manchester
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Title:
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Senior Vice President
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[SIGNATURE PAGE TO SECURITY AGREEMENT]
SCHEDULE I
LEGAL NAME; ORGANIZATIONAL IDENTIFICATION NUMBER;
STATE OR JURISDICTION OF ORGANIZATION
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Legal Name
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Imperial PFC Financing II, LLC
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State or Jurisdiction of Organization
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Georgia
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Type of Organization
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Limited Liability Company
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Organizational Indemnification Number
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09008735
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Sched. I-1
SCHEDULE II
INTELLECTUAL PROPERTY; TRADE NAMES
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A.
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COPYRIGHTS
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1.
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Registered Copyrights
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none
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2.
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Copyright Applications
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none
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B.
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PATENTS
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1.
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Patents
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none
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2.
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Patent Applications
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none
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C.
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TRADEMARKS
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1.
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Registered Trademarks
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none
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2.
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Trademark Applications
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none
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D.
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OTHER PROPRIETARY RIGHTS
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E.
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TRADE NAMES
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none
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F.
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NAME OF, AND EACH TRADE NAME USED BY, EACH
PERSON FROM WHICH THE GRANTOR HAS ACQUIRED ANY
SUBSTANTIAL PART OF THE COLLATERAL WITHIN THE
PRECEDING FIVE YEARS
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none
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Sched. II-1
SCHEDULE III
LOCATIONS OF GRANTOR
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Location
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Description of Location (state if Location
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(i) contains Collateral
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(ii) is chief place of business and chief
executive office, or
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(iii) contains Records concerning Accounts,
Insurance Premium Loans and originals of
Chattel Paper)
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Chief Place of Business
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701 Park of Commerce Blvd., Suite 301, Boca
Raton, FL 33487
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Chief Executive Office
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191 Peachtree Street NE, Suite 3300, Atlanta,
GA 30303
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Location of Records
concerning Accounts,
Insurance Premium Loans
and originals of Chattel
Paper
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701 Park of Commerce Blvd., Suite 301, Boca
Raton, FL 33487
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Location of Collateral
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701 Park of Commerce Blvd., Suite 301, Boca
Raton, FL 33487
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Sched. III-1
SCHEDULE IV
DEPOSIT ACCOUNTS, SECURITIES ACCOUNTS AND COMMODITIES ACCOUNTS
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Name and Address of
Institution Maintaining Account
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Wachovia Bank
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Account Name
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Imperial PFC Financing II, LLC
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Type of Account
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Collection
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Name and Address of
Institution Maintaining Account
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Wachovia Bank
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Account Name
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Imperial PFC Financing II, LLC
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Type of Account
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Operating
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Name and Address of
Institution Maintaining Account
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Wachovia Bank
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Account Name
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Imperial PFC Financing II, LLC
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Type of Account
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Reserve
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Sched. IV-1
SCHEDULE V
UCC FINANCING STATEMENTS
UCC Financing Statements have been filed in the jurisdictions below against the Grantor:
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Name of Grantor
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Jurisdiction - Filing Office
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Imperial PFC Financing II, LLC
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Florida Secured Transaction Registry
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Imperial PFC Financing II. LLC
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Georgia Superior County Clerk, Fulton
County
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Exh. B-1
SCHEDULE VI
COMMERCIAL TORT CLAIMS
None
Sched.VI-1
SCHEDULE VII
PLEDGED DEBT
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Principal Amount
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Grantor
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Name of Maker
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Description
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Outstanding as of
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None
Sched. VII-1
SCHEDULE VIII
PLEDGED SHARES
None
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Name of Pledged
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Percentage of
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Grantor
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Issuer
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Number of Shares
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Outstanding Shares
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Class
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Certificate Number
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Sched. VIII-1
EXHIBIT A
PLEDGE AMENDMENT
This Pledge Amendment, dated
___, ___, is delivered pursuant to Section 4 of the
Pledge and Security Agreement referred to below. The undersigned hereby agrees that this Pledge
Amendment may be attached to the Pledge and Security Agreement, dated
, 2009, as it may heretofore
have been or hereafter may be amended, restated, supplemented, modified or otherwise changed from
time to time (the
Security Agreement
) and that the promissory notes or shares listed on
this Pledge Amendment shall be hereby pledged and assigned to the Collateral Agent and become part
of the Pledged Interests referred to in such Pledge Agreement and shall secure all of the Secured
Obligations referred to in such Security Agreement.
Pledged Debt
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Principal Amount
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Grantor
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Name of Maker
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Description
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Outstanding as of
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Pledged Shares
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Percentage of
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Name of
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Number of
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Outstanding
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Certificate
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Grantor
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Pledged Issuer
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Shares
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Shares
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Class
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Number
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[GRANTOR]
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By:
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Name:
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Title:
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,
as the Collateral Agent
Exh. A-1
EXHIBIT B
NOTICE OF BORROWING
[LETTERHEAD OF THE BORROWER]
LoIC LLC, as Administrative Agent
under the below-referenced Financing Agreement
New York City
275 Madison Avenue
27th Floor
New York, New York 10016
Attention: David Nussbaum
Telecopier:
Ladies and Gentlemen:
The undersigned, Imperial PFC Financing II, LLC, a Georgia limited liability company (the
Borrower
), refers to the Financing Agreement, dated as of
, 2009 (as the same may
be further amended, supplemented or otherwise modified from time to time, the
Financing
Agreement
), by and among the Borrower, the lenders from time to time party thereto (each a
Lender and collectively, the
Lenders
), LoIC LLC, a Delaware limited liability company
(LoIC), as collateral agent for the Lender (in such capacity, the
Collateral Agent
),
and LoIC, as administrative agent for the Lender (in such capacity, the
Administrative
Agent
and together with the Collateral Agent, each an
Agent
and collectively, the
Agents
), and hereby gives you notice pursuant to Section 2.02 of the Financing Agreement
that the undersigned hereby requests a Loan under the Financing Agreement, and in that connection
sets forth below the information relating to such Loan (the
Proposed Loan
) as required by
Section 2.02(a) of the Financing Agreement. All capitalized terms used but not defined herein have
the same meanings herein as set forth in the Financing Agreement.
(i) The aggregate principal amount of the Proposed Loan is $
[Proposed Loan amount
cannot exceed $4,000,000].
(ii) The Proposed Loan shall bear interest on the principal amount thereof from time to time
outstanding from the borrowing date until repaid in full at a rate per annum equal to
[
].
1
The Borrower hereby represents that as of the date hereof, none of it, its
parent or any Affiliate has entered into an agreement to finance premium insurance loans originated
or held by it at an interest rate higher than the interest rate specified in this clause (ii).
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1
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This rate should be 20% unless the borrower
has entered into another transaction to finance premium insurance loans at a
higher interest rate in which case such higher interest rate should be filled
in here.
|
Exh. B-1
(iii) The borrowing date of the Proposed Loan is
.
2
(iv) The proceeds of the Proposed Loan should be made available to the undersigned by wire
transferring such proceeds in accordance with the payment instructions attached hereto as Exhibit
A.
[signature page follows]
The undersigned certifies that (i) the representations and warranties contained in Article VI of
the Financing Agreement and in each other Loan Document and certificate or other writing delivered
to any Agent or any Lender pursuant thereto on or prior to the date hereof are true and correct on
and as of the date hereof as though made on and as of the date hereof (except that any
representation and warranty made as of a specific date shall be true and correct as of such
specific date), (ii) no Default or Event of Default has occurred and is continuing or will result
from the making of the Proposed Loan or will occur or will be continuing on the date of the
Proposed Loan and (iii) all applicable conditions set forth in Article V of the Financing Agreement
have been satisfied as of the date hereof.
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Very truly yours,
IMPERIAL PFC FINANCING II, LLC
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By:
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Imperial Premium Finance, LLC, its sole member
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By:
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Imperial Holdings, LLC, its managing member
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By:
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Name:
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Jonathan Neuman
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Title:
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President
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2
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This date must be a Business Day and not
occur more than once each week.
|
Exh. B-2
EXHIBIT A
Payment Instructions
[Wachovia Operating Account information to be provided]
EXHIBIT C
FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (
Assignment Agreement
) is entered into as of
___, 20___between
(
Assignor
) and
(
Assignee
).
Reference is made to the agreement described in
Item 2
of
Annex I
annexed hereto
(as amended, restated, modified or otherwise supplemented from time to time, the
Financing
Agreement
). Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to them in the Financing Agreement.
1. In accordance with the terms and conditions of
Section 12.07
of the Financing
Agreement, the Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases
and assumes from the Assignor, that interest in and to the Assignors rights and obligations under
the Loan Documents as of the date hereof and the Commitments with respect to the Obligations owing
to the Assignor, and the Assignors portion of the Loans as specified on
Annex I
.
2. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of
the interest being assigned by it hereunder and that such interest is free and clear of any adverse
claim and (ii) it has full power and authority, and has taken all action necessary, to execute and
deliver this Assignment Agreement and to consummate the transactions contemplated hereby; (b) makes
no representation or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Loan Documents or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any
other instrument or document furnished pursuant thereto; and (c) makes no representation or
warranty and assumes no responsibility with respect to the financial condition of any Loan Party or
the performance or observance by any Loan Party of any of its obligations under the Loan Documents
or any other instrument or document furnished pursuant thereto.
3. The Assignee (a) confirms that it has received copies of the Financing Agreement and the
other Loan Documents, together with copies of the financial statements referred to therein and such
other documents and information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment Agreement; (b) agrees that it will, independently and
without reliance upon the Administrative Agent, the Collateral Agent, the Assignor, or any other
Lender, based on such documents and information as it shall deem appropriate at the time, continue
to make its own credit decisions in taking or not taking action under the Loan Documents; (c)
appoints and authorizes each of the Administrative Agent and the Collateral Agent to take such
action as the Administrative Agent or the Collateral Agent (as the case may be) on its behalf and
to exercise such powers under the Loan Documents as are delegated to the Administrative Agent or
the Collateral Agent (as the case may be) by the terms thereof, together with such powers as are
reasonably incidental thereto; (d) agrees that it will perform in accordance with their terms all
of the obligations which by the terms of the Loan Documents are required to be performed by it as a
Lender; and (e) attaches the forms prescribed by the Internal Revenue Service of the United States
certifying as to the Assignees status for
Exh. C-1
purposes of determining exemption from United States withholding taxes with respect to all
payments to be made to the Assignee under the Financing Agreement or such other documents as are
necessary to indicate that all such payments are subject to such rates at a rate reduced by an
applicable tax treaty.
4. Following the execution of this Assignment Agreement by the Assignor and the Assignee, it
will be delivered by the Assignor to the Collateral Agent for recording by the Administrative
Agent. The effective date of this Assignment Agreement (the
Settlement Date
) shall be the
latest of (a) the date of the execution hereof by the Assignor and the Assignee, (b) the date this
Assignment Agreement has been accepted by the Collateral Agent and recorded in the Register, (c)
the date of receipt by the Collateral Agent of a processing and recordation fee in the amount of
$5,000
3
, (d) the settlement date specified on
Annex I
, and (e) the receipt by
Assignor of the Purchase Price specified in
Annex I
.
5. As of the Settlement Date (a) the Assignee shall be a party to the Financing Agreement and,
to the extent of the interest assigned pursuant to this Assignment Agreement, have the rights and
obligations of a Lender thereunder and under the other Loan Documents, and (b) the Assignor shall,
to the extent of the interest assigned pursuant to this Assignment Agreement, relinquish its rights
and be released from its obligations under the Financing Agreement and the other Loan Documents.
6. Upon recording by the Administrative Agent, from and after the Settlement Date, the
Administrative Agent shall make all payments under the Financing Agreement and the other Loan
Documents in respect of the interest assigned hereby (including, without limitation, all payments
of principal, interest and commitment fees (if applicable) with respect thereto) to the Assignee.
The Assignor and the Assignee shall make all appropriate adjustments in payments under the
Financing Agreement and the other Loan Documents for periods prior to the Settlement Date directly
between themselves on the Settlement Date.
7. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS CONFLICTS OF LAWS PROVISION (OTHER
THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
8. EACH PARTY HERETO HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BASED UPON OR ARISING OUT OF THIS ASSIGNMENT AGREEMENT OR ANY OF THE TRANSACTIONS
RELATED HERETO, AND AGREES THAT ANY SUCH ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY.
9. This Assignment Agreement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all of which taken together shall
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3
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Not applicable in connection with an
assignment by a Lender to a Lender, an Affiliate of such Lender or a Related
Fund of such Lender.
|
Exh. C-2
constitute one and the same agreement. Delivery of an executed counterpart of this Assignment
Agreement by facsimile or electronic mail shall be equally effective as delivery of an original
executed counterpart.
[Remainder of page left intentionally blank.]
Exh. C-3
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by
their respective officers thereunto duly authorized, as of the date first above written.
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[ASSIGNOR]
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By:
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Name:
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Title:
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Date:
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NOTICE ADDRESS FOR ASSIGNOR
[INSERT ADDRESS]
Telephone No.:
Telecopy No.:
[ASSIGNEE]
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By:
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Name:
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Title:
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Date:
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NOTICE ADDRESS FOR ASSIGNEE
[INSERT ADDRESS]
Telephone No.:
Telecopy No.:
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Exh. C-4
ACCEPTED AND CONSENTED TO this _______day
of _____, 20_____
LoIC LLC, as Collateral Agent
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By:
|
EBC Asset Management, Inc., its Sole Member
|
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By:
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Name:
|
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Title:
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Exh. C-5
ANNEX FOR ASSIGNMENT AND ACCEPTANCE
ANNEX I
1.
|
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Borrower: Imperial PFC Financing II, LLC
|
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2.
|
|
Name and Date of Financing Agreement:
|
Financing Agreement, dated as of , 2009, by and among Imperial PFC
Financing II, LLC, a Georgia limited liability company (the
Borrower
), the lenders from time to time party thereto
(each a Lender and collectively, the
Lenders
), LoIC LLC,
a Delaware limited liability company (LoIC), as collateral agent
for the Lenders (in such capacity, the
Collateral Agent
),
and LoIC, as administrative agent for the Lenders (in such capacity,
the
Administrative Agent
and together with the Collateral
Agent, each an
Agent
and collectively, the
Agents
).
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3.
|
|
Date of Assignment Agreement:
|
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4.
|
|
Amount of Commitments:
|
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|
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5.
|
|
Amount of Loans:
|
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|
6.
|
|
Purchase Price:
|
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7.
|
|
Settlement Date:
|
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|
|
Exh. C-6
EXHIBIT D
FORM OF INDIVIDUAL GUARANTY
INDIVIDUAL GUARANTY, dated as of
, 2009, made by [Jonathan Neuman] [Antony Mitchell],
an individual with a principal address at [
] (the
Guarantor
), in favor of each
of the Lenders (as hereinafter defined) and LoIC LLC, a Delaware limited liability company
(LoIC), as Collateral Agent for the Lenders (in such capacity, the
Collateral Agent
)
pursuant to the Financing Agreement referred to below.
W I T N E S S E T H
:
WHEREAS, Imperial PFC Financing II, LLC, a Georgia limited liability company (the
Borrower
), the lenders from time to time party thereto (each a
Lender
and
collectively, the
Lenders
), the Collateral Agent, and LoIC, as administrative agent for
the Lenders (in such capacity, the
Administrative Agent
and together with the Collateral
Agent, each an Agent and collectively, the
Agents
) are parties to a Financing
Agreement, dated as of
, 2009 (such agreement, as amended, restated or otherwise modified from time
to time, being hereinafter referred to as the
Financing Agreement
);
WHEREAS, pursuant to the Financing Agreement, the Lenders have agreed to make term loans (each
a
Loan
and collectively, the
Loans
) to the Borrower;
WHEREAS, pursuant to Section 5.01(d) of the Financing Agreement, the Guarantor is required to
execute and deliver to the Agents a guaranty guaranteeing the Loans and all other Obligations under
the Financing Agreement under certain limited circumstances set forth in this Guaranty; and
WHEREAS, the Guarantor has determined that his execution, delivery and performance of this
Guaranty directly benefit, and are within the purposes and in the best interests of, the Guarantor;
NOW, THEREFORE, in consideration of the premises and the agreements herein and in order to
induce the Lenders to enter into the Financing Agreement and to make the Loans pursuant thereto,
the Guarantor hereby agrees with the Lenders and the Agents as follows:
SECTION 1.
Definitions
. Reference is hereby made to the Financing Agreement for a
statement of the terms thereof. All terms used in this Guaranty which are defined in the Financing
Agreement and not otherwise defined herein shall have the same meanings herein as set forth
therein.
SECTION 2.
Guaranty
. (a) The Guarantor hereby (i) irrevocably, absolutely and
unconditionally guarantees (A) the prompt payment by the Borrower, as and when due and payable
(whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), of all
Obligations from time to time owing in respect of the Financing Agreement or any other Loan
Document, whether for principal, interest (including, without limitation, all interest that accrues
after the commencement of any Insolvency Proceeding with respect to the Borrower, whether or not a
claim for post-filing interest is allowed in such proceeding), fees,
Exh. D-1
commissions, expense reimbursements, indemnifications or otherwise, and whether accruing
before or subsequent to the commencement of any Insolvency Proceeding with respect to the Borrower
(notwithstanding the operation of the automatic stay under Section 362(a) of the U.S. Bankruptcy
Code), and the due performance and observance by the Borrower of its other obligations now or
hereafter existing in respect of the Loan Documents, and (B) the full and completion performance by
Imperial Premium Finance, LLC of all of its obligations and duties under the Initial Servicing
Agreement (collectively, the
Guaranteed Obligations
), and (ii) agrees to pay any and all
expenses (including reasonable counsel fees and expenses) incurred by the Agents and the Lenders in
enforcing any rights under this Guaranty. Without limiting the generality of the foregoing, the
Guarantors liability shall extend to all amounts that constitute part of the Guaranteed
Obligations and would be owed by the Borrower to the Agents and the Lenders under any Loan Document
but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving any Credit Party.
(b) Notwithstanding anything contained in this Guaranty, except as provided in clause (ii) of
this Section 2(b) and Section 2(c), (x) the Guarantor shall not have any liability under this
Guaranty for the payment or performance of the Guaranteed Obligations, (y) the Guarantor shall not
have any obligation to expend its own funds in the performance of any provision of any Loan
Document, and (z) no Agent nor any Lender shall obtain any deficiency judgment against the
Guarantor with respect to any of the foregoing;
provided
,
however
, that:
(i) nothing contained herein shall limit or otherwise restrict (A) any Agents or any Lenders
rights and remedies against any of the Collateral under any other Loan Document, either at law or
equity, including, without limitation, any rights or remedies with respect to the Equity Interests
of the Borrower owned by the Guarantor, (B) the Agent or any Lender from bringing any action, suit
or proceeding for specific performance against the Guarantor to perform any obligation imposed on
the Guarantor hereunder, (C) recourse to or liability of the Guarantor for any fraud committed by
the Guarantor or material misrepresentation by the Guarantor in any Loan Document to which the
Guarantor is a party, or (D) the obligations of the Guarantor under any Loan Document which
obligations are either directly in favor of any Agent or any Lender or have been assigned to any
Agent or any Lender, each of which may be enforced by and for the benefit of the Agents and
Lenders, and
(ii) the Guarantor shall have (A) full liability and responsibility for the Guaranteed
Obligations and other obligations hereunder if (x) any act (or omission to act) constituting fraud
or willful misconduct on the part of the Guarantor or any Non-Corporate Trustee that impairs the
Agents and the Lenders ability to be repaid under the Loan Documents occurs, or (y) the Guarantor
or any Non-Corporate Trustee authorizes, approves, participates in or assists the Borrower or the
Originator in commencing a voluntary or involuntary case under the Bankruptcy Code or any other
Insolvency Proceeding, and (B) liability and responsibility for the Guaranteed Obligations and
other obligations hereunder if (x) any Collections are not promptly deposited directly into the
Collection Account or (ii) inadvertently deposited into an account of the Originator or any
Affiliate and promptly removed from such account and deposited into the Collection Account);
provided, that in the case of this clause (B)(x), such liability and responsibility of the
Guarantor shall not exceed the aggregate amount of the Collections not promptly deposited directly
into the Collection Account, or (y) the Borrower,
Exh. D-2
Guarantor and/or an agent of Imperial and/or its Subsidiaries or any Person appointed by the
Borrower to perform any duties on behalf of the Borrower in connection with the Collateral Value
Policy or the Contingent Collateral Value Policy shall refer any claim to the Collateral Value
Insurer or the Contingent Collateral Value Insurer knowing the same to be fraudulent;
provided
, that in the case of this clause (B)(y), such liability and responsibility of the
Guarantor shall not exceed the aggregate amount of the loss relating to the applicable Coverage
Certificate related to such fraudulent claim or (z) the applicable Premium Finance Borrower, the
Originator or the Borrower ceases to be the legal owner of a Covered Policy (as defined in the
Collateral Value Policy or the Contingent Collateral Value Policy) and any Non-Corporate Trustee,
the Guarantor and/or an employee of Imperial and/or its Subsidiaries (collectively, the Guarantor
Responsible Parties), directly or indirectly, caused, or assisted another Person in, the transfer
of legal title of such Covered Policy from the applicable Premium Finance Borrower, the Originator
or the Borrower to another Person other than the Collateral Value Insurer or the Contingent
Collateral Value Insurer (or a designee of the Collateral Value Insurer or of the Contingent
Collateral Value Insurer) in accordance with the provisions of the Collateral Value Policy or the
Contingent Collateral Value Policy; provided, that in the case of this clause (B)(z), such
liability and responsibility of the Guarantor shall not exceed the aggregate amount of the loss
relating to the applicable Coverage Certificate related to such Covered Policy; provided further,
and for greater clarity, in the case of this clause (B)(z), any transfer or change in legal
ownership caused solely by a Person other than a Guarantor Responsible Party that is permitted by
the Transaction Documents shall not result in liability or responsibility hereunder for the
Guarantor.
(c) Nothing in subsection (b) of this Section 2 shall limit or otherwise restrict in any
manner the rights, powers and privileges of any Agent against the Guarantor under any other Loan
Document to which the Guarantor is a party.
SECTION 3.
Guaranty Absolute; Continuing Guaranty; Assignments
.
(a) Subject to Sections 2(b) and 2(c) of this Agreement, the Guarantor hereby guarantees that
the Guaranteed Obligations will be paid or performed, as applicable, strictly in accordance with
the terms of the Loan Documents, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the Agents or the Lenders
with respect thereto. The Guarantor agrees that, subject to Sections 2(b) and 2(c) of this
Agreement, this guarantee constitutes a guaranty of payment when due and not of collection and
waives any right to require that any resort be made by the Agents or the Lenders to any Collateral.
The obligations of the Guarantor under this Guaranty are independent of the obligations under the
Financing Agreement and the other Loan Documents, and a separate action or actions may be brought
and prosecuted against the Guarantor to enforce this Guaranty, irrespective of whether any action
is brought against any Credit Party or whether any Credit Party is joined in any such action or
actions. Subject to Sections 2(b) and 2(c) of this Agreement, the liability of the Guarantor under
this Guaranty shall be irrevocable, absolute and unconditional irrespective of, and the Guarantor
hereby irrevocably waives any defenses it may now or hereafter have in any way relating to, any or
all of the following:
(i) any lack of validity or enforceability of any Loan Document or any agreement or instrument
relating thereto;
Exh. D-3
(ii) any change in the time, manner or place of payment or performance of, or in any other
term in respect of, all or any of the Guaranteed Obligations, or any other amendment or waiver of
or any consent to departure from any Loan Document, including, without limitation, any increase in
the Guaranteed Obligations resulting from the extension of additional credit to any Credit Party or
otherwise;
(iii) any taking, exchange, release or non-perfection of any Collateral, or any taking,
release or amendment or waiver of or consent to departure from any other guaranty, for all or any
of the Guaranteed Obligations;
(iv) the existence of any claim, set-off, defense or other right that the Guarantor may have
against any Person, including, without limitation, any Agent or any Lender;
(v) any change, restructuring or termination of the limited liability company structure or
existence of the Borrower; or
(vi) any other circumstance (including any statute of limitations) or any existence of or
reliance on any representation by the Agents or the Lenders that might otherwise constitute a
defense available to, or a discharge of, any Credit Party or any other guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time
any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by the
Agents, the Lenders or any other Person upon the insolvency, bankruptcy or reorganization of any
Credit Party or otherwise, all as though such payment had not been made.
(b) This Guaranty is a continuing guaranty and shall (i) remain in full force and effect until
the later of (x) the cash payment in full of the Guaranteed Obligations and all other amounts
payable under this Guaranty and (y) the Final Maturity Date, (ii) be binding upon the Guarantor,
his heirs, executors, administrators, legal representatives, successors and assigns and (iii) inure
to the benefit of and be enforceable by the Agents, the Lenders and their successors, pledgees,
transferees and assigns. Without limiting the generality of the foregoing clause (iii), any Lender
may pledge, assign or otherwise transfer all or any portion of his rights and obligations under any
Loan Document to any other Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to such Lender herein or otherwise, in each case as provided in
the Financing Agreement.
SECTION 4.
Waivers
. The Guarantor hereby waives, to the full extent permitted by
applicable law, (i) promptness and diligence; (ii) notice of acceptance and notice of the
incurrence of any Obligation by the Borrower; (iii) notice of any actions taken by any Agent, the
Borrower, any Credit Party or any Lender under any Loan Document or any other agreement or
instrument related thereto; (iv) all other notices, demands and protests, and all other formalities
of every kind in connection with the enforcement of the Obligations or of the obligations of the
Guarantor hereunder, the omission of or delay in which, but for the provisions of this Section 4,
might constitute grounds for relieving the Guarantor of his obligations hereunder; (v) any right to
compel or direct any Agent or any Lender to seek payment or recovery of any amounts owed under this
Guaranty from any one particular fund or source; (vi) any requirement that any Agent
Exh. D-4
or any Lender protect, secure, perfect or insure any security interest or Lien or any property
subject thereto or exhaust any right or take any action against the Borrower, any other Credit
Party or any other Person or any Collateral; and (vii) any other defense available to the
Guarantor. The Guarantor acknowledges that it will receive direct and indirect benefits from the
financing arrangements contemplated herein and that the waiver set forth in this Section 4 is
knowingly made in contemplation of such benefits. The Guarantor hereby waives any right to revoke
this Guaranty, and acknowledges that this Guaranty is continuing in nature and applies to all
Guaranteed Obligations, whether existing now or in the future.
SECTION 5.
Subrogation
. (a) Until the final payment in cash and performance in full
of all of the Obligations, the Guarantor shall not exercise any rights against the Borrower or any
other guarantor arising as a result of payment by the Borrower or such guarantor hereunder, by way
of subrogation, reimbursement, restitution, contribution or otherwise, and will not prove any claim
in competition with any Agent or any Lender in respect of any payment hereunder in any Insolvency
Proceedings; the Guarantor will not claim any setoff, recoupment or counterclaim against the
Borrower or any other guarantor in respect of any liability of the Guarantor to the Borrower or
guarantor; and the Guarantor, the Borrower and each guarantor waives any benefit of and any right
to participate in any collateral security which may be held by any Agent or any Lender. Anything to
the contrary contained in the foregoing notwithstanding, the Guarantor shall not exercise any such
rights against the Borrower (including after payment in full of the Obligations) if all or any
portion of the Obligations shall have been satisfied in connection with an exercise of remedies by
the Collateral Agent in respect of the Equity Interests of the Borrower whether pursuant to the
Individual Guarantor Security Agreement or otherwise.
(b) The payment of any amounts due with respect to any Indebtedness of the Borrower or the
Guarantor for money borrowed or credit received now or hereafter owed to the Guarantor is hereby
subordinated to the prior payment in full of all of the Obligations. The Guarantor agrees that,
after the occurrence of any default in the payment or performance of any of the Obligations, the
Guarantor will not demand, sue for or otherwise attempt to collect any such indebtedness of the
Borrower or other guarantor to the Guarantor until all of the Obligations shall have been paid in
full. If, notwithstanding the foregoing sentence, the Guarantor shall collect, enforce or receive
any amounts in respect of such indebtedness while any Obligations are still outstanding, such
amounts shall be collected, enforced and received by the Guarantor as trustee for the Agents and
the Lenders and be paid over to the Collateral Agent, for the benefit of the Agents and the
Lenders, on account of the Obligations without affecting in any manner the liability of the
Guarantor under the other provisions of this Guaranty.
SECTION 6.
Representations, Warranties
. The Guarantor hereby represents and warrants
as follows:
(a) The Guarantor has the legal capacity and right to execute, deliver and perform this
Guaranty and each other Loan Document to which the Guarantor is a party.
(b) The execution, delivery and performance by the Guarantor of this Guaranty and each other
Loan Document to which the Guarantor is a party (i) do not and will not contravene any Requirements
of Law or any contractual restriction binding on or otherwise affecting the Guarantor or his
properties, (ii) do not and will not result in or require the creation
Exh. D-5
of any Lien (other than pursuant to any Loan Document) upon or with respect to any of his
properties, and (iii) do not and will not result in any default, noncompliance, suspension,
revocation, impairment, forfeiture or nonrenewal of any permit, license, authorization or approval
applicable to any of his properties.
(c) No authorization or approval or other action by, and no notice to or filing with, any
Governmental Authority is required in connection with the due execution, delivery and performance
by the Guarantor of this Guaranty or any of the other Loan Documents to which the Guarantor is a
party, except for the filing of any UCC financing statement or such other registrations, filings or
recordings as may be necessary to perfect the Lien purported to be created by any Loan Documents to
which the Guarantor is a party.
(d) Each of this Guaranty and the other Loan Documents to which the Guarantor is or will be a
party, when delivered, will be, a legal, valid and binding obligation of the Guarantor, enforceable
against the Guarantor in accordance with its terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws.
(e) There are no pending or written notices threatening any action, suit or proceeding
affecting the Guarantor before any court or other Governmental Authority or any arbitrator that (x)
if adversely determined could reasonably be expected to have a material adverse effect to the
Guarantors financial condition or (y) relates to this Guaranty or any of the other Loan Documents
to which the Guarantor is a party or any transaction contemplated hereby or thereby.
(f) The Guarantor is not in violation of any Requirements of Law or any material term of any
agreement or instrument (including, without limitation, any contract) binding on or otherwise
affecting him or any of his properties.
(g) The Guarantor is not a party to any agreement or instrument, or subject to any restriction
or any judgment, order, regulation, ruling or other requirement of a court or other Governmental
Authority, which has, or in the future could have, a material adverse effect to the Guarantors
financial condition.
(h) The Guarantor has filed or caused to be filed all tax returns which he is required to file
and has paid all taxes shown to be due and payable on such returns or on any assessments made
against the Guarantor or any of his property by any Governmental Authority except to the extent any
such taxes are being contested in good faith. No tax Lien has been filed with respect to any
material tax liability against the Guarantor, and, to the knowledge of the Guarantor, no tax
assessment is pending against the Guarantor.
(i) The Guarantor (i) has read and understands the terms and conditions of the Financing
Agreement and the other Loan Documents, and (ii) now has and will continue to have independent
means of obtaining information concerning the affairs, financial condition and business of the
Borrower and the other Credit Parties, and has no need of, or right to obtain from any Agent or any
Lender, any credit or other information concerning the affairs, financial condition or business of
the Borrower or the other Credit Parties that may come under the control of any Agent or any
Lender.
Exh. D-6
(j) All representations and warranties set forth in this Guaranty are true and correct in all
respects at the time as of which such representations were made and on the Effective Date.
SECTION 7.
Covenants
. The Guarantor hereby covenants and agrees that, until full and
final payment of the Obligations in cash and the termination of the Total Term Loan Commitment, the
Guarantor will:
(a) Not accept or retain any distribution or other payment from the Borrower if the making of
such distribution or other payment by the Borrower violates, or may reasonably be expected to
result in a violation of, the Financing Agreement or any other Loan Document.
(b) Comply in all material respects with all Requirements of Law (including any settlement of
any claim that, if breached, could give rise to any of the foregoing).
(c) Promptly notify the Agents of:
(i) (A) any breach or non-performance of, or any default under, any Contractual Obligation of
such Guarantor which could reasonably be expected to have a material adverse effect to the
Guarantors financial condition, and (B) any action, suit, litigation or proceeding which may exist
at any time which could reasonably be expected to have a material adverse effect to the Guarantors
financial condition; and
(ii) the occurrence of any event or development that could have a material adverse effect to
the Guarantors financial condition;
provided
that (A) each notice pursuant to this Section 7(c) shall be accompanied by a
written statement signed by such Guarantor, setting forth details of the occurrence referred to
therein, and stating what action the Guarantors propose to take with respect thereto and at what
time. Each notice under Section 7(c)(i) shall describe with particularity the provisions of this
Guaranty or other Loan Document that have been breached.
(d) Pay all taxes, assessments, governmental charges and other obligations when due, except as
may be contested in good faith or those as to which a bona fide dispute may exist.
(e) Execute and deliver to the Agents such further instruments and do such other further acts
as the Agent may reasonably request to carry out more effectively the purposes of this Guaranty,
the other Loan Documents and any agreements and instruments referred to herein.
(f) Not knowingly commit, and not knowingly permit any of its Affiliates, including the
Borrower, to knowingly commit, a Prohibited Act (as defined in the Collateral Value Policy) or any
other act that results in the liability of the Collateral Value Insurer under the Collateral Value
Policy being reduced or terminated.
(g) On the Effective Date, deliver to the Agents, for the benefit of the Lenders, a personal
financial statement of the Guarantor, in form and substance reasonably
Exh. D-7
satisfactory to the Agents, accompanied by a signed representation by the Guarantor that such
personal financial statement is complete and accurate in all material respects and fairly presents
the financial condition of the Guarantor as of the Effective Date and that the Guarantor has no
contingent obligations or liabilities (for taxes or otherwise) or any unusual long term commitment
except as set forth in such financial statement or the notes thereto.
SECTION 8.
Right of Set-off
. Upon the occurrence and during the continuance of any
Event of Default, and subject to Sections 2(b) and 2(c) of this Agreement, the Agents and the
Lenders may, and are hereby authorized to, at any time and from time to time, without notice to the
Guarantor (any such notice being expressly waived by the Guarantor) and to the fullest extent
permitted by law, set-off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing by any Agent or any
Lender to or for the credit or the account of the Guarantor against any and all obligations of the
Guarantor either now or hereafter existing under this Guaranty or any other Loan Document,
irrespective of whether or not any Agent or any Lender shall have made any demand under this
Guaranty or any other Loan Document and although such obligations may be contingent or unmatured.
Each of the Agents and Lenders agrees to notify the Guarantor promptly after any such set-off and
application made by such Agent or Lender,
provided
that the failure to give such notice
shall not affect the validity of such set-off and application. The rights of the Agents and the
Lenders under this Section 8 are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Agents and the Lenders may have under this Guaranty
or any other Loan Document in law or otherwise.
SECTION 9.
Notices, Etc
. All notices and other communications provided for hereunder
shall be in writing and shall be mailed (by certified mail, postage prepaid and return receipt
requested), telecopied or delivered, if to the Guarantor, to it at his address set forth on the
signature page hereto, or if to the Collateral Agent, to it at its address set forth in the
Financing Agreement; or as to either such Person at such other address as shall be designated by
such Person in a written notice to such other Person complying as to delivery with the terms of
this Section 9. All such notices and other communications shall be effective (i) if mailed
(certified mail, postage prepaid and return receipt requested), when received or 3 days after
deposited in the mails, whichever occurs first, (ii) if telecopied, when transmitted and
confirmation received, or (iii) if delivered by hand, Federal Express or other reputable overnight
courier, upon delivery.
SECTION 10.
CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE
. ANY LEGAL ACTION
OR PROCEEDING WITH RESPECT TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS
OF THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK OR OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE GUARANTOR
HEREBY IRREVOCABLY ACCEPTS IN RESPECT OF HIS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS. THE GUARANTOR HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS AND IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING
OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, AT ITS ADDRESS SET FORTH ON THE
SIGNATURE PAGE HERETO, SUCH SERVICE TO BECOME EFFECTIVE TEN (10) DAYS
Exh. D-8
AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY AGENT AND THE LENDERS TO
SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST THE GUARANTOR IN ANY OTHER JURISDICTION. THE GUARANTOR HEREBY EXPRESSLY
AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE JURISDICTION OR LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH
COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. TO THE EXTENT THAT THE GUARANTOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION
OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO
JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO HIM OR HIS PROPERTY, THE
GUARANTOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF HIS OBLIGATIONS UNDER THIS GUARANTY
AND THE OTHER LOAN DOCUMENTS.
SECTION 11.
WAIVER OF JURY TRIAL, ETC
. THE GUARANTOR HEREBY WAIVES ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS GUARANTY
OR THE OTHER LOAN DOCUMENTS, OR UNDER ANY AMENDMENT, WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR OTHER
AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR
ARISING FROM ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH THIS GUARANTY OR THE OTHER LOAN
DOCUMENTS, AND AGREES THAT ANY SUCH ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY. THE GUARANTOR CERTIFIES THAT NO OFFICER, REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY AGENT OR ANY LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE AGENT OR ANY
LENDER WOULD NOT, IN THE EVENT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM, SEEK TO ENFORCE THE
FOREGOING WAIVERS. THE GUARANTOR HEREBY ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT
FOR THE AGENTS AND THE LENDERS ENTERING INTO THIS AGREEMENT.
SECTION 12.
Miscellaneous
.
(a) The Guarantor will make each payment hereunder in lawful money of the United States of
America and in immediately available funds to the Collateral Agent, for the benefit of the Lenders,
at such address specified by the Collateral Agent from time to time by notice to the Guarantor.
(b) No amendment of any provision of this Guaranty shall be effective unless it is in writing
and signed by the Guarantor and the Collateral Agent, and no waiver of any provision of this
Guaranty, and no consent to any departure by the Guarantor therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Guarantor and the
Exh. D-9
Collateral Agent, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
(c) No failure on the part of any Agent or any Lender to exercise, and no delay in exercising,
any right hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall
any single or partial exercise of any right hereunder or under any other Loan Document preclude any
other or further exercise thereof or the exercise of any other right. The rights and remedies of
the Agents and the Lenders provided herein and in the other Loan Documents are cumulative and are
in addition to, and not exclusive of, any rights or remedies provided by law. The rights of the
Agents and the Lenders under any Loan Document against any party thereto are not conditional or
contingent on any attempt by the Agents and the Lenders to exercise any of their rights under any
other Loan Document against such party or against any other Person.
(d) Any provision of this Guaranty which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining portions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
(e) This Guaranty shall (i) be binding on the Guarantor and his heirs, executors,
administrators, legal representatives, successors and assigns, and (ii) inure, together with all
rights and remedies of the Agents and the Lenders hereunder, to the benefit of the Agents and the
Lenders and their respective successors, transferees and assigns. Without limiting the generality
of clause (ii) of the immediately preceding sentence, to the extent permitted by Section 12.07 of
the Financing Agreement, any Lender may assign or otherwise transfer its rights under the Financing
Agreement or any other Loan Document to any other Person, and such other Person shall thereupon
become vested with all of the benefits in respect thereof granted to the Lenders herein or
otherwise. The Guarantor agrees that each participant shall be entitled to the benefits of Section
8 with respect to its participation in any portion of the Loans as if it was a Lender. None of the
rights or obligations of the Guarantor hereunder may be assigned or otherwise transferred without
the prior written consent of the Collateral Agent.
(f) This Guaranty and the other Loan Documents reflect the entire understanding of the
transactions contemplated hereby and thereby and shall not be contradicted or qualified by any
other agreement, oral or written, before the date hereof.
(g) Section headings herein are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
(h) Delivery of an executed counterpart of this Guaranty by telefacsimile or electronic mail
shall be equally as effective as delivery of an original executed counterpart of this Guaranty. Any
party delivering an executed counterpart of this Guaranty by telefacsimile or electronic mail also
shall deliver an original executed counterpart of this Guaranty but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability, and binding effect of
this Guaranty.
Exh. D-10
(i) This Guaranty and the other Loan Documents (unless expressly provided to the contrary in
another Loan Document in respect of such other Loan Document) shall be governed by, and construed
in accordance with, the laws of the State of New York applicable to contracts made and to be
performed in the State of New York.
[signature page follows]
Exh. D-11
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed by an officer
thereunto duly authorized, as of the date first above written.
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Antony Mitchell Guarantor
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Address:
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On this
day of
, 2009, before me personally came
, to me known to be the person who executed the foregoing instrument, and who,
being duly sworn by me, did depose and say to me that s/he executed the foregoing instrument.
[SIGNATURE PAGE TO INDIVIDUAL GUARANTEE]
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed by an officer
thereunto duly authorized, as of the date first above written.
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Jonathan Neuman Guarantor
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Address:
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On this
day of
, 2009, before me personally came
, to me known to be the person who executed the foregoing instrument, and who,
being duly sworn by me, did depose and say to me that s/he executed the foregoing instrument.
[SIGNATURE PAGE TO INDIVIDUAL GUARANTEE]
EXHIBIT E
FORM OF GUARANTOR SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT, dated as of
, 2009 (this
Agreement
), made by Imperial
Premium Finance, LLC, a Florida limited liability company (the
Pledgor
), in favor of LoIC
LLC, a Delaware limited liability company (LoIC), in its capacity as collateral agent (in such
capacity, together with any successors or assigns in such capacity, if any, the
Collateral
Agent
) on behalf of the Lenders referred to below.
W I T N E S S E T H
:
WHEREAS, Imperial PFC Financing II, LLC, a Georgia limited liability company (the
Borrower
), the lenders from time to time party thereto (each a
Lender
and
collectively, the
Lenders
), the Collateral Agent, and LoIC, as administrative agent for
the Lenders (in such capacity, the
Administrative Agent
and together with the Collateral
Agent, each an
Agent
and collectively, the
Agents
) are parties to a Financing
Agreement, dated as of , 2009 (such agreement, as amended, restated or otherwise modified from time
to time, being hereinafter referred to as the
Financing Agreement
);
WHEREAS, pursuant to the Financing Agreement the Lenders have agreed to make term loans (each
a
Loan
and collectively, the Loans) to the Borrower in an aggregate principal amount at
any one time outstanding not to exceed the Total Term Loan Commitment (as defined in the Financing
Agreement);
WHEREAS, the Pledgor owns 100% of the Equity Interests (as defined in the Financing Agreement)
of the Borrower, as set forth in Schedule I hereto;
WHEREAS, it is a condition precedent to the Lenders making any Loan to the Borrower pursuant
to the Financing Agreement that the Pledgor shall have executed and delivered to the Collateral
Agent a pledge and security agreement providing for the pledge to the Collateral Agent, for the
benefit of the Agents and the Lenders, and the grant to the Collateral Agent, for the benefit of
the Agents and the Lenders, of a security interest in and Lien on the outstanding shares of the
Equity Interests (as defined in the Financing Agreement) owned by the Pledgor of the Borrower, and
in which such Pledgor has any interest at any time;
WHEREAS, the Pledgor has determined that the execution, delivery and performance of this
Agreement directly benefits, and is in the best interest of, the Pledgor.
NOW, THEREFORE, in consideration of the premises and the agreements herein and in order to
induce the Lenders to make and maintain the Loans to the Borrower pursuant to the Financing
Agreement, the Pledgor hereby agrees with the Collateral Agent, for the benefit of the Agents and
the Lenders, as follows:
SECTION 1.
Definitions
. Reference is hereby made to the Financing Agreement for a
statement of the terms thereof. All terms used in this Agreement which are defined in the
Exh. E-1
Financing Agreement or in Article 8 or Article 9 of the Uniform Commercial Code (the
Code
) as in effect from time to time in the State of New York and which are not otherwise
defined herein shall have the same meanings herein as set forth therein;
provided
, that
terms used herein which are defined in the Code as in effect in the State of New York on the date
hereof shall continue to have the same meaning notwithstanding any replacement or amendment of such
statute except as the Collateral Agent may otherwise determine.
SECTION 2.
Pledge and Grant of Security Interest
. As collateral security for all of
the Obligations (as defined in Section 3 hereof), the Pledgor hereby pledges and assigns to the
Collateral Agent, and grants to the Collateral Agent, for the benefit of the Agents and the
Lenders, a continuing security interest in and Lien on the Pledgors right, title and interest in
and to the following (collectively, the
Pledged Collateral
):
(a) the shares of stock, partnership interests, member interests and other equity interests
described in Schedule I hereto (the
Pledged Shares
), whether or not evidenced or
represented by any stock certificate, certificated security or other instrument, issued by the
Borrower described in such Schedule I (the
Pledged Issuers
), the certificates
representing the Pledged Shares, all options and other rights, contractual or otherwise, in respect
thereof and all dividends, distributions, cash, instruments, investment property and other property
(including but not limited to, any stock dividend and any distribution in connection with a stock
split) from time to time received, receivable or otherwise distributed in respect of or in exchange
for any or all of the Pledged Shares;
(b) all additional shares of stock, partnership interests, member interests or other equity
interests from time to time acquired by the Pledgor, of the Pledged Issuers, the certificates
representing such additional shares, all options and other rights, contractual or otherwise, in
respect thereof and all dividends, distributions, cash, instruments, investment property and other
property from time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such additional shares, interests or equity;
(c) all security entitlements of the Pledgor in any and all of the foregoing; and
(d) all proceeds (including proceeds of proceeds) of any and all of the foregoing;
in each case, whether now owned or hereafter acquired by the Pledgor and howsoever its interest
therein may arise or appear (whether by ownership, security interest, Lien, claim or otherwise).
SECTION 3.
Obligations
. (a) The Pledgor hereby (i) irrevocably, absolutely and
unconditionally guarantees the prompt payment by the Borrower, as and when due and payable (whether
by scheduled maturity, required prepayment, acceleration, demand or otherwise), of all amounts from
time to time owing in respect of the Financing Agreement or any other Loan Document, whether for
principal, interest (including, without limitation, all interest that accrues after the
commencement of any Insolvency Proceeding with respect to the Borrower, whether or not a claim for
post-filing interest is allowed in such proceeding), fees, commissions, expense
Exh. E-2
reimbursements, indemnifications or otherwise, and whether accruing before or subsequent to
the commencement of any Insolvency Proceeding with respect to the Borrower (notwithstanding the
operation of the automatic stay under Section 362(a) of the U.S. Bankruptcy Code), and the due
performance and observance by the Borrower of its other obligations now or hereafter existing in
respect of the Loan Documents (the
Obligations
), and (ii) agrees to pay any and all
expenses (including reasonable counsel fees and expenses) incurred by the Agents and the Lenders in
enforcing any rights under this Agreement.
(b) The security interest created hereby in the Pledged Collateral constitutes continuing
collateral security for (x) Obligations and (y) the due performance and observance by the Pledgor
of all of its other obligations from time to time existing in respect of the Loan Documents.
(c) Notwithstanding anything to the contrary contained in this Agreement, the recourse of the
Agent and the Lenders with respect to the liability of the Pledgor under this Agreement solely with
respect to the Obligations shall be limited to the Pledged Collateral.
SECTION 4.
Delivery of the Pledged Collateral
.
(a) (i) All certificates currently representing the Pledged Shares shall be delivered to the
Collateral Agent contemporaneously with or prior to the execution and delivery of this Agreement.
All other certificates and instruments constituting Pledged Collateral from time to time or
required to be pledged to the Collateral Agent, pursuant to the terms of this Agreement or the
Financing Agreement (the
Additional Collateral
), shall be delivered to the Collateral
Agent promptly upon receipt thereof by or on behalf of the Pledgor. All such certificates and
instruments shall be held by or on behalf of the Collateral Agent pursuant hereto and shall be
delivered in suitable form for transfer by delivery or shall be accompanied by duly executed
instruments of transfer or assignment or undated stock powers executed in blank, all in form and
substance reasonably satisfactory to the Collateral Agent. If any Pledged Collateral consists of
uncertificated securities, unless the immediately following sentence is applicable thereto, the
Pledgor shall cause the Collateral Agent (or its designated custodian or nominee) to become the
registered holder thereof, or cause each issuer of such securities to agree that it will comply
with instructions originated by the Collateral Agent with respect to such securities without
further consent by the Pledgor. If any Pledged Collateral consists of security entitlements, the
Pledgor shall transfer such security entitlements to the Collateral Agent (or its custodian,
nominee or other designee), or cause the applicable securities intermediary to agree that it will
comply with entitlement orders by the Collateral Agent without further consent by the Pledgor.
(ii) Within five (5) days of the receipt by the Pledgor of any Additional Collateral, a Pledge
Amendment, duly executed by the Pledgor, in substantially the form of Annex I hereto (a
Pledge
Amendment
) shall be delivered to the Collateral Agent, in respect of the Additional Collateral
which must be pledged pursuant to this Agreement and the Financing Agreement. The Pledge Amendment
shall from and after delivery thereof constitute part of Schedule I hereto. The Pledgor hereby
authorizes the Collateral Agent to attach each Pledge Amendment to this Agreement and agrees that
all certificates or instruments listed on any Pledge
Exh. E-3
Amendment delivered to the Collateral Agent shall for all purposes hereunder constitute
Pledged Collateral and such Pledgor shall be deemed upon delivery thereof to have made the
representations and warranties set forth in Section 5 hereof with respect to such Additional
Collateral.
(b) If the Pledgor shall receive, by virtue of the Pledgors being or having been an owner of
any Pledged Collateral, any (i) stock certificate (including, without limitation, any certificate
representing a stock dividend or distribution in connection with any increase or reduction of
capital, reclassification, merger, consolidation, sale of assets, combination of shares, stock
split, spin-off or split-off) or other instrument, (ii) option or right, whether as an addition to,
substitution for, or in exchange for, any Pledged Collateral, or otherwise, (iii) dividends payable
in cash (except such dividends permitted to be retained by any such Pledgor pursuant to Section 7
hereof) or in securities or other property or (iv) dividends or other distributions in connection
with a partial or total liquidation or dissolution or in connection with a reduction of capital,
capital surplus or paid-in surplus, the Pledgor shall receive such stock certificate, instrument,
option, right, payment or distribution constituting certificated Pledged Collateral in trust for
the benefit of the Collateral Agent, shall segregate it from such Pledgors other property and
shall deliver it forthwith to the Collateral Agent, in the exact form received, with any necessary
endorsement and/or appropriate stock powers duly executed in blank, to be held by the Collateral
Agent as Pledged Collateral and as further collateral security for the Obligations.
SECTION 5.
Representations and Warranties
. The Pledgor represents and warrants as
follows:
(a) The Pledgor is a limited liability company duly organized, validly existing and in good
standing under the laws of the state of its organization as set forth on the first page hereof, and
has all the requisite limited liability company power and authority to execute, deliver and perform
this Agreement.
(b) The execution, delivery and performance by the Pledgor of this Agreement (i) have been
duly authorized by all necessary limited liability company power and authority, (ii) do not and
will not contravene its certificate of formation, operating agreement, any Requirements of Law or
any contractual restriction binding on or affecting it or any of its properties, (ii) do not and
will not result in or require the creation of any Lien upon or with respect to any of its
properties other than pursuant to this Agreement, and (iii) do not and will not results in any
default, noncompliance, suspension, revocation, impairment, forfeiture or nonrenewal of any
material permit, license, authorization or approval applicable to any of its properties.
(c) Schedule II hereto sets forth (i) the exact legal name of the Pledgor and all other names
used by the Pledgor at any time during the five years preceding the Effective Date, and (ii) the
Pledgors chief executive office and principal place of business and each place of business of the
Pledgor during the five years preceding the Effective Date.
(d) The Pledged Shares have been duly authorized and validly issued and are fully paid and
nonassessable and the holders thereof are not entitled to any preemptive,
Exh. E-4
first refusal or other similar rights (other than pursuant to a stock transfer agreement
entered into with the prior written consent of the Collateral Agent). All other shares of stock
constituting Pledged Collateral will be duly authorized and validly issued, fully paid and
nonassessable.
(e) The Pledgor is and will be at all times the legal and beneficial owner of the Pledged
Collateral free and clear of all Liens except for the Lien created by this Agreement.
(f) The exercise by the Collateral Agent of any of its rights and remedies hereunder will not
contravene any law or any contractual restriction binding on or affecting the Pledgor or any of the
properties of the Pledgor and will not result in or require the creation of any Lien upon or with
respect to any of the properties of the Pledgor other than pursuant to this Agreement or the other
Loan Documents.
(g) No authorization or approval or other action by, and no notice to or filing with, any
Governmental Authority is required to be obtained or made by the Pledgor for (i) the due execution,
delivery and performance by the Pledgor of this Agreement, (ii) the grant by the Pledgor, or the
perfection, of the Lien created hereby in the Pledged Collateral, except for the filing in the
office described in Schedule III hereto of a UCC financing statement naming the Pledgor as debtor,
the Collateral Agent as secured party and describing the Pledged Collateral, to perfect the
Collateral Agents security interests in items of the Pledged Collateral in which such security
interests are not susceptible to perfection by possession of certificates or instruments, which
financing statement has been duly filed or (iii) the exercise by the Collateral Agent of any of its
rights and remedies hereunder, except as may be required in connection with any sale of any Pledged
Collateral by laws affecting the offering and sale of securities generally.
(h) This Agreement is a legal, valid and binding obligation of the Pledgor, enforceable
against the Pledgor in accordance with its terms.
(i) This Agreement creates a valid Lien in favor of the Collateral Agent, for the benefit of
the Agents and the Lenders, in the Pledged Collateral as security for the Obligations. The
Collateral Agents having possession of the certificates representing the Pledged Shares and all
other certificates, instruments and cash constituting Pledged Collateral from time to time results
in the perfection of such Lien. Such Lien is, or in the case of Pledged Collateral in which the
Pledgor obtains rights after the date hereof, will be, a perfected, first priority Lien. All action
necessary or desirable to perfect and protect such Lien has been duly taken, except for the
Collateral Agents having possession of certificates, instruments and cash constituting Pledged
Collateral after the date hereof
(j) The partnership interests or membership interests of each Pledged Issuer are (i)
securities for purposes of Article 8 of the UCC, (iii) investment company securities within the
meaning of Section 8-103 of the UCC and (iii) evidenced by a certificate.
(k) The pledge of the Pledged Collateral pursuant to this Agreement does not violate
Regulation T, U or X of the Board of Governors of the Federal Reserve System.
Exh. E-5
SECTION 6.
Covenants as to the Pledged Collateral
. So long as any of the Obligations
shall remain outstanding or prior to the termination of all Commitments, the Pledgor will, unless
the Collateral Agent shall otherwise consent in writing:
(a) keep adequate records concerning the Pledged Collateral and permit the Collateral Agent or
any agents, designees or representatives thereof at any time or from time to time to examine and
make copies of and abstracts from such records consistent with the terms of the Financing
Agreement;
(b) at the Pledgors expense, promptly deliver to the Collateral Agent a copy of each notice
or other communication received by it in respect of the Pledged Collateral;
(c) at the Pledgors expense, defend the Collateral Agents right, title and security interest
in and to the Pledged Collateral against the claims of any Person;
(d) at the Pledgors expense, at any time and from time to time, promptly execute and deliver
all further instruments and documents and take all further action that may be necessary or
desirable or that the Collateral Agent may reasonably request in order to (i) perfect and protect,
or maintain the perfection of, the security interest and Lien created hereby, (ii) enable the
Collateral Agent to exercise and enforce its rights and remedies hereunder in respect of the
Pledged Collateral or (iii) otherwise effect the purposes of this Agreement, including, without
limitation, delivering to the Collateral Agent irrevocable proxies in respect of the Pledged
Collateral;
(e) not sell, assign (by operation of law or otherwise), exchange or otherwise dispose of any
Pledged Collateral or any interest therein except as expressly permitted by Section 7.02(c) of the
Financing Agreement;
(f) not create or suffer to exist any Lien upon or with respect to any Pledged Collateral
except for the Lien created hereby;
(g) not make or consent to any amendment or other modification or waiver with respect to any
Pledged Collateral or enter into any agreement or permit to exist any restriction with respect to
any Pledged Collateral other than pursuant to the Loan Documents;
(h) not vote in favor of the issuance of (i) any additional shares of any class of Equity
Interests of each Pledged Issuer, (ii) any securities convertible voluntarily by the holder thereof
or automatically upon the occurrence or non occurrence of any event or condition into, or
exchangeable for, any such shares of Equity Interests or (iii) any warrants, options, contracts or
other commitments entitling any Person to purchase or otherwise acquire any such shares of Equity
Interests, except in the case of clauses (i), (ii) and (iii), to the extent any such issuance is
expressly permitted by the Financing Agreement;
(i) not take or fail to take any action which would in any manner impair the value of or the
enforceability of the Collateral Agents security interest in and Lien on any Pledged Collateral;
and
Exh. E-6
(j) cause each interest in each Pledged Issuer controlled by the Pledgor and pledged hereunder
to be (i) represented by a certificate, (ii) deemed a security within the meaning of Article 8 of
the UCC and (iii) governed by Article 8 of the UCC.
SECTION 7.
Voting Rights, Dividends, Etc
. in Respect of the Pledged Collateral.
(a) So long as no Event of Default shall have occurred and be continuing:
(i) the Pledgor may exercise any and all voting and other consensual rights pertaining to any
Pledged Collateral for any purpose not inconsistent with the terms of this Agreement, the Financing
Agreement or the other Loan Documents;
provided
,
however
, that (A) the Pledgor will
not exercise or will refrain from exercising any such right, as the case may be, if the Collateral
Agent gives the Pledgor notice that, in the Collateral Agents judgment, such action (or inaction)
is reasonably likely to have a material adverse effect to the Pledgors financial condition and (B)
the Pledgor will give the Collateral Agent at least five (5) Business Days notice of the manner in
which it intends to exercise, or the reasons for refraining from exercising, any such right which
is reasonably likely to have a material adverse effect to the Pledgors financial condition;
(ii) the Pledgor may receive and retain any and all dividends, interest or other distributions
or payments in respect of the Pledged Collateral to the extent permitted by the Financing
Agreement;
provided
,
however
, that any and all (A) dividends and interest paid or
payable other than in cash in respect of, and instruments and other property received, receivable
or otherwise distributed in respect of or in exchange for, any Pledged Collateral, (B) dividends
and other distributions paid or payable in cash in respect of any Pledged Collateral in connection
with a partial or total liquidation or dissolution or in connection with a reduction of capital,
capital surplus or paid-in surplus, and (C) cash paid, payable or otherwise distributed in
redemption of, or in exchange for, any Pledged Collateral, together with any dividend, interest or
other distribution or payment which at the time of such payment was not permitted by the Financing
Agreement, shall be, and shall forthwith be delivered to the Collateral Agent, if such Collateral
constitutes certificated Pledged Collateral, to hold as, Pledged Collateral and shall, if received
by the Pledgor, be received in trust for the benefit of the Collateral Agent, shall be segregated
from the other property or funds of the Pledgor, and shall be forthwith delivered to the Collateral
Agent in the exact form received with any necessary endorsement and/or appropriate stock powers
duly executed in blank, to be held by the Collateral Agent as Pledged Collateral and as further
collateral security for the Obligations; and
(iii) the Collateral Agent will execute and deliver (or cause to be executed and delivered) to
the Pledgor all such proxies and other instruments as the Pledgor may reasonably request for the
purpose of enabling the Pledgor to exercise the voting and other rights which it is entitled to
exercise pursuant to Section 7(a)(i) hereof and to receive the dividends, interest and/or other
distributions which it is authorized to receive and retain pursuant to Section 7(a)(ii) hereof.
Exh. E-7
(b) Upon the occurrence and during the continuance of an Event of Default:
(i) all rights of the Pledgor to exercise the voting and other rights which it would otherwise
be entitled to exercise pursuant to Section 7(a)(i) hereof, and to receive the dividends,
distributions, interest and other payments which it would otherwise be authorized to receive and
retain pursuant to Section 7(a)(ii) hereof, shall cease, and all such rights shall thereupon become
vested in the Collateral Agent which shall thereupon have the sole right to exercise such voting
and other consensual rights and to receive and hold as Pledged Collateral such dividends and
interest payments;
(ii) without limiting the generality of the foregoing, the Collateral Agent may, at its option
exercise any and all rights of conversion, exchange, subscription or any other rights, privileges
or options pertaining to any of the Pledged Collateral as if it were the absolute owner thereof,
including, without limitation, the right to exchange, in its discretion, any and all of the Pledged
Collateral upon the merger, consolidation, reorganization, recapitalization or other adjustment of
each Pledged Issuer, or upon the exercise by each Pledged Issuer of any right, privilege or option
pertaining to any Pledged Collateral, and, in connection therewith, to deposit and deliver any and
all of the Pledged Collateral with any committee, depository, transfer agent, registrar or other
designated agent upon such terms and conditions as it may determine; and
(iii) all dividends, distributions, interest and other payments which are received by the
Pledgor contrary to the provisions of Section 7(b)(i) hereof shall be received in trust for the
benefit of the Collateral Agent shall be segregated from other funds of the Pledgor, and shall be
forthwith paid over to the Collateral Agent as Pledged Collateral in the exact form received with
any necessary endorsement and/or appropriate stock powers duly executed in blank, to be held by the
Collateral Agent as Pledged Collateral and as further collateral security for the Obligations.
SECTION 8.
Additional Provisions Concerning the Pledged Collateral
.
(a) To the maximum extent permitted by applicable law, and for the purpose of taking any
action which the Agent may deem necessary or advisable to accomplish the purposes of this
Agreement, the Pledgor (i) authorizes the Collateral Agent to execute any such agreements,
instruments or other documents in the Pledgors name and to file such agreements, instruments or
other documents in the Pledgors name and to file such agreements, instruments, or other documents
in any appropriate filing office (ii) authorizes the Collateral Agent to file any financing
statements required hereunder or under any other Loan Document, and any continuation statements or
amendment with respect thereto, in any appropriate filing office without the signature of the
Pledgor and (iii) ratifies the filing of any financing statement, and any continuation statement or
amendment with respect thereto, filed without the signature of the Pledgor prior to the date hereof
A photocopy or other reproduction of this Agreement or any financing statement covering the Pledged
Collateral or any part thereof shall be sufficient as a financing statement where permitted by law.
Exh. E-8
(b) The Pledgor hereby irrevocably appoints the Collateral Agent as the Pledgors
attorney-in-fact and proxy, with full authority in the place and stead of the Pledgor and in the
name of the Pledgor or otherwise, from time to time in the Collateral Agents discretion, to take
any action and to execute any instrument which the Collateral Agent may deem necessary or advisable
to accomplish the purposes of this Agreement (subject to the rights of the Pledgor under Section
7(a) hereof), including, without limitation, to receive, endorse and collect all instruments made
payable to the Pledgor representing any dividend, interest, distribution or other payment in
respect of any Pledged Collateral and to give full discharge for the same. This power is coupled
with an interest and is irrevocable until all of the Obligations are indefeasibly paid in full
after all Commitments have been terminated.
(c) If the Pledgor fails to perform any agreement or obligation contained herein, the
Collateral Agent itself may perform, or cause performance of, such agreement or obligation, and the
expenses of the Collateral Agent incurred in connection therewith shall be payable by the Pledgor
pursuant to Section 10 hereof and shall be secured by the Pledged Collateral.
(d) Other than the exercise of reasonable care to assure the safe custody of the Pledged
Collateral while held hereunder, the Collateral Agent shall have no duty or liability to preserve
rights pertaining thereto and shall be relieved of all responsibility for the Pledged Collateral
upon surrendering it or tendering surrender of it to the Pledgor. The Collateral Agent shall be
deemed to have exercised reasonable care in the custody and preservation of the Pledged Collateral
in its possession if the Pledged Collateral is accorded treatment substantially equal to that which
the Collateral Agent accords its own property, it being understood that the Collateral Agent shall
not have responsibility for (i) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relating to any Pledged Collateral, whether or not
the Collateral Agent has or is deemed to have knowledge of such matters, or (ii) taking any
necessary steps to preserve rights against any parties with respect to any Pledged Collateral.
(e) The powers conferred on the Collateral Agent hereunder are solely to protect its interest
in the Pledged Collateral and shall not impose any duty upon the Collateral Agent to exercise any
such powers. Except for the safe custody of any Pledged Collateral in its possession and the
accounting for monies actually received by it hereunder, the Collateral Agent shall have no duty as
to any Pledged Collateral or as to the taking of any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Pledged Collateral.
(f) The Collateral Agent may at any time in its discretion (i) without notice to the Pledgor,
transfer or register in the name of the Collateral Agent or any of its nominees any or all of the
Pledged Collateral, subject only to the revocable rights of such Pledgor under Section 7(a) hereof,
and (ii) exchange certificates or instruments constituting Pledged Collateral for certificates or
instruments of smaller or larger denominations.
SECTION 9.
Remedies Upon Default
. If any Event of Default shall have occurred and be
continuing:
Exh. E-9
(a) The Collateral Agent may exercise in respect of the Pledged Collateral, in addition to any
other rights and remedies provided for herein or otherwise available to it, all of the rights and
remedies of a secured party upon default under the Code then in effect in the State of New York;
and without limiting the generality of the foregoing and without notice except as specified below,
sell the Pledged Collateral or any part thereof in one or more parcels at public or private sale,
at any exchange or brokers board or elsewhere, at such price or prices and on such other terms as
the Collateral Agent may deem commercially reasonable. The Pledgor agrees that, to the extent
notice of sale shall be required by law, at least five (5) days notice to the Pledgor of the time
and place of any public sale of Pledged Collateral owned by the Pledgor or the time after which any
private sale is to be made shall constitute reasonable notification. The Collateral Agent shall not
be obligated to make any sale of Pledged Collateral regardless of whether or not notice of sale has
been given. The Collateral Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned.
(b) In the event that the Collateral Agent determines to exercise its right to sell all or any
part of the Pledged Collateral pursuant to Section 9(a) hereof, the Pledgor will, upon request by
the Collateral Agent: (i) execute and deliver, and vote in favor of causing the issuer of the
Pledged Collateral and the directors and officers thereof to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts and things, as may be
necessary or, in the opinion of the Collateral Agent, advisable to register the Pledged Collateral
under the provisions of the Securities Act of 1933, as amended (the
Securities Act
), and
to cause the registration statement relating thereto to become effective and to remain effective
for such period as prospectuses are required by law to be furnished, and to make all amendments and
supplements thereto and to the related prospectus which, in the opinion of the Collateral Agent,
are necessary or advisable, all in conformity with the requirements of the Securities Act and the
rules and regulations of the Securities and Exchange Commission applicable thereto, (ii) vote in
favor of causing the issuer of the Pledged Collateral to qualify the Pledged Collateral under the
state securities or Blue Sky laws of each jurisdiction, and to obtain all necessary governmental
approvals for the sale of the Pledged Collateral, as requested by the Collateral Agent, (iii) vote
in favor of causing each Pledged Issuer to make available to its securityholders, as soon as
practicable, an earnings statement which will satisfy the provisions of Section 11(a) of the
Securities Act, and (iv) do or cause to be done all such other acts and things within its power as
may be necessary to make such sale of the Pledged Collateral valid and binding and in compliance
with any applicable law.
(c) Notwithstanding the provisions of Section 9(b) hereof, the Pledgor recognizes that the
Collateral Agent may deem it impracticable to effect a public sale of all or any part of the
Pledged Shares or any other securities constituting Pledged Collateral and that the Collateral
Agent may, therefore, determine to make one or more private sales of any such securities to a
restricted group of purchasers who will be obligated to agree, among other things, to acquire such
securities for their own account, for investment and not with a view to the distribution or resale
thereof. The Pledgor acknowledges that any such private sale may be at prices and on terms less
favorable to the seller than the prices and other terms which might have been obtained at a public
sale and, notwithstanding the foregoing, agrees that such private sales shall be deemed to have
been made in a commercially reasonable manner and that the Collateral
Exh. E-10
Agent shall have no obligation to delay the sale of any such securities for the period of time
necessary to permit the issuer of such securities to register such securities for public sale under
the Securities Act. The Pledgor further acknowledges and agrees that any offer to sell such
securities which has been (i) publicly advertised on a bona fide basis in a newspaper or other
publication of general circulation in the financial community of New York, New York (to the extent
that such an offer may be so advertised without prior registration under the Securities Act) or
(ii) made privately in the manner described above to not less than fifteen
bona
fide
offerees shall be deemed to involve a public disposition for the purposes of Section
9-610(c) of the Code (or any successor or similar, applicable statutory provision) as then in
effect in the State of New York, notwithstanding that such sale may not constitute a public
offering under the Securities Act, and that the Collateral Agent may, in such event, bid for the
purchase of such securities.
(d) Any cash held by the Collateral Agent as Pledged Collateral and all cash proceeds received
by the Collateral Agent in respect of any sale of, collection from, or other realization upon, all
or any part of the Pledged Collateral may, in the discretion of the Collateral Agent, be held by
the Collateral Agent as collateral for, and/or then or at any time thereafter applied (after
payment of any amounts payable to the Collateral Agent pursuant to Section 10 hereof) in whole or
in part by the Collateral Agent against, all or any part of the Obligations in such order as the
Collateral Agent shall elect consistent with the provisions of the Financing Agreement. Any surplus
of such cash or cash proceeds held by the Collateral Agent and remaining after indefeasible payment
in full of all of the Obligations after all Commitments have been terminated shall be paid over to
the Pledgor or to such Person as may be lawfully entitled to receive such surplus.
(e) In the event that the proceeds of any such sale, collection or realization are
insufficient to pay all amounts to which the Agents and the Lenders are legally entitled, the
Pledgor shall be liable for the deficiency, together with interest thereon at the highest rate
specified in the Financing Agreement for interest on overdue principal thereof or such other rate
as shall be fixed by applicable law, together with the costs of collection and the fees, costs and
expenses and other client charges of any attorneys employed by the Collateral Agent to collect such
deficiency.
SECTION 10.
Indemnity and Expenses
.
(a) The Pledgor agrees to defend, protect, indemnify and hold harmless each Agent and each
Lender (and all of their respective officers, directors, employees, attorneys, consultants and
agents) from and against any and all claims, damages, losses, liabilities obligations, penalties,
fees, costs and expenses (including, without limitation, legal fees, costs and expenses of counsel)
to the extent that they arise out of or otherwise result from the enforcement of this Agreement,
except, as to any such indemnified Person, claims, losses or liabilities resulting solely and
directly from such Persons gross negligence or willful misconduct as determined by a final
judgment of a court of competent jurisdiction.
(b) The Pledgor agrees to pay to the Collateral Agent upon demand the amount of any and all
costs and expenses, including the fees, costs, expenses and disbursements of the Collateral Agents
counsel and of any experts and agents, which the Collateral Agent may
Exh. E-11
incur in connection with (i) the amendment, waiver or other modification or termination of
this Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection
from, or other realization upon, any Pledged Collateral, (iii) the exercise or enforcement of any
of the rights of the Collateral Agent hereunder, or (iv) the failure by the Pledgor to perform or
observe any of the provisions hereof.
SECTION 11.
Notices, Etc
. All notices and other communications provided for hereunder
shall be in writing and shall be mailed (by certified mail, postage prepaid and return receipt
requested), telecopied or delivered, if to the Pledgor, to the Pledgor as specified next to such
Pledgors signature below; if to the Borrower, at its address specified in Section 12.01 of the
Financing Agreement; or if to the Collateral Agent, to it at its address specified in Section 12.01
of the Financing Agreement; or as to any such Person at such other address as shall be designated
by such Person in a written notice to such other Person complying as to delivery with the terms of
this Section 11. All such notices and other communications shall be effective (i) if mailed
(certified mail, postage prepaid and return receipt requested), when received or three (3) days
after deposited in the mails, whichever occurs first, (ii) if telecopied, when transmitted and
confirmation received, or (iii) if delivered by hand, Federal Express or other reputable overnight
courier, upon delivery.
SECTION 12.
Security Interest Absolute
. All rights of the Agents and the Lenders, all
Liens and all obligations of the Pledgor hereunder shall be absolute and unconditional irrespective
of: (i) any lack of validity or enforceability of the Financing Agreement or any other agreement or
instrument relating thereto, (ii) any change in the time, manner or place of payment of, or in any
other term in respect of, all or any of the Obligations, or any other amendment or waiver of or
consent to any departure from the Financing Agreement or any other Loan Document, (iii) any
exchange or release of, or non-perfection of any Lien on any Collateral, or any release or
amendment or waiver of or consent to departure from any Guaranty, for all or any of the
Obligations, or (iv) any other circumstance which might otherwise constitute a defense available
to, or a discharge of, the Pledgor in respect of the Obligations. All authorizations and agencies
contained herein with respect to any of the Pledged Collateral are irrevocable and powers coupled
with an interest.
SECTION 13.
Miscellaneous
.
(a) No amendment of any provision of this Agreement shall be effective unless it is in writing
and signed by the Collateral Agent, and no waiver of any provision of this Agreement, and no
consent to any departure the Pledgor therefrom, shall be effective unless it is in writing and
signed by the Collateral Agent, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
(b) No failure on the part of any Agent or any Lender to exercise, and no delay in exercising,
any right hereunder or under any Loan Document shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The rights and remedies of the Agents and the Lenders provided herein
and in the other Loan Documents are cumulative and are in addition to, and not exclusive of, any
rights or remedies provided by law. The rights of the
Exh. E-12
Agents and the Lenders under the applicable Loan Document against any party thereto are not
conditional or contingent on any attempt by the Agents or the Lenders to exercise any of their
rights under any other document against such party or against any other Person, including but not
limited to, the Pledgor.
(c) Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining portions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
(d) This Agreement shall create a continuing security interest in and Lien on the Pledged
Collateral and shall (i) remain in full force and effect until the indefeasible payment in full or
release of the Obligations after the termination of all of the Commitments and (ii) be binding on
each Pledgor and, by its acceptance hereof, the Collateral Agent, and its respective successors and
assigns, and shall inure, together with all rights and remedies of the Agents and the Lenders
hereunder, to the benefit of each of the Agents and the Lenders and their respective successors,
transferees and assigns. Without limiting the generality of clause (ii) of the immediately
preceding sentence, without notice to the Pledgor, the Agents and the Lenders may assign or
otherwise transfer their respective rights and obligations under this Agreement and any other Loan
Document to any other Person, and such other Person shall thereupon become vested with all of the
benefits in respect thereof granted to the Agents and the Lenders herein or otherwise. Upon any
such assignment or transfer, all references in this Agreement to any such Agent or Lender shall
mean the assignee of such Agent or Lender. None of the rights or obligations of the Pledgor
hereunder may be assigned or otherwise transferred without the prior written consent of the
Collateral Agent, and any such assignment or transfer shall be null and void.
(e) Upon the satisfaction in full of the Obligations after the termination of all of the
Commitments (i) this Agreement and the security interest and Lien created hereby shall terminate
and all rights to the Pledged Collateral shall revert to the Pledgor, and (ii) the Collateral Agent
will, upon the Pledgors request and at the Pledgors expense, (A) return to the Pledgor such of
the Pledged Collateral as shall not have been sold or otherwise disposed of or applied pursuant to
the terms hereof, and (B) execute and deliver to the Pledgor, without recourse, representation or
warranty, such documents as the Pledgor shall reasonably request to evidence such termination.
(f) This Agreement may be executed in any number of counterparts and by the different parties
hereto on separate counterparts, each of which shall be deemed an original, but all such
counterparts shall constitute one and the same agreement. Delivery of an executed counterpart of
this Agreement by telefacsimile or electronic mail shall be equally as effective as delivery of an
original executed counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile or electronic mail also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed counterpart shall not
affect the validity, enforceability, and binding effect of this Agreement.
(g) This Agreement shall be governed by and construed in accordance with the law of the State
of New York, except as required by mandatory provisions of law and
Exh. E-13
except to the extent that the validity and perfection or the perfection and the effect of
perfection or non-perfection of the security interest and Lien created hereby, or remedies
hereunder, in respect of any particular Pledged Collateral are governed by the law of a
jurisdiction other than the State of New York.
(h)
ANY LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY DOCUMENT
RELATED THERETO MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK OR
THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS THEREOF,
AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE PLEDGOR HEREBY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.
THE PLEDGOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF
FORUM
NON CONVENIENS
, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING
OF ANY SUCH ACTION, SUIT OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT.
(i) THE PLEDGOR AND (BY ITS ACCEPTANCE OF THE BENEFITS OF THIS AGREEMENT) THE COLLATERAL AGENT
WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN STATEMENT OR OTHER ACTION OF THE PARTIES HERETO.
[signature page follows]
Exh. E-14
IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be executed and delivered on the
date first above written.
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PLEDGOR:
IMPERIAL PREMIUM FINANCE, LLC
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By:
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Imperial Holdings, LLC, its managing member
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By:
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Name:
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Jonathan Neuman
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Title:
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President
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Address:
701 Park of Commerce Blvd., Suite 301
Boca Raton, Florida 33487
Telecopy No.: (561) 995-4203
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[SIGNATURE
PAGE TO INDIVIDUAL GUARANTEE SECURITY AGREEMENT]
SCHEDULE I
TO
GUARANTOR SECURITY AGREEMENT
Pledged Shares
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Pledgor
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Name of Issuer
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Number of Shares
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Class
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Certificate Number
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Imperial Premium
Finance, LLC
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Imperial PFC
Financing II, LLC
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100
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Common
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1
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SCHEDULE II
TO
GUARANTOR SECURITY AGREEMENT
Part A
Current Names and Addresses of Pledgor
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Exact Name
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Address
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City
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State
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Zip Code
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Imperial Premium
Finance, LLC
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701 Park of
Commerce Blvd.,
Suite 301
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Boca Raton
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Florida
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33487
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Part B
Names and Addresses of Pledgor Used During Last Five Years
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Exact Name
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Address
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City
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State
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Zip Code
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SCHEDULE III
TO
GUARANTOR SECURITY AGREEMENT
Filing Offices
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Name
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Filing Office
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Florida
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Secretary of State
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ANNEX I
TO
GUARANTOR SECURITY AGREEMENT
PLEDGE AMENDMENT
This Pledge Amendment, dated
, is delivered pursuant to Section 4 of the Pledge and
Security Agreement referred to below. The undersigned hereby agrees that this Pledge Amendment may
be attached to the Guarantor Security Agreement, dated as of
, 2009, as it may
heretofore have been or hereafter may be amended or otherwise modified or supplemented from time to
time (the
Pledge and Security Agreement
) and that the shares listed on this Pledge
Amendment shall be hereby pledged and assigned to the Collateral Agent and become part of the
Pledged Collateral referred to in such Pledge and Security Agreement and shall secure all of the
Obligations referred to in such Pledge and Security Agreement.
Pledged Shares
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Number of
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Certificate
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Pledgor
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Name of Issuer
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Shares
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Class
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Number(s)
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[PLEDGOR]
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By:
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Name:
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Title:
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Exhibit F
Loan Document Package
AUTHORIZATION AND DIRECTION TO PROVIDE DEATH CERTIFICATE
I hereby authorize and direct my personal representative, family members, funeral service
providers, physician or any other person with responsibility for my affairs at the time of and
after my death to provide to (i) the [Trust-Name] (the Trust) , (ii) [Name of Trustee], as
trustee of the Trust (the Trustee) and any other person or entity that demonstrates an ownership
or security interest in a life insurance policy under which I am designated as the insured (each, a
Policyowner), one or more original death certificates and any other documents necessary for the
Trust or a Policyowner to process a claim for benefits under, or a surrender of, any life insurance
policy under which I am designated as the insured.
If any of the above referenced individuals fails or refuses to provide original death
certificates or any other documents necessary to process a claim for benefits under, or a surrender
of, any insurance policy under which I am designated as the insured, then this authorization may be
used by the Trust, the Trustee, any Policyowner and any of their respective agents, designees,
successors or assigns to obtain (i) one or more originals of my death certificates directly from
the appropriate governmental agency and/or funeral service provider, notwithstanding that such
certificate may contain confidential information otherwise protected from dissemination under any
state or federal law or (ii) an order from a court of competent jurisdiction requiring (a) specific
performance of my directions herein or (b) that the appropriate governmental agency deliver to the
Trust, the Trustee or other Policyowner one or more originals of my death certificates.
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[INSURED]
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Signature
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Date of Birth
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Social Security Number
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STATE OF
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)
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: ss.:
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COUNTY OF
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)
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Sworn to (or affirmed) and subscribed before me this ___day of
by
, who
is personally known to me or who produced
as identification.
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(Print, Type, or Stamp Commissioned
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Name of Notary Public)
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My Commission Expires:
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Exh. F-1
BROKERS RIGHTS OF AGENT
Policy # [POLICY-NUMBER] (the Policy)
Insurance Company: [INSURER]
Policy Owner: [TRUST-NAME] (the Policy Owner)
Insured: [INSURED]
Agent: [AGENT]
(the Agent)
(collectively, the Agent if multiple Agents)
WHEREAS
, the Policy as identified by the insured name and policy number on Exhibit A hereto,
which Exhibit shall be amended from time to time by executing a new Exhibit A hereto, which shall
be attached to and incorporated into the prior Exhibit A, to which this Brokers Rights of Agent
shall apply, is being purchased or financed with the assistance of the Agent with financing or
other financial accommodations (the Loan) being provided or arranged by Imperial Premium Finance,
LLC (Imperial);
WHEREAS
, Imperial has agreed to lend, on the terms and conditions and subject to the limitations
set forth in the Loan Application and Agreement, dated as of [DATE] between Imperial and the Policy
Owner (the Loan Agreement), funds in the amounts designated in the Loan Agreement to pay premiums
on the Policy;
WHEREAS
, the Agent has agreed to limit any compensation that the Agent may be entitled to in
connection with a future sale of the Policy, if any.
NOW THEREFORE
, in consideration of the premises set forth herein and other consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
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a)
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Agent understands and acknowledges that in certain circumstances the Policy may
be sold, and in such event, the Agent and/or his affiliates shall not, under any
circumstances, be entitled to receive compensation in excess of the lesser of (i) two
percent (2%) of the net death benefit of the Policy, and (ii) the proceeds of such sale
to be received by the Policy Owner after deducting from the gross proceeds (a) the
Policy amount required to fully satisfy the Loan, and (b) the Agents compensation.
Agent further understands that Agent shall not be entitled to any compensation in
connection with a sale except to the extent Agent has all applicable licenses and
appointments required to receive such compensation under applicable law, Agent
participates and renders services in connection with such sale, the Policy Owner agrees
to the payment of such compensation and the payment of such compensation is permitted
under applicable law.
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b)
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Upon the request of Policy Owner, Agent shall cooperate fully with Policy Owner
and Imperial to facilitate the sale, if any, of the Policy and shall in no event take
any action which could be construed as acting as the broker for the sale of such Policy
or in any way interfering with, or obstructing the sale of such Policy;
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c)
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Cooperation shall include, but not be limited to, assisting a prospective
purchaser of the Policy with (i) obtaining: (a) illustrations, (b) verifications of
coverage, and (c) duplicate policies, (ii) having any documents reviewed or executed by
the insured, and (iii) obtaining any other information reasonably requested by a
prospective purchaser or by Imperial, as the case may be, and shall also include using
Agents best efforts to obtain any executed documents or information provided or the
possible future sale of the Policy,
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d)
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Agent agrees that a breach of this agreement shall result in damages that are
not quantifiable and agrees to liquidated damages in the amount of [
2XLOANAMOUNT
], in
the event of a breach by the Agent. The liquidated damages shall not be construed as a
penalty or forfeiture.
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This Brokers Rights of Agent shall be governed by the laws of the State of Florida.
Any and all controversies, claims, disputes, rights, interests, suits, or causes of action arising
out of or relating to this Brokers Rights of Agent and the negotiations relating thereto, or the
breach thereof, shall be brought in any court of competent jurisdiction located in Palm Beach
County, Florida and the parties consent to such exclusive jurisdiction and exclusive venue in said
county.
Wherefore, the Agent executes this Brokers Rights of Agent this ___day of
, 200.
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[
AGENT
], Agent
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ACKNOWLEDGED BY:
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Imperial Premium Finance, LLC
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By:
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Name:
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EXHIBIT A
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Insured:
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[INSURED]
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Policy Number:
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[POLICY-NUMBER]
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Insurer:
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[INSURER]
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[
DATE]
INSURER: [INSURER]
ASSIGNMENT OF LIFE INSURANCE POLICY AS COLLATERAL
This ASSIGNMENT OF LIFE INSURANCE POLICY AS COLLATERAL (this
Assignment
) is dated as
of [DATE], and is made in favor of [COLLATERAL-AGENT], a
, in its capacity as
collateral agent (the
Collateral Agent
) by [
TRUST-NAME
], a [JURISDICTION] life insurance
trust (together with its successors and permitted assigns, the
Assignor
).
WHEREAS
, pursuant to a Loan Application and Agreement between [LENDER-NAME], a Florida limited
liability company (including any application and assignees thereof, the
Lender
) and
Assignor dated [DATE] (the
Loan Agreement
), the Lender has made an initial loan in the
amount of [FIRST-YEAR-PREMIUM] (the
Loan
) to the Assignor as evidenced by a Promissory
Note dated [DATE] (as amended, supplemented or modified from time to time, the
Promissory
Note
);
WHEREAS
, the Assignor is the sole owner of the Life Policy (as defined below);
WHEREAS
, as a condition precedent to the Lenders obligations under the Promissory Note and
Loan Agreement to make the Loan to the Assignor, the Lender requires the Assignor to execute and
deliver this Assignment to the Collateral Agent;
NOW, THEREFORE
, in consideration of the premises and the mutual covenants hereinafter
contained, and for other good and valuable consideration, the adequacy and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1.
DEFINITIONS
. Capitalized terms used herein and not otherwise defined have the respective
meanings specified in the Loan Agreement.
2.
COLLATERAL ASSIGNMENT
. For value received, the Assignor hereby assigns, transfers,
pledges and grants all of the Assignors claims, options, privileges, rights, title and interest
in, to and under the life insurance policy described below to the Collateral Agent:
Policy No.: [POLICY
-NUMBER]
Issued by: [INSURER]
(
Insurer
)
Insured:
[
INSURED
] (
Insured
)
and any and all applications, riders, endorsements, supplements, amendments, renewals and all other
documents that modify or otherwise affect the terms and conditions of such policy issued in
connection therewith, and any and all proceeds thereof (said policy, contracts, other documents and
proceeds are hereinafter collectively referred to as the
Life Policy
), subject to
1
all the terms and conditions of this Assignment. This Assignment includes, without limitation,
assignment of the following rights:
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(a)
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the sole right to collect from the Insurer the net proceeds of the Life Policy
payable upon the death of the Insured or maturity of the Life Policy;
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(b)
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the sole right to surrender, in whole or in part, the Life Policy and receive
the surrender value thereof at any time provided by the terms of such Life Policy and
at such other times as the Insurer may allow, and the sole right to exercise any and
all other rights permitted by the terms of the Life Policy or allowed by the Insurer
and to receive all benefits and advantages derived therefrom;
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(c)
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the sole right to obtain any loans or advances on the Life Policy at any time,
either from the Insurer or from other persons or entities, and to pledge or assign the
Life Policy as security for such loans or advances;
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(d)
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the sole right to further assign the Collateral Agents rights under the Life
Policy to any person and for any purpose;
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(e)
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the sole right to collect and receive all distributions,
credited earnings, any shares of surplus, dividend deposits or additions to and other proceeds of the Life
Policy now or hereafter made or apportioned thereto, and to exercise any and all rights
and options contained in the Life Policy with respect thereto and to determine the
amount of premium or other amount paid with respect to any feature of the Life Policy
permitting such a right or option;
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(f)
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the sole right to request that the Insurer amend the Life Policy;
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(g)
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the sole right to any and all contract rights, arising from or relating to the
Life Policy, and any and all payment rights, and the other rights listed above,
existing with respect thereto;
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(h)
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the sole right to exercise any and all amendment, voting, or nonforfeiture
rights or privileges to the extent created or endowed by the Life Policy and the right
to apply for and maintain waiver of premium or conversion of the Life Policy;
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(i)
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the sole right to return the Life Policy for cancellation or redemption; and
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(j)
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the sole right to do or cause to be done all things necessary, proper or
advisable to maintain the Life Policy in force.
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Notwithstanding the foregoing, the right to elect any optional mode of settlement permitted by the
Life Policy or allowed by the Insurer is reserved and excluded from this Assignment and does not
pass by virtue hereof, but the reservation of this right shall in no way impair the right of the
Collateral Agent to surrender the Life Policy completely with all its incidents or impair any other
right of the Collateral Agent hereunder, and any election of a mode of settlement shall be made
subject to this Assignment and to the rights of the Collateral Agent hereunder.
2
It is expressly agreed that the following specific rights may not be exercised while this
Assignment is in effect, except with the consent of the Assignor and Collateral Agent:
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(a)
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The right to change the death benefit option;
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(b)
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The right to change the face amount; or
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(c)
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The right to add or delete any riders or other policy benefits, which are
permitted by the terms of the Life Policy.
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It is further agreed that the Collateral Agent will not exercise either the right to surrender the
Life Policy or request a partial withdrawal, or otherwise act under this Assignment, until there
has been a default in any of the Obligations (as defined below), and the Collateral Agent has
mailed, by first class mail to the Assignor to the address set forth in Section 10(f), notice of
intention to exercise such right, and three days have elapsed after the date such notice has been
mailed by the Collateral Agent.
3.
OBLIGATIONS SECURED
. This Assignment is made, and the Life Policy is to be held, as
collateral security for all present and future obligations of the Assignor to the Lender under the
Loan Agreement and Promissory Note (including, without limitation, all rights of the Lender to
receive the outstanding principal amounts, accrued interest and other fees and charges due
thereunder) and all liabilities, obligations, covenants, duties, and indebtedness owing by the
Assignor to the Collateral Agent under this Assignment (all of which obligations of the Assignor to
the Lender/Collateral Agent secured or to become secured hereby are herein called the
Obligations
). For purposes of this Assignment, the term Obligations shall also include,
without limitation, interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or allowable in such
proceeding.
4.
BENEFITS PAYMENT DIRECTIVE
. The Assignor hereby authorizes and directs the Insurer to
pay any and all periodic payments and other amounts, including, without limitation, death benefits,
due or that become due and payable under or on account of the Life Policy either to the Collateral
Agent or as the Collateral Agent directs in writing;
provided
,
however
, that
nothing in this paragraph entitles the Collateral Agent to retain more than the amount of the
Obligations.
5.
REPRESENTATIONS AND WARRANTIES OF THE ASSIGNOR
. The Assignor hereby represents and
warrants as follows:
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(a)
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it is validly existing as a life insurance trust under the laws of the State of
[JURISDICTION];
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(b)
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the execution, delivery and performance by the Assignor of this Assignment (i)
are within the Assignors power, (ii) have been duly authorized by all necessary
action, and (iii) do not contravene any provision of the Assignors trust agreement
(Trust Documents), any law, rule or regulation applicable to the Assignor or its
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assets, or conflict with, violate, create a lien or default under, or require a
consent under, the Life Policy or other document or agreement to which the Assignor
is a party or by which it or its assets are bound;
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(c)
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this Assignment constitutes a legal, valid and binding obligation of the
Assignor enforceable against the Assignor in accordance with the terms hereof (subject
to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and similar laws affecting creditors rights and remedies generally);
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(d)
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as of the date hereof:
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(i) it is the sole and recorded owner of, and the sole and duly designated
beneficiary under, the Life Policy;
(ii) the Assignor has an insurable interest in the life of the Insured under
the Life Policy;
(iii) the Life Policy is in full force and effect and constitutes the valid and
binding obligation of the Insurer, enforceable in accordance with its terms;
(iv) the Life Policy has not lapsed and/or been reinstated;
(v) the information set forth in Section 2 hereof with respect to the Life
Policy is true and correct in all respects;
(vi) the Life Policy has not been sold to any person or entity, there are no
outstanding loans on or encumbering the Life Policy, and the Life Policy is free and
clear of any and all Liens other than the interests granted to the Lender and
Collateral Agent under this Assignment, the Promissory Note, the Loan Agreement and
the other Financing Documents. As used in this Assignment, Liens means any
security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or other), or preference, priority or other security
agreement, option or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as any
of the foregoing, and the filing of any financing statement executed by or on behalf
of the debtor named therein under the Uniform Commercial Code or comparable law of
any jurisdiction, and any restriction on the use, voting, transfer, receipt of
income or other exercise of any attributes of ownership);
(vii) to the Assignors actual knowledge, the Life Policy is not subject to any
right of rescission, set-off, recoupment, counterclaim or defense, whether arising
out of the transactions concerning such Life Policy between the Lender and the
Assignor, the Insured or otherwise, and no such right has been asserted;
4
(viii) there is no default, breach or violation under the Life Policy, and no
event has occurred that, with notice and/or the expiration of any grace or cure
period, would constitute a default, breach or violation under the Life Policy;
(ix) the Assignor is not subject to any Internal Revenue Service, state or
local governmental authority review, notice of deficiency, tax assessment, audit
notice or equivalent review regarding the tax benefits or tax payable in connection
with the purchase, holding or transfer of the Life Policy;
(x) there are no governmental orders and no proceedings or investigations
pending or, to the actual knowledge of the Assignor, threatened, before any
governmental authority asserting the invalidity of the Life Policy, seeking the
payment under the Life Policy or seeking any governmental order that could
reasonably be expected to adversely affect the validity or enforceability of the
Life Policy, or reduce the death benefit or surrender value thereunder;
(xi) no proceedings in bankruptcy are pending or to the Assignors knowledge
threatened against the Assignor, its trustee or the Insured (and no grounds exist
for such proceedings) and none of the Assignors, its trustees or the Insureds
property is subject to any assignment for the benefit of creditors; and
(xii) the Assignor has delivered or caused to be delivered to the Collateral
Agent true and correct copies of all necessary or appropriate consents executed by
the appropriate persons (including, without limitation, the Insured) authorizing the
Lender and each of its representatives to review the Life Policy, all applications,
riders, endorsements, supplements, amendments and all other documents that modify or
otherwise affect the terms and conditions of the Life Policy, and all medical,
psychological and health and/or life expectancy related records regarding the
Insured.
6.
ACKNOWLEDGEMENTS AND AGREEMENTS
. The Assignor hereby acknowledges and agrees as follows:
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(a)
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any balance of sums received hereunder from the Insurer remaining after payment
of the then-existing Obligations, matured or unmatured, shall be paid in full by the
Collateral Agent to the persons or entities entitled thereto under the terms of the
Life Policy as if this Assignment had not been executed;
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(b)
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the Insurer is hereby authorized and directed to recognize the Collateral
Agents claims to rights hereunder without investigating the reason for any action
taken by the Collateral Agent, or the validity or the amount of the Obligations or the
existence of any default therein, or the giving of any notice hereunder, under
applicable law or otherwise, or the application to be made by the Collateral Agent of
any amounts to be paid to the Collateral Agent; the sole signature of the Collateral
Agent shall be sufficient for the exercise of any rights under the Life Policy assigned
hereby and the sole receipt by the Collateral Agent of any sums shall be a full
discharge and release therefor to the Insurer; wire transfers or
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checks for all or any part of the sums payable under the Life Policy and assigned
herein shall be paid to the Collateral Agent or its designee if, when, and in such
amounts as may be requested by the Collateral Agent;
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(c)
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neither the Lender nor the Collateral Agent shall be under any obligation to
pay from their own funds any premium, or the principal of or interest on loans or
advances on the Life Policy, if any, whether or not obtained by the Lender or the
Collateral Agent, or any other charges on the Life Policy, but such amounts so paid by
the Lender or Collateral Agent from their own funds shall become a part of the
Obligations hereby secured, shall be due and payable immediately, and shall accrue
interest at rate set forth in the Promissory Note;
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(d)
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the exercise of any right, option, privilege or power given to the Collateral
Agent under this Assignment shall be at the option of the Collateral Agent, and the
Collateral Agent may exercise any such right, option, privilege or power without notice
to, or consent by, or affecting the liability of, or releasing any interest hereby
assigned by the Assignor;
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(e)
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the Assignor shall do or cause to be done all things necessary to preserve and
keep in full force and effect the Assignors existence; the Assignor shall not
distribute, sell, transfer, lease or otherwise dispose of (in one transaction or in a
series of transactions) all or substantially all of its assets (in each case, whether
now owned or hereafter acquired), or terminate, liquidate or dissolve while the
Obligations remain outstanding;
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(f)
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the Assignor shall deliver to the Collateral Agent copies of any and all
reports, financial statements, notices, illustrations, projections and other
information received from the Insurer in any way related to the Life Policy, and the
Assignor shall cooperate with the Collateral Agent in obtaining any additional
information from the Insurer that the Collateral Agent may reasonably request from time
to time in respect of the Life Policy;
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(g)
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the Assignor shall not surrender, cancel or otherwise terminate the Life Policy
or allow the Life Policy to lapse or terminate and the Assignor shall, at its sole cost
and expense, preserve and keep in full force the Life Policy until the Obligations have
been satisfied in full pursuant to the terms of the Promissory Note;
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(h)
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the Assignor shall not take any action in contravention of the Collateral
Agents security interest in the Life Policy, or grant or permit to exist any Lien on
the Life Policy other than the interests granted to the Lender and Collateral Agent
under this Assignment, the Promissory Note, the Loan Agreement and the other Financing
Documents.
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(i)
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the Assignor shall not, directly or indirectly, by operation of law or
otherwise, merge, consolidate, or otherwise combine with, any person or entity, unless
this
Assignment and all obligations hereunder are assumed by such person or entity
pursuant to such merger, consolidation or other combination;
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(j)
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the Assignor shall comply with and enforce all provisions of its Trust
Documents;
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(k)
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Following an Event of Default (as defined in the Loan Agreement), the Assignor
shall accept written instructions from the Collateral Agent regarding the disposition
of the Life Policy and any other collateral or proceeds covered thereby, including
instructions to assign ownership of the Life Policy to the Lender or any third party
engaged to dispose of the collateral, or to dispose of the collateral in a commercially
reasonable fashion or as otherwise directed in writing by the Collateral Agent; and
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(1)
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the Assignor shall not take any action under the Life Policy without the
written consent of the Lender or Collateral Agent, and agrees to take such actions with
respect to the Life Policy as the Lender or Collateral Agent may reasonably request in
writing.
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7.
TERMINATION
. Upon the final and irrevocable payment and satisfaction in full of all of
the Obligations, this Assignment and the security interests created hereunder shall automatically
terminate.
8.
LIMITED POWER OF ATTORNEY; STANDARD OF CARE
.
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(a)
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The Assignor hereby irrevocably constitutes and appoints the Collateral Agent
and any officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place and
stead of such Assignor and in the name of such Assignor or in its own name, from time
to time at the Collateral Agents discretion, for the limited purpose of carrying out
the terms of this Assignment, to take any and all appropriate action and to execute and
deliver any and all documents and instruments that the Collateral Agent may deem
necessary or desirable to accomplish the purposes of this Assignment and to effectuate
any right assigned to the Collateral Agent under this Assignment (including, without
limitation, the right to transfer or direct the transfer of the Life Policy or the
proceeds thereof to the Collateral Agent upon the sole signature of the Collateral
Agent) or Lender under the Promissory Note, as the case may be; provided, however, that
nothing in this Assignment shall obligate the Collateral Agent to protect the interests
of the Assignor or any other person or entity in or under the Life Policy.
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(b)
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The Assignor hereby ratifies, to the extent permitted by law, all that any said
attorney shall lawfully do or cause to be done by virtue hereof. The power of attorney
granted pursuant to this Assignment, being coupled with an interest, shall be
irrevocable until the Obligations are indefeasibly paid in full (in the case of payment
obligations) and otherwise satisfied and discharged.
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(c)
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The powers conferred on the Collateral Agent pursuant to this Section 8 are
solely to protect the Collateral Agents interests in the Life Policy and shall not
impose
any duty upon the Collateral Agent to exercise any such powers. For the avoidance of
doubt, nothing herein shall obligate the Collateral Agent to take any
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action with
respect to the Life Policy, including, without limitation, selling, transferring or
disposing of the Life Policy, and the Collateral Agent shall have the right to do or
cause to be done all things necessary, proper or advisable to maintain the Life
Policy in full force in accordance with its terms.
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(d)
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The Collateral Agents sole duty with respect to the Life Policy shall be to
use reasonable care in the custody and preservation of any documents or instruments in
the Collateral Agents possession evidencing such Life Policy in the same manner as the
Collateral Agent deals with similar property for its own account. The Collateral Agent
shall not be responsible to the Assignor except for the Collateral Agents own gross
negligence or willful misconduct.
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(e)
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The Collateral Agent shall not be responsible for filing any financing or
continuation statements or recording any documents or instruments in any public office
at any time or times or otherwise perfecting or maintaining the perfection of any
security interest in the Collateral. The Collateral Agent shall not be liable or
responsible for any loss or diminution in the value of any of the Collateral, by reason
of the act or omission of any carrier, forwarding agency or other agent or bailee
selected by the Collateral Agent in good faith. The Collateral Agent shall not be
responsible for the existence, genuineness or value of any of the Collateral or for the
validity, perfection, priority or enforceability of the liens in any of the Collateral,
whether impaired by operation of law or by reason of any action or omission to act on
its part hereunder, except to the extent such action or omission constitutes gross
negligence, bad faith or willful misconduct on the part of the Collateral Agent, for
the validity or sufficiency of the Collateral or any agreement or assignment contained
therein or for the payment of taxes, charges, assessments or liens upon the Collateral
or otherwise as to the maintenance of the Collateral.
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9.
NO WAIVER
. Any forbearance or failure or delay by the Collateral Agent in exercising any
right, power or remedy hereunder shall not be deemed to be a waiver of such right, power or remedy,
and any single or partial exercise of any right, power or remedy shall not preclude the further
exercise thereof. The Collateral Agent may take or release other security, may release any party
primarily or secondarily liable for any of the Obligations, may grant extensions, renewals or
indulgences with respect to the Obligations, or may apply to the Obligations in such order as the
Collateral Agent shall determine the proceeds of the Life Policy hereby assigned or any amount
received on account of the Life Policy by the exercise of any right permitted under this
Assignment, without resorting or regard to other security or any guaranty. No waiver of any
provision hereof shall be effective unless it shall be in writing and signed by the Collateral
Agent.
10.
MISCELLANEOUS
.
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(a)
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Counterparts
. This Assignment may be executed in any number of counterparts,
each of which shall constitute an original and together shall constitute one and the
same instrument.
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(b)
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Assignment
. This Assignment shall be binding upon the Assignor and its
successors and assigns and shall inure to the benefit of the Collateral Agent and its
successors and assigns.
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(c)
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Arbitration
. Any claims, questions or controversies arising under or related to
in any manner whatsoever this Assignment or the transactions contemplated hereunder
including, but not limited to, any challenge by the Assignor, the Insured, or the
Insureds estate or subrogees (each, a Assignor Party) against the Collateral Agent,
Lender or any other party with a participation in the loan evidenced under the
Promissory Note (each, an Interested Party, notwithstanding the fact such parties are
not signatories hereto) (a Dispute) shall be submitted to arbitration conducted
before the American Arbitration Association (the AAA). Any Assignor Party or any
Interested Party is hereby authorized to invoke this arbitration provision, and any
judgment with respect to any award rendered pursuant to this arbitration provision may
be entered in any court of competent jurisdiction. Such arbitration will be conducted
under the rules of the AAA and the laws of the State of [JURISDICTION] and will be
conducted in [TRUST-CITY-STATE]. Each Assignor Party understands that claims submitted
to arbitration are not heard by a jury and are not subject to the rules governing the
courts. Each Assignor Party further agrees that no claim may be brought as a class
action, and that no Assignor Party has the right to act, nor shall they attempt to act,
as a class representative or participate as a member of a class of claimants with
respect to any claim related to or arising out of this Assignment. To the extent that
this arbitration provision is held unenforceable, the Assignor Parties: (a) irrevocably
submit to the exclusive jurisdiction of any federal or state court sitting in
[TRUST-CITY-STATE] in respect of any action or proceeding arising under or related to
in any manner whatsoever this Assignment, (b) agree that this Assignment and the
transactions contemplated hereunder shall in all respects be governed by and construed
in accordance with the laws of the State of [JURISDICTION] (without reference to
conflicts of laws provisions); provided, however, that the rights, protections and
immunities of the Collateral Agent shall be governed under the laws of the State of
[JURISDICTION]; and (c) HEREBY WAIVE THE RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY
ON ANY CLAIM, COUNTERCLAIM, SETOFF, DEMAND, ACTION OR CAUSE OF ACTION (I) ARISING OUT
OF OR IN ANY WAY RELATED TO THIS ASSIGNMENT OR (II) IN ANY WAY IN CONNECTION WITH OR
PERTAINING OR RELATED TO OR INCIDENTAL TO ANY DEALINGS OF THE PARTIES TO THIS
ASSIGNMENT IN CONNECTION WITH THIS ASSIGNMENT OR THE EXERCISE OF ANY PARTYS RIGHTS AND
REMEDIES UNDER THIS ASSIGNMENT OR OTHERWISE, OR THE CONDUCT OR THE RELATIONSHIP OF THE
PARTIES HERETO, IN ALL OF THE FOREGOING CASES WHETHER NOW EXISTING OR HEREAFTER ARISING
AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. The Assignor Parties hereby agree
and acknowledge that this provision is intended to encompass any Dispute between any
Assignor Party and any Interested Party. The parties hereby expressly agree, and each
Interested Party in receipt of this Assignment acknowledges that the arbitration
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provision in this Section 10(c) shall not apply to the trustee of the Assignor in
respect of its rights, duties, protections and immunities under the Trust Documents.
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(d)
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Inconvenient Forum
. The Assignor hereby irrevocably waives, to the fullest
extent that it may legally do so, the defense of an inconvenient forum to the
maintenance of any action or proceeding arising out of or related to this Assignment or
any other Financing Documents. The Assignor further agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
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(e)
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Disclaimers
. THE ASSIGNOR ACKNOWLEDGES AND AGREES THAT THE COLLATERAL AGENT HAS
NOT AND WILL NOT PROVIDE ANY ADVICE OR RECOMMENDATIONS IN CONNECTION WITH THIS
ASSIGNMENT, INCLUDING, WITHOUT LIMITATION, ADVICE OR RECOMMENDATIONS RELATING TO ESTATE
OR FINANCIAL PLANNING, TAXES OR ACCOUNTING OR LEGAL MATTERS. THE ASSIGNOR HAS HAD THE
OPPORTUNITY TO BE REPRESENTED BY ITS OWN COMPETENT COUNSEL IN CONNECTION WITH THE
NEGOTIATION AND EXECUTION OF THIS ASSIGNMENT. THE UNDERSIGNED ACKNOWLEDGES THAT BEFORE
SIGNING THIS ASSIGNMENT, THE ASSIGNOR HAS READ THIS ASSIGNMENT IN ITS ENTIRETY AND
RECEIVED A LEGIBLE, COMPLETELY FILLED-IN COPY OF THIS ASSIGNMENT.
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(f)
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Notices
. All demands, notices and communications hereunder will be in writing
and will be deemed to have been duly given if personally delivered at, mailed by
certified mail, return receipt requested, mailed by a nationally recognized overnight
courier or sent via facsimile or email, to each applicable party at the address
specified below or, as to any of such parties, at such other address or facsimile
number as will be designated by such party in a written notice to the other party:
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If to the Assignor:
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[TRUST-NAME]
c/o [TRUSTEE-NAME], [TRUST-ADDRESS], [TRUST-
CITYSTATE] [TRUST-ZIP]
Telephone:
Facsimile:
10
If to the Lender:
[LENDER-NAME]
701 Park of Commerce Blvd, Ste 301
Boca Raton, FL 33487
Facsimile: 1.561.995.4201
If to the Collateral Agent:
[COLLATERAL-AGENT]
[COLLATERAL-AGENT-STREET-ADDRESS]
[COLLATERAL-AGENT-CITY-STATE-ZIP]
Attention:
Telephone:
Facsimile:
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(g)
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Severability
. In the event any one or more of the provisions contained in this
Assignment shall for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any other
provision hereof, and this Assignment shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
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(h)
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Trustee Recourse
. It is expressly understood and agreed by the parties hereto
that (i) this Assignment is entered into by [
TRUSTEE-NAME
], not individually or
personally, but solely as trustee of the Assignor in the exercise of the powers and
authority conferred and vested in [
TRUSTEE-NAME
] by the Assignor and (ii) in no event
shall [
TRUSTEE-NAME
], in its individual capacity, have any liability for the
representations, warranties, covenants, agreements or other obligations of the Assignor
hereunder, as to all of which recourse shall be had solely to the assets of the
Assignor.
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[
Signature Page Follows]
11
IN WITNESS WHEREOF
, the undersigned Assignor has executed this Assignment in favor of the
Lender as of the date first written above.
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ASSIGNOR:
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[TRUST-NAME]
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By:
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, solely as Trustee
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Name: [TRUSTEE-NAME]
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Title: TRUSTEE
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STATE OF
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)
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):
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COUNTY OF
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)
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Sworn to (or affirmed) and subscribed before me this ___day of
by
[TRUSTEE-NAME]
,
who is personally known to me or who produced
as identification.
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(Print, type, or stamp commissioned
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Name of Notary Public)
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My Commission Expires:
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12
IN WITNESS WHEREOF
, the undersigned Lender has accepted and acknowledged this Assignment as of
the date first written above.
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LENDER:
[LENDER-NAME]
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By:
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Name:
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Title:
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IN WITNESS WHEREOF
, the undersigned Collateral Agent has accepted and acknowledged this
Assignment as of the date first written above.
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COLLATERAL AGENT:
[COLLATERAL-AGENT]
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By:
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[COLLATERAL AGENT]., solely as Collateral Agent
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Name:
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Title:
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13
Consent and Acknowledgment
The undersigned hereby:
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(a)
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acknowledges its receipt of the attached Assignment of Life
Insurance Policy as Collateral (the Assignment) with respect to the Life
Policy (as defined in such Assignment);
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(b)
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confirms that it has recorded in its books and records, with
respect to the Life Policy, the Assignment of such Life Policy to the
Collateral Agent (as defined in the Assignment) in a manner sufficient to cause
the Assignment to the Collateral Agent to be recognized in its books and
records;
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(c)
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confirms that it has not previously received notice of any
other assignment of or security interest in the Life Policy except for
[describe any known prior assignments], securing the Loan Agreement (as defined
in the Assignment) and Promissory Note (as defined in the Assignment); and
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(d)
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agrees to pay all amounts/death benefits due under the Life
Policy directly to the Collateral Agent.
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[(Name of) Life Insurance Company is not a party to the Assignment and assumes no responsibility
for the sufficiency or validity of the Assignment.]
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[Name of ] L114E, INSURANCE COMPANY
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By:
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Signature
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Print Name
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Title:
Date:
Assigned Life Policy:
Policy Owner:
Policy Number:
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Contacts For [INSURED]
Contact # 1 Name:
Relationship:
Mailing Address:
City, State, Zip:
Phone Number:
Contact # 2 Name:
Relationship:
Mailing Address:
City, State, Zip:
Phone Number:
Contact # 3 Name:
Relationship:
Mailing Address:
City, State, Zip:
Phone Number:
AUTHORIZATION FOR USE AND/OR DISCLOSURE OF HEALTH INFORMATION
I,
, hereby voluntarily authorize the disclosure of information from my health record
including protected health information (PHI) as defined in the HIPAA Privacy Regulations. I
understand that the disclosing health care provider will not condition treatment, payment,
enrollment, or eligibility for benefits on my providing or refusing to provide this authorization.
I hereby authorize the Disclosing Party:
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Name of Disclosing Party
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Address
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City
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State
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Zip Code
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to disclose to Imperial Premium Finance, LLC, 701 Park of Commerce Blvd, Ste. 301, Boca Raton, FL
33487, who may provide the information to the companies listed below, or its reinsurers, any
insurance support organizations, and those persons authorized to represent them who may need to
collect information on me in regard to proposed coverage, records and information pertaining to:
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Allianz Life of North America
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Imperial Premium Finance, LLC
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Presidential Life Ins. Co.
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AIG
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ING
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Principal Insurance
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American General Life Ins. Co.
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Jefferson Pilot Life Ins. Co.
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Prudential Life Ins. Co.
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American General Life Ins. Co. of NY
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John Hancock Life Ins. Co.
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Security Life of Denver
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American National
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Lexington Insurance Company
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State Life Ins. Co.
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AXA
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Lincoln Benefit Life Ins. Co.
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Sun Life Ins. Co.
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First Colony Life Ins. Co.
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Massachusetts Mutual Life Ins. Co.
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The Producers Group
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General American Life Ins. Co.
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Metropolitan Life Ins. Co.
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TransAmerica Ins. Co.
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Guarantee Trust Life Ins. Co.
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MONY
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Transamerica Occidental
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Genworth Financial
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Nationwide
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United of Omaha Life Ins. Co.
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IBU, Inc.
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New York Life Insurance Co.
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US Financial Life
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North American Co. for Life &
Health
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US Life Ins. Co.
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National Western
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West Coast Life Ins. Co.
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PDC Retrievals
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Name of Patient/Member (list other names used)
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Medical Record Number
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Date of Birth
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Address
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Social Security Number
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Telephone Number
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DURATION:
This authorization shall become effective immediately and shall remain in effect for one
year from the date of signature unless a different date is specified here
(date).
REVOCATION:
This authorization is also subject to written revocation by the Patient/Member at any
time. The written revocation will be effective upon receipt, except to the extent that the
disclosing party or others have acted in reliance upon this authorization and such revocation can
be made to Imperial Premium Finance, LLC and the Health Records Department of the Disclosing Party
in writing at the addresses stated above.
REDISCLOSURE:
I understand that information disclosed by this authorization, except for Alcohol and
Drug Abuse as defined in 42 CFR Part 2, may be subject to re-disclosure by the recipient and may no
longer be protected by the Health Insurance Portability and Accountability Act Privacy Rule (45 CFR
Part 164) and the Privacy Act of 1974 (5 USC 552a).
SPECIFY RECORDS:
Check the line, initial and/or sign which type of information is to be disclosed:
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Medical Information (Entire Record)
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Psychiatric/Mental Health X EKG
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þ
Progress Notes
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HIV/AIDS Related Treatment
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Alcohol/Drug Abuse Treatment/Referral
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Billing Statements
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Genetic Records
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Other Health Information (Specify)
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Specify the date of records to be disclosed:
Any and all available .
The recipient may use the health information authorized on this form for the following
purposes:
at the request of an individual including; but not limited to. insurance application and
related business
.
I understand that I may revoke this authorization in writing submitted at any time to the Health
Records Department of the Disclosing Party except to the extent that action has been taken in
reliance on this authorization. If this authorization was obtained as a condition of obtaining
insurance coverage or a policy of insurance, other law may provide the insurer with the right to
contest a claim under the policy. A copy of this authorization is valid as the original and the
Member/Patient and I have received a signed copy of this authorization.
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Signature of Patient/Member
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Date
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Signature of Personal Representative
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Date
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(State Relationship to Patient/Member)
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2
HOLD HARMLESS AGREEMENT
[TRUST-NAME]
The undersigned Grantor and each undersigned Beneficiary release and agree to hold harmless
the Insurance Agent [AGENT], the Trustee of the [TRUST-NAME], (the Trust), for any and all
actions, acts or inactions of the Insurance Agent and the Trustee in connection with the issuance
and/or maintenance of any insurance policy(ies) acquired or held by the Trust, the administration
of the Trust or any other matters related thereto, except for dishonesty or intentional fraud, and
understand and agree that in the event the Trust assets are sold or liquidated on account of any
default under any loan agreement or other indebtedness (Policy Loan) there are no guarantees as
to the amount of the net proceeds therefrom except that the Trust shall pay to the Beneficiaries
the amounts, if any, in excess of full satisfaction under any loan agreement or indebtedness in the
event of (a) the Grantors death or (b) the termination of the Trust. NOTWITHSTANDING, THE GRANTOR
AND EACH BENEFICIARY UNDERSTAND THAT THERE ARE NO REPRESENTATIONS OR GUARANTEES OF ANY KIND THAT
THERE WILL BE ANY FUNDS TO DISTRIBUTE TO THE BENEFICIARIES AFTER THE PAYMENT OF ANY INDEBTEDNESS.
The Grantor and each Beneficiary understand that neither the Trustee nor the Insurance Agent
nor any other person is rendering legal or tax advice by virtue of the Trust or acquisition or
financing of the life insurance policy, and that the Grantor and each Beneficiary are urged to
consult their own advisors,
AS THE TRUST IS NOT A COMPLETE ESTATE PLANNING DOCUMENT
.
The Grantor and each Beneficiary also represent that the only understanding, obligations and
representations of any person in connection with the Trust and/or the acquisition and/or financing
of the life insurance policy that are of any validity, force or effect are those in writing and
that no oral statement or representation to the contrary is of any force or effect, and there are
no other terms, conditions, or understandings whatsoever of any kind or nature concerning the
purchase, financing, or acquisition of any life insurance policy, the subject matter of the Trust,
and that any other such term, condition, or understanding is of no force or effect.
The Grantor and each Beneficiary also represent that the insurance applied for and owned or to
be owned by the Trust was applied for and/or obtained not for investment but rather for estate
preservation purposes and the ability to leverage the money of Lender will allow the Trust to
purchase the Policy that will have a high death benefit option. This will (a) allow Grantor and the
representative of Grantors estate the ability to protect against significant estate tax
consequences that Grantors estate may face given the current state of the law, (b) will provide
Grantors estate with certain protection in the event estate tax liability should arise, and (c)
permit Grantor to be able to protect the Beneficiaries from certain potential expenses that they
would otherwise sustain without the liquidity that the Policy will offer.
[Signature pages follow.]
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IN WITNESS WHEREOF the Grantor and the Beneficiary(ies) have executed this Hold Harmless and
Disclosure Agreement on this ___day of
, ___.
STATE OF
COUNTY OF
This day personally appeared before me, the undersigned authority in and for said County and
State, the within named [INSURED] (Grantor) who acknowledged signing and delivering the above and
foregoing
Hold Harmless Agreement
on the day and date therein mentioned as a free and
voluntary act and deed and for the purpose therein expressed.
GIVEN under my hand and official seal of office this the ___day of
,
.
Notary Public
My Commission Expires:
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BENEFICIARY:
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[Beneficiary]
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STATE OF
COUNTY OF
This day personally appeared before me, the undersigned authority in and for said County and
State, the within named
[BENEFICIARY] (Beneficiary)
who acknowledged signing and delivering the
above and foregoing
Hold Harmless Agreement
on the day and date therein mentioned as a free
and voluntary act and deed and for the purpose therein expressed.
GIVEN under my hand and official seal of office this the ___day of
,
.
Notary Public
My Commission Expires:
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GUARANTY
THIS GUARANTY
is entered into as of [DATE] by the undersigned (the
Guarantor
), in favor of and
for the benefit of [LENDER-NAME], a Florida limited liability company (which for all purposes of
this Guaranty shall include any assignees, whether or not by operation of law, and successors
thereto, the
Lender
).
RECITALS
Pursuant to a loan agreement between the Lender and [TRUST-NAME] (Trust or Borrower) dated
[DATE] (the Loan Agreement), the Lender has made an initial loan in the amount of
[FIRST-YEAR-PREMIUM] (the Loan) to the Trust as evidenced by the Promissory Note dated [DATE] (as
amended, supplemented or modified from time to time, the Note). The proceeds of the Loan were
used to pay or reimburse for the premiums due under life insurance policy number [POLICY-NUMBER]
issued by [INSURER] (the Insurer) on the life of [INSURED] in the face amount of
[NET-DEATH-BENEFIT] (the Policy).
The Guarantor, as grantor of the Borrower, acknowledges and agrees that the Guarantor has received
and will receive direct and indirect benefits from the extension of the Loan made to the Borrower.
Any capitalized terms used herein and not otherwise defined shall have the definitions accorded to
such terms in the Loan Agreement.
1.
Conditions to Liability
. Notwithstanding anything herein to the contrary, this
Guaranty shall result in liability to the Guarantor only in the event that any of the following
shall occur (each of which shall be identified as a
Default
):
(a) Any act (or omission to act) of fraud or willful misconduct on the part of the Guarantor,
or any other action or inaction by the Guarantor, that impairs the Lenders ability to be repaid
under the Note or otherwise under the Loan;
(b) Any act (or omission to act) of the Guarantor that directly or indirectly impairs the
Lenders rights to the Policy as collateral under the terms of the Loan, the Note, any Financing
Document and/or the Collateral Assignment;
(c) Any failure of the Borrower to use the proceeds of the Loan exclusively as set forth in
the Note, the Financing Documents or any other documents related to the Loan;
(d) Any act by the Borrower or the Guarantor to transfer, amend, change ownership of, cancel,
convey, sell or assign the Policy or any interest therein without the express written consent of
the Lender;
(e) Any failure to act by the Borrower or the Guarantor that results, directly or indirectly,
in the transfer of the Policy or any interest therein or any amendment, change of ownership,
cancellation, conveyance, sale or assignment thereof, except with the express written consent of
the Lender;
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(f) [Any default in payment of, or failure to pay any, interest, principal or other amounts
which become due under the Note or Loan;] [OPTIONAL]
(g) The breach of any representation, warranty or covenant by the Guarantor contained in the
Collateral Assignment or in any Financing Document; and
(h) Any failure of the Borrower, the Guarantor or any beneficiary of the Borrower who directly
or indirectly receives any payment from the Insurer prior to the repayment of the Loan, to pay or
cause to be paid to the Lender all or such portion of such payment necessary to repay the entire
outstanding balance of the Loan and any other outstanding amounts under the Financing Documents,
together with any accrued and unpaid interest thereon and any other charges and expenses payable to
the Lender under the terms of the Note, the Financing Documents and any other documents related to
the Loan.
Upon the occurrence of a Default, the Guarantor hereby irrevocably and unconditionally
guarantees to the Lender, the due and punctual payment when due of all liabilities and all other
amounts outstanding or due to be paid to the Lender under, in connection with or related to, the
Loan and any other agreements entered into with respect thereto (including the Financing
Documents), including but not limited to outstanding principal and accrued and unpaid interest
under the Note, any early termination fees, costs and expenses payable to the Lender (including,
but not limited to, reasonable attorneys fees) in the event of an uncured default under the Loan
or any Financing Document, as well as any and all costs and expenses of the Lender to enforce this
Guaranty (including, but not limited to, reasonable attorneys fees), whether or not (i) due or
owing to, or in favor or for the benefit of, the Lender, or (ii) ARISING OR ACCRUING BEFORE OR
AFTER THE FILING BY OR AGAINST THE GUARANTOR OF A PETITION UNDER THE BANKRUPTCY CODE OR ANY SIMILAR
FILING BY OR AGAINST THE GUARANTOR, AS THE CASE MAY BE, UNDER THE LAWS OF ANY JURISDICTION OR (c)
ALLOWABLE UNDER SECTION 502(b)(2) OF THE BANKRUPTCY CODE (collectively, the
Guaranteed
Obligations
).
Notwithstanding the foregoing, in the event liability under this Guaranty results solely as a
result of a Default as described in Section 1(g), the Guarantors liability shall be limited to
100% of the amount outstanding or due under the Guaranteed Obligations.
2.
Waiver
.
(a) The Guarantor unconditionally and irrevocably waives, to the fullest extent permitted by
applicable law: (i) notice of any of the matters referred to in Section 1 hereof; (ii) all notices
which may be required by statute, rule of law or otherwise to preserve any rights against the
Guarantor hereunder, including, without limitation, notice of the acceptance of this Guaranty, or
the creation, renewal, extension, modification or accrual of the Guaranteed Obligations or notice
of any other matters relating thereto, any presentment, demand, notice of dishonor, protest,
nonpayment of any damages or other amounts payable under any Financing Document; (iii) any
requirement for the enforcement, assertion or exercise of any right, remedy, power or privilege
under or in respect of any Financing Document, including, without limitation, diligence in
collection or protection of or realization upon the Guaranteed Obligations or any part thereof or
any collateral therefor; (iv) any requirement of diligence; (v) any requirement to
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mitigate the damages resulting from a default by the Borrower under the Note or any Financing
Document; (vi) the occurrence of every other condition precedent to which the Guarantor or the
Borrower may otherwise be entitled; (vii) the right to require the Lender to proceed against the
Borrower or any other person liable on the Guaranteed Obligations, to proceed against or exhaust
any security held by the Borrower or any other person, or to pursue any other remedy in the
Lenders power whatsoever; (viii) the right to have the property of the Borrower first applied to
the discharge of the Guaranteed Obligations; (ix) any lack of validity or enforceability in the
Note or any other Financing Document, (x) any exchange or release of, or non-perfection of any
collateral securing, all or any of the Guaranteed Obligations; (xi) any release, amendment or
waiver of or consent to departure from any other guaranty or any document relating to any security
for or in respect of the Guaranteed Obligations; (xii) any other circumstances which might
otherwise constitute a defense available to, or discharge of, the Guarantor; or (xiii) any and all
rights it may now or hereafter have under any agreement or at law or in equity (including, without
limitation, any law subrogating the Guarantor to the rights of the Lender) to assert any claim
against or seek contribution, indemnification or any other form of reimbursement from the Borrower
or any other party liable for payment of any or all of the Guaranteed Obligations for any payment
made by the Guarantor under or in connection with this Guaranty or otherwise.
(b) The Lender may, at its election, exercise any right or remedy it may have against the
Borrower without affecting or impairing in any way the liability of the Guarantor hereunder and the
Guarantor waives, to the fullest extent permitted by applicable law, any defense arising out of the
absence, impairment or loss of any right of reimbursement, contribution or subrogation or any other
right or remedy of the Guarantor against the Borrower, whether resulting from such election by the
Lender or otherwise. The Guarantor waives any defense arising by reason of any disability or other
defense of the Borrower or by reason of the cessation for any cause whatsoever of the liability,
either in whole or in part, of the Borrower to the Lender for the Guaranteed Obligations.
(c) The Guarantor assumes the responsibility for being and keeping informed of the financial
condition of the Borrower and of all other circumstances bearing upon the risk of nonpayment of the
Guaranteed Obligations and agrees that the Lender shall not have any duty to advise the Guarantor
of information regarding any condition or circumstance or any change in such condition or
circumstance. The Guarantor acknowledges that the Lender has not made any representations to the
Guarantor concerning the financial condition of the Borrower. The value of the consideration
received and to be received by the Guarantor is reasonably worth at least as much as the liability
and obligation of Guarantor incurred or arising under this Guaranty and all related papers and
arrangements.
3.
Parties
. This Guaranty shall inure to the benefit of the Lender and its successors,
assigns or transferees, and shall be binding upon the Guarantor and his or her respective heirs,
successors and assigns; provided, that the Guarantor may not delegate or assign any of the
Guarantors duties or obligations under this Guaranty without the prior written consent of the
Lender.
4.
Notices
. All notices and other communications provided for herein shall be in
writing and shall be delivered by hand or overnight courier service, mailed by U.S. mail, certified
with return receipt requested, or sent by telecopy (with confirmed receipt or followed by
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overnight delivery) to the addresses (or telecopy numbers) set forth on the signature pages
hereto. The Guarantor or the Lender may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and other
communications given in accordance with the provisions of this Guaranty shall be deemed to have
been given on the date of receipt or, if mailed, the fifth (5th) business day following the date so
mailed, if earlier, or the next business day if sent by overnight courier.
5.
Right to Deal with the Borrower
. At any time and from time to time, without
terminating, affecting or impairing the validity of this Guaranty or the obligations of the
Guarantor hereunder, the Lender may deal with the Borrower in the same manner and as fully as if
this Guaranty did not exist and shall be entitled, among other things, to grant the Borrower,
without notice or demand and without affecting the Guarantors liability hereunder, such extension
or extensions of time to perform, renew, compromise, accelerate or otherwise change the time for
payment of or otherwise change the terms of indebtedness or any part thereof contained in or
arising under any Financing Document or any other document evidencing Obligations of the Borrower
to the Lender, or to waive any obligation of the Borrower to perform, any act or acts as the Lender
may deem advisable.
6.
Subrogation
. Notwithstanding anything to the contrary contained herein, any and all
rights and claims of the Guarantor against the Borrower or any of its property or against any other
person, arising by reason of any payment by the Guarantor to the Lender pursuant to the provisions,
or in respect, of this Guaranty shall be subordinate, junior and subject in right of payment to the
prior and indefeasible payment in full of the Guaranteed Obligations to the Lender, and until such
time, the Guarantor shall have no right of subrogation, contribution or any similar right and
hereby waive any right to enforce any remedy the Lender may now or hereafter have against the
Borrower, any endorser or any other guarantor of all or any part of the Guaranteed Obligations and
any right to participate in, or benefit from, any security given to the Lender to secure the
Guaranteed Obligations. Any promissory note evidencing such liability of the Borrower to the
Guarantor shall be non-negotiable, shall expressly state that it is subordinated pursuant to this
Guaranty and shall be immediately assigned (with recourse) and delivered to the Lender. All liens
and security interests of the Guarantor, whether now or hereafter arising and howsoever existing,
in assets of the Borrower or any assets securing the Guaranteed Obligations shall be and hereby are
subordinated to the rights and interests of the Lender in those assets until the prior and
indefeasible final payment in full of all of the Guaranteed Obligations to the Lender and
termination of all financing arrangements between the Borrower and the Lender. If any amount shall
be paid to the Guarantor contrary to the provisions of this Section 6 at any time when all the
Guaranteed Obligations shall not have been indefeasibly paid in full, such amount shall be held in
trust for the benefit of the Lender and shall forthwith be turned over in kind in the form received
to the Lender (duly endorsed if necessary) to be credited and applied against the Guaranteed
Obligations, whether matured or unmatured, in accordance with the terms of the Financing Documents
and this Guaranty.
7.
Survival of Representations, Warranties, and Agreements
. All representations,
warranties, covenants and agreements made herein, including representations and warranties deemed
made herein, shall survive any investigation or inspection made by or on behalf of the Lender and
shall continue in full force and effect until all of the obligations of the
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Guarantor under this Guaranty shall be fully performed in accordance with the terms hereof,
and until the payment in full of the Guaranteed Obligations.
8.
GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL
. THIS GUARANTY SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF [JURISDICTION-UC]. THE
GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR
ANY DISTRICT OF [JURISDICTION-UC] AND ANY COURT IN THE STATE OF [JURISDICTION-IX] IN ANY ACTION,
SUIT OR PROCEEDING BROUGHT AGAINST THE GUARANTOR AND RELATED TO OR IN CONNECTION WITH THIS GUARANTY
OR THE TRANSACTIONS CONTEMPLATED HEREBY, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
GUARANTOR HEREBY WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE IN ANY
SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT THE GUARANTOR IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF SUCH COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT
FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER, OR THAT THIS GUARANTY OR ANY
DOCUMENT OR ANY INSTRUMENT REFERRED TO HEREIN OR THE SUBJECT MATTER THEREOF MAY NOT BE LITIGATED IN
OR BY SUCH COURTS. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE GUARANTOR AGREES (I) NOT TO SEEK
AND HEREBY WAIVES THE RIGHT TO ANY REVIEW OF THE JUDGMENT OF ANY SUCH COURT BY ANY COURT OF ANY
OTHER NATION OR JURISDICTION WHICH MAY BE CALLED UPON TO GRANT AN ENFORCEMENT OF SUCH JUDGMENT AND
(II) NOT TO ASSERT ANY COUNTERCLAIM, IN ANY SUCH SUIT, ACTION OR PROCEEDING UNLESS SUCH
COUNTERCLAIM COULD NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE
INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION. THE GUARANTOR AGREES THAT SERVICE OF PROCESS
MAY BE MADE UPON THE GUARANTOR BY CERTIFIED OR REGISTERED MAIL TO THE ADDRESS FOR NOTICES SET FORTH
IN THIS GUARANTY OR ANY METHOD AUTHORIZED BY THE LAWS OF [JURISDICTION-UC]. THE GUARANTOR
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT
OF OR RELATING TO THIS GUARANTY, THE FINANCING DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.
9.
Expenses
. The Guarantor hereby agrees to pay on demand, and to hold the Lender
harmless against liability for, any and all costs and expenses (including, without limitation,
reasonable legal fees, costs and expenses of counsel and fees, costs and expenses incurred in
connection with any bankruptcy proceeding) incurred or expended by the Lender in connection with
the enforcement, amendment, modification or waiver of or preservation of any rights under this
Guaranty, and the collection of amounts payable hereunder, and until so paid, such fees, costs,
disbursements and expenses shall be added to, and constitute, Guaranteed Obligations.
5
10.
Further Assurances
. The Guarantor hereby covenants and agrees to execute and
deliver to the Lender such additional agreements, instruments and documents as the Lender may
reasonably request to give effect to the obligations of the Guarantor under this Guaranty.
11.
Miscellaneous
.
If any term of this Guaranty or any application hereof shall be invalid or unenforceable, the
remainder of this Guaranty and any other application of such term shall not be affected thereby.
Any term of this Guaranty may be amended, waived, discharged or terminated only by an
instrument in writing signed by the Guarantor and the Lender. No notice to or demand on the
Guarantor shall be deemed to be a waiver of the obligations of the Guarantor or of the right of the
Lender to take further action without notice or demand as provided in this Guaranty. No course of
dealing between the Guarantor and the Lender shall change, modify or discharge, in whole or in
part, this Guaranty or any obligations of the Guarantor hereunder. No waiver of any term, covenant
or provision of this Guaranty shall be effective unless given in writing by the Lender and if so
given shall only be effective in the specific instance in which given.
The headings in this Guaranty are for purposes of reference only and shall not limit or define
the meaning hereof.
No delay or failure of the Lender in exercising any right, power or privilege hereunder or
under the Financing Documents, shall affect such right, power or privilege nor shall any single or
partial exercise thereof or any abandonment or discontinuance of steps to enforce such a right,
power or privilege preclude any further exercise thereof or of any other right, power or privilege.
The Lenders rights and remedies hereunder are cumulative and not exclusive of any rights or
remedies which it would otherwise have. Any waiver, permit, consent or approval of any kind or
character of the Lender concerning any breach or default by the Guarantor under this Guaranty must
be in writing and specifically described.
All payments made by the Guarantor hereunder to the Lender in respect of the Guaranteed
Obligations shall be made to the Lender in U.S. dollars and immediately available funds at an
account designated by the Lender, or to such other place as the Lender may hereafter specify in
writing.
The execution and delivery of this Guaranty shall not supersede, terminate, modify or
supplement in any manner any other guaranty previously executed and delivered to the Lender by the
Guarantor and no release or termination of this Guaranty shall be construed to terminate or release
any other guaranty unless such other guaranty is specifically referred to in any such termination.
The Guarantors obligations hereunder shall be the personal obligations of such Guarantor.
This Guaranty is a continuing guaranty and shall remain in full force and effect without
regard to any defenses or counterclaims that the Guarantor or the Borrower may assert on the debt
underlying this Guaranty, including, but not limited to, failure of consideration,
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breach of warranty, fraud, statute of frauds, bankruptcy, statute of limitations, lender
liability, accord and satisfaction and usury until (A) all of the Guaranteed Obligations shall have
been indefeasibly paid in full and (B) Borrower shall have indefeasibly satisfied all of its
Obligations under the Note and the other Financing Documents and notice thereof has been provided
by Lender to the Guarantor.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, the undersigned have executed and delivered this Guaranty as of the day and
year first above written.
[INSURED] signature
Address:
Phone:
Fax:
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INSURED DISCLOSURE STATEMENT,
REPRESENTATIONS AND WARRANTIES, AND CONSENT
IMPORTANT
: PLEASE READ THIS DISCLOSURE STATEMENT AND CONSENT AND CONSULT WITH YOUR ADVISORS
BEFORE SIGNING THIS OR ANY OF THE LIFE INSURANCE FINANCING ARRANGEMENT DOCUMENTS
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INSURED:
INSURED S
SPOUSE:
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[INSURED],
[INSURED-ADDRESS], [INSURED-CITY-STATE]
[INSURED-SPOUSE], [INSURED-ADDRESS], [INSURED-CITY-STATE]
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GRANTOR:
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[INSURED],
[INSURED-ADDRESS], [INSURED-CITY-STATE]
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LIFE INSURANCE TRUST:
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[TRUST-NAME], a [JURISDICTION] trust
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TRUSTEE OR LIFE INSURANCE TRUSTEE:
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[TRUSTEE-NAME], [TRUST-ADDRESS], [TRUST-CITY-STATE] [TRUST-ZIP]
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[LENDER-NAME]
(the
Lender
) is offering a life insurance premium financing arrangement
(the
Financing Arrangement
) which provides trusts settled by individuals, such as the
Grantor, with financing to purchase and maintain a life insurance policy (the
Policy
) on
the life of certain qualifying individuals, such as the Insured. To obtain financing under the
Financing Arrangement, the Insured or Grantor must settle (or have settled) a life insurance trust
(the
Life Insurance Trust
or
Trust
) under
[JURISDICTION]
law and the Insured
must consent (or have consented) to the Life Insurance Trusts purchase of the Policy. The Grantor
must have an insurable interest in the life of the Insured and all beneficiaries of the Life
Insurance Trust must be individuals or tax-exempt charities with an insurable interest in the life
of the Insured or an estate planning vehicle, all of the owners or beneficiaries of which have an
insurable interest in the life of the Insured.
In order to participate in the Financing Arrangement, the Trust will be required to execute a Loan
Application and Agreement (the
Loan Agreement
) and a Promissory Note in favor of the
Lender. Pursuant to the Loan Agreement, the Lender will, subject to the terms, provisions and
conditions of the Loan Agreement, make an advance of funds to, or for the benefit of, the Trust for
the purpose of funding premiums under the Policy. The obligations of the Trust under the Loan
Agreement may be secured by a collateral assignment of the Life Insurance Trusts interest in the
Policy under a collateral assignment agreement between the Trust and the Collateral Agent (the
Collateral Assignment Agreement
). The obligations under the Loan Agreement will bear
periodic interest at a
[FIXED-FLOATING]
subject to a minimum interest rate of nine percent (9%) (in
the case of a floating rate) and will be due and payable (i) one (1) Business Day after payment of
any proceeds of the Policy, and (ii) any other date that the principal and interest shall become
due and payable in full under the Loan Agreement, whether at the scheduled maturity under the
Promissory Note, by acceleration, notice of prepayment, or otherwise. The Trust may
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pre-pay the Loan (including any accrued interest), in full but not in part, without penalty other
than the payment of the Yield Maintenance Premium in some circumstances, as provided under the Loan
Agreement.
Capitalized terms used but not defined herein shall have the meanings assigned thereto in the Loan
Agreement.
Each of the following are events of default under the Loan Agreement and Financing Documents:
Payment Default
. Trust fails to make any payment within three (3) Business Days after the
same becomes due and payable under the Loan Agreement, the Promissory Note or any other
Financing Document.
Other Defaults
. Trust fails to comply with or to perform any other term, obligation,
covenant or condition contained in the Promissory Note, the Loan Agreement or in any of the
other Financing Documents or to comply with or to perform any term, obligation, covenant or
condition contained in any other agreement between Lender and Trust or a default occurs
under the Promissory Note, Loan Agreement, Security Agreement or any other Financing
Document.
False Statements. Any warranty
, representation or statement made or furnished to Lender by
the Trust, the Insured or on Trusts behalf under the Promissory Note, the Loan Agreement or
any other Financing Document is false or misleading in any material respect, either now or
at the time made or furnished or becomes false or misleading at any time thereafter.
Related Agreements
. The Policy, Promissory Note, Loan Agreement, Security Agreement or any
other Financing Document ceases to be in full force and effect (including failure of any
collateral document to create a valid and perfected security interest or lien) at any time
and for any reason; the Trust becomes a revocable trust, contests the validity or
enforceability of any Financing Document or denies that it has any further liability under
any Financing Document to which it is a party, or cancels or terminates, or attempts to
cancel or terminate, the Policy; or the Insurer contests the Policy based on the Trust
lacking an insurable interest in the life of the Insured.
Indebtedness, Creditor or Forfeiture Proceedings
. Any garnishment of any of Trusts
accounts, attachment, lien, levy, additional encumbrance or additional security interest
being placed upon any of the Collateral, or any commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any other method, by
any creditor of Trust or by any governmental agency against any Collateral, and which is not
discharged in full within one (1) day of the placement thereof. However, this Event of
Default shall not apply if there is a good faith dispute by the Trust as to the validity or
reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and
if the Trust gives Lender written notice of the creditor or forfeiture proceeding and
deposits with Lender monies or a surety bond for the
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creditor or forfeiture proceeding, in an amount determined by Lender, in its sole
discretion, as being an adequate reserve or bond for the dispute.
Insolvency or Default of Trust
. The Trust is: (i) dissolved, liquidated or terminated; (ii)
is unable to pay its debts as they mature; (iii) makes an assignment for the benefit of
creditors; (iv) is bankrupt or insolvent; (v) seeks appointment of, or becomes the subject
of an order appointing, a trustee, conservator, liquidator or receiver as to all or part of
its assets; (vi) commences, approves or consents to, or is the debtor in, any case or
proceeding under any bankruptcy, reorganization or similar law, and in the case of an
involuntary case or proceeding, such case or proceeding is not dismissed thirty (30) days
following its commencement; (vii) is the subject of an order for relief in an involuntary
case under federal bankruptcy law; (viii) the Trust defaults under any loan, extension of
credit, security agreement, purchase or sales agreement, or any other agreement, in favor of
any other creditor or person that may materially affect any of Trusts property or Trusts
ability to repay the Promissory Note or perform Trusts Obligations under the Promissory
Note, the Loan Agreement or any of other Financing Documents; or (ix) Trust violates any
Law.
Insolvency or Default of Insured or Guarantor
. (i) The Insured or any Guarantor makes an
assignment for the benefit of creditors; (ii) The Insured or any Guarantor is adjudicated a
bankrupt or insolvent; (iii) The Insured or any Guarantor seeks appointment of, or becomes
the subject of an order appointing, a trustee, conservator, or receiver as to all or part of
his assets; (iv) The Insured or any Guarantor commences, approves or consents to, or is the
debtor in, any case or proceeding under any bankruptcy or similar law and, in the case of an
involuntary case or proceeding, such case or proceeding is not dismissed thirty (30) days
following its commencement; (v) The Insured or any Guarantor is the subject of an order for
relief in an involuntary case under federal bankruptcy law; (vi) Trust defaults under any
loan, extension of credit, security agreement, purchase or sales agreement, or any other
agreement, in favor of any other creditor or person that may materially affect any of
Trusts property or Trusts ability to repay the Obligations; or (vii) any Guarantor
defaults under the terms of the Personal Guaranty.
Events Affecting Guarantor
. Any of the preceding events occurs with respect to any Guarantor
of any of the indebtedness under the Promissory Note or any Guarantor dies or becomes
incompetent, or revokes or disputes the validity of, or liability under, any guaranty of the
indebtedness evidenced by the Promissory Note; in the event of a death, Lender, at its
option, may, but shall not be required to, permit the Guarantors estate to assume
unconditionally the obligations arising under the guaranty in a manner satisfactory to
Lender, and, in doing so, cure any Event of Default.
Adverse Change
. A material adverse change occurs in Trusts financial condition, or Lender
believes the prospect of payment or performance of the Obligations is materially impaired.
Cure Provisions
. Other than as set forth in the preceding clauses of this Section, failure
by the Trust or Beneficiary, as applicable, to perform in any material respect any of its
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obligations under the Promissory Note, Loan Agreement, Security Agreement or any other
Financing Document to which either is a party if such failure is not remedied on or prior to
the fifteenth (15th) day after written notice of such failure is given to the Trust or the
Beneficiary, respectively, by the Lender.
In connection with, and as a condition precedent to the Trust obtaining a loan from the Lender in
connection with the Financing Arrangement, settlement of the Trust and the undersigned Grantor,
Insured and, if as of the date hereof the Insured is lawfully married, the Insureds
Spouse
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, do each hereby acknowledge, represent, warrant, covenant and agree, jointly and
severally, to the following:
1.
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The. Grantor, the Insured and the Insureds Spouse with their advisors which they deem
appropriate (including, for example, attorneys, tax advisors and accountants), have read and
understand the terms of each Financing Arrangement Document, including, without limitation,
this Insured Disclosure Statement, Representations and Warranties, and Consent (Disclosure
Statement), any credit application, the Trust Agreement for the Life Insurance Trust, the
Loan Agreement, the Promissory Note, the Collateral Assignment, the Authorization for
Disclosure of Protected Health Information and the Authorization and Direction to Provide
Death Certificate (collectively, the
Financing Arrangement Documents
). The Insured
has specifically received appropriate legal and tax advice regarding the form, substance and
drafting of the Trust Agreement for the Life Insurance Trust.
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2.
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The terms of the Financing Arrangement Documents are fair and reasonable to the Life
Insurance Trust, the Insured and the Insureds Spouse.
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3.
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The initial contribution of the Insured, if any, to the Life Insurance Trust constitutes the
Insureds separate property and does not constitute the community property or quasi-community
property of the Insured and the Insureds Spouse. The Insured and the Insureds Spouse hereby
agree to execute any additional documentation legally required to commute such property to the
separate property of the Insured.
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4.
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The Insured is financially sophisticated and, individually or together with the Insureds
Spouse, has a net worth of at least
[NET-WORTH]
. The Insured formed and is the sole grantor of
the Life Insurance Trust.
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5.
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There may be federal, state or local income, gift or estate tax effects of participation in
the Financing Arrangement to the Grantor, the Insured, the Insureds Spouse, the
beneficiary(ies) of the Life Insurance Trust (Beneficiary) and the Life Insurance Trust.
Participation in the Financing Arrangement, and termination of participation, could increase
the taxable income, taxable gifts or taxable estate of a participant including the Grantor and
Beneficiary. The Grantor, the Insured and the Insureds Spouse recognize that if the Policy is
not held to maturity and is instead surrendered to the issuer or sold on the secondary market,
any amounts received in excess of the tax basis or possibly the fair market value, if lower,
of the Policy will be taxable income to one or more of the
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If the Insured is not married as of the date hereof, all references to Spouse in this Disclosure Statement and Consent are
hereby rendered null and void.
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participants. It is unclear under existing tax law whether this income will be treated as
ordinary income or capital gain income. Some tax practitioners have suggested that if the
surrender or sale proceeds exceed a policys cash surrender value, the excess should be
taxed as capital gains; and if the cash surrender value exceeds the basis of the policy, a
conservative approach is to treat that excess as ordinary income. In addition, it is unclear
under federal income tax law how to compute the tax basis in the Policy. Specifically, the
Internal Revenue Service has taken the position that an owners basis in a policy equals
premiums paid minus any nontaxable dividends and minus the value of the life insurance
protection the owner has enjoyed. While existing case law does not appear to support this
position, there can be no assurances on the outcome of this issue if disputed. The Grantor,
the Insured and the Insureds Spouse recognize that interest incurred on indebtedness the
proceeds of which are used to pay premiums on the Policy cannot be deducted for tax purposes
and it is unclear whether any non-deductible interest can be added to the tax basis in the
Policy. In the event that the Lender forecloses upon the Policy following a default under
the Financing Arrangement, the excess of the amount owed over the tax basis in, or possibly
the fair market value, if lower, of, the Policy may be ordinary taxable income, unless an
exception to recognition applies. In all cases, any income realized upon a sale, surrender,
foreclosure upon or other transfer of the Policy may be taxable to the Grantor even through
any proceeds may be receivable by the Trustee and be required to be used to satisfy any
outstanding indebtedness and then be distributed to the Beneficiary. This will result in the
Grantor recognizing income without any cash proceeds (so-called phantom income) from which
to pay any related tax. The Grantor may also recognize phantom income annually based on the
value of any insurance provided. The Grantor, the Insured, the Beneficiary and the Insureds
Spouse have not relied upon any advice from the Lender, any life agent or other producer,
any insurance company that has issued the Policy or any other person associated with the
Financing Arrangement regarding any such tax effects. The Grantor, the Insured, the
Beneficiary and the Insureds Spouse have consulted with their own legal, tax and accounting
advisors to determine the tax effects of the Financing Arrangement on such party.
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6.
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Insurance companies may only allow any person to purchase, in the aggregate, a limited amount
of life insurance on the life of the Insured, and the Trusts purchase, and the maintenance in
force, of the Policy may use all or a part of this limited insurance capacity. Therefore, in
the future, the Insured, the Insureds Spouse, the Trust or any other family members of the
Insured may be unable to purchase life insurance on the life of the Insured in the amounts
desired as a consequence of the purchase, and the maintenance in force, of the Policy. In the
event that the Lender forecloses upon the Policy following an Event of Default under the Loan
Agreement and Financing Documents and resells or further assigns the Policy in order to
recover on its loan, the Policy may be maintained in force and this could in the future limit
or eliminate the ability of the Insured, the Insureds Spouse, the Trust or any other family
members of the Insured to purchase future insurance on the Insureds life because there is a
limit to how much coverage insurers will issue on one life.
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7.
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Unless otherwise set forth in Schedule A hereto, the only beneficiaries of the Insurance
Trust are the Insured, the Insureds Spouse and/or children or other issue of the Insured or
an entity or trust [(a)] the beneficiaries of which are either the Insureds Spouse or a child
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or other issue of the Insured [and/or (b) an entity which is qualified as tax-exempt under
Section 501(c)(3) of the Internal Revenue Code of 1986, as amended,] and the Grantor is
either the Insured, the Insureds Spouse or a child of the Insured.
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8.
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Neither the Insured nor the Insureds Spouse have been paid, directly or indirectly, any
inducement (money, property or otherwise) in connection with the Financing Arrangement or to
obtain the Policy.
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9.
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None of the Grantor, the Insured, the Insureds Spouse or, to the knowledge of the foregoing
persons, any beneficiary of the Trust has any present intention to surrender, sell or settle,
directly or indirectly, the Policy or any interest therein.
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10.
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Unless otherwise set forth in Schedule A hereto, no person or entity other than the Life
Insurance Trust, the Life Insurance Trustee, the beneficiaries of the Life Insurance Trust,
and the Lender has any direct or indirect interest in the Policy.
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11.
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The Policy application has been completed accurately and there are no material omissions or
misstatements in the application.
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12.
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The Lender, or any subsequent owner of the Loan Agreement, may sell, or sell participations
in, the Loan Agreement without the consent of, or prior notice to, the Grantor, the Insured,
the Insureds Spouse or the Life Insurance Trust and the Insured and the Insureds Spouse
agree to take all actions (but at no cost or expense to the Insured or the Insureds Spouse)
requested by the Lender in connection with any such sale or participation.
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13.
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The Insured agrees to provide certain medical and health information (collectively,
Private Health Information
) as may be reasonably requested, from time to time, by
the Life Insurance Trust, the Lender, life expectancy underwriters and any of their respective
representatives, agents, designees, third party servicers and purchasers of the Policy
following the occurrence of an event of default under the Loan Agreement, successors or
assignees (collectively, the
Authorized Recipients
). To facilitate this provision of
Private Health Information, the Insured agrees to execute such documents as are necessary to
release such information to the relevant parties needing to review such information so as to
allow the Life Insurance Trust to obtain a loan from the Lender in connection with the
Financing Arrangement or to sell the Policy in connection with a foreclosure or otherwise. The
Private Health Information may be used by the Authorized Recipients for the purposes of (i)
valuing the Policy as collateral for the loan and (ii) assisting in any disposition of the
Policy. The Private Health Information may be maintained and/or processed in any jurisdiction
or country. The disclosure of Private Health Information to any of the Authorized Recipients
may involve transfers to countries outside the United States which may not have laws
comparable to those in the United States to protect personal data.
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14.
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The Insured understands that the Trusts obligations under the Loan Agreement are secured or
supported by, among other things, the Policy, and that the Lender can properly evaluate the
value of the Policy as collateral for the Loan Agreement only by considering
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the Private Health Information. Absent such information, the Lender would likely deny the
Insureds application because the cash surrender value of the Policy would be inadequate to
support the loan requested. Therefore, in order for the Lender to evaluate the collateral
value of the Policy, the Insured directs and authorizes the Lender to obtain and consider
the Private Health Information.
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15.
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The Insured represents that all Private Health Information that has been provided by or on
behalf of the Insured to the Lender and its designees or third party servicers, the issuer of
the Policy and any life expectancy underwriters, at the time so provided, was true and
complete in all material respects to the best of the Insureds knowledge.
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16.
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The Insured agrees to inform the Trustee, or any designees or agents thereof, within thirty
(30) days of any and all changes in contact information of the Insured and the Insureds
Spouse, including home address or telephone number. The Insured and the Insureds Spouse
acknowledge that the Trustee, on behalf of the Trust, the Lender and its designees or third
party servicers and any subsequent owner of the Policy, or any of their respective
representatives, servicers, agents or designees may, from time to time and at their own
discretion, contact the Insured and the Insureds Spouse for confirmation and update of such
information.
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17.
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The Policy is being purchased as part of the Insureds estate planning and for retirement
purposes.
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18.
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To the knowledge of the Insured, the Life Insurance Trust has not entered into any contracts
or agreements, other than the Policy and the relevant Financing Arrangement Documents.
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19.
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If the Insurer of the Policy cancels the Policy prior to the repayment of the obligations of
the Trust to Lender under the Financing Arrangement Documents, the obligations of the Insured
and the Life Insurance Trust and the rights of Lender with respect to the Financing
Arrangement Documents and with respect to the Policy shall continue in full force, unaffected
by such cancellation.
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20.
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Each of the Insured and the Insureds Spouse is required to take all actions relating to the
Financing Arrangement that may be necessary or desirable from time to time in the Life
Insurance Trust or Lenders discretion (but at no cost or expense to the Insured or the
Insureds Spouse), including, but not limited to, executing all such documents as may be
required by the Life Insurance Trust, any life agent or other producer or any insurance
company that has issued the Policy and/or beneficiary designation if the Lender enforces its
security interest, if any, in the Policy, the Life Insurance Trust accounts and all other
assets of the Life Insurance Trust following the occurrence of any event of default under the
Loan Agreement or the Financing Arrangement Documents.
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21.
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Any claims, questions or controversies arising under or related to in any manner whatsoever
this Disclosure Statement or the transactions contemplated under the Financing Arrangement
including, but not limited to, any challenge by the Grantor, the Insured, the Insureds Spouse
or the Insureds estate, beneficiaries or subrogees (each, a
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Insured Party
) against the Lender, its designees and/or third party servicers, the
Life Insurance Trust, any broker, any insurance company or any other party interested in or
related in any way to the Financing Arrangement (each, an
Interested Third Party
,
notwithstanding the fact such parties are not signatories hereto) (a
Dispute
)
shall be submitted to arbitration conducted before the American Arbitration Association (the
AAA
). Any Insured Party or any interested third party is hereby authorized to
invoke this arbitration provision, and any judgment with respect to any award rendered
pursuant to this arbitration provision may be entered in any court of competent
jurisdiction. Such arbitration will be conducted under the rules of the AAA and the laws of
the State of [JURISDICTION] and will be conducted in [TRUST-CITY-STATE]. Each Insured Party
understands that claims submitted to arbitration are not heard by a jury and are not subject
to the rules governing the courts. Each Insured Party further agrees that no claim may be
brought as a class action, and that no Insured Party has the right to act, nor shall they
attempt to act, as a class representative or participate as a member of a class of claimants
with respect to any claim related to or arising out of the Financing Arrangement. To the
extent that this arbitration provision is held unenforceable, the Insured Parties: (i)
irrevocably submit to the exclusive jurisdiction of any federal or state court sitting in
[TRUST-CITYSTATE] in respect of any action or proceeding arising under or related to in any
manner whatsoever this Disclosure Statement or the transactions contemplated under the
Financing Arrangement, (ii) agree that this Disclosure Statement and the transactions
contemplated by the Financing Arrangement shall in all respects be governed by and construed
in accordance with the laws of the State of [JURISDICTION] (without reference to conflicts
of laws provisions) and (iii) HEREBY WAIVE THE RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY
ON ANY CLAIM, COUNTERCLAIM, SETOFF, DEMAND, ACTION OR CAUSE OF ACTION (I) ARISING OUT OF OR
IN ANY WAY RELATED TO THIS DISCLOSURE STATEMENT OR (II) IN ANY WAY IN CONNECTION WITH OR
PERTAINING OR RELATED TO OR INCIDENTAL TO ANY DEALINGS OF THE PARTIES TO THIS DISCLOSURE
STATEMENT IN CONNECTION WITH THIS DISCLOSURE STATEMENT OR THE EXERCISE OF ANY PARTYS RIGHTS
AND REMEDIES UNDER THIS DISCLOSURE STATEMENT OR OTHERWISE, OR THE CONDUCT OR THE
RELATIONSHIP OF THE PARTIES HERETO, IN ALL OF THE FOREGOING CASES WHETHER NOW EXISTING OR
HEREAFTER ARISING AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. The sole exception to
this requirement for arbitration involves suits brought on behalf of the Lender seeking a
temporary restraining order, preliminary injunction, and/or permanent injunction
(injunctive relief) based upon (i) any failure of the Trust to use the proceeds of advanced
exclusively as set forth in the Loan Agreement, the Promissory Note, the Financing Documents
or any other documents related to the Loan Agreement; (ii) any act by the Trust or any
Guarantor to transfer, amend, change ownership, cancel, convey, sell or assign the Policy
without the express written consent of the Lender; or (iii) any failure to act by the Trust
or any Guarantor that results, directly or indirectly, in the transfer of the Policy or any
amendment, change of ownership, cancellation, conveyance, sale or assignment thereof, in the
event there is immediate and irreparable injury, loss, or damage (which immediate and
irreparable injury, loss, or damage may be presumed by law and/or by agreement of the
parties). The parties hereby expressly agree, and each
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Interested Third Party in receipt of this Disclosure Statement acknowledges, that the
arbitration provisions in this section shall not apply to the Trustee in respect of its
rights, duties, protections and immunities.
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22.
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The Grantor, the Insured and the Insureds Spouse acknowledge and understand that various
charities, educational institutions and federal, state or local governmental entities or
agencies may take into account the Life Insurance Trusts purchase, and the maintenance in
force, of the Policy in determining the eligibility of the Insured, the Insureds Spouse or
any other family members of the Insured to receive aid under one or more charitable,
educational and federal, state or local governmental programs, including without limitation,
Medicaid.
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23.
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The Grantor, the Insured and the Insureds Spouse acknowledge and understand that, due to
cost of insurance increases or other factors relating to the Policy, it is possible that the
amount of funds advanced under the Loan Agreement may not be sufficient to keep the Policy in
force during the term of the Loan Agreement.
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24.
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The Grantor, the Insured and the Insureds Spouse are each signing this Disclosure Statement
freely and voluntarily and are each of sound mind and not subject to any constraint or undue
influence, and neither has ever been the subject of any mental health or mental competency
proceeding or any other proceeding or hearing with respect to which such partys competency or
capacity to contract is or was an issue.
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25.
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Each of the Grantor, the Insured and the Insureds Spouse has a complete understanding of
this Disclosure Statement and has been given the opportunity to ask questions regarding the
nature and operation of the Financing Arrangement.
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26.
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As of the Execution Date and the Initial Premium Funding Date, the Insured is an individual
residing in the state designated in the Financing Documents.
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27.
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This document and the other Financing Documents to which the Insured is a party have been
duly executed and delivered by the Insured, and (assuming due authorization, execution and
delivery by the other parties thereto) the Financing Documents constitute legal, valid and
binding obligations of the Insured, enforceable against the Insured in accordance with their
terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar
laws affecting creditors rights generally and to equitable principles of general application,
regardless of whether such principles are considered in a proceeding in equity or at law).
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28.
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The execution, delivery and performance by the Insured of the Financing Documents to which it
is a party do not and will not (i) to the knowledge of the Insured, conflict with or cause a
violation by the Insured of (A) any Law or Governmental Order of the Insureds state of
residence applicable to the Insured or to any of the Insureds assets, properties or business
or (B) to the knowledge of the Insured, any other Law or Governmental Order applicable to the
Insured or to any of the Insureds assets, properties or business or (ii) conflict with,
result in any breach of, constitute a default (or event which with the giving of notice or
lapse of time, or both, would become a default) under, require any consent
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under, or give to others any rights of termination, amendment or acceleration pursuant to
any Contract to which the Insured is a party.
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29.
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No authorization, approval, consent, franchise, license, covenant, order, ruling, permit,
certification, exemption, notice, declaration or similar right, undertaking or other action
of, to or by, or any filing, qualification or registration with, any Governmental Authority is
required to be obtained by the Insured that has not been obtained or is not in full force and
effect, and no registration, declaration, or filing with any Governmental Authority is
required to be given or made by the Insured to or with, any Governmental Authority that has
not been given or made or the applicable waiting period for which has not expired or
terminated, each in connection with the execution and delivery of this Disclosure Statement
and the other Financing Documents and the consummation of the transactions contemplated hereby
and thereby.
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30.
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No Default or Event of Default with respect to the Insured has occurred and is continuing.
The Insured is not in violation of any Law or Governmental Order applicable to it or any of
its properties or assets. No judicial, administrative or arbitral proceeding is pending or, to
the best knowledge of the Insured, threatened against the Insured, which would have an adverse
effect on the Insureds ability to perform under the Financing Documents.
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31.
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To the best of the Insureds knowledge on the Execution Date, and the Initial Premium Funding
Date, the Insured does not have a catastrophic or life-threatening illness or condition. The
Insured expressly waives any and all rights, claims, interests, powers and privileges that the
Insured possesses with respect to the Policy.
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32.
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The Insured has read, understands, and has signed each document in the Closing Package that
is required to be executed by the Insured. The Insured has retained his or her own legal
counsel, and has obtained his or her own tax, accounting and financial advice, with respect to
this Disclosure Statement and the other Financing Documents and any obligations that the
Insured will incur or undertake hereunder or thereunder, including any risks associated
herewith or therewith, and is relying solely upon his or her own legal, tax, accounting,
financial and other advisers in his or her decision to enter into this Disclosure Statement
and any related transactions. The Insured has considered other alternatives for financing the
Policy, and has satisfied himself or herself that entering into this Disclosure Statement and
the other Financing Documents and consummating the transactions contemplated thereby is in his
or her best interest. The Insured acknowledges that he or she has had this Disclosure
Statement and the other Financing Documents for an amount of time sufficient to thoroughly
analyze, discuss and receive advice from any professionals or anyone else of his or her
choosing.
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33.
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Each of the Insured and Insureds Spouse has read and understands the Privacy Statement by
the Lender set out below (the
Privacy Statement
) and consents to the collection and
use of their Private Health Information and Personal Information (as defined below) for the
purposes set out in the Privacy Statement and as otherwise described in the Privacy Statement
or elsewhere in this Disclosure Statement, and as set forth in Schedule B to the Loan
Agreement.
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Privacy Statement by [LENDER-NAME]
. This section, the Privacy Statement, is provided by
[LENDER-NAME]
(the
Lender
), and applies only in connection with the financing
arrangement set forth herein (the
Financing Arrangement
). In this Privacy
Statement, Insured means the person who is the Insured of the Policy held by the Life
Insurance Trust under the Financing Arrangement. The Lender may collect medical and health
information (collectively,
Private Health Information
) from the Insured. The
Lender may also collect other personally identifiable information (
Personal
Information
) about the Insured from the following sources: (i) Personal Information the
Lender receives from the Insured or Insureds spouse on applications or other forms; (ii)
Personal Information about transactions with the Lender or other parties; and (iii) Personal
Information the Lender receives from third parties, such as consumer reporting agencies.
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The Lender will process the Private Health Information and Personal Information for the
purposes of: (i) valuing the Policy as collateral for the loan; (ii) assisting in any
disposition of the Policy following the occurrence of an event of default under the Loan
Agreement; and (iii) as otherwise required to administer, effect or enforce any of the
transactions contemplated hereunder.
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The Lender may disclose the Private Health Information or other Personal Information to the
Life Insurance Trust, life expectancy underwriters, any potential purchasers of the Policy
following a default under the Loan Agreement and any of their respective representatives,
agents, designees, third party servicers, successors or assignees (the
Recipients
), and may also disclose Private Health Information, and other Personal
Information to government agencies, fraud prevention agencies, or as required by a court.
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The Lender does not disclose any information about its customers or former customers to
anyone, except as described herein or as otherwise permitted or required by law. The Lender
restricts access to Personal Information to those employees or agents who need to know that
information to provide products or services to you.
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The Lender maintains physical, electronic and procedural safeguards that comply with
requirements under the U.S. federal standards to protect Private Health Information and
Personal Information.
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The Insured agrees and consents to the Trust and Lenders use and disclosure of non-public
medical, financial and personal information about the Trust and the Insured as necessary, in
the opinion of the Lender, to provide funding or insurance for the Lenders obligations under
the Loan Agreement or the other Financing Documents or to effect, administer or enforce the
transactions contemplated by the Loan Agreement, the other Financing Documents and any other
agreements entered into in connection therewith, including, without limitation, the sale or
exercise of rights under the Policy; provided that the Trust and Lender shall keep such
information confidential and limit access to such information to those Persons who, in the
Lenders reasonable discretion, require access to such information to provide funding or
insurance for the Lenders obligations under the Loan Agreement or the other Financing
Documents or to effect, administer or enforce the transactions contemplated by this Disclosure
Statement, the Loan Agreement, the other
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Financing Documents and any other agreements entered into in connection therewith,
including, without limitation, the sale or the exercise of rights under the Policy.
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35.
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The Insured agrees that he or she shall be liable for damages for any misrepresentation made
by him or her in this Disclosure Statement or the other Financing Documents, and for any
default by him or her in the performance of any of his or her obligations under this
Disclosure Statement or the other Financing Documents, but otherwise shall have no liability
under the Financing Documents, except to the extent provided in the personal guaranty, if any,
entered into by Insured to provide additional credit support for the Obligations.
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36.
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For so long as any Obligations remain outstanding, the Insured hereby covenants and agrees as
follows:
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(a) The Insured shall take such further action and/or execute and deliver all further
assurances, documents and/or instruments as may be reasonably requested by the Lender in
order to (i) effect, administer or enforce the transactions contemplated by this Disclosure
Statement and the other Financing Documents or to sell the Policy in connection with a
foreclosure or otherwise, (ii) permit the realization of the benefits of any collateral
assignment or pledge of the Policy to the Lender and its assigns and (iii) authorize the
provision and/or delivery of medical, financial, personal and other information and
documentation about the Insured to the Lender, any affiliate of the Lender, any of their
assigns, or any Insurer from any physician, hospital, medical provider, provider of a life
expectancy estimate, insurance company or other Person.
(b) The Insured agrees to notify the Lender in writing of any change of his or her
address, telephone number or other contact information provided by the Insured to the
Lender. The Insured understands that the Lender or the Lenders designee may be verifying
quarterly his or her current address, contact information and other relevant information by
sending the Insured correspondence with a prepaid return response. The Insured covenants and
agrees that he or she shall accurately complete and manually execute each such response and
return the same to the Lender and/or its designees in a timely manner. The Insured further
acknowledges that the Lender or its designee may use other methods to obtain such
information, and the Insured agrees to cooperate, and to request that other Persons
cooperate, in providing such information.
(c) The Insured shall, immediately upon his or her discovery thereof, notify the Lender
in writing of any breaches of the representations and warranties of the Insured in this
document and the other Financing Documents.
37.
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The undersigned hereby acknowledge and agree that (i) [NAME OF TRUSTEE] is acting as a
limited service provider in connection with the Financing Arrangement and is acting solely in
accordance with the terms of the documents governing its services, (ii) [NAME OF TRUSTEE], in
its individual and representative capacities, has not provided any legal or tax advice to the
undersigned in connection with the Financing Arrangement, and (iii) [NAME OF TRUSTEE] has not
reviewed any Financing Arrangement Document on behalf of the undersigned or any other Person
and shall not be responsible for or in
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12
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respect of and makes no representation as to the validity, accuracy or sufficiency of any
provision of this Disclosure Statement or any other Financing Arrangement Document.
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38.
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[OPTIONAL] ACCREDITED INVESTOR STATUS: The Insured hereby represents and warrants that the
Insured is an accredited investor within the meaning of Rule 501 of Regulation D promulgated
under the Securities Act of 1933 by virtue of meeting one or more of the following
qualifications (
please check the space to the left of EACH category which is
applicable
):
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[ ]
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(1
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)
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The Insureds net worth, or joint net worth with the
undersigneds spouse, exceeds $1 million on the date hereof;
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[ ]
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(2
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)
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The Insured had an individual income in excess of $200,000 in
each of the two most recent years, or joint income with the
Insureds spouse in excess of $300,000 in each of those
years, and the Insured has a reasonable expectation of
reaching the same income level in the current year; or
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[ ]
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(3
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)
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The Insured is a trust with total assets in excess of $5
million, which trust was not formed for the specific purpose
of acquiring the securities offered, and whose purchase is
directed by a sophisticated person with such knowledge and
experience in financial and business matters as to be capable
of evaluating the merits and risks of an investment in the
Company.
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Notwithstanding anything to the contrary in this Disclosure Statement, the Grantor, the Insured and
the Insureds Spouse (and any representative or agent of the Grantor, the Insured or Insureds
Spouse) may disclose to any and all persons, without limitation of any kind, the tax treatment and
tax structure of the transactions described in this Disclosure Statement and Consent and all
materials of any kind (including opinions or other tax analyses) that are provided to the Grantor,
the Insured and the Insureds Spouse relating to such tax treatment and tax structure. This
authorization of tax disclosure is retroactively effective to the commencement of discussions with
the Grantor, the Insured and the Insureds Spouse regarding the transactions contemplated herein.
* * * *
IRS Circular 230 Disclosure: [LENDER-NAME] and its affiliates do not provide tax advice. Any
discussion of United States federal tax issues set forth herein is written in connection with the
promotion and marketing of the Financing Arrangement. Such discussion is not intended or written to
be legal or tax advice to any person and is not intended or written to be used, and cannot be used,
by any person for the purpose of avoiding any United States federal tax penalties that may be
imposed on such person. The Grantor, the Insured and the Insureds Spouse should seek advice based
on their particular circumstances from an independent tax advisor.
13
AGREED TO AND ACKNOWLEDGED BY THE UNDERSIGNED.
INSURED
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X
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INSURED]
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(Printed name of Insured)
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STATE OF
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)
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)
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:
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COUNTY OF
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)
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Sworn to (or affirmed) and subscribed before me this ___day of
___by [
INSURED
],
who is personally known to me or who produced
as identification.
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(Print, type, or stamp commissioned
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Name of Notary Public)
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My Commission Expires:
14
AGREED TO AND ACKNOWLEDGED BY THE UNDERSIGNED.
INSUREDS SPOUSE (Unmarried Insureds Please Leave Blank)
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X
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(Signature of Insured Spouse)
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INSURED-SPOUSE
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(Printed name of Insureds Spouse)
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STATE OF
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)
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)
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:
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COUNTY OF
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)
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Sworn to (or affirmed) and subscribed before me this ___day of
by
, who is personally known to me or who produced
as
identification.
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(Print, type, or stamp commissioned
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Name of Notary Public)
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My Commission Expires:
AGREED TO AND ACKNOWLEDGED BY THE UNDERSIGNED.
GRANTOR
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X
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INSURED]
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(Printed name of Grantor)
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15
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STATE OF
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)
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)
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:
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COUNTY OF
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)
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Sworn to
(or affirmed) and subscribed before me this ___ day of
by [
INSURED
], who
is personally known to me or who produced
as identification.
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(Print, type, or stamp commissioned
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Name of Notary Public)
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My Commission Expires:
16
Schedule A
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Trust Beneficiary(s)/Grantor and relationship to Insured:
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Persons with a direct or indirect interest in the Policy:
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17
AUTHORIZATION FORM
FOR USE AND DISCLOSURE OF HEALTH INFORMATION
To: Any health plan, physician, health care professional, hospital, clinic, laboratory, pharmacy,
medical facility, or other health care provider that has provided payment, treatment or services to
me or on my behalf.
Patients Name:
[INSURED]
Address:
[INSURED-ADDRESS], [INSURED-CITY-STATE]
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Date of Birth:
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Social Security No.:
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I,
[INSURED]
, hereby authorize you to release and disclose (in writing and/or verbally) to
[LENDER-NAME]
, its affiliates, including Imperial Finance & Trading, LLC, Imperial Life & Annuity
Services or any of their representatives (collectively Imperial), 701 Park of Commerce, Suite
301, Boca Raton, FL 33487, 1.561.995.4200, all reports, records, office notes, personal notes,
outpatient notes, treatment notes, intake notes, progress notes, any other notes of any kind,
discharge summaries, data compilations, treatment plans, test protocols, test results (including
but not limited to raw scores, computer printouts, and documents showing sequence of tests),
billing records, documents showing diagnosis and treatment, and all other documents and all other
information of any kind in your possession (from whatever source) concerning or in any way
referencing me or my physical health, alcohol and drug/substance abuse and/or mental health
(including all psychological and psychiatric records and all records relating to HIV/AIDS, HIV/AIDS
testing, and /or HIV/AIDS infection status) and treatment.
For the purpose of evaluating my health (and assisting others in evaluating my health) in
connection with the issuance, maintenance in force and/or disposition of one or more life insurance
policies (individually a Policy and collectively, the Policies)) on my life by or through
Imperial and any financing of the premiums due on the Policy or Policies through one or more
premium finance loans provided by Imperial.
This Authorization is effective until
[three][four][five]
years after the date of signature below.
I understand that I have the right to revoke this Authorization by submitting a written request
that clearly specifies my intent to revoke this Authorization to the health care provider or health
plan to which this Authorization is addressed. I understand that my written revocation will not
affect the ability of the health care provider or health plan to continue to use or disclose my
health information to the extent that it has already acted in reliance on this Authorization.
I understand that my ability to receive treatment from the health care provider, to enroll in or
receive benefits from the health plan, or to have payments made on my behalf is not conditioned on
my signing this Authorization.
I understand that, once disclosed, my health information may not be protected by privacy laws and
may be subject to redisclosure by the recipient person or organization.
A photocopy or facsimile copy of this Authorization shall be valid as the original.
Signature:
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Signature:
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Print Name:
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[INSURED]
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Address:
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[INSURED-ADDRESS]
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[INSURED-CITY-STATE]
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Date:
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If you are completing this form on behalf of another person, please explain your legal authority to
sign this Authorization on behalf of such person (parent, guardian, power of attorney, etc.) and
attach copies of any supporting documentation:
Witness:
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Signature:
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Print Name:
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Date:
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2
LIMITED POWER OF ATTORNEY
Know all by these presents, that the undersigned hereby irrevocably constitutes and appoints
[COLLATERAL-AGENT], and any officer or agent thereof, with full power of substitution, the
undersigneds true and lawful attorney-in-fact with full irrevocable power and authority in the
place and stead of the undersigned and in the name of the undersigned or in its own name, from time
to time, for the limited purpose of carrying out the terms of the Collateral Assignment, Loan
Agreement or any other documents contemplated by the Loan Agreement (capitalized terms used but not
defined herein shall have the meanings assigned thereto in the Loan Application and Agreement
between the undersigned and the [LENDER-NAME] dated as of [DATE] (the Loan Agreement)) to take
any action that the Collateral Agent is required to take and to execute and deliver any and all
documents and instruments necessary or desirable to accomplish the purposes of the Collateral
Assignment and to effectuate any right assigned to the Collateral Agent under the Collateral
Assignment (including, without limitation, the right to transfer or direct the transfer of
ownership of the Life Insurance Policy or the proceeds thereof to the Collateral Agent or a third
party designed by the Collateral Agent upon the sole signature of the Collateral Agent following an
Event of Default) or Lender under the Promissory Note, as the case may be.
The undersigned hereby ratifies, to the extent permitted by law, all that any said attorney
shall lawfully do or cause to be done by virtue hereof. This power of attorney given as security
for indebtedness by the undersigned to [LENDER-NAME], being coupled with an interest, shall be
irrevocable until all Obligations under the Loan Agreement are indefeasibly paid in full (in the
case of payment obligations) and otherwise satisfied and discharged.
The undersigned expressly authorizes any said attorney-in-fact to sign any document on the
undersigneds behalf, either by signing the undersigneds name or by signing the name of the
attorney-in-fact, without the need to disclose the fact that said attorney-in-fact is acting as
attorney-in-fact, and in either event such signature shall have the same effect as if the
undersigned personally had signed the document. The undersigned specifically authorizes my
attorney-in-fact so to sign the undersigneds name for or in the presence of a notary public as the
undersigneds notarized signature. The undersigned further authorizes and requires all institutions
and persons, including banks and insurance companies, to accept the signature of said
attorney-in-fact with the same effect as the undersigneds signature would have.
The powers conferred on the Collateral Agent pursuant to this Limited Power of Attorney are
solely to protect the Collateral Agents and [LENDER-NAME] s interests in the Life Insurance
Policy and shall not impose any duty upon the Collateral Agent to exercise any such powers. For the
avoidance of doubt, nothing herein shall obligate the Collateral Agent to take any action with
respect to the Life Insurance Policy, including, without limitation, selling, transferring or
disposing of the Life Insurance Policy, and the Collateral Agent shall have the right to do or
cause to be done all things necessary, proper or advisable to maintain the Life Insurance Policy in
full force in accordance with its terms.
It is expressly understood and agreed by any recipient hereof that in no event shall [NAME OF
TRUSTEE], as trustee of the [Insert Trust Name] (the Trust), in its individual
capacity have any liability for the representations, warranties, covenants, agreements or
other obligations of the Trust hereunder or under any schedule, exhibit, appendix or other document
in connection with this Limited Power of Attorney, as to all of which recourse shall be had solely
to the assets of the Trust, and under no circumstances shall [NAME OF TRUSTEE] as trustee of the
Trust be personally liable for the payment of any indebtedness or expenses of the Trust or be
liable for the breach or failure of any obligation, representation, warranty or covenant made or
undertaken by the Trust under this Limited Power of Attorney or under any schedule, exhibit,
appendix or other document in connection with this Limited Power of Attorney.
IN WITNESS WHEREOF,
the undersigned has caused this Limited Power of Attorney to be signed,
and this Limited Power of Attorney shall be effective as of the ___day of
, 2009.
Signed, sealed and delivered
In the presence of
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Witnesses:
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[TRUST-NAME]
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By: [NAME OF TRUSTEE], solely as Trustee
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Name:
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[Type or Print Name]
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Title:
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STATE OF
COUNTY OF
The foregoing instrument was acknowledged before me this ___day of
, 2009, by
[TRUSTEE-NAME], the trustee of the [TRUST-NAME]. He is personally known to me or produced
as identification.
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Typed or Printed Name
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Notary Public, State of
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Commission Number
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My commission expires:
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2
LOAN APPLICATION AND AGREEMENT
THIS APPLICATION AND AGREEMENT
, dated as of [DATE] (this Agreement), among Imperial Premium
Finance, LLC, a Florida limited liability company, with a principal address at 701 Park of Commerce
Blvd., Ste. 301, Boca Raton, FL 33487 (the Lender) and [TRUST-NAME], a [
] trust, with a
principal address at [TRUST-ADDRESS], [TRUST-CITY-STATE] [TRUST-ZIP] (Trust or Borrower).
RECITALS
WHEREAS
, the Trust intends to acquire, or has acquired, the Life Insurance Policy and desires to
obtain, pursuant to the terms hereof, financing of Premium payments;
WHEREAS
, the Lender has agreed to lend, on the terms and conditions and subject to the limitations
set forth herein, funds in the amounts designated in this Agreement to pay Premiums on the Life
Insurance Policy owned, or to be owned, by the Trust under the Trust Agreement, together with
related Trustee Expenses; and
WHEREAS
, the Insured is providing additional credit support for the Obligations by delivering the
Personal Guaranty.
NOW, THEREFORE
, in consideration of these premises and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE 1
PAYMENT TERMS
1.1
Loan Payment Amount and Provisions
The following is a summary of the terms of the Advances to be provided under this Agreement.
This Section 1.1 is only a summary and to the extent of any conflict with the balance of this
Agreement, the terms and provisions set forth elsewhere shall prevail.
Loan Date: [DATE]
Advance on Initial Premium Funding Date: [FIRST-YEAR-PREMIUM]
Initial Premium Funding Date: On or about
[INSERT DATE
]
Maximum Loan Amount: [PRINCIPAL]
Interest Rate:
[
Eleven and one-half percent (11.5%)].
Principal Amount: Variable based on amount advanced hereunder.
Maximum
Maturity Date: [MATURITY-DATE
5
].
Projected
Maturity Date: [PROJECTED MATURITY DATE
6
].
Loan Number: [LOAN-NUMBER]
Borrower Name and Address: [TRUST-NAME], [TRUST-ADDRESS], [TRUST-CITY-STATE] [TRUST-ZIP]
Lender Name and Address: Imperial Premium Finance, LLC, 701 Park of Commerce Blvd., Ste. 301, Boca
Raton, FL 33487
Life Insurance Policy: (a) Insurer: [INSURER], (b) Policy Number: [POLICY-NUMBER], and (c) Face
Amount: [NET-DEATH-BENEFIT] (the Life Insurance Policy).
Insurance Agent, Broker and/or Agency for Policy: [AGENT], [AGENT-ADDRESS].
Origination Fees: [Insert Amount equal to 25% of the Maximum Premiums that can be Advanced]
Service Charges: $0
Prepayment: Subject to Section 2.4, the Obligations hereunder may be prepaid in full, but not in
part, provided that a Yield Maintenance Premium payment will be required in connection with a
voluntary prepayment.
INSURANCE PREMIUM FINANCE AGREEMENT NOTICE: Do not sign this Agreement before you have read it or
if it contains any blank spaces. You are entitled to a completely filled in copy of this
Agreement. Keep your copy of this Agreement to protect your legal rights.
1.2.
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Premium and Trustee Expense Advances
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(a) Subject to the terms and conditions hereof, the Lender may, in its sole discretion, cause
to be made and loaned to the Trust, and the Trust shall borrow, Advances for the purpose of
funding certain Premiums and Trustee Expenses during the Term of this Agreement.
An initial Advance shall be made on the Initial Premium Funding Date in the amount set forth
in Section 1.1 . Any Advance hereunder may be (a) delivered to the Trust or (b) paid directly to
the Insurer at the Insurers Mailing Address for Payments with respect to the Life Insurance
Policy.
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5
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Insert date five (5) years from Agreement
date.
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6
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Insert date 26 months from Agreement date.
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2
Any additional Advances shall be made at such times and in such amounts as shall be determined
in the sole discretion of Lender. Further, if the Lender determines in its sole discretion at any
time during the Term that Premium payments are required to maintain the Life Insurance Policy in
full force and effect or that Trustee Expenses are required to be paid, the Lender may make
Advances hereunder to fund such additional Premium payments or Trustee Expenses at any time during
the Term and the amount of any such Advance shall be added to the outstanding principal amount
hereunder beginning on the date of such Advance.
(b) Any Advance for Trustee Expenses may be made at the election of the Lender on the Initial
Premium Funding Date. If the Lender elects not to make an Advance for Trustee Expenses, such
Trustee Expenses shall be the responsibility of the Trust. The date of any Advance for Trustee
Expenses may be changed by the Lender. Any Advance for Trustee Expenses may be applied by the
Lender directly to such expenses.
(c) Without prejudice to the Borrowers obligation to repay the Advances to the Lender in
accordance with the terms of this Agreement, any Advance made hereunder by the Lender shall be
evidenced by, and repaid with interest in accordance with, the Promissory Note payable to the order
of the Lender.
(a) Interest due under the Promissory Note shall accrue at the Interest Rate on the aggregate
principal amount of the Advances plus the Origination Fee outstanding hereunder on each day from
the date of the Advances (or in the case of the Origination Fee, the date hereof, to the date that
the Advances plus the Origination Fee plus accrued interest is paid in full. [
At the end of each
month, accrued interest shall be added to the principal amount due under the Promissory Note, and
interest shall accrue thereafter on such increased principal amount.][DELETE IN GEORGIA AND OTHER
STATES NOT PERMITTING COMPOUNDING OF INTEREST.
] Such outstanding principal amount plus any accrued
and unpaid interest as of any date shall be referred to as the Total Amount Due.
(b) On the Maturity Date, the Trust shall pay to the Lender the Total Amount Due under the
Promissory Note.
(c) Anything contained herein or within the Promissory Note to the contrary notwithstanding,
if said rate or rates of interest or manner of payment exceeds the maximum allowable under
applicable law, then the Trust shall be liable only for the payment of such maximum as allowed by
law, and any payment received from the Trust in excess of such legal maximum, whenever received,
shall be applied to reduce the principal balance of the amount due hereunder to the extent of such
excess or, at the option of the Trust, shall be returned to the Trust.
(d) The Lender may perform its obligations to compute and determine any amounts under this
Agreement directly or through an agent. The Lender shall not be liable to the Trustee in
connection with the performance of any such obligations in the absence of willful misconduct or
gross negligence.
3
1.4.
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Partial and Surplus Payments
.
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If at any time the Lender receives a smaller payment than the Total Amount Due or any other
Obligations due under this Agreement, the Promissory Note or the other Financing Documents, it may
apply the amount actually received in or towards discharge of the Obligations in the order
indicated by the Promissory Note. If the amount realized by the Lender under Article 6 of this
Agreement is more than the amount of the Obligations, the Lender shall pay the excess to the Trust.
1.5.
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Dispute Resolution
.
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(a) All controversies or disputes arising out of, relating to or in connection with this
Agreement (Disputes) shall be resolved pursuant to this Section 1.5.
(b) All Disputes shall in the first instance be discussed amicably between the parties with a
view to resolving such Dispute, commencing upon one party giving other parties written notice of
such Dispute. In the event that such Dispute is not resolved within thirty (30) days after such
notice (or such longer period as the parties may agree in writing with respect to any such
Dispute), any party may submit such Dispute to be finally settled by arbitration administered under
the Commercial Arbitration Rules of the American Arbitration Association (the Rules) by a panel
of three arbitrators sitting in the State of the Trust Situs. One arbitrator shall be nominated by
the party initiating arbitration at the time of the filing of its demand for arbitration, the
second arbitrator shall be nominated by the opposing party(ies) at the time of the filing of its
answering statement, and the third arbitrator (who shall act as chairman) shall be jointly
nominated by party-nominated arbitrators if they are able to agree. If the first two party
nominated arbitrators are unable to agree upon a third within thirty (30) days after the nomination
of the second, or if either party fails to nominate an arbitrator as set forth herein, an
arbitrator shall be appointed pursuant to the Rules. The award of the arbitrators shall be final
and binding upon the parties, and shall not be subject to any appeal or review. The parties agree
that such award may be recognized and enforced in any court of competent jurisdiction. The parties
agree to submit to the personal jurisdiction of the federal and state courts sitting in the State
of the Trust Situs, for the sole purpose of enforcing this Agreement (including, where appropriate,
issuing injunctive relief), the agreement to arbitrate contained herein and any award resulting
from arbitration pursuant to this Section and, to the fullest extent permitted by law, waive any
objection which they may have at any time to the laying of venue of any proceedings brought in such
court and any claim that such proceedings have been brought in an inconvenient forum.
(c) The Trust further agrees that no claim arising out of, relating to or in connection with
this Agreement may be brought as a class action, and that the Insured and Trustee, on behalf of the
Trust, do not have the right to act, nor shall they attempt to act, as a class representative or
participate as a member of a class of claimants with respect to any claim related to, in connection
with or arising out of this Agreement. To the extent that this arbitration provision is held
unenforceable, each of the Trust and the Lender: (i) irrevocably submits to the exclusive
jurisdiction of any federal or state court sitting in the location of the Trust Situs in respect of
any action or proceeding arising under or related to in any manner whatsoever this Agreement or the
transactions contemplated under this Agreement, (ii) agrees that this Agreement and the
4
transactions contemplated by the Financing Documents shall in all respects be governed by and
construed in accordance with the laws of the State of the Trust Situs (without reference to
conflicts of laws provisions) and (iii) HEREBY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY
JURY ON ANY CLAIM, COUNTERCLAIM, SETOFF, DEMAND, ACTION OR CAUSE OF ACTION (I) ARISING OUT OF OR IN
ANY WAY RELATED TO THIS AGREEMENT, OR (II) IN ANY WAY IN CONNECTION WITH OR PERTAINING OR RELATED
TO OR INCIDENTAL TO ANY DEALINGS OF THE PARTIES TO THIS AGREEMENT IN CONNECTION WITH THIS
DISCLOSURE STATEMENT, REPRESENTATIONS AND WARRANTIES, AND CONSENT OR THE EXERCISE OF ANY PARTYS
RIGHTS AND REMEDIES UNDER THIS AGREEMENT OR OTHERWISE, OR THE CONDUCT OR THE RELATIONSHIP OF THE
PARTIES HERETO, IN ALL OF THE FOREGOING CASES WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE. The parties hereby agree and acknowledge that this
provision is intended to encompass any dispute between any party to this Agreement.
(d) In any arbitral proceeding arising under this Agreement, the parties agree that they will
engage in cooperative discovery, to be supervised by the arbitral tribunal. In its discretion, the
tribunal may order the exchange of documents in the custody or control of parties to this
Agreement, and may order a limited number of party depositions of one (1) days duration each if
requested by the opposing party and if the tribunal finds that such depositions would contribute to
the efficient development of evidence.
(e) The sole exception to this Section 1.5 involves suits brought on behalf of the Lender
seeking a temporary restraining order, preliminary injunction, and/or permanent injunction
(injunctive relief) based upon (i) any failure of the Borrower to use the proceeds advanced
hereunder exclusively as set forth in this Agreement, the Promissory Note, the Financing Documents
or any other documents related to this Agreement; (ii) any act by the Borrower or any Guarantor to
transfer, amend, change ownership, cancel, convey, sell or assign or grant an encumbrance in the
Life Insurance Policy without the express written consent of the Lender; or (iii) any failure to
act by the Borrower or any Guarantor that results, directly or indirectly, in the transfer of the
Life Insurance Policy or any amendment, change of ownership, cancellation, conveyance, sale or
assignment thereof or the creation of any encumbrance therein, in the event there is immediate and
irreparable injury, loss, or damage (which immediate and irreparable injury, loss, or damage may be
presumed by law and/or by agreement of the Parties).
(f) The parties hereby expressly agree, and each interested third party in receipt of this
Agreement acknowledges, that the arbitration provisions in this Section 1.5 shall not apply to the
Trustee in respect of its rights, duties, protections and immunities under the Trust Agreement.
5
ARTICLE 2
GENERAL PAYMENT PROVISIONS
(a) All payments by the Trust of any Obligations shall be made in Dollars in immediately
available funds, without defense, setoff or counterclaim, free of any restriction or condition, and
delivered to the Lender not later than 12:00 p.m. (EST) on the date due by wiring such funds to the
Lender at such account as the Lender may from time to time designate in writing to the Trust or by
payment of bank or certified check to the Lenders address as it may from time to time provide in
writing to the Trust.
(b) Whenever any payment to be made hereunder shall be stated to be due on a day that is not a
Business Day, such payment shall be made on the next succeeding Business Day and such extension of
time shall be included in the computation of the payment of interest hereunder.
2.2.
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Default Interest; Payments Set Aside.
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(a) Any Obligations payable by the Trust under this Agreement, the Promissory Note or any
other Financing Document not paid when due (whether upon the Maturity Date or otherwise), and any
Obligations payable at any time if a Default or an Event of Default shall have occurred and be
continuing (without reference to any cure period), shall (to the fullest extent permitted by law)
bear interest from the date when due, or the date upon which such Default or Event of Default shall
have occurred, until paid in full at a rate per annum equal to the Interest Rate in effect at the
time of such due date or Default or Event of Default plus 2% per annum (the Default Rate).
(b) To the extent that the Trust makes a payment to the Lender, or the Lender enforces any
security interest or lien, and such payment or proceeds of such enforcement or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to
be repaid to a trustee, receiver or any other party under any bankruptcy or insolvency law, any
other state or federal law, common law or any equitable principles, then, to the extent of such
recovery, the obligation or part thereof originally intended to be satisfied, and all Encumbrances,
rights and remedies therefor or related thereto, shall, to the fullest extent permitted by law, be
revived and continued in full force and effect as if such payment had not been made or such
enforcement had not occurred.
2.3.
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Determinations and Delegation by Lender.
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(a) Any determination by the Lender or a Person retained by the Lender of the principal amount
including capitalized interest and the Total Amount Due under this Agreement shall be binding on
the Trust absent manifest error.
(b) The Lender may retain a servicer, a special servicer, a calculation agent, an actuary or
other Person to make any determinations, prepare any calculations, reports and notices, and provide
any other services in connection with the Lenders performance of its obligations, or the exercise
of its rights, under this Agreement and the other Financing Documents.
6
No privilege is reserved by Borrower to prepay any principal due hereunder and under the
Promissory Note prior to the Maturity Date, except that the Borrower may after giving five (5)
days prior written notice to Lender, prepay in full, but not in part, all principal and interest
to and including the date on which payment is made, along with all sums, amounts, advances, or
charges due under this Agreement, the Promissory Note or the other Financing Documents, upon the
payment of the Yield Maintenance Premium. Notwithstanding the foregoing, no Yield Maintenance
Premium payment shall be required in the event that a full prepayment of the Obligations hereunder
is made promptly following a death of the Insured under the Life Insurance Policy.
ARTICLE 3
CONDITIONS PRECEDENT
3.1.
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Conditions Precedent to the Initial Premium Funding Date.
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The Lender in its sole discretion may make the Advance. In addition to any other conditions
imposed by the Lender, the Lender shall not make the Advance on the Initial Premium Funding Date
unless the following conditions have been satisfied or waived:
(a) The Lender shall have received this Agreement and the other documents described in the
Closing Package, each fully completed, duly executed and dated the Initial Premium Funding Date (or
such earlier date as shall be satisfactory to the Lender), and in form and substance satisfactory
to the Lender;
(b) The Lender shall be satisfied that the life insurance illustration corresponds with the
policy form number, personal data, underwriting classification and cash surrender value set forth
in the Life Insurance Policy to be provided on the Initial Premium Funding Date; and
(c) The representations and warranties of the Trust and the Insured contained herein and in
the other Financing Documents shall be true and correct on and as of the Initial Premium Funding
Date to the same extent as though made on and as of such date (except to the extent such
representations and warranties relate to a specified date); all obligations of the Trust and the
Insured in this Agreement and the other Financing Documents required to be performed on or prior to
the Initial Premium Funding Date shall have been performed; and no event shall have occurred and be
continuing or would result from the making of such Advance or the consummation of the other
transactions contemplated hereby that would constitute an Event of Default or a Default under this
Agreement or the other Financing Documents.
From the Execution Date to the Initial Premium Funding Date, this Agreement may be terminated
at any time at the Lenders sole discretion with written notice to the Trust.
7
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Trust represents and warrants to the Lender, as of the Execution Date, the Initial Premium
Funding Date, the date of any subsequent Advance under this Agreement and on the dates otherwise
specified below, as follows:
(a)
Organization
. The Trust Agreement is valid, binding and enforceable in accordance
with its terms and is in full force and effect under the laws of the State of location of the
Trusts situs (subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar
laws affecting creditors rights generally and to equitable principles of general application,
regardless of whether such principles are considered in a proceeding in equity or at law). The
Trust has requisite capacity and all requisite power and authority and all requisite
authorizations, consents and approvals, in each case, to hold the trust estate, to purchase and own
the Life Insurance Policy, to enter into this Agreement and the Financing Documents to which the
Trust is a party and to carry out the transactions contemplated thereby.
(b)
Execution.
This Agreement and the other Financing Documents to which the Trust is
a party have been duly executed and delivered by the Trustee. Assuming due authorization, execution
and delivery by the other parties thereto, this Agreement and such other Financing Documents
constitute legal, valid and binding obligations of the Trust, enforceable against the Trust in
accordance with their terms (subject to applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors rights generally and to equitable principles of
general application, regardless of whether such principles are considered in a proceeding in equity
or at law).
(c)
No Conflict
. The execution and performance by the Trust of this Agreement and the
other Financing Documents to which it is a party do not (i) violate, conflict with or result in the
breach of any provision of its constitutive documents or the Trust Agreement, (ii) conflict with or
cause a violation of any Law or Governmental Order applicable to it or to any of the Trusts
assets, properties or business or (iii) conflict with, result in any breach of, constitute a
default (or event which with the giving of notice or lapse of time, or both, would become a
default) under, require any consent under, or give to others any rights of termination, amendment
or acceleration pursuant to any Contract to which the Trust is a party.
(d)
Consents
. No authorization, approval, consent, franchise, license, covenant,
order, ruling, permit, certification, exemption, notice, declaration or similar right, undertaking
or other action of, to or by, or any filing, qualification or registration with, any Governmental
Authority is required to be obtained by the Trust that has not been obtained or is not in full
force and effect, and no registration, declaration, or filing with any Governmental Authority is
required to be given or made by the Trust to or with, any Governmental Authority that has not been
given or made or the applicable waiting period for which has not expired or terminated, each in
connection with the execution and delivery of this Agreement and the other Financing Documents and
the consummation of the transactions contemplated hereby and thereby.
8
(e)
No Default; Compliance and Litigation
. No Default or Event of Default under this
Agreement or any other Financing Document has occurred and is continuing. The Trust is not in
violation of any Law or Governmental Order applicable to it or any of its properties or assets. No
judicial, administrative or arbitral proceeding is pending or, to the best knowledge of the Trust,
threatened against the Trust, which would have an adverse effect on the Trusts ability to perform
under the Financing Documents.
(f)
Payment of Taxes
. The Trust has filed all tax returns and reports of the Trust
required to be filed, and all taxes shown on such tax returns to be due and payable, and all
assessments, fees and other governmental charges upon the Trust and upon its properties, assets,
income, businesses and franchises which are due and payable, have been paid when due and payable.
(g)
Investment Company Act
. The Trust is not subject to regulation under the
Investment Company Act of 1940, as amended and is not a registered investment company or company
controlled by a registered investment company or a principal underwriter of a registered
investment company as such quoted terms are defined in the Investment Company Act of 1940, as
amended.
(h)
Purpose of Loan
. The Trust has entered into this Agreement for estate and
retirement planning purposes and the Trust has no present intention to transfer the Life Insurance
Policy or any interest therein, other than any collateral assignment or pledge made in connection
with this Agreement.
(i)
Independent Decision
. The Trust has read and understood, and the Trust has signed
or caused to be signed by the appropriate Persons (other than Lender), each document in the Closing
Package. The Trust has been encouraged by Lender to consult with and has had ample opportunity to
receive advice from attorneys, accountants and tax or other financial advisors of its choosing.
The Trust has considered other options for financing the Life Insurance Policy, and is satisfied
that entering into this Agreement and the other Financing Documents and consummating the
transactions contemplated by this Agreement and the other Financing Documents are in the best
interests of the Trust. The Trust acknowledges that it has had this Agreement and the other
Financing Documents for an amount of time sufficient to thoroughly analyze, discuss and receive
advice from any professionals or anyone else of the Trusts choosing.
(j)
Trustee
. At least one trustee of the Borrower is an attorney, certified public
accountant or bank or trust company which is authorized to serve as trustee for the Borrower in the
state where the Borrower has its situs and has its principal place of administration.
(k)
No Upfront Inducement or Gift
. In connection with the issuance of the Life
Insurance Policy by the Insurer to the Trust, no Person has provided any upfront inducement or gift
for the benefit of the Trust, the Trustee or any other trustee of the Trust, any beneficiary, the
Insured and/or the spouse or significant other of the Insured.
9
(l) Insurable Interest. At the time the Life Insurance Policy was issued to the Trust, the
Trust had an insurable interest in the life of the Insured.
(m) No Sale. Since the issuance of the Life Insurance Policy to the Trust, the Trust has not
sold, transferred or assigned the Life Insurance Policy or the proceeds thereof in whole or in part
to any Person. To the best of the Trusts knowledge, at the time the Life Insurance Policy was
issued to the Trust, there was no pre-arrangement to sell, transfer or assign the Life Insurance
Policy or the beneficial interest in the Trust to any Person.
(n) Sole Owner. The Trust is the sole owner and beneficiary under the Life Insurance Policy.
When the Trust purchased the Life Insurance Policy, neither the Trust nor the Insured had any
intent, agreement or understanding under which the Life Insurance Policy was being held for the
benefit of any Person not having any insurable interest in the life of the Insured. The Trust has
retained the incidents of ownership of the Life Insurance Policy, including, without limitation,
the right to sell or transfer the Life Insurance Policy and the right to take all permitted action
and exercise all rights of the owner of the Life Insurance Policy, subject to the provisions of the
this Agreement and the other Financing Documents.
(o) Non-Reliance. In connection with entering into this Agreement and the other Financing
Documents, neither the Trust nor the Insured is relying on any representation, warranty, covenant
or agreement not contained in this Agreement or any of the other Financing Documents. All
agreements and understandings of the Trust and the Insured with the Lender are contained in this
Agreement and the other Financing Documents.
(p) No Advice. The Lender has not provided the Trust or the Insured with any advice regarding
the income, estate or gift tax or other effects of this Agreement or the transactions contemplated
herein, but has disclosed to the Trust and Insured that there may be adverse tax and/or financial
consequences to the Trust and/or the Insured as a result of any foreclosure on the Life Insurance
Policy or the beneficial interest in the Trust following an Event of Default. The Trust
understands that it should consult with its own tax and legal counsel regarding such effects.
The representations and warranties made by the Trust hereunder shall at all times be true until the
termination of this Agreement in accordance with the terms hereof.
ARTICLE 5
COVENANTS
For so long as any Obligations remain outstanding, the Trust hereby covenants and agrees as
follows:
(a) To take such further action and/or execute and deliver all further assurances, documents
and/or instruments as may be reasonably requested by the Lender in order to (i) effect, administer
or enforce the transactions contemplated by this Agreement and the other Financing Documents to
which the Trust is a party, (ii) permit the realization of the benefits of any collateral
assignment or pledge of the Life Insurance Policy to the Lender and its assigns,
10
(iii) execute any documents reasonably requested by the Lender to submit to the Insurer for
payment of the Death Benefit, and (iv) authorize the provision and/or delivery of medical,
financial, personal and other information and documentation about the Insured to the Lender, any
affiliate of the Lender, any of their assigns, or any Insurer from any physician, hospital, medical
provider, provider of a life expectancy estimate, insurance company or other Person with respect to
the Insured.
(b) To notify the Lender in writing of any change of the address, telephone number or other
contact information of the Trust\. The Trust acknowledges that the Lender or its designee may be
verifying quarterly the current addresses, contact information and other relevant information of
the Trust. The Trust covenants and agrees that it shall accurately complete and manually execute
its response and return the same to the Lender and/or its designees in a timely manner. The Trust
further acknowledges that the Lender or its designee may use other methods to obtain such
information, and the Trust agrees to cooperate, and to request that other Persons cooperate, in
providing such information.
(c) If the Trust receives proceeds derived or to be derived from the Life Insurance Policy, to
(i) hold such proceeds in trust for the benefit of the Lender and its assigns (to the extent of
amounts owed hereunder), (ii) notify the Lender of such receipt within three (3) Business Days,
(iii) transfer, convey and pay over such proceeds (to the extent of amounts owed hereunder) to the
Lender within three (3) Business Days of its receipt of payment instructions from the Lender and
(iv) take any and all actions reasonably requested by the Lender, at the expense of the Lender, in
order to change the payment instructions with respect to such Life Insurance Policy [or such
beneficial interest] such that proceeds therefrom are payable directly to the Lender or any person
designated in writing by the Lender.
(d) The Trust shall preserve its existence as a trust established under the laws of the State
of the location of the Trusts situs, and shall not change its form of organization, amend the
Trust Agreement or permit an Encumbrance to the Life Insurance Policy or any Collateral (except as
contemplated by this Agreement) without the consent of the Lender. The Trust shall maintain an
office located in the State of the Trust Situs.
(e) The Trust shall pay all Taxes imposed upon the Trust or any of its properties or assets
before any penalty or fine accrues thereon, and shall notify the Lender of any such Taxes as soon
as the Trust has actual knowledge thereof. .
(f) The Trust shall notify the Lender in writing of (i) the Insureds death, and (ii) any
breaches of the representations and warranties of the Trust or the Insured in this Agreement or the
other Financing Documents within one (1) business day of its actual knowledge thereof.
(g) The Trust shall not engage in any business or activity other than (i) the acquisition,
maintenance and protection of the Life Insurance Policy and (ii) the entering into this Agreement,
the Promissory Note and the other Financing Documents contemplated hereby;
(h) The Trust shall not (i) incur any indebtedness not committed or provided by this Agreement
or assume or guaranty directly or indirectly any indebtedness of any other entity,
11
other than Trustees fees (and any related costs of counsel and out of pocket expenses and
other Trustee Expenses) or (ii) utilize any funds other than funds advanced under, or pursuant to,
this Agreement to make premium payments on the Life Insurance Policy, except with the express
written consent of the Lender, which consent shall be granted or withheld in the sole discretion of
the Lender;
(i) The Trustee shall not dissolve or liquidate the Trust, in whole or in part; and
(j) Following an Event of Default, the Trust (i) shall accept written instructions from the
Collateral Agent under the Collateral Assignment or (ii) following a foreclosure on the beneficial
interests in the Trust by the Lender or its designee, accept written instructions by the Lender or
its designee, regarding the disposition of the Life Insurance Policy and any other Collateral or
proceeds covered thereby, including instructions to assign ownership of the Life Insurance Policy
to the Lender or any third party engaged to dispose of the Collateral, or to dispose of the
Collateral in a commercially reasonable fashion or as otherwise directed by the Collateral Agent.
(k) In the event that the Trust elects to sell, assign or settle, or to consider selling,
assigning or settling, the Life Insurance Policy when any amounts are outstanding hereunder, the
Trust agrees to take such action according to applicable law.
ARTICLE 6
EVENTS OF DEFAULT AND REMEDIES
The occurrence and continuance of any of the following events shall constitute an Event of
Default:
(a)
Payment Default
. The Trust fails to make any payment within three (3) Business Days after
the same becomes due and payable under this Agreement, the Promissory Note or any other Financing
Document.
(b)
Other Defaults
. The Trust or the Insured fails to comply with or to perform any other
term, obligation, covenant or condition contained in the Promissory Note, this Agreement or in any
of the other Financing Documents or to comply with or to perform any term, obligation, covenant or
condition contained in any other agreement between Lender and Trust or Insured.
(c)
False Statements
. Any warranty, representation or statement made or furnished to Lender
by Trust, the Insured, or on Trusts behalf under the Promissory Note, this Agreement or any other
Financing Document is false or misleading in any material respect, either now or at the time made
or furnished or becomes false or misleading at any time thereafter.
12
(d)
Related Agreements
. The Life Insurance Policy, Promissory Note, this Agreement,
Beneficiary Pledge Agreement or any other Financing Document ceases to be in full force and effect
(including failure of any collateral document to create a valid and perfected security interest or
lien) at any time and for any reason; the Trust becomes a revocable trust, contests the validity or
enforceability of any Financing Document or denies that it has any further liability under any
Financing Document to which it is a party, or cancels or terminates, or attempts to cancel or
terminate, the Life Insurance Policy; or the Insurer contests the Life Insurance Policy based on
the Trust lacking an insurable interest in the life of the Insured or on any other grounds.
(e)
Indebtedness, Creditor or Forfeiture Proceedings
. Any garnishment of any of Trusts
accounts, attachment, lien, levy, additional encumbrance or additional security interest being
placed upon any of the Collateral, or any commencement of foreclosure or forfeiture proceedings,
whether by judicial proceeding, self-help, repossession or any other method, by any creditor of
Trust or by any governmental agency against any Collateral, and which is not discharged in full
within one (1) day of the placement thereof. However, this Event of Default shall not apply if
there is a good faith dispute by Trust as to the validity or reasonableness of the claim which is
the basis of the creditor or forfeiture proceeding and if Trust gives Lender written notice of the
creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor
or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an
adequate reserve or bond for the dispute.
(f)
Insolvency or Default of Trust
. The Trust is: (i) dissolved, liquidated or terminated;
(ii) is unable to pay its debts as they mature; (iii) makes an assignment for the benefit of
creditors; (iv) is bankrupt or insolvent; (v) seeks appointment of, or becomes the subject of an
order appointing, a trustee, conservator, liquidator or receiver as to all or part of its assets;
(vi) commences, approves or consents to, or is the debtor in, any case or proceeding under any
bankruptcy, reorganization or similar law, and in the case of an involuntary case or proceeding,
such case or proceeding is not dismissed thirty (30) days following its commencement; (vii) is the
subject of an order for relief in an involuntary case under federal bankruptcy law; (viii) the
Trust defaults under any loan, extension of credit, Beneficiary Pledge Agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person that may materially
affect any of Trusts property or Trusts ability to repay the Promissory Note or perform Trusts
Obligations under the Promissory Note, this Agreement or any of other Financing Documents; or (ix)
Trust violates any Law.
(g)
Insolvency or Default of Insured or Guarantor
. (i) The Insured or any Guarantor makes an
assignment for the benefit of creditors; (ii) The Insured or any Guarantor is adjudicated a
bankrupt or insolvent; (iii) The Insured or any Guarantor seeks appointment of, or becomes the
subject of an order appointing, a trustee, conservator, or receiver as to all or part of his or her
assets; (iv) The Insured or any Guarantor commences, approves or consents to, or is the debtor in,
any case or proceeding under any bankruptcy or similar law and, in the case of an involuntary case
or proceeding, such case or proceeding is not dismissed thirty (30) days following its
commencement; (v) The Insured or any Guarantor is the subject of an order for relief in an
involuntary case under federal bankruptcy law; (vi) Trust defaults under any loan, extension of
credit, Beneficiary Pledge Agreement, purchase or sales agreement, or any other
13
agreement, in favor of any other creditor or person that may materially affect any of Trusts
property or Trusts ability to repay the Obligations; or (vii) any Guarantor defaults under the
terms of the Personal Guaranty.
(h)
Events Affecting Guarantor
. Any of the preceding events occurs with respect to any
Guarantor of any of the indebtedness under the Promissory Note or any Guarantor dies or becomes
incompetent, or revokes or disputes the validity of, or liability under, any guaranty of the
indebtedness evidenced by the Promissory Note; in the event of a death, Lender, at its option, may,
but shall not be required to, permit the Guarantors estate to assume unconditionally the
obligations arising under the guaranty in a manner satisfactory to Lender, and, in doing so, cure
any Event of Default.
(i)
Events Affecting Beneficiary
. Any Beneficiary under the Trust dies or becomes
incompetent, or revokes or disputes the validity of, or liability under, the Beneficiary Pledge
Agreement; provided, however, that in the event of a death of [the][any] Beneficiary, the Lender,
in its sole discretion, may, but shall not be required to, permit such Beneficiarys estate to
assume unconditionally the obligations arising under the Beneficiary Pledge Agreement in a manner
satisfactory to the Lender, and, in doing so, cure any related Event of Default.
(j)
Adverse Change
. A material adverse change occurs in Trusts financial condition, or
Lender believes the prospect of payment or performance of the Obligations is materially impaired.
(k)
Other Failures
. Other than as set forth in the preceding clauses of this Section, failure
by the Trust or Insured, as applicable, to perform in any material respect any of its obligations
under the Promissory Note, this Agreement, Beneficiary Pledge Agreement or any other Financing
Document to which either is a party if such failure is not remedied on or prior to the fifteenth
(15th) day after written notice of such failure is given to the Trust or the Insured, respectively,
by the Lender.
(a) Automatically upon the occurrence of any Event of Default described in Section 6.1, and in
the case of any other Event of Default, upon notice from the Lender to the Trust, the Total Amount
Due, together with all other Obligations, shall immediately become due and payable, without
presentment, demand, protest or other requirements of any kind, all of which are expressly waived
by the Trust.
(b) Upon the occurrence and during the continuance of an Event of Default, in addition to the
remedies set forth in Section 6.2(a) above, the Lender and its assigns shall have the right to:
(i) exercise all rights and remedies provided for herein or in any other
Financing Document (including surrendering the Life Insurance Policy) or otherwise
available to it at law or in equity, and all rights and remedies of a
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secured party on default under the Uniform Commercial Code or common law; and
(ii) execute any instrument and do all other things necessary and proper to
protect, preserve and realize upon any Collateral and the other rights contemplated
hereunder and under the other Financing Documents.
(c) Upon the occurrence and during the continuance of an Event of Default, each of the Trust
and the Trustee shall accept, and take action in accordance with, written instructions from the
Lender or its designee as designated in writing by the Lender under each of the Collateral
Assignment and the Beneficiary Pledge Agreement regarding the disposition of the Life Insurance
Policy and any other Collateral, including instructions to assign ownership of the Life Insurance
Policy or the beneficial interests in the Trust to the Lender or its designee or any Person engaged
by the Lender or its designee to dispose of the Collateral or any other Person designated in
writing by the Lender or its designee (including, without limitation, a purchaser of the Collateral
in a foreclosure sale).
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ARTICLE 7
OTHER PROVISIONS
All notices, requests, claims, demands and other communications required or permitted to be
given hereunder shall be in writing, shall be given to the Lender and the Trust (with a copy to the
Insured), shall be delivered by hand or telecopied or sent by reputable overnight courier service,
and shall be deemed given when so delivered by hand or telecopied (with proof of transmission) or
emailed or one (1) Business Day after being sent by reputable overnight domestic courier service,
and five (5) Business Days after being sent by reputable overnight international courier service.
All such notices, requests, claims, demands and other communications shall be addressed as set
forth below, or pursuant to such other instructions as may be designated in writing to the other
party in accordance with this Section.
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If to the Trust:
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[TRUST-NAME]
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c/o [TRUSTEE NAME]
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[TRUST ADDRESS]
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[TRUST-CITY-STATE]
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Phone:
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Fax:
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Email:
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with a copy to insured:
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[INSURED]
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[INSURED-ADDRESS]
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[INSURED-CITY-STATE]
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Phone:
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Fax:
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Email:
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If to the Lender:
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Imperial Premium Finance, LLC
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701 Park of Commerce Blvd.
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Suite 301
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Boca Raton, FL 33487
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Phone: 561-995-4200
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Fax: 561-995-4201
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Email:
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(a) Except as otherwise specified in this Agreement, all costs and expenses, including,
without limitation, fees and disbursements of counsel, financial advisors and accountants, incurred
in connection with this Agreement and the transactions contemplated hereby, shall be paid by the
party incurring such costs and expenses unless, at any time after the Initial Premium Funding Date,
the Lender elects in its sole discretion to pay the costs and expenses of any other party hereto.
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(b) The Trust agrees, after the occurrence of a Default or an Event of Default, to pay all
costs and expenses incurred by the Lender in enforcing any Obligations of, or in collecting any
payments due from, the Trust hereunder or under the other Financing Documents, including reasonable
fees and expenses of the Lenders attorneys (which shall include the allocated costs of internal
counsel), financial advisors and accountants within five (5) Business Days after receiving an
invoice from the Lender.
(c) The Trust will indemnify the Lender against, and on demand reimburse the Lender for, any
and all liabilities, obligations, losses, damages, penalties, stamp and other similar taxes,
actions, judgments, costs, expenses or disbursements of any kind or nature whatsoever
(collectively, the Losses) that may at any time be imposed on, incurred by or asserted against
the Lender in any way relating to or arising out of this Agreement or any of the other Financing
Documents, including, without limitation, Losses relating to a material misrepresentation or fraud
in connection with the issuance of the Life Insurance Policy; provided, that the Trust shall not be
liable for any of the foregoing to the extent they arise from the gross negligence or willful
misconduct of the Lender.
(d) This Section shall survive the payments of all other amounts due hereunder.
Notwithstanding anything else herein to the contrary, if the Life Insurance Policy is not
issued at the time this Agreement is executed, the Borrower authorizes the Lender to fill in the
name of the insurance company, policy number and face amount of the policy after the Life Insurance
Policy directly or indirectly funded hereby is issued.
(a) The Lender is committed to maintaining the confidentiality, integrity and security of
personal information about its current, former and prospective customers. The Trust does not have
to contact the Lender to benefit from the Lenders privacy protections; they apply automatically.
By entering into this Agreement, the Trust consents to the collection and use of information as set
forth below and in Schedule B.
(b) The Lender agrees (i) not to use or disclose non-public medical, financial and personal
information about the Trust and the Insured except as necessary, in the opinion of the Lender, to
secure funding or insurance for its obligations under this Agreement or the other Financing
Documents or to effect, administer or enforce the transactions contemplated by this Agreement, the
other Financing Documents and any other agreements entered into in connection therewith, including,
without limitation, the sale or exercise of rights under the Life Insurance Policy; and (ii) to
keep such information confidential and limit access to such information to those Persons who, in
the Lenders reasonable discretion, require access to such information to effect, administer or
enforce the transactions contemplated by this Agreement, the other Financing Documents and any
other agreements entered into in connection therewith, including, without limitation, the sale or
the exercise of rights under the Life Insurance Policy.
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(c) Nothing in this Section shall prohibit disclosure of information that is required or
permitted by any Law or regulation, including, but not limited to, the Gramm-Leach-Bliley Act of
1999, or in response to legal process or to the extent that it may otherwise have become publicly
available without the fault of the person proposing to disclose. In addition, notwithstanding
anything herein to the contrary, in accordance with Section 1.6011-4(b)(3) of the United States
Treasury Regulations, the parties (and each employee, representative, or other agent of any party)
may disclose to any and all Persons, without limitation of any kind, the tax treatment and tax
structure of the transactions contemplated by this Agreement and all materials of any kind
(including opinions or other tax analyses) that are provided to the parties relating to such tax
treatment and tax structure.
7.5.
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Entire Agreement; Effectiveness; Counterparts; Headings; Severability
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(a) This Agreement, together with the other Financing Documents, embodies the entire agreement
and understanding between the Trust and the Lender with respect to the financing hereunder and
supersedes all prior, contemporaneous or subsequent oral agreements of the Trust and the Lender.
(b) This Agreement may be executed in any number of counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument. Delivery of an executed counterpart of a signature
page to this Agreement by facsimile shall be effective as delivery of an original executed
counterpart of this Agreement.
(c) Section headings herein are included herein for convenience of reference only and shall
not constitute a part hereof for any other purpose or be given any substantive effect.
(d) In case any provision in or obligation hereunder shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not
in any way be affected or impaired thereby.
7.6.
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Amendments and Waivers
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No amendment, waiver, modification or supplement of any provision of this Agreement shall be
effective unless the same shall be in writing and signed by the Lender and the Trust, provided that
no amendment, waiver, modification or supplement of any provision of this Agreement that affects
the rights or obligations of the Insured shall be effective until approved in writing by the
Insured, and each amendment, waiver, modification, supplement or consent shall be effective only in
the specific instance and for the specific purpose for which given. Any forbearance or failure to
exercise, and any delay in exercising, any right, power or remedy hereunder shall not impair any
such right, power or remedy or be construed to be a waiver thereof, nor shall it preclude the
further exercise of any such right, power or remedy. The rights, powers and remedies given to the
Lender hereby are cumulative and shall be in addition to and
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independent of all rights, powers and remedies existing by virtue of any statute or rule of
law or in any of the other Financing Documents.
7.7.
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Assignments; Third Party Beneficiaries
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(a) Except as otherwise expressly provided herein to the contrary, this Agreement shall be
binding upon and inure solely to the benefit of the parties hereto and their respective successors
and permitted assigns, and nothing herein is intended to or shall confer upon any other Person any
legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement. The rights or obligations hereunder or any interest therein of the Trust may not be
assigned or delegated without the prior written consent of the Lender.
(b) The Lender shall have the right at any time to sell, assign or transfer all or any portion
of its rights and obligations under this Agreement and the other Financing Documents, including,
without limitation, all or a portion of the financing hereunder or any other of the Obligations to
(i) any Affiliates of the Lender, including without limitation Imperial PFC Financing II, LLC, a
Georgia limited liability company (Imperial PFC Financing) or (ii) to any Wholesale Lender.
Further, the Lender shall have the right at any time, with notice to, and the written consent of
the Borrower, which consent shall not be unreasonably withheld, delayed or conditioned, to sell,
assign or transfer all or any portion of its rights and obligations under this Agreement and the
other Financing Documents, including, without limitation, all or a portion of the financing
hereunder or any other of the Obligations to any other third party. The Lender shall also have the
right at any time, without notice to or consent of any other party, to sell one or more
participations to any Person in all or any part of the financing hereunder or in any of the other
Obligations on terms and conditions satisfactory thereto.
(c) The Lender may, without notice to or consent of any other party, pledge, collaterally
assign or grant a security interest in the right, title and interest of the Lender in and to this
Agreement and the other Financing Documents and its interest in the Collateral. In such case, the
Lender shall remain liable for all of its obligations under this Agreement and the other Financing
Documents, and the secured party shall not be liable for any obligation of the Lender whether under
this Agreement or the other Financing Documents or otherwise.
7.8.
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Limited Liability of Trustees
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(a) It is expressly understood and agreed by the parties hereto that in no event shall [Name
of Trustee], as trustee of the Trust, in its individual capacity have any liability for the
representations, warranties, covenants, agreements or other obligations of the Trust hereunder or
under any schedule, exhibit, appendix or other document in connection with this Agreement, as to
all of which recourse shall be had solely to the assets of the Trust, and under no circumstances
shall [Name of Trustee] as trustee of the Trust be personally liable for the payment of any
indebtedness or expenses of Trust or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by Trust under this Agreement or under any
schedule, exhibit, appendix or other document in connection with this Agreement.
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(b) In no event shall any officers, directors, employees, agents, accountants, attorneys or
service providers of Lender be liable in their personal capacities to any Person for the
representations and obligations of the Lender under any Financing Document.
7.9.
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Survival of Representations, Warranties and Agreements.
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All representations, warranties and agreements made in this Agreement shall survive the
execution and delivery hereof, and shall continue in full force and effect, until no Obligation
remains outstanding.
THIS AGREEMENT AND ALL MATTERS RELATING THERETO SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LOCAL LAW OF THE STATE OF THE TRUST SITUS (WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES THAT COULD OR WOULD CAUSE THE APPLICATION OF ANY OTHER LAWS), ALL RIGHTS AND REMEDIES
BEING GOVERNED BY SAID LAW.
ARTICLE 8
DEFINITIONS AND RULES OF INTERPRETATION
As used in this Agreement, the following terms shall have the respective meanings set forth in this
Section.
Advance(s) means any amount advanced as set forth in this Agreement for the payment of Premiums
plus any amounts advanced for the payment of Trustee Expenses.
Advance for Trustee Expenses means amounts advanced for the payment of Trustee Expenses, subject
to such adjustments as the Lender may elect.
Agreement has the meaning set forth in the introductory paragraph.
Beneficiary means the beneficiary(ies) of the Trust.
Beneficiary Pledge Agreement
means the beneficiary pledge agreement by which
[each][the] Beneficiary grants to the Lender a first priority security interest in the beneficial
interests in the Trust and the proceeds thereof to secure payment of the Obligations.
Bidder has the meaning set forth in Section 5(k).
Borrower has the meaning set forth in the introductory paragraph.
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Business Day means (i) any day excluding Saturday, Sunday and any day which is a legal holiday
under the laws of the State of the Trust Situs, or is a day on which banking institutions located
in such states are authorized or required by law or other governmental action to close.
Closing Package means, collectively, the agreements, instruments, certificates, reports and
documents set forth in Schedule A to this Agreement, to the extent they are required to be
delivered and/or completed on or prior to the Initial Premium Funding Date.
Collateral means the Trusts entire interest in and to the Life Insurance Policy and any related
documents and security and the death benefits payable under the Life Insurance Policy and all
proceeds thereof.
Collateral Agent means such person or entity designated as the collateral agent in the Collateral
Assignment.
Collateral Assignment means the agreement under which the Borrower assigns the Life Insurance
Policy as collateral to secure the Obligations due or to become due hereunder.
Contract means any contract, agreement, lease, sublease, license, note, bond, mortgage or
indenture, permit, franchise, insurance policy or other instrument, whether written or oral.
Death Benefit means the amount paid by any Insurer upon the death of the Insured under the terms
of the Life Insurance Policy, including any interest paid by the Insurer attributable to the period
beginning on the Death Date.
Death Date means the date on which the Insured dies.
Default means (i) a condition or event that, after notice or lapse of time or both, would
constitute an Event of Default under this Agreement or (ii) any default under any Financing
Document.
Default Rate means the rate of interest set forth in Section 2.2(a).
Disputes has the meaning set forth in Section 1.5(a).
Dollar and the sign $ mean the lawful money of the United States of America.
Encumbrance means any mortgage, pledge, hypothecation, assignment, security interest, charge,
lien (statutory or other), or encumbrance of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, any lease in the nature
thereof) and any option, trust or other preferential arrangement having the practical effect of any
of the foregoing.
Event of Default means each of the events set forth in Section 6.1.
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Execution Date means the date on which this Agreement is fully executed by the Lender and the
Trust.
Financing Documents means this Agreement, any pledge or collateral assignment of the Life
Insurance Policy, the Disclosure Statement Representations and Warranties and Consent, the Personal
Guaranty, the Closing Package and all other documents, instruments or agreements executed and
delivered by the Trust for the benefit of the Lender in connection herewith, as the same may be
amended or modified with the consent of the Lender.
Governmental Authority means any foreign, or U.S. federal, state, regional, local, municipal or
other government, or any department, commission, board, bureau, agency, public authority or
instrumentality thereof or any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government or any court or arbitrator.
Governmental Order means any order, writ, judgment, injunction, decree, stipulation,
determination or administrative ruling or award entered by or with any Governmental Authority.
Guarantor means any person who delivers a Personal Guaranty to guaranty a portion or all of the
Obligations due by the Borrower hereunder.
Imperial PFC Financing II, LLC has the meaning set forth in Section 7.7(b).
Initial Premium Funding Date means the date specified in Section 1.1 on which the Lender makes
the initial Advance pursuant to Section 1.2.
Insured means [INSURED].
Insurer means the issuer of the Life Insurance Policy as identified in this Agreement.
Insurers Mailing Address for Payments is as follows: [INSURER], [INSURER-ADDRESS].
Interest Period means each period commencing on the first day of each calendar month during the
term of this Agreement (or, in the case of the first Interest Period, the date the Advance is made)
and ending on the last day of each calendar month during the term of this Agreement (or in the case
of the final Interest Period, the Maturity Date or such earlier date the Obligations hereunder
become due or are pre-paid by the Trust).
Interest Rate means a per annum rate of interest set as follows: equal to [eleven and one-half
percent (11.5%)].
Interest Determination Date means, with respect to any Interest Reset Date for an Interest
Period, the second London Banking Day prior to such Interest Reset Date.
Interest Reset Date means, with respect to each Interest Period, the first (1st) day of such
Interest Period.
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LIBOR means, with respect to any Interest Period, the London Interbank Offered Rate (one month)
on the Interest Determination Date which is publicly announced in the Money Rates section of The
Wall Street Journal, Eastern Edition, or such other similar publication, as is reasonably
determined by the Lender.
Law means any federal, national, supranational, state, provincial or local statute, law,
ordinance, regulation, rule, code, order, requirement or rule of law (including, without
limitation, common law).
Lender means [LENDER-NAME], a Florid a limited liability company authorized to do business in the
State of the Trust Situs.
Life Insurance Policy means the life insurance policy or policies identified in this Agreement,
including all amendments, modifications and supplements thereto and all restatements and
replacements thereof.
Loan Date has the meaning given to such term in Section 1.1 of this Agreement.
Loan Term shall mean five (5) years commencing on and including the Loan Date.
London Banking Day means a day on which dealings in deposits in United States dollars are
transacted on the London Interbank Market.
Maturity Date means the earliest of: (i) one (1) Business Day after payment of any proceeds of
the Life Insurance Policy, (ii) the Maximum Maturity Date, (iii) the Projected Maturity Date and
(iv) any other date that principal and interest on the Total Amount Due shall become due and
payable in full hereunder, whether by acceleration, notice of prepayment, or otherwise.
Maximum Loan Amount means that amount advanced as set forth in this Agreement to pay premiums
upon the Life Insurance Policy up and until the Maximum Maturity Date plus any amounts advanced for
the payment of Trustee Expenses.
Maximum Maturity Date means that date which is five (5) years from the date on which the Life
Insurance Policy is issued.
Net Death Benefit with respect to the financing hereunder means an amount equal to the Death
Benefit payable by the Insurer under the Life Insurance Policy less the Total Amount Due and any
other Obligations.
Obligations means all payment and performance obligations of every nature of the Trust from time
to time owed to the Lender under any Financing Document, including without limitation, the Total
Amount Due in connection with the financing hereunder, principal, interest (including interest
which, but for the filing of a petition in bankruptcy or the commencement of any insolvency,
reorganization, or like proceeding with respect to the Trust would have accrued on any Obligation,
whether or not a claim is allowed against the Trust for such interest in such proceeding), the
Origination Fee, the Yield Maintenance Premium, fees, costs, expenses
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(including the reasonable fees, charges and disbursements of counsel to the Lender),
indemnification or otherwise.
Offer has the meaning set forth in Section 5(k).
Origination Fee means an amount equal to Five percent (5%) per annum of the original loan amount
for the Loan Term
Party(ies) means the Borrower or Trust and Lender as set forth in the introductory paragraph.
Person means and includes natural persons, corporations, limited partnerships, general
partnerships, limited liability companies, limited liability partnerships, joint stock companies,
joint ventures, unincorporated associations, companies, trusts, banks, trust companies, business
trusts or other entity, or a government or political subdivision or agency thereof.
Personal Guaranty means a guaranty executed by the Insured in favor of the Lender in such form as
shall be agreed to by the Lender.
Premium(s) means the premium(s) for the Life Insurance Policy, subject to adjustment with the
Lenders approval.
Projected Maturity Date shall mean the date which is sixty (60) days prior to the date on which
the Life Insurance Policy will lapse absent the payment of additional premiums to the Insurer
beyond those payments contained in the Advance.
Promissory Note shall mean the promissory note from the Borrower to the Lender, executed
contemporaneously with this Agreement, evidencing amounts owed and/or to be owed under this
Agreement, as such note may be amended, modified or extended.
Rules has the meaning set forth in Section 1.5(b).
Beneficiary Pledge Agreement means each and every Beneficiary Pledge Agreement executed by any
beneficiary of the Trust pursuant to which beneficial interests in the Trust are pledged to secure
the obligations due by the Borrower to the Lender.
Tax means any present or future tax, levy, impost, duty, assessment, charge, fee, deduction or
withholding of any nature and whatever called, by whomsoever, on whomsoever and wherever imposed,
levied, collected, withheld or assessed, and including interest, additions to tax and penalties.
Term shall mean the period commencing on the date of this Agreement first set forth above and
ending on the Maturity Date.
Total Amount Due has the meaning given to such term in clause (b) of Section 1.3 of this
Agreement.
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Trust has the meaning set forth in the introductory paragraph.
Trust Agreement means the Trust Agreement entered into between the Grantor named therein and the
Trustee, dated [TRUST-DATE].
Trust Situs means the State of
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Trustee means [TRUSTEE-NAME].
Trustee Expenses means any fees and expenses of the Trustee which the Lender may elect to
advance.
Wholesale Lender means any person or entity that provides or has provided financing to the Lender
or its Affiliates to, directly or indirectly, fund the making, continuing or carrying of retail
life insurance premium finance loans, including the financing under this Agreement. The term
Wholesale Lender shall include any Affiliates of a Wholesale Lender as well as agents acting on
behalf of one or more Wholesale Lender and named as such in agreements relating to such financings.
Yield Maintenance Premium shall mean the premium calculated as provided in subparagraphs (a)
through (c) of this definition below:
(a) Determine the Reinvestment Yield. The Reinvestment Yield will be equal to the yield on
the U.S. Treasury Issue (Primary Issue)* selected by Lender, published one week prior to the date
of prepayment, and converted to an equivalent monthly compounded nominal yield. In the event there
is no market activity involving the Primary Issue at the time of prepayment, Lender shall choose a
comparable Treasury Bond, Note or Bill (Secondary Issue) which Lender reasonably deems to be
similar to the Primary Issues characteristics (i.e., rate, remaining time to maturity, yield).
(b) Calculate the Present Value of the Loan. The Present Value of the Loan is the present
value of the payments to be made in accordance with this Agreement and the Promissory Note (all
installment payments and any remaining payment due on the Maturity Date discounted at the
Reinvestment Yield for the number of months remaining from the date of prepayment to the Maturity
Date).
(c) Subtract the amount of the prepaid proceeds (excluding the payment of this Yield
Maintenance Premium) from the Present Value of the Loan as of the date of prepayment. Any
resulting positive differential shall be the yield maintenance premium.
*
If at this time there is not a U.S. Treasury Issue for this prepayment period. At the time
of prepayment, Lender shall select in its sole and absolute discretion a U.S. Treasury Issue with
similar remaining time to the end of the applicable prepayment period.
The Yield Maintenance Premium shall not be less than zero. Further, notwithstanding anything
else herein to the contrary, in no event shall the Yield
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Maintenance Premium be in an amount which would cause the Borrower to pay more upon
prepayment of the loan hereunder than the Borrower would have paid in full satisfaction of
the loan hereunder at maturity on the scheduled Maturity Date and to the extent necessary,
the Yield Maintenance Premium shall be reduced in the least amount needed to comply with
this limit.
(a) A reference to any document or agreement shall include such document or agreement as
amended, modified or supplemented as permitted by section 7.6 herein and in accordance with its
terms or the terms of this Agreement.
(b) The singular includes the plural and the plural includes the singular.
(c) A reference to any law includes any amendment or modification to such law.
(d) A reference to any Person includes its permitted successors and permitted assigns.
(e) The words include, includes and including are not limiting.
(f) All terms not specifically defined herein, which terms are defined in the Uniform
Commercial Code as in effect in the State of the Trust Situs, have the meanings assigned to them
therein.
(g) The words herein, hereof, hereunder and words of like import shall refer to this
Agreement as a whole and not to any particular section or subdivision of such Agreement.
(h) This Agreement is the result of negotiation between, and has been reviewed by counsel to,
the Lender and the Trust. Accordingly, this Agreement is not intended to be construed against the
Lender merely on account of the Lenders involvement in the preparation of such document.
[
Signature Page Follows
]
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IN WITNESS WHEREOF, the parties have executed this Agreement with the effect from the date
specified above.
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IMPERIAL PREMIUM FINANCE, LLC
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By:
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Name:
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Title:
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Place of Execution:
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[
TRUST-NAME
]
By: [
TRUSTEE-NAME
], not in its
individual capacity, but solely as Trustee under the
Trust Agreement
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By:
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Name:
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Title:
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Place of Execution:
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SCHEDULE A
CLOSING PACKAGE
1.
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Irrevocable and Durable Limited Power of Attorney signed by the Insured permitting the Lender
to review and receive copies of all records protected by the federal Health Insurance
Portability and Accountability Act of 1996.
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2.
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Authorization for Disclosure of Protected Health Information from the Insured.
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3.
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Authorization and Direction to Provide Death Certificate Form from Insured.
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4.
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Copy of the Trust Agreement as in effect on the Initial Premium Funding Date, together with
any other documents affecting the Trust requested by the Lender.
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5.
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A copy of the drivers license of the Insured or other proof of the Insureds age and sex
reasonably satisfactory to the Lender, and confirmation of the Insureds social security
number and address.
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6.
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The original, executed Life Insurance Policy, or a complete copy thereof.
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7.
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The original of the application for the Life Insurance Policy, or a complete copy thereof.
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8.
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Life insurance illustration signed by the Trust reasonably satisfactory to the Lender.
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9.
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Risk and Disclosure Statement executed by the Insured.
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10.
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Risk and Disclosure Statement executed by the Trust.
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11.
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Acknowledgment for the Life Insurance Policy from the Insurer that the Trust is the sole
recorded owner of and duly designated beneficiary under such Life Insurance Policy.
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12.
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Notice from the life insurance agent/broker confirming that medical records provided to the
Lender are true and accurate and that no form of rebating has occurred.
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13.
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Fully Executed Personal Guaranty of the Insured in such form as shall be approved by the
Lender.
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14.
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Beneficiary Pledge Agreement.
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15.
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Promissory Note.
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16.
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A Collateral Assignment of the Life Insurance Policy.
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17.
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Such other documents, instruments, or opinions as the Lender may reasonably request.
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SCHEDULE B
GRAMM-LEACH-BLILEY PRIVACY NOTICE
The Lender knows that you, as the Borrower or Trust, are concerned with how personal information is
treated. This notice is designed to help describe what personal information is collected and how
such information is used with respect to current and former customers. Terms used, but not defined
herein, shall have the meanings given to them in the Agreement to which this schedule is annexed.
Categories of nonpublic personal information collected by the Lender
:
Nonpublic personal information may be collected from the following sources:
(i) information we received from the Trust or the Insured, including information received on
applications or other forms, such as name, address, social security number, assets and income;
(ii) information about transactions with us, our affiliates, or others, including other
parties to this transaction; such as account balances, payment history, assets purchased and sold;
and
(iii) information we received from a consumer reporting agency, such as your credit history
and creditworthiness.
Disclosure of nonpublic personal information
:
(i) The Lender does not disclose any nonpublic personal information about the Trust or the
Insured to anyone, except as permitted or required by law. The Lender may disclose the information
described above to firms that perform services on our behalf in connection with maintaining or
servicing an account of the Trust or the Insured, or in connection with processing products or
services at the request of the Trust or the Insured.
(ii) In addition, the Lender reserves the right to disclose nonpublic personal information to
any person or entity, including without limitation any governmental agency, regulatory authority or
self-regulatory organization having jurisdiction over the Lender or an affiliate of the Lender, if
(i) the Lender determines in our discretion that such disclosure is necessary or advisable pursuant
to or in connection with any United States federal, state or local, or non-U. S., law, rule,
regulation, executive order or policy, including without limitation any anti-money laundering law
or the USA PATRIOT Act of 2001, and (ii) such disclosure is not otherwise prohibited by law, rule,
regulation, executive order or policy.
29
Confidentiality and security
THE LENDER RESTRICTS ACCESS TO NONPUBLIC PERSONAL INFORMATION ABOUT THE TRUST AND THE INSURED TO
THOSE EMPLOYEES AND AGENTS WHO NEED TO KNOW THAT INFORMATION TO PROVIDE PRODUCTS OR SERVICES TO THE
TRUST OR THE INSURED, AND AS ALLOWED BY APPLICABLE LAW OR REGULATION, AND DOES NOT PERMIT IT TO BE
SHARED OR USED FOR ANY OTHER PURPOSE. THE LENDER MAINTAINS PHYSICAL, ELECTRONIC, AND PROCEDURAL
SAFEGUARDS TO GUARD THE NONPUBLIC PERSONAL INFORMATION OF THE TRUST AND THE INSURED.
30
Mandatory Trust Agreement Provisions
Ability to Surrender Assets to Satisfy Policy Loan
Notwithstanding any provision contained herein to the contrary:
1. In the event that a Policy Loan is outstanding, is scheduled to mature within 60 days
(based upon the maturity date specified in the Loan Application and Agreement and the Promissory
Note executed by the Trust) and there are insufficient funds in the Trust to fully satisfy the
obligations under the Policy Loan, the Trustee shall deliver written notice to the
Grantor
7
and the beneficiaries of the Trust at the addresses set forth in the Trust
Agreement (provided, however, that if beneficiaries are listed by class, the Trustee shall only be
required to deliver such notice to the members of such class of beneficiaries identified in a
written statement received by the Trustee from the grantor) stating (a) that the Policy Loan is
maturing and the amount due (or projected to be due) on the maturity date thereof, as specified to
the Trustee in a written notice delivered to the Trustee by the Lender, (b) the amount of funds
insufficient in the Trust, or otherwise unavailable, to fully satisfy the obligations under the
Policy Loan and (c) that unless the grantor and/or beneficiaries contribute funds to the Trust on
or before three (3) Business Days prior to the maturity date sufficient to permit the Trust to pay
the Policy Loan in full, that the Trustee is hereby directed to and shall have no discretion not to
unconditionally and irrevocably transfer and assign the Policy to the lender under the Policy Loan
(the
Lender
8
) or to a designee of the Lender if such designee is specified by the
Lender in a written notice delivered prior to such transfer and assignment to the Trustee (the
Designee). If on or before three (3) Business Days prior to the maturity date the grantor and/or
beneficiaries contribute any funds to the Trust, the Trustee shall, within three (3) Business Days
after the receipt of any funds identified as being contributed by the grantor and/or a beneficiary,
pay such funds to the Lender. In the event that the insured and/or beneficiaries fail to contribute
funds to the Trust on or prior to such three (3) Business Day period in an amount sufficient to
permit the Trust to pay all obligations scheduled to be due with respect to the Policy Loan on such
maturity date (as specified to the Trustee in a written notice delivered to the Trustee by the
Lender or the Designee), the Trustee is hereby directed to and shall have no discretion not to as
soon as is commercially reasonably practicable thereafter unconditionally and irrevocably transfer
and assign the Policy and any cash or other assets of the Trust to the Lender or the Designee. For
purposes hereof, the term Policy Loan shall refer to the borrowing effected by the Trust under
the loan documents referenced in Section [ ] of this Trust Agreement.
2. Following the maturity of the Policy Loan (whether at stated maturity, by acceleration
following an event of default or otherwise), if (a) the grantor and/or beneficiaries have not
contributed funds to the Trust on or before three (3) Business Days prior to the maturity date in
an amount sufficient to permit the Trustee to pay the amount due on the Policy Loan in full at the
maturity date, as specified to the Trustee in a written notice delivered to the Trustee by the
Lender, and (b) the Trust does not otherwise have sufficient funds to satisfy the Policy Loan
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1 Substitute Settlor for Grantor if state
trust law uses Settlor in lieu of Grantor.
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For avoidance of doubt, the term Lender shall
include any person that acquires the Policy Loan, either via purchase and
assignment or via a participation interest in the loan.
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in full, immediately following receipt by the Trustee of a notice of default from the Lender
and a written demand for the assignment or transfer of the Policy to the Lender or the Designee,
the Trustee is hereby directed to and shall have no discretion not to as soon as is commercially
reasonably practicable thereafter unconditionally and irrevocably transfer and assign the Policy
and any cash or other assets of the Trust to the Lender or the Designee.
3. Any such transfer and assignment of the Policy shall be effected by the Trustee executing
and delivering on behalf of the Trust to the Lender or the Designee as aforesaid (i) a change of
owner form changing the owner of the Policy to the Lender or the Designee, (ii) a change in
beneficiary form changing the beneficiary of the Policy to the Lender or the Designee and (iii)
such other documents or instruments as shall be reasonably requested by the Lender for the purpose
of effecting such changes in owner and beneficiary and the transfer and assignment of all right,
title and interest in and to the Policy, each of such forms, documents or instruments to be in the
form provided by Lender to the Trustee. Any funds in the Trust to be transferred shall be
transferred by wire transfer of immediately available funds to the account specified in writing by
the Lender to the Trustee.
4. At any time following the receipt of a written notice from the Lender stating that an event
of default has occurred under the Policy Loan and requesting a delivery to the Lender or the
Designee of the original Policy and all amendments and endorsements thereto and any other documents
related to such Policy, the Trustee is hereby directed to and shall have no discretion not to
unconditionally and irrevocably deliver the original Policy and such other documents to the Lender
or the Designee. If requested in writing at any time by the Lender after the execution and delivery
of the change in owner and change in beneficiary forms referred to in paragraph 3 of this Article,
the Trustee shall execute all documents presented to it for execution by Lender to cause the
relevant insurance carrier to issue a verification of coverage form indicating that ownership of
the Policy and the beneficiary under the Policy have been changed to the Lender or the Designee.
5. After the transfer of the Policy and Trust assets as provided in Paragraphs (1), (2), (3)
and (4) of this Article, the Trustee shall thereafter arrange for any filings to be made or actions
to be taken by the Trustee or the Trust that are required prior to the termination of the Trust,
including without limitation, the making of any tax or other filings required by law. Upon the
completion of such filing and the taking of such actions, the Trust shall, subject to obtaining the
consent of the Lender and any Designee, terminate and the Trustee thereafter shall have no further
duties, obligations or liabilities whatsoever to the grantor or beneficiaries hereunder or in
connection with or relating to such transfer and assignment. The Trustee shall engage, at the
expense of the Trust, a firm of independent public accountants (the Accountants) to prepare any
and all tax returns of the Trust that may be required. The Trustee shall have no liability with
respect to the negligence or misconduct of the Accountants and shall only be obligated to (a)
execute tax returns presented to it by the Accountants and file the same with the appropriate tax
authorities and (b) pay the tax shown to be due on such tax returns, to the to the extent of
available funds in the Trust. The Grantor agrees to contribute sufficient funds to the Trust to
provide for the payment of the Accountants tax return preparation fees and to pay any tax shown to
be due on such tax returns, to the extent that the Trust has insufficient funds therefore.
2
6. The grantor acknowledges that in the event that the Trustee is required to transfer and
assign all of the Trusts assets to the Lender under the circumstances described above in
Paragraphs (1), (2), (3) and (4) of this Article, the beneficiaries shall receive no benefits under
the Trust or any Policy owned by the Trustees.
Spendthrift Clause
Notwithstanding any provision contained herein to the contrary:
1. Except as may be required in conjunction with any Policy Loan or as otherwise provided
herein, the interest of any beneficiary in any trust created hereunder shall not be transferred,
assigned or conveyed and shall not be subject to the claims of any creditors of such beneficiary
and any attempted transfer, assignment or conveyance shall be void and of no effect, and the
Trustee shall continue distributing trust property directly to or for the benefit of such
beneficiary as provided for hereunder notwithstanding any transfer, assignment or conveyance, and
notwithstanding any action by creditors.
2. Notwithstanding the foregoing, the interest of any beneficiary in any trust created
hereunder may be pledged to the Lender pursuant to the Policy Loan. In addition, notwithstanding
the foregoing, immediately upon the receipt by the Trustee of a notice of default from the Lender
stating that the interest of a beneficiary in the Trust has been pledged to the Lender pursuant to
the Policy Loan and that an event of default has occurred under the Policy Loan, and that pursuant
to an assignment of beneficial interest previously delivered pursuant to a security agreement, the
interest of the beneficiary in the Trust has been unconditionally and irrevocably assigned and
transferred to the Lender or the Designee, the Trustee shall immediately thereafter reflect on the
books and records of the Trust the assignment and transfer of such beneficial interest to, and the
ownership of such beneficial interest by, the Lender or the Designee.
3. From and after the recordation of such transfer of the beneficial interests in the Trust to
the Lender or the Designee, the Trustee is directed unconditionally and irrevocably not to take any
action with regard to the Trust or the Policy without the prior written consent of the Lender and
any such Designee.
4. In the event the interest of any beneficiary in the Trust created hereunder is transferred,
assigned and re-titled in the name of the Lender or the Designee, as required by paragraph 2 of
this clause, the Lender or Designee shall have the power and right to direct that the Trust be
terminated, after which all of the principal thereof, together with accumulated income (including
any Policy), shall be immediately thereafter unconditionally and irrevocably paid and distributed
to, or re-titled in the name of, the Lender or the Designee by the Trustee.
Authorization for Life Insurance Premium Financing Transaction
The Trustee, on behalf of the Trust, is hereby directed to, and shall cause the Trust to enter into
the following Policy Loan documents:
1.
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Loan Application and Agreement.
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2.
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Risk and Disclosure Statement.
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3.
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Promissory Note.
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4.
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A Collateral Assignment of the Life Insurance Policy.
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5.
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Such other documents or instruments as the Lender may reasonably request in writing and as
presented to it for execution.
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Subject to [section/article where main protective provisions in the Trust Agreement will be
placed], the Trustee shall, at the written direction of the Lender, cause the Trust to take such
actions as the Lender shall specify in connection with the matters set forth in Article 5(a) of the
Loan Application and Agreement and shall pursuant to such written directions cause the Trust to
comply with the remaining covenants set forth in Article 5 of the Loan Application and Agreement.
Subject to [section/article where main protective provisions in the Trust Agreement will be
placed], for so long as the Policy Loan remains outstanding, the Trustee shall cause the Trust to:
(a) upon written direction from the Lender, take such further action and/or execute and
deliver all further assurances, documents and/or instruments as may be reasonably requested in
writing by the Lender in order to (i) effect, administer or enforce the transactions contemplated
by the Policy Loan documents, and (ii) permit the realization of the benefits of any collateral
assignment or pledge of the Policy to the Lender and its assigns.
(b) within one (1) Business Day of its discovery thereof, notify the Lender in writing of any
breaches of the representations and warranties of the Trust under any Policy Loan document.
Insurance On The Life Of The Grantor
1. During the lifetime of the Grantor, the Trustee may receive, as owner and/or beneficiary,
any policy or policies of insurance on the life of the Grantor or the joint lives of the Grantor
and any other person (a Policy), and may apply for, purchase or enter into any agreement for the
purchase of any Policy.
2. The Trustee, on behalf of the Trust, is vested with all right, title and interest in and to
the life insurance policies which may compose part of the Trust estate and is authorized and
empowered to exercise as absolute owner all of the rights, powers, interests, privileges, and
benefits of every kind which may accrue on account of any Policy or interest therein.
3. The Grantor shall have no incidents of ownership, interest or rights of any kind in or to
any of the said Policies which may be included within the Trust estate, or any other property of
the Trust. The Grantor hereby relinquishes all rights and powers in any Policy included within the
Trust estate which are not assignable, and will, at the request of the Trustee, execute all other
instruments reasonably required to effectuate this relinquishment.
4. The Grantor hereby authorizes and directs any insurance company issuing any Policy now or
hereafter included within the Trust estate to recognize the Trustee as the absolute owner of such
Policy, fully entitled to all options, rights, privileges and interests under such Policy.
4
5. In the event that the Trustee receives written notice that a Policy is being contested or
rescinded by a life insurance carrier, the Trustee shall, within three (3) business days of its
receipt thereof, forward such communications and all documents relating to such contest or
rescission action to the Grantor and Lender.
If directed in writing by the Lender
, The
Trustee shall at the written direction and expense of the Trust and Lender cause the Trust to
defend any actions by a life insurance carrier to rescind or contest any Policy.
6. Without limiting the generality of any other provision of this Trust Agreement, it is
expressly understood and agreed by the parties hereto (i) that in no event shall Wells Fargo Bank,
N.A.[Name of Trustee], in its individual capacity have any liability for any representations or
warranties in any Policy application or any document submitted to an insurance company in
connection with any Policy, and (ii) Wells Fargo Bank, [Name of Trustee] in its individual and
representative capacities shall have no duty or obligation, and the parties hereto have no
expectation that it shall, and it shall not undertake, to inquire into or independently verify the
accuracy or completeness in any manner of the representations or warranties made in any Policy
application or any document submitted to an insurance company in connection with any Policy.
7. The Grantor hereby agrees and, as evidenced by its acceptance of any benefits hereunder,
any Beneficiary agrees that the Trustee in any capacity has not provided and will not provide in
the future, any advice, counsel or opinion regarding the tax, financial, investment or insurance
implications and consequences of the formation, funding and ongoing administration of the Trust,
including, but not limited to, income, gift, and estate tax issues, insurable interest issues, and
the initial and ongoing selection and monitoring of annuity product and financing arrangements.
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Notifier Name
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Notifier Address
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Notifier City, State, Zip
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Notifier Phone Number
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Dear
:
A company called Imperial Premium Finance, LLC has allowed me to buy an insurance policy with me as
the insured by lending to me money to pay the premium on the Policy.
As a condition to the loan and as a part of the on-going obligations thereunder, I am asking you to
notify Imperial Premium Finance, LLC of my passing. Please contact Imperial Premium Finance, LLC,
Attention: General Counsel at 701 Park of Commerce Boulevard, Ste. 301, Boca Raton, Florida 33487,
telephone number (888) 364-6775 immediately upon my death.
5
Thank you in advance for assisting me in this process.
Sincerely,
[INSURED]
Insurance Company: [INSURER]
Policy #: [POLICY-NUMBER]
6
LIMITED SPECIFIC POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that [INSURED] hereinafter called Principal does hereby make,
constitute, and appoint IMPERIAL PREMIUM FINANCE, LLC, a Florida limited liability company
hereinafter called Agent, my true and lawful attorney-in-fact, for me and in my name and on my
behalf, giving and granting onto the Agent full power and authority to act as to limited matters
stated below pertaining to the loan and trust documents herein described and no others.
Name of Lender: IMPERIAL PREMIUM FINANCE, LLC
Name of Life Insurance Trust: [TRUST-NAME]
Name of Trustee: [TRUSTEE-NAME]
Name of Borrower: [TRUST-NAME]
Name of Grantor: [INSURED]
PURPOSE: In the event of a clerical or typographical error is discovered on any document involving
the loan of monies by Agent to the Life Insurance Trust to fund the payment of life insurance
premiums, my Agent is hereby authorized to correct any clerical or typographical error and to
initial, sign and deliver, any instrument which my Agent determines to be necessary to effectuate a
correction. Specifically my Agent may make a correction limited to the matters stated below. The
undersigned declared that any and all corrections made by my Agent shall be as valid as if they had
been initialed, signed and delivered by me personally. The undersigned ratifies whatsoever my said
Agent shall lawfully do or cause to be done in the correction of typographical errors as limited
below.
SPECIFIC DUTIES:
My Agent is authorized to correct clerical and typographical errors as to my name, address, or
information concerning my loan documents that are subject to the loan transaction between the Life
Insurance Trust, the Insured and the Lender, if such correction is deemed verified and necessary to
process loan documents and/or the life insurance trust. My agent may make the corrections, initial
the instruments and process as it sees fit.
My Agent shall notify in writing [Name of Trustee], as Trustee of the Life Insurance Trust, of any
actions taken by the Agent pursuant to this Limited Specific Power of Attorney.
It is expressly understood and agreed by any recipient hereof that in no event shall [Name of
Trustee], as trustee of the [Insert Trust Name] (the Trust), in its individual capacity have any
liability for the representations, warranties, covenants, agreements or other obligations of the
Trust hereunder or under any schedule, exhibit, appendix or other document in connection with this
Limited Specific Power of Attorney, as to all of which recourse shall be had solely to the assets
of the Trust, and under no circumstances shall [Name of Trustee] as trustee of the Trust be
personally liable for the payment of any indebtedness or expenses of the Trust or be liable for the
breach or failure of any obligation, representation, warranty or covenant made or undertaken by
the Trust under this Limited Specific Power of Attorney or under any schedule, exhibit, appendix or
other document in connection with this Limited Specific Power of Attorney.
IN WITNESS WHEREOF, the Principal has hereunto set his/her hand and seal, on the day and year first
above written.
[Signatures Follow on Next Pages]
[INSURED]
This day personally appeared before me, the undersigned authority in and for said County and
State, the within named who acknowledged signing and delivering the above and foregoing on the day
and date therein mentioned as a free and voluntary act and deed and for the purposes therein
expressed.
GIVEN under my hand and official seal of office this the _day of 2009.
My Commission Expires:
2
PROMISSORY NOTE
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Maximum Principal
[PRINCIPAL]
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Loan Date
[DATE]
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Maturity
[MATURITY-DATE]
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Loan No.
[LOAN-NUMBER]
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Fixed/Variable Rate
[FIXED-FLOATING]
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A
ccount
******
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References in the shaded area are for Lenders use only and do not limit the applicability of this document to any particular loan or item.
Any items above containing ***** or left blank have been omitted due to text length limitations
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Borrower:
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[TRUST-NAME]
[TRUST-ADDRESS]
[TRUST-CITY-STATE] [TRUST-ZIP]
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Lender:
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[LENDER-NAME], LLC
701 Park of Commerce Blvd.
Suite 301
Boca Raton, FL 33487
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Maximum Principal Amount: [MAXIMUM PREMIUMS TO BE ADVANCED PLUS ORIGINATION FEE], Initial Loan
Amount Advanced: [FIRST-YEAR-PREMIUM], Initial Rate: [INTEREST-RATE], Date of Note: [DATE]
PROMISE TO PAY. [TRUST-NAME]
(Borrower) promises to pay to the order of [LENDER-NAME] (Lender)
in lawful money of the United States of America, all principal, together with accrued interest and
all other charges, owed under the terms of this Promissory Note as hereinafter set forth and the
Loan Agreement (as defined below). The maximum principal that may be advanced to Borrower shall
be
[MAXIMUM PREMIUMS TO BE ADVANCED PLUS ORIGINATION FEE]
, or such lesser amount as determined in
accordance with that certain Loan Application and Agreement (the Loan Agreement) of even date
herewith between Borrower and Lender and Lender shall have no obligation to make any advance in
excess of that amount. Any advance shall be made under, and in accordance with, the Loan
Agreement. In the event the unpaid balance of this Promissory Note ever is greater than the
maximum principal advance, Borrower agrees to repay immediately the excess upon Lenders written
demand. Capitalized terms used but not defined herein shall have the meanings assigned thereto in
the Loan Agreement.
PAYMENT.
The principal amount of this Promissory Note, together with all accrued but unpaid
interest and all other charges, shall be due and payable in full in one lump sum on
[MATURITY-DATE], or if earlier, either: (a) one (1) Business Day after payment of any proceeds of
the Life Insurance Policy to or for the benefit of the Borrower; or (b) if the Life Insurance
Policy is rescinded for any reason, one (1) Business Day after the return of any Life Insurance
Policy premium. All payments shall be applied in the following order: (i) to any collection costs
Lender may have incurred in procuring Borrowers performance on this Promissory Note; (ii) to any
fees due under the Loan Agreement; (iii) to the outstanding interest which has accrued on the
balance of the Promissory Note; and (iv) to the outstanding principal balance of the Promissory
Note. All interest under the Promissory Note shall be calculated on the basis of a 360-day year
for the actual number of days elapsed in an interest period (actual/360 method). Determination of
a rate of interest by the Lender shall, in the absence of manifest error, be conclusive and binding
upon the Borrower. Borrower will pay Lender at Lenders address shown above or at such other place
as Lender may designate in writing. All payments shall be made in lawful money of the United States
to Lender at the address set forth above or at such other place as the Lender under this Promissory
Note may designate in writing (Payment Address).
INTEREST RATE.
The Interest Rate on this Promissory Note shall be set (or initially set) at
[INTEREST-RATE] per annum [
and shall compound on a monthly basis][delete in [GEORGIA and other
states not permitting compounding of interest] and substitute on a simple interest basis
]. The
interest rate on this Promissory Note shall be a
[FIXED-FLOATING]
. If a fixed rate, it shall be
fixed at the Interest Rate set forth in the preceding sentence; if a floating or variable rate, it
shall be reset periodically as follows. If the interest rate on this Promissory Note is set as
variable/floating and not fixed, the Interest Rate shall initially be as set forth in the first
sentence of this paragraph and shall be adjusted thereafter on the first day of each month during
the term of this Promissory
1
Note. Each date on which the interest rate could vary or change is called a Change Date.
Beginning with the first Change Date, the Interest Rate will be based on an Index plus the Spread.
The Index is the [INDEX] on the Change Date which is publicly announced in the Money Rates
section of The Wall Street Journal, Eastern Edition, or such other similar publication, as is
reasonably determined by the Lender. If the Index is no longer available, the Lender will choose
a new index which is based upon comparable information. If the Change Date is not a Business Day,
the rate as announced on the next Business Day shall be used.
On each Change Date, the Lender will calculate the new interest rate by adding [SPREAD] basis
points (the Spread) to the Index. Subject to the limits set forth herein, this amount will be
the new interest rate until the next Change Date. The interest rate the Borrower is required to
pay under this Promissory Note will not be greater than 16% or less than 9%. Any new interest rate
will become effective on each Change Date.
[At the end of each month, accrued interest as calculated above shall be added to the principal
amount due under the Promissory Note, and interest shall accrue thereafter on such increased
principal amount.][DELETE IN GA and other states not permitting the compounding of interest]
NOTICE: Under no circumstances will the effective rate of interest on this Promissory Note be more
than the maximum rate allowed by applicable law.
PREPAYMENT.
Borrower agrees that all loan fees, including the Origination Fee and the Yield
Maintenance Premium, and other prepaid finance charges are earned fully as of the date of this
Promissory Note and will not be subject to refund upon early payment (whether voluntary or as a
result of default), except: (i) in the case of death of the Insured prior to maturity, the Yield
Maintenance Premium will be waived, or (ii) as otherwise required by law. Borrower agrees not to
send Lender payments marked paid in full, without recourse, or similar language. If Borrower
sends such a payment, Lender may accept it without losing any of Lenders rights under this
Promissory Note, and Borrower will remain obligated to pay any further amount owed to Lender. All
written communications concerning disputed amounts, including any check or other payment instrument
that indicates that the payment constitutes payment in full of the amount owed or that is
tendered with other conditions or limitations or as full satisfaction of a disputed amount must be
mailed or delivered to the Payment Address. No privilege is reserved by Borrower to prepay any
principal due hereunder and under the Loan Agreement prior to the Maturity Date, except that the
Borrower may after giving five (5) days prior written notice to Lender, prepay in full, but not in
part, all principal and interest to and including the date on which payment is made, along with all
sums, amounts, advances, or charges due under the Loan Agreement, this Promissory Note or the other
Financing Documents, upon the payment of the Yield Maintenance Premium.
LATE CHARGE.
Borrower shall pay to Lender a late charge in an amount equal to three percent (3%)
of any amounts that are not paid within five (5) days after the due date thereof to cover the extra
expense involved in handling delinquent payments. Lenders collection of a late charge hereunder
shall not be deemed a waiver by Lender of any of its rights under this Promissory Note, or any
other document between Borrower and Lender.
SECURITY.
This Promissory Note is entitled to the benefit of, among other things, that certain
Assignment Of Life Insurance Policy As Collateral (Collateral Assignment) made by Borrower in
favor of [
], as collateral agent for the Lender (the Collateral Agent), pursuant
to which the Collateral Agent is granted a first priority security interest in the Life Policy (as
such term is defined in the Collateral Assignment). This Promissory Note shall be subject to the
terms and conditions set forth in such Collateral Assignment, the Loan Agreement, and the other
Financing Documents.
INTEREST AFTER DEFAULT.
Upon default, all amounts due under this Promissory Note shall bear
interest from the date of acceleration or maturity at the interest rate set forth in this
Promissory Note (as it may be adjusted from time to time) plus 2% per annum.
DEFAULT.
Each of the following shall constitute an event of default (Event of Default) under
this Promissory Note:
2
Payment Default.
Borrower fails to make any payment within three (3) Business Days after
the same becomes due and payable under this Promissory Note, the Loan Agreement, or any
other Financing Document.
Other Defaults.
Borrower fails to comply with or to perform any other term, obligation,
covenant or condition contained in this Promissory Note, the Loan Agreement or in any of the
other Financing Documents or to comply with or to perform any term, obligation, covenant or
condition contained in any other agreement between Lender and Borrower.
False Statements.
Any warranty, representation or statement made or furnished to Lender by
Borrower, the Insured or on Borrowers behalf under this Promissory Note, the Loan Agreement
or any other Financing Document is false or misleading in any material respect, either now
or at the time made or furnished or becomes false or misleading at any time thereafter.
Related Agreements.
The Life Insurance Policy, Promissory Note, Loan Agreement, Security
Agreement or any other Financing Document ceases to be in full force and effect (including
failure of any collateral document to create a valid and perfected security interest or
lien) at any time and for any reason; the Borrower becomes a revocable trust, contests the
validity or enforceability of any Financing Document or denies that it has any further
liability under any Financing Document to which it is a party, or cancels or terminates, or
attempts to cancel or terminate, the Life Insurance Policy; or the Insurer contests the Life
Insurance Policy based on the Borrower lacking an insurable interest in the life of the
Insured.
Indebtedness, Creditor or Forfeiture Proceedings.
Any garnishment of any of Borrowers
accounts, attachment, lien, levy, additional encumbrance or additional security interest
being placed upon any of the Collateral, or any commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any other method, by
any creditor of Borrower or by any governmental agency against any Collateral, and which is
not discharged in full within one (1) day of the placement thereof. However, this Event of
Default shall not apply if there is a good faith dispute by Borrower as to the validity or
reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and
if Borrower gives Lender written notice of the creditor or forfeiture proceeding and
deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in
an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond
for the dispute.
Insolvency or Default of Borrower
. The Borrower is: (i) dissolved, liquidated or
terminated; (ii) is unable to pay its debts as they mature; (iii) makes an assignment for
the benefit of creditors; (iv) is bankrupt or insolvent; (v) seeks appointment of, or
becomes the subject of an order appointing, a trustee, conservator, liquidator or receiver
as to all or part of its assets; (vi) commences, approves or consents to, or is the debtor
in, any case or proceeding under any bankruptcy, reorganization or similar law, and in the
case of an involuntary case or proceeding, such case or proceeding is not dismissed thirty
(30) days following its commencement; (vii) is the subject of an order for relief in an
involuntary case under federal bankruptcy law; (viii) the Borrower defaults under any loan,
extension of credit, security agreement, purchase or sales agreement, or any other
agreement, in favor of any other creditor or person that may materially affect any of
Borrowers property or Borrowers ability to repay this Promissory Note or perform
Borrowers Obligations under this Promissory Note, the Loan Agreement or any of other
Financing Documents; or (ix) Borrower violates any Law.
Insolvency or Default of Insured or Guarantor.
(i) The Insured or any Guarantor makes an
assignment for the benefit of creditors; (ii) The Insured or any Guarantor is adjudicated a
bankrupt or insolvent; (iii) The Insured or any Guarantor seeks appointment of, or is the
subject of an order appointing, a trustee, conservator, or receiver as to all or part of his
assets (iv) The Insured or any Guarantor commences, approves or consents to, or is the
debtor in, any case or proceeding under any bankruptcy or similar law and, in the case of an
involuntary case or proceeding, such case or proceeding is not dismissed thirty (30) days
following its commencement; (v) The Insured or any Guarantor is the subject of an order for
relief in an involuntary case under federal bankruptcy law; (vi) Borrower defaults under any
loan, extension of credit, security agreement, purchase or sales agreement, or any other
agreement, in favor of any other
3
creditor or person that may materially affect any of Borrowers property or Borrowers
ability to repay the Obligations; or (vi) any Guarantor defaults under the terms of the
Personal Guaranty.
Events Affecting Guarantor.
Any of the preceding events occurs with respect to any
Guarantor of any of the indebtedness under this Promissory Note or any Guarantor dies or
becomes incompetent, or revokes or disputes the validity of, or liability under, any
guaranty of the indebtedness evidenced by this Promissory Note; in the event of a death of a
Guarantor, Lender, at its option, may, but shall not be required to, permit the Guarantors
estate to assume unconditionally the obligations arising under the Personal Guaranty in a
manner satisfactory to Lender, and, in doing so, cure any Event of Default.
Adverse Change.
A material adverse change occurs in Borrowers financial condition, or
Lender believes the prospect of payment or performance of the Obligations is materially
impaired.
Cure Provisions.
Other than as set forth in the preceding clauses of this Section, failure
by the Borrower or Insured, as applicable, to perform in any material respect any of its
obligations under this Promissory Note, Loan Agreement, Security Agreement or any other
Financing Document to which either is a party if such failure is not remedied on or prior to
the fifteenth (15th) day after written notice of such failure is given to the Borrower or
the Insured, respectively, by the Lender.
LENDERS RIGHTS.
It is stipulated and agreed in the event one or more installments are not paid
when the same falls due, or in default of any covenant herein, then the entire balance of the
indebtedness shall at once or at any time thereafter, at the option of the payee of this Promissory
Note, become due, payable and collectible. Demand, protest, and notice of demand, protest, and
non-payment are hereby waived by the undersigned.
ATTORNEYS FEES: EXPENSES.
Lender may hire or pay someone else to help collect this Promissory
Note if Borrower does not pay. Borrower will pay Lender the amount of these costs and expenses,
which includes, subject to any limits under applicable law, Lenders reasonable attorneys fees and
Lenders legal expenses whether or not there is a lawsuit including reasonable attorneys fees and
legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay
or injunction), and appeals. If not prohibited by applicable law, Borrower also will pay any court
costs, in addition to all other sums provided by law.
JURY WAIVER.
LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION,
PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR BORROWER AGAINST THE OTHER.
GOVERNING LAW
. THIS PROMISSORY NOTE WILL BE GOVERNED BY THE LAWS OF THE STATE OF
[JURISDICTION-UC] WITHOUT REGARD TO ITS CONFLICTS OF LAW PROVISIONS. THIS PROMISSORY NOTE HAS BEEN
ACCEPTED BY LENDER IN THE STATE OF [JURISDICTION-UC]. BORROWER AGREES TO BE SUBJECT TO THE
EXCLUSIVE JURISDICTION OF [TRUST-CITY-STATE-UC] CONCERNING ANY DISPUTES ARISING OUT OF OR RELATING
TO THIS PROMISSORY NOTE AND HEREBY SUBMITS TO SUCH JURISDICTION.
REQUESTS FOR SPECIAL SERVICES.
In general, there are no borrower-paid fees associated with the
routine servicing of a loan. Borrower, however, may occasionally find it necessary to request
services for which there is a charge. The services that fall outside of routine servicing include,
without limitation, providing the following documents upon request: duplicate year-and statements,
copies of loan documents or periodic statements, payment histories, and replacement coupon books.
Borrower agrees to pay the fees imposed by Lender in connection with providing the requested
services, as in effect from time to time. Borrower also agrees to pay facsimile or other fees
imposed by Lender if these services are requested on an expedited basis. All such fees shall be
fully earned and non-refundable and shall be paid upon Lenders demand (provided, that Lender, in
its discretion, may add the fees to the principal indebtedness due, and accrue interest thereon,
and the same shall be due, if not sooner demanded by Lender upon the maturity of the indebtedness
without further demand). The fees shall not be deemed to be interest or charges for the use of
money.
4
SUCCESSOR INTERESTS; REGISTERED OBLIGATION.
The terms of this Promissory Note shall be binding
upon Borrower, and upon Borrowers heirs, personal representative, successors and assigns, and
shall inure to the benefit of Lender and its successors and assigns. It is intended that all
interest paid under this Promissory Note shall constitute portfolio interest within the meaning
of Sections 871(h) and 881(c) of the Internal Revenue Code of 1986, as amended (the Code), and
the Treasury Regulations promulgated thereunder (the Regulations). This Promissory Note is
registered as to both principal and stated interest with the Borrower, and, notwithstanding
anything herein to the contrary, this Note may be transferred or assigned by the Lender only by a
surrender of this Promissory Note to the Borrower by the Lender and: (1) the reissuance of this
Promissory Note by the Borrower to the transferee or assignee; or (2) the issuance by the Borrower
of a new note to the transferee or assignee. In addition, if any such transfer or assignment is to
any transferee or assignee that is not a United States person within the meaning of Section
7701(a)(30) of the Code, then such transferee or assignee shall submit to the Borrower on or before
the date of such assignment a statement, meeting the requirements of Section 871(h)(5) of the Code,
that the beneficial owner of the obligation is not a United States person and any other statement
or form required by the Code or Regulations for purposes of determining exemption from U.S.
withholding, information reporting and backup withholding with respect to all payments to be made
to such transferee or assignee. Unless and until there has been a valid transfer or assignment of
this Promissory Note and of all of the rights hereunder by the Lender in accordance with the terms
of this Promissory Note, the Borrower shall deem and treat the Lender as the absolute beneficial
owner and holder of this Promissory Note and of all of the rights hereunder for all purposes
(including, without limitation, for the purpose of receiving all payments to be made under this
Promissory Note). Any attempted transfer or assignment in violation of this paragraph shall be void
and of no force and effect.
Subject to the foregoing, as used herein, the terms Borrower and Lender shall be deemed to
include their respective transferees, successors and assigns, whether by voluntary action of the
parties or by operation of law.
GENERAL PROVISIONS.
If any part of this Promissory Note cannot be enforced, this fact will not
affect the rest of this Promissory Note. Borrower does not agree or intend to pay, and Lender does
not agree or intend to contract for, charge, collect, take, reserve or receive (collectively
referred to herein as charge or collect), any amount in the nature of interest or in the nature of
a fee for this loan, which would in any way or event (including demand prepayment, or acceleration)
cause Lender to charge or collect more for this loan than the maximum Lender would be permitted to
charge or collect by federal law or the law of the State of [JURISDICTION] (as applicable). Any
such excess interest or unauthorized fee shall, instead of anything stated to the contrary, be
applied first to reduce the principal balance of the amounts due hereunder to the extent of such
excess or, at the option of the Borrower, shall be returned to the Borrower. Lender may delay or
forgo enforcing any of its rights or remedies under this Promissory Note without losing them.
Borrower and any other person who signs, guarantees or endorses this Promissory Note, to the extent
allowed by law, waive presentment, demand for payment, and notice of dishonor. This Promissory
Note is the Promissory Note referred to in, and is entitled to the benefits of, the Loan Agreement
and the other Financing Documents.
PRIOR TO SIGNING THIS PROMISSORY NOTE BORROWER HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS
PROMISSORY NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF
THE PROMISSORY NOTE.
It is expressly understood and agreed by any recipient hereof that in no event shall [Name of
Trustee], as trustee of the Borrower, in its individual capacity have any liability for the
representations, warranties, covenants, agreements or other obligations of the Borrower hereunder
or under any schedule, exhibit, appendix or other document in connection with this Promissory Note,
as to all of which recourse shall be had solely to the assets of the Borrower, and under no
circumstances shall [Name of Trustee] as trustee of the Borrower be personally liable for the
payment of any indebtedness or expenses of the Borrower or be liable for the breach or failure of
any obligation, representation, warranty or covenant made or undertaken by the Borrower under this
Promissory Note or under any schedule, exhibit, appendix or other document in connection with this
Promissory Note.
5
BORROWER:
[TRUST-NAME]
BY: [Name of Trustee], solely as Trustee
On
, 2008, before me, the undersigned, personally appeared
,
personally known to me or proved to me on the basis of satisfactory evidence to be the individual
whose name is subscribed to the within instrument, and he or she acknowledged to me that he or she
is a
of [Name of Trustee], which executed the foregoing instrument as Trustee of
the [Life Insurance Trust Name]; and that he or she was authorized by general signing authority
resolutions adopted by [Name of Trustee] to execute documents such as this instrument.
6
OUT OF STATE CLOSING AFFIDAVIT
STATE OF
COUNTY OF
BEFORE ME, the undersigned, a Notary Public in and for the State aforesaid, personally
appeared
[TRUSTEE-NAME]
, the Trustee of the
[TRUST-NAME]
(collectively, the Borrower), who, being
by me first duly sworn, stated:
1. On the date hereof, the Borrower executed a promissory note (the Note) of even date
herewith in the principal amount of
[FIRST-YEAR-PREMIUM]
in favor of
[LENDER-NAME], LLC
, a Florida
limited liability company (collectively, the Lender) in
County,
.
2. The Borrower personally delivered the Note to Lender, and Lender accepted the Note on the
date hereof in
County,
.
DATED this
day of
, 2009.
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Signature of Borrower:
[TRUST-NAME]
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Name:
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[TRUSTEE-NAME]
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Title:
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Trustee
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Signature of Lender
(or Authorized Agent):
[LENDER-NAME], LLC
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Name:
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Title:
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Authorized Agent
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Sworn to and subscribed before me
this
day of
, 2009.
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Notary Public
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Print Name:
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State and County Aforesaid
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My Commission Expires:
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1
REPRESENTATIONS, WARRANTIES AND COVENANTS OF AGENT
The undersigned (the
Agent(s)
), hereby makes the following representations,
warranties and covenants in favor of IMPERIAL PREMIUM FINANCE, LLC AND IMPERIAL FINANCE & TRADING,
LLC, each a Florida limited liability company and [Name of Trustee], as trustee (collectively, the
Reliance Parties
), knowing that the Reliance Parties have and shall rely thereon in
making certain financial accommodations relating to the financing of that certain life insurance
policy or policies (the
Policy
) identified by the insureds name and policy number on
Exhibit A hereto, which Exhibit shall be amended from time to time by executing a new Exhibit
A, which shall be attached to and incorporated into the prior Exhibit A, and to which each and
every one of the representations, warranties and covenants herein shall apply. The Agent shall not
be responsible for the inaccuracies and/or omissions on the part of the insured, with the exception
of those of which the Agent had or should have had knowledge.
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a)
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To the best of my knowledge, insured
1
is the grantor under that
certain irrevocable life insurance trust (the Trust) that has been formed to own the
Policy.
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b)
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Other than any pledge or (collateral) assignment interest of the Policy granted
to the Reliance Parties to secure the financing provided to the Trust, no person or
entity other than the Trust and the beneficiaries of the Trust have an interest in the
Policy, except as provided on Schedule I. I have not paid, loaned or otherwise advanced
to the Trust, the insured, the insureds spouse or the Policys issuing insurance
company (the Carrier) any funds for the purpose of paying premium payments on the
Policy. To the best of my knowledge, except as provided on Schedule I, no person other
than the insured, the insureds spouse or the Reliance Parties has paid, loaned or
otherwise advanced to the Trust or the Carrier any funds for the purpose of paying any
portion of any premium payment due with respect to the Policy.
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c)
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To the best of my knowledge, I have completed the Policy application and all
related documents accurately and completely and there are no material omissions in the
application or related documents.
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d)
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I currently hold all licenses required to be the writing Agent on the
referenced Policy, and all such licenses are current and in full force and effect.
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e)
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Any information provided to the Carrier in connection with applying for and/or
obtaining the Policy is complete and current including, but not limited to, providing
the Carrier with copies of the irrevocable life insurance trust and the loan documents
and any subsequent changes thereto, if requested by the Carrier. Furthermore, the Agent
has accurately and thoroughly provided any and all other information requested by the
Carrier.
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f)
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The Reliance Parties may call [
], an employee of the Carrier
(the Insurance Company), at [
( )
] to confirm that the
Policy was issued on a form approved by the [JURISDICTION] Department of Insurance
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1
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If grantor is a person other than insured,
state name of such person and their relationship to the insured.
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and that the Policy has been collaterally assigned as contemplated under the
financing arrangement.
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g)
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The Agent has not paid or offered, directly or indirectly, any inducement, nor
is the Agent aware of any inducement paid or offered, to the Insured or any other party
affiliated with the Insured.
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h)
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To the best of the Agents knowledge, the entire application for the Policy is
accurate and contains no omissions or errors, and all questions posed by the Carrier in
connection with the application for the Policy have been answered truthfully and
without omission, including, but not limited to insureds net worth and other financial
representations.
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i)
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I am aware of the written and unwritten guidance and corresponding
questionnaires provided by the Carrier in connection with the application for the
Policy where premiums are financed, and have provided full and correct copies of same
to the Reliance Parties. The application and financing arrangement for the Policy are
compliant with the Carriers instructions and all related questionnaires have likewise
been provided to the Carrier and to the best of my knowledge, same has been fully and
accurately completed.
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j)
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The Agent shall promptly, within two (2) business days, upon receipt of any
notice in connection with the Policy, deliver such notice to the Reliance Parties via
fax and United States Postal Service and shall use its best efforts to make the
Reliance Parties aware of any correspondence or other action by the Carrier which could
cause the coverage to lapse, to be rescinded, or impacted in any other material way
whatsoever.
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k)
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The Agent agrees that a breach of this agreement shall result in damages that
are not quantifiable and agrees to liquidated damages in the amount of [2XLOANAMOUNT],
in the event of a breach by the Agent. The liquidated damages shall not be construed as
a penalty or forfeiture.
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1)
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Agent shall execute and deliver to the Reliance Parties that certain
Authorization to Conduct Credit and Criminal Background Checks, annexed hereto as
Exhibit B.
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These representations, warranties and covenants shall survive until the tenth (10th) anniversary of
this agreement.
This agreement shall be governed by the laws of the State of Florida.
Any and all controversies, claims, disputes, rights, interests, suits or causes of action arising
out of or relating to this agreement and the negotiations relating thereto, or the breach thereof,
shall be brought in any court of competent jurisdiction located in Palm Beach County, Florida and
the parties consent to such exclusive jurisdiction and exclusive venue in said county.
2
Wherefore, the Agent executes this agreement this ___day of
, 2009, in favor of the
Reliance Parties.
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ACKNOWLEDGED BY:
IMPERIAL PREMIUM FINANCE, LLC
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By:
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Name:
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Jonathan Neuman
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Title:
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President
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IMPERIAL FINANCE & TRADING, LLC
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By:
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Name:
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Jonathan Neuman
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Title:
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President
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3
Schedule I
EXHIBIT A
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Insured:
Policy Number:
Insurer:
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[INSURED]
[POLICY-NUMBER
]
[INSURER]
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To the best of the Agents knowledge, the Insured is obtaining this Policy for estate planning
and/or preservation purposes. Any other purpose should be stated below:
1
EXHIBIT B
Authorization to Conduct Credit and Criminal Background Checks
I, [AGENT], residing at [AGENT-ADDRESS], hereby authorize The Reliance Parties or any of their
agents or designees, to conduct any and all criminal background reports, searches or checks and any
and all credit history reports, searches or checks which it in its sole discretion and judgment
deems necessary or advisable.
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Dated:
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Agent Signature
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Social Security #
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STATE OF
COUNTY OR CITY OF
On the day of ___day of
, in the year ___before me, the undersigned,
personally appeared [AGENT], personally known to me or proved to me on the basis of satisfactory
evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument, and
acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by
his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which
the individual(s) acted, executed the instrument.
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Notary
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My Commission expires on
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1
BENEFICIARY PLEDGE AGREEMENT
THIS BENEFICIARY PLEDGE AGREEMENT
(this Pledge Agreement) [DATE], is made and executed between
[BENEFICIARY-NAME] (Beneficiary), a beneficiary of the [TRUST] (the Trust) and IMPERIAL PREMIUM
FINANCE, LLC, a Florida limited liability company (Lender).
RECITALS
A. Pursuant to the Loan Application and Agreement (the Loan Agreement) dated as of the date
hereof between Lender and [TRUSTEE], the Trustee of the Trust, Lender has loaned or will loan to
Trust an amount under the Loan Agreement to be used by the Trust to pay premiums on a Life
Insurance Policy;
B. The Trust is the sole owner and beneficiary of the Life Insurance Policy, which the Trust
holds pursuant to the terms of the Trust Agreement;
C. The Beneficiary will derive significant benefits from the loan to the Trust under the Loan
Agreement by reason of his or her interest in the Trust;
D. In order to induce the Lender to make the advance contemplated by the Loan Agreement and
extend credit to the Trust as provided in the Loan Agreement, the Beneficiary has agreed to grant a
security interest in the Beneficiarys beneficial interest in the Trust to the Lender in accordance
with the terms and conditions of this Pledge Agreement.
NOW, THEREFORE,
intending to be legally bound and in consideration of the matters described in
the foregoing Recitals, which Recitals are incorporated herein and made a part hereof, and for
other good and valuable consideration the receipt and sufficiency of which are acknowledged,
Beneficiary and Lender hereby covenant and agree as follows:
1.
GRANT OF SECURITY INTEREST
. Beneficiary hereby grants, gives, conveys and pledges to Lender
a first priority security interest in all of Beneficiarys right, title and interest whether now
owned or hereafter acquired and wherever located, in and to the Collateral to secure the
Obligations and agrees that Lender shall have the rights stated in this Pledge Agreement with
respect to the Collateral, in addition to all other rights that Lender may have by law.
2.
COLLATERAL DESCRIPTION.
The word Collateral means all of the Beneficiarys right, title
and interest in and to the beneficial interests in the Trust, the Trust Agreement and the assets
held by the Trust under the Trust Agreement and any Financing Documents, including without
limitation the Trusts entire beneficial interest in and to the Life Insurance Policy and the death
benefits payable thereunder, and all proceeds of all of the foregoing.
3.
BENEFICIARYS REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL
.
With respect to the Collateral, Beneficiary represents and warrants to Lender that:
a.
Ownership
. On and after the Initial Premium Funding Date, the Beneficiary has, and will do
nothing to impair, full, complete and absolute ownership of the Collateral and all rights
thereunder free and clear of any Encumbrances, options, purchase rights or commitments of any kind
except as otherwise contemplated by the Financing Documents. Under the terms of the Trust, the
Beneficiary has, and shall do nothing to impair, the sole and absolute right, subject to the terms
of the Financing Documents, to pledge or assign such beneficial interests as collateral and receive
all proceeds and other amounts now or in the future due and payable in respect to the Collateral.
On and after the Initial Premium Funding Date, Beneficiary has not taken and shall not take, any
actions to provide any Person other than the Beneficiary any interest in or claim to the Collateral
other than as expressly provided in the Financing Documents.
b.
Right to Grant Security Interest
. Beneficiary has the full right, power and authority to
enter into this Pledge Agreement and to grant a security interest, assignment and pledge of the
Collateral to Lender as provided herein, and this Pledge Agreement and the security interest
created by Beneficiary hereunder does not violate or breach, or result in the creation of an
Encumbrance under, the Trust Agreement or any other document, instrument, mortgage or agreement to
which Beneficiary is a party or to which its assets are bound.
c.
Trust Agreement
. A true and correct copy of the Trust Agreement, including all amendments,
supplements and other modifications thereto, has been previously delivered by Trust to Lender. The
Trust Agreement is a legal, valid and binding agreement, enforceable by Beneficiary in accordance
with its terms.
d.
Consents
. No consent, approval, authorization or other order or other action by, and no
notice to or filing with, the trustee of the Trust or any other person is required (i) for the
grant of the security interest by Beneficiary in the Collateral pursuant to this Pledge Agreement
or for the execution, delivery or performance of this Pledge Agreement by Beneficiary, or (ii) for
the exercise by Lender of any of its rights provided for in this Pledge Agreement or the remedies
in respect of the Collateral pursuant to this Pledge Agreement.
e.
Due Authorization, Execution and Delivery; Valid and Binding Obligation
. This Pledge
Agreement has been duly authorized, executed and delivered by Beneficiary and constitutes a legal,
valid and binding obligation of Beneficiary enforceable by Lender against Beneficiary in accordance
with its terms.
f.
No Prior Assignment
. Beneficiary has not previously granted a security interest in any of
the Collateral to any other creditor or other person.
g.
No Further Transfer
. Beneficiary shall not sell, assign, encumber, or otherwise dispose of
any of Beneficiarys rights in the Collateral except as expressly provided in this Pledge
Agreement.
h.
No Defaults
. There are no defaults relating to the Collateral, and there are no offsets or
counterclaims to the same. Beneficiary will strictly and promptly do everything required of
Beneficiary under the terms, conditions, promises, and agreements contained in or relating to the
Collateral.
2
i.
Proceeds
. Any and all replacement or renewal certificates, instruments, or other benefits
or proceeds related to the Collateral that are received by Beneficiary shall be held by Beneficiary
in trust for Lender and immediately shall be delivered by Beneficiary to Lender to be held as part
of the Collateral.
j.
Location
. Beneficiarys primary office and principal place of business or residence if an
individual and the place where Beneficiary keeps Beneficiarys records concerning the Collateral
are located at the address set forth in Section 9(i) below. If Beneficiary changes Beneficiarys
name or address, or the name or address of any person granting a security interest under this
Pledge Agreement changes, Beneficiary will promptly notify the Lender of such change, but in no
event later than thirty (30) days following such change.
k.
Further Acts
. Beneficiary will, at its sole expense, promptly execute, acknowledge and
deliver all such instruments and take all such actions as Lender from time to time may request in
order to ensure to Lender the benefits of its lien in and to the Collateral intended to be created
by this Pledge Agreement, including the filing of any necessary financing statements or
continuation statements, which may be filed by Lender with or (to the extent permitted by law)
without the signature of Beneficiary, and will cooperate with Lender, at Beneficiarys expense, in
obtaining all necessary approvals and making all necessary filings under federal, state, local or
foreign law in connection with such lien or any sale or transfer of the Collateral.
4.
PERFECTION AND PROTECTION OF SECURITY
. The Beneficiary makes the following
representations, warranties and covenants to the Lender from the Execution Date until the
Obligations are paid in full:
a. (i) The pledgors right, title and interest in any Collateral is and shall be free from any
Encumbrance except for the security interest and lien created hereby and pursuant to the other
Financing Documents; and
(ii) The Pledgor shall not sell or otherwise dispose of, or pledge, mortgage or create, or
suffer to exist a lien on, the Collateral in favor of any person other than the Lender (except as
permitted in the Loan Agreement).
b. The Beneficiary authorizes the Lender to file financing statements relating to the
Collateral under the Uniform Commercial Code (UCC) containing the information set forth on
Schedule B hereto in the jurisdictions indicated in this Pledge Agreement or as otherwise
determined by the Lender. Subject to the filing of continuation statements in respect of such
financing statements required from time to time under the UCC, (i) the security interest in the
Collateral, to the extent the same can be perfected by filing of financing statements under the
UCC, constitutes and will constitute a perfected first priority security interest therein, subject
to no other Encumbrance which is perfected by filing of financing statements, and (ii) subject
further to the Lenders obtaining and maintaining possession or control over Collateral as to which
a security interest can be perfected by possession or control under the UCC, the security interest
in the Collateral, to the extent the same can be perfected under the UCC, constitutes and will
constitute a perfected first priority security interest therein, subject to no other Encumbrance;
provided that continuation of such security
3
interest in the proceeds of the Collateral is limited by the provisions of Sections 9-203,
9-315 and 9-322 of the UCC.
c. There is no financing statement naming the Beneficiary or any of its predecessors in
interest as debtor now on file or registered in any public office evidencing any Encumbrance on the
Collateral, or intended so to be and the Beneficiary (including any of its predecessors in
interest) has not filed or authorized the filing of, any financing statement relating to any of its
right, title or interest in or to any of the Collateral, except financing statements filed or to be
filed in respect of and covering the security interest and lien of the Lender granted and provided
for in this Pledge Agreement and the other Financing Documents.
d. The Beneficiary shall cause the Trust to annotate its books and records to reflect the
pledge of the beneficial interests in the Trust effected by this Pledge Agreement.
e. The Beneficiary shall ensure at all times that the Lender has control for purposes of
Section 8-106 of the UCC of all uncertificated instruments included within the Collateral. The
Beneficiary has caused the Trust to execute and deliver to the Lender on the date of this Pledge
Agreement a consent in the form attached hereto as Schedule C in order to comply with the
requirements of Section 8-106(c)(2) of the UCC to the extent beneficial interests in the Trust
constitute uncertificated securities for purposes of Article 8 of the UCC.
5.
LENDERS RIGHTS AND OBLIGATIONS WITH RESPECT TO THE COLLATERAL.
a. While this Pledge Agreement is in effect, Lender shall retain all of Beneficiarys rights,
title and interest in the Collateral, together with any and all evidence of the Collateral, and
this Pledge Agreement will remain in effect until (a) there no longer are any Obligations owing to
Lender; and (b) all other obligations secured by this Pledge Agreement have been fulfilled. In
furtherance of the foregoing, the Beneficiary shall execute an Assignment of Beneficial Interests
in the form attached hereto as Schedule D contemporaneously with the execution of this Pledge
Agreement.
b. Notwithstanding Section 5(a) above, so long as no Event of Default shall have occurred and
be continuing, the Beneficiary shall be entitled:
(i) to exercise, as it shall think fit, but in a manner not inconsistent with the terms hereof
and the terms of the other Financing Documents, any voting power with respect to the Collateral,
and for that purpose the Lender shall (if any securities pledged under this Agreement (each, a
Pledged Security) shall be registered in the name of the Lender or its nominee) execute or cause
to be executed from time to time, at the expense of the Beneficiary, such proxies or other
instruments in favor of the Beneficiary or its nominee, in such form and for such purposes as shall
be reasonably required by the Beneficiary and shall be specified in a written request therefor, to
enable it to exercise such voting power with respect to such Pledged Security; and
4
(ii) except as otherwise provided in Sections 5(c) and 5(d) hereof, to receive and retain for
its own account any and all payments, proceeds, dividends, distributions, monies, compensation,
property, assets, instruments or rights to the extent such are permitted pursuant to the terms of
the Loan Agreement, other than (x) stock or liquidating dividends or (y) extraordinary dividends
and dividends or other amounts payable under or in connection with any recapitalization,
restructuring, or other non ordinary course event (the dividends and amounts in this clause (y)
being Extraordinary Payments), paid, issued or distributed from time to time in respect of the
Collateral.
c.
Extraordinary Payments and Distributions.
(i) In case, upon the dissolution or liquidation (in whole or in part) of any issuer of any
Collateral, any sum shall be paid or payable as a liquidating dividend or otherwise upon or with
respect to any Pledged Security or, in the event any other Extraordinary Payment is paid or
payable, then and in any such event, such sum or Extraordinary Payment shall be paid by the
Beneficiary over to the Lender promptly, and in any event within ten (10) days after receipt
thereof, to be held by the Lender as additional collateral hereunder.
(ii) In case any stock dividend shall be declared with respect to any Pledged Security, or any
shares of stock or fractions thereof shall be issued pursuant to any stock split involving any
Pledged Security, or any distribution of capital shall be made on any of the Collateral, or any
shares, obligations or other property shall be distributed upon or with respect to the Collateral,
in each case pursuant to a recapitalization or reclassification of the capital of the issuer
thereof, or pursuant to the dissolution, liquidation (in whole or in part), bankruptcy or
reorganization of such issuer, or to the merger or consolidation of such issuer with or into
another corporation, the shares, obligations, capital or other property so distributed shall be
delivered by the Beneficiary to the Lender promptly, and in any event within ten (10) days after
receipt thereof, to be held by the Lender as additional collateral hereunder subject to the terms
of this Pledge Agreement, and all of the same shall constitute Collateral for all purposes hereof.
(d)
Voting Rights and Ordinary Payments After an Event of Default
. Upon the occurrence and
during the continuance of any Event of Default, all rights of the Beneficiary to exercise or
refrain from exercising the voting and other consensual rights that it would otherwise be entitled
to exercise pursuant to Section 5(b)(i) hereof and to receive the payments, proceeds, dividends,
distributions, monies, compensation, property, assets, instruments or rights that the Beneficiary
would otherwise be authorized to receive and retain pursuant to Section 5(b)(ii) hereof shall
cease, and thereupon the Lender shall be entitled to exercise all voting power with respect to any
Pledged Security and to receive and retain, as additional collateral hereunder, any and all
payments, proceeds, dividends, distributions, monies, compensation, property, assets, instruments
or rights at any time declared or paid upon any of the Collateral during such an Event of Default
and otherwise to act with respect to the Collateral as outright owner thereof.
e.
All Payments in Trust
. All payments, proceeds, dividends, distributions, monies,
compensation, property, assets, instruments or rights that are received by the Beneficiary contrary
to the provisions of Section 5 hereof shall be received and held in trust
5
for the benefit of the Lender, shall be segregated by the Beneficiary from other funds of the
Beneficiary and shall be forthwith paid over to the Lender as Collateral in the same form as so
received (with any necessary endorsement).
6.
LENDERS EXPENDITURES
. If any action or proceeding is commenced that would materially
affect Lenders interest in the Collateral or if Beneficiary fails to comply with any provision of
this Pledge Agreement or any Financing Documents, including but not limited to Beneficiarys
failure to discharge or pay when due any amounts Beneficiary is required to discharge or pay under
this Pledge Agreement or any Financing Documents, Lender on Beneficiarys behalf may (but shall not
be obligated to) take any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any
time levied or placed on the Collateral and paying all costs for insuring, maintaining and
preserving the Collateral. All such expenditures incurred or paid by Lender for such purposes will
then bear interest at the Interest Rate from the date incurred or paid by Lender to the date of
repayment by Trust. All such expenses will become a part of the Obligations and, at Lenders
option, will (A) be payable on demand; (B) be added to the Total Amount Due and be apportioned
among and be payable with any installment payments to become due during either (1) the term of any
applicable insurance Life Insurance Policy; or (2) the remaining term of the Loan Agreement; or (C)
be treated as a balloon payment which will be due and payable at the Maturity Date. The liens
created under this Pledge Agreement also will secure payment of these amounts. Such right shall
be in addition to all other rights and remedies to which Lender may be entitled upon an Event of
Default.
7.
LIMITATIONS ON OBLIGATIONS OF LENDER
. Lender shall use ordinary reasonable care in the
physical preservation and custody of the Collateral to the extent in the possession of the Lender
but shall have no other obligation to protect the Collateral or its value. In particular, but
without limitation, Lender shall have no responsibility (A) for the collection or protection of any
income on the Collateral (other than any death benefits paid or payable under the Life Insurance
Policy and any interest or payments in the nature of interest which may be paid or become due in
respect thereto); (B) for the preservation of rights against issuers of the Collateral or against
third persons (other than the Insurer); (C) for ascertaining any maturities, conversions,
exchanges, offers, tenders, or similar matters relating to the Collateral other than the Life
Insurance Policy; nor (D) for informing the Beneficiary about any of the above, whether or not
Lender has or is deemed to have knowledge of such matters.
8.
RIGHTS AND REMEDIES ON DEFAULT
. Upon the occurrence of an Event of Default, or at any
time thereafter, Lender may exercise any one or more of the following rights and remedies in
respect of the Collateral, in addition to any rights or remedies that may be available at law, in
equity, or otherwise:
a. Upon the occurrence and during the continuance of any Event of Default, the Lender may
exercise, in addition to other rights and remedies provided for herein or otherwise available to
it, all rights of voting, exercise and conversion with respect to the Collateral and all of the
rights and remedies of a collateral agent upon default under the UCC at that time (whether or not
applicable to the affected Collateral) and may also, without obligation to resort to other
security, at any time and from time to time sell, resell, assign and deliver, in its sole
discretion, all or any of the Collateral, in one or more parcels at the same or different times,
and all right, title and interest, claim and demand therein and right of redemption thereof, on any
6
securities exchange on which any Collateral may be listed, or at public or private sale, for
cash, upon credit or for future delivery, and in connection therewith the Lender may grant options.
b. If any of the Collateral is sold upon credit or for future delivery, the Lender shall not
be liable for the failure of the purchaser to purchase or pay for the same and, in the event of any
such failure, the Lender may resell such Collateral. In no event shall the Beneficiary be credited
with any part of the proceeds of sale of any Collateral until cash payment therefor has actually
been received by the Lender.
c. The Lender may purchase any Collateral at any public sale and, if any Collateral is of a
type customarily sold in a recognized market or is of the type that is the subject of widely
distributed standard price quotations, the Lender may purchase such Collateral at private sale, and
in each case may make payment therefor by any means, including, without limitation, by release or
discharge of Obligations in lieu of cash payment.
d. The Beneficiary recognizes that the Lender may be unable to effect a public sale of all or
part of the Collateral consisting of securities by reason of certain prohibitions contained in the
Securities Act of 1933, as amended (the Securities Act), or in applicable Blue Sky or other state
securities laws, as now or hereafter in effect, but may be compelled to resort to one or more
private sales to a restricted group of purchasers who will be obliged to agree, among other things,
to acquire such securities for their own account, for investment and not with a view to the
distribution or resale thereof. The Beneficiary agrees that any such Collateral sold at any such
private sale may be sold at a price and upon other terms less favorable to the seller than if sold
at public sale and that each such private sale shall be deemed to have been made in a commercially
reasonable manner. The Lender shall have no obligation to delay the sale of any such securities
for the period of time necessary to permit the issuer of such securities, even if such issuer would
agree, to register such securities for public sale under the Securities Act. The Beneficiary
agrees that private sales made under the foregoing circumstances shall be deemed to have been made
in a commercially reasonable manner.
e. No demand, advertisement or notice, all of which are hereby expressly waived, shall be
required in connection with any sale or other disposition of any part of the Collateral that
threatens to decline speedily in value or that is of a type customarily sold on a recognized
market; otherwise the Lender shall give the Beneficiary at least ten (10) days prior notice of the
time and place of any public sale and of the time after which any private sale or other disposition
is to be made, which notice the Beneficiary agrees is commercially reasonable.
f. The Lender shall not be obligated to make any sale of Collateral if it shall determine not
to do so, regardless of the fact that notice of sale may have been given. The Lender may, without
notice or publication, adjourn any public or private sale or cause the same to be adjourned from
time to time by announcement at the time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the same was so adjourned.
g. The remedies provided herein in favor of the Lender shall not be deemed exclusive, but
shall be cumulative, and shall be in addition to all other remedies in favor of the Lender existing
at law or in equity.
7
h. To the extent that applicable law imposes duties on the Lender to exercise remedies in a
commercially reasonable manner, the Beneficiary acknowledges and agrees that it is not commercially
unreasonable for the Lender (i) to advertise dispositions of Collateral through publications or
media of general circulation; (ii) to contact other persons, whether or not in the same business as
the Beneficiary, for expressions of interest in acquiring all or any portion of the Collateral;
(iii) to hire one or more professional auctioneers to assist in the disposition of Collateral; (iv)
to dispose of Collateral by utilizing Internet sites that provide for the auction of assets of the
types included in the Collateral or that have the reasonable capability of doing so, or that match
buyers and sellers of assets; (v) to disclaim disposition warranties, or (vi) to the extent deemed
appropriate by the Lender, to obtain the services of brokers, investment bankers, consultants and
other professionals to assist the Lender in the disposition of any of the Collateral. The
Beneficiary acknowledges that the purpose of this clause (h) is to provide non-exhaustive
indications of what actions or omissions by the Lender would not be commercially unreasonable in
the Lenders exercise of remedies against the Collateral and that other actions or omissions by the
Lender shall not be deemed commercially unreasonable solely on account of not being indicated in
this clause (h). Without limiting the foregoing, nothing contained in this clause (h) shall be
construed to grant any rights to the Beneficiary or to impose any duties on the Lender that would
not have been granted or imposed by this Pledge Agreement or by applicable law in the absence of
this clause (h).
i. The Lenders prior recourse to any Collateral shall not constitute a condition of any
demand, suit or proceeding for payment or collection of the Obligations.
9.
MISCELLANEOUS PROVISIONS
. The following miscellaneous provisions are a part of this
Pledge Agreement:
a.
Amendments
. This Pledge Agreement, together with the Loan Agreement, and all Financing
Documents, constitutes the entire understanding and agreement of the parties as to the matters set
forth in this Pledge Agreement. No alteration of or amendment to this Pledge Agreement shall be
effective unless given in writing and signed by the party or parties sought to be charged or bound
by the alteration or amendment.
b.
Arbitration
. All controversies or disputes arising out of or in connection with this
Pledge Agreement (Disputes) shall be resolved pursuant to this Section 9b.
(i) All Disputes shall in the first instance be discussed amicably between the parties with a
view to resolving such Dispute, commencing upon one party giving other parties written notice of
such Dispute. In the event that such Dispute is not resolved within thirty (30) days after such
notice (or such longer period as the parties may agree in writing with respect to any such
Dispute), any party may submit such Dispute to be finally settled by arbitration administered under
the Commercial Arbitration Rules of the American Arbitration Association (the Rules) by a panel
of three arbitrators sitting in [
]. One arbitrator shall be nominated by the party
initiating arbitration at the time of the filing of its demand for arbitration, the second
arbitrator shall be nominated by the opposing party(ies) at the time of the filing of its answering
statement, and the third arbitrator (who shall act as chairman) shall be jointly nominated by
party-nominated arbitrators if they are able to agree. If the first two party nominated
arbitrators are unable to agree upon a third within thirty (30) days after the
8
nomination of the second, or if either party fails to nominate an arbitrator as set forth
herein, an arbitrator shall be appointed pursuant to the Rules. The award of the arbitrators shall
be final and binding upon the parties, and shall not be subject to any appeal or review. The
parties agree that such award may be recognized and enforced in any court of competent
jurisdiction. The parties agree to submit to the personal jurisdiction of the federal and state
courts sitting in [
], for the sole purpose of enforcing this Pledge Agreement (including,
where appropriate, issuing injunctive relief), the agreement to arbitrate contained herein and any
award resulting from arbitration pursuant to this Section and, to the fullest extent permitted by
law, waive any objection which they may have at any time to the laying of venue of any proceedings
brought in such court and any claim that such proceedings have been brought in an inconvenient
forum.
(ii) The Lender and Beneficiary further agree that no claim may be brought as a class action,
and that the Lender and Beneficiary do not have the right to act, nor shall they attempt to act, as
a class representative or participate as a member of a class of claimants with respect to any claim
related to or arising out of this Pledge Agreement. To the extent that this arbitration provision
is held unenforceable, the Lender and Beneficiary: (i) irrevocably submit to the exclusive
jurisdiction of any federal or state court sitting in [
] in respect of any action or
proceeding arising under or related to in any manner whatsoever this Pledge Agreement or the
transactions contemplated under this Pledge Agreement, (ii) agree that this Pledge Agreement and
the transactions contemplated by the Financing Arrangement shall in all respects be governed by and
construed in accordance with the laws of the State of [
] (without reference to conflicts
of laws provisions) and (iii) HEREBY WAIVE THE RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY ON ANY
CLAIM, COUNTERCLAIM, SETOFF, DEMAND, ACTION OR CAUSE OF ACTION (I) ARISING OUT OF OR IN ANY WAY
RELATED TO THIS AGREEMENT, OR (II) IN ANY WAY IN CONNECTION WITH OR PERTAINING OR RELATED TO OR
INCIDENTAL TO ANY DEALINGS OF THE PARTIES TO THIS AGREEMENT IN CONNECTION WITH THIS PLEDGE
AGREEMENT, REPRESENTATIONS AND WARRANTIES, AND CONSENT OR THE EXERCISE OF ANY PARTYS RIGHTS AND
REMEDIES UNDER THIS AGREEMENT OR OTHERWISE, OR THE CONDUCT OR THE RELATIONSHIP OF THE PARTIES
HERETO, IN ALL OF THE FOREGOING CASES WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE. The Parties hereby agree and acknowledge that this
provision is intended to encompass any dispute between any Party to this Pledge Agreement and any
interested third party.
(iii) In any arbitral proceeding arising under this Pledge Agreement, the parties agree that
they will engage in cooperative discovery, to be supervised by the arbitral tribunal. In its
discretion, the tribunal may order the exchange of documents in the custody or control of parties
to this Pledge Agreement, and may order a limited number of party depositions of one (1) days
duration each if requested by the opposing party and if the tribunal finds that such depositions
would contribute to the efficient development of evidence.
c.
Attorneys Fees; Expenses
. Beneficiary agrees to pay upon demand all of Lenders costs
and expenses, including Lenders reasonable attorneys fees and Lenders legal expenses, incurred
in connection with the enforcement of this Pledge Agreement.
9
Lender may hire or pay someone else to help enforce this Pledge Agreement, and Beneficiary
shall pay the costs and expenses of such enforcement. Costs and expenses include Lenders
reasonable attorneys fees and legal expenses whether or not there is a lawsuit, including
reasonable attorneys fees and legal expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment
collection services. Beneficiary also shall pay all court costs and such additional fees as may be
directed by the court.
d.
Indemnification
. The Beneficiary hereby releases the Lender and its officers,
shareholders, directors, employees and agents (each, an Indemnified Party) from any claims,
causes of action and demands at any time arising out of or with respect to this Pledge Agreement,
the Obligations, the Collateral and its use and/or any actions taken or omitted to be taken by such
Indemnified Party with respect thereto (except such claims, causes of action and demands arising
from the bad faith, gross negligence or willful misconduct of such Indemnified Party) and the
Beneficiary hereby agrees to hold each Indemnified Party harmless from and with respect to any and
all such claims, causes of action and demands (except such claims, causes of action and demands
arising from the gross negligence or willful misconduct of such Indemnified Party).
e.
Caption Headings
. Caption headings in this Pledge Agreement are for convenience purposes
only and are not to be used to interpret or define the provisions of this Pledge Agreement.
f.
Governing Law
. THIS PLEDGE AGREEMENT WILL BE GOVERNED BY THE LAWS OF THE STATE OF
[
] WITHOUT REGARD TO ITS CONFLICTS OF LAW PROVISIONS. LENDER HAS ACCEPTED THIS PLEDGE
AGREEMENT IN THE STATE OF [
].
g.
Marshalling
. The Lender shall not be required to marshal any present or future collateral
security (including but not limited to this Pledge Agreement and the Collateral) for, or other
assurances of payment of, the Obligations or any of them or to resort to such collateral security
or other assurances of payment in any particular order, and all of its rights hereunder and in
respect of such collateral security and other assurances of payment shall be cumulative and in
addition to all other rights, however existing or arising. To the extent that it lawfully may, the
Beneficiary hereby agrees that it shall not invoke any law relating to the marshalling of
collateral which might cause delay in or impede the enforcement of the Lenders rights under this
Pledge Agreement or under any other instrument creating or evidencing any of the Obligations or
under which any of the Obligations is outstanding or by which any of the Obligations is secured or
payment thereof is otherwise assured, and, to the extent that it lawfully may, the Beneficiary
hereby irrevocably waives the benefits of all such laws.
h.
No Waiver by Lender.
Lender shall not be deemed to have waived any rights under this
Pledge Agreement unless such waiver is given in writing and signed by Lender. No delay or omission
on the part of Lender in exercising any right shall operate as a waiver of such right or any other
right. A waiver by Lender of a provision of this Pledge Agreement shall not prejudice or constitute
a waiver of Lenders right otherwise to
demand strict compliance with that provision or any other provision of this Pledge Agreement.
No prior
10
waiver by Lender, nor any course of dealing between Lender and Beneficiary, shall constitute a
waiver of any of Lenders rights or of any of Beneficiarys obligations as to any future
transactions. Whenever the consent of Lender is required under this Pledge Agreement, the granting
of such consent by Lender in any instance shall not constitute continuing consent to subsequent
instances where such consent is required and in all cases such consent may be granted or withheld
in the sole discretion of Lender.
i.
Notices
. All demands, notices and communications hereunder will be in writing and will be
deemed to have been duly given if personally delivered at, mailed by certified mail, return receipt
requested, mailed by a nationally recognized overnight courier or sent via facsimile or email, to
each applicable party at the address specified below or, as to any of such parties, at such other
address or facsimile number as will be designated by such party in a written notice to the other
party. Any party may change its address for notices under this Pledge Agreement by giving written
notice to the other parties, specifying that the purpose of the notice is to change the partys
address. For notice purposes, Beneficiary agrees to keep Lender informed at all times of
Beneficiarys current address. Notice shall be provided as follows:
If to the Beneficiary:
[BENEFICIARY-NAME]
c/o [BENEFICIARY-NAME, ADDRESS]
Telephone:
Facsimile:
If to the Lender:
Imperial Premium Finance, LLC
701 Park of Commerce Blvd, Ste 301
Boca Raton, FL 33487
Facsimile: 1.561.995.4201
j.
Power of Attorney
. Beneficiary hereby appoints Lender as its true and lawful
attorney-in-fact, irrevocably, with full power of substitution to do the following: (1) to demand,
collect, receive, sue and recover all sums of money or other property which may now or hereafter
become due, owing or payable from the Collateral; (2) to execute, sign and endorse any and all
claims, instruments, receipts, checks, drafts or warrants issued in payment for the Collateral; (3)
to settle or compromise any and all claims arising under the Collateral, and in the place and stead
of Beneficiary, to execute and deliver its release and settlement for the claim; (4) to execute and
sign any agreements to confirm that ownership of the Collateral has been changed to a third party
and (5) to file any claim or claims or to take any action or institute or take part in any
proceedings, either in its own name or in the name of Beneficiary, or otherwise, which in the
discretion of Lender may seem to be necessary or advisable. The foregoing power of attorney given
as security for the Obligations, being coupled with an interest, shall be irrevocable until the
Obligations are indefeasibly paid in full and otherwise satisfied and discharged.
k.
Severability
. If a court of competent jurisdiction finds any provision of this Pledge
Agreement to be illegal, invalid, or unenforceable as to any
11
circumstance, that finding shall not make the offending provision illegal, invalid, or
unenforceable as to any other circumstance. To the extent permitted by applicable law, the
offending provision shall be considered modified so that it becomes legal, valid and enforceable;
however, if the offending provision cannot be so modified, it shall be considered deleted from this
Pledge Agreement. Unless otherwise required by law, the validity, invalidity, or unenforceability
of any provision of this Pledge Agreement shall not affect the legality, validity or enforceability
of any other provision of this Pledge Agreement.
l.
Successors and Assigns
. Subject to any limitations stated in this Pledge Agreement on
transfer of Beneficiarys interest, this Pledge Agreement shall be binding upon and inure to the
benefit of the parties, their successors and assigns. If ownership of the Collateral becomes
vested in a person other than Beneficiary, Lender, without notice to Beneficiary, may deal with
Beneficiarys successors with reference to this Pledge Agreement and the Obligations by way of
forbearance or extension without releasing Beneficiary from the obligations of this Pledge
Agreement or liability under the Obligations.
m.
Survival of Representations and Warranties
. All representations, warranties, and
agreements made by Trust in this Pledge Agreement shall survive the execution and delivery of this
Pledge Agreement, shall be continuing in nature, and shall remain in full force and effect until
such time as the Obligations shall be paid in full.
n.
Time is of the Essence
. Time is of the essence in the performance of this Pledge
Agreement.
o.
Waive Jury
. ALL PARTIES TO THIS PLEDGE AGREEMENT HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL
IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY.
10.
DEFINITIONS
. The following capitalized words and terms shall have the following
meanings when used in this Pledge Agreement. Capitalized terms used but not defined herein shall
have the meanings assigned thereto in the Loan Agreement. Unless specifically stated to the
contrary all references to dollar amounts shall mean amounts in lawful money of the United States
of America. Words and terms used in the singular shall include the plural, and the plural shall
include the singular, as the context may require, Words and terms not otherwise defined in this
Pledge Agreement shall have the meanings attributed to such terms in the UCC:
a.
Collateral
. The word Collateral is defined in Section 2 hereof.
b.
Guaranty
. The word Guaranty means any guaranty from Guarantor to Lender, including
without limitation a guaranty of all or part of the Obligations.
c.
Lender
. The word Lender means Imperial Premium Finance, LLC, its successors and assigns.
d.
Pledge Agreement
. The words Pledge Agreement mean this Pledge Agreement, as amended or
modified from time to time, together with all exhibits and schedules attached hereto from time to
time.
12
THE [BENEFICIARY-NAME] HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS PLEDGE AGREEMENT AGREES
TO ITS TERMS. THIS PLEDGE AGREEMENT IS DATED [DATE].
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BENEFICIARY
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[BENEFICIARY-NAME]
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SCHEDULE A
LOAN APPLICATION AND AGREEMENT
14
SCHEDULE B
UCC FINANCING STATEMENT DETAILS
Debtor information
:
1.
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Name of Beneficiary
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2.
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Street address of principal residence of Beneficiary; cannot be a post-office box or business
address, unless beneficiary is a business, in which case, the place of business should be
included or, if there is more than one place of business, the chief executive office
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3.
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If Beneficiary is a business, also include (a) the entity form (e.g., corporation, limited
liability company, limited partnership, etc.), (b) its jurisdiction of formation and (c) any
organizational identification number issued by such jurisdiction
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Secured Party information
:
Imperial Premium Finance, LLC
701 Park of Commerce Blvd.
Suite 301
Boca Raton, Florida 33487
Collateral Description
:
All of Debtors right, title and interest in and to the beneficial interest in [
insert name of
Trust
] (the
Trust
), the Trusts trust agreement and the assets held by the Trust under
such trust agreement and any Financing Documents, including without limitation the Trusts entire
beneficial interest in and to the Life Insurance Policy and the death benefits payable thereunder,
and all proceeds of all of the foregoing.
For purposes of the foregoing description of the Collateral, the each of the terms
Financing
Documents
and
Life Insurance Policy
shall have the meanings set forth in the Loan
Application and Agreement dated as of [
insert applicable closing date
] between the Trust (through
its trustee), as borrower, and the Secured Party, as lender.
15
SCHEDULE C
CONSENT OF ISSUER OF UNCERTIFICATED SECURITIES
The undersigned, [NAME OF BORROWER TRUST] (the Issuer), hereby acknowledges receipt of the
foregoing Pledge Agreement, consents to any transfer of the beneficial interests of the Issuer
pursuant to the exercise of remedies thereunder and irrevocably agrees to comply with any
instructions originated by the Lender without further consent by [NAME OF BENEFICIARY] or any other
Person.
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[BORROWER TRUST]
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By:
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Name:
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Title:
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SCHEDULE D
FORM OF ASSIGNMENT OF BENEFICIAL INTERESTS
2
ASSIGNMENT OF BENEFICIAL INTERESTS
This Assignment of Beneficial Interests is made as of
, 20___, by
[
]
(
Beneficiary
) for good and valuable consideration, in favor of
Imperial Premium Finance, LLC
, a Florida limited liability company (
Lender
) pursuant to a certain
Pledge Agreement between Beneficiary and Lender, dated [
, 20___] (
Pledge Agreement
).
All capitalized terms used but not defined herein are defined in the Pledge Agreement.
Beneficiary hereby assigns, transfers and sets over to Lender, its successors and assigns
all of Beneficiarys right, title and interest in and under the Trust Agreement (and the trust
created thereby (the Trust)) dated [
, 20___] of which [
] is the settlor or
grantor and of which Beneficiary is a beneficiary, including without limitation, ownership of the
beneficial ownership interests in or under the Trust Agreement and the Trust, any and all rights to
distributions of assets, corpus, income and principal and any rights to amend or terminate the
Trust and Trust Agreement.
ASSIGNMENT OF BENEFICIAL INTERESTS
This Assignment of Beneficial Interests is made as of
, 20___, by [
Imperial
Premium Finance, LLC
, a Florida limited liability company][
Imperial PFC Financing II, LLC
, a
Georgia limited liability company] (
Lender
) for good and valuable consideration, in favor of
[
Lexington Insurance Company, Inc
., a Delaware corporation] (
Insurer
).
Lender hereby assigns, transfers and sets over to Insurer, its successors and assigns all
of Lenders right, title and interest in and under the Trust Agreement (and the trust created
thereby (the Trust)) dated [
, 20___] of which [
] is the settlor or grantor and
of which [] [was][were] the initial beneficiar[y][ies] and of which Lender is the current
beneficiary (following foreclosure upon the initial beneficiar[y][ies] interests), including
without limitation, ownership of the beneficial ownership interests in or under the Trust Agreement
and the Trust, any and all rights to distributions of assets, corpus, income and principal and any
rights to amend or terminate the Trust and Trust Agreement.
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[IMPERIAL PREMIUM FINANCE, LLC]
[IMPERIAL PFC FINANCING II, LLC]
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By:
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Name:
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Title:
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Imperial Life & Annuity Services, LLC
701 Park of Commerce Blvd., Suite 301
Boca Raton, FL 33487
FEE AGREEMENT
Date:
, 2009
, hereinafter called the Agent, as full consideration and compensation for all
services of Imperial Life & Annuity Services LLC (ILAS) , agrees to pay to ILAS the following
fees (Fee), in cash, on or about the following dates (Fee Due Date) in connection with the
financing provided for the policy years and policy indicated below.
Initial Fee:
Subsequent Fee:
Fee Due Date:
Insured:
Plan:
Insurance Company:
Policy No.:
Should Agent become aware that any Fee will not be paid on the Fee Due Date set forth above,
Agent shall immediately (and not more than two (2) days after Agent becomes aware of such
non-payment) notify ILAS in writing that said Fee will not be paid on the Fee Due Date, explain
the reason that the Fee will not be paid on such date and provide an updated Fee Due Date.
Notwithstanding, ILAS reserves the right to charge interest on the Fee up to the maximum amount
permitted by law should Agent fail to pay the Fee on the Fee Due Date.
1. This agreement (hereinafter, this Agreement) may not be terminated.
2. The Agent and ILAS shall adhere to and be subject to all applicable State, Federal and local
laws and regulations.
3. No assignment of this Agreement or any rights and benefits accruing to the ILAS hereunder, shall
be valid unless authorized in advance in writing, by an officer of ILAS.
4. ILAS shall have no authority to alter, modify, waive or change any of the terms, rates or
conditions of any Insurance Company or Insurance Companies that Agent represents, or their policies
or contract, nor to perform any act or make any representations concerning the Insurance Company or
Insurance Companies that Agent represents or their policies or contracts other than as expressly
authorized in writing by an officer of the Agent, or as authorized or permitted herein. ILAS shall
have no authority to endorse checks or other forms of payment payable to the Agent or to the
Insurance Company or Insurance Companies that Agent
1
represents, nor to advertise or publish any matter or thing concerning the Agent or its policies
without written permission of the Agent, or to do or perform any act or thing other than that which
is expressly authorized or permitted herein.
5. This Agreement relates solely to the procurement of premium financing of the above Policy and
shall not create, or be construed as creating, a principal-agent, employer-employee or
master-servant relationship between the Agent and ILAS, nor shall ILAS hold itself out as a
soliciting agent for or on behalf of the Agent.
6. ILAS and Agent acknowledge that money damages may not be an adequate remedy for violations of
this Agreement and that any party may, in its sole discretion, apply to a court of competent
jurisdiction for specific performance or injunctive or such other relief as such court may deem
just and proper to enforce this Agreement or to prevent any violation hereof. In addition, if Agent
fails to pay ILAS any amounts due hereunder, Agent agrees to a Consent to Judgment for any amounts
due and owing ILAS hereunder and consents to ILAS executing Agents name on Agents behalf on any
documents including, but not limited to, the Consent to Judgment, itself, in order to give full
force and effect to said Consent to Judgment. In addition, Agent agrees that ILAS may pursue relief
from a court of competent jurisdiction, including but not limited to obtaining an order or writ of
attachment (or other pre or post judgment relief in favor of ILAS) on commissions being paid to
Agent on all other deals involving Agent, as well as and, to the extent permitted by applicable
law, the Agent waives any objection to the imposition of such relief in appropriate circumstances,
including but not limited to waives any objection against ILAS to seize Agents assets in order to
satisfy said Confession of Judgment. In the event ILAS undertakes any collection or other actions
to collect the amounts due to ILAS hereunder, Agent agrees to pay upon demand all of ILASs costs
and expenses, including ILASs reasonable attorneys fees and ILASs legal expenses, incurred in
connection with the enforcement of this Agreement.
7. In addition this Agreement shall be construed and governed in accordance with the laws of the
State of Florida, without regard to conflict of laws principles. In the event the parties are
unable to mediate their dispute to a satisfactory resolution, the parties agree that the Circuit
Court of the Fifteenth Judicial Circuit in and for Palm Beach County, Florida shall have exclusive
jurisdiction to hear and determine any claims or disputes between the parties arising out of or
related to this Agreement, unless federal jurisdiction is available, in which case the Southern
District of Florida, West Palm Beach Division, shall have exclusive jurisdiction to determine any
claims or disputes arising out of or related to this Agreement. The parties expressly submit and
consent in advance to such jurisdiction in any action or suit commenced in such court, and each
party hereby waives any objection that it may have based upon lack of personal jurisdiction,
improper venue or
forum non conveniens
.
IN THE EVENT OF ANY LITIGATION PROCEEDINGS AND TO THE
EXTENT PERMITTED BY LAW, EACH OF THE PARTIES HEREBY KNOWINGLY AND WILLINGLY WAIVES AND SURRENDERS
SUCH PARTYS RIGHT TO TRIAL BY JURY AND AGREES THAT SUCH LITIGATION SHALL BE TRIED TO A JUDGE
SITTING ALONE AS THE TRIER OF BOTH FACT AND LAW, IN A BENCH TRIAL, WITHOUT A JURY
.
8. This Agreement replaces any previous Agreement relating to the above Policy. No
2
change in this Agreement shall bind the Agent unless in writing and signed by an officer of the
Agent.
IN WITNESS WHEREOF
, the parties hereto have executed and delivered this Agreement as of the
date and year first written above.
Imperial Life & Annuities Services, LLC
Signature:
L046727
Current License Number
AGENT INFORMATION:
Agent
Address:
Current License Number
3
STATE OF
COUNTY OF
On the
day of
, in the year___before me, the undersigned, personally appeared
,
personally known to me or proved to me on the basis of satisfactory evidence to be the
individual(s) whose name(s) is (are) subscribed to the within instrument, and acknowledged to me
that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their
signature(s) on the instrument, the individual(s), or the person upon behalf of which the
individual(s) acted, executed the instrument.
My Commission expires on
4
TRUST DISCLOSURE STATEMENT,
REPRESENTATIONS AND WARRANTIES, AND CONSENT
IMPORTANT
: PLEASE READ THIS DISCLOSURE STATEMENT AND CONSENT AND CONSULT WITH YOUR ADVISORS
BEFORE SIGNING THIS OR ANY OF THE LIFE INSURANCE FINANCING ARRANGEMENT DOCUMENTS
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INSURED:
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[INSURED], [INSURED-ADDRESS], [INSURED-CITY-STATE]
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INSUREDS
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[INSURED-SPOUSE], [INSURED-ADDRESS], [INSURED-CITY-STATE]
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SPOUSE:
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GRANTOR:
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[INSURED], [INSURED-ADDRESS], [INSURED-CITY-STATE]
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LIFE INSURANCE TRUST:
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[TRUST-NAME], a [JURISDICTION] Trust
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TRUSTEE OR LIFE INSURANCE TRUSTEE:
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[TRUSTEE-NAME], [TRUST-ADDRESS], [TRUST-CITY-STATE] [TRUST-ZIP]
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[LENDER-NAME]
(the
Lender
) is offering a life insurance premium financing arrangement
(the
Financing Arrangement
) which provides trusts settled by individuals, such as the
Grantor, with financing to purchase and maintain a life insurance policy (the
Policy
) on
the life of certain qualifying individuals, such as the Insured. To obtain financing under the
Financing Arrangement, the Insured or Grantor must settle (or have settled) a life insurance trust
(the
Life Insurance Trust
) under [JURISDICTION] law and the Insured must consent (or have
consented) to the Life Insurance Trusts application for the Policy. The Grantor must have an
insurable interest in the life of the Insured and all beneficiaries of the Life Insurance Trust
must be individuals or tax-exempt charities with an insurable interest in the life of the Insured
or an estate planning vehicle, all of the owners or beneficiaries of which have an insurable
interest in the life of the Insured.
In order to participate in the Financing Arrangement, the Life Insurance Trust was required to
execute a Loan Application and Agreement (the Loan Agreement) and a Promissory Note in favor of
the Lender. Pursuant to the Loan Agreement, the Lender will, subject to the terms, provisions and
conditions of the Loan Agreement, make an advance of funds to, or for the benefit of, the Life
Insurance Trust for the purpose of funding premiums under the Policy. The obligations of the Life
Insurance Trust under the Loan Agreement are secured by a collateral assignment of the Life
Insurance Trusts interest in the Policy under a collateral assignment agreement between the Life
Insurance Trust and the Collateral Agent (the
Collateral Assignment Agreement
). The
obligations under the Loan Agreement bear a periodic interest at a
[FIXED-FLOATING]
subject to a
minimum interest rate of nine percent (9%) (in the case of a floating rate) and will be due and
payable upon any date that the principal and interest shall become due and payable in full under
the Loan Agreement, whether at the scheduled maturity under the Promissory Note, by acceleration,
notice of prepayment, or otherwise. The Life Insurance Trust may pre-pay the Loan (including any
accrued interest), in full but not in part,
1
without penalty other than the payment of the Yield Maintenance Premium in some circumstances, as
provided under the Loan Agreement.
Capitalized terms used but not defined herein shall have the meanings assigned thereto in the Loan
Agreement.
Each of the following are events of default under the Loan Agreement and Financing Documents:
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Payment Default.
Life Insurance Trust fails to make any payment within three (3) Business
Days after the same becomes due and payable under the Loan Agreement, the Promissory Note or
any other Financing Document.
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Other Defaults.
Life Insurance Trust fails to comply with or to perform any other term,
obligation, covenant or condition contained in the Promissory Note, the Loan Agreement or in
any of the other Financing Documents or to comply with or to perform any term, obligation,
covenant or condition contained in any other agreement between Lender and Life Insurance
Trust or a default occurs under the Promissory Note, Loan Agreement, Security Agreement or
any other Financing Document.
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False Statements.
Any warranty, representation or statement made or furnished to Lender by
the Life Insurance Trust, the Insured or on Life Insurance Trusts behalf under the
Promissory Note, the Loan Agreement or any other Financing Document is false or misleading
in any material respect, either now or at the time made or furnished or becomes false or
misleading at any time thereafter.
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Related Agreements.
The Policy, Promissory Note, Loan Agreement, Security Agreement or any
other Financing Document ceases to be in full force and effect (including failure of any
collateral document to create a valid and perfected security interest or lien) at any time
and for any reason; the Life Insurance Trust becomes a revocable trust, contests the
validity or enforceability of any Financing Document or denies that it has any further
liability under any Financing Document to which it is a party, or cancels or terminates, or
attempts to cancel or terminate, the Policy; or the Insurer contests the Policy based on the
Life Insurance Trust lacking an insurable interest in the life of the Insured.
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Indebtedness, Creditor or Forfeiture Proceedings.
Any garnishment of any of Life Insurance
Trusts accounts, attachment, lien, levy, additional encumbrance or additional security
interest being placed upon any of the Collateral, or any commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other
method, by any creditor of Life Insurance Trust or by any governmental agency against any
Collateral, and which is not discharged in full within one (1) day of the placement thereof.
However, this Event of Default shall not apply if there is a good faith dispute by the Life
Insurance Trust as to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Life Insurance Trust gives Lender written notice of
the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for
the creditor or forfeiture
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proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate
reserve or bond for the dispute.
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Insolvency or Default of Life Insurance Trust.
The Life Insurance Trust is: (i) dissolved,
liquidated or terminated; (ii) is unable to pay its debts as they mature; (iii) makes an
assignment for the benefit of creditors; (iv) is bankrupt or insolvent; (v) seeks
appointment of, or becomes the subject of an order appointing, a trustee, conservator,
liquidator or receiver as to all or part of its assets; (vi) commences, approves or consents
to, or is the debtor in, any case or proceeding under any bankruptcy, reorganization or
similar law, and in the case of an involuntary case or proceeding, such case or proceeding
is not dismissed thirty (30) days following its commencement; (vii) is the subject of an
order for relief in an involuntary case under federal bankruptcy law; (viii) the Life
Insurance Trust defaults under any loan, extension of credit, security agreement, purchase
or sales agreement, or any other agreement, in favor of any other creditor or person that
may materially affect any of Life Insurance Trusts property or Life Insurance Trusts
ability to repay the Promissory Note or perform Life Insurance Trusts Obligations under the
Promissory Note, the Loan Agreement or any of other Financing Documents; or (ix) Life
Insurance Trust violates any Law.
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Insolvency or Default of Insured or Guarantor.
The Insured or any Guarantor: (i) makes an
assignment for the benefit of creditors; (ii) is adjudicated a bankrupt or insolvent; (iii)
seeks appointment of, or becomes the subject of an order appointing, a trustee, conservator,
or receiver as to all or part of his assets; (iv) commences, approves or consents to, or is
the debtor in, any case or proceeding under any bankruptcy or similar law and, in the case
of an involuntary case or proceeding, such case or proceeding is not dismissed thirty (30)
days following its commencement; (v) is the subject of an order for relief in an involuntary
case under federal bankruptcy law; (vi) Life Insurance Trust defaults under any loan,
extension of credit, security agreement, purchase or sales agreement, or any other
agreement, in favor of any other creditor or person that may materially affect any of
Trusts property or Trusts ability to repay the Obligations; or (vii) any Guarantor
defaults under the terms of the Guaranty.
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Events Affecting Guarantor.
Any of the preceding events occurs with respect to any Guarantor
of any of the indebtedness under the Promissory Note or any Guarantor dies or becomes
incompetent, or revokes or disputes the validity of, or liability under, any guaranty of the
indebtedness evidenced by the Promissory Note; in the event of a death, Lender, at its
option, may, but shall not be required to, permit the Guarantors estate to assume
unconditionally the obligations arising under the guaranty in a manner satisfactory to
Lender, and, in doing so, cure any Event of Default.
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Adverse Change.
A material adverse change occurs in Life Insurance Trusts financial
condition, or Lender believes the prospect of payment or performance of the Obligations is
materially impaired.
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Cure Provisions.
Other than as set forth in the preceding clauses of this Section, failure
by the Life Insurance Trust or Beneficiary, as applicable, to perform in any material
respect any of its obligations under the Promissory Note, Loan Agreement, Security
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Agreement or any other Financing Document to which either is a party if such failure is not
remedied on or prior to the fifteenth (15th) day after written notice of such failure is
given to the Life Insurance Trust or the Beneficiary, respectively, by the Lender.
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In connection with, and as a condition precedent to the Life Insurance Trust obtaining a loan from
the Lender in connection with the Financing Arrangement, the undersigned on behalf of the Life
Insurance Trust hereby acknowledges, represents, warrants, covenants and agrees to the following:
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1.
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The Trustee has not taken any action to dissolve the Life Insurance Trust, and
to the actual knowledge of the Trustee, no voluntary, involuntary or judicial actions
have been taken to dissolve the Life Insurance Trust.
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2.
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In the event the Trustee receives written notice that the Policy is Contested
(as defined below) at any time that any amount remains owing under the Loan Agreement,
the Trustee shall, within three (3) business days of its receipt thereof, forward such
communications and all documents relating to such Contest to the Lender. The Life
Insurance Trust agrees to cooperate fully in a defense against any Contest. Contested
means, with respect to a Policy, the denial of a claim for benefits under, or the
assertion of a right by the issuer of such Policy to cancel or rescind the Policy
pursuant to the suicide or contestability provisions thereof or otherwise.
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3.
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The copy of the trust agreement of the Life Insurance Trust (the Trust
Agreement) attached hereto as Exhibit A is true, complete and accurate, and has not
been amended, revoked or otherwise changed since the date adopted.
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4.
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The execution, performance and delivery of the Financing Arrangement Documents
are in accordance with, and do not violate, the Trust Agreement. Amounts received by
the Trustee under the Life Insurance Trust may be used or applied only in accordance
with the Trust Agreement.
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5.
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There may be federal, state or local income, gift or estate tax effects of
participation in the Financing Arrangement to the Life Insurance Trust. Participation
in the Financing Arrangement, and termination of participation, could increase the
taxable income, taxable gifts or taxable estate of a participant. The Life Insurance
Trust has not relied upon any advice from the Lender, any life agent or other producer,
any insurance company that has issued the Policy or any other person associated with
the Financing Arrangement regarding any such tax effects.
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6.
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The Life Insurance Trust and the Trustee have not been paid, directly or
indirectly, any inducement (money, property or otherwise) in connection with the
Financing Arrangement or to obtain the Policy other than reasonable and customary fees
for services as Trustee.
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7.
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None of the Life Insurance Trust, to the actual knowledge of the Trust, the
Grantor, the Insured, the Insureds Spouse or any beneficiary of the Life
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Insurance Trust has any present intention to surrender, sell or settle, directly or
indirectly, the Policy or any interest therein.
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8.
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To the knowledge of the Life Insurance Trust, the Policy application has been
completed accurately and to the knowledge of the Life Insurance Trust there are no
material omissions or misstatements in the application.
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9.
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The Lender, or any subsequent owner of the Loan Agreement, may sell, or sell
participations in, the Loan Agreement without the consent of, or prior notice to, the
Grantor, the Insured, the Insureds Spouse or the Life Insurance Trust and the Life
Insurance Trust agrees to take all actions (but at no cost or expense to the Life
Insurance Trust) requested by the Lender in connection with any such sale or
participation.
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10.
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The Life Insurance Trust (i) has not entered into any contracts or agreements,
other than the Policy and the Financing Arrangement Documents and (ii) after the date
hereof, will not, without the prior written consent of Lender (such consent not to be
unreasonably withheld) enter into any contract or agreement which could be expected to
have a material adverse effect on the Life Insurance Trusts ability to perform its
obligations under any Financing Arrangement Document or which could adversely effect
Lenders rights under any Financing Arrangement Documents (as determined by Lender).
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11.
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Any claims, questions or controversies arising under or related to in any
manner whatsoever this Disclosure Statement or the transactions contemplated under the
Financing Arrangement including, but not limited to, any challenge by the Life
Insurance Trust against the Lender, its designees and/or third party servicers, any
broker, any insurance company or any other party interested in or related in any way to
the Financing Arrangement (each, an Interested Third Party, notwithstanding the fact
such parties are not signatories hereto) (a Dispute) shall be submitted to
arbitration conducted before the American Arbitration Association (the AAA). The Life
Insurance Trust is hereby authorized to invoke this arbitration provision, and any
judgment with respect to any award rendered pursuant to this arbitration provision may
be entered in any court of competent jurisdiction. Such arbitration will be conducted
under the rules of the AAA and the laws of the State of [JURISDICTION] and will be
conducted in [TRUST-CITY-STATE]. The Life Insurance Trust understands that claims
submitted to arbitration are not heard by a jury and are not subject to the rules
governing the courts. The Life Insurance Trust further agrees that no claim may be
brought as a class action, and that the Life Insurance Trust has no right to act, nor
shall attempt to act, as a class representative or participate as a member of a class
of claimants with respect to any claim related to or arising out of the Financing
Arrangement. To the extent that this arbitration provision is held unenforceable, the
Life Insurance Trust: (i) irrevocably submits to the exclusive jurisdiction of any
federal or state court sitting in [TRUST-CITY-STATE] in respect of any action or
proceeding arising under or related to in any manner whatsoever this Disclosure
Statement or the transactions contemplated under the Financing Arrangement, (ii)
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agrees that this Disclosure Statement and the transactions contemplated by the
Financing Arrangement shall in all respects be governed by and construed in
accordance with the laws of the State of [JURISDICTION] (without reference to
conflicts of laws provisions) and (iii) HEREBY WAIVES THE RIGHT TO A TRIAL BY JURY
ON ANY CLAIM, COUNTERCLAIM, SETOFF, DEMAND, ACTION OR CAUSE OF ACTION (I) ARISING
OUT OF OR IN ANY WAY RELATED TO THIS DISCLOSURE STATEMENT, OR (II) IN ANY WAY IN
CONNECTION WITH OR PERTAINING OR RELATED TO OR INCIDENTAL TO ANY DEALINGS TO THIS
DISCLOSURE STATEMENT IN CONNECTION WITH THIS DISCLOSURE STATEMENT OR THE EXERCISE OF
ANY OF ITS RIGHTS AND REMEDIES UNDER THIS DISCLOSURE STATEMENT OR OTHERWISE, OR THE
CONDUCT OR THE RELATIONSHIP OF THE PARTIES HERETO, IN ALL OF THE FOREGOING CASES
WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE. The sole exception to this requirement for arbitration involves suits
brought on behalf of the Lender seeking a temporary restraining order, preliminary
injunction, and/or permanent injunction (injunctive relief) based upon (i) any
failure of the Life Insurance Trust to use the proceeds of advanced exclusively as
set forth in the Loan Agreement, the Promissory Note, the Financing Documents or any
other documents related to the Loan Agreement; (ii) any act by the Life Insurance
Trust or any Guarantor to transfer, amend, change ownership, cancel, convey, sell or
assign the Policy without the express written consent of the Lender; or (iii) any
failure to act by the Life Insurance Trust or any Guarantor that results, directly
or indirectly, in the transfer of the Policy or any amendment, change of ownership,
cancellation, conveyance, sale or assignment thereof, in the event there is
immediate and irreparable injury, loss, or damage (which immediate and irreparable
injury, loss, or damage may be presumed by law and/or by agreement of the parties).
The parties hereby expressly agree and each Interested Third Party in receipt of
this Disclosure Statement acknowledges, that the arbitration provisions of this
section shall not apply to the Trustee in respect of its rights, duties, protections
and immunities under the Trust Agreement.
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12.
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The Lender and any purchaser of the Policy in the event of a disposition of the
Policy following the occurrence of an event of default under the Loan Agreement or
Financing Arrangement Documents shall be entitled to rely on the acknowledgments,
representations, warranties and agreements of the Life Insurance Trust herein and in
any other Financing Arrangement Documents.
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13.
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This document and the other Financing Arrangement Documents to which the Life
Insurance Trust is a party have been duly executed and delivered by the Life Insurance
Trust, and (assuming due authorization, execution and delivery by the other parties
thereto) the Financing Arrangement Documents constitute legal, valid and binding
obligations of the Life Insurance Trust, enforceable against the Life Insurance Trust
in accordance with their terms (subject to applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting
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6
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creditors rights generally and to equitable principles of general application,
regardless of whether such principles are considered in a proceeding in equity or at
law).
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14.
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No authorization, approval, consent, franchise, license, covenant, order,
ruling, permit, certification, exemption, notice, declaration or similar right,
undertaking or other action of, to or by, or any filing, qualification or registration
with, any Governmental Authority is required to be obtained by the Life Insurance Trust
that has not been obtained or is not in full force and effect, and no registration,
declaration, or filing with any Governmental Authority is required to be given or made
by the Life Insurance Trust to or with, any Governmental Authority that has not been
given or made or the applicable waiting period for which has not expired or terminated,
each in connection with the execution and delivery of this and the other Financing
Arrangement Documents and the consummation of the transactions contemplated hereby and
thereby. Governmental Authority means any foreign, or U.S. federal, state, regional,
local, municipal or other government, or any department, commission, board, bureau,
agency, public authority or instrumentality thereof or any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining to
government or any court or arbitrator.
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15.
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No Default or Event of Default with respect to the Life Insurance Trust has
occurred and is continuing. The Life Insurance Trust is not in violation of any Law or
Governmental Order applicable to it or any of its properties or assets. No judicial,
administrative or arbitral proceeding is pending or, to the best knowledge of the Life
Insurance Trust, threatened against the Life Insurance Trust, which would have an
adverse effect on the Life Insurance Trusts ability to perform under the Financing
Arrangement Documents. Law means any federal, national, supranational, state,
provincial or local statute, law, ordinance, regulation, rule, code, order, requirement
or rule of law (including, without limitation, common law). Governmental Order means
any order, writ, judgment, injunction, decree, stipulation, determination or
administrative ruling or award entered by or with any Governmental Authority.
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16.
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Following an Event of Default, the Trustee shall accept instructions from the
Collateral Agent regarding the disposition of the Policy and any other Collateral or
proceeds covered thereby, including instructions to assign ownership of the Policy to
the Lender or any third party engaged to dispose of the Collateral, or to dispose of
the Collateral in a commercial reasonable fashion or as otherwise directed by the
Collateral Agent.
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17.
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For so long as any Indebtedness remains outstanding, the Life Insurance Trust
hereby covenants and agrees as follows:
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(a) The Life Insurance Trust shall take such further action and/or execute and
deliver all further assurances, documents and/or instruments as may be reasonably
requested by the Lender in order to (i) effect, administer or enforce
7
the transactions contemplated by this Disclosure Statement and the other
Financing Arrangement Documents, and (ii) permit the realization of the benefits of
any collateral assignment or pledge of the Policy to the Lender and its assigns.
(b) The Life Insurance Trust shall, immediately upon its discovery thereof,
notify the Lender in writing of any breaches of the representations and warranties
of the Life Insurance Trust in this document and the other Financing Arrangement
Documents.
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Notwithstanding anything to the contrary in this Disclosure Statement, this Disclosure
Statement and the representations and warranties contained herein shall at all times be
subject to the Trustee rights, protections and immunities set forth in the Trust Agreement
of the Life Insurance Trust.
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Notwithstanding anything to the contrary in this Disclosure Statement, the Life Insurance
Trust may disclose to any and all persons, without limitation of any kind, the tax treatment
and tax structure of the transactions described in this Disclosure Statement and all
materials of any kind (including opinions or other tax analyses) that are provided to the
Life Insurance Trust relating to such tax treatment and tax structure. This authorization of
tax disclosure is retroactively effective to the commencement of discussions with the
Grantor, the Insured and the Insureds Spouse regarding the transactions contemplated
herein.
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It is expressly understood and agreed by any recipient hereof that (i) in no event shall
[Name of Trustee], as Trustee of the Life Insurance Trust, in its individual capacity have
any liability for the representations, warranties, covenants, agreements or other
obligations of the Life Insurance Trust hereunder or under any schedule, exhibit, appendix
or other document in connection with this Disclosure Statement, as to all of which recourse
shall be had solely to the assets of the Life Insurance Trust, (ii) under no circumstances
shall [Name of Trustee] as Trustee of the Life Insurance Trust be personally liable for the
payment of any indebtedness or expenses of the Life Insurance Trust or be liable for the
breach or failure of any obligation, representation, warranty or covenant made or undertaken
by Life Insurance Trust under this Disclosure Statement or under any schedule, exhibit,
appendix or other document in connection with this Disclosure Statement, and (iii) the
Trustee of the Life Insurance Trust has not reviewed any Financing Arrangement Document on
behalf of the Life Insurance Trust or any other Person and shall not be responsible for or
in respect of and makes no representation as to the validity or sufficiency of any provision
of this Disclosure Statement or any other Financing Arrangement Document.
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* * * * *
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IRS Circular 230 Disclosure: [LENDER-NAME] and its affiliates do not provide tax advice. Any
discussion of United States federal tax issues set forth herein is written in connection
with the promotion and marketing of the Financing Arrangement. Such discussion is not
intended or written to be legal or tax advice to any person and is not
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8
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intended or written to be used, and cannot be used, by any person for the purpose of
avoiding any United States federal tax penalties that may be imposed on such person. The
Grantor, the Insured and the Insureds Spouse should seek advice based on their particular
circumstances from an independent tax advisor.
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AGREED TO AND ACKNOWLEDGED BY THE UNDERSIGNED.
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9
[TRUST-NAME]
By [Name of Trustee], solely as Trustee
10
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STATE OF
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)
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):
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COUNTY OF
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)
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Sworn to (or affirmed) and subscribed before me this ___day of
, 200___by
[TRUSTEE-NAME]
, who is personally known to me Or who
produced
as identification.
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Notary Public
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(Print, type, or stamp commissioned
Name of Notary Public)
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My Commission Expires:
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11
EXHIBIT A
[Trust Agreement]
1
EXHIBIT G
FORM OF BORROWING BASE CERTIFICATE
Date:
.
This Borrowing Base Certificate (this
Certificate
) is given by Imperial PFC
Financing II, LLC, a Georgia limited liability company (the
Borrower
) pursuant to the
Financing Agreement, dated as of
, 2009 (as amended, restated, supplemented or
otherwise modified from time to time, including any replacement agreement therefor, the
Financing Agreement
), by and among the Borrower, the lenders from time to time party
thereto (each a
Lender
and collectively, the
Lenders
), LoIC LLC, a Delaware
limited liability company (LoIC), as collateral agent for the Lenders (the
Collateral
Agent
), and LoIC, as administrative agent for the Lenders (the
Administrative Agent
and together with the Collateral Agent, each an
Agent
and collectively, the
Agents
). Capitalized terms defined in the Financing Agreement and not otherwise defined
herein are used herein as defined in the Financing Agreement.
The individual executing this Certificate on behalf of the Borrower is an Authorized Officer
and, as such, is duly authorized to execute and deliver this Certificate on behalf of the Borrower.
By executing this Certificate such Authorized Officer hereby certifies to the Agents and the
Lenders that:
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(a)
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Attached hereto as
Exhibit A
is a schedule of the Borrowing Base as of
the date set forth above and the calculations made with respect thereto; and
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(b)
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Based on such schedule:
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(i)
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the Borrowing Base as of the date set forth above is $
, and
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(ii)
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[no prepayment of the principal amount of the Loans is required
pursuant to Section 2.05(c)(ii) of the Financing Agreement] [$
of the
principal amount of the Loans is required to be prepaid pursuant to Section
2.05(c)(ii) of the Financing Agreement].
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Additionally, the undersigned hereby certifies, represents and warrants to the Agents and the
Lenders that (i) as of the date hereof, each representation and warranty contained in or made
pursuant to any Loan Document is true and correct in all material respects (except to the extent
such representation or warranty expressly relates to an earlier date, in which case, such
representation or warranty was true and correct as of such earlier date), (ii) each of the
covenants and agreements contained in any Loan Document have been performed (to the extent required
to be performed on or before the date hereof), (iii) no Default or Event of Default has occurred
and is continuing on the date hereof, and (iv) all of the calculations set forth on Exhibit A have
been made in accordance with the requirements of the Financing Agreement.
[Signature page follows]
1
IN WITNESS WHEREOF, the Borrower has caused this Certificate to be executed by one of its
Authorized Officers this ___day of
, 200__.
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IMPERIAL PFC FINANCING II, LLC
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By:
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Imperial Premium Finance, LLC, its sole member
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By:
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Imperial Holdings, LLC, its managing member
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By:
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Name:
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Jonathan Neuman
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Title:
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President
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2
EXHIBIT A
TO
BORROWING BASE CERTIFICATE
Effective Date of Calculation:
A. Borrowing Base Calculation
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1. 100% of the present value (utilizing __% as the
discount rate) of the sum of (A) the aggregate of the
Covered Loan Amount of all Eligible Insurance Premium
Loans owned (actually, beneficially or through a
participation) by the Borrower and (B) the Aggregate
Interest Amount of all such Eligible Insurance Premium
Loans at the maturity date of each such Eligible Insurance
Premium Loan
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$
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2. Covered Loan Amount Limit
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(a)
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The lesser of (x) the outstanding principal
balance of all Eligible Insurance Premium
Loans financed under the Financing
Agreement and (y) (A) with respect to
Eligible Insurance Premium Loans being
initially financed under the Financing
Agreement at the time of calculation, the
aggregate First Year Premiums relating
thereto and (B) with respect to Eligible
Insurance Loans not described in the
preceding clause (A), the aggregate First
Year Premiums and Second Year Premiums
relating thereto
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$
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(b)
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Aggregate Origination Fees with respect to
such Insurance Premium Loans
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$
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(c)
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Aggregate of the Collateral Value Policy
and the Contingent Collateral Value Policy
premium reimbursement amounts payable,
directly or indirectly, by the Premium
Finance Borrowers to the Borrower in
respect of such Insurance Premium Loans,
to the extent financed under the Financing
Agreement
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$
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(d)
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The amount of interest reasonably expected
to be due on the scheduled maturity dates of
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1
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the Eligible Premium Finance Loans
financed hereunder
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$
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(e)
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100% of the
sum of 2(a), 2(b), 2(c)
and 2(d)
discounted to present value utilizing ___%
as the discount rate
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$
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3. Borrowing Base (the lesser of 1 and 2)
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$
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2
EXHIBIT H
FORM OF OPINION
September
, 2009
To the Agents and each of the
Lenders party to the Financing
Agreement referred to below
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Re:
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Imperial PFC Financing II, LLC
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Ladies and Gentlemen:
We have acted as counsel to Imperial PFC Financing II, LLC, a Georgia limited liability
company (the
Borrower
), Imperial Premium Finance, LLC, a Florida limited liability
company (
Imperial
) and Jonathan Neuman and Antony Mitchell (each an
Individual
Guarantor
and collectively, the
Individual Guarantors
and together with the Borrower
and Imperial, each a
Credit Party
, and collectively, the
Credit Parties
) in
connection with the making by the Lenders (as defined herein) of the term loans (the
Term
Loans
) to the Borrower pursuant to the Financing Agreement, dated as of
, 2009 (the
Financing Agreement
), by and among the Borrower, the lenders from time to time party
thereto (each a
Lender
and collectively, the
Lenders
) and LoIC LLC, a Delaware
limited liability company (LoIC), as collateral agent for the Lenders (in such capacity, the
Collateral Agent
), and LoIC, as administrative agent for the Lenders (in such capacity,
the
Administrative Agent
and together with the Collateral Agent, each an
Agent
and collectively, the
Agents
). This opinion is being delivered to you pursuant to Section
5.01(d) of the Financing Agreement. All capitalized terms used and not defined herein have the same
meanings herein as set forth in the Financing Agreement.
1
In connection with this opinion, we have reviewed (i) the organization and existence of the
Credit Parties, (ii) the proceedings of the Credit Parties in relation to the Loan Documents and
the Transaction Documents to which the Credit Parties are parties, (iii) the Loan Documents, (iv)
the UCC financing statements which have been prepared by the Collateral Agent pursuant to Section
5.01(d) of the Financing Agreement (the
Financing Statements
), and (v) such certificates
and other documents of the public officials, officers and other representatives of the Credit
Parties as we have deemed relevant or proper as a basis for our opinions set forth herein. In this
regard, we have relied as to factual matters on the representatives of the Credit Parties as we
have deemed relevant or proper as a basis for our opinions set forth herein. In this regard, we
have relied as to factual matters on the representations and warranties contained in the Loan
Documents and the Transaction Documents. In addition, we have assumed the genuineness of signatures
on original documents
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1
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Note that in addition to these opinions, we
will also need full non-consolidation, true sale and true participation
opinions.
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1
of all Persons and officers and other representatives of the Credit Parties, and the
conformity to the original of all copies submitted to us as photocopies or conformed copies.
Based upon the foregoing and such investigations as we deem advisable and proper, we are of
the opinion that:
1. Each of the Borrower and Imperial (i) is a limited liability company duly organized,
validly existing and in good standing under the law of the state of its organization, (ii) has all
requisite power and authority to conduct its business as now conducted and to consummate the
transactions contemplated by the Loan Documents and the Transaction Documents to which it is a
party, and (iii) is duly qualified to do business and is in good standing in each jurisdiction in
which the character of the properties owned or leased by it or in which the transaction of its
business makes such qualification necessary or desirable. Each Individual Guarantor has the legal
capacity and right to execute, deliver and perform each Loan Document and each Transaction Document
to which the Individual Guarantor is a party.
2. The execution, delivery and performance by each Credit Party of each Loan Document and
Transaction Document to which it is a party, (i) have been duly authorized by all necessary action,
(ii) do not contravene its Governing Documents, any law or regulation (including, without
limitation, Regulations T, U, or X of the Board), or any judgment, writ, injunction, decree, order
or ruling of which we have knowledge that names such Credit Party and is specifically directed to
it or its properties, (iii) do no breach, result in a default under or accelerate, or give any
party the right to accelerate, any of the obligations of such Credit Party under any Material
Contract, (iv) do not and will not result in or require the creation of any lien, security interest
or other charge or encumbrance (other than pursuant to the Loan Documents) upon or with respect to
any of its properties, and (v) do not and will not result in any suspension, revocation,
impairment, forfeiture or nonrenewal of any permit, licenses, authorization or approval applicable
to its operations or any of its properties.
3. No consent, authorization or approval or other action by, and no notice to or filing with,
any Governmental Authority or other regulatory body is required (i) in connection with the due
execution, delivery and performance by any Credit Party of any Loan Document or Transaction
Document to which such Person is a party, (ii) for the grant by any Credit Party pursuant to any
Loan Document, or the perfection, of any lien or security interest purported to be created thereby
in any Collateral, or (iii) for the exercise by the Agents and the Lenders of any of their rights
and remedies under any Loan Document, except for the recordings and filings referred to in
paragraph 6 below, all of which have been duly obtained or made and are in full force and effect.
4. Each Loan Document and Transaction Document has been duly executed and delivered by each
Credit Party which is a party thereto. Each such Loan Document and Transaction Document constitutes
the legal, valid and binding obligation of the Credit Party which is a party thereto, enforceable
against such Credit Party in accordance with its terms, except to the extent that the
enforceability thereof may be limited by any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws from time to time in effect affecting generally the enforcement of
creditors rights and remedies and by general principles of equity.
2
5. The Security Agreement creates a valid security interest in favor of the Collateral Agent
for the benefit of the Agents and the Lenders in the Collateral purported to be covered thereby as
security for the obligations purported to be secured thereby. Each Individual Guarantor Security
Agreement creates a valid security interest in favor of the Collateral Agent for the benefit of the
Agents and the Lenders in the Collateral purported to be covered thereby as security for the
obligations purported to be secured thereby.
6. The Borrower is a registered organization and is located in the state where the
Borrower is formed as set forth in
Schedule A
, and the local law of such state governs
perfection by the filing of Financing Statements. Each Individual Guarantor resides at the location
set forth in
Schedule A
, and the local law of such state governs perfection by the filing
of Financing Statements. Each Financing Statement to be filed in a state set forth on Schedule A
hereto (each, a
State
) is in appropriate form and has been duly filed in the offices set
forth in Schedule A hereto, which filings result in the perfection of the security interests in the
Collateral covered by such Financing Statements to the extent that such Collateral consists of the
type of property in which a security interest may be created under Article 9 of the Uniform
Commercial Code as currently in effect in such State (the
UCC
) and in which a security
interest may be perfected by the filing of a financing statement in such State. The description of
the Collateral set forth in the Financing Statements is sufficient to perfect a security interest
in the items and types of collateral in which a security interest may be perfected by the filing of
financing statements under the UCC currently in effect in the applicable State. Such security
interests of the Agents and the Lenders are perfected security interests. Other than nominal
recording or filing fees, no fees, taxes or other charges are due or payable in any State in
connection with the execution, delivery, filing or recordation of any Financing Statement.
7. Upon the execution and delivery of each cash management agreement by a depositary bank that
maintains a collection account, the security interest of the Collateral Agent in the applicable
collection account maintained with such depositary bank will be perfected.
8. Each Credit Party which is a party to the Security Agreement or an Individual Guarantor
Security Agreement is the owner of the Pledged Debt (as defined in the Security Agreement or an
Individual Guarantor Security Agreement, as applicable) and the Pledge Shares (as defined in the
Security Agreement or an Individual Guarantor Security Agreement, as applicable) in existence on
the date hereof, free and clear of any Lien except for the security interest created by the
Security Agreement or the Individual Guarantor Security Agreement. The Pledged Shares have been
duly authorized and validly issued, are fully paid and nonassessable and constitute 100% of the
issued and outstanding Equity Interests of the issuer of such Pledged Shares.
9. The Collateral Agents having possession of the certificates representing the Pledged
Shares and the promissory notes representing the Pledged Debt delivered to the Collateral Agent on
the date hereof results in the perfection of such security interest. Such security interest is a
perfected, first priority security interest. The Collateral Agent has a perfected security interest
in that portion of the Pledged Shares consisting of general intangibles and other items in which a
security interest may be perfected by the filing of a financing statement in the applicable State.
3
10. There is no pending or, to our knowledge, threatened action, suit or proceeding affecting
any Credit Party before any court, arbitrator, or Governmental Authority which may materially and
adversely affect (i) the financial condition, business, performance, properties, operations or
prospects of any Credit Party, (ii) the ability of any Credit Party to perform the obligations of
such Person under any Loan Document or Transaction Document to which it is a party, (iii) the
legality, validity or enforceability of any Loan Document or Transaction Document, (iv) the rights
and remedies of any Agent or any Lender under any Loan Document, or (v) the creation, perfection or
priority of the Lien of the Collateral Agent on any of the Collateral securing the Obligations.
11. None of the Credit Parties is an investment company or a company controlled by an
investment company, as such terms are defined in the Investment Company Act of 1940, as amended.
12. The choice of New York law to govern the Financing Agreement and the other Loan Documents
is a valid choice of law and will be upheld in a properly presented case by a court of competent
jurisdiction in the States of
. The Credit Parties submission to the jurisdiction of
the courts of the State of New York in the county of New York or the United District court for the
Southern District of New York is legal, valid and binding under the laws of the applicable state
jurisdiction.
13. If a court of the States of
were to apply the usury law of such
jurisdiction to the Financing Agreement and the other Loan Documents, the Term Loans, as made,
would not violate any applicable usury law of such jurisdiction, or other applicable laws
regulating the interest rate, fees and other charges that may be collected with respect to the Term
Loans.
2
14. This opinion letter may not be relied upon or furnished to any other Person, except your
attorneys and auditors, any state or federal governmental or other regulatory authority, bank
examiners, pursuant to any legal process of any court or governmental or regulatory authority or to
your successors, assigns and participants.
Very truly yours,
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2
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For each Credit Party, insert the State of
incorporation or organization for such Credit Party, and each State where such
Credit Partys headquarters, chief executive office and principal place of
business or personal residence are located.
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4
SCHEDULE A
FILINGS OF FINANCING STATEMENTS
Debtor Office
1
EXHIBIT I
FORM OF INSURANCE PREMIUM LOAN SALE AND ASSIGNMENT AGREEMENT
This
INSURANCE PREMIUM LOAN SALE AND ASSIGNMENT AGREEMENT
(
Assignment Agreement
) is
entered into as of
, 20___between Imperial Premium Finance, LLC, a Florida limited liability
company (
Assignor
) and Imperial PFC Financing II, LLC, a Georgia limited liability
company (
Assignee
). Reference is made to the agreement described in
Item 2
of
Annex I
annexed hereto (as amended, restated, modified or otherwise supplemented from time
to time, the Financing Agreement). Capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to them in the Financing Agreement.
1.
Interests
. The Assignor hereby sells, transfers and assigns to the Assignee, and
the Assignee hereby purchases and assumes from the Assignor, all of the Assignors right, title and
interest in and to the Insurance Premium Loan identified on Annex I together with the Loan
Documentation Package as of the date hereof with respect to such Insurance Premium Loan originated
in an Applicable Non-Licensed State as specified on Annex I.
2.
Representations and Warranties of the Assignor
. The Assignor hereby represents and
warrants to the Assignee as of the Settlement Date (or such other date as expressly provided below)
that:
(a)
Organization and Good Standing
. The Assignor has been duly organized and is
validly existing as a limited liability company in good standing under the laws of the state of its
incorporation or formation, and has power and authority to own its properties and to conduct its
business as such properties shall be currently owned and such business is presently conducted.
(b)
Due Qualification
. The Assignor is duly qualified to do business (or is exempt
from such qualification requirements) and has obtained all necessary licenses and approvals in each
jurisdiction in which failure to so qualify or to obtain such licenses or approvals would have a
material adverse effect on the Assignors ability to perform its obligations as an Assignor under
this Assignment Agreement.
(c)
Due Authorization
. The Assignors execution, delivery and performance of this
Assignment Agreement and the other agreements and instruments executed or to be executed by the
Assignor contemplated by this Assignment Agreement, and the consummation of the transactions
contemplated by this Assignment Agreement, have been duly and validly authorized by all necessary
action on the part of the Assignor.
(d)
Binding Obligation
. This Assignment Agreement constitutes the legal, valid and
binding obligation of the Assignor enforceable against the Assignor in accordance with its terms,
except as enforceability may be limited by insolvency, reorganization, moratorium and other similar
laws affecting creditors rights generally or by general principles of equity whether considered in
a suit at law or in equity.
(e)
No Conflict
. The Assignors execution and delivery of this Assignment Agreement,
its performance of the transactions contemplated hereby and its fulfillment of the
1
terms hereof applicable to the Assignor do not (i) contravene the Assignors organizational or
governing documents, (ii) conflict with or violate any applicable law, (iii) violate any provision
of, or require any filing, registration, consent or approval under, any law presently in effect
having applicability to the Assignor, except for such filings, registrations, consents or approvals
as have already been obtained or made and are in full force and effect, (iv) conflict with, result
in any breach of (A) any of the terms or provisions of, or constitute (with or without notice or
lapse of time or both) a default under any Insurance Premium Loan or (B) any of the terms or
provisions of, or constitute (with or without notice or lapse of time or both) a default under any
indenture, contract, agreement, mortgage, deed of trust or other instrument to which the Assignor
is a party or by which it or its properties or assets are bound.
(f)
No Proceedings
. There are no proceedings, injunctions, writs, restraining orders
or investigations pending or, to the best knowledge of the Assignor, threatened against the
Assignor before any governmental authority (i) asserting the illegality, invalidity or
unenforceability, or seeking any determination or ruling that would affect the legality, validity
or enforceability, of the Loan Documents, this Assignment Agreement or any other Transaction
Document, (ii) seeking to prevent the consummation of any of the transactions contemplated by the
Loan Documents, this Assignment Agreement or any other Transaction Document, (iii) seeking any
determination or ruling that, if adversely determined, could have a material and adverse effect on
the financial condition or operations of the Assignor or the validity or enforceability of, or the
performance by the Assignor of its obligations under, this Assignment Agreement or (iv) seeking to
affect adversely the income tax attributes or other tax attributes of the Assignor under the U.S.
federal or the State of Florida, as applicable, tax systems. There are no proceedings, injunctions,
writs, restraining orders or investigations pending with respect to any Insurance Premium Loan an
interest in which is being sold to the Assignee, or the related Life Insurance Policy, before any
governmental authority asserting the illegality, invalidity or unenforceability, or seeking any
determination or ruling that would affect the legality, validity or enforceability, of any such
Insurance Premium Loan or the related Life Insurance Policy.
(g)
No Consents
. No authorization, consent, license, order or approval of, or
registration or declaration with, any Person, including any governmental authority, is required for
the Assignor in connection with the execution and delivery of this Assignment Agreement by the
Assignor or the performance of its obligations under this Assignment Agreement, except for the
exercise by the Assignee or its assigns of the rights provided for in this Assignment Agreement or
the remedies in respect of any Insurance Premium Loans an interest in which is sold, transferred,
assigned or otherwise conveyed by the Assignor to the Assignee pursuant to this Assignment
Agreement.
(h)
Liens
. Each Insurance Premium Loan which has been sold and transferred hereunder
is owned by the Assignor free and clear of any Lien, and the Assignor has not either created or
consented to the creation of any Lien affecting any Insurance Premium Loan sold and transferred
hereunder or any related Life Insurance Policy other than the Liens contemplated by the Transaction
Documents.
(i)
Valid Transfers
. This Assignment Agreement constitutes a valid sale, transfer and
assignment to the Assignee of an interest in the Assignors entire right, title and interest in and
to the Insurance Premium Loans sold and transferred hereunder, whether now
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existing or hereafter created (including all monies due or to become due with respect to such
Insurance Premium Loans, all proceeds (including proceeds as defined in the UCC of the
jurisdiction whose law governs the perfection of an interest in such Insurance Premium Loans) of
such Insurance Premium Loans and all cash proceeds of any related security).
(j)
Solvency
. The Assignor is solvent and will not become insolvent after giving
effect to the transactions contemplated by this Assignment Agreement.
(k)
Compliance
. The Assignor has complied with all Requirements of Law with respect to
it, its business and properties and all Insurance Premium Loans and the Life Insurance Policy
related thereto. The Assignor has obtained all applicable permits, certifications and licenses
(including all licenses to originate Insurance Premium Loans) necessary with respect to its
business and properties and all Insurance Premium Loans and the Life Insurance Policy related
thereto.
(l)
No Rescission
. Neither any Insurance Premium Loans sold hereunder nor the related
Life Insurance Policy has been subordinated or rescinded or, except as disclosed in writing to the
Assignee, amended in any manner
(m)
No Event of Bankruptcy
. No Event of Bankruptcy has occurred with respect to the
Assignor. An Event of Bankruptcy means an Event of Default under Sections 9.01(g) or (h) of the
Financing Agreement.
(n)
Fraudulent Conveyance
. The Assignor is not entering into the transactions
contemplated hereby with any intent of hindering, delaying or defrauding creditors.
(o)
Insurance Premium Loans
.
(i) As of the Settlement Date, each Insurance Premium Loan sold by the Assignor hereunder is
an Eligible Insurance Premium Loan and the grant, sale and purchase hereunder of such Insurance
Premium Loans and Collections arising thereunder do not conflict with, result in a breach of any of
the provisions of, or constitute (with or without notice or lapse of time or both) a default under,
any agreements evidencing such Insurance Premium Loan;
(ii) As of the Settlement Date, each Insurance Premium Loan on such date is the valid, binding
and enforceable obligation of each obligor thereunder;
(iii) As of the Settlement Date, each Insurance Premium Loan on such date was originated by
the Assignor in the ordinary course of the Assignors premium finance lending activities and in
accordance with all Requirements of Law;
(iv) As of any Settlement Date, the information set forth in this Assignment Agreement with
respect to each Insurance Premium Loan therein is correct;
(v) With respect to each Insurance Premium Loan sold by the Assignor, the Assignor represents
and warrants that each such Insurance Premium Loans has
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been originated in accordance with the applicable criteria set forth in the Transaction
Documents;
(vi) As of the Settlement Date, no payment default exists with respect to any Insurance
Premium Loan;
(vii) As of the Settlement Date, no event or circumstance under Section V.A or Section V.B of
the Collateral Value Policy has occurred;
(viii) As of the Settlement Date, the Assignor (A) has not committed a Prohibited Act (as
defined in the Collateral Value Policy) and (B) is not aware that any Prohibited Act has been
committed by any Person with respect to an Insurance Premium Loan in which an interest is sold by
the Assignor hereunder; and
(ix) As of the Settlement Date, no policy loan, cash withdrawal or surrender has occurred with
respect to the Life Insurance Policy related to the Insurance Premium Loan in which an interest is
sold by the Assignor hereunder.
(p)
Legal Names
. As of the Settlement Date, the legal name of the Assignor is as set
forth on the signature pages of this Assignment Agreement.
(q)
Margin Regulations
. The Assignor will not use any of the proceeds of the Purchase
Price for any purpose which will conflict with or contravene any of Regulations T, U or X
promulgated by the Federal Reserve Board from time to time.
(r)
Reasonably Equivalent Value
. The Assignee has given reasonably equivalent value to
the Assignor in consideration for each purchase under this Assignment Agreement, no such transfer
has been made for or on account of an antecedent debt owed by the Assignor to the Assignee, and no
such transfer is or may be voidable or subject to avoidance under any applicable bankruptcy,
insolvency or other similar law.
(s)
Accuracy of Information
. All certificates, reports, statements, documents and
other information furnished to the Assignee by or on behalf of the Assignor pursuant to any
provision of this Assignment Agreement, or in connection with or pursuant to any amendment or
modification of, or waiver under, this Assignment Agreement are, and shall, at the time the same
are so furnished, be complete and correct in all material respects on the date the same are
furnished.
(t)
Taxes
. The Assignor has filed or has caused to be filed all federal, state and
local tax returns which it is required to file and has paid all Taxes, assessments and other
governmental charges due in respect of its respective returns, except to the extent that any such
Taxes, assessments or other governmental charges are being contested in good faith and as to which
the Assignor has set aside on its books adequate reserves and in respect of which no Liens have
attached to or been filed against the Assignor or any of its properties. There are no agreements or
waivers extending the statutory period of limitations applicable to any federal income tax return
of the Assignor for any period.
4
(u)
Investment Company Act
. The Assignor is not an investment company within the
meaning of the Investment Company Act of 1940, as amended.
(v)
Quality of Title
. No effective financing statement or other similar instrument is
in effect covering any of the Insurance Premium Loans that have been transferred hereunder or any
interest therein that has been filed, authorized, acknowledged or otherwise permitted by the
Assignor or any Affiliate thereof in any recording office except for financing statements that may
be filed (x) in favor of the Collateral Agent in accordance with the Security Agreement, and/or (y)
in favor of the Assignor under the related Loan Document Package.
3.
Representations and Warranties of the Assignee
. The Assignee hereby represents and
warrants to the Assignor as of the Settlement Date that:
(a)
Organization and Good Standing
. The Assignee has been duly organized and is
validly existing as a limited liability company in good standing under the laws of the State of
Georgia, and has power and authority to own its properties and to conduct its business as such
properties shall be currently owned and such business is presently conducted.
(b)
Power and Authority
. The Assignee shall have the power and authority to execute
and deliver this Assignment Agreement and to carry out its terms; the Assignee shall have full
power and authority to purchase the property to be purchased and shall have duly authorized such
purchase; and the execution, delivery and performance of this Assignment Agreement shall have been
duly authorized by the Assignee by all necessary action.
(c)
Binding Obligation
. This Assignment Agreement shall constitute a legal, valid and
binding obligation of the Assignee enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws affecting creditors rights generally or by general principles of equity.
The representations and warranties set forth in Section 2 and Section 3 of this Assignment
Agreement shall survive the sale of the interests by the Assignor to the Assignee pursuant to this
Assignment Agreement. Upon discovery by the Assignor or the Assignee of a breach of any of the
foregoing representations and warranties, the party discovering such breach shall give prompt
written notice to the other.
4.
Remedies
.
(a)
Repurchase of interests for Certain Breaches
. In the event of a breach of any
representations and warranties set forth in Section 2(c), (d), (e), (f), (g), (h), (i), (j), (k),
(l), (o) or (v), upon the earlier to occur of the discovery of such breach by the Assignor or
receipt by the Assignor of written notice of such breach given by or on behalf of the Assignee, the
Assignees interest in each Insurance Premium Loan relating to such breach shall be repurchased by
the Assignor from the Assignee and upon such repurchase shall terminate and be extinguished.
(b)
Reconveyed Insurance Premium Loans
. Upon the repurchase by the Assignor of any
interest under this Assignment Agreement, then, on the date required for such repurchase, the
Assignor shall deposit into the Collection Account in immediately available
5
funds an amount equal to the outstanding principal balance of the affected Insurance Premium
Loans on the date of such repurchase, together with accrued and unpaid interest thereon through
such date. Such deposit shall be considered payment in full for such interest.
In connection with the preceding paragraph, the Assignee shall execute such documents and
instruments of transfer or assignment as shall be prepared by the Assignor, and shall take such
other actions as shall reasonably be requested by the Assignor, to effect the repurchase of the
interests from the Assignee. Upon repurchase of the interests in Insurance Premium Loans from the
Assignee, the Assignee shall automatically and without further action be deemed to transfer,
assign, set over and otherwise convey to or upon the order of the Assignor, without recourse,
representation or warranty, all the right, title and interest of the Assignee in and to the
reconveyed interest and all Collections with respect thereto and all proceeds thereof received
after the date of such repurchase.
5.
Covenants of the Assignor
. The Assignor hereby covenants that:
(a)
No Impairment
. Except in accordance with, or as contemplated by, the Loan
Documents and the Transaction Documents, the Assignor shall take no action, nor omit to take any
action, which would impair the rights of the Assignee in any Insurance Premium Loan in which an
interest has been transferred hereunder.
(b)
Compliance with Law
. The Assignor will comply in all material respects with all
Requirements of Law with respect to it, its business and properties and the Insurance Premium Loans
and related Life Insurance Policies. The Assignor will maintain all applicable permits,
certifications and licenses (including all licenses to originate Insurance Premium Loans) necessary
with respect to its business and properties and all Insurance Premium Loans and the Life Insurance
Policy related thereto.
(c)
Preservation of Existence
. The Assignor will preserve and maintain its existence,
rights, franchises and privileges as a limited liability company or corporation, as applicable, and
become and remain licensed in each jurisdiction where the failure to maintain such license would
materially and adversely affect (A) the interests of the Assignee hereunder or (B) the
collectibility of any Insurance Premium Loans in which an interest has been transferred hereunder
or the related Life Insurance Policies; and the Assignor shall not consolidate with or merge into
any other Person or convey or transfer its properties and assets substantially as an entirety to
any Person without the prior written consent of the Assignee.
(d)
Performance and Compliance with Insurance Premium Loans
. The Assignor will, at its
expense, timely and fully perform and comply with all provisions, covenants and other promises
required to be observed by it hereunder. The Assignor shall comply with and perform its obligations
with respect to any Insurance Premium Loan.
(e)
Collections and Payments
. Except as otherwise provided in this Assignment
Agreement, the Assignor will cause any Collections received by it to be deposited in the Collection
Account no later than the Business Day following the receipt and identification of proceeds.
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(f)
Arms-Length Relationship; Separate Existence
. The Assignor will maintain an
arms-length relationship with the Assignee. Any transaction between the Assignee on the one hand
and the Assignor or any respective Affiliates thereof, on the other hand, will, in the reasonable
judgment of the Assignor, be fair and equitable to the Assignee. The Assignor shall not acquire any
obligations of the Assignee.
(g)
Responsibility of Assignor
. The Assignor will not agree to be, or hold itself out
to be, responsible for the debts of the Assignee or for the decisions or actions with respect to
the daily business and affairs of the Assignee.
(h)
Reporting Requirements
.
(i) As soon as possible and in any event within ten (10) Business Days after the Assignor
obtains knowledge thereof, the Assignor shall notify the Assignee of any litigation, investigation
or proceeding that could reasonably be expected to impair in any material respect the ability of
the Assignor to perform its obligations under this Assignee Agreement.
(ii) The Assignor shall promptly deliver to the Assignee such other information, documents,
records or reports regarding the Insurance Premium Loans in which an interest has been transferred
hereunder and related Life Insurance Policies as the Assignee may from time to time reasonably
request in order to protect the Assignees interests under or as contemplated by this Assignment
Agreement..
(i)
No Bankruptcy Filing Against Assignee
. The Assignor will not commence, institute
or cause to be commenced or instituted any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any United States federal or state bankruptcy
or similar law, against the Assignee or join in the commencement of any proceeding against the
Assignee under any such law.
6.
Sale
. It is the intention of the parties that the conveyance of the Insurance
Premium Loans hereunder constitute a sale and not pledges of security for a loan and the parties
will treat such conveyance as a sale for tax and accounting purposes. The parties acknowledge and
agree that the transactions contemplated by this Assignment Agreement shall be, and shall be
treated as a purchase by the Assignor and a sale by the Assignee of the Insurance Premium Loans
hereunder, and not as a lending transaction or the grant of a security interest in the Insurance
Premium Loans hereunder, such that the Insurance Premium Loans hereunder shall not be part of the
bankruptcy estate of the Assignor under Section 541 of the Bankruptcy Code or subject to the
automatic stay under Section 362 of the Bankruptcy Code or any similar law. However, if the
conveyances of such Insurance Premium Loans were not characterized by a court of law as sales of
Insurance Premium Loans or a court of law determined that the consideration for the conveyance of
the Insurance Premium Loans hereunder did not represent fair value, then such conveyances of such
Insurance Premium Loans shall be considered a capital contribution to the Assignee (or, in the case
where the consideration for the conveyances of the Insurance Premium Loans did not represent fair
value, capital contributions to the extent of any shortfall in fair value).
7
7.
Settlement Date
. Following the execution of this Assignment Agreement by the
Assignor and the Assignee, it will be delivered by the Assignor to the Collateral Agent and the
Insurance Collateral Agent. The effective date of this Assignment Agreement (the Settlement Date)
shall be the latest of (a) the date of the execution hereof by the Assignor and the Assignee, (b)
the date this Assignment Agreement has been delivered to the Collateral Agent and the Insurance
Collateral Agent, (c) the settlement date specified on Annex I, and (d) the receipt by Assignor of
the Purchase Price specified in Annex I.
8.
Rights
. As of the Settlement Date (a) the Assignee shall be a party to the Loan
Documentation Package and, to the extent of the interest assigned pursuant to this Assignment
Agreement, have the rights and obligations of a Lender thereunder, and (b) the Assignor shall, to
the extent of the interest assigned pursuant to this Assignment Agreement, subject to the
provisions of any Servicing Agreement, relinquish its rights and be released from its obligations
under the Loan Documentation Package.
9.
Adjustments
. The Assignor and the Assignee shall make all appropriate adjustments
in payments under the Loan Documentation Package for periods prior to the Settlement Date directly
between themselves on the Settlement Date.
10.
Governing Law
. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
11.
Waiver of Jury Trial
. EACH PARTY HERETO HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BASED UPON OR ARISING OUT OF THIS ASSIGNMENT AGREEMENT OR
ANY OF THE TRANSACTIONS RELATED HERETO, AND AGREES THAT ANY SUCH ACTION, PROCEEDING OR COUNTERCLAIM
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
12.
Counterparts
. This Assignment Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart of this Assignment
Agreement by facsimile or electronic mail shall be equally effective as delivery of an original
executed counterpart.
13.
Indemnification
. Without limiting any other rights that the Assignee may have
hereunder or under any applicable law, the Assignor hereby agrees to indemnify the Assignee and the
Indemnitees from and against any and all amounts awarded against or incurred by any of them, and
arising out of or resulting from this Assignment Agreement or the activities of the Assignor in
connection herewith or in respect of any Insurance Premium Loan in which an interest has been
transferred hereunder or related Life Insurance Policy that are sustained as a result of:
(i) any representation, warranty or covenant made by the Assignor under this Assignment
Agreement, or any other document, certificate or report
8
delivered by the Assignor hereunder that was incorrect in any material respect when made or
deemed made or that the Assignor failed to perform;
(ii) the failure by the Assignor to comply with this Assignment Agreement, the Transaction
Documents, the Loan Documents, or any Requirement of Law with respect to any Insurance Premium Loan
or Life Insurance Policy;
(iii) any commingling by the Assignor of Collections with other funds of the Assignor or any
of its Affiliates; or
(iv) any breach by the Assignor of any obligation under any Insurance Premium Loan in which an
interest has been transferred hereunder or related Life Insurance Policy.
The foregoing indemnity excludes (a) losses on Insurance Premium Loans in which an interest
has been transferred hereunder to the extent reimbursement therefor would constitute credit
recourse to the Assignor for nonpayment of any Insurance Premium Loan in which an interest has been
transferred hereunder by the related obligor and (b) any income or franchise taxes or similar taxes
(or any interest or penalties on them).
14.
Amendment
. This Assignment Agreement may be amended from time to time by the
Assignor and the Assignee in writing with the prior written consent of the Agents and the Required
Lenders. Notwithstanding the foregoing, the parties hereby agree that no amendment, modification or
waiver of, or consent with respect to, any provision of this Assignment Agreement that (a) prior to
the occurrence of a Credit Event (as defined in the Collateral Value Insurance Policy) would, in
the reasonable belief of any party hereto, be likely to adversely affect the interests of the
Collateral Value Insurer shall in any event be made or become effective unless the same shall be
consented to by the Collateral Value Insurer in writing or (b) following the occurrence of a Credit
Event, would, in the reasonable belief of any party hereto, be likely to adversely affect the
interests of the Contingent Collateral Value Insurer shall in any event be made or become effective
unless the same shall be consented to by the Contingent Collateral Value Insurer in writing. In all
events, copies of any amendments to this Agreement shall be promptly provided to (x) the Collateral
Value Insurer prior to the occurrence of a Credit Event and (y) the Contingent Collateral Value
Insurer following the occurrence of a Credit Event, by the Assignee following execution thereof.
Each of the parties hereto agrees that the Collateral Value Insurer and the Contingent Collateral
Value Insurer are third party beneficiaries solely with respect to this Section 14, and shall have
no rights with respect to any other provisions of this Assignment Agreement. Each of the parties
hereto agrees that the each of the Agents and the Lenders is a third party beneficiary with respect
to this Assignment Agreement.
[Remainder of page left intentionally blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered
by their respective officers thereunto duly authorized, as of the date first above written.
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ASSIGNOR:
IMPERIAL PREMIUM FINANCE, LLC
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By:
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Imperial Holdings, LLC, its managing
member
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By:
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Name:
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Title:
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Date:
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NOTICE ADDRESS FOR ASSIGNOR
701 Park of Commerce Blvd., Suite 301
Boca Raton, Florida 33487
Telephone No.: (561) 995-4202
Telecopy No.: (561) 995-4203
ASSIGNEE:
IMPERIAL PFC FINANCING II, LLC
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By:
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Name:
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David Manchester
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Title:
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Senior Vice President
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Date:
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NOTICE ADDRESS FOR ASSIGNEE
191 Peachtree Street, NE, Suite 3300
Atlanta, Georgia 30303
Telephone No.: (404) 736-3630
Telecopy No.: (404) 736-3620
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[SIGNATURE PAGE TO INSURANCE PREMIUM LOAN SALE AND ASSIGNMENT AGREEMENT]
ANNEX FOR INSURANCE PREMIUM LOAN SALE AND ASSIGNMENT AGREEMENT
ANNEX I
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1.
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Assignee/Purchaser: Imperial PFC Financing II, LLC, a Georgia limited liability company
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2.
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Name and Date of Financing Agreement:
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Financing Agreement, dated as of , 2009, by and among Imperial PFC
Financing II, LLC, a Georgia limited liability company (the
Borrower), the lenders from time to time party thereto (each a
Lender and collectively, the Lenders), LoIC LLC, a Delaware
limited liability company (LoIC), as collateral agent for the
Lenders (in such capacity, the Collateral Agent), and LoIC, as
administrative agent for the Lenders (in such capacity, the
Administrative Agent and together with the Collateral Agent, each
an Agent and collectively, the Agents).
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3.
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Date of Assignment Agreement:
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4.
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Premium Finance Borrower:
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5.
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Insurance Premium Loan Number:
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6.
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Loan Documentation:
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7.
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Insurance Premium Loan Agreement Date:
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8.
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Life Insurance Policy Number:
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9.
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Amount of Insurance Premium Loan:
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10.
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Purchase Price:
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11.
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Final Maturity Date of Insurance Premium Loan:
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12.
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Settlement Date:
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EXHIBIT J
FORM OF MASTER PARTICIPATION AGREEMENT
This
MASTER PARTICIPATION AGREEMENT, dated as
of
, 2009 (the Agreement), between Imperial
Premium Finance, LLC, a Florida limited liability company (the Originator) and Imperial PFC
Financing II, LLC, a Georgia limited liability company (the Participant).
In consideration of the premises and the mutual covenants herein contained, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the
parties hereto, the parties hereby agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.01
Definitions
. Capitalized terms used herein and not otherwise defined in
this Agreement shall have the respective meanings ascribed to such terms in the Financing Agreement
or, if not in the Financing Agreement, in the Glossary of Defined Terms attached hereto as Exhibit
A.
SECTION 1.02
Usage of Terms
.
(a) The words hereof, herein and hereunder and words of similar import when used in this
Agreement, including the Glossary of Defined Terms, shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; article, section, subsection, exhibit and
schedule references contained in this Agreement are references to articles, sections, subsections,
exhibits and schedules in or to this Agreement unless otherwise specified; with respect to all
terms in this Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other genders; references to writing include printing, typing,
lithography and other means of reproducing words in a visible form; references to agreements and
other contractual instruments include all subsequent amendments, amendments and restatements and
supplements thereto or changes therein entered into in accordance with their respective terms and
not prohibited by this Agreement; references to Persons include their permitted successors and
assigns; references to laws include their amendments and supplements, the rules and regulations
thereunder and any successors thereto; and the term including means including without
limitation.
SECTION 1.03
Computation of Time Periods
. Unless otherwise stated in this Agreement,
in the computation of a period of time from a specified date to a later specified date, the word
from means from and including and the words to and until each means to but excluding.
ARTICLE II.
TRANSFERS OF INTERESTS IN INSURANCE PREMIUM LOANS
SECTION 2.01
Transfers of Interests in Insurance Premium Loans
. On the terms and
subject to the conditions of this Agreement, the Originator shall, on the Effective Date and from
time to time thereafter, sell and transfer to the Participant without recourse, and the Participant
shall, on the Effective Date and from time to time thereafter purchase from the Originator (any
such sale, transfer, purchase and acquisition is herein referred to as a Transfer), a
participation interest in each Insurance Premium Loan originated by the Originator in an Applicable
Licensed State.
ARTICLE III.
PARTICIPATIONS
SECTION 3.01
Transfers
. (a) On the terms and conditions set forth herein, during the
Effective Period and on and as of the related Transfer Effective Date, the Originator hereby sells,
transfers and assigns to the Participant, and the Participant hereby purchases and acquires from
the Originator, with respect to each Insurance Premium Loan made by the Originator in an Applicable
Licensed State identified in a Participation Certificate (as defined herein), a participation
evidencing a 100% undivided beneficial ownership interest (each, a Participation) in all of the
Originators right, title and interest in, to and under (i) such Insurance Premium Loan, the
related promissory note and all other documents in the Loan Documentation Package for such
Insurance Premium Loan and all right, title and interest of the Originator in the Collateral
(including any related Life Insurance Policies) and (ii) all Collections thereon received by the
Originator on or after the Transfer Effective Date, including all cash proceeds received with
respect to such Insurance Premium Loans and all related security (including proceeds as defined
in the UCC of the jurisdiction whose law governs the perfection of an interest in such Insurance
Premium Loans). On each Transfer Effective Date, the Participant and the Originator shall execute a
participation certificate in the form of Exhibit B attached hereto (each a Participation
Certificate). Each Participation Certificate shall be deemed to incorporate in its entirety, the
terms and conditions of this Agreement and all representations, warranties, agreements and
covenants made hereunder shall be deemed to have been made in respect of the Insurance Premium
Loans the subject of the Participation Certificate as of the applicable Transfer Effective Date.
(b) The parties acknowledge and agree that (i) the conveyance of the Insurance Premium Loans
is being effected hereunder by Participations instead of outright assignments and (ii) accordingly,
the sale, transfer, assignment and conveyance of the Participations in the Insurance Premium Loans
hereunder shall have the consequence that the Originator holds legal title and not an equitable
interest in such Insurance Premium Loans and the Participant holds 100% of the equitable interest
in such Insurance Premium Loans. The Originator acknowledges and agrees that, to the fullest extent
permitted by applicable law, it holds legal title to such Insurance Premium Loans as trustee for
the benefit of the Participant and its successors and assigns. However, notwithstanding any other
provision herein, the Originator and the Participant agree and acknowledge that the Originator
shall remain the lender of record
2
on all Insurance Premium Loans in which a Participation has been transferred hereunder. The
parties acknowledge and agree that the transactions contemplated by this Agreement shall be, and
shall be treated as a purchase by the Participant and a sale by the Originator of Participations in
the Insurance Premium Loans hereunder, and not as a lending transaction or the grant of a security
interest in Participations in the Insurance Premium Loans hereunder, such that the Participations
in the Insurance Premium Loans hereunder shall not be part of the bankruptcy estate of the
Originator under Section 541 of the Bankruptcy Code or subject to the automatic stay under Section
362 of the Bankruptcy Code or any similar law.
(c) Subject to Section 5.03, the Participations sold, transferred, assigned and conveyed
hereunder in such Insurance Premium Loans are final and irrevocable from and after the Transfer
Effective Date, and neither the Participant nor the Originator shall have any right to require that
any such Participation terminate or be repurchased by the Originator from the Participant and be
extinguished.
(d) It is the intention of the parties that the conveyance of the Insurance Premium Loans to
the Participant effected by this Agreement constitute sales of Participations in such Insurance
Premium Loans and not pledges of security for a loan. However, if the conveyances of such Insurance
Premium Loans were not characterized by a court of law as sales of Participations or a court of law
determined that the consideration for the Participations did not represent fair value, then such
conveyances of such Insurance Premium Loans shall be considered a capital contribution to the
Participant (or, in the case where the consideration for the Participations did not represent fair
value, capital contributions to the extent of any shortfall in fair value).
SECTION 3.02
Payment of Purchase Price
. In consideration of the Transfer of each
Participation from the Originator to the Participant as provided in Section 3.01, on each Transfer
Effective Date the Participant agrees to pay the Originator an amount equal to the Purchase Price
for each such Participation purchased by the Participant hereunder.
(a) Initial Purchase Price Payment. On the terms and subject to the conditions set forth in
this Agreement, the Participant agrees to pay to the Originator the Purchase Price in cash for the
purchase to be made from the Originator on the Effective Date.
(b) Subsequent Purchase Price Payments. On each Transfer Effective Date subsequent to the
Effective Date, on the terms and subject to the conditions set forth in this Agreement, the
Participant shall pay to the Originator the Purchase Price for the Participations being sold by the
Originator on such Transfer Effective Date in cash.
SECTION 3.03
Payments to Participant
. Whenever the Originator receives or collects a
payment in respect of any Insurance Premium Loan subject to a Participation, it will pay over the
same to the Participant in the same funds as received promptly after its receipt thereof and in any
event within one Business Day of its receipt thereof.
3
ARTICLE IV.
CONDITIONS TO EFFECTIVENESS AND PURCHASES
SECTION 4.01
Conditions Precedent to Initial Transfer
. The initial Transfer hereunder
is subject to the condition precedent that the Participant shall have received, on or before the
date hereof, the following, each in form and substance satisfactory to the Participant:
(a) A certified copy of the organizational or governing documents of the Originator.
(b) Evidence reasonably satisfactory to the Participant of (i) due authorization by the
Originator of the transactions contemplated by this Agreement and (ii) due execution of this
Agreement (including the names and true signatures of the officers of the Originator authorized to
execute this Agreement and any other documents contemplated hereunder and appropriate documentation
evidencing the incumbency of such officers).
(c) Written search reports certified by a search service acceptable to the Participant,
listing all effective financing statements that name the Originator as debtor or assignor and that
are filed in the jurisdictions in which filings were made pursuant to clause (d) below and in such
other jurisdictions that the Participant shall reasonably request, together with copies of such
financing statements (none of which shall cover any Collateral or interests therein or proceeds of
any thereof), and tax, ERISA and judgment lien search reports from a Person satisfactory to the
Participant showing no evidence of such lien filed against the Originator.
(d) Copies of proper amendment or termination statements, if any, necessary to release all
security interests and other rights of any Person in the Collateral previously granted by the
Originator.
(e) The Agreement and the other Transaction Documents and all documentation to be delivered in
connection therewith shall have been executed and delivered, and all conditions thereto shall have
been satisfied.
(f) An opinion of Locke Lord Bissell & Liddell, local counsel to the Participant and an
opinion of Foley & Lardner, LLP, counsel to the Participant and the Originator, in form and
substance satisfactory to the Agents, and as to such other matters as the Collateral Agent may
reasonably request, including, without limitation, non-consolidation, true sale and true
participation opinions.
(g) All legal matters incident to the execution and delivery of this Agreement and to the
purchases by the Participant of a Participation from the Originator shall be satisfactory to
counsel for the Participant.
SECTION 4.02
Conditions Precedent to All Transfers
. The Transfer to take place on the
initial Transfer Effective Date and each Transfer to take place on a subsequent Transfer Effective
Date hereunder shall be subject to the further conditions precedent that:
4
(a) On or prior to such Transfer Effective Date, the Originator (or the Servicer on its
behalf) shall, at its own expense, have marked its records related to each Insurance Premium Loan
in which a Participation has been transferred hereunder with a notation, acceptable to the
Participant, stating that a Participation in such Insurance Premium Loan, the related promissory
note and all other documents in the Loan Documentation Package for such Insurance Premium Loan and
Collections with respect thereto and other proceeds thereof, has been sold in accordance with this
Agreement, and the Originator further agrees not to alter such file designation with respect to any
applicable Insurance Premium Loan in which a Participation has been transferred hereunder during
the term of this Agreement;
(b) On each Transfer Effective Date, the following statements shall be true:
(i) all of the Originators representations and warranties contained in Section 5.01
are correct on and as of such date as though made on and as of such date; and
(ii) no event has occurred and is continuing, or would result from such Transfer, that
constitutes an Event of Termination or would constitute an Event of Termination but for the
requirement that notice be given or that time elapse or both;
(c) On each Transfer Effective Date, the Originator and the Participant shall have executed a
Participation Certificate for each Insurance Premium Loan for which a Participation has been
transferred hereunder;
(d) On each Transfer Effective Date, the Originator shall have complied with all of its
covenants hereunder and shall have fulfilled in all material respects all of its obligations
hereunder;
(e) As of each Transfer Effective Date, no Originator shall be insolvent;
The acceptance by the Originator of the Purchase Price for any Participation shall be deemed
to be a representation and warranty by the Originator as to the matters set forth in this Section.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
SECTION 5.01
Representations and Warranties of the Originator
. The Originator hereby
represents and warrants as to itself to the Participant as of the Effective Date and each Transfer
Effective Date (or such other date as expressly provided below) that:
(a)
Organization and Good Standing
. The Originator has been duly organized and is
validly existing as a limited liability company in good standing under the laws of the state of its
incorporation or formation, and has power and authority to own its properties and to conduct its
business as such properties shall be currently owned and such business is presently conducted.
5
(b)
Due Qualification
. The Originator is duly qualified to do business (or is exempt
from such qualification requirements) and has obtained all necessary licenses and approvals in each
jurisdiction in which failure to so qualify or to obtain such licenses or approvals would have a
material adverse effect on the Originators ability to perform its obligations as the Originator
under this Agreement.
(c)
Due Authorization
. The Originators execution, delivery and performance of this
Agreement and the other agreements and instruments executed or to be executed by the Originator
contemplated by this Agreement, and the consummation of the transactions contemplated by this
Agreement, have been duly and validly authorized by all necessary action on the part of the
Originator.
(d)
Binding Obligation
. This Agreement constitutes the legal, valid and binding
obligation of the Originator enforceable against the Originator in accordance with its terms,
except as enforceability may be limited by insolvency, reorganization, moratorium and other similar
laws affecting creditors rights generally or by general principles of equity whether considered in
a suit at law or in equity.
(e)
No Conflict
. The Originators execution and delivery of this Agreement, its
performance of the transactions contemplated hereby and its fulfillment of the terms hereof
applicable to the Originator do not (i) contravene the Originators organizational or governing
documents, (ii) conflict with or violate any applicable law, (iii) violate any provision of, or
require any filing, registration, consent or approval under, any law presently in effect having
applicability to the Originator, except for such filings, registrations, consents or approvals as
have already been obtained or made and are in full force and effect, (iv) conflict with, result in
any breach of (A) any of the terms or provisions of, or constitute (with or without notice or lapse
of time or both) a default under any Insurance Premium Loan or (B) any of the terms or provisions
of, or constitute (with or without notice or lapse of time or both) a default under any indenture,
contract, agreement, mortgage, deed of trust or other instrument to which the Originator is a party
or by which it or its properties or assets are bound.
(f)
No Proceedings
. There are no proceedings, injunctions, writs, restraining orders
or investigations pending or, to the best knowledge of the Originator, threatened against the
Originator before any governmental authority (i) asserting the illegality, invalidity or
unenforceability, or seeking any determination or ruling that would affect the legality, validity
or enforceability, of the Loan Documents, this Agreement or any other Transaction Document, (ii)
seeking to prevent the consummation of any of the transactions contemplated by the Loan Documents,
this Agreement or any other Transaction Document, (iii) seeking any determination or ruling that,
if adversely determined, could have a material and adverse effect on the financial condition or
operations of the Originator or the validity or enforceability of, or the performance by the
Originator of its obligations under, this Agreement or (iv) seeking to affect adversely the income
tax attributes or other tax attributes of the Originator under the U.S. federal or the State of
Florida, as applicable, tax systems. There are no proceedings, injunctions, writs, restraining
orders or investigations pending with respect to any Insurance Premium Loan a Participation in
which is being sold to the Participant, or the related Life Insurance Policy, before any
governmental authority asserting the illegality, invalidity or unenforceability, or seeking any
6
determination or ruling that would affect the legality, validity or enforceability, of any
such Insurance Premium Loan or the related Life Insurance Policy.
(g)
No Consents
. No authorization, consent, license, order or approval of, or
registration or declaration with, any Person, including any governmental authority, is required for
the Originator in connection with the execution and delivery of this Agreement by the Originator or
the performance of its obligations under this Agreement, except for (i) the filing of the financing
statements or other documents required to have been filed on or prior to the Effective Date or
applicable Transfer Effective Date pursuant to Section 4.01, all of which were so filed and are in
full force and effect, (ii) the filing from time to time of any amendments, assignments or
continuation statements which may become applicable pursuant to this Agreement or (iii) the
exercise by the Participant or its assigns of the rights provided for in this Agreement or the
remedies in respect of any Insurance Premium Loans a Participation in which is sold, transferred,
assigned or otherwise conveyed by the Originator to the Participant pursuant to this Agreement.
(h)
Liens
. Each Insurance Premium Loan in which a Participation has been transferred
hereunder is owned by the Originator free and clear of any Lien (subject to the Participations
therein), and the Originator has not either created or consented to the creation of any Lien
affecting any Insurance Premium Loan in which a Participation has been transferred hereunder or any
related Life Insurance Policy other than the Liens contemplated by this Agreement and the other
Transaction Documents.
(i)
Location
. As of the Effective Date, the chief executive office of the Originator,
and the office where the Originator keeps its copy of the Transaction Documents and Records, is
located at the Originators address specified in Section 9.03.
(j)
Valid Transfers
. This Agreement constitutes a valid sale, transfer and assignment
to the Participant of Participations in the Originators entire right, title and interest in and to
the Insurance Premium Loans in which a Participation has been transferred hereunder, whether now
existing or hereafter created (including all monies due or to become due with respect to such
Insurance Premium Loans, all proceeds (including proceeds as defined in the UCC of the
jurisdiction whose law governs the perfection of an interest in such Insurance Premium Loans) of
such Insurance Premium Loans and all cash proceeds of any related security). If an Event of
Bankruptcy were to occur with respect to the Originator, the right to retain the Insurance Premium
Loans (including all monies due or to become due with respect to such Insurance Premium Loans, all
proceeds of such Insurance Premium Loans and all cash proceeds of any related security) would not
be deemed to be property of the Originator. If and to the extent the sale of the Participations in
the Insurance Premium Loans under this Agreement is not deemed to be or is not recognized as a sale
by a court of law, the conveyance of the interest in the Insurance Premium Loans created on or
after the applicable Transfer Effective Date, shall to the extent set forth in Section 3.01(d) be
considered a capital contribution to the Participant.
(k)
Solvency
. The Originator is, solvent and will not become insolvent after giving
effect to the transactions contemplated by this Agreement. The Originator is currently repaying all
of its indebtedness as such indebtedness becomes due; and, after giving effect to the
7
transactions contemplated by this Agreement, the Originator will have adequate capital to
conduct its business as presently conducted and as contemplated by this Agreement.
(1)
Compliance
. The Originator has complied, and will comply on each Transfer
Effective Date, with all Requirements of Law with respect to it, its business and properties and
all Insurance Premium Loans and the Life Insurance Policy related thereto. The Originator has
obtained and will maintain all applicable permits, certifications and licenses (including all
licenses to originate Insurance Premium Loans) necessary with respect to its business and
properties and all Insurance Premium Loans and the Life Insurance Policy related thereto.
(m)
No Rescission
. Neither any Insurance Premium Loans in which a Participation is
sold hereunder nor the related Life Insurance Policy has been subordinated or rescinded or, except
as disclosed in writing to the Participant, amended in any manner.
(n)
No Event of Bankruptcy
. No Event of Bankruptcy has occurred with respect to the
Originator.
(o)
Fraudulent Conveyance
. The Originator is not entering into the transactions
contemplated hereby with any intent of hindering, delaying or defrauding creditors.
(p)
Insurance Premium Loans
.
(i) As of each Transfer Effective Date, each Insurance Premium Loan in which a
Participation is granted or sold by the Originator hereunder is an Eligible Insurance
Premium Loan and the grant, sale and purchase hereunder of a Participation in such Insurance
Premium Loans and Collections arising thereunder do not conflict with, result in a breach of
any of the provisions of, or constitute (with or without notice or lapse of time or both) a
default under, any agreements evidencing such Insurance Premium Loan;
(ii) As of any Transfer Effective Date, each Insurance Premium Loan on such date is the
valid, binding and enforceable obligation of each obligor thereunder;
(iii) As of any Transfer Effective Date, each Insurance Premium Loan on such date was
originated by the Originator in the ordinary course of the Originators premium finance
lending activities and in accordance with all Requirements of Law;
(iv) As of any Transfer Effective Date, the information set forth in the applicable
Participation Certificate with respect to each Insurance Premium Loan therein was correct;
(v) With respect to each Insurance Premium Loan in which a
Participation is granted or sold by the Originator, the Originator represents and
warrants that each such Insurance Premium Loans has been originated in accordance with the
applicable criteria set forth in the Transaction Documents;
8
(vi) As of any Transfer Effective Date, no payment default exists with respect to any
Insurance Premium Loan;
(vii) As of any Transfer Effective Date, no event or circumstance under Section V.A or
Section V.B. of the Collateral Value Policy has occurred;
(viii) As of any Transfer Effective Date, the Originator (A) has not committed a
Prohibited Act (as defined in the Collateral Value Policy) and (B) is not aware that any
Prohibited Act has been committed by any Person with respect to an Insurance Premium Loan in
which a Participation is granted or sold by the Originator; and
(ix) As of any Transfer Effective Date, no policy loan, cash withdrawal or surrender
has occurred with respect to the Life Insurance Policy related to the Insurance Premium Loan
in which a Participation is granted or sold by the Originator.
(q)
Legal Names
. As of the Effective Date, the legal name of the Originator is as set
forth on the signature pages of this Agreement.
(r)
ERISA
. With respect to any Plan maintained or participated in during the past six
years by the Originator or any of its ERISA Affiliates, (i) such Plan complied and complies in all
material respects with all Requirements of Law, (ii) a Reportable Event has not occurred with
respect to any such Plan, (iii) such Plan has not been terminated and (iv) no funding deficiency
has occurred in respect of any such Plan, except, in each case, where the occurrence of any of the
foregoing could not be reasonably expected to result in liability to such Seller or any such ERISA
Affiliate in excess of $50,000 or result in a Lien against the Participations, or any related
Insurance Premium Loans or related Life Insurance Policies (or any portion thereof). With respect
to any such Plan that is intended to qualify for special tax treatment under Sections 401(a) or
403(a) of the Code, such Plan is in compliance with the applicable requirements of the Code for
such qualifications.
(s)
Margin Regulations
. The Originator will not use any of the proceeds of the
Purchase Price for any purpose which will conflict with or contravene any of Regulations T, U or X
promulgated by the Federal Reserve Board from time to time.
(t)
Reasonably Equivalent Value
. The Participant has given reasonably equivalent value
to the Originator in consideration for each purchase of a Participation under this Agreement, no
such transfer has been made for or on account of an antecedent debt owed by the Originator to the
Participant, and no such transfer is or may be voidable or subject to avoidance under any
applicable bankruptcy, insolvency or other similar law.
(u)
Accuracy of Information
. All certificates, reports, statements, documents and
other information furnished to the Participant by or on behalf of the Originator pursuant to any
provision of this Agreement, or in connection with or pursuant to any amendment or modification of,
or waiver under, this Agreement are, and shall, at the time the same are so furnished, be complete
and correct in all material respects on the date the same are furnished.
9
(v)
Taxes
. The Originator has filed or has caused to be filed all federal, state and
local tax returns which it is required to file and has paid all Taxes, assessments and other
governmental charges due in respect of its respective returns, except to the extent that any such
Taxes, assessments or other governmental charges are being contested in good faith and as to which
the Originator has set aside on its books adequate reserves and in respect of which no Liens have
attached to or been filed against the Originator or any of its properties. There are no agreements
or waivers extending the statutory period of limitations applicable to any federal income tax
return of the Originator for any period.
(w)
Investment Company Act
. The Originator is not an investment company within the
meaning of the Investment Company Act of 1940, as amended.
(x)
Quality of Title
. No effective financing statement or other similar instrument is
in effect covering any of the Insurance Premium Loans in which a Participation has been transferred
hereunder or any interest therein that has been filed, authorized, acknowledged or otherwise
permitted by the Originator or any Affiliate thereof in any recording office except for financing
statements that may be filed (x) in favor of the Collateral Agent in accordance with the Security
Agreement, (y) in favor of the Participant under this Agreement, and/or (z) in favor of the
Originator under the related Loan Documentation Package.
SECTION 5.02
Representations and Warranties of the Participant
. The Participant hereby
represents and warrants to the Originator as of the Effective Date and each Transfer Effective Date
that:
(a)
Organization and Good Standing
. The Participant has been duly organized and is
validly existing as a limited liability company in good standing under the laws of the State of
Illinois, and has power and authority to own its properties and to conduct its business as such
properties shall be currently owned and such business is presently conducted.
(b)
Power and Authority
. The Participant shall have the power and authority to execute
and deliver this Agreement and to carry out its terms; the Participant shall have full power and
authority to purchase the property to be purchased and shall have duly authorized such purchase;
and the execution, delivery and performance of this Agreement shall have been duly authorized by
the Participant by all necessary action.
(c)
Binding Obligation
. This Agreement shall constitute a legal, valid and binding
obligation of the Participant enforceable in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting creditors rights generally or by general principles of equity.
The representations and warranties set forth in this Section 5.02 and in Section 5.01 shall
survive the sale of the Participations by the Originator to the Participant pursuant to this
Agreement. Upon discovery by the Originator or the Participant of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall give prompt written notice
to the other.
10
SECTION 5.03
Remedies
.
(a)
Repurchase of Participations for Certain Breaches
. In the event of a breach of any
representations and warranties set forth in Sections 5.01(e), (f), (g), (h), (l), (p) or (x), upon
the earlier to occur of the discovery of such breach by the Originator or receipt by the Originator
of written notice of such breach given by or on behalf of the Participant, the Participants
Participation in each Insurance Premium Loan relating to such breach shall be repurchased by the
Originator from the Participant and upon such repurchase shall terminate and be extinguished.
(b)
Reconveyed Insurance Premium Loans
. Upon the repurchase by the Originator of any
Participation under this Agreement, then, on the date required for such repurchase, the Originator
shall deposit into the Collection Account in immediately available funds an amount equal to the
outstanding principal balance of the affected Insurance Premium Loans on the date of such
repurchase, together with accrued and unpaid interest thereon through such date. Such deposit shall
be considered payment in full for such Participation.
In connection with the preceding paragraph, the Participant shall execute such documents and
instruments of transfer or assignment as shall be prepared by the Originator, and shall take such
other actions as shall reasonably be requested by the Originator, to effect the repurchase of
Participations from the Participant. Upon repurchase of Participations in Insurance Premium Loans
from the Participant, the Participant shall automatically and without further action be deemed to
transfer, assign, set over and otherwise convey to or upon the order of the Originator, without
recourse, representation or warranty, all the right, title and interest of the Participant in and
to the reconveyed Participations and all Collections with respect thereto and all proceeds thereof
received after the date of such repurchase.
SECTION 5.04
Covenants of the Originator
. The Originator hereby covenants that:
(a)
Security Interests
. Except for the Transfers hereunder and the Liens contemplated
by the Loan Documents and the Transaction Documents, the Originator will not sell, pledge, assign
or transfer to any other Person, or grant, create, incur, assume or suffer to exist any Lien on any
Insurance Premium Loan in which a Participation has been transferred hereunder, whether now
existing or hereafter created, or any interest therein, the Originator will promptly notify the
Participant upon its knowledge of the existence of any such Lien on any such Insurance Premium
Loan, and the Originator shall defend the Participation interest of the Participant in the
Insurance Premium Loans transferred hereunder, whether now existing or hereafter created, against
all claims of third parties claiming through or under the Originator.
(b)
No Impairment
. Except in accordance with, or as contemplated by, the Loan
Documents and the Transaction Documents, the Originator shall take no action, nor omit to take any
action, which would impair the rights of the Participant in any Insurance Premium Loan in which a
Participation has been transferred hereunder, nor shall the Originator, except as expressly
provided in the Servicing Agreement, reschedule, revise or defer payments due on any Insurance
Premium Loan in which a Participation has been transferred hereunder.
11
(c)
Compliance with Law
. The Originator will comply in all material respects with all
Requirements of Law with respect to it, its business and properties and the Insurance Premium Loans
and related Life Insurance Policies. The Originator will maintain all applicable permits,
certifications and licenses (including all licenses to originate Insurance Premium Loans) necessary
with respect to its business and properties and all Insurance Premium Loans and the Life Insurance
Policy related thereto.
(d)
Preservation of Existence
. The Originator will preserve and maintain its
existence, rights, franchises and privileges as a limited liability company or corporation, as
applicable, and become and remain licensed in each jurisdiction where the failure to maintain such
license would materially and adversely affect (A) the interests of the Participant hereunder or (B)
the collectibility of any Insurance Premium Loans in which a Participation has been transferred
hereunder or the related Life Insurance Policies; and the Originator shall not consolidate with or
merge into any other Person or convey or transfer its properties and assets substantially as an
entirety to any Person without the prior written consent of the Participant.
(e)
Keeping of Records and Books of Account
. The Originator (or the Servicer on its
behalf) will maintain and implement administrative and operating procedures (including, without
limitation, the ability to recreate the records related to any items comprising a Loan
Documentation Package in the event of the destruction of the originals thereof) and keep and
maintain all such records and other documents, books, records and information reasonably necessary
or advisable for the collection of the Insurance Premium Loans and related Life Insurance Policies
(including, without limitation, records adequate to permit the daily identification of each
Insurance Premium Loan and related Life Insurance Policy and all Collections of and adjustments to
each such Insurance Premium Loan and related Life Insurance Policy).
(f)
Performance and Compliance with Insurance Premium Loans
. The Originator will, at
its expense, timely and fully perform and comply with all provisions, covenants and other promises
required to be observed by it hereunder, The Originator shall comply with and perform its
obligations with respect to any Insurance Premium Loan.
(g)
Collections and Payments
. Except as otherwise provided in this Agreement, the
Originator will cause any Collections received by it to be deposited in the Collection Account no
later than the Business Day following the receipt and identification of proceeds.
(h)
Protection of the Participants Interest in Insurance Premium Loans
.
(i) Except as provided in Article VII, the Originator covenants and agrees that it will
not convey, assign, exchange or otherwise transfer its rights under the Insurance Premium
Loan in which a Participation has been transferred hereunder to any Person prior to the
termination of this Agreement pursuant to Section 7.01.
(ii) The Originator will advise the Participant promptly, in reasonable detail, (A) of
any Lien or claim asserted against any of the Insurance Premium Loans in which a
Participation has been transferred hereunder or related Life Insurance Policy,
12
other than the Liens created hereby, (B) of the occurrence of any breach by the
Originator of any of its representations, warranties and covenants contained herein, (C) of
the occurrence of any other event that would materially and adversely affect the value of
any of the Insurance Premium Loans in which a Participation has been transferred hereunder,
(D) of the occurrence of any event or circumstance under [Section V.A or Section V.B. of the
Collateral Value Policy or Contingent Collateral Value Policy] [discuss], (E) of the
occurrence of a Prohibited Act (as defined in the Collateral Value Policy) by the Originator
or knowledge of the commission of a Prohibited Act by any Person with respect to an
Insurance Premium Loan in which a Participation is granted or sold by the Originator, and
(F) of the occurrence of any policy loan, cash withdrawal or surrender with respect to the
Life Insurance Policy related to the Insurance Premium Loan in which a Participation is
granted or sold by the Originator.
(iii) The Originator will not, without providing 45 days prior written notice to the
Participant and without filing such amendments to any previously filed financing statements
as may be required by law to fully preserve and protect the interests of the Participant
hereunder in and to the Insurance Premium Loans Participations in which are conveyed hereby,
(i) change its jurisdiction of organization, (ii) change the location of its chief executive
office in the United States or the location of where records related to the Insurance
Premium Loans are kept or (iii) change its name, identity or business structure in any
manner that would, could or might make any financing statement or continuation statement
filed by the Originator in accordance with this Agreement seriously misleading within the
meaning of Section 9-402(7) of any applicable enactment of the UCC.
(i)
Arms-Length Relationship; Separate Existence
. The Originator will maintain an
arms-length relationship with the Participant. Any transaction between the Participant on the one
hand and the Originator or any respective Affiliates thereof, on the other hand, will, in the
reasonable judgment of the Originator, be fair and equitable to the Participant. The Originator
shall not acquire any obligations of the Participant.
(j)
Responsibility of Originator
. The Originator will not agree to be, or hold itself
out to be, responsible for the debts of the Participant or for the decisions or actions with
respect to the daily business and affairs of the Participant.
(k)
Reporting Requirements
.
(i) As soon as possible and in any event within ten (10) Business Days after the
Originator obtains knowledge thereof, the Originator shall notify the Participant of any
litigation, investigation or proceeding that could reasonably be expected to impair in any
material respect the ability of the Originator to perform its obligations under this
Agreement.
(ii) The Originator shall promptly deliver to the Participant such other information,
documents, records or reports regarding the Insurance Premium Loans in which a Participation
has been transferred hereunder and related Life Insurance Policies
13
as the Participant may from time to time reasonably request in order to protect the
Participants interests under or as contemplated by this Agreement.
(1)
Extension, Renewal, Waiver or Amendment of Insurance Premium Loans
. Except as
otherwise permitted under this Agreement, Originator will not without the consent of the
Participant (i) renew, extend, amend, waive or otherwise modify the terms of any Insurance Premium
Loan in which a Participation has been transferred hereunder or other item comprising a component
of any Loan Documentation Package or (ii) rescind, cancel, terminate or sell any Insurance Premium
Loan in which a Participation has been transferred hereunder or other item comprising a component
of any Loan Documentation Package except as ordered by a court of competent jurisdiction or other
governmental authority.
(m)
No Actions Against Obligors
. The Originator will not, without the consent of the
Participant, commence or settle any legal action to enforce collection of any Insurance Premium
Loan in which a Participation has been transferred hereunder.
(n)
No Bankruptcy Filing Against Participant
. The Originator will not commence,
institute or cause to be commenced or instituted any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any United States federal or
state bankruptcy or similar law, against the Participant or join in the commencement of any
proceeding against the Participant under any such law.
(o)
ERISA
. The Originator will not maintain any Plans in its own name or otherwise
agree to make contributions to any Plan. The Originator will not allow any Plan maintained by any
of its ERISA Affiliates to incur any accumulated funding deficiency (within the meaning of
Section 302 of ERISA or Section 412 of the Code), whether or not waived. The Originator will not
allow any of its ERISA Affiliates to fail to timely make all contributions required to be made by
it to any Plans.
(p)
Taxes
. The Originator will file or will cause to be filed all federal, state and
local tax returns which it is required to file and will pay promptly when due all Taxes,
assessments and other governmental charges due in respect of its respective returns, except to the
extent that any such Taxes, assessments or other governmental charges are being contested in good
faith and as to which the Originator has set aside on its books adequate reserves and in respect of
which no Liens have attached to or been filed against the Originator or any of its properties.
ARTICLE VI.
CONFIDENTIALITY
SECTION 6.01
General Duty
. Each party hereto agrees that (i) each of the Transaction
Documents and its contents, (ii) each Loan Documentation Package and its contents, (iii) all
medical and personal information concerning the Underlying Lives and Premium Finance Borrowers,
(iv) the identity of and information concerning payments to brokers or other similar parties
involved in the sourcing, negotiation and funding of any Insurance Premium Loan, (v) any
information supplied by either party and marked confidential, restricted or proprietary or that
otherwise reasonably could be expected to be confidential in nature regarding its customers and
14
prospective customers, account information, products and services, vendors, financial,
technical or marketing information, business or marketing strategies, operating policies and
procedures, in whatever form, in each case to the extent not in the public domain when transmitted
by one party to another, not published or otherwise become part of the public domain (through no
fault of the receiving party) after transmission, not known to the receiving party prior to
transmission or through disclosure by a third party with a lawful right to make such disclosure
(and not to the knowledge of the recipient of such information bound by any duty to the
transmitting party to keep such information confidential) and not independently developed by the
receiving party, comprise Confidential Information.
SECTION 6.02
Reasonable Precautions
. Each party hereto shall safeguard and hold as
confidential all Confidential Information, and shall use such information solely for the purposes
contemplated by the Transaction Documents, in each case other than its own Confidential Information
to the extent appropriately disclosed to others in connection with its business unrelated to the
transactions contemplated by the Transaction Documents. Each party hereto shall take such
precautions as may be lawful and reasonably necessary to restrain its officers, directors,
employees, agents or representatives from disclosure of all Confidential Information to any other
Person other than to its own officers, directors, employees, agents or representatives that have a
need to know such information in order for such party to perform its obligations under the
Transaction Documents, other than its own Confidential Information to the extent appropriately
disclosed to others in connection with its business unrelated to the transactions contemplated by
the Transaction Documents. If any party reasonably and in good faith determines that it is required
by law (or by subpoena, discovery request, search warrant or similar legal process) to disclose any
Confidential Information to a third party (other than a regulator that regulates the Originator or
any of its Affiliates), such party promptly shall notify the other of such situation or of its
receipt of such legal process and shall reasonably cooperate with such other party in an effort to
quash such legal process or to seek a protective order or other appropriate relief. Upon the
termination or expiration of this Agreement, each party hereto promptly shall return to the other
all Confidential Information of such other party that is within its custody and control. Each party
hereto agrees that legal remedies may be insufficient for a breach of the duties specified in this
Section 6.02, and that each party shall be entitled to injunctive relief to prevent disclosure of
and cause the return of Confidential Information as contemplated herein, in addition to any other
legal or equitable remedies available to such party.
SECTION 6.03
Dissemination of Certain Information
. Each party hereto shall at all
times comply with all laws and regulations applicable to it in the performance of its duties
hereunder and affecting the Insurance Premium Loans and related Collateral (including any Life
Insurance Policies) and the negotiation, documentation, funding and servicing thereof, including
laws and regulations regarding the privacy of any Underlying Life or Premium Finance Borrower and
the maintenance of all information obtained by the Originator and/or the Participant in the
performance of their duties in accordance with applicable laws and regulations concerning the
dissemination of such information; provided that any party may disclose such information to
competent judicial or regulatory authorities in response to a written request therefrom for such
information or as otherwise reasonably and in faith determined to be required by law; provided,
however, that (i) no party shall disclose such information to such judicial or regulatory
authorities before the date set forth in such request therefor and (ii) each party shall provide
the other with prompt notice to the extent permitted by law or regulation of such request,
15
in order to permit such other party, at its own expense, to seek judicial or other relief
before such information is disclosed.
SECTION 6.04
Monitoring
. In recognition of the Originators responsibilities under the
Gramm Leach Bliley Act, Section 501(b) (15 U.S.C. 6801) and the Interagency Guidelines Establishing
Standards for Safeguarding Customer Information (the Guidelines), the Participant represents and
warrants that it maintains an information security program designed to: (i) ensure the security and
confidentiality of customer information, (ii) protect against any anticipated threats or hazards to
the security or integrity of customer information, (iii) protect against unauthorized access to or
use of customer information that could result in substantial harm or inconvenience to any customer
of the Originator and (iv) ensure proper disposal of consumer and customer information as required
by applicable law, in each case only with respect to customer information actually in the
possession and control of the Participant received in connection with an Insurance Premium Loan.
The Participant agrees promptly to notify the Originator of any security breaches that relate to
Confidential Information supplied by the Originator.
ARTICLE VII.
EVENTS OF TERMINATION SECTION 7.01 Termination.
If any of the following events (each, an Event of Termination) shall have occurred:
(a) any failure by the Originator to make any payment, transfer or deposit required to be
paid, effected or made by it hereunder on or before the date occurring two (2) Business Days after
the date such payment, transfer or deposit is required to be made hereunder; or
(b) any representation (other than any representation as to an Insurance Premium Loan the
breach of which is cured by repurchase pursuant to Section 5.03), warranty, certification or
written statement made or deemed made by the Originator under or in connection with this Agreement
or in any statement, record, certificate, financial statement or other document delivered pursuant
hereto or in connection herewith shall prove to have been incorrect in any material respect on or
as of the date made or deemed made which continues unremedied for 30 days after the date on which
written notice of such failure, requiring the same to be remedied, shall have been given to the
Originator by the Participant; or
(c) the Originator shall fail to observe or perform in any covenant or agreement applicable to
it contained herein (other than as specified in clause (a) or (b) above) which continues unremedied
for 30 days after the date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Originator by the Participant; or
(d) an Event of Bankruptcy shall occur with respect to the Originator; or
(e) the Participant shall fail for any reason to have a valid sale, transfer and assignment of
the Participations and a beneficial ownership of the Originators right, title and interest in and
to the Insurance Premium Loans in which a Participation has been transferred
16
hereunder, Collections related thereto, all proceeds of such Insurance Premium Loans and all
cash proceeds of any related security; or
(f) this Agreement shall cease to be in full force and effect except in accordance with its
terms; or
(g) the Originator shall become required to register as an investment company under the
Investment Company Act of 1940, as amended; or
(h) a Servicer Default shall have occurred; or
(i) an Event of Default shall have occurred under the Financing Agreement;
then, if the event set forth in paragraph (d) above shall have occurred, an Event of Termination
shall occur without any notice, demand, protest or other requirement of any kind immediately upon
the occurrence of such event, and the Participant may, by notice to the Originator, declare that an
Event of Termination shall occur as of the date set forth in such notice. Upon the occurrence of an
Event of Termination, the Effective Period shall automatically terminate (any such termination of
the Effective Period, an Early Termination).
Upon the occurrence of an Early Termination, the Participant shall have, in addition to the
rights and remedies set forth above and any other rights and remedies under this Agreement, the
following rights and remedies:
(1) The Participant may require the Originator to assign all of the Originators right, title
and interest in and to the Insurance Premium Loans in which a Participation has been transferred
hereunder, the related promissory note and all other documents in the Loan Documentation Package
for such Insurance Premium Loan and any Collateral therefor (including any related Life Insurance
Policy) to a Person designated by the Participant; and
(2) The Participant shall have all other rights and remedies with respect to the Insurance
Premium Loans in which a Participation has been transferred hereunder and related Life Insurance
Policies provided after default under the UCC of the applicable jurisdiction and under other
applicable laws, which rights and remedies shall be cumulative.
ARTICLE VIII.
INDEMNIFICATION AND LIMITATION ON LIABILITY
SECTION 8.01
Originator Indemnification
. Without limiting any other rights that the
Participant may have hereunder or under any applicable law, the Originator hereby agrees to
indemnify the Participant and the Indemnitees from and against any and all amounts awarded against
or incurred by any of them, and arising out of or resulting from this Agreement or the activities
of the Originator in connection herewith or in respect of any Insurance Premium Loan in which a
Participation has been transferred hereunder or related Life Insurance Policy that are sustained as
a result of:
17
(a) any representation, warranty or covenant made by the Originator under this Agreement, or
any other document, certificate or report delivered by the Originator hereunder that was incorrect
in any material respect when made or deemed made or that the Originator failed to perform;
(b) the failure by the Originator to comply with this Agreement, the Transaction Documents,
the Loan Documents, or any Requirement of Law with respect to any Insurance Premium Loan or Life
Insurance Policy;
(c) any commingling by the Originator of Collections with other funds of the Originator or any
of its Affiliates;
(d) any breach by the Originator of any obligation under any Insurance Premium Loan in which a
Participation has been transferred hereunder or related Life Insurance Policy; or
(e) the failure to vest and maintain vested in the Participant a first priority perfected
ownership interest in any Participation or Collections or a first priority perfected security
interest in the Insurance Premium Loans in which a Participation has been transferred hereunder and
Collections.
The foregoing indemnity excludes (a) losses on Insurance Premium Loans in which a
Participation has been transferred hereunder to the extent reimbursement therefor would constitute
credit recourse to the Originator for nonpayment of any Insurance Premium Loan in which a
Participation has been transferred hereunder by the related obligor and (b) any income or franchise
taxes or similar taxes (or any interest or penalties on them).
ARTICLE IX.
MISCELLANEOUS PROVISIONS
SECTION 9.01
Amendment
. This Agreement may be amended from time to time by the
Participant and the Originator in writing with the prior written consent of the Agents and the
Required Lenders. Notwithstanding the foregoing, the parties hereby agree that no amendment,
modification or waiver of, or consent with respect to, any provision of this Agreement that (a)
prior to the occurrence of a Credit Event (as defined in the Collateral Value Insurance Policy)
would, in the reasonable belief of any party hereto, be likely to adversely affect the interests of
the Collateral Value Insurer shall in any event be made or become effective unless the same shall
be consented to by the Collateral Value Insurer in writing, or (b) following to the occurrence of a
Credit Event, would, in the reasonable belief of any party hereto, be likely to adversely affect
the interests of the Contingent Collateral Value Insurer, shall in any event be made or become
effective unless the same shall be consented to by the Contingent Collateral Value Insurer in
writing. In all events, copies of any amendments to this Agreement shall be promptly provided to
(x) the Collateral Value Insurer prior to the occurrence of a Credit Event, and (y) the Contingent
Collateral Value Insurer following the occurrence of a Credit Event, by the Participant following
execution thereof. Each of the parties hereto agrees that the Collateral Value Insurer and the
Contingent Collateral Value Insurer are third party beneficiaries solely with respect to this
Section 9.01, and shall have no rights with respect to any other provisions of
18
this Agreement. Each of the parties hereto agrees that the each of the Agents and the Lenders
is a third party beneficiary with respect to this Agreement.
SECTION 9.02
Governing Law; Submission to Jurisdiction; Waiver
.
(a) THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICTS OF LAWS PROVISIONS
(OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW), AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
(b) EACH OF THE PARTIES HERETO IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY
FEDERAL OR STATE COURT SITTING IN THE COUNTY AND STATE OF NEW YORK IN RESPECT OF ANY ACTION OR
PROCEEDING ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY TO THIS AGREEMENT
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH PROCEEDINGS IN ANY SUCH COURT AND ANY
CLAIM THAT ANY PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(c) EACH PARTY HERETO HEREBY WAIVES THE RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY ON ANY
CLAIM, COUNTERCLAIM, SETOFF, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING OUT OF OR IN ANY WAY
RELATED TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENTS, OR (B) IN ANY WAY IN CONNECTION WITH
OR PERTAINING OR RELATED TO OR INCIDENTAL TO ANY DEALINGS OF THE PARTIES TO THIS AGREEMENT WITH
RESPECT TO THE TRANSACTION DOCUMENTS OR IN CONNECTION WITH THIS AGREEMENT OR THE EXERCISE OF ANY
PARTYS RIGHTS AND REMEDIES UNDER THIS AGREEMENT OR OTHERWISE, OR THE CONDUCT OR THE RELATIONSHIP
OF THE PARTIES HERETO, IN ALL OF THE FOREGOING CASES WHETHER NOW EXISTING OR HEREAFTER ARISING AND
WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.
SECTION 9.03
Notices
. All demands, notices, reports and communications hereunder shall
be in writing and shall be deemed to have been duly given if personally delivered at, delivered by
electronic mail to, mailed by certified mail, return receipt requested, mailed by a nationally
recognized overnight courier or sent via facsimile, to (a) in the case of the Participant, to such
partys address specified in the Financing Agreement or (b) in the case of the Originator, to the
address specified for the Originator in the signature pages attached hereto; or, as to any of such
Persons, at such other address, facsimile number or electronic mail address as shall be designated
by such Person in a written notice to the other Persons. Notices, demands and communications
hereunder given shall be effective, (1) if personally delivered, when received, (2) if sent by
certified mail, three (3) Business Days after having been deposited in the mail, postage prepaid,
(3) if sent by overnight courier, one (I) Business Day after having been given to
19
such courier, and (4) if transmitted by facsimile or electronic mail, upon oral confirmation
of receipt by the addressee or upon the senders receipt of an affirmative confirmation of receipt
thereof by the addressee. Notwithstanding the foregoing, notice of breach, service of legal process
or other similar communications shall not be given by electronic mail and will not be deemed duly
given under this Agreement if delivered by such means.
SECTION 9.04
Severability of Provisions
. If any one or more of the covenants,
agreements, provisions or terms of this Agreement shall for any reason whatsoever be held invalid,
then such covenants, agreements, provisions or terms shall be deemed severable from the remaining
covenants, agreements, provisions and terms of this Agreement and shall in no way affect the
validity or enforceability of the other provisions of this Agreement.
SECTION 9.05
Further Assurances
. The Originator and the Participant agree to do and
perform, from time to time, any and all acts and to authorize and execute any and all further
documents and instruments reasonably and in good faith determined to be required by law or
reasonably requested by the other party hereto to more fully to effect the purposes of this
Agreement. The Originator authorizes the Participant to file any financing statements or
continuation statements relating thereto and to the Insurance Premium Loans in which a
Participation has been transferred hereunder and related Life Insurance Policy under the provisions
of the UCC, or any similar law, of any applicable jurisdiction.
SECTION 9.06
No Waiver, Cumulative Remedies
. No failure to exercise and no delay in
exercising, on the part of the Participant or the Originator, of any right, remedy, power or
privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and not exhaustive of any rights, remedies, powers and
privileges provided by law.
SECTION 9.07
Counterparts
. This Agreement may be executed in two or more counterparts
(and by different parties on separate counterparts), each of which shall be an original, but all of
which together shall constitute one and the same instrument. Delivery of an executed counterpart of
a signature page to this Agreement by telecopier shall be effective as delivery of a manually
executed counterpart of this Agreement.
SECTION 9.08
Merger and Integration
. Except as specifically stated otherwise herein,
in the other Transaction Documents and in the Loan Documents to which the parties hereto are a
party, this Agreement sets forth the entire understanding of the parties hereto relating to the
subject matter hereof, and all prior understandings, written or oral, are superseded by this
Agreement. This Agreement may not be modified, amended, waived or supplemented except as provided
herein. Except for items specifically required to be delivered hereunder, the Participant shall not
have any duty or responsibility to provide the Originator or any of their respective affiliates any
information that comes into the possession of the Participant or any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
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SECTION 9.09
Headings
. The headings herein are for purposes of reference only and
shall not otherwise affect the meaning or interpretation of any provision hereof
SECTION 9.10
No Petition
. The Originator, by entering into this Agreement, hereby
covenants and agrees that it will not at any time institute against the Participant, or solicit or
incite any other Person to institute for the purpose of joining in any such institution against the
Participant, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or
other proceedings under any United States federal or state bankruptcy or similar law. This Section
will survive the termination of this Agreement.
SECTION 9.11
Tax Classification
. Nothing contained in this Agreement shall be deemed
or construed by the parties hereto or by any third person to create the relationship of a
partnership or joint venture. The parties hereto agree that they will not take any action contrary
to the foregoing intention and agree to report the transaction for all tax purposes consistent with
the foregoing intention unless and until determined to the contrary by an applicable tax authority.
SECTION 9.12
Electronic Communications
. Unless otherwise provided herein,
communications may be via e-mail; provided that if communication by e-mail is required under this
Agreement, but is not available for any reason, any other suitable means of written communication
providing for same or next day delivery shall be used in lieu thereof, including by facsimile
transmission or personal delivery.
SECTION 9.13
Participations
. THE PARTIES HERETO ARE PARTICIPATING IN INSURANCE PREMIUM
LOANS AND ARE NOT INVESTING IN A BUSINESS ENTERPRISE.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their
respective officers as of the day and year first above written.
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IMPERIAL PREMIUM FINANCE, LLC,
as the Originator
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By:
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Imperial Holdings, LLC, its managing member
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By:
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Name:
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Jonathan Neuman
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Title:
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President
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Address:
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701 Park of Commerce Blvd., Suite 30
Boca Raton, FL 33487
Telecopy No.: (561) 995-4203
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IMPERIAL PFC FINANCING II, LLC,
as Participant
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By:
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Name:
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David Manchester
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Title:
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Senior Vice President
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Address:
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191 Peachtree Street NE, Suite 3300
Atlanta, GA 30303
Telecopy No.: (404) 736-3620
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[SIGNATURE PAGE TO MASTER PARTICIPATION AGREEMENT]
EXHIBIT A
Glossary of Defined Terms
Agents means
, as collateral agent and administrative agent under the
Financing Agreement, together with its successors and assigns.
Code means the Internal Revenue Code of 1986, as amended.
Collection Account means that certain bank account, referenced as the Imperial PFC
Financing II, LLC Collection Account and pledged pursuant to the Security Agreement, maintained at
the Cash Management Bank, for the purpose of receiving Collections and which is subject to a
blocked account agreement, or with respect to which a security interest has otherwise been created
and perfected.
Early Termination is defined in Section 7.01 of the Master Participation Agreement.
Effective Period means the period beginning on the Effective Date and terminating on the
close of business on the date on which an Early Termination occurs.
ERISA Affiliate means, with respect to any Person, any trade or business (whether or not
incorporated) which is a member of a group of which such Person is a member and which would be
deemed to be a controlled group within the meaning of Sections 414(b), (c), (m) and (o) of the
Code.
Event of Bankruptcy means an Event of Default under Sections 9.01(g) or (h) of the Financing
Agreement.
Event of Termination is defined in Article VII of the Master Participation Agreement.
Financing Agreement means the Financing Agreement, dated on or about the Effective Date, by
and among the Participant, the lenders from time to time party thereto and LoIC LLC, a Delaware
limited liability company (LoIC), as administrative agent and LoIC, as collateral agent, as the
same may be amended, modified, restated, supplemented, refinanced, extended, refunded or replaced
(in whole or in part) from time to time.
Funding Date means for each Insurance Premium Loan the date on which the Participant pays
the Originator the Purchase Price.
Lenders means the lenders from time to time party to the Financing Agreement, together with
their successors and assigns.
Lien means any interest in property securing an obligation owed to, or a claim by, a Person,
whether such interest is based on the common law, statute or contract, and including but not
limited to the security interest lien arising from a mortgage, encumbrance, judgment, pledge,
conditional sale or trust receipt for a lease, consignment or bailment for
security purposes, but, with respect to a Life Insurance Policy, does not include the interest
of the Life Insurance Carrier therein if such interest arises solely from or with respect to a
related policy loan.
Life Insurance Carrier means the issuer of a Life Insurance Policy.
Master Participation Agreement means the Master Participation Agreement, dated as of the
Effective Date, between the Originator and the Participant.
Originator means Imperial Premium Finance, LLC.
Participant means Imperial PFC Financing II, LLC, a Georgia limited liability company, in
its capacity as participant under the Master Participation Agreement, and its successors and
permitted assigns in that capacity.
Participation has the meaning set forth in the Master Participation Agreement.
Purchase Price means, with respect to each 100% participation in an Insurance Premium,
acquired or purported to be acquired by the Participant under the Master Participation Agreement or
any similar sale or purchase agreement, the initial outstanding principal balance of such Insurance
Premium Loan.
Requirements of Law means, with respect to any Person, collectively, the common law and all
federal, state, provincial, local, foreign, multinational or international laws, statutes, codes,
treaties, standards, rules and regulations, guidelines, ordinances, orders, judgments, writs,
injunctions, decrees (including administrative or judicial precedents or authorities) and the
interpretation or administration thereof by, and other determinations, directives, requirements or
requests of, any Governmental Authority, in each case that are applicable to or binding upon such
Person.
Transfer Effective Date means, with respect to any Insurance Premium Loan in which a
Participation has been transferred, the related Funding Date.
EXHIBIT B
FORM OF PARTICIPATION CERTIFICATE
AGREEMENT, dated as of
, 200_, by and between Imperial Premium Finance, LLC,
a Florida limited liability company (in such capacity, the
Seller
) and Imperial PFC
Financing II, LLC, a Georgia limited liability company (
Purchaser
).
Reference is made to that certain Master Participation Agreement dated as of
,
2009 by and between Seller and Purchaser (the
Master Participation Agreement
).
Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in
the Master Participation Agreement.
This Participation Certificate shall be deemed to be a Participation Certificate as described
in the Master Participation Agreement and with respect to the sale by Seller to Purchaser of a
participation interest in certain Insurance Premium Loans described below. As set forth in Section
3.01 of the Master Participation Agreement, the terms and conditions of the Master Participation
Agreement shall be deemed incorporated herein.
The parties hereto hereby agree that the Seller has sold a Participation (subject to the
receipt of funds in the amount of the Participation in accordance with the provisions of the Master
Participation Agreement), and the Participant has purchased from the Seller (and forwarded to the
Seller funds in the amount of the Participation in accordance with the terms of the Master
Participation Agreement), a Participation in the Insurance Premium Loan:
Item 1.
Transfer Effective Date
:
Item 2.
Borrower
:
Item 3.
Insurance Premium Loan Number
:
Item 4.
Loan Documentation
:
Item 5.
Insurance Premium Loan Agreement Date
:
Item 6.
Life Insurance Policy Number
:
Item 7.
Amount of Participation in Outstanding Insurance Premium Loan
:
Item 8.
Insurance Premium Loan
:
Item 9.
Purchase Price
:
Item 10:
Final Maturity Date of Insurance Premium Loan
:
IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Participation
Certificate this ___day of
, 200_.
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SELLER
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IMPERIAL PREMIUM FINANCE, LLC
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By:
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Imperial Holdings, LLC, its managing member
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By:
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Name: Jonathan Neuman
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Title: President
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PURCHASER
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IMPERIAL PFC FINANCING II, LLC
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By:
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Imperial Premium Finance, LLC, its sole member
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By:
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Imperial Holdings, LLC, its managing member
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By:
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Name: Jonathan Neuman
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Title: President
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EXHIBIT K
Local Counsel Opinion Questions
1. What states insurable interest laws would a state court (or a federal court) apply to determine
whether an irrevocable life insurance trust (or its trustee) has an insurable interest in the life
of the insured (assuming that a case would be brought in and remain in either state or federal
court in the state where the trustee with authority over the policy and loan was located (the
State), rather than a state or federal court in the home state of the insured)?
2. Will the life insurance policy issued in the proposed lending transaction be supported by a
valid insurable interest under the law of the State, including, if applicable, does the States law
address or provide that a trustee of a trust, or the trust itself, has an insurable interest in the
life of the grantor or settlor of such trust?
3. Does the State have a usury law that is applicable to the individual lending transactions in the
Imperial program; if so, what is the maximum permissible interest rate under the usury law; and if
relevant, whether any loan origination fees and any pass-through of the life insurance policy
premium and other fees to be charged would be included as part of interest under such usury law?
4. Does the State have an insurance premium finance law and, if so, does such law apply to the
individual lending transactions in the Imperial program? If so, would the lending transactions and
the related loan documents be in compliance with such premium finance law? If there is not a
premium finance law in effect in the State, or if there is not an Imperial entity that is a
licensed premium finance company in the State, do the States general consumer lending laws apply
to the Imperial loans and/or to the Imperial lender? If so, would the individual lending
transactions and the related Loan Documents be in compliance with the general consumer lending
laws?
5. Does the State have a life or viatical settlement law and, if so, does it apply to the
individual lending transactions in the Imperial program?
6. Are life insurance policies generally assignable to a lender as security under the States law?
Exhibit L
GUARANTY
THIS GUARANTY is entered into as of November ___, 2009 by
IMPERIAL HOLDINGS, LLC
, a Florida
limited liability company (the
Guarantor
), and
EBC ASSET MANAGEMENT, INC.,
a New York
corporation
,
as Collateral Agent (
Collateral Agent
) in favor of and for the benefit of
Cedar Lane Capital, LLC, a Delaware limited liability company (the
Lender
, which for all
purposes of this Guaranty shall include any assignees, whether or not by operation of law, and
successors thereto).
RECITALS
WHEREAS, pursuant to a financing agreement among Lender and Imperial PFC Financing II, LLC, a
Georgia limited liability company (Borrower) dated September 14, 2009 (as amended, supplemented
or otherwise modified from time to time (Financing Agreement)), Lender has agreed to make Term
Loans to Borrower, upon the terms and subject to the conditions set forth therein;
WHEREAS, pursuant to the Financing Agreement, the Lender agreed to make one or more Term Loans
to the Borrower prior to the Term Loan Commitment Termination Date, in the case of all Term Loans,
in an aggregate principal amount not to exceed the amount of the Lenders Term Loan Commitment;
WHEREAS, the aggregate principal amount of any Term Loan made on any borrowing date shall not
exceed the lesser of (x) the undrawn Total Term Loan Commitment at such time, and (y) the Maximum
Tranche Amount with respect to any applicable Insurance Premium Loans being acquired by the
Borrower with the proceeds of such Term Loan;
WHEREAS, the Lender desires to secure the guaranty by Guarantor of five percent (5%) of each
Term Loan made under the Financing Agreement;
WHEREAS, Guarantor indirectly owns 100% of the equity interests in the Borrower and will
derive benefits from the extension of Term Loans under the Financing Agreement;
WHEREAS, capitalized terms referred to herein without definition have the meaning given to
them in the Financing Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter
contained, and for other good and valuable consideration, the adequacy and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1.
Conditions to Liability
. Subject to the limitation set forth herein, the Guarantor
hereby unconditionally guaranties the punctual payment in full (in immediately available funds)
when due of five percent (5%) of the amount outstanding (including interest accrued thereon) under
each Term Loan made or arising under the Financing Agreement (the Guaranteed Obligations).
Notwithstanding the foregoing or anything else herein to the contrary, before making a claim or
proceeding against the Guarantor under this Guaranty, (a) the Lender shall be obligated to proceed
against the Borrower or any other person liable on the Guaranteed Obligations and to proceed
against any security held by the Borrower or any other person, or to pursue any other remedy in the
Lenders power whatsoever to collect the Term Loans, and an Event of Default involving the failure
of the Borrower in paying any interest or principal due under a Term Loan or Tranche (determined
without regard to, and by disregarding the effects of,
Page 1 of 10
any acceleration of amounts due under a Term Loan or Tranche prior to the applicable Final
Maturity Date) shall have existed for at least thirty (30) consecutive days or (b) there shall be a
default in full payment of the Covered Loan Amount under an Eligible Insurance Premium Loan
(determined without regard to, and by disregarding the effects of, any acceleration of amounts due
under such loan prior to the applicable maturity date) owned actually or beneficially through a
participation by the Borrower (a Client Default) and such Client Default shall have existed for
sixty (60) days; provided further, in the event of a Client Default, the amount due under this
guaranty as a result of such event shall be limited to the shortfall in collections arising as a
consequence thereof (taking into account any payments from the Collateral Value Insurer and
Contingent Collateral Value Insurer and any proceeds from the disposition of any collateral for
such Eligible Insurance Premium Loan) and the Guarantor shall be subrogated to the Lenders rights
to the shortfall in respect to such Client Default following payment.
2.
Waiver
.
(a) The Guarantor unconditionally and irrevocably waives, to the fullest extent permitted by
applicable law: (i) any release, amendment or waiver of or consent to departure from any other
guaranty or any document relating to any security for or in respect of the Guaranteed Obligations;
(ii) all notices which may be required by statute, rule of law or otherwise to preserve any rights
against the Guarantor hereunder, including, without limitation, notice of the acceptance of this
Guaranty, or the creation, renewal, extension, modification or accrual of the Guaranteed
Obligations or notice of any other matters relating thereto, any presentment, demand, notice of
dishonor, protest, nonpayment of any damages or other amounts payable under the Financing
Agreement; (iii) any requirement for diligence in collection or protection of or realization upon
the Guaranteed Obligations or any part thereof or any collateral therefor; (iv) any requirement of
diligence; (v) any requirement to mitigate the damages resulting from a default by the Borrower
under the Financing Agreement; (vi) the occurrence of every other condition precedent to which the
Guarantor or the Borrower may otherwise be entitled; (vii) any lack of validity or enforceability
of the Financing Agreement, (vii) any exchange or release of, or non-perfection of any collateral
securing, all or any of the Guaranteed Obligations; (ix) any other circumstances which might
otherwise constitute a defense available to, or discharge of, the Guarantor; or (x) any and all
rights it may now or hereafter have under any agreement or at law or in equity (including, without
limitation, any law subrogating the Guarantor to the rights of the Lender) to assert any claim
against or seek contribution, indemnification or any other form of reimbursement from the Borrower
or any other party liable for payment of any or all of the Guaranteed Obligations for any payment
made by the Guarantor under or in connection with this Guaranty or otherwise.
(b) The Lender may, at its election, exercise any right or remedy it may have against the
Borrower without affecting or impairing in any way the liability of the Guarantor hereunder and the
Guarantor waives, to the fullest extent permitted by applicable law, any defense arising out of the
absence, impairment or loss of any right of reimbursement, contribution or subrogation or any other
right or remedy of the Guarantor against the Borrower, whether resulting from such election by the
Lender or otherwise. The Guarantor waives any defense arising by reason of any disability or other
defense of the Borrower or by reason of the cessation for any cause whatsoever of the liability,
either in whole or in part, of the Borrower to the Lender for the Guaranteed Obligations.
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(c) The Guarantor assumes the responsibility for being and keeping informed of the financial
condition of the Borrower and of all other circumstances bearing upon the risk of nonpayment of the
Guaranteed Obligations and agrees that the Lender shall not have any duty to advise the Guarantor
of information regarding any condition or circumstance or any change in such condition or
circumstance. The Guarantor acknowledges that the Lender has not made any representations to the
Guarantor concerning the financial condition of the Borrower. The value of the consideration
received and to be received by the Guarantor is reasonably worth at least as much as the liability
and obligation of Guarantor incurred or arising under this Guaranty and all related papers and
arrangements.
3.
Parties
. This Guaranty shall inure to the benefit of the Lender and its
successors, assigns or transferees, and shall be binding upon the Guarantor and his or her
respective heirs, successors and assigns; provided, that the Guarantor may not delegate or assign
any of the Guarantors duties or obligations under this Guaranty without the prior written consent
of the Lender.
4.
Notices
. All notices and other communications provided for herein shall be in
writing and shall be delivered by hand or overnight courier service, mailed by U.S. mail, certified
with return receipt requested, or sent by telecopy (with confirmed receipt or followed by overnight
delivery) to the addresses (or telecopy numbers) set forth on the signature pages hereto. The
Guarantor or the Lender may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and other
communications given in accordance with the provisions of this Guaranty shall be deemed to have
been given on the date of receipt or, if mailed, the fifth (5th) business day following the date so
mailed, if earlier, or the next business day if sent by overnight courier.
5.
Right to Deal with the Borrower
. At any time and from time to time, without
terminating, affecting or impairing the validity of this Guaranty or the obligations of the
Guarantor hereunder, the Lender and/or Agent may deal with the Borrower in the same manner and as
fully as if this Guaranty did not exist and shall be entitled, among other things, to grant the
Borrower, without notice or demand and without affecting the Guarantors liability hereunder, such
extension or extensions of time to perform, renew, compromise, accelerate or otherwise change the
time for payment of or otherwise change the terms of indebtedness or any part thereof contained in
or arising under the Financing Agreement or any other document evidencing obligations of the
Borrower to the Lender, or to waive any obligation of the Borrower to perform, any act or acts as
the Lender and/or Agent may deem advisable.
6.
Subrogation
.
Notwithstanding anything to the contrary contained herein, any and
all rights and claims of the Guarantor against the Borrower or any of its property or against any
other person, arising by reason of any payment by the Guarantor to the Lender pursuant to the
provisions, or in respect, of this Guaranty shall be subordinate, junior and subject in right of
payment to the prior and indefeasible payment in full of the Guaranteed Obligations to the Lender,
and until such time, the Guarantor shall have no right of subrogation, contribution or any similar
right and hereby waive any right to enforce any remedy the Lender may now or hereafter have against
the Borrower, any endorser or any other guarantor of all or any part of the Guaranteed Obligations
and any right to participate in, or benefit from, any security given to the Lender to secure the
Guaranteed Obligations. All liens and security interests of the Guarantor,
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whether now or hereafter arising and howsoever existing, in assets of the Borrower or any
assets securing the Guaranteed Obligations shall be and hereby are subordinated to the rights and
interests of the Lender in those assets until the prior and indefeasible final payment in full of
all of the Guaranteed Obligations to the Lender and termination of all financing arrangements
between the Borrower and the Lender. If any amount shall be paid to the Guarantor contrary to the
provisions of this Section 6 at any time when all the Guaranteed Obligations shall not have been
indefeasibly paid in full, such amount shall be held in trust for the benefit of the Lender and
shall forthwith be turned over in kind in the form received to the Lender (duly endorsed if
necessary) to be credited and applied against the Guaranteed Obligations, whether matured or
unmatured, in accordance with the terms of the Financing Documents and this Guaranty.
7.
Representations and Warranties
. The Guarantor hereby represents and warrants as
follows:
(a) The Guarantor has the legal capacity and right to execute, deliver and perform this
Guaranty to which the Guarantor is a party.
(b) The execution, delivery and performance by the Guarantor of this Guaranty and each other
Loan Document to which the Guarantor is a party (i) do not and will not contravene any Requirements
of Law or any contractual restriction binding on or otherwise affecting the Guarantor or its
properties, (ii) do not and will not result in or require the creation of any Lien (other than
pursuant to any Loan Document) upon or with respect to any of its properties, and (iii) do not and
will not result in any default, noncompliance, suspension, revocation, impairment, forfeiture or
nonrenewal of any permit, license, authorization or approval applicable to any of its properties.
(c) No authorization or approval or other action by, and no notice to or filing with, any
Governmental Authority is required in connection with the due execution, delivery and performance
by the Guarantor of this Guaranty or any of the other Loan Documents to which the Guarantor is a
party.
(d) Each of this Guaranty and the other Loan Documents to which the Guarantor is or will be a
party, when delivered, will be, a legal, valid and binding obligation of the Guarantor, enforceable
against the Guarantor in accordance with its terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws.
(e) There are no pending or written notices threatening any action, suit or proceeding
affecting the Guarantor before any court or other Governmental Authority or any arbitrator that (x)
if adversely determined could reasonably be expected to have a material adverse effect to the
Guarantors financial condition or (y) relates to this Guaranty or any of the other Loan Documents
to which the Guarantor is a party or any transaction contemplated hereby or thereby.
(f) The Guarantor is not in violation of any Requirements of Law or any material term of any
agreement or instrument (including, without limitation, any contract) binding on or otherwise
affecting him or any of his properties.
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(g) The Guarantor is not a party to any agreement or instrument, or subject to any restriction
or any judgment, order, regulation, ruling or other requirement of a court or other Governmental
Authority, which has, or in the future could have, a material adverse effect to the Guarantors
financial condition.
(h) The Guarantor has filed or caused to be filed all tax returns which it is required to file
and has paid all taxes shown to be due and payable on such returns or on any assessments made
against the Guarantor or any of his property by any Governmental Authority except to the extent any
such taxes are being contested in good faith. No tax Lien has been filed with respect to any
material tax liability against the Guarantor, and, to the knowledge of the Guarantor, no tax
assessment is pending against the Guarantor.
(i) The Guarantor (i) has read and understands the terms and conditions of the Financing
Agreement and the other Loan Documents, and (ii) now has and will continue to have independent
means of obtaining information concerning the affairs, financial condition and business of the
Borrower, and has no need of, or right to obtain from any Agent or any Lender, any credit or other
information concerning the affairs, financial condition or business of the Borrower that may come
under the control of any Agent or any Lender.
(j) As of the date hereof, the Guarantor has members equity of an amount not less than
$12,500,000.
(k) All representations and warranties set forth in this Guaranty are true and correct in all
respects at the time as of which such representations were made and on the Effective Date.
8.
Survival of Representations, Warranties, and Agreements
.
All representations,
warranties, covenants and agreements made herein, including representations and warranties deemed
made herein, shall survive any investigation or inspection made by or on behalf of the Lender and
shall continue in full force and effect until all of the obligations of the Guarantor under this
Guaranty shall be fully performed in accordance with the terms hereof, and until the payment in
full of the Guaranteed Obligations.
9.
Covenants
. The Guarantor hereby covenants and agrees that, during the term of this
Guaranty, the Guarantor will:
(a) Maintain members equity not less than 5% of the aggregate Guaranteed Obligations. The
members equity shall be determined by the Guarantors independent accountants in accordance with
GAAP.
(b) Not accept or retain any distribution or other payment from the Borrower if the making of
such distribution or other payment by the Borrower violates, or may reasonably be expected to
result in a violation of, the Financing Agreement or any other Loan Document.
(c) Comply in all material respects with all Requirements of Law (including any settlement of
any claim that, if breached, could give rise to any of the foregoing).
(d) Promptly notify the Agents of:
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(i)
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(A) any breach or non-performance
of, or any default under, any Contractual Obligation of such
Guarantor which could reasonably be expected to have a material
adverse effect to the Guarantors financial condition, and (B)
any action, suit, litigation or proceeding which may exist at
any time which could reasonably be expected to have a material
adverse effect to the Guarantors financial condition; and
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(ii)
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the occurrence of any event or
development that could have a material adverse effect to the
Guarantors financial condition;
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provided that (A) each notice pursuant to this Section 7(d) shall be accompanied by a written
statement signed by such Guarantor, setting forth details of the occurrence referred to therein,
and stating what action the Guarantor proposes to take with respect thereto and at what time. Each
notice under Section 7(d)(i) shall describe with particularity the provisions of this Guaranty or
other Loan Document that have been breached.
(e) Pay all taxes, assessments, governmental charges and other obligations when due, except as
may be contested in good faith or those as to which a bona fide dispute may exist.
(f) Execute and deliver to the Agents such further instruments and do such other further acts
as the Agent may reasonably request to carry out more effectively the purposes of this Guaranty.
(g) Not knowingly commit, and not knowingly permit any of its Affiliates, including the
Borrower, to knowingly commit, a Prohibited Act (as defined in the Collateral Value Policy) or any
other act that results in the liability of the Collateral Value Insurer or Contingent Collateral
Value Insurer under the Collateral Value Policy or the Contingent Collateral Value Policy, as
applicable, being reduced or terminated.
10.
CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE.
ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF
THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK OR OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE GUARANTOR
HEREBY IRREVOCABLY ACCEPTS IN RESPECT OF HIS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS. THE GUARANTOR HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS AND IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING
OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, AT ITS ADDRESS SET FORTH ON THE
SIGNATURE PAGE HERETO, SUCH SERVICE TO BECOME EFFECTIVE TEN (10) DAYS AFTER SUCH MAILING. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF ANY AGENT AND THE LENDERS TO SERVICE OF PROCESS IN ANY OTHER
MANNER
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PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE GUARANTOR
IN ANY OTHER JURISDICTION. THE GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE JURISDICTION OR
LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM
THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE
GUARANTOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID
OF EXECUTION OR OTHERWISE) WITH RESPECT TO HIM OR HIS PROPERTY, THE GUARANTOR HEREBY IRREVOCABLY
WAIVES SUCH IMMUNITY IN RESPECT OF HIS OBLIGATIONS UNDER THIS GUARANTY AND THE OTHER LOAN
DOCUMENTS.
11.
WAIVER OF JURY TRIAL, ETC.
THE GUARANTOR HEREBY WAIVES ANY RIGHT TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS GUARANTY OR THE
OTHER LOAN DOCUMENTS, OR UNDER ANY AMENDMENT, WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR OTHER
AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR
ARISING FROM ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH THIS GUARANTY OR THE OTHER LOAN
DOCUMENTS, AND AGREES THAT ANY SUCH ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY. THE GUARANTOR CERTIFIES THAT NO OFFICER, REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY AGENT OR ANY LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE AGENT OR ANY
LENDER WOULD NOT, IN THE EVENT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM, SEEK TO ENFORCE THE
FOREGOING WAIVERS. THE GUARANTOR HEREBY ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT
FOR THE AGENTS AND THE LENDERS ENTERING INTO THIS AGREEMENT.
12.
Expenses
. The Guarantor hereby agrees to pay on demand, and to hold the Lender
harmless against liability for, any and all costs and expenses (including, without limitation,
reasonable legal fees, costs and expenses of counsel and fees, costs and expenses incurred in
connection with any bankruptcy proceeding) incurred or expended by the Lender in connection with
the enforcement, amendment, modification or waiver of or preservation of any rights under this
Guaranty, and the collection of amounts payable hereunder, and until so paid, such fees, costs,
disbursements and expenses shall be added to, and constitute, Guaranteed Obligations.
13.
Further Assurances
.
The Guarantor hereby covenants and agrees to execute and
deliver to the Lender such additional agreements, instruments and documents as the Lender may
reasonably request to give effect to the obligations of the Guarantor under this Guaranty.
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14.
Miscellaneous.
(a) The Guarantor will make each payment hereunder in lawful money of the United States of
America and in immediately available funds to the Collateral Agent, for the benefit of the Lenders,
at such address specified by the Collateral Agent from time to time by notice to the Guarantor.
(b) No amendment of any provision of this Guaranty shall be effective unless it is in writing
and signed by the Guarantor and the Collateral Agent, and no waiver of any provision of this
Guaranty, and no consent to any departure by the Guarantor therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Guarantor and the Collateral Agent,
and then such waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
(c) No failure on the part of any Agent or any Lender to exercise, and no delay in exercising,
any right hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall
any single or partial exercise of any right hereunder or under any other Loan Document preclude any
other or further exercise thereof or the exercise of any other right. The rights and remedies of
the Agents and the Lenders provided herein and in the other Loan Documents are cumulative and are
in addition to, and not exclusive of, any rights or remedies provided by law. The rights of the
Agents and the Lenders under any Loan Document against any party thereto are not conditional or
contingent on any attempt by the Agents and the Lenders to exercise any of their rights under any
other Loan Document against such party or against any other Person.
(d) Any provision of this Guaranty which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining portions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
(e) This Guaranty shall (i) be binding on the Guarantor and its successors and assigns, and
(ii) inure, together with all rights and remedies of the Agents and the Lenders hereunder, to the
benefit of the Agents and the Lenders and their respective successors, transferees and assigns.
Without limiting the generality of clause (ii) of the immediately preceding sentence, to the extent
permitted by Section 12.07 of the Financing Agreement, any Lender may assign or otherwise transfer
its rights under the Financing Agreement or any other Loan Document to any other Person, and such
other Person shall thereupon become vested with all of the benefits in respect thereof granted to
the Lenders herein or otherwise. None of the rights or obligations of the Guarantor hereunder may
be assigned or otherwise transferred without the prior written consent of the Collateral Agent.
(f) This Guaranty and the other Loan Documents reflect the entire understanding of the
transactions contemplated hereby and thereby and shall not be contradicted or qualified by any
other agreement, oral or written, before the date hereof.
(g) Section headings herein are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
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(h) Delivery of an executed counterpart of this Guaranty by telefacsimile or electronic mail
shall be equally as effective as delivery of an original executed counterpart of this Guaranty. Any
party delivering an executed counterpart of this Guaranty by telefacsimile or electronic mail also
shall deliver an original executed counterpart of this Guaranty but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability, and binding effect of
this Guaranty.
(i) This Guaranty and the other Loan Documents (unless expressly provided to the contrary in
another Loan Document in respect of such other Loan Document) shall be governed by, and construed
in accordance with, the internal law of the State of New York applicable to contracts made and to
be performed in the State of New York.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, the undersigned have executed and delivered this Guaranty as of the day and
year first above written.
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IMPERIAL HOLDINGS, LLC
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By:
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Name:
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Title:
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Address:
Accepted:
EBC ASSET MANAGEMENT, INC., as Collateral Agent in favor of and for the benefit of Cedar Lane Capital, LLC
Address:
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Exhibit 10.15
EXECUTION COPY
IMPERIAL SETTLEMENTS FINANCING 2010, LLC,
as the Issuer,
PORTFOLIO FINANCIAL SERVICING COMPANY,
as the Initial Master Servicer,
and
WILMINGTON TRUST COMPANY,
as the Trustee and the Collateral Trustee,
MASTER TRUST INDENTURE
Dated as of September 24, 2010
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS
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SECTION 1.01. Definitions
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SECTION 1.02. Other Definitional Provisions
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SECTION 1.03. Acts of Series 2010-1 Noteholders
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SECTION 1.04. Conflict with Trust Indenture Act
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SECTION 1.05. Benefits of Indenture
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SECTION 1.06. Incorporation of Recitals
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SECTION 1.07. Conditions Precedent to the Effectiveness of this Agreement
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ARTICLE II GRANT OF SECURITY INTEREST IN RECEIVABLES; ORIGINAL ISSUANCE OF SERIES 2010-1
NOTES
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SECTION 2.01. Grant of Security Interest in Assets; No Assumption of Obligations Related
to Receivables; Certain Matters Regarding the Grant
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SECTION 2.02. Acceptance by Trustee
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SECTION 2.03. General Representations and Warranties of the Issuer
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38
|
|
SECTION 2.04. Affirmative Covenants of the Issuer
|
|
|
41
|
|
SECTION 2.05. Representations and Warranties of the Issuer Relating to the Series
Trust Assets, Liens and Security Interests
|
|
|
47
|
|
SECTION 2.06. Negative Covenants of the Issuer
|
|
|
50
|
|
|
|
|
|
|
ARTICLE III ADMINISTRATION AND SERVICING OF RECEIVABLES
|
|
|
55
|
|
SECTION 3.01. Acceptance of Appointment and Other Matters Relating to the
Master Servicer
|
|
|
55
|
|
SECTION 3.02. Servicing Compensation
|
|
|
56
|
|
SECTION 3.03. Representations and Warranties of the Master Servicer
|
|
|
56
|
|
SECTION 3.04. Covenants of the Master Servicer
|
|
|
58
|
|
SECTION 3.05. Reports and Records
|
|
|
61
|
|
SECTION 3.06. Servicing Report of Independent Public Accountants
|
|
|
61
|
|
SECTION 3.07. Reserved
|
|
|
62
|
|
SECTION 3.08. Adjustments
|
|
|
62
|
|
SECTION 3.09. Reserved
|
|
|
62
|
|
|
|
|
|
|
ARTICLE IV RIGHTS OF SERIES 2010-1 NOTEHOLDERS AND ALLOCATION
AND APPLICATION OF COLLECTIONS
|
|
|
62
|
|
SECTION 4.01. Rights of Series 2010-1 Noteholders
|
|
|
62
|
|
SECTION 4.02. Establishment of the Master Collection Account and the Applicable
Lock-Box Accounts; Establishment of the Issuer Split Payment
Account
|
|
|
63
|
|
SECTION 4.03. Series Accounts
|
|
|
65
|
|
SECTION 4.04. Establishment of the Trustees Account
|
|
|
67
|
|
SECTION 4.05. Other Payments
|
|
|
67
|
|
i
|
|
|
|
|
ARTICLE V DISTRIBUTIONS AND REPORTS TO SERIES 2010-1
NOTEHOLDERS
|
|
|
67
|
|
|
|
|
|
|
ARTICLE VI THE SERIES 2010-1 NOTES
|
|
|
68
|
|
SECTION 6.01. The Series 2010-1 Notes
|
|
|
68
|
|
SECTION 6.02. Authentication of Series 2010-1 Notes
|
|
|
69
|
|
SECTION 6.03. Transfer and Exchange of Series 2010-1 Notes
|
|
|
70
|
|
SECTION 6.04. Mutilated, Destroyed, Lost or Stolen Series 2010-1 Notes
|
|
|
78
|
|
SECTION 6.05. Persons Deemed Owners; Deemed Representations by Series 2010-1
Noteholders
|
|
|
79
|
|
SECTION 6.06. Appointment of Paying Agent
|
|
|
80
|
|
SECTION 6.07. Access to List of Series 2010-1 Noteholders Names and Addresses
|
|
|
80
|
|
SECTION 6.08. Authenticating Agent
|
|
|
81
|
|
SECTION 6.09. Issuance of the Series 2010-1 Notes
|
|
|
82
|
|
SECTION 6.10. Transfer of Series 2010-1 Notes
|
|
|
83
|
|
SECTION 6.11. Provisions Relating to the Regulation S Global Notes
|
|
|
84
|
|
|
|
|
|
|
ARTICLE VII OTHER MATTERS RELATING TO THE ISSUER
|
|
|
85
|
|
SECTION 7.01. Obligations Not Assignable
|
|
|
85
|
|
SECTION 7.02. Limitations on Liability
|
|
|
85
|
|
SECTION 7.03. Indemnification by the Issuer
|
|
|
86
|
|
SECTION 7.04. Net Worth of the Issuer
|
|
|
88
|
|
SECTION 7.05. Non-Payment of Settlement Receivables Due to Change in Law
|
|
|
88
|
|
|
|
|
|
|
ARTICLE VIII OTHER MATTERS RELATING TO THE MASTER SERVICER
|
|
|
88
|
|
SECTION 8.01. Liability of the Master Servicer
|
|
|
88
|
|
SECTION 8.02. Merger or Consolidation of, or Assumption of the Obligations of,
the Master Servicer
|
|
|
88
|
|
SECTION 8.03. Limitations on Liability
|
|
|
89
|
|
SECTION 8.04. Indemnification by Master Servicer
|
|
|
89
|
|
SECTION 8.05. Master Servicer Not to Resign
|
|
|
90
|
|
SECTION 8.06. Examination of Records
|
|
|
90
|
|
|
|
|
|
|
ARTICLE IX EVENTS OF DEFAULT
|
|
|
90
|
|
SECTION 9.01. Events of Default
|
|
|
90
|
|
SECTION 9.02. Additional Rights Upon the Occurrence of any Event of Default
|
|
|
91
|
|
SECTION 9.03. Certain Specific Rights Upon the Occurrence of an Insolvency Event
|
|
|
92
|
|
|
|
|
|
|
ARTICLE X SERVICER DEFAULTS
|
|
|
93
|
|
SECTION 10.01. Servicer Defaults
|
|
|
93
|
|
SECTION 10.02. Appointment of Successor
|
|
|
94
|
|
SECTION 10.03. Notification to Series 2010-1 Noteholders
|
|
|
95
|
|
|
|
|
|
|
ARTICLE XI THE TRUSTEE
|
|
|
95
|
|
SECTION 11.01. Duties of Trustee
|
|
|
95
|
|
SECTION 11.02. Certain Matters Affecting the Trustee
|
|
|
97
|
|
ii
|
|
|
|
|
SECTION 11.03. Trustee Not Liable for Recitals in Series 2010-1 Notes
|
|
|
99
|
|
SECTION 11.04. Compensation; Trustees Expenses; Indemnification
|
|
|
99
|
|
SECTION 11.05. Eligibility Requirements for Trustee
|
|
|
100
|
|
SECTION 11.06. Resignation or Removal of Trustee
|
|
|
100
|
|
SECTION 11.07. Successor Trustee
|
|
|
101
|
|
SECTION 11.08. Merger or Consolidation of Trustee
|
|
|
101
|
|
SECTION 11.09. Appointment of Co-Trustee or Separate Trustee
|
|
|
101
|
|
SECTION 11.10. Trustee May Enforce Claims Without Possession of Series 2010-1
Notes
|
|
|
102
|
|
SECTION 11.11. Suits for Enforcement
|
|
|
103
|
|
SECTION 11.12. Rights of Series 2010-1 Noteholders to Direct Trustee
|
|
|
103
|
|
SECTION 11.13. Representations and Warranties of Trustee
|
|
|
103
|
|
SECTION 11.14. Maintenance of Office or Agency
|
|
|
104
|
|
SECTION 11.15. Trustee May Own Series 2010-1 Notes
|
|
|
104
|
|
|
|
|
|
|
ARTICLE XII SATISFACTION AND DISCHARGE
|
|
|
104
|
|
SECTION 12.01. Satisfaction and Discharge of the Indenture
|
|
|
104
|
|
SECTION 12.02. Final Distribution
|
|
|
105
|
|
SECTION 12.03. Release of Liens
|
|
|
105
|
|
|
|
|
|
|
ARTICLE XIII MISCELLANEOUS PROVISIONS
|
|
|
106
|
|
SECTION 13.01. Amendment; Waiver of Default Events
|
|
|
106
|
|
SECTION 13.02. Protection of Right, Title and Interest to Trust Assets
|
|
|
107
|
|
SECTION 13.03. Limitation on Rights of Series 2010-1 Noteholders
|
|
|
108
|
|
SECTION 13.04. Governing Law; Jurisdiction; Consent to Service of Process
|
|
|
108
|
|
SECTION 13.05. Notices; Payments
|
|
|
109
|
|
SECTION 13.06. Assignment of the Issuer Purchase Agreement; Substitution
Under the Powers of Attorney
|
|
|
110
|
|
SECTION 13.07. Severability of Provisions
|
|
|
110
|
|
SECTION 13.08. Assignment
|
|
|
110
|
|
SECTION 13.09. Further Assurances
|
|
|
110
|
|
SECTION 13.10. Nonpetition Covenant
|
|
|
111
|
|
SECTION 13.11. No Waiver; Cumulative Remedies
|
|
|
111
|
|
SECTION 13.12. Counterparts
|
|
|
111
|
|
SECTION 13.13. Third-Party Beneficiaries
|
|
|
111
|
|
SECTION 13.14. Actions by Series 2010-1 Noteholders
|
|
|
111
|
|
SECTION 13.15. Merger and Integration
|
|
|
112
|
|
SECTION 13.16. Headings
|
|
|
112
|
|
SECTION 13.17. Tax and Usury Treatment
|
|
|
112
|
|
SECTION 13.18. Liability of the Issuer
|
|
|
112
|
|
SECTION 13.19. Offers to Purchase Series 2010-1 Notes
|
|
|
112
|
|
|
|
|
|
|
ARTICLE XIV THE COLLATERAL TRUSTEE
|
|
|
112
|
|
SECTION 14.01. Duties of Collateral Trustee
|
|
|
112
|
|
SECTION 14.02. Certain Matters Affecting the Collateral Trustee
|
|
|
114
|
|
SECTION 14.03. Collateral Trustee Not Liable for Recitals in Series 2010-1 Notes
|
|
|
116
|
|
iii
|
|
|
|
|
SECTION 14.04. Compensation; Collateral Trustees Expenses; Indemnification
|
|
|
117
|
|
SECTION 14.05. Eligibility Requirements for Collateral Trustee
|
|
|
117
|
|
SECTION 14.06. Resignation or Removal of Collateral Trustee
|
|
|
117
|
|
SECTION 14.07. Successor Collateral Trustee
|
|
|
118
|
|
SECTION 14.08. Merger or Consolidation of Collateral Trustee
|
|
|
118
|
|
SECTION 14.09. Tax Returns
|
|
|
119
|
|
SECTION 14.10. Representations and Warranties of Collateral Trustee
|
|
|
119
|
|
SECTION 14.11. Maintenance of Office or Agency
|
|
|
119
|
|
SECTION 14.12. Collateral Trustee May Own Series 2010-1 Notes
|
|
|
119
|
|
SCHEDULES
|
|
|
Schedule I
|
|
Credit Policy Manual
|
Schedule II
|
|
Issuers Chief Executive Office and Location of Records
|
Schedule III
|
|
Settlement Lock-Box Banks, Annuity Lock-Box Banks, Settlement Lock-Boxes,
Annuity Lock-Boxes, Settlement Lock-Box Accounts and Annuity Lock-Box Accounts
|
Schedule IV
|
|
ERISA Matters
|
EXHIBITS
|
|
|
Exhibit A
|
|
Form of Settlement Purchase Agreements
|
Exhibit B
|
|
Lock-Box Notices
|
Exhibit C
|
|
Form of Letter to be Delivered by Accredited Investors on the Closing Date
|
Exhibit D
|
|
Form of Letter to be Delivered by Accredited Investors in Connection with
Subsequent Transfers
|
Exhibit E
|
|
Form of Daily Report
|
Exhibit F
|
|
Form of Monthly Report and Compliance Certificate
|
Exhibit G
|
|
Model Structured Settlement Statute
|
Exhibit H
|
|
Form of Rule 144A Transfer Certificate
|
Exhibit I
|
|
Form of Regulation S Transfer Certificate
|
iv
THIS MASTER TRUST INDENTURE, dated as of September 24, 2010, is by and among IMPERIAL
SETTLEMENTS FINANCING 2010, LLC, a Georgia limited liability company, as the Issuer, PORTFOLIO
FINANCIAL SERVICING COMPANY, a Delaware corporation, as the Initial Master Servicer, and WILMINGTON
TRUST COMPANY, a Delaware banking corporation, as the Trustee and as the Collateral Trustee.
RECITALS OF THE ISSUER
The Issuer has duly authorized the creation and issuance of the Series 2010-1 Notes (defined
below), which shall have the tenor and be in the amount set forth herein and in the Supplement. In
order to provide for the foregoing, the Issuer has duly authorized the execution and delivery of
this Indenture.
The Series 2010-1 Notes shall each be limited recourse obligations of the Issuer and shall be
secured solely by and paid from the Series 2010-1 Noteholders respective allocable shares of the
Trust Assets as set forth herein. If and to the extent that such allocable share is insufficient
to pay all amounts owing with respect to such Series 2010-1 Notes, then, except as otherwise
expressly provided hereunder, the Series 2010-1 Noteholders of such Series 2010-1 Notes shall have
no claim in respect of such insufficiency against the Issuer or any of its other assets or
properties.
All things necessary to (a) make the Series 2010-1 Notes, when executed by the Issuer and
authenticated and delivered by the Trustee hereunder and duly issued by the Issuer, the valid
obligations of the Issuer, and (b) make this Indenture a valid agreement of the Issuer, in each
case, in accordance with their respective terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That the Issuer, in consideration of the premises herein contained and of the purchase of the
Series 2010-1 Notes by the Series 2010-1 Noteholders, and for other good and lawful consideration,
the receipt of which is hereby acknowledged, will, pursuant to the Supplement, in order to secure,
equally and ratably without prejudice, priority or distinction, except as specifically otherwise
set forth in this Indenture and in the Supplement, the payment of the Series 2010-1 Notes issued
pursuant to the Supplement, the payment of all other amounts due under or in connection with the
Series 2010-1 Notes or with this Indenture, and the performance and observance of all of the
covenants and conditions contained herein or in the Series 2010-1 Notes, from time to time grant a
security interest, convey, transfer, assign and deliver, in each case, to the Trustee, its
successors and assigns and its or their assigns forever, to have and to hold in trust for the
benefit of the Series 2010-1 Noteholders all and singular in the property hereinafter described, to
wit:
All of the Issuers right, title and interest in, to and under, (i) each Receivable set forth
on the List of Receivables delivered by the Issuer to the Trustee on or before the Closing Date and
each Advance Date, (ii) all Related Property relating to such Receivables, (iii) all monies due or
to become due and all Collections and other amounts received from time to time with respect to such
Receivables on or after the applicable Cut-Off Date, (iv) any Settlement Lock-Box
1
Account, any
Settlement Lock-Box, any Annuity Lock-Box Account, any Annuity Lock-Box, the Master Collection Account, the Series Collection Account, the Series Reserve Account, the
Series Payment Account, any other Series Account and the Trustees Account, together with all
monies from time to time on deposit in any such account, and all Eligible Investments and other
securities, instruments and other investments purchased from funds on deposit in any such Account,
and (v) all proceeds (including, without limitation, proceeds as defined in the UCC of the
jurisdiction the law of which governs the perfection of the security interest in such Receivables)
of any of the foregoing. Such property described in the preceding sentence, and the security
interest granted to the Trustee pursuant to
Section 13.06
hereof, together with any other
property identified as Series Trust Assets in the Supplement, shall constitute the
Trust
Assets
.
It is expressly agreed that, anything herein contained to the contrary notwithstanding, the
Issuer shall remain liable under any instrument or documents included in the Trust Assets to
perform all of the obligations assumed by it hereunder, all in accordance with and pursuant to the
terms and provisions thereof and, except as otherwise expressly provided in this Indenture, the
Trustee shall not have any obligations or liabilities under such instruments or documents by reason
of or arising out of this Indenture, nor shall the Trustee be required or obligated in any manner
to perform or fulfill any obligations of Issuer under or pursuant to such instruments or documents
or to may any payment, to make any inquiry as to the nature or sufficiency of any payment received
by it, to present or file any claim or to take any action to collect or enforce the payment of any
amounts which may have been assigned to it or to which it may be entitled at any time or times.
AND IT IS HEREBY COVENANTED, DECLARED AND AGREED by and between the parties hereto that all
Series 2010-1 Notes are to be issued, countersigned and delivered and that all of the Trust Assets
are to be held and applied, subject to the further covenants, conditions, releases, uses and trusts
hereinafter set forth, and the Issuer and the Master Servicer, in each case, for itself and its
successors, does hereby covenant and agree to and with the Trustee and each of the foregoings
respective successors in said trust, for the benefit of those who shall hold the Series 2010-1
Notes, or any of them, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01.
Definitions
. Whenever used in this Agreement, the following words and phrases shall
have the following meanings, and the definitions of such terms are applicable to the singular as
well as the plural forms of such terms and to the masculine as well as to the feminine and neuter
genders of such terms.
An
Act
of one or more Series 2010-1 Noteholders has the meaning specified in
Section 1.04
.
Advance
shall have the meaning specified in the Supplement.
Advance Date
shall have the meaning specified in the Supplement.
2
Affiliate
shall mean, with reference to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person;
provided
,
that for purposes of this Agreement when used with respect to Issuer or any of its direct or
indirect subsidiaries or Affiliates, any limited partners of such Persons shall also be deemed
Affiliates of any such Person. For the purposes of this definition, control when used with
reference to any specified Person shall mean the power to direct the management and policies of
such specified Person, directly or indirectly, whether through the ownership of voting securities,
by contract or otherwise; and the terms controlling and controlled have meanings correlative to
the foregoing.
Affiliated Entity
means any of the Seller, the Issuer or any Affiliate of any of the
foregoing.
Aggregate Discounted Receivables Balance
shall mean, with respect to any designated
group of Receivables at any time, the sum at such time of the respective Discounted Receivables
Balances of such Receivables.
Aggregate Principal Balance
shall mean, with respect to any designated group of
Series 2010-1 Notes, the sum at such time of the respective Principal Balances of such Series
2010-1 Notes.
Agreement
or
Indenture
shall mean this Master Trust Indenture, as the same
may from time to time be amended, modified or otherwise supplemented, including, by the Supplement.
A.M. Best
shall mean A.M. Best Company or its successor.
Annuitant
shall mean, with respect to any Assignable Annuity Contract, the natural
person, if any, identified as the annuitant or measuring life, or similar, thereunder.
Annuity Beneficiary
shall mean, with respect to any Assignable Annuity Contract,
collectively, the Person or Persons (i) receiving or entitled to receive Scheduled Payments
thereunder (which may include any Annuity Owner and/or Annuitant), (ii) if any, identified as the
beneficiary or contingent beneficiary or payee, or similar, thereunder and/or (iii) otherwise
entitled to acquire pursuant to the terms of such Assignable Annuity Contract any immediate or
contingent right to receive Scheduled Payments thereunder upon the death of the related Annuitant
or Annuity Owner, in each case prior to giving effect to an assignment of such Assignable Annuity
Contract to the Company.
Annuity Contract
shall mean any Settlement Annuity Contract or Assignable Annuity
Contract.
Annuity Facility Documents
shall mean the Annuity Purchase Agreements and any other
agreements, instruments, certificates or documents delivered or contemplated to be delivered
thereunder or in connection therewith, as the same may be supplemented or amended from time to time
hereafter in accordance with the terms thereof, and Annuity Facility Document shall mean any of
the foregoing.
3
Annuity Lock-Box Account
shall have the meaning specified in
Section
4.02(b)
.
Annuity Lock-Box
shall mean any post office box identified as an Annuity Lock-Box
on Schedule III into which Collections are received.
Annuity Lock-Box Bank
shall have the meaning specified in
Section 4.02(b)
.
Annuity Owner
shall mean, with respect to any Assignable Annuity Contract,
collectively, the Person or Persons identified therein as owner or annuity holder or contract
holder, or any similar designation that indicates the party who owns the Assignable Annuity
Contract, in each case prior to giving effect to an assignment thereof to the Seller.
Annuity Package
shall mean, as it relates to any Annuity Receivable, fully executed
copies of all documentation related to the purchase of the related Assignable Annuity Contract by
the Seller, and shall include, without limitation, (i) a copy of the Annuity Purchase Agreement
related thereto, executed by the Seller and the Individual Annuity Seller, and all documents
required to be delivered to the Seller pursuant thereto, (ii) a copy of the Assignable Annuity
Contract, unless such copy is unavailable from both the Individual Annuity Seller and the
Assignable Annuity Provider after inquiry therefor by the Individual Annuity Seller and by the
Seller in accordance with the Credit Policy Manual; provided, that, for any Annuity Receivable with
respect to which the related Assignable Annuity Contract constitutes a part of, or is subject to, a
group contract or group policy, or the like, a complete copy of the Assignable Annuity Contract
(including any group contract or group policy or any related riders or endorsements) shall be
included in the related Annuity Package, (iii) a copy of the Assignable Annuity Provider
Acknowledgment, (iv) a credit report with respect to the applicable Individual Annuity Seller
(unless such Individual Annuity Seller was deceased or the subject of a bankruptcy proceeding, in
which case a credit report shall not be required), (vi) evidence that the Seller has paid the
purchase price with respect to such Annuity Receivable, (vii) a statement by the Assignable Annuity
Provider (a) confirming that such Assignable Annuity Contract (1) has been issued to the Annuity
Owner and (2) remains in force, (b) identifying the amount and payment date for each scheduled
payment owing thereunder and (c) confirming that such scheduled payments are payable by such
Assignable Annuity Provider on such dates without regard to the life or death of the Annuitant,
(viii) UCC lien search reports against the Individual Annuity Seller, (ix) any other documentation
that is expressly required to be included in such Annuity Package under the terms of the Annuity
Facility Documents, and (x) all other applicable notices, agreements, instruments and documents
required to be obtained under any applicable laws relating to the transfer of Assignable Annuity
Contracts in each Approved Annuity State related thereto.
Annuity Provider
shall mean, with respect to any Annuity Receivable, the related
Assignable Annuity Provider, and with respect to any Settlement Receivable, the related Settlement
Annuity Provider.
Annuity Purchase Agreement
shall mean any agreement substantially in the form of
Exhibit E pursuant to which an Individual Annuity Seller sells, assigns and conveys to the Seller
all or a portion of the Individual Annuity Sellers right, title and interest in an Assignable
Annuity Contract including without limitation any payments payable to the Individual Annuity Seller
thereunder.
4
Annuity Receivable
shall mean all rights (a) to all Scheduled Payments (other than
any related Split Payments) due or to become due under an Assignable Annuity Contract, and (b) all
other rights (but not obligations or liabilities) purchased by the Seller from an Individual
Annuity Seller pursuant to an Annuity Purchase Agreement, whether such Scheduled Payments (or such
portions thereof) or other rights constitute accounts, general intangibles (including, without
limitation, payment intangibles), investment property, intangible or tangible chattel paper
(including, without limitation, electronic chattel paper), instruments, documents, securities,
cash, supporting obligations or any other kind of property, and Annuity Receivables shall mean
all such Receivables. Without limiting the foregoing in any way, it is understood and agreed that
the Holders of Notes of any Series shall only have rights to, and recourse against, the Series
Receivables for such Series, and shall have no rights in, or recourse against, any Receivables
relating to any other Series. Notwithstanding the foregoing, the term Annuity Receivable shall
not include any Scheduled Payments due prior to the applicable Series Cut-Off Date for the Series
to which such Annuity Receivable is to be allocated.
Applicable Lock-Box Account
shall mean any Annuity Lock-Box Account or Settlement
Lock-Box Account.
Applicable Lock-Box
shall mean any Annuity Lock-Box or Settlement Lock-Box.
Applicable Lock-Box Bank
shall mean any Annuity Lock-Box Bank or Settlement Lock-Box
Bank.
Approved Annuity State
shall mean with reference to any Series at any time (a) each
Approved Annuity State specified in the applicable Supplement or (b) if none are so specified,
each of the 50 states within the United States except for New Hampshire, Vermont, Wisconsin and the
District of Columbia.
Approved State
shall mean, at any time, any state that has adopted a Transfer
Statute (and which Transfer Statute is effective as of the date of determination) authorizing, upon
the issuance of an appropriate court order, transfers by Claimants of rights to receive Scheduled
Payments arising under Settlement Agreements, which statute is substantially similar to the model
structured settlement transfer statute attached hereto as
Exhibit G
.
Assignable Annuity Contract
shall mean any annuity contract, rights to receive
payments arising under an annuity contract, which annuity contract does not prohibit the assignment
of any rights arising thereunder by any related Annuity Beneficiary or Annuity Owner.
Assignable Annuity Provider
shall mean, with respect to any Annuity Receivable, the
insurance company that (i) is identified on the related Assignable Annuity Contract as the
issuer, insurer or similar and (ii) has an obligation to make periodic payments pursuant to the
Assignable Annuity Contract with respect to such Annuity Receivable.
Assignable Annuity Provider Acknowledgment
shall mean, with respect to any Annuity
Receivable, an acknowledgment signed by the related Assignable Annuity Provider pursuant to which
such Assignable Annuity Provider shall have (i) acknowledged (and consented to, if required by the
terms of the related Assignable Annuity Contract), (ii) agreed to reflect such
5
ownership and other rights in its books and records, (iii) agreed that there shall have been
no previous effective assignments by the related Annuity Owner of the related Assignable Annuity
Contract (other than pursuant to the related Annuity Purchase Agreement) and (iv) agreed to deliver
the related Scheduled Payments to the Annuity Lock-Box.
Assignee
shall mean the Person to which the obligations to make payments under a
Settlement Agreement have been assigned pursuant to an Assignment and shall include, without
limitation, a Qualified Assignee.
Assignment
shall mean an assignment of the obligations to make payments under a
Settlement to an Assignee, including, without limitation, a Qualified Assignment.
Available Issuer Funds
shall mean at any time all cash of the Issuer to the extent
fully distributable by the Issuer at the Issuers discretion.
Back-up Servicer
shall mean Imperial or any successor thereto as Back-up Servicer
under the Imperial BUSA.
Back-up Servicing Agreement
shall mean the Imperial BUSA.
Back-up Servicing Fee
shall mean, with respect to any Payment Date, the sum of (i)
the product of (x) 1/12 (or, in the case of the initial Payment Date, a fraction, the numerator of
which is the number of days from (and including) the Closing Date to (but excluding) such Payment
Date and the denominator of which is 360)
times
(y) the Back-up Servicing Fee Rate,
times
(z) the Aggregate Discounted Receivables Balance of all Series Receivables on the
first day of the Collection Period immediately preceding such Payment Date
plus
(ii) any
accrued and unpaid Back-up Servicing Fees with respect to any Payment Dates preceding the Payment
Date for which such determination is being made;
provided
, that, with respect to any
Collection Period (or portion thereof) during which the obligations of the Back-up Servicer have
been terminated in accordance with the terms of the Back-up Servicing Agreement, the Back-up
Servicing Fee shall be zero (0.0).
Back-up Servicing Fee Rate
shall mean 0.02%.
Business Day
shall mean any day other than a Saturday or Sunday or any other day on
which national banking associations or state banking institutions in New York, New York or
Wilmington, Delaware are authorized or obligated by law, executive order or governmental decree to
be closed.
Certificated Notes
shall mean permanent certificated Series 2010-1 Notes issued to
Institutional Accredited Investors or Affiliated Entities that are not Qualified Institutional
Buyers pursuant to
Section 6.01(e)
.
Claimant
shall mean, with respect to any Settlement, the Person entitled to receive
the Settlement under the terms of the Settlement Agreement who has agreed to sell his interest in
such Settlement (or a portion thereof) to the Seller pursuant to a Settlement Purchase Agreement
which in turn has been sold to the Issuer under the Issuer Purchase Agreement.
6
Clearstream
shall mean Clearstream Banking,
societé anonyme
, a corporation organized
under the laws of the Grand Duchy of Luxembourg.
Clearstream Account
shall have the meaning specified in
Section 6.11(d)
.
Clearstream Security
shall mean a security (as defined in Section 8-102(a)(15) of
the UCC) that (i) is a debt security and (ii) is capable of being transferred to the relevant
depositorys account at Clearstream pursuant to Article VI, whether or not such transfer occurred.
Closing Date
shall mean September 24, 2010.
Code
shall mean the Internal Revenue Code of 1986, together with the rules and
regulations promulgated thereunder, as amended from time to time.
Collateral Trustee
shall mean the Person serving in such capacity under this
Agreement and the Supplement (not individually but solely in its capacity as Collateral Trustee);
provided
, that in any event, the Collateral Trustee shall at all times be the same Person
as the Trustee. The initial Collateral Trustee shall be Wilmington Trust Company.
Collateral Trustee Office
has the meaning specified in
Section 14.11
.
Collection Period
shall mean, with respect to any Payment Date, the calendar month
immediately preceding the calendar month in which such Payment Date occurs.
Collections
shall mean with respect to all Receivables, all cash payments thereon
and other cash proceeds thereof, whether in the form of cash, checks, wire transfers, electronic
transfers or any other form of cash payment (including, without limitation, (x) from the Seller in
connection with any repurchase of such Receivables (or the Issuers beneficial ownership thereof)
pursuant to
Section 2.04(s)
, (y) any substitution of additional Scheduled Payments or
deposit of cash with respect to such Receivable or the Issuers interest therein pursuant to
Section 2.04(s)
, or (z) any Holdback Replacement Payments made in respect thereof (as
defined in the Supplement), including, without limitation, in each case with respect to all
Receivables, any interest earned on such amounts while on deposit in any collection account;
provided
,
however
, that (i) Collections shall not include any Split Payments; (ii)
Servicer Advances shall also be deemed to be Collections; and (iii) Collections shall not include
any amounts related to Scheduled Payments due prior to the applicable Cut-Off Date for any
Receivable.
Common Depository
shall mean The Depository Trust Company, its nominees, and their
respective assigns.
Control Party
shall have the meaning specified in the Supplement.
Credit Policy Manual
shall mean the credit and collection policies and practices of
the Seller, including, without limitation, those described in
Schedule I
hereto, in effect
on the date hereof, relating to Receivables, as modified from time to time in compliance with
Section 2.06(g)
.
7
Cut-Off Date
shall have the meaning specified in the Supplement.
Daily Report
shall mean a report in the form attached hereto as
Exhibit E
to
be delivered by the Master Servicer to the Trustee and the Collateral Trustee on each Business Day,
and relating to the preceding Business Day.
Defaulted Receivable
shall mean, unless otherwise specified in the Supplement
exclusively with respect to the related Series designated thereunder, a Receivable with respect to
which:
(a) any Scheduled Payment (or any portion thereof) due thereunder has been or should have been
deemed to be uncollectible by the Master Servicer or its sub-servicer in accordance with the Credit
Policy Manual; provided, however, that only such portion of such Receivable that has been or should
have been so deemed uncollectible shall constitute a Defaulted Receivable pursuant to this clause
(a);
(b) the Trustee does not have a first priority perfected security interest, free and clear of
any Liens other than Permitted Liens;
(c) the related Annuity Provider has become or has been deemed insolvent, and either (x) its
liquidation or rehabilitation plan has caused the stated amount of the Scheduled Payments due in
respect of the related Annuity Contract to be reduced, delayed or otherwise modified; provided,
that only such portion of such Receivable which is so reduced, delayed or otherwise modified shall
be deemed to be a Defaulted Receivable pursuant to this clause (x), (y) a liquidation or
rehabilitation plan providing for the full payment of the related Annuity Contract has been adopted
or approved by the applicable court but such order remains subject to appeal, or (z) no
rehabilitation or reorganization plan dealing with payment of the related Annuity Contracts has yet
been adopted and approved by the applicable court; provided, that in the case of clause (y) or (z)
above, to the extent that such court has entered an order authorizing or requiring the continued
payment in full of the Scheduled Payments owing by such Annuity Provider under the related Annuity
Contract in accordance with the terms thereof pending the entry and approval of such a plan or such
a plan becoming final, then such Receivables shall not be deemed to be Defaulted Receivables
pursuant to this clause (c);
(d) any Scheduled Payment (or any portion thereof) is more than 90 days past due;
(e) any Scheduled Payment (or any portion thereof) has been diverted by the Claimant or any
other Person and such diverted payment has not been returned to the Issuer within 15 days after
such diversion; or
(f) any Person other than the Trustee obtains an interest in all or any portion of the
Scheduled Payments to be made thereunder; provided, that this clause (f) shall not be deemed to
include any interest of any such other Person in any Scheduled Payment (or portion thereof) to the
extent constituting (i) any Split Payment obligation owing to any Claimant or Individual Annuity
Seller with respect thereto, (ii) a Permitted Lien or (iii) any Lien granted by, or imposed
against, any of the Noteholders or the Trustee covering such Scheduled Payment;
8
it
being
understood
and
agreed
, that a Receivable that
was a Defaulted Receivable may thereafter cease to be deemed a Defaulted Receivable if such
Receivable is Rehabilitated.
Definitive Notes
shall mean Series 2010-1 Notes issued to individual Series 2010-1
Noteholders in the form of registered Series 2010-1 Notes in exchange for U.S. Global Notes or
Regulation S Notes pursuant to
Section 6.03(c)
.
Deposit Account
shall mean any of the Master Collection Account, the Series
Collection Account, the Series Reserve Account, any Settlement Lock-Box Account, any Annuity
Lock-Box Account, the Series Payment Account, and any other bank accounts established and
maintained for the benefit of the Issuer or Series 2010-1, and
Deposit Accounts
shall
mean all such accounts, collectively.
Discount Rate
shall mean the per annum rate specified as such in the Supplement.
Discounted Receivables Balance
shall mean, with respect to any Receivable at any
time, the present value at such time of the Scheduled Payments (net of the Split Payment
obligations associated therewith) included as a Receivable discounted at the applicable Discount
Rate.
Eligible Annuity Receivable
shall mean, with reference to any Series, unless
otherwise specified in the Supplement for such Series, an Annuity Receivable designated as a Series
Receivable for such Series in respect of which, on the Series Closing Date for such Series (or for
any Annuity Receivable that is not such a Series Receivable on such Series Closing Date, on such
later date as such Receivable shall become a Series Receivable for such Series in accordance with
the terms hereof and of the related Supplement):
(a) (x) all Scheduled Payments required to be made thereon to the Seller or the Issuer from
the time of the Sellers purchase of such Receivable have been paid (or no portion thereof is past
due more than thirty (30) days at such time) and (y) no such Scheduled Payments have been diverted
from the Seller or the Issuer, unless, in either case, such Receivable shall have been and
continues to be Rehabilitated (in which case only the Rehabilitated portion of such Receivable
shall constitute an Eligible Annuity Receivable hereunder);
(b) (x) such Annuity Receivable was purchased by the Seller from an Individual Annuity Seller
that purchased the related Assignable Annuity Contract from the related Assignable Annuity Provider
at the time of the original issuance thereof, or otherwise acquired ownership of such annuity
contract, in either case in full compliance with (1) the terms thereof, (2) the terms of any
predecessor annuity contract in respect of which the related Assignable Annuity Contract was issued
as a full or partial replacement, and (3) all applicable laws, including if applicable any
insurable interest requirements, and (y) with respect to which the related Assignable Annuity
Contract was issued in full compliance with all applicable laws, including if applicable any
insurable interest requirements;
(c) the Assignable Annuity Contract relating to such Receivable has been duly authorized and
issued and constitutes the legal, valid and binding obligation of the related Assignable Annuity
Provider and is not subject to rescission, reduction, set-off or other defenses and does not
contravene in any material respect any requirement of law applicable thereto;
9
(d) such Receivable was purchased by the Seller (x) at least six (6) months after the issuance
of the related Assignable Annuity Contract by the related Assignable Annuity Provider, unless the
Seller shall have provided documentation confirming that the Individual Annuity Seller (or, if
applicable, its predecessor in interest) did not procure such annuity contract with the intention
to assign it, and (y) after the expiration of any contestability or rescission period applicable to
such Assignable Annuity Contract;
(e) such Receivable was purchased by the Seller from the related Individual Annuity Seller
pursuant to an Annuity Purchase Agreement and sold to the Issuer pursuant to the Issuer Purchase
Agreement, in each case in full compliance with all applicable laws and with the terms of the
related Assignable Annuity Contract;
(f) the related Assignable Annuity Contract is denominated and payable only in U.S. Dollars
and payments in respect of which will be made without deduction or withholding for any federal
income tax or any premium or similar tax;
(g) neither the related Assignable Annuity Contract nor the related Assignable Annuity
Provider, prior to the acquisition thereof by the Issuer, has designated any Person as an
irrevocable beneficiary or irrevocable payee thereof;
(h) (x) after the acquisition of such Assignable Annuity Contract by the Issuer, the
Assignable Annuity Provider shall have designated the Issuer or its designee as the sole payee,
beneficiary and owner thereof, and copies of documentation reflecting such designations in such
Assignable Annuity Providers books and records shall have been included in the related Annuity
Package;
(i) the following are true: (I) the Seller has conducted a UCC lien search and obtained a
credit report with respect to the related Individual Annuity Seller, (II) such Annuity Receivable
is not subject to any outstanding lien, encumbrance, deduction, withholding, dispute, litigation,
counterclaim, defense (including usury), rescission, or set-off, including garnishment proceedings,
with respect thereto in each case other than Permitted Liens; provided that only such portion of
such Annuity Receivable which is subject to any of the foregoing shall be deemed ineligible
pursuant to this clause (II); (III) such Annuity Receivable is not evidenced by any instrument or
chattel paper; and (IV) such Receivable is not a Defaulted Receivable;
(j) the Back-up Servicer has verified its receipt of all documents required to be contained in
the related Annuity Package in accordance with the definition thereof and the Back-up Servicing
Agreement;
(k) the Issuer shall have obtained a first priority, indefeasible ownership interest in, and
good title to, such Annuity Receivable, the related Assignable Annuity Contract and in all
Scheduled Annuity Payments due thereunder, free and clear of any Lien, claim or encumbrance of any
Person (except for the portion(s) of any such Scheduled Payments that constitute Split Payments or
any Permitted Liens);
(l) with respect to such Annuity Receivable, each person that is an Annuity Owner, an
Annuitant or an Annuity Beneficiary shall have entered into an Annuity Purchase Agreement pursuant
to which it has (x) sold to the Seller all of its right, title and interest under the related
10
Assignable Annuity Contract or (y) if it has no such right, title or interest, acknowledged
the sale or purported sale to the Seller of all right, title and interest thereunder by other
parties to such Annuity Purchase Agreement;
(m) under the related Assignable Annuity Contract (x) all Scheduled Payments are guaranteed
payments that are required to be made at the times and in the amounts specified in the related
Annuity Purchase Agreement, without regard to whether the Individual Annuity Seller or any other
Person is or continues to be alive, and (y) no payment will be made at the election of the
Assignable Annuity Provider upon or as a result of the death of the Annuitant or any other Person
if such payment would not otherwise be required to be made at such time;
(n) the assignment of such Receivable to both the Seller and the Issuer (w) is not prohibited
by the terms of the related Assignable Annuity Contract, (x) is not subject to any life settlement,
senior settlement or viatical settlement statute or regulation, (y) does not require any conditions
to be satisfied, either under law or the related Assignable Annuity Contract, to be permissible or
to become fully effective, that shall not have been satisfied at the time of each such assignment,
and (z) does not require any consents or approvals, either under law or the related Assignable
Annuity Contract, to be permissible or to become fully effective, except those consents or
approvals which have been obtained and are evidenced by documentation included in the related
Annuity Package;
(o) all premium obligations under the related Assignable Annuity Contract were paid in full by
the Annuity Owner (or any predecessor thereof) prior to the purchase thereof by the Seller, and no
further amounts are required to be paid to the related Assignable Annuity Provider or any other
Person to maintain such Assignable Annuity Contract in full force and effect;
(p) the total purchase price (excluding, other than with respect to any substituted Receivable
pursuant to Section 2.04(s) hereof, any holdback funds in respect thereof) has been paid in full by
the Seller to the Individual Annuity Seller under the applicable Annuity Purchase Agreement, by the
Issuer to the Seller under the Issuer Purchase and Contribution Agreement, and all obligations of
the Seller under such Annuity Purchase Agreement and of the Seller under the Issuer Purchase and
Contribution Agreement have been fully performed, in each case to fully effectuate the purchase of
such Annuity Receivable;
(q) such Receivable was originated by the Seller in accordance with its policies and
procedures and in the ordinary course of its business;
(r) no related Individual Annuity Seller was a minor in any jurisdiction in which such
Individual Annuity Seller was a resident at the time of such Individual Annuity Sellers execution
of the related Annuity Purchase Agreement;
(s) such Receivable was purchased by the Seller from an Individual Annuity Seller that was a
resident of an Approved Annuity State both at the time of the issuance of such Assignable Annuity
Contract and at the time of such purchase by the Seller;
(t) the terms and conditions of the related Annuity Purchase Agreement complied with all
applicable federal, state, and local laws; provided, that this clause (u) shall not be construed to
limit the scope of clause (b);
11
(u) (x) the purchase of such Receivable by the Seller was made pursuant to and in full
compliance with the Credit Policy Manual and (y) Collections in respect of which, from and after
the date of the Companys purchase thereof, have been received, collected and otherwise pursued by
the Seller or the Master Servicer (or its sub-servicer) pursuant to and in full compliance with the
policies and procedures set forth in the Credit Policy Manual;
(v) neither the related Assignable Annuity Contract nor any document in the related Annuity
Package has been satisfied, subordinated or rescinded;
(w) the related Annuity Purchase Agreement is subject to, and expressly governed by the laws
of, an Approved Annuity State (and not any state that is not an Approved Annuity State); and
(x) the related Assignable Annuity Provider is not a Governmental Authority.
Eligible Institution
shall mean a commercial bank or trust company organized under
the laws of the United States of America or any one of the states thereof, including the District
of Columbia (or any domestic branch of a foreign bank), which at all times (i) is a member of the
FDIC, has a combined capital and surplus of at least $500,000,000 and (ii)(a) with respect to
Wilmington Trust Company, has a certificate of deposit rating or long-term unsecured senior debt
rating of at least BBB- (or the equivalent thereof) by each of S&P and Moodys or (b) with
respect to any other commercial bank or trust company, has a certificate of deposit rating or
long-term unsecured senior debt rating of at least BBB+ (or the equivalent thereof) by each of
S&P and Moodys;
provided
,
however
, that (x) a commercial bank which does not
satisfy the requirements set forth in
clause (ii)
shall nonetheless be deemed to be an
Eligible Institution for purposes of holding any Deposit Account or any other account so long as
such commercial bank is a federally or state chartered depository institution subject to
regulations regarding fiduciary funds on deposit substantially similar to 12 C.F.R. §9.10(b) and
such account is maintained as a segregated trust account with the corporate trust department of
such bank and (y) in the event that Wilmington Trust Company fails to satisfy the requirements set
forth in
clause (ii)(a)
, Wilmington Trust Company shall nonetheless be deemed to be an
Eligible Institution for all purposes of this Agreement and the other Operative Documents unless
the Control Party shall have delivered written notice to the Issuer and the Master Servicer
requesting the resignation of Wilmington Trust Company as Trustee, Collateral Trustee or holder of
any Deposit Account, in which case Wilmington Trust Company shall cease to be considered an
Eligible Institution for the purposes described in such written notice on the sixtieth
(60
th
) day following the Issuers and the Master Servicers receipt of such notice.
Eligible Investments
shall mean book-entry securities entered on the books of the
registrar of such security and held in the name or on behalf of the Trustee or negotiable
instruments or securities represented by instruments in bearer or registered form which evidence:
(a) direct obligations of and obligations fully guaranteed as to timely payment by, the
full faith and credit of the United States of America or any agency or instrumentality
thereof;
12
(b) demand and time deposits in, certificates of deposit of, and federal funds sold by,
depository institutions or trust companies incorporated under the laws of the United States
of America or any state thereof (or domestic branches of foreign banks), subject to
supervision and examination by Federal or state banking or depository institution
authorities, and having, at the time of the Issuers investment or contractual commitment to
invest therein, a short-term unsecured debt rating of P-1 or better by Moodys and A-1
or better by S&P;
(c) commercial paper having, at the time of the Issuers investment or contractual
commitment to invest therein, a rating of P-1 or better by Moodys and A-1 or better by
S&P;
(d) readily marketable investments in money market funds (including funds for which the
Trustee or any of its affiliates acts as an investment adviser or manager) (which money
market funds may be 12b-1 funds, as contemplated under the rules promulgated by the
Securities Exchange Commission under the Investment Company Act) or in mutual funds
(including funds for which the Trustee or any of its affiliates acts as an investment
adviser or manager) having as their sole investments any of the investments described in the
foregoing
clauses (a)
,
(b)
and
(c)
, which in either case (i) are
rated Aaa by Moodys and AAA by S&P and (ii) seek to maintain a constant net asset
value; or
(e) investment agreements or guaranteed investment contracts issued or guaranteed by an
entity with a long-term senior debt or financial strength rating of Aaa and AAA by
Moodys and S&P, respectively,
in each case, provided that all such investments do not have a final maturity date occurring later
than the Business Day immediately preceding the next Payment Date.
Eligible Master Servicer
shall mean PFSC or any other operating entity which, at the
time of its appointment as Master Servicer, (a) is servicing a portfolio of receivables having
similar attributes as the Receivables, (b) is legally qualified and has the capacity to service the
Receivables, and (c) is approved by the Control Party as having demonstrated the ability to
professionally and competently service a portfolio of receivables of a nature similar to the
Receivables in accordance with high standards of skill and care.
Eligible Receivable
shall mean, with reference to any Series, those Series
Receivables that are either Eligible Settlement Receivables or Eligible Annuity Receivables.
Eligible Settlement Receivable
shall mean a Settlement Receivable designated as a
Series Receivable in respect of which, on the Closing Date (or, for any Settlement Receivable that
is not such a Series Receivable on such Closing Date, on such later Advance Date or other date as
such Receivable shall become a Series Receivable in accordance with the terms hereof and of the
Supplement):
(a) (x) all Scheduled Payments required to be made thereon to the Seller and/or the
Issuer, as applicable, from the time of their acquisition of such Receivable,
13
have been paid (or no portion thereof is past due more than thirty (30) days at such
time) and (y) no such Scheduled Payments have been diverted from the Seller or the Issuer,
unless, in either case, such Receivable shall have been and continues to be Rehabilitated
(in which case only the Rehabilitated portion of such Receivable shall constitute an
Eligible Receivable hereunder);
(b) the underlying Settlement (x) does not arise from a settlement that is subject to
appeal or court approval (unless such approval has been received and written evidence of
such approval has been delivered to the Trustee and the Back-up Servicer) and (y) is the
subject of a transaction in which the related Settlement Agreement remains in full force and
effect notwithstanding any Assignees or Obligors purchase or ownership of any Settlement
Annuity Contracts;
(c) the underlying Settlement is denominated and payable only in U.S. Dollars, the
related Claimant is a U.S. resident and payments on the underlying Settlement will be made
without deduction or withholding for any Federal income tax;
(d) if such Settlement is the subject of a Qualified Assignment or other assignment,
the underlying Settlement Agreement releases all liable parties (other than the Assignee)
under the applicable Settlement Agreement from all liability pertaining thereto;
(e) except as provided in the Transfer Statute, neither the transfer thereof from the
related Claimant to the Seller nor the underlying Settlement Agreement related thereto is
subject to the law of a state or other jurisdiction which expressly prohibits the
assignability of Scheduled Payments related to Settlements;
(f) (i) the transfer thereof from the related Claimant to the Seller was approved as
evidenced by a Transfer Order which remains in full force and effect and a copy of which has
been delivered by the Seller to the related Obligor (and any Settlement Annuity Provider) in
accordance with the Notice Procedures and (ii) the transfer thereof from the related
Claimant to the Seller was made in full compliance with all applicable Requirements of Law
(including without limitation Transfer Statutes);
(g) the following are true: (I) the Seller has conducted a UCC lien search and has
received a credit report with respect to the related Claimant; (II) such Receivable is not
subject to any lien, encumbrance, deduction, withholding, dispute, litigation, counterclaim,
defense (including usury), rescission, or set-off, including garnishment proceedings, with
respect thereto;
provided
that only such portion of such Receivable which is subject
to any of the foregoing shall be deemed ineligible pursuant to this
clause (II)
,
(III) such Receivable is not evidenced by any instrument or chattel paper, (IV) such
Receivable is a payment intangible within the meaning of the UCC as adopted in the state
in which the Claimant has its domicile, unless such UCC expressly excludes rights to payment
under Settlements from the scope of Article 9 of such UCC, and (V) such Receivable is not a
Defaulted Receivable;
14
(h) the Back-up Servicer has verified (in a written certification to the Trustee for
the benefit of the Series 2010-1 Noteholders) its receipt of all documents required to be
contained in the related Settlement Package in accordance with the definition thereof and
the Back-up Servicing Agreement;
(i) all notices (including, without limitation, notices to Obligors and Settlement
Annuity Providers), filings and other actions required to (x) create an ownership interest
in such Receivable in favor of the Seller as against the related Claimant, and in favor of
the Issuer as against the Seller, and (y) perfect a first priority security interest therein
in favor of the Trustee, on behalf of the Secured Parties, as against each of the Issuer and
the Seller, in each case under the UCC and all other applicable Requirements of Law and in
each case enforceable against the creditors and/or a bankruptcy trustee or
debtor-in-possession of or for the Seller and the Issuer have been given, made or taken (or,
in the case of UCC filings, will have been made within ten days of the Closing Date);
(j) such Receivable is included on the List of Receivables delivered either on the
Closing Date, Advance Date or other date on which such Receivable shall become a Series
Receivable in accordance with the terms hereof and of the Supplement;
(k) the Issuer shall have obtained a first priority indefeasible ownership interest in,
and good and valid title to, such Receivable and in all Scheduled Payments due thereunder,
free and clear of any Lien, security interest, claim or encumbrance of any Person (except
for the portion(s) of any such Scheduled Payments that constitute Split Payments or any
Permitted Liens);
(l) the payment of the underlying Settlement is supported by a Settlement Annuity
Contract in the full amount thereof, or is the direct obligation of a highly-rated Obligor,
and the Collections thereon have been directed to be made directly from the Settlement
Annuity Provider (or, if none, the Obligor) relating thereto to a Settlement Lock-Box
Account or a Settlement Lock-Box;
(m) the Seller delivered timely notice of the proceeding giving rise to the Transfer
Order in respect of such Receivable to each Notice Party in accordance with the Notice
Procedures;
(n) neither the related Settlement Agreement nor any other agreement relating thereto
releases the Assignee (or, if there is no Assignee, the Settlement Counterparty thereunder)
from liability thereunder as a result of the existence of any Settlement Annuity Contract
purchased to fund the Settlement relating thereto;
(o) the Claimant thereon did not at the time of its sale of such Receivable to the
Seller pursuant to the applicable Settlement Purchase Agreement own the Settlement Annuity
Contract related thereto;
(p) all representations and warranties relating to such Receivable set forth in
Section 2.05
hereof are true and correct;
15
(q) no portion of the Obligors and/or the Settlement Annuity Providers
obligation to make any of the Scheduled Payments under such Receivable may be terminated or
prepaid at a discount as a result of the death of the related Claimant;
(r) such Receivable was originated by the Seller (i) in accordance with the Credit
Policy Manual and all applicable Requirements of Law and (ii) in the ordinary course of its
business;
(s) such Receivable is evidenced by each of a Settlement Agreement and a Settlement
Purchase Agreement that is legal, valid and binding against all parties thereto;
(t) the Settlement Agreement related to such Receivable evidences a contractual
settlement of a personal injury or workers compensation claim and the related contractual
obligation of the Obligor thereunder, and the related Claimants assignment of its rights
under such Settlement Agreement does not constitute an assignment of a right represented by
a judgment within the meaning of Section 9-109 of the UCC;
(u) the related Claimant was not a minor in any jurisdiction in which he was a resident
and/or to which the underlying Settlement Agreement was subject at the time of his transfer
to the Seller of his rights under such Settlement Agreement;
(v) the Sellers purchase of such Receivable and entry into the related Settlement
Purchase Agreement were not made in violation of the terms of any (i) agreement entered into
between the Seller or any of its Affiliates and any Obligor or Settlement Annuity Provider,
including, without limitation, any requirement therein that the origination of such
Receivable be made pursuant to any type of court order, (ii) class action settlement
agreement entered into by the Seller or any of its Affiliates, (iii) other settlement
agreement entered into by the Seller or any of its Affiliates and the Claimant related to
such Receivable or (iv) agreement or stipulation entered into by the Seller or any of its
Affiliates and the Attorney General of the jurisdiction the law of which governs such
purchase;
(w) such Receivable constituted a structured settlement factoring transaction which
satisfied all applicable requirements of Section 5891 of the Code and in connection with
which the Seller obtained a qualified order as defined in Section 5891 of the Code;
provided
, that if the related Transfer Order was not issued under the authority of
an applicable State statute by an applicable State court (in each case, as defined in
Section 5891 of the Code), such Receivable shall only constitute an Eligible Receivable
if, as of the date of such transfer, (x) none of the states in which any of the related
Claimant, the related Obligor or the related Settlement Annuity Provider were then domiciled
had enacted a Transfer Statute or (y) the Seller and the related Claimant, Obligor and
Settlement Annuity Provider (if any) collectively were unable to satisfy the jurisdictional
requirements of any Transfer Statute in any such state as a matter of law;
(x) the purchase of which by the Seller was made pursuant to and in full compliance
with the Credit Policy Manual and all applicable Requirements of Law and
16
(b) Collections in respect of which, since the date of the Sellers purchase thereof,
have been received, collected and otherwise pursued by the Master Servicer pursuant to and
in full compliance with the Credit Policy Manual and all applicable Requirements of Law;
(y) with respect to such Receivable, the Seller obtained a Transfer Order either (i) in
the jurisdiction in which the related Claimant was domiciled at the time of the Sellers
purchase of the Scheduled Payments giving rise to such Receivable from such Claimant or (ii)
if such jurisdiction did not at such time have a Transfer Statute, in the jurisdiction in
which either (A) the applicable Obligor was domiciled at such time or (B) (1) the original
claim giving rise to the related Structured Settlement was adjudicated and (2) the court
adjudicating such claim had exclusive jurisdiction over such claim;
(z) in respect of which the underlying Settlement Agreement does not arise under, and
is not subject to, any workmens compensation statute as in effect in any applicable state
or other jurisdiction, unless such Settlement Receivable is an Eligible Workers
Compensation Receivable;
(aa) the related Obligor is not a Governmental Authority;
(bb) such Receivable was purchased (i) by the Seller pursuant to a Settlement Purchase
Agreement, and (ii) by the Issuer pursuant to the Issuer Purchase Agreement; and
(cc) the total purchase price (excluding, other than with respect to any substituted
Receivable pursuant to
Section 2.04(s)
hereof, any Holdback Funds in respect
thereof) required to be paid by the Seller to the Claimant for such Receivable under the
applicable Settlement Purchase Agreement has been paid in full and all obligations of the
Seller to fully effectuate the purchase of such Receivable pursuant to the Settlement
Purchase Agreement have been fully performed by the Seller (it being understood and agreed
that the Seller may have a continuing obligation to remit Split Payments to such Claimant
from time to time, but such obligation alone shall not render the foregoing incorrect).
Eligible WC Transfer Statute
shall mean any Transfer Statute that expressly permits
assignments of Workers Compensation Receivables.
Eligible Workers Compensation Receivable
shall mean a Workers Compensation
Receivable designated as a Series Receivable in respect of which, on the Closing Date (or, for any
Workers Compensation Receivable that is not such a Series Receivable on such Closing Date, on the
Advance Date or other date on which such Receivable shall become a Series Receivable in
accordance with the terms hereof and of the Supplement):
(a) arising under, and the Settlement Agreement and Settlement Purchase Agreement
related to which shall have been entered into in compliance with, an Eligible Workers
Compensation Statute, and, in connection with such Settlement Agreement and Settlement
Purchase Agreement, the related Claimant and the Seller shall have obtained any and all
required approvals under the laws of the jurisdiction that has enacted such
17
Eligible Workers Compensation Statute, including, if applicable, the approval of the
applicable workers compensation commission or similar Governmental Authority;
(b) purchased by the Seller from the related Claimant pursuant to a Transfer Order
issued by a court in accordance with an Eligible WC Transfer Statute;
(c) in respect of which the related Settlement Counterparty has entered into an
Assignment, and the related Assignee is the Obligor and has purchased a Settlement Annuity
Contract from a Settlement Annuity Provider to fund the payment obligations assumed by it
pursuant to such Assignment;
(d) if such Workers Compensation Receivable is a Longshore Act Receivable, then (i)
the related Claimant is (and was, on the effective date of the related Settlement Purchase
Agreement) a resident of Alabama, Florida or Georgia, (ii) the situs of the Claimants
employment out of which the underlying workers compensation claim arose was within Alabama,
Florida or Georgia, and (iii) the related Transfer Order was obtained in a court, and
pursuant to the Transfer Statute, of either Alabama, Florida or Georgia; and
(e) if the related Eligible Workers Compensation Statute is the Texas workers
compensation statute, T.C.A. Labor Code §401.001 et seq., then the related Claimant is a
legal beneficiary of a deceased employee, the related Settlement represents the Claimants
right to receive certain Scheduled Payments as a result of such employees death and the
Claimant has obtained the consent of the Texas commissioner of workers compensation, all as
contemplated by §408.202 of the above-referenced statute.
Eligible Workers Compensation Statute
shall mean (a) each Eligible Workers
Compensation Statute specified in the Supplement or (b) if none are so specified, (i) any state or
federal workers compensation statute that does not prohibit the transfer or assignment of benefits
under such statute and (ii) the Longshore and Harbor Workers Compensation Act, 33 U.S.C. §916.
ERISA
shall mean the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the regulations promulgated thereunder.
ERISA Affiliate
shall mean with respect to any Person, at any time, such trade or
business (whether or not incorporated) that would, at the time, be treated together with such
Person as a single employer under Section 4001 of ERISA or any of Sections 414(b), (c), (m) or (o)
of the Code.
Euroclear
shall mean Euroclear Bank S.A./N.V., as operator of the Euroclear system.
Euroclear Account
shall have the meaning specified in
Section 6.11(c)
.
Euroclear/Clearstream Global Notes
shall mean the Series 2010-1 Notes delivered in
book-entry form on the Closing Date or on any date thereafter through the facilities of Clearstream
and Euroclear.
18
Euroclear Security
shall mean a security (as defined in Section 8-102(a)(15) of
the UCC) that (i) is a debt security and (ii) is capable of being transferred to the relevant
depositorys account at Euroclear pursuant to Article VI, whether or not such transfer has
occurred.
Event of Default
shall mean (a) any event described in
clauses
(a)
,
(b)
or
(c)
of
Section 9.01
, and (b) any Series Event of Default, but only
to the extent giving rise to an Event of Default pursuant to the terms of the Supplement.
Force Majeure Event
shall mean any event due to any cause beyond the reasonable
control of the Trustee or Master Servicer, such as restrictions on convertibility or
transferability, requisitions, involuntary transfers, general unavailability of communications
system, sabotage, fire, flood, explosions, acts of God, civil commotion, strikes or industrial
action of any kind, riots, insurrection, war or acts of government.
FDIC
shall mean the Federal Deposit Insurance corporation or any successor.
Fiscal Year
shall mean the taxable year of the Issuer which shall be the calendar
year (or such other year as is required by Section 706(b) of the Code).
GAAP
shall mean generally accepted accounting principles as are in effect from time
to time in the United States of America and applied on a consistent basis.
Global Notes
shall mean the U.S. Global Notes and the Regulation S Global Notes.
Governmental Authority
shall mean any country or nation, any political subdivision
of such country or nation, and any entity exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to government of any country or nation or political
subdivision thereof.
Granting Clause
means the provisions of this Agreement and/or the Supplement
effecting the grant by the Issuer to the Trustee of a security interest in the Trust Assets, as
described in the Recitals hereto.
Holder
shall mean a Series 2010-1 Noteholder.
Imperial
shall mean Imperial Finance & Trading, LLC a Florida limited liability
company.
Imperial BUSA
shall mean that certain Back-up Servicing Agreement, dated as of
September 24, 2010, among Wilmington Trust Company, as trustee under each of the Indentures
defined therein, the Collateral Trustee, the Initial Master Servicer and Imperial, as Back-up
Servicer, as amended, restated, supplemented or otherwise modified from time to time.
Imperial Holdings
shall mean Imperial Holdings, LLC, the sole member of the Seller.
Indebtedness
shall mean, with respect to any Person, (i) the principal amount of all
obligations of such Person for borrowed money, (ii) the principal amount of all obligations of
19
such Person evidenced by bonds, debentures, notes, trust certificates or other similar
instruments (in each case, other than the Series 2010-1 Notes), (iii) all obligations of such
Person to pay the deferred purchase price of property or services recorded on the books of such
Person, except for (a) trade and other similar accounts payable and accrued expenses arising in the
ordinary course of business and (b) employee compensation and pension obligations and other
obligations arising from employee benefit programs and agreements or other similar employment
arrangements, (iv) all obligations of such Person as lessee which are capitalized on the books of
such Person in accordance with GAAP, (v) all indebtedness or obligations (other than under this
Agreement) which would constitute Indebtedness under the other provisions of this definition which
are secured by a Lien on the assets of such Person, whether such Person has assumed the obligation
to pay such indebtedness or obligation, and (vi) all obligations of such Person under any direct or
indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or
otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the types which would constitute Indebtedness under the other provisions
of this definition.
Indemnified Party
shall mean each of the Trustee (in its individual and trustee
capacities), the Collateral Trustee (in its individual and collateral trustee capacities), the
Series 2010-1 Noteholders, any other persons as may be named as indemnified parties in the
Supplement and any Affiliate of any of the foregoing.
Individual Annuity Seller
shall mean, with respect to any Annuity Receivable,
collectively, each Person that has entered into an Annuity Purchase Agreement pursuant to which it
has (i) sold or purported to sell to the Seller all of its right, title and interest under the
related Assignable Annuity Contract or (ii) if it has no such right, title or interest,
acknowledged the sale or purported sale to the Seller of all right, title and interest thereunder
by other parties to such Annuity Purchase Agreement.
Initial Cut-Off Date
shall mean the date specified as such in the Supplement.
Initial Master Servicer
shall mean PFSC in its capacity as the initial Master
Servicer with respect to such Series pursuant to
Section 3.01
.
Initial Series Payment Date
shall have the meaning specified in the Supplement.
Initial Servicing Fee Rate
shall mean 0.18%.
Institutional Accredited Investor
shall mean an institution that is an accredited
investor as such term is defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
Insolvency Event
shall mean with respect to a specified Person, that:
(a) such Person shall fail to, or admit in writing its inability to, pay its debts
generally as they become due, or shall commence a voluntary case or other proceeding under
any applicable bankruptcy, insolvency, reorganization, debt arrangement, dissolution or
other similar law now or hereafter in effect, or shall consent to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee, custodian or sequestrator
(or other similar official) for, such Person or for any substantial part of its
20
property, or shall make any general assignment for the benefit of creditors, or shall
take any corporate, partnership or company action authorizing the taking of any of the
foregoing actions; or
(b) a case or other proceeding shall be commenced, without the application or consent
of such Person, in any court, seeking the liquidation, reorganization, debt arrangement,
dissolution, winding up, or composition or readjustment of debts of such Person, the
appointment of a trustee, receiver, custodian, liquidator, assignee, sequestrator or the
like for such Person or any substantial part of its assets, or any similar action with
respect to such Person under any law (foreign or domestic) relating to bankruptcy,
insolvency, reorganization, winding up or composition or adjustment of debt, or any of the
actions sought in such petition or proceeding, including the entering of an unappealable
order for relief in respect of such Person or the appointment of any trustee, receiver,
custodian, liquidator, assignee, sequestrator or the like for such Person or any substantial
portion of such Persons property shall be granted or otherwise occur, and any such case,
proceeding or action shall continue undismissed, or unstayed and in effect, for a period of
30 days.
Investment Company Act
shall mean the Investment Company Act of 1940, together with
the rules and regulations promulgated thereunder, as amended from time to time.
Investment Proceeds
shall have the meaning specified in
Section 4.03(c)
.
Issuer
shall mean Imperial Settlements Financing 2010, LLC, a Georgia limited
liability company.
Issuer Indemnified Losses
shall have the meaning specified in
Section 7.03
.
Issuer Interest
shall have the meaning specified in the Supplement.
Issuer Interest Holder
shall have the meaning specified in the Supplement.
Issuer Purchase Agreement
shall mean that certain Purchase and Contribution
Agreement, dated as of the Closing Date, between the Seller and the Issuer, as the same may be
amended, restated, supplemented or otherwise modified from time to time.
Issuers Account
shall mean the checking account maintained by the Issuer for
deposits by the Master Servicer, the Collateral Trustee or the Trustee in accordance with the
Master Servicers instructions, as applicable pursuant hereto or to the Supplement. The initial
Issuers Account shall be Account No. 1000090005843 maintained at SunTrust Bank, or such other
account as the Issuer may designate for such purpose from time to time, maintained at such bank as
the Issuer may designate from time to time.
Issuer Split Payment Account
shall mean an account maintained by the Collateral
Trustee with an Eligible Institution pursuant to
Section 4.03(a)
and into which Split
Payments are to be deposited in accordance with the Daily Reports and
Section 4.03(a)
. The
Issuer Split Payment Account shall initially be Account No. 1000089497233 maintained at SunTrust
Bank.
21
Lien
shall mean any mortgage, deed of trust, pledge, hypothecation, assignment,
encumbrance, lien (statutory or other), preference, participation interest, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing and the filing of any financing
statement under the UCC or comparable law of any jurisdiction to evidence any of the foregoing but
not including any statutory liens with respect to payments not yet due and payable.
List of Receivables
shall mean, with reference to any Series, a list of the
Receivables pledged by the Issuer on any Series Closing Date or any other date on which a
Receivable shall become a Series Receivable in accordance with the terms hereof and the applicable
Supplement, specifying for each such Receivable the name of the Claimant or Individual Annuity
Seller, the Discounted Receivables Balance thereof, the name of the Obligor or Annuity Provider
making payments thereon, the Series that such Receivables support, and the Applicable Lock-Box to
which Scheduled Payments thereunder are to be sent.
Lock-Box Notice
shall have the meaning specified in
Section 4.02(c)
.
Longshore Act Receivable
shall mean any Workers Compensation Receivable in respect
of which the related Eligible Workers Compensation Statute is the Longshore and Harbor Workers
Compensation Act, 33 U.S.C. §916.
Master Collection Account
shall have the meaning specified in
Section
4.02(a)
.
Master Collection Account Bank
shall have the meaning specified in
Section
4.02(a)
.
Master Servicer
initially shall mean PFSC in its capacity as Master Servicer
pursuant to this Agreement, and after any Service Transfer, shall mean the Successor Servicer.
Master Servicer Indemnified Losses
shall the meaning specified in
Section
8.04
.
Master Servicing Fee
shall mean, with respect to any Payment Date, (i) to the extent
PFSC, any Affiliated Entity or the Back-up Servicer shall have acted as Master Servicer during the
immediately preceding Collection Period, the sum of (a) the product of (x) 1/12 (or, in the case of
the initial Payment Date or in the event that the Back-up Servicer acted as Master Servicer for
only a portion of the immediately preceding Collection Period, a fraction, the numerator of which
is the number of days from (and including) the Closing Date or the first day on which the Back-up
Servicer acted as Master Servicer, as applicable, to (and including) the last day of the
immediately preceding Collection Period for such Series and the denominator of which is 360), (y)
the Aggregate Discounted Receivables Balance of all Series Receivables on the first day of such
Collection Period and (z) (1) the Successor Servicing Fee Rate to the extent that the Back-up
Servicer has acted as Master Servicer during the immediately preceding Collection Period, and (2)
the Initial Servicing Fee Rate to the extent that PFSC or any other Affiliated Entity has acted as
Master Servicer during the immediately preceding Collection Period,
plus
(b) any unpaid
Master Servicing Fees for any Payment Date preceding the Payment Date for which such determination
is being made and (ii) to the extent any Successor Servicer not described in the foregoing clause
(i) shall have acted as Master Servicer during the immediately preceding Collection Period, such
fee as may be agreed upon by the Trustee, at the
22
direction of the Control Party, and such Successor Servicer pursuant to
Section
10.02(c)
at the time of such Successor Servicers appointment as Master Servicer, which fee, if
greater than the fee described in
clause (i)
(using sub-clause (1) of clause (i)(a)(z)),
shall not exceed 120% of the actual reasonable out-of-pocket costs and expenses reasonably incurred
by such Successor Servicer in performing its duties hereunder and under the Supplement with respect
to the Series Trust Assets.
Material Adverse Effect
shall mean, (i) with respect to any Person, the occurrence
or existence of any event or condition which has a material adverse effect (x) on such Persons
ability to perform under the Operative Documents or (y) on the businesses, properties or condition
(financial or otherwise) of such Person, (ii) the occurrence or existence of any event or condition
which has a material adverse effect (x) on the ability of the Trustee, the Collateral Trustee or
the requisite Series 2010-1 Noteholders to enforce any of the Operative Documents or (y) on the
rights of the Trustee, for the benefit of the Secured Parties, in the Trust Assets, or (z) on any
material portion of the Series Trust Assets or (iii) the occurrence or existence of any event or
condition that could reasonably be expected to impair the timely payment in full of amounts due and
owing with respect to the Series 2010-1 Notes.
Maturity Date
shall mean the earlier of (i) the date following the Closing Date on
which (x) the principal amount of the Series 2010-1 Notes, all interest thereon and all fees and
other amounts payable in connection therewith have been paid in full, under this Agreement and (y)
the Series 2010-1 Revolving Period shall have terminated, and (ii) the date of discharge and
satisfaction of this Agreement in accordance with
Section 12.01
hereof.
Monthly Report
shall mean a report in the form of that attached hereto as
Exhibit F
to be delivered by the Master Servicer to the Collateral Trustee, the Trustee and
each Series 2010-1 Noteholder on or prior to 3:00 p.m. (New York City time) on each Series
Determination Date and relating to the immediately preceding Collection Period.
Moodys
shall mean Moodys Investors Service, Inc. or its successor.
Multiemployer Plan
shall mean a multiemployer plan as defined in Section
4001(a)(3) of ERISA to which contributions are or have been made during the preceding six years by
any Person or any ERISA Affiliate of such Person.
Note Rate
shall mean the note rate specified therefor in the Supplement.
Note Register
shall have the meaning specified in
Section 6.03(a)
.
Note Registrar and Transfer Agent
shall have the meaning specified in
Section
6.03(a)
.
Notice Party
shall mean, with respect to any Settlement Receivable, the related
Claimant, the related Obligor, any applicable Settlement Annuity Provider and, if the Seller has
obtained a Transfer Order with respect to such Receivable, any other Person required to receive
notice in connection with the issuance of such Transfer Order under any applicable Transfer
Statute.
23
Notice Procedures
shall mean, with respect to any notice or Transfer Order required
to be delivered to any Person, that such notice or Transfer Order shall be delivered by (i)
national overnight courier service, (ii) certified mail, return receipt requested or (iii) personal
delivery.
Notices
shall have the meaning specified in
Section 13.05(a)
.
Obligor
shall mean any party obligated to make Scheduled Payments under any
Settlement Agreement (including any Qualified Assignment or any other assignment thereof),
including, without limitation, any Settlement Counterparty and any Qualified Assignee.
OC Shortfall
shall mean an OC Shortfall as defined in the Supplement.
Officers Certificate
shall mean, unless otherwise specified in this Agreement, a
certificate signed by the president, any vice president, the chief financial officer, the chief
operating officer, the treasurer or controller of the Issuer, the Master Servicer, or the Back-up
Servicer, as the case may be, and delivered to the Trustee, the Collateral Trustee or the Series
2010-1 Noteholders, as the case may be.
Operative Documents
shall mean this Agreement, the Supplement, the Series 2010-1
Notes, the Issuer Purchase Agreement, the Annuity Purchase Agreements, the Settlement Purchase
Agreements, the Back-up Servicing Agreement, each note purchase agreement described in the
Supplement, and the other agreements and instruments related to any of the foregoing or any other
instruments, documents and/or agreements, if any, designated as such in the Supplement.
Opinion of Counsel
shall mean a written opinion of counsel, who, except as otherwise
provided herein, may be counsel for, or an employee of, the Person providing the opinion and who
shall be reasonably acceptable to the Trustee and the Control Party.
Order
shall mean a written direction or order executed by the Issuer and delivered
to the Trustee.
Organizational Documents
shall mean the Issuers Certificate of Formation and
Limited Liability Company Agreement.
Original Series Note Principal Balance
shall have the meaning specified in the
Supplement.
Paying Agent
shall mean any paying agent appointed pursuant to
Section 6.06
.
Payment Date
shall mean the 15
th
day of each calendar month (commencing
on the Initial Series Payment Date) or, if such day is not a Business Day, the next following
Business Day.
PBGC
shall mean the Pension Benefit Guaranty Corporation (or any successor).
24
Permanent Regulation S Global Note
shall mean the Regulation S Notes held by the
Common Depository or any other depository representing the Euroclear/Clearstream Global Notes
following the Restricted Period.
Permitted Lien
shall mean any Lien arising under the Operative Documents and
assigned to the Issuer and pledged to the Trustee under such Operative Documents and under this
Agreement, respectively.
Person
shall mean any individual, corporation, partnership, joint venture, limited
liability company association, joint-stock company, trust, unincorporated organization,
Governmental Authority or any other entity of similar nature.
PFSC
means Portfolio Financial Servicing Company, a Delaware corporation.
Plan
shall mean, with respect to any Person, any defined benefit plan (as defined in
Section 3(35) of ERISA) that (a) is or was at any time during the past six years maintained by such
Person or any ERISA Affiliate of such Person, or to which contributions by any such Person are or
were at any time during the past six years required to be made or under which such Person has or
could have any liability, (b) is subject to the provisions of Title IV of ERISA and (c) is not a
Multiemployer Plan.
Plan Event
shall mean, with respect to any Person, (a) the imposition of an
obligation of such Person or any of its ERISA Affiliates under Section 4041 of ERISA to provide any
affected parties written notice of an intent to terminate a Plan in a distress termination
described in Section 4041(c) of ERISA, (b) the receipt of any notice by any Plan to the effect that
the PBGC intends to apply for the appointment of a trustee to administer any Plan, (c) the
termination of any Plan which results in any liability of such Person and/or any of its ERISA
Affiliates in excess of the Plan Liability Threshold, (d) the withdrawal of such Person or any
ERISA Affiliate of such Person from any Plan described in Section 4063 of ERISA which may
reasonably be expected to result in any liability of such Person and/or any of its ERISA Affiliates
in excess of the Plan Liability Threshold, (e) the complete or partial withdrawal of such Person or
any ERISA Affiliate of such person from any Multiemployer Plan which may reasonably be expected to
result in any liability of such Person and/or any of its ERISA Affiliates in excess of the Plan
Liability Threshold, (f) a Reportable Event or an event described in Section 4068(f) of ERISA which
may reasonably be expected to result in any liability of such Person and/or any of its ERISA
Affiliates in excess of the Plan Liability Threshold, and (g) any other event or condition which
under ERISA or the Code may reasonably be expected to constitute grounds for the imposition of a
lien on the property of such Person in respect of any Plan or Multiemployer Plan.
Plan Liability Threshold
shall mean, with respect to any Person and its ERISA
Affiliates, any liability of such Person and such ERISA Affiliates with respect to any Plan Event
which when aggregated with all other liabilities of such Person and its ERISA Affiliates incurred
as a result of any other Plan Events during the immediately preceding twelve month period,
plus
any unpaid liabilities of such Person and its ERISA Affiliates arising as a result of
any Plan Events occurring at any other time, exceeds $1,000,000.
25
Potential Event of Default
means any event or condition which with the giving
of notice or passage of time, or both, would constitute an Event of Default or a Series Event of
Default.
Power of Attorney
shall mean an irrevocable power of attorney executed by a Claimant
in favor of the Seller or any other Person with full power of substitution (which Person has
irrevocably appointed the Seller as its substitute), in each case, with full power of substitution
at the election of the Seller, pursuant to a Settlement Purchase Agreement, authorizing the Seller
(or any such substitute therefor) to act for and on behalf of the Claimant in connection with the
enforcement of such Claimants Settlement.
Premium
shall have the meaning, with reference to any Series, specified in the
Supplement.
Principal Balance
shall mean, with respect to any Series 2010-1 Note at any time,
the outstanding principal balance of such Series 2010-1 Note at such time;
provided
, that
the Principal Balance of any Series 2010-1 Note shall only be reduced upon distribution of any
amounts on account of the principal thereof to or for the benefit of the Series 2010-1 Noteholder
thereof on a Payment Date, and the Principal Balance of any Series 2010-1 Note shall be reinstated
to the extent any such distribution (or any portion thereof) is rescinded or returned or such
Series 2010-1 Noteholder is required to return or disgorge or returns or disgorges any such
distribution (or any portion thereof) previously made to it.
Principal Terms
shall mean: (a) the name or designation; (b) the Series Receivables
and other Series Trust Assets; (c) the initial and maximum principal amount (or method for
calculating such amounts); (d) the Note Rate (or method for the determination thereof); (e) the
payment date or dates and the date or dates from which interest shall accrue; (f) the method for
allocating Collections to Series 2010-1 Noteholders; (g) the designation of any Series Accounts and
the terms governing the operation of any such Series Accounts; and (h) certain of the terms on
which the Series 2010-1 Notes may be exchanged for other Series 2010-1 Notes, repurchased by the
Issuer or remarketed to other investors.
Qualified Assignee
shall mean the Person to which the obligations to make payments
under a Settlement have been assigned pursuant to a Qualified Assignment.
Qualified Assignment
shall mean an assignment of the obligations to make payments
under a Settlement which satisfies Section 130(c) of the Code.
Qualified Institutional Buyer
shall have the meaning specified in Rule 144A under
the Securities Act.
Receivable
shall mean any Settlement Receivable or Annuity Receivable.
Record Date
shall have the meaning specified in the Supplement.
Records
means all Settlement Purchase Agreements and Annuity Purchase Agreements and
other documents, books, records and other information (including without limitation, computer
programs, tapes, discs, punch cards, data processing software and related property and
26
rights) maintained with respect to the Receivables and the related Claimants or Individual
Annuity Sellers.
Regulation S Global Note
shall mean (i) initially, with respect to such Series
2010-1 Note, a Temporary Regulation S Global Note and (ii) thereafter, a Permanent Regulation S
Global Note, each representing Euroclear/Clearstream Global Notes, in fully-registered form.
Regulation S Note
shall mean any temporary or permanent Series 2010-1 Note sold in
an offshore transaction to a non-U.S. person in accordance with Rule 903 or Rule 904 of Regulation
S of the Securities Act.
Regulation S Transfer Certificate
shall mean a certificate substantially in the form
of
Exhibit I
hereto.
Rehabilitated
with respect to any Series Receivable, shall have the meaning
specified in the applicable Supplement, or if no such meaning is so specified, shall mean the cure
of the circumstances that rendered such Series Receivable a Defaulted Receivable, which cure must
consist of, without limitation, either (i) with respect to any Defaulted Receivable, receipt by the
Issuer, the Master Servicer, or the Trustee, of written confirmation from the related Obligor or
Annuity Provider that subsequent Scheduled Payments with respect to such Receivable shall
henceforth be made to the Issuer or (ii) (a) with respect to any Defaulted Receivable described in
clause (d) or clause (e) of the definition of Defaulted Receivable receipt by the Issuer, the
Master Servicer or Trustee, of three consecutive Scheduled Payments related to such Receivable on
or before the 90th day after the respective scheduled due dates therefor, and (b) with respect to
any other Defaulted Receivable, the receipt by the Issuer, or the Master Servicer, or the Trustee,
of two consecutive Scheduled Payments related to such Receivable on or before the 90th day after
the respective scheduled due dates therefor; provided, that no Series Receivable may be
Rehabilitated more than two times.
Rehabilitated Receivable
shall mean any Receivable that was a Defaulted Receivable
but which has been Rehabilitated.
Related Property
means, with respect to any Receivable of any Series, (i) all of the
rights of the Trustee under this Agreement and the Back-up Servicing Agreement to the extent
relating to such Series, and (ii) all of the Issuers rights, title, interests, remedies, powers
and privileges (a) in the case of a Settlement Receivable, under the Settlement Purchase Agreement
pursuant to which such Receivable was purchased by the Seller and, if applicable, under the related
Power of Attorney, (b) in the case of an Annuity Receivable, under the Annuity Purchase Agreement
pursuant to which the Seller purchased such Annuity Receivable, (c) to and in all security
interests or other Liens and property subject thereto from time to time securing payment of such
Receivable, if any, whether pursuant to the Settlement Purchase Agreement related to such
Receivable in the case of a Settlement Receivable, the Annuity Purchase Agreement in the case of an
Annuity Receivable or otherwise, (d) under or pursuant to the Issuer Purchase Agreement, (d) under
this Agreement and the Back-up Servicing Agreement, (e) to and in all Annuity Lock-Box Accounts,
Annuity Lock-Boxes, Settlement Lock-Box Accounts, Settlement Lock-Boxes, Series Payment Account,
Series Reserve Account, Series Collection Account and all other Series Accounts into which any
Collections are deposited or concentrated; all monies
27
and other items of payment therein; all monies and other items of payment relating on deposit
from time to time in the Master Collection Account to the extent constituting Collections of Trust
Assets; and all Eligible Investments purchased with any such amounts and any investment income with
respect thereto, (f) under any interest rate hedging instruments or agreements entered into by the
Issuer or the Seller, (g) under other agreements or arrangements of whatever character (including
guaranties, letters of credit, letter of credit rights, supporting obligations, annuity contracts
(including Annuity Contracts) or other credit support) from time to time supporting or securing
payment of such Receivables whether pursuant to any related Settlement Agreement, Assignment,
Annuity Contract, the Settlement Purchase Agreement, the Annuity Purchase Agreement or any other
agreement related to such Receivable, (h) under all UCC financing statements filed by the Issuer
against the Seller (in each case, to the extent relating to such Series), (i) under all UCC
financing statements filed by the Seller against the related Individual Annuity Seller or by the
Issuer against the Seller, and in any case related to such Receivable in the case of an Annuity
Receivable, (j) to and in all Records and all other instruments and rights relating to such
Receivable, (k) to and in any other property designated as such pursuant to the Supplement, and (l)
to and in all products and proceeds of any of the foregoing.
Reportable Event
shall mean any of the events set forth in Section 4043 of ERISA.
Requirements of Law
shall mean any law, treaty, rule or regulation, or final
determination of an arbitrator or Governmental Authority, and, when used with respect to any
Person, the certificate of incorporation and by-laws or other organizational or governing documents
of such Person.
Responsible Officer
shall mean, (i) when used with respect to the Trustee or the
Collateral Trustee, any officer within the corporate trust department (or any successor department
or group) of the Trustee or the Collateral Trustee, as applicable, including any managing director,
vice president, assistant vice president, secretary, assistant secretary, treasurer, assistant
treasurer, trust officer or any other officer of such Person customarily performing functions
similar to those performed by the persons who at the time shall be such officers, respectively, or
to whom any corporate trust matter is referred because of such officers knowledge of and
familiarity with the particular subject and (ii) when used with respect to any other Person, any
president, vice president, chief financial officer, chief operating officer, treasurer or any other
officer of such Person customarily performing functions similar to those performed by the Persons
who at the time shall be such officers (including, without limitation, any officer identified in
the notice address set forth for such Person in
Section 13.05
).
Restricted Period
shall mean in the case of the Regulation S Global Notes, the
period from the Closing Date through the 40
th
day thereafter.
Rule 144A Transfer Certificate
shall mean a certificate substantially in the form of
Exhibit H
hereto.
Sale
,
Sell
and
Sold
shall have the meaning specified in
Section 6.03(b)
.
28
S&P
shall mean Standard & Poors Ratings Services, a Standard & Poors Financial
Services LLC business, or its successor.
Scheduled Payments
shall mean, (i) when used with respect to any Settlement, those
payments from time to time required to be paid by the Obligor or by a Settlement Annuity Provider
on behalf of the Obligor, to the Claimant pursuant to the terms of the related Settlement
Agreement, (ii) when used with respect to a Settlement Receivable, those payments described in the
foregoing clause (i) (or portions thereof), the rights to receive which have been transferred to
the Issuer, (iii) when used with respect to an Assignable Annuity Contract, those payments from
time to time required to be paid by the Assignable Annuity Provider to the Individual Annuity
Seller pursuant to the terms of such Assignable Annuity Contract and (iv) when used with respect to
an Annuity Receivable, those payments described in the foregoing clause (iii) (or portions
thereof), the rights to receive which have been transferred to the Issuer.
Secured Parties
shall have the meaning as shall be specified in the Supplement.
Securities Act
shall mean the Securities Act of 1933, as amended, from time to time.
Seller
shall mean Washington Square Financial, LLC, a Georgia limited liability
company.
Series
shall mean the Series 2010-1 Notes established pursuant to the Supplement.
Series 2010-1 Note
shall mean any one of the $50,000,000 8.39% Fixed Rate Asset
Backed Variable Funding Notes, Series 2010-1 Notes executed by the Issuer, authenticated by the
Trustee, and delivered by or on behalf of the Issuer pursuant hereto and the Supplement, in
substantially the form attached to the Supplement.
Series 2010-1 Noteholder
shall mean the Person in whose name a Series 2010-1 Note is
registered in the Note Register.
Series Accounts
shall mean the Series Collection Account, the Series Reserve
Account, the Series Payment Account, the Series Investment Proceeds Account and the Series Holdback
Account, together with the Master Collection Account to the extent of any Collections of the Series
Receivables or the Related Property relating thereto.
Series Collection Account
shall mean the segregated bank account established and
designated as such pursuant to
Section 4.03(a)
, and identified in the Supplement as the
Series Collection Account.
Series Determination Date
shall have the meaning specified in the Supplement.
Series Event of Default
shall have the meaning specified in the Supplement.
Series Investment Proceeds Account
shall mean the segregated bank account
established and designated as such pursuant to
Section 4.03(a)
, and identified in the
Supplement as the Series Investment Proceeds Account.
29
Series Payment Account
shall mean the segregated bank account established and
designated as such pursuant to
Section 4.03(a)
, and identified in the Supplement as the
Series Payment Account.
Series Receivables
shall mean those Receivables specified on a List of Receivables
in which the Issuer has granted a security interest to the Trustee pursuant to the Supplement for
the benefit of,
inter alia
, the 2010-1 Noteholders.
Series Reserve Account
shall mean the segregated bank account established and
designated as such pursuant to
Section 4.03(a)
, and identified in the Supplement as the
Series Reserve Account.
Service Transfer
shall have the meaning specified in
Section 10.01
.
Series Trust Assets
shall have the meaning specified in the Supplement.
Servicer Advance
shall have the meaning set forth in
Section 3.09
.
Servicer Default
shall mean the occurrence of any of the following:
(a) (x) any failure by the Master Servicer to remit any Collections received by it in
accordance with
Section 3.04(b)
of this Agreement or (y) any failure (other than as
described in
clause (x)
above) by the Master Servicer to make any allocation of any
payment or to make any payment, transfer or deposit or, if applicable, to give instructions
or notice to the Trustee or the Collateral Trustee to make such payment, transfer or
deposit, in either case, required to be made under the Supplement, this Agreement or any of
the other Operative Documents on or before the date occurring five (5) Business Days after
the date such payment, transfer or deposit or such instruction or notice is required to be
made or given, as the case may be;
(b) the assignment by the Master Servicer of its duties under this Agreement or under
the Supplement other than as permitted by
Section 8.02
;
(c) subject to
paragraphs (a)
and
(b)
above, any failure by the Master
Servicer duly to observe or perform in any respect any covenant or agreement by it under
this Agreement, the Supplement or any of the other Operative Documents, which failure (i)
continues unremedied for thirty (30) days after the earlier of (x) the date upon which a
Responsible Officer of such breaching party obtained actual knowledge of such failure and
(y) the date upon which written notice of such failure shall have been given to the Master
Servicer by the Collateral Trustee, the Trustee, the Back-up Servicer, any Series 2010-1
Noteholder or the Control Party, and (ii) has or could reasonably be expected to have a
Material Adverse Effect with respect to the Master Servicer or the Issuer;
(d) any representation, warranty or certification made or deemed to have been made by
the Master Servicer under or in connection with this Agreement, the Supplement or any of the
other Operative Documents shall prove to have been incorrect in any respect when made or
deemed to have been made or remade, which incorrectness (i) continues unremedied for thirty
(30) days after the earlier of (x) the date upon which a Responsible
30
Officer of such breaching party obtained actual knowledge of such failure and (y) the
date upon which written notice of such incorrectness shall have been given to the Master
Servicer by the Collateral Trustee, the Trustee, the Back-up Servicer, any Series 2010-1
Noteholder or the Control Party, and (ii) has or could reasonably be expected to have a
Material Adverse Effect with respect to the Master Servicer or the Issuer;
(e) the Master Servicer shall become the subject of an Insolvency Event;
(f) an Event of Default occurs;
(g) the termination of the Master Servicer as servicer for any securitization in
respect of which an Affiliated Entity is the issuer; or
(h) a Material Adverse Effect with respect to the Master Servicer.
Servicing Officer
shall mean, with respect to the Master Servicer, any officer or
other employee of the Master Servicer or other agent of the Master Servicer who in any case is
involved in, or responsible for, the administration and servicing of the Series Receivables and
whose name appears on a list of Servicing Officers furnished to the Trustee by the Master Servicer,
as such list may from time to time be amended.
Settlement
shall mean the Scheduled Payments due or to become due under and in
connection with, and all of the Claimants other rights (but no obligations or liabilities) under,
a Settlement Agreement, including payments under any Settlement Annuity Contract purchased by any
Obligor to fund its contractual obligations under such Settlement Agreement.
Settlement Agreement
shall mean a settlement agreement entered into between a
Claimant and a Settlement Counterparty evidencing, among other things, the contractual indebtedness
of the Settlement Counterparty to such Claimant and the right of the Claimant to receive future
payments thereunder as compensation.
Settlement Annuity Contract
shall mean an annuity contract issued to fund the
obligations of an Obligor under a Settlement Agreement.
Settlement Annuity Provider
means, with respect to any Settlement and a related
Settlement Annuity Contract, the insurance company that issued and is obligated under such
Settlement Annuity Contract.
Settlement Counterparty
shall mean the Person that entered into, and was originally
obligated to make Scheduled Payments under, a Settlement Agreement with a Claimant.
Settlement Lock-Box
shall mean any post office box identified as a Settlement
Lock-Box on
Schedule III
into which Collections are received.
Settlement Lock-Box Account
shall have the meaning specified in
Section
4.02(b)
.
Settlement Lock-Box Bank
shall have the meaning specified in
Section
4.02(b)
.
31
Settlement Lock-Boxes
shall have the meaning specified in
Section 4.02(b)
.
Settlement Package
shall mean, with respect to any Settlement Receivable, the
following items: (i) a copy of the Transfer Order approving the transfer of the Settlement
Receivable from the Claimant to the Seller; (ii) a copy of the Settlement Purchase Agreement
documenting terms of the Sellers purchase of the Settlement Receivable from the Claimant; (iii) a
copy of the Settlement Agreement, or a copy of the Stipulation, or a copy of the Uniform Qualified
Assignment, or a similar document evidencing a Settlement has occurred; (iv) evidence that an
annuity has been issued; (v) UCC search reports and credit reports against the Claimant and, if the
Claimant is not the seller of the Settlement or the Settlement Receivable to the Seller, the seller
of such Settlement Receivable (provided, that in the case where the seller of the Settlement
Receivable was deceased or the subject of a bankruptcy proceeding, a credit report shall not be
required); (vi) to the extent provided, a form completed by the Claimant (or such other seller of
such Settlement Receivable) either waiving or acknowledging receipt of professional advice, or if
professional advice is received, the Claimants (or such other sellers) professional advisor may
either complete a form or provide a letter stating that they provided professional advice; and
(vii) if applicable, the original Power of Attorney related to such Settlement Receivable in favor
of the Seller or any other Person (which Person has irrevocably appointed the Seller as its
substitute), in each case with full power of substitution by the Seller.
Settlement Purchase Agreement
shall mean any agreement substantially in the form of
Exhibit A
hereto entered into between a Claimant and the Seller pursuant to which the
Claimant sells, assigns and conveys to the Seller all or a portion of the Claimants right, title
and interest in certain payments which such Claimant is to receive under a Settlement Agreement.
Settlement Receivable
shall mean all rights (a) to certain Scheduled Payments (or
portions thereof) due or to become due in connection with a Settlement Agreement and (b) all other
rights (but not obligations or liabilities), in any case which are purchased by the Seller from a
Claimant pursuant to a Settlement Purchase Agreement, including, without limitation, all rights to
receive such periodic Scheduled Payments from any Assignee pursuant to an Assignment and all rights
to receive any payments under any Settlement Annuity Contract purchased by any Obligor (or its
assignee) to fund its payment obligations under such Settlement Agreement, whether such Scheduled
Payments (or such portions thereof) or other rights constitute accounts, general intangibles
(including, without limitation, payment intangibles), investment property, intangible or tangible
chattel paper (including, without limitation, electronic chattel paper), instruments, documents,
securities, cash, supporting obligations or any other kind of property, and
Settlement
Receivables
shall mean all such Receivables. Notwithstanding the foregoing, the term
Settlement Receivable shall not include any Scheduled Payments due prior to the applicable
Cut-Off Date for such Receivable.
Special Record Date
shall have the meaning specified in the Supplement.
Specified Insolvency Default
shall have the meaning set forth in clause (i) of
Section 9.01(a)
hereto.
Specified Series Reserve Balance
shall have the meaning specified in the Supplement.
32
Split Payment
shall mean, with respect to any Settlement Purchase Agreement or
Annuity Purchase Agreement pursuant to which the Claimant or any Individual Annuity Seller has
reserved an interest (which interest shall solely be in the form of an independent claim against
the Seller for payment to such Person of certain amounts upon, and to the extent of, receipt by the
Seller of the Scheduled Payments sold (or portions of which have been sold) by the Claimant or
Individual Annuity Seller to the Seller pursuant to such Settlement Purchase Agreement or Annuity
Purchase Agreement), the amount of each such payment obligation so reserved and payable by the
Seller to such Claimant from time to time pursuant to (and in accordance with) such Settlement
Purchase Agreement or Annuity Purchase Agreement and the Credit Policy Manual.
Stipulation
shall mean an agreement between the Seller and an insurance carrier
evidencing that an annuity exists that was issued pursuant to a personal injury settlement.
Successor Servicer
shall have the meaning specified in
Section 10.02(a)
.
Successor Servicing Fee Rate
shall mean 0.125%.
Supplement
shall mean that certain Series 2010-1 Supplement to the Master Trust
Indenture, dated as of the Closing Date, among the Issuer, the Master Servicer, the Trustee and the
Collateral Trustee, as the same may be amended, restated, supplemented or otherwise modified from
time to time.
Tax Opinion
shall mean, with respect to any action, an Opinion of Counsel who is not
an employee of any Affiliated Entity to the effect that, (i) for federal income tax purposes (a)
such action will not adversely affect the Tax Opinion Characterization of the Series 2010-1 Notes,
(b) such action will not cause a taxable event to any Series 2010-1 Noteholder (other than the
parties to such action) and (c) without limiting the applicability of
clauses (a)
, and
(b)
of this definition, in the case of the original issuance of Series 2010-1 Notes
hereunder, the Series 2010-1 Notes will be properly characterized in accordance with the Tax
Opinion Characterization and (ii) for federal income tax purposes, following any such action, the
Issuer will not be treated as an association (or publicly traded partnership) taxable as a
corporation.
Tax Opinion Characterization
shall mean, with respect to the Series 2010-1 Notes,
the characterization of such Series 2010-1 Notes as debt of the Issuer for Federal income tax
purposes.
Temporary Regulation S Global Note
shall mean a Regulation S Note held by the Common
Depository representing Euroclear/Clearstream Global Notes during the Restricted Period.
Termination Notice
shall have the meaning specified in
Section 10.01
.
Transfer Date
shall have the meaning specified in
Section 6.10
.
Transfer Order
shall mean a final, non-appealable written order of a court of
competent jurisdiction in the applicable Approved State evidencing such courts approval of a
transfer of some or all of a Claimants rights under a Settlement to the Seller which transfer has
been made
33
in accordance with such states Transfer Statute, which order is binding with respect to such
Claimant and each of the Notice Parties and with respect to which the period during which such
order could be appealed by any Notice Party has expired.
Transfer Statute
shall mean any statute which has been enacted in any state, as such
statute shall be amended from time to time, and which authorizes, subject to compliance therewith,
the transfer of a Settlement (or a portion thereof) by the original payee thereunder to a
transferee.
Trust Assets
shall have the meaning specified in the Recitals.
Trust Indenture Act
shall mean the Trust Indenture Act of 1939, as in effect on the
Closing Date.
Trustee
shall mean Wilmington Trust Company, not in its individual capacity, but
solely in its capacity as trustee on behalf of the Series 2010-1 Noteholders, or its successor in
interest, or any successor trustee appointed as herein provided.
Trustee Fee
shall mean, for any Payment Date, the Trustee Fee specified in the
Supplement.
Trustees Account
shall have the meaning specified in
Section 4.04
.
UCC
shall mean the Uniform Commercial Code, as amended from time to time, as in
effect in any applicable jurisdiction.
U.S. Dollars
or
Dollars
means dollars of the United States of America.
U.S. Global Notes
shall mean the U.S. Notes delivered in book-entry form through the
facilities of the Common Depository.
U.S. Note
shall mean any Series 2010-1 Note sold by the Issuer to an initial Series
2010-1 Noteholder pursuant to the exemption from registration provided by Section 4(2) of the
Securities Act and subsequently sold by such initial Series 2010-1 Noteholder to any Series 2010-1
Noteholder on or after the Closing Date pursuant to Rule 144A under the Securities Act.
Workers Compensation Receivable
means a Settlement Receivable arising in connection
with the settlement of a claim brought by a Claimant employee (or an heir or other legal
beneficiary of an employee) against such employees Settlement Counterparty employer pursuant to a
workers compensation statute for damages resulting from injury or sickness sustained or contracted
in the course of such employees employment.
SECTION 1.02.
Other Definitional Provisions
.
(a) All terms defined in this Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto unless otherwise defined therein.
34
(b) As used herein and in any certificate or other document made or delivered pursuant hereto
or thereto, accounting terms not defined in this Agreement, and accounting terms partly defined in
this Agreement to the extent not defined, shall have the respective meanings given to them under
generally accepted accounting principles or regulatory accounting principles, as applicable, as in
effect in the United States. To the extent that the definitions of accounting terms herein are
inconsistent with the meanings of such terms under generally accepted accounting principles or
regulatory accounting principles as in effect in the applicable jurisdiction, the definitions
contained herein shall control.
(c) The words hereof, herein and hereunder and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular provision of this
Agreement; and Section, Schedule and Exhibit references contained in this Agreement are references
to Sections, Schedules and Exhibits in or to this Agreement unless otherwise specified; and the
term including means including without limitation.
SECTION 1.03.
Acts of Series 2010-1 Noteholders
.
(a) Any request, demand, authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be given or taken by any Series 2010-1 Noteholders, or a specified
percentage or number of Series 2010-1 Noteholders, may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Series 2010-1 Noteholders, in person or
by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered to the Trustee or
the Collateral Trustee, as herein provided, and, where it is hereby expressly required, to the
Issuer. Such instrument or instruments (and the action embodied therein and evidenced thereby) are
herein sometimes referred to as the
Act
of the Series 2010-1 Noteholders signing such
instrument or instruments. Proof of execution of any such instrument or of a writing appointing
any such agent shall be sufficient for any purpose of this Indenture and (subject to
Section
11.02
and
Section 14.02
, as applicable) conclusive in favor of the Trustee, the
Collateral Trustee and/or the Issuer, as applicable, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any Person of any such instrument or writing may be
proved by the affidavit of a witness of such execution or by an acknowledgment of a notary public
or other officer authorized by law to take acknowledgments of deeds, certifying that the individual
signing such instrument or writing acknowledged to him the execution thereof. Where such execution
is by a signer acting in a capacity other than such signers individual capacity, such certificate
or affidavit shall also constitute sufficient proof of the signers authority. The fact and date
of the execution of any such instrument or writing, or the authority of the person executing the
same, may also be proved in any other manner which the Trustee or the Collateral Trustee, as
applicable, deems sufficient.
(c) The ownership of the Series 2010-1 Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of any
Series 2010-1 Noteholder or the Series 2010-1 Noteholders shall bind every future holder of the
same Series 2010-1 Note or Series 2010-1 Notes and the holder of any Series 2010-
35
1 Note issued upon the registration of transfer thereof or in exchange therefor or in lieu
thereof in respect of anything done, suffered or omitted to be done by the Trustee, the Collateral
Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such
Series 2010-1 Note.
SECTION 1.04.
Conflict with Trust Indenture Act
. None of the Series 2010-1 Notes
issued under this Indenture are intended to be registered under the Securities Act and this
Indenture is not intended to be qualified under the Trust Indenture Act. If, notwithstanding such
intent, this Indenture at any time becomes or is required to become qualified under the Trust
Indenture Act and any provision hereof limits, qualifies or conflicts with the duties imposed by
any of Sections 310 through 317, inclusive, of the Trust Indenture Act through the operation of
Section 318(c) thereof, such imposed duties shall control.
SECTION 1.05.
Benefits of Indenture
. Nothing in this Indenture or in the Series
2010-1 Notes, express or implied, shall give to any Person (other than the Series 2010-1
Noteholders and the other Secured Parties identified in the Supplement) any benefit or any legal or
equitable right, remedy or claim under this Indenture.
SECTION 1.06.
Incorporation of Recitals
. The Recitals of the Issuer set forth above
in this Indenture are hereby incorporated by this reference hereto as if, and to the same extent
that, such Recitals were contained in the body of this Indenture.
SECTION 1.07.
Conditions Precedent to the Effectiveness of this Agreement
. The
effectiveness of this Agreement is subject to (i) the receipt by the Trustee of executed
counterparts to this Agreement from the Initial Master Servicer, the Issuer, the Trustee and the
Collateral Trustee; and (ii) the satisfaction of each of the conditions to issuance of the Series
2010-1 Notes set forth in
Section 5.01
of the Supplement.
ARTICLE II
GRANT OF SECURITY INTEREST IN RECEIVABLES;
ORIGINAL ISSUANCE OF SERIES 2010-1 NOTES
SECTION 2.01.
Grant of Security Interest in Assets; No Assumption of Obligations Related
to Receivables; Certain Matters Regarding the Grant
.
(a) Pursuant to the Supplement and in accordance with the Granting Clause hereof, the Issuer
shall from time to time grant, convey, transfer, assign and deliver, in each case, to the Trustee,
its successors and assigns and its or their assigns forever, to have and to hold in trust for the
benefit of the Series 2010-1 Noteholders of the Series 2010-1 Notes issued pursuant to the
Supplement, a first priority security interest in the Series Trust Assets.
(b) Other than the obligation of the Master Servicer and/or the Collateral Trustee to remit
Split Payments to Claimants pursuant hereto, the grant described in the Granting Clause shall not
be deemed to constitute, nor is it intended to result in, a creation or an assumption by the
Trustee or any Series 2010-1 Noteholder of any obligation of any Claimant, Individual Annuity
Seller, the Seller, the Issuer or any other Person in connection with the Receivables or under any
Operative Document, including, without limitation, any obligation to any Claimant or Individual
Annuity Seller. Each such grant shall be made to the Trustee on behalf of the Series
36
2010-1
Noteholders, and each reference in this Agreement to such grant shall be construed accordingly.
(c) In connection with the grant to the Trustee as described in the Granting Clause, the
Issuer agrees to record and file from time to time, at its own expense, financing statements and
other documents (and amendments thereto, assignments thereof and continuation statements, when
applicable) with respect to the Receivables and the other Trust Assets now existing and hereafter
created meeting the requirements of the UCC and other applicable Requirements of Law in such manner
and in such jurisdictions as are necessary to perfect, and maintain the perfection and priority of,
the security interests granted hereunder and the ownership interests of the Issuer in the
Receivables and the other Trust Assets purchased from the Seller, and to deliver a file-stamped
copy of each such financing statement or other document or other evidence of such filing to the
Trustee on or prior to the Closing Date or, with respect to any security interest granted hereunder
on a date other than the Closing Date or, in the case of any financing statement, continuation
statement or other document filed by or on behalf of the Issuer after the Closing Date, promptly
after the filing thereof. While the Trustee shall be under no obligation whatsoever to file such
financing statements, documents, amendments, assignments or continuation statements, or to make any
other filing under the UCC in connection with the grant to the Trustee as described in the Granting
Clause, the Issuer hereby authorizes the Trustee, within the meaning of Section 9-509 of the UCC,
to take, at the Issuers expense, and at the direction of the Issuer or the Control Party, all
actions necessary to maintain the perfection and priority of the liens and security interests
granted under this Agreement, including, without limitation, the filing of any financing statement
related to the applicable Trust Assets without the Issuers signature or further authorization.
The Issuer acknowledges and agrees that any such financing statement may include a collateral
description to the effect that the collateral covered by such financing statement includes all of
the assets of Issuer.
(d) In connection with the grant to the Trustee as described in the Granting Clause, the
Issuer further agrees, at its own expense, on or prior to the Closing Date, the applicable Advance
Date or any other date on which Receivables are pledged by the Issuer under the Supplement to
indicate in its files that the Receivables which are the subject of any such grant of a security
interest in the Supplement have been pledged to the Trustee in accordance with this Agreement for
the benefit of the Series 2010-1 Noteholders.
(e) In connection with the grant to the Trustee of the security interest pursuant to the
Supplement, the Master Servicer shall, on behalf of the Issuer, on or prior to the Closing Date,
the applicable Advance Date or any other date on which Receivables are pledged by the Issuer under
the Supplement mark or cause to be marked, the master data processing records of the Seller
evidencing the Receivables identifying the Receivables that have been sold or contributed
to the Issuer pursuant to the Issuer Purchase Agreement and indicating that a security
interest in such Receivables has been further granted to the Trustee pursuant to the Supplement.
SECTION 2.02.
Acceptance by Trustee
. The Trustee hereby acknowledges its acceptance
on behalf of the Series 2010-1 Noteholders of the security interest in all of the Trust Assets and
declares that it shall maintain such security interest, upon the trust herein set forth, for the
benefit of the Series 2010-1 Noteholders.
37
SECTION 2.03.
General Representations and Warranties of the Issuer
. The Issuer hereby
represents and warrants as of the date hereof and on each date hereafter until the satisfaction and
discharge of this Indenture pursuant to
Section 12.01
, that:
(a)
Organization and Good Standing
. The exact legal name of the Issuer is Imperial
Settlements Financing 2010, LLC. The Issuer is a limited liability company duly organized, validly
existing and in good standing under the laws of the state of Georgia. The Issuers organizational
identification number is 10058074. The Issuer has full power and authority to own its properties
and conduct its business as presently owned or conducted, and to execute, deliver and perform its
obligations under the Operative Documents, and to execute and deliver to the Trustee pursuant
hereto the Series 2010-1 Notes.
(b)
Due Qualification
. The Issuer is duly qualified to do business and is in good
standing as a foreign limited liability company, and has obtained all necessary licenses and
approvals, in each jurisdiction in which failure to so qualify or to obtain such licenses and
approvals has, or could reasonably be expected to have, a Material Adverse Effect.
(c)
Due Authorization; Conflicts
. The execution, delivery and performance by the
Issuer of the Operative Documents are within the Issuers powers, have been duly authorized by all
necessary company and member action, and do not contravene (i) the Issuers Organizational
Documents, (ii) any Requirements of Law binding on, or affecting, the Issuer and the violation of
which has, or could reasonably be expected to have, a Material Adverse Effect, or (iii) any
agreement, contract, indenture, mortgage, or other instrument, document or agreement to which the
Issuer or any of its assets are subject or may be effected.
(d)
Consents
. No authorization or approval or other action by, and no notice to or
registration of or filing with, any Governmental Authority or other regulatory body is required to
be made or obtained by the Issuer or the Seller for the due execution, delivery and performance by
the Issuer, or to insure the legality, validity, binding effect or enforceability, of the Operative
Documents, except for the filing of UCC financing statements against the Seller and the Issuer in
respect of the transactions contemplated herein all of which that need to be filed to perfect the
ownership interest of the Issuer and the security interest of the Trustee, respectively, in the
Trust Assets (as comprised as of the date of each making or remaking of this representation and
warranty), have been so made (or delivered to the Trustee in form suitable for filing).
(e)
Enforceability
. Each of the Operative Documents to which the Issuer is a party is
and will be the legal, valid and binding obligation of the Issuer enforceable against the Issuer in
accordance with its respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors rights generally or general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law).
(f)
Proceedings
. Except as disclosed in writing to the Trustee and the Collateral
Trustee, there are no judgments or other judicial or administrative orders outstanding against the
Issuer nor is there any pending or, to the best of the Issuers knowledge, threatened action or
proceeding affecting the Issuer before any court, governmental agency or arbitrator.
38
(g)
Compliance with Laws, Etc.
The Issuer is not in violation of any Requirements of
Law applicable to it or any of its properties or any indenture, lease, loan or other agreement to
which it is a party or by which it or its assets, including without limitation the Receivables, may
be bound or affected, the violation of which, in any of the foregoing cases, would have, or could
reasonably be expected to have, a Material Adverse Effect.
(h)
Margin Regulations
. The Issuer will not use any of the proceeds that it receives
pursuant hereto or the Supplement for any purpose which will conflict with or contravene any of
Regulations T, U or X promulgated by the Federal Reserve Board from time to time.
(i)
Locations
. The principal place of business and chief executive office of the
Issuer are located at the address of the Issuer set forth in
Section 13.05
, and the offices
where the Issuer keeps all of its records relating to the Receivables are located at the addresses
set forth on
Schedule II
hereto, or, in each case, at such other locations notified to the
Trustee in accordance with
Section 2.04(e)
.
(j)
Lock-Box Banks.
The names and addresses of all the Applicable Lock-Box Banks, and
the account numbers of all Settlement Lock-Box Accounts and the related Settlement Lock-Boxes
serviced by such Applicable Lock-Box Banks, are in each case specified in
Schedule III
hereto or have been notified to the Trustee, and all action required to be taken with respect to
the foregoing pursuant to
Sections 3.04
and
4.02
has been taken. The Applicable
Lock-Box Banks are the only institutions holding any deposit accounts or servicing any lockboxes
for the receipt of Scheduled Payments in respect of the Receivables. All Annuity Providers or
other Obligors, as applicable, have been directed to make payments on the Receivables, or the
Annuity Contracts relating thereto, as applicable, to (i) in the case of payments in respect of
Annuity Receivables, an Annuity Lock-Box covered by a Lock-Box Notice, the Master Collection
Account or the Series Collection Account and (ii) in the case of payments made in respect of
Settlement Receivables, a Settlement Lock-Box covered by an Lock-Box Notice, the Master Collection
Account or Series Collection Account, and in each case such instructions are in full force and
effect.
(k)
ERISA Matters
. Except as set forth on Schedule IV, neither the Issuer nor any of
its ERISA Affiliates has maintained or participated in any Plan or Multiemployer Plan during the
past six (6) years. With respect to any such Plan and/or Multiemployer Plan, (i) such Plan and/or
Multiemployer Plan complied and complies in all material respects with all applicable Requirements
of Law, (ii) no Reportable Event has occurred with respect to any such Plan and/or Multiemployer
Plan, (iii) no such Plan or Multiemployer Plan has been terminated, and (iv) no
funding deficiency has occurred in respect of any such Plan or Multiemployer Plan, except, in
each case, where the occurrence of any of the foregoing could not be reasonably expected to result
in liability to the Issuer in excess of the Plan Liability Threshold or result in a Lien against
the Trust Assets (or any portion thereof). With respect to any such Plan or Multiemployer Plan
that is intended to qualify for special tax treatment under Sections 401(a) or 403(a) of the Code,
such Plan or Multiemployer Plan is in compliance with the applicable requirements of the Code for
such qualifications.
(l)
Taxes
. The Issuer has filed all federal, state and local tax returns which it is
required by law to file and has paid all taxes, assessments and other governmental charges due in
39
respect of its respective returns, except to the extent that any such taxes, assessments or other
governmental charges are being contested in good faith and as to which the Issuer has set aside on
its books adequate reserves.
(m)
Other Agreements
. Other than the Operative Documents, the Issuer is not a party
to any material lease, contract, agreement, understanding or commitment of any kind which, if
breached, has, or could reasonably be expected to directly or indirectly have, a Material Adverse
Effect.
(n)
Accuracy of Information
. Each certificate, information, exhibit, financial
statement, document, book, record, report or disclosure furnished by the Issuer to the Trustee, the
Collateral Trustee, the Master Servicer, the Back-up Servicer or any Series 2010-1 Noteholder
(other than an Affiliated Entity) is accurate in all material respects and contains no untrue
statement of a material fact or omits to state a material fact necessary in order to make the
statements contained herein and therein not misleading.
(o)
Investment Company Act Matters
. The Issuer is not an investment company or a
company controlled by an investment company within the meaning of the Investment Company Act.
(p)
Title to Property
. The Issuer, at the time of the grant of a security interest in
favor of the Trustee, owns good and marketable title to the Receivables free and clear of any Lien,
claim or encumbrance of any Person (other than Permitted Liens).
(q)
Tradenames
. The Issuer has no tradenames, fictitious names, assumed names or
doing business as names and since its formation, the Issuer has not been the subject of any
merger or other corporate reorganization that resulted in a change of name, identity or corporate
structure.
(r)
Subsidiaries
. The Issuer has no subsidiaries.
(s)
Solvency
. After giving effect to the initial Purchase under the Issuer Purchase
Agreement on the Closing Date, and after giving effect to the issuance of Series 2010-1 Notes
hereunder and each Purchase under the Issuer Purchase Agreement related to an Advance made on each
Advance Date, the Issuer (i) is (or was) not insolvent (as such term is defined in §101(31)(A) of
the Bankruptcy Code), (ii) is (or was) able to pay its debts as they come due, and (iii) does (or
did) not have unreasonably small capital for the business in which it is (or was) engaged.
(t)
Valid Transfer and Valid Grant
. The Issuer Purchase Agreement creates a valid
sale, transfer and assignment to the Issuer of all right, title and interest of the Seller in and
to all Receivables and Related Property conveyed to the Issuer thereunder. This Agreement creates
a valid and continuing security interest (as defined in the UCC) in the Issuers interest in the
Receivables and Trust Assets in favor of the Trustee on behalf of the Series 2010-1 Noteholders,
which security interest is prior to all other Liens and is enforceable as such against the Issuers
creditors.
40
(u)
No Claim or Interest
. Except as otherwise provided in this Agreement or the
Supplement, neither the Issuer nor any Person claiming through or under the Issuer has any claim to
or interest in the Deposit Accounts.
(v)
Offering of Series 2010-1 Notes
. The Issuer has not taken or caused to be taken,
and has no knowledge that any other Person has taken, any action which would subject the issuance
or sale of any Series 2010-1 Note to the provisions of Section 5 of the Securities Act or to the
qualification provisions of any securities or Blue Sky law of any applicable jurisdiction.
(w)
Transfer of Receivables
. The Issuer has given reasonably equivalent value to the
Seller in consideration for the transfer to the Issuer by the Seller of the Receivables and Related
Property pursuant to the Issuer Purchase Agreement, and no such transfer has been made for or on
account of an antecedent debt owed by the Seller to the Issuer.
(x)
Policies and Procedures
. No change has been made to the Credit Policy Manual,
except such change as would be permitted under
Section 2.06(g)
.
(y)
Pro-Forma Balance Sheet
. The pro-forma balance sheets of the Issuer as of the
Closing Date certified by the Chief Financial Officer of the Issuer, copies of which have been
provided to the Trustee, present fairly the financial condition of the Issuer on a pro-forma basis
as of such date after giving effect to the transactions contemplated under the Operative Documents
to take place on such date.
(z)
Affiliated Entities
. PFSC is not an Affiliated Entity.
The representations and warranties made pursuant to this
Section 2.03
shall survive
the making thereof. Upon discovery by the Issuer, the Master Servicer, the Collateral Trustee or
the Trustee of a breach of any of the foregoing representations and warranties which breach has, or
could reasonably be expected to have, a Material Adverse Effect, the party discovering such breach
shall give prompt written notice to the other parties. The Trustees and the Collateral Trustees
obligations in respect of any such breach are limited as provided in
Section 11.02
and
Section 14.02
, respectively.
SECTION 2.04.
Affirmative Covenants of the Issuer
. The Issuer hereby covenants that,
until the satisfaction and discharge of this Indenture pursuant to
Section 12.01
:
(a)
Compliance with Law
. The Issuer will comply in all respects with all Requirements
of Law applicable to the Issuer, its business and properties and the Trust Assets.
(b)
Preservation of Existence
. The Issuer will preserve and maintain its existence,
rights, franchises and privileges as a limited liability company in the jurisdiction of its
organization, and qualify and remain qualified in good standing as a foreign limited liability
company in each jurisdiction where the failure to maintain such qualification has, or could
reasonably be expected to have, a Material Adverse Effect.
(c)
Inspection of Books and Records
. The Collateral Trustee, the Control Party (or,
if such Control Party is a designated percentage of the Series 2010-1 Noteholders for any Series, a
representative of such Control Party), and independent accountants appointed by, or other agents
41
of, any of the foregoing, shall have the right, upon reasonable prior written notice to the Issuer
and at the Issuers expense, to visit the Issuer to (i) discuss the affairs, finances and accounts
of the Issuer with, and to be advised as to the same by, its officers, and (ii) to examine the
books of account and records of the Issuer, and to make or be provided with copies and extracts
therefrom, all at such reasonable times and intervals and to such reasonable extent during regular
business hours as the Collateral Trustee, such Control Party (or designated representative
thereof), or such accountants or agents appointed by any of the foregoing, as applicable, may
desire;
provided
,
however
, that, so long as no Event of Default or OC Shortfall has
occurred and is continuing, the Issuer shall not be obligated to pay for more than one (1) such
inspection during any twelve month period;
provided
,
further
,
however
,
that, after the occurrence and during the continuation of any OC Shortfall or Event of Default,
such Control Party shall have the right to conduct an unlimited number of inspections of the type
described in this clause (c) at the Issuers expense.
(d)
Keeping of Records and Books of Account
. The Issuer itself or through its agents
will (i) keep proper books of record and account, which shall be maintained or caused to be
maintained by the Issuer and shall be separate and apart from those of any Affiliated Entity, in
which full and correct entries shall be made of all financial transactions and the assets and
business of the Issuer in accordance with generally accepted accounting principles consistently
applied, and (ii) maintain and implement administrative and operating procedures (including,
without limitation, an ability to recreate records evidencing the Receivables in the event of the
destruction of the originals thereof) and keep and maintain all documents, books, records and other
information reasonably necessary or advisable for the collection of all Receivables (including,
without limitation, records adequate to permit the daily identification of all Collections of and
adjustments to each existing Receivable).
(e)
Location of Records
. The Issuer will keep its principal place of business and
chief executive office at the address of the Issuer referred to in
Section 2.03(i)
and
shall keep the other offices where it keeps the books, records and documents regarding the Trust
Assets at the addresses of the Issuer referred to on
Schedule II
, or, in either case, upon
30 days prior written notice to the Trustee, at any other location within the United States.
(f)
Maintenance of Separate Independent Manager or Member
. The Issuer will maintain
at least one independent manager or member, which otherwise is not (or at any time during the last
five years has not been) a direct, indirect or beneficial officer, general partner, member,
director, employee, affiliate, associate, creditor, customer or supplier of any of the Affiliated
Entities (unless acting as such in an independent capacity), nor a direct, indirect or beneficial
owner of the outstanding equity interest (including, limited partnership interests or limited
liability company interest) of any of the Affiliated Entities (any such Person also being
an
Affiliated Entity
for the purposes of this
Section 2.04(f)
), nor a
relative of any of the foregoing, nor a trustee in bankruptcy for any of the foregoing.
(g)
Issuer Purchase Agreement
. The Issuer will at its expense timely perform and
comply with all provisions, covenants and other promises required to be observed by it under the
Issuer Purchase Agreement, maintain each such agreement in full force and effect, enforce each such
agreement in accordance with its terms, and, at the request of the Trustee or the Collateral
Trustee, take such action or make to the Seller such reasonable demands and requests for
42
information and reports or for action as the Trustee or the Collateral Trustee may request to the
extent that the Issuer is entitled to do the same thereunder.
(h)
Payment of Taxes, Etc
. The Issuer will pay promptly when due all taxes,
assessments and governmental charges or levies imposed upon it or any Trust Asset, or in respect of
its income or profits therefrom, and any and all claims of any kind (including, without limitation,
claims for labor, materials and supplies), except where such tax, assessment, charge or levy is
being contested in good faith and by proper proceedings and adequate reserves have been set up and
are being maintained in respect thereof on the Issuers books and records.
(i)
Reporting Requirements
.
(i) The Issuer will furnish, or cause to be furnished, to the Collateral Trustee and each
Series 2010-1 Noteholder:
(1) as soon as available and in any event within one hundred and twenty (120) days after the
end of each fiscal year of Imperial Holdings, Imperial and Seller, a copy of the audited
consolidated financial statements for such year for each of Imperial Holdings, Imperial and Seller,
containing financial statements for such year certified in a manner acceptable to the Collateral
Trustee by independent public accountants acceptable to the Collateral Trustee;
(2) as soon as available and in any event within forty-five (45) days after the end of each
fiscal quarter of Imperial Holdings, Imperial and Seller, the unaudited consolidated and
consolidating balance sheets and income statements for such fiscal quarter for each of Imperial
Holdings, Imperial and Seller;
(3) on or before April 30 of each calendar year, beginning with April 30, 2011, for so long as
PFSC shall be the Master Servicer, PFSC shall cause, at Issuers expense, a firm of nationally
recognized independent public accountants to furnish a report to the Collateral Trustee and each
Series 2010-1 Noteholder containing such firms conclusions with respect to an examination of
certain information relating to PFSCs compliance with its servicing obligations hereunder, in a
form and substance to be agreed upon by PFSC and the Collateral Trustee;
(4) on or before April 30 of each calendar year, beginning with April 30, 2011, for so long as
PFSC shall be the Master Servicer, PFSC shall cause, at Issuers expense, a firm of nationally
recognized independent public accountants to furnish a report to the Collateral Trustee and each
Series 2010-1 Noteholder containing such firms conclusions with respect to an examination of the
calculations of amounts set forth in certain of PFSCs reports delivered hereunder during the prior
calendar year and PFSCs source records for such amounts, in a form and substance to be agreed upon
by PFSC and the Collateral Trustee;
(5) (A) promptly, and in any event within five Business Days, after becoming aware of the
occurrence of each Event of Default, Potential Event of Default, Series Event of Default, and
Servicer Default, the statement of the chief financial officer or chief accounting officer of the
Issuer setting forth details of such occurrence or event and the action which the Issuer has taken
and proposes to take with respect thereto, and (B) as soon as possible and in any event within five
Business Days after obtaining knowledge thereof, notice of any other event,
43
development or
information which has, or is reasonably likely to have, a Material Adverse Effect with respect to
the Series 2010-1 Notes;
(6) promptly, and in any event within five Business Days, after the Issuers receipt thereof,
copies of all notices, requests, and other documents (excluding regular periodic reports) delivered
or received by the Issuer under or in connection with the Issuer Purchase Agreement; and
(7) promptly, and in any event within five Business Days, after the Issuer acquires knowledge
of the occurrence of any event described in the definition of Plan Event (as determined without
giving effect to any limitations as to materiality or dollar thresholds contained in such
definition), written notice of such Plan Event.
Audited and unaudited financial statements required pursuant to clauses (1)-(6) above will set
forth in comparative form the corresponding figures for the most recent year-end or comparable
period for which audited or unaudited financial statements were prepared. Audited financial
statements shall be prepared and presented in accordance with, and provide all necessary disclosure
(including footnote disclosure) required by, GAAP and shall be accompanied by a certificate signed
by the chief financial officer and controller of Imperial Holdings or Imperial, as applicable,
stating that (i) such financial statements present fairly the financial condition of Imperial
Holdings or Imperial, as applicable, and (ii) such financial statements have been prepared in
accordance with GAAP consistently applied.
(ii) Promptly following any request therefor by the Trustee, the Collateral Trustee or the
Control Party, the Issuer will furnish to the Trustee, the Collateral Trustee and the Series 2010-1
Noteholders, as applicable, such information, documents, records or reports respecting the Series
Receivables, the other Series Trust Assets relating thereto or the condition or operations,
financial or otherwise, of the Issuer as the Trustee, the Collateral Trustee, the Control Party or
any such Series 2010-1 Noteholder may from time to time reasonably request.
(j)
Acquisition of Receivables from the Seller
. With respect to each Receivable
acquired by the Issuer from the Seller, the Issuer shall (a) acquire such Receivable pursuant to
and in accordance with the terms of the Issuer Purchase Agreement, (b) take all action necessary to
perfect, protect and more fully evidence the Issuers ownership of such Receivable, including,
without limitation, (1) filing and maintaining effective financing statements and continuations
thereof (Forms UCC-1 and UCC-3) against the Seller in all necessary or appropriate filing offices,
and filing continuation statements, amendments or assignments with respect thereto in such filing
offices and (2) executing or causing to be executed such other instruments or notices (other than
to the Claimant, the Assignee or the Annuity Provider) as may be necessary or appropriate and (c)
take all additional action that the Trustee or the Control Party may reasonably
request to perfect, protect and more fully evidence the respective interests of the parties to
this Agreement and the Series 2010-1 Noteholders in the applicable Receivables.
(k)
Collections
. In the event that the Issuer or any other Affiliated Entity receives
any Collections, the Issuer agrees to hold, or cause such Affiliated Entity to hold, all such
Collections in trust and to deposit, or cause such Affiliated Entity to deposit, such Collections
(i) in the case of Collections in respect of Annuity Receivables, to an Annuity Lock-Box, the
Master
44
or the Series Collection Account and (ii) in the case of all other Collections, to the
Settlement Lock-Box, the Master Collection Account or the Series Collection Account, in each case,
as soon as practicable, but in no event later than two Business Days after its receipt thereof.
(l)
ERISA
. The Issuer will not maintain any Plans in its own name or otherwise agree
to make contributions to any Plan. The Issuer shall not allow any Plan maintained by any of its
ERISA Affiliates to incur any accumulated funding deficiency (within the meaning of Section 302
of ERISA or Section 412 of the Code), whether or not waived. Each ERISA Affiliate of the Issuer
shall timely make all contributions required by it to be made by it to any Plans and/or
Multiemployer Plans to which contributions are or shall be required to be made by such ERISA
Affiliate, and no event requiring notice to the PBGC under Section 302(f) of ERISA shall occur with
respect to any such Plan, in any case, that could reasonably be expected to result, directly or
indirectly, in any Lien being imposed on the property of the Issuer or the payment of any amount in
excess of the Plan Liability Threshold to avoid such Lien. No Plan Event with respect to the
Issuer or any of its ERISA Affiliates shall occur that could reasonably be expected to result,
directly or indirectly, in any Lien being imposed on the property of the Issuer or the payment of
any amount in excess of the Plan Liability Threshold.
(m)
Accounting for Transfers
. To the fullest extent permitted by applicable
accounting principals, the Issuer shall treat the transfers and conveyances of the Receivables by
the Seller to it pursuant to the Issuer Purchase Agreement as sales and absolute transfers thereof
for all tax and accounting purposes.
(n)
Fidelity Insurance
. The Issuer shall maintain, at its own expense, a fidelity
insurance policy, with broad coverage with responsible companies on all officers, employees or
other persons acting on behalf of the Issuer in any capacity with regard to the Receivables to
handle documents and papers related thereto. Any such fidelity insurance shall protect and insure
the Issuer against losses, including forgery, theft, embezzlement, and fraud, and shall be
maintained in an amount of at least $10,000,000 or such lower amount as the Control Party may in
its commercially reasonable credit judgment designate to the Issuer from time to time, and in a
form acceptable to the Control Party in its commercially reasonable judgment. No provision of this
Section 2.04(o)
requiring such fidelity insurance shall diminish or relieve the Issuer from
its duties and obligations as set forth in this Agreement or any of the other Operative Documents.
The Issuer shall be deemed to have complied with this provision if one of its respective Affiliates
has such fidelity policy coverage and, by the terms of such fidelity policy, the coverage afforded
thereunder extends to the Issuer. Upon the request of the Trustee or the Control Party, the Issuer
shall cause to be delivered to the Trustee or such Control Party, as applicable, a certificate
evidencing coverage under such fidelity policy. Any such insurance policy shall contain a
provision or endorsement providing that such policy may not be canceled or modified without ten
(10) days prior written notice to the Trustee.
(o)
Confidentiality of Settlement Agreements
. The Issuer, and its officers, directors
and employees shall keep, and shall cause to be kept, strictly confidential all terms of all
Settlement Agreements, including, without limitation, the name of the Settlement Counterparties
related thereto and the nature of the injury to the Claimant, and shall not copy or disclose such
terms in any manner whatsoever, in whole or in part, except (i) to the Back-up Servicer in
accordance with the Back-up Servicing Agreement, (ii) to the Master Servicer to the extent
45
necessary to service the Receivables in accordance with the terms hereof and the Supplement, (iii)
to the Trustee, the Collateral Trustee and the Series 2010-1 Noteholders solely to the extent
required to enforce their respective rights hereunder and under the Supplement and (iv) as required
by applicable Requirements of Law;
provided
that the Issuer may in any event disclose in
its sole discretion the terms of any Settlement Agreement so long as (A) all references therein to
the Settlement Counterparties related thereto and the nature of the Claimants injury shall be
stricken from such disclosure, and (B) such recipient shall agree to the terms of confidentiality
contained in this
Section 2.04(p)
.
(p)
Compliance Certifications
. In connection with the delivery by the Master Servicer
of each Monthly Report, a Responsible Officer of the Issuer will make on behalf of the Issuer any
certifications designated to be made by the Issuer on the form of Monthly Report attached as an
exhibit to the Supplement.
(q)
Separate Existence
. The Issuer shall take such actions as are necessary on its
part to ensure that the facts and assumptions set forth in any Opinion of Counsel issued by counsel
for the Issuer in connection with the issuance of the Series 2010-1 Notes and relating to
substantive consolidation issues, and in any certificates accompanying any such Opinion of Counsel,
remain true and correct in all material respects at all times.
(r)
Repurchase of Receivables
. To the extent that any representation or warranty of
the Seller under the Issuer Purchase Agreement with respect to any Series Receivable, or, to the
extent that any representation or warranty in any certificate delivered by Imperial Holdings for,
and on behalf of, Seller (in its capacity as a sole shareholder, member or manager of the Seller),
in any case with respect to any Series Receivable and in connection with any of the opinions of
counsel delivered on the Closing Date, was in any case incorrect in any material respect when made
or deemed made, the Issuer shall in any case within five Business Days after learning thereof,
cause the Seller to (x) convey to the Issuer, in exchange for such affected Series Receivable, one
or more different Eligible Receivables (1) to be described on a List of Receivables delivered to
the Trustee, (2) having a Discounted Receivables Balance approximately equal to (but not less than)
that of the Receivable being so replaced (provided that for purposes of this clause, the Discounted
Receivables Balance of such Series Receivable being so replaced shall be calculated by treating any
past due Scheduled Payments thereon as if such payments were due on the date of such calculation
and the Discounted Receivables Balance of the replacement Series Receivable shall be calculated
without giving effect to any past due Scheduled Payments owing thereon) and (3) the Settlement
Annuity Provider(s) and/or Obligor(s), as applicable, related thereto shall have a rating of at
least Baa3 from Moodys, BBB- from S&P or B+ from A.M. Best (or any successor thereto) and/or
(y) repurchase, in cash delivered to the Series Collection Account for such Series, such affected
Series Receivable from the Issuer for an amount equal to the Discounted Receivables Balance (as
calculated by treating any past due Scheduled Payments thereon as if such payments were due on the
date of
such calculation) of such Series Receivable, whereupon, in any case, (a) the Series Receivable
being replaced or repurchased shall cease to be a Series Receivable and, in the case of
clause (x)
, any such new Receivable shall become a Series Receivable (it being agreed
that the incorrectness of any such representation or warranty, and the obligations of the Seller
pursuant to this
clause (s)
resulting therefrom, shall in each case, be determined without
giving effect to any limitation on the knowledge, best of knowledge or other similar limitation
on the knowledge
46
of the Seller, or Imperial Holdings, as applicable, contained in any such
representation or warranty) and (b) the Trustee shall release the Issuers interest in such
affected Series Receivable from the lien of the Trustee effected pursuant to the Granting Clause
and pursuant to the Supplement (and shall, at the Issuers expense, execute and deliver to the
Issuer all necessary UCC releases and other releases in respect thereof).
SECTION 2.05.
Representations and Warranties of the Issuer Relating to the Series Trust
Assets, Liens and Security Interests
. The Issuer hereby represents and warrants to the Trustee
and each of the Series 2010-1 Noteholders, as of the Closing Date (or, with respect to any
Receivable that is not a Series Receivable on such Closing Date, on the applicable Advance Date or
such later date as such Receivable shall become a Series Receivable in accordance with the terms
of this Agreement and the Supplement), that, with respect to itself and/or with respect to each
such Series Receivable constituting a Settlement Receivable:
(i) With respect to itself and/or with respect to each such Series Receivable constituting a
Settlement Receivable with respect to such Series:
(a) Such Series Receivable is an Eligible Settlement Receivable.
(b) Such Series Receivable is the legal, valid and binding obligation of each Obligor related
thereto, which obligation is, in each case, enforceable against each such Person in accordance with
its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws affecting creditors rights generally, now or
hereafter in effect, and except as such enforceability may be limited by general principles of
equity.
(c) Such Series Receivable has not, nor has any document in the related Settlement Package,
been satisfied, subordinated or rescinded.
(d) Such Series Receivable is unrelated to any Settlement Annuity Provider which on the
Closing Date (or, with respect to any Receivable that is not a Series Receivable on the Closing for
such Series on the applicable Advance Date or such later date as such Receivable became a Series
Receivable in accordance with the terms of this Agreement and the Supplement) is, or Claimant
which as of the applicable Cut-Off Date was the subject of an Insolvency Event (as determined
without giving effect to the thirty (30) day grace period for involuntary proceedings), unless,
with respect to a Claimant which was the subject of such an event, the bankruptcy court having
jurisdiction over such Claimant had approved the sale of such Series Receivable to the Seller.
(e) The Scheduled Payments with respect to the Settlement Agreement that is related to such
Series Receivable have no related guaranty, letter of credit providing support therefor, or
collateral security therefor, other than any guaranty, letter of credit, letter-of-credit rights,
supporting obligations or collateral security that has been assigned by the Claimant to Seller and
by the Seller to the Issuer.
(f) The Settlement Annuity Contract relating to such Series Receivable has been duly
authorized and issued and constitutes the legal, valid and binding obligation of the Settlement
Annuity Provider and is not subject to defense, rescission, reduction, set-off or other defenses.
47
(g) The Settlement Agreement under which such Series Receivable arises has been duly executed
by all parties thereto and constitutes the legal, valid and binding obligation of such parties
(except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors rights generally or general
principals of equity (regardless of whether such enforcement is considered in a proceeding in
equity or at law)) and is not subject to defense, rescission, reduction, set-off or other defenses;
provided that only such portion of such Receivable which is subject to such defense, rescission,
reduction, set-off or other defense shall be deemed to violate this
clause (g)
.
(h) Neither the Settlement Annuity Contract, if any, relating to such Series Receivable nor
the Settlement Agreement under which such Series Receivable arises contravenes in any material
respect any Requirements of Law applicable thereto.
(i) Neither the transfer of such Series Receivable from the Seller to the Issuer, nor the
grant of a security interest in such Series Receivable to the Trustee for the benefit of the
Secured Parties, would cause an Event of Default or a Potential Event of Default to occur.
(j) No effective financing statement or other instrument similar in effect that covers all or
part of such Series Receivable or any other Series Trust Assets relating thereto is on file in any
recording office except (A) to the extent relating to such Series Receivable, such as may be filed
(i) in favor of the Seller in accordance with the Settlement Purchase Agreement, (ii) by the Issuer
against the Seller pursuant to the Issuer Purchase Agreement (and which shall be assigned to the
Trustee), (iii) in favor of the Trustee, in accordance with this Agreement and the Supplement and
(vi) relating to any Permitted Lien, and (B) filings in respect of which duly executed UCC-3
termination statements or releases effective to terminate such filing against the Trust Assets
shall have been delivered to the Trustee.
(k) The Issuer has complied with all registration and licensing requirements in each state in
which it is required to be specially registered or licensed as a purchaser of such Series
Receivable.
(l) As of the Closing Date, the applicable Advance Date or such other date or such later date
as such Receivable became a Series Receivable in accordance with the terms of this Agreement and
the Supplement, unless otherwise permitted under the Operative Documents, no Person other than the
Issuer or, if Split Payments arise from such Series Receivable, the related Claimant, shall have
any interest therein or a right thereto.
(m) This Agreement and the Supplement create a valid and continuing security interest (as
defined in the UCC) in such Series Receivable (and any other Series Trust Assets relating thereto)
in favor of the Trustee on behalf of the Secured Parties which security interest is prior to all
other Liens and security interests and is enforceable as such against the Issuers creditors.
(n) The Issuer has received all consents and approvals required by the terms of such Series
Receivable to the pledge of such Series Receivable under the Supplement to the Trustee on behalf of
the Secured Parties.
48
(o) The Issuer has caused or will have caused on or prior to the Closing Date the filing of
all appropriate financing statements in the proper filing office in the appropriate jurisdictions
under applicable Requirements of Law in order to perfect the security interest in such Series
Receivable (and any other Series Trust Assets related thereto) granted to the Trustee on behalf of
the Secured Parties. Other than the security interest granted to the Trustee on behalf of such
Secured Parties under the Supplement and this Agreement, the Issuer has not pledged, assigned,
sold, granted a security interest in, or otherwise conveyed such Series Receivable (or any other
Series Trust Assets related thereto). The Issuer has not authorized the filing and is not aware of
any financing statements against the Issuer that include a description of such Series Receivable
(or any other Series Trust Assets related thereto) other than any financing statement (i) relating
to the security interest granted to the Trustee on behalf of the Secured Parties, (ii) that has
been terminated or (iii) relating to a Permitted Lien. The Issuer is not aware of any judgment or
tax lien filings against it.
(p) Any Transfer Order that has been issued with respect to a transfer of such Series
Receivable evidences the binding obligation of the related Obligor to make the related Scheduled
Payments to the Seller.
(q) The assignment of the related Claimants right to receive payments under such Series
Receivable does not contravene or conflict with any applicable Requirements of Law or any
contractual or other restriction, limitation or encumbrance, which, in any case, would materially
impair the enforceability of such assignment as against the creditors or any debtor-in-possession,
bankruptcy trustee, receiver or other similar Person of or for such Claimant.
(r) The Seller has delivered a letter, together with the Transfer Order, to either the
Settlement Annuity Provider or, if none, the Obligor with respect to such Series Receivable
directing such Settlement Annuity Provider or Obligor to make all Scheduled Payments with respect
to Series Receivable to the Seller.
(ii) With respect to each such Series Receivable constituting an Annuity Receivable with
respect to such Series, such Series Receivable is an Eligible Annuity Receivable.
The representations and warranties made pursuant to this
Section 2.05
as of the
Closing Date for each Series (or, with respect to any Receivable that is not a Series Receivable
with respect to such Series on the Closing Date, on the applicable Advance Date or such other date
as such Receivable shall become a Series Receivable in accordance with the terms of this
Agreement and the Supplement) shall survive such Closing Date (or, with respect to any
Receivable that is not a Series Receivable on the Closing Date, such Advance Date or other
date as such Receivable shall become a Series Receivable in accordance with the terms of this
Agreement and the Supplement). Upon discovery by the Issuer, the Master Servicer, the Back-up
Servicer, the Collateral Trustee or the Trustee of a breach of any of the foregoing representations
and warranties, the party discovering such breach shall give prompt written notice to the other
parties hereto. The Trustees and the Collateral Trustees obligations in respect of any such
breach are limited as provided in Article XI and Article XIV, respectively, of this Agreement.
49
SECTION 2.06.
Negative Covenants of the Issuer
. The Issuer hereby further covenants
that, until the satisfaction and discharge of this Indenture pursuant to
Section 12.01
:
(a)
No Liens
. Other than (a) certain Liens created pursuant to the Operative
Documents (all of which Liens have been assigned to the Trustee and/or Collateral Trustee pursuant
hereto), (b) the security interest granted pursuant to the Granting Clause and (c) any other
Permitted Liens, the Issuer will not sell, pledge, assign or transfer to any Person, or grant,
create, incur, assume or suffer to exist any Lien on, any Trust Asset, whether now existing or
hereafter created, or any interest therein, and the Issuer shall defend the Issuers right, title
and interest in and to, and the Trustees security interest in and to, the Trust Assets, whether
now existing or hereafter created, against all claims of third parties claiming through or under
the Issuer.
(b)
Activities of the Issuer
. The Issuer will not engage in, enter into or be a party
to any business, activity or transaction of any kind other than the businesses, activities and
transactions authorized in its Organizational Documents as in effect as of the Closing Date, or as
otherwise amended with the prior written consent of the Trustee and the Control Party.
(c)
Indebtedness
. Except for any Permitted Liens and except as contemplated herein
(including the Supplement hereto) with respect to any Advances under the Series 2010-1 Notes, the
Issuer will not create, incur or assume any Indebtedness or enter into any other securitization
transaction or any other off-balance sheet financing arrangement.
(d)
Guarantees
. The Issuer will not become or remain liable, directly or
contingently, in connection with any Indebtedness or other liability of any other Person, whether
by guarantee, endorsement (other than endorsements of negotiable instruments for deposit or
collection in the ordinary course of business), agreement to purchase or repurchase, agreement to
supply or advance funds, or otherwise.
(e)
Investments
. The Issuer will not make or suffer to exist any loans or advances
to, or extend any credit to, or make any investments (by way of transfer of property, contributions
to capital, purchase of stock or securities or evidences of indebtedness, acquisition of the
business or assets, or otherwise) in, any Affiliate or any other Person except for (i) purchases of
assets permitted pursuant to the Issuers Organizational Documents and (ii) loans, advances,
extensions, investments and contributions incurred in the ordinary course of business and not
exceeding $25,000 in the aggregate at any one time outstanding.
(f)
Extension or Amendment of Receivables
. Except as permitted by Section
3.01(d)
with respect to the Master Servicer, the Issuer will not extend, amend or otherwise
modify (or consent to, or fail to object to, any such extension, amendment or modification by the
Seller or the Master Servicer) the terms of any Receivable or rescind or cancel, or permit the
rescission or cancellation of, any Receivable except:
(i) as permitted under the Supplement; and
(ii) as ordered by a court of competent jurisdiction or other Governmental Authority.
50
(g)
Change in Credit Policy Manual
. The Issuer will not make, or consent or fail to
object to, any change in the Credit Policy Manual which change could be reasonably likely to
impair or delay the collectability of any Receivable or result in a deterioration in the
creditworthiness of the Obligors generally.
(h)
Deposits to Applicable Lock-Boxes, the Master Collection Account and the Series
Collection Account
. The Issuer will not deposit or otherwise credit, or cause to be so
deposited or credited, or consent or fail to object to any such deposit or credit, to any
Applicable Lock-Box Account, any Applicable Lock-Box, the Master Collection Account, cash or cash
proceeds other than Collections of Receivables and other Trust Assets; provided, that to the extent
any such other funds are so deposited on any date, it shall not constitute a breach of this
Section 2.06(h)
if such other funds are removed from such Applicable Lock-Box or such
account within two Business Days after such amounts were so deposited in such account. The Issuer
will not deposit or otherwise credit, or cause to be so deposited or credited, or consent or fail
to object to any such deposit or credit, to the Series Collection Account cash or cash proceeds
other than Collections of the Series Receivables and other Series Trust Assets;
provided
,
that to the extent that any such other funds are so deposited, it shall not constitute a breach of
this
Section 2.06(h)
if such funds are removed from such account within two Business Days
after so deposited in such account.
(i)
Receivables Not To Be Evidenced by Promissory Notes
. The Issuer will take no
action to cause any Receivable to be evidenced by any instrument (as defined in the UCC of the
jurisdiction the law of which governs the perfection of the interest in such Receivable created
hereunder), except in connection with its enforcement, in which event the Issuer shall deliver such
instrument to the Trustee, for the benefit of the Series 2010-1 Noteholders, as required pursuant
to
Section 2.01
.
(j)
Change in Name or Jurisdiction of Organization
. The Issuer will not (i) make any
change to its name or principal place of business or use any tradenames, fictitious names, assumed
names or doing business as names unless, at least thirty (30) days prior to the effective date of
any such name change, change in principal place of business, or use, the Issuer delivers to the
Trustee such financing statements (Forms UCC-1 and UCC-3) and such other documents or instruments
executed by the Issuer as shall be necessary to maintain the perfection of the Trustees ownership
or security interest in the Trust Assets free and clear of all other Liens other than Permitted
Liens or which the Trustee or the Control Party may reasonably request to reflect such change or
(ii) change its jurisdiction of organization unless the Trustee shall have
received from the Issuer, prior to such change, (A) those items described in clause (i)
hereof, and (B) prior to the effective date thereof, an Opinion of Counsel, in form and substance
reasonably satisfactory to the Trustee, as to such organization and the Issuers valid existence
and good standing and as to the matters referred to in
Section 2.03(e)
.
(k)
Issuer Purchase Agreement
. The Issuer will not (i) cancel or terminate the Issuer
Purchase Agreement or consent to or accept any cancellation or termination thereof, (ii) amend or
otherwise modify any term or condition of the Issuer Purchase Agreement or give any consent, waiver
or approval thereunder, (iii) waive any default under or breach of the Issuer Purchase Agreement or
(iv) take any other action under the Issuer Purchase Agreement not required by the terms thereof to
the extent that it could reasonably be expected to impair the
51
value of any Trust Asset or the
rights or interests of the Issuer thereunder or of the Trustee or any Series 2010-1 Noteholders
hereunder or thereunder. Notwithstanding the foregoing, the Issuer may amend, waive or otherwise
modify the Issuer Purchase Agreement if such amendment, waiver or modification is made in
accordance with
Section 13.01
hereof and the amendment provisions of the Supplement.
(l)
Organizational Documents
. Except as permitted by
Section 2.06(j)
or, if
such amendment could reasonably be expected to result in a Material Adverse Effect, as consented to
by the Control Party, the Issuer will not amend any of its Organizational Documents.
(m)
Maintenance of Separate Existence
. The Issuer shall take all reasonable steps to
continue its identity as a separate legal entity and to make it apparent to third Persons that it
is an entity with assets and liabilities distinct from those of PFSC, the Seller, the other
Affiliated Entities or any other Person, and that it is not a division of any of the Affiliated
Entities or any other Person. In that regard, and without limiting the foregoing in any manner,
the Issuer shall:
(1) maintain its limited liability company existence and make independent decisions with
respect to its daily operations and business affairs and, other than decisions of its managing
member pursuant to the terms of the limited liability company agreement of the Issuer, not be
controlled in making such decisions by any other Affiliated Entity or any other Person;
(2) maintain at least one independent manager or member which otherwise is not (or at any time
during the last five (5) years has not been) a direct, indirect or beneficial officer, general
partner, member, director, employee, affiliate, associate, creditor, customer or supplier of any of
the Affiliated Entities (unless acting as such in an independent capacity), nor a direct, indirect
or beneficial owner of the outstanding equity interest (including, limited partnership interests or
limited liability company interest) of any of the Affiliated Entities, nor a relative of any of the
foregoing, nor a trustee in bankruptcy for any of the foregoing;
(3) maintain separate and clearly delineated office space owned by it or evidenced by a
written lease or sublease (even if located in an office owned or leased by, or shared with, another
Affiliated Entity);
(4) maintain its assets in a manner which facilitates their identification and segregation
from those of any of the other Affiliated Entities;
(5) maintain a separate telephone number which will be answered only in its own name and
separate stationery and other business forms;
(6) conduct all intercompany transactions with the other Affiliated Entities on terms which
the Issuer reasonably believes to be on an arms-length basis;
(7) not guarantee any obligation of any of the other Affiliated Entities or any other Person,
nor have any of its obligations guaranteed by any other Affiliated Entity, or hold itself out as
responsible for the debts of any other Affiliated Entity or for the decisions or actions with
respect to the business and affairs of any other Affiliated Entity or any other Person, nor seek or
obtain credit or incur any obligation to any third-party based upon the creditworthiness or assets
of any other Affiliated Entity or any other Person;
52
(8) except as expressly otherwise permitted hereunder or under any of the other Operative
Documents, not permit the commingling or pooling of its funds or other assets with the assets of
any other Affiliated Entity;
(9) maintain separate deposit and other bank accounts to which no other Affiliated Entity
(other than as the Master Servicer) has any access;
(10) maintain financial records which are separate from those of the other Affiliated
Entities;
(11) compensate (either directly or through reimbursement of its allocable share of any shared
expenses) all employees, consultants and agents, and Affiliated Entities, to the extent applicable,
for services provided to the Issuer by such employees, consultants and agents or Affiliated
Entities, in each case, from the Issuers own funds;
(12) have agreed with each of the other relevant Affiliated Entities to allocate among
themselves shared overhead and corporate operating services and expenses which are not reflected in
the Master Servicing Fee (including without limitation the services of shared employees,
consultants and agents and reasonable legal and auditing expenses) on the basis of actual use or
the value of services rendered, and otherwise on a basis reasonably related to actual use or the
value of services rendered;
(13) pay for its own account for accounting and payroll services, rent, lease and other
expenses (or its allocable share of any such amounts provided by one or more other Affiliated
Entities) and not have such operating expenses (or the Issuers allocable share thereof) paid by
any of the Affiliated Entities, provided, that the Seller shall be permitted to pay the initial
organizational expenses of the Issuer;
(14) maintain adequate capitalization in light of its business and purpose;
(15) conduct all of its business (whether in writing or orally) solely in its own name through
its duly authorized officers, employees and agents;
(16) not make or declare any dividends or other distributions of cash or property to the
holders of its equity securities or make redemptions or repurchases of its equity
securities, in either case, on a periodic basis any more frequently than monthly or otherwise,
in certain other irregular cases, in accordance with appropriate corporate formalities and
consistent with sound business judgment; and all such distributions, redemptions or repurchases
shall only be permitted to be made hereunder out of Available Issuer Funds and only to the extent
that it is not violative of any applicable Requirements of Law and no Event of Default or Potential
Event of Default then exists or would result therefrom;
(17) maintain at least one employee (which employee may be shared with an Affiliate pursuant
to a written agreement allocating the compensation and other remuneration and benefits for such
employee as among such parties) in charge of day-to-day operations of the Issuer;
53
(18) otherwise practice and adhere to corporate formalities such as complying with its
Organizational Documents and member and manager resolutions, the holding of regularly scheduled
meetings of members and managers, and maintaining complete and correct books and records and
minutes of meetings and other proceedings of its members and managers; and
(19) not fail to maintain all policies and procedures or take or continue to take all actions
necessary or appropriate to ensure that all factual assumptions set forth in those certain Opinions
of Counsel of the Issuer delivered on the Closing Date concluding that sales of Receivables made
pursuant to the Issuer Purchase Agreement would constitute true sales and that the Issuer would not
be substantively consolidated with the Seller following the occurrence of an Insolvency Event with
respect to any such Person.
(n)
Merger and Other Transactions
. The Issuer will not (i) enter into any transaction
of merger or consolidation, or convey or otherwise dispose of any portion of its assets (except as
contemplated herein) to any Person or Person(s), (ii) terminate, liquidate or dissolve itself (or
suffer any termination, liquidation or dissolution), (iii) acquire any Person, or (iv) appoint any
Person other than the Seller or an Affiliate of the Seller to be the manager or controlling
co-manager of the Issuer.
(o)
Transactions with Affiliates
. The Issuer will not enter into, or be a party to,
any transaction with any of its Affiliates, except (i) the transactions contemplated hereby, by the
Issuer Purchase Agreement and (ii) any other transactions (including, without limitation, the lease
of office space or computer equipment or software by the Issuer from an Affiliate and the sharing
of employees and employee resources and benefits) (A) in the ordinary course of business or as
otherwise permitted hereunder, (B) pursuant to the reasonable requirements and purposes of the
Issuers business, (C) upon fair and reasonable terms (and, to the extent material, pursuant to
written agreements) that are consistent with market terms for any such transaction (including any
financing arrangements entered into pursuant to
Section 2.06(e)(ii)
), and (D) not
inconsistent with the factual assumptions set forth in the opinion letters referred to in
clause (19)
of
Section 2.06(m)
.
(p)
Change in Applicable Lock-Box Accounts and Instructions to Obligors
. The Issuer
will not add or terminate any institution as an Applicable Lock-Box Bank or add, terminate or
substitute any Applicable Lock-Box Account or any Applicable Lock-Box from
those listed in
Schedule III
hereto, except as otherwise permitted pursuant to
Section 4.02
or
Section 4.03
. The Issuer will not instruct any Obligor or Annuity
Provider to remit Collections to any Person, address or account other than (i) in the case of
Collections in respect of Annuity Receivables constituting Series Receivables, to an Annuity
Lock-Box, the Master Collection Account or the applicable Series Collection Account and (ii) in the
case of all other Collections, to the Settlement Lock-Box, the Master Collection Account or the
Series Collection Account.
(q)
Classification Election
. The Issuer will not elect to be classified as an
association taxable as a corporation for federal, state, local or other income tax purposes.
(r)
Activities of the Issuer
. The Issuer will not acquire any property with the
intent to realize a gain arising from market value changes, or otherwise engage in, enter into or
be a party
54
to any business, activity or transaction of any kind, or fail to take any action, which
would cause the Issuer to fail to satisfy the requirements of Rule 3a-7 promulgated under the
Investment Company Act.
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 3.01.
Acceptance of Appointment and Other Matters Relating to the Master
Servicer
.
(a) PFSC agrees to act as the Initial Master Servicer under this Agreement (subject to
Article X
) and shall act and be appointed as such under the Supplement without any further
action hereunder or thereunder (subject to
Article X
). The Series 2010-1 Noteholders, by
their acceptance of the Series 2010-1 Notes, consent to PFSC so acting as Master Servicer under
this Agreement and the Supplement.
(b) Each of the Trustee and the Issuer hereby appoints as its agent, for the benefit of the
Series 2010-1 Noteholders, separately, the Person appointed by the Trustee, at the direction of the
Control Party, or, in accordance with
Section 3.01(a)
, deemed appointed to act as Master
Servicer with respect to the Supplement (subject to
Article X
) to enforce the Trustees and
the Issuers respective rights and interests in, to and under the Receivables and the other Series
Trust Assets; and, in connection therewith, the Master Servicer shall take or cause to be taken all
such actions as may be necessary or advisable to collect each Receivable from time to time, all in
accordance with applicable Requirements of Law, with reasonable care and diligence, and in
accordance with the Credit Policy Manual. The Master Servicer shall exercise the same care and
apply the same policies with respect to the collection, administration and servicing of the
Receivables and other Trust Assets that it would exercise and apply if it owned such Receivables
and other Trust Assets.
(c) The Master Servicer shall have full power and authority, acting alone or through any party
properly designated by it hereunder, to do any and all things in connection with such servicing and
administration which it may deem necessary or desirable, subject to the limitations set forth
herein and in the Supplement. Without limiting the generality of the foregoing and subject to
Section 10.01
, the Master Servicer or its designee is hereby authorized and empowered, and
except in the case of
clause (vi)
below, shall be obligated, to (i) subject to the
last sentence of
Section 3.05(a)
and the terms of the Supplement, to withdraw, or
instruct the Collateral Trustee in writing to withdraw, from the Issuer Split Payment Account, the
amounts owing to the applicable Claimants and Individual Annuity Sellers in respect of Split
Payments, on the Series Receivables, and, in accordance with
Section 4.02(a)
, to remit or
cause the Collateral Trustee to remit such amounts to such Claimants and Individual Annuity
Sellers, such instructions to also be set forth in the Daily Reports to be delivered to the Trustee
and the Collateral Trustee in accordance with
Section 3.05(a)
, (ii) subject to, and in
accordance with, the terms of the Supplement, administer the Series Accounts, and (iii) to
subcontract at the Master Servicers expense with any other Person, with the prior consent of the
Control Party, for servicing, administering or collecting, in whole or in part, the Receivables
whereupon such other Person with which the Master Servicer so subcontracts shall be entitled such
rights and powers of the Master Servicer hereunder as may be delegated to it;
provided
,
however
, that the Master
55
Servicer shall remain fully liable for the performance of the
duties and obligations of the Master Servicer pursuant to the terms hereof. The Trustee shall
execute any documents furnished by the Master Servicer which are necessary or appropriate to enable
the Master Servicer to carry out its servicing and administrative duties hereunder and which are
acceptable in form and substance to the Trustee.
(d) No Master Servicer shall extend the maturity, adjust the Discounted Receivables Balance,
or otherwise modify the terms of any Receivable, except (i) as permitted pursuant to
Section
2.06(f)
, (ii) as permitted pursuant to the Supplement and (iii) unless otherwise provided in
the Supplement, to the extent no Servicer Default, Event of Default or Series Event of Default with
respect to any affected Series has occurred and is outstanding, the Master Servicer shall be
permitted to adjust the Discounted Receivables Balance of, or extend the time of payment for, any
Defaulted Receivable, all as it may deem appropriate to maximize the Collections thereon and all in
accordance with its ordinary business practices;
provided
, that except as otherwise
provided herein, such Receivable shall remain a Defaulted Receivable hereunder notwithstanding such
adjustments or modifications unless and until the same shall be Rehabilitated.
SECTION 3.02.
Servicing Compensation
. As full compensation for its servicing
activities hereunder, and as reimbursement for any expense incurred by it in connection therewith,
the Master Servicer shall be entitled to receive the Master Servicing Fee. Notwithstanding the
foregoing, the Master Servicer shall also be entitled to receive all reasonable and necessary
out-of-pocket expenses paid or incurred by the Master Servicer to fulfill its obligations under
this Agreement.
SECTION 3.03.
Representations and Warranties of the Master Servicer
. The Master
Servicer hereby makes, and each Successor Servicer by acceptance of its appointment hereunder shall
make, the following representations and warranties as of the date hereof or, if later, the date of
its appointment as a Master Servicer (and shall be deemed to remake such representations and
warranties on each day hereafter or thereafter during which such Person is acting as such):
(a)
Organization and Good Standing
. Such Master Servicer is a corporation, limited
liability company or partnership duly organized, validly existing and in good standing under the
applicable laws of its jurisdiction of formation and has full power and authority to own its
properties and conduct its business as such properties are presently owned and as such business is
presently conducted, and to execute, deliver and perform its obligations under the Operative
Documents to which it is a party or by which it is bound.
(b)
Due Qualification
. Such Master Servicer is duly qualified to do business and is
in good standing as a foreign corporation, limited liability company or partnership (or is exempt
from such requirements), and has obtained all necessary licenses and approvals, in each
jurisdiction in which failure to so qualify or to obtain such licenses or approvals has, or could
reasonably be expected to have, a Material Adverse Effect.
(c)
Due Authorization
. Such Master Servicers execution, delivery and performance of
the Operative Documents to which it is a party or by which it is bound have been duly
56
authorized by
all necessary corporate, limited liability company or partnership, as applicable, and shareholder,
member or partner, as applicable, actions on the part of such Master Servicer.
(d)
Binding Obligation
. Each of the Operative Documents to which it is a party or by
which it is bound constitutes a legal, valid and binding obligation of such Master Servicer
enforceable against it in accordance with its terms except as such enforceability may be limited by
applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors
rights generally, and except as such enforceability may be limited by general principles of equity
(whether considered in a suit at law or in equity).
(e)
No Conflict
. The Master Servicers execution and delivery of the Operative
Documents and the performance of the transactions contemplated by the Operative Documents to which
it is a party or by which it is bound, and fulfillment of the terms hereof and thereof applicable
to it, do not conflict with or violate any Requirements of Law applicable to the Master Servicer,
or conflict with, result in any breach of any of the enforceable terms and provisions of, or
constitute (with or without notice or lapse of time or both) a default under, any indenture,
contract, agreement, mortgage, deed of trust or other instrument to which the Master Servicer is a
party or by which it or its properties are bound.
(f)
No Proceedings
. There are no proceedings or investigations pending or, to the
best of the Master Servicers knowledge, threatened against it before any Governmental Authority
(i) asserting the illegality, invalidity or unenforceability, or seeking any determination or
ruling that would affect the legality, binding effect, validity or enforceability, of any of the
Operative Documents to which it is a party or by which it is bound, (ii) seeking to prevent the
consummation of any of the transactions contemplated by any of the Operative Documents to which it
is a party or by which it is bound, or (iii) seeking any determination or ruling that is reasonably
likely to have a Material Adverse Effect.
(g)
No Consents
. No authorization, consent, license, order or approval of or
registration or declaration with any Governmental Authority is required to be obtained, effected or
given by the Master Servicer in connection with the execution and delivery by it of any of the
Operative Documents or the performance by it of its obligations under the Operative Documents
to which it is a party or by which it is bound.
(h)
Information
. Each certificate, information, exhibit, financial statement,
document, book or record or report furnished by the Master Servicer to the Trustee, the Collateral
Trustee, the Issuer or any Series 2010-1 Noteholder in connection with this Agreement is accurate
in all material respects as of its date, and no such document contains any material misstatement of
fact or omits to state a material fact or any fact necessary to make the statements contained
therein not materially misleading as of its date.
The representations and warranties made pursuant to this
Section 3.03
shall survive
the date of the making thereof. Upon a discovery by the Issuer, such Master Servicer or the Trustee
of a breach of any of the foregoing representations and warranties which breach has, or could
reasonably be expected to have, a Material Adverse Effect, the party discovering such breach shall
give prompt written notice to the other parties. The Trustees obligations in respect of any such
breach are limited as provided in
Section 11.02
.
57
SECTION 3.04.
Covenants of the Master Servicer
. From the Closing Date until the
earlier of (a) the date of the satisfaction and discharge of this Indenture and (b) the Maturity
Date of the Series 2010-1 Notes, the Master Servicer hereby covenants, and each Successor Servicer
by its acceptance of its appointment hereunder shall be deemed to covenant, that:
(a)
Change in Accounts
. The Master Servicer will not (i) terminate or substitute the
Series Collection Account except as required pursuant to
Section 4.02
or (ii) add or
terminate any institution as an Applicable Lock-Box Bank or terminate or substitute any Applicable
Lock-Box Account or any Applicable Lock-Boxes from those listed in
Schedule III
hereto,
except as otherwise permitted pursuant to
Section 4.02
or
Section 4.03
. The Master
Servicer shall not instruct any Annuity Provider or Obligor to remit, or consent to any applicable
Claimants, Annuity Providers or Obligors instructions to remit or remittance of, Collections to
any Person, address or account other than (i) in the case of payments in respect of Annuity
Receivables, an Annuity Lock-Box covered by a Lock-Box Notice, the Master Collection Account or the
Series Collection Account and (ii) in the case of payments made in respect of Settlement
Receivables, the Settlement Lock-Box covered by a Lock-Box Notice, the Master Collection Account or
the Series Collection Account
(b)
Collections
. In the event that the Master Servicer or any Affiliate thereof
receives any Collections relating to any Receivables, the Master Servicer agrees to hold, or cause
such Affiliate to hold, all such Collections in trust and to deposit, or cause such Affiliate to
deposit, such Collections (i) in the case of Collections in respect of Annuity Receivables, to an
Annuity Lock-Box covered by a Lock-Box Notice, the Master Collection Account or the Series
Collection Account and (ii) in the case of all other Collections, to the Settlement Lock-Box
covered by a Lock-Box Notice, the Master Collection Account or the Series Collection Account, in
each case, as soon as practicable, but in no event later than two (2) Business Days after its
receipt thereof.
(c)
Preservation of Existence; Compliance with Requirements of Law
.
(i) Except as permitted pursuant to
Section 8.02
, the Master Servicer will preserve
and maintain its corporate or other existence, rights, franchises and privileges in the
jurisdiction of its organization, and qualify and remain qualified in good standing as a foreign
corporation or other type of organization, as applicable, in each jurisdiction where the failure to
maintain such qualification could reasonably be expected to have a Material Adverse Effect.
(ii) The Master Servicer will duly satisfy all obligations on its part to be fulfilled under
or in connection with each Series Receivable, will maintain in effect all qualifications required
under Requirements of Law in order properly to service such Series Receivable and will comply with
all other Requirements of Law in connection with servicing such Series Receivable.
(d)
Extension or Amendment of Receivables
. Except as permitted pursuant to
Sections 2.06(f)
and
3.01(d)
, the Master Servicer will not extend, amend or
otherwise modify (or consent or fail to object to any such extension, amendment or modification by
the Seller, the Seller or the Issuer of) the terms of any then existing Receivable.
58
(e)
Protection of Series 2010-1 Noteholders Rights
. Except as expressly permitted
hereunder or under the Supplement, the Master Servicer will not take any action which could
reasonably be expected to impair the rights of any of the Series 2010-1 Noteholders in any
Receivable or Trust Asset.
(f)
Deposits to Applicable Lock-Box Accounts, Applicable Lock-Boxes, the Master Collection
Account and the Series Collection Account
. The Master Servicer will not deposit or otherwise
credit, or cause to be so deposited or credited, or consent or fail to object to any such deposit
or credit, to any Applicable Lock-Box Account, any Applicable Lock-Box or the Master Collection
Account cash or cash proceeds other than Collections of Receivables and other Trust Assets;
provided that to the extent that any such other funds are so deposited on any date, it shall not
constitute a breach of this
Section 3.04(f)
if such other funds are removed from such
Applicable Lock-Box or such account within two (2) Business Days after such amounts were so
deposited in such account. The Master Servicer will not deposit or otherwise credit, or cause to
be so deposited or credited, or consent or fail to object to any such deposit or credit, to the
Series Collection Account cash or cash proceeds other than Collections of the Series Receivables
and other Series Trust Assets; provided that to the extent that any such other funds are so
deposited, it shall not constitute a breach of this
Section 3.04(f)
if such funds are
removed from such account within two (2) Business Days after so deposited in such account.
(g)
Receivables Not To Be Evidenced by Promissory Notes
. The Master Servicer will not
take any action to cause any Receivable to be evidenced by any instrument (as defined in the UCC
of the State the law of which governs the perfection of the interest in such Receivable created
hereunder), except in connection with its enforcement, in which event the Master Servicer shall
deliver such instrument to the Trustee as required pursuant to
Section 2.01
.
(h)
Reporting Requirements
.
(i) The Master Servicer will furnish to the Trustee, the Collateral Trustee and each Series
2010-1 Noteholder:
(1) promptly, and in any event within five (5) Business Days, after becoming aware thereof,
notice of the occurrence of any Event of Default, Potential Event of Default, Servicer Default or
event that, with the giving of notice or lapse of time or both, would constitute a Servicer
Default, and, in the case of such a Servicer Default or incipient Servicer Default, the statement
of the chief financial officer or president of such Master Servicer setting forth details of such
occurrence or event and the action which such Master Servicer has taken and proposes to take with
respect thereto; and
(2) as soon as possible and in any event within two (2) Business Days after acquiring
knowledge thereof, notice of the occurrence of any Material Adverse Effect.
(ii) Promptly following any request therefor by the Trustee, the Collateral Trustee or the
Control Party, the Master Servicer will furnish or cause to be furnished to the Trustee, the
Collateral Trustee or the Series 2010-1 Noteholders, as applicable, such information, documents,
records or reports respecting the Series Receivables, the other Series Trust Assets relating
thereto or the condition or operations, financial or otherwise, of the Issuer as the Trustee,
59
the
Collateral Trustee, the Control Party or any such Series 2010-1 Noteholder may from time to time
reasonably request.
(i)
Inspection of Books and Records
. The Trustee, the Collateral Trustee and/or the
Control Party (or if such Control Party is a designated percentage of the Series 2010-1
Noteholders, a representative of such Control Party), independent accountants appointed by, or
other agents of, any of the foregoing, and the Issuer shall have the right, upon reasonable prior
written notice to the Master Servicer and at the Issuers expense, to visit the Master Servicer to
(1) discuss the affairs, finances and accounts of the Master Servicer (as they relate to the Master
Servicers obligations under this Agreement and the other Operative Documents) with, and to be
advised as to the same by, its officers, and (2) examine the books of account and records of the
Master Servicer as they relate to the Trust Assets and to make or be provided with copies and
extracts therefrom, all at such reasonable times and intervals and to such reasonable extent during
regular business hours of the Master Servicer as the Trustee, the Collateral Trustee, such
designated representative of the Control Party or such accountants or agents appointed by any of
the foregoing, as applicable, may desire.
(j)
Fidelity Insurance
. The Master Servicer shall maintain, at its own expense (x)
all insurance required by federal and state law, including workers compensation insurance; (y)
errors and omissions insurance in an amount of at least $3,000,000; and (z) employee theft and
dishonesty insurance in an amount of at least $1,000,000. No provision of this
Section
3.04(j)
requiring such fidelity insurance shall diminish or relieve the Master Servicer from
its duties and obligations as set forth in this Agreement or any of the other Operative Documents.
The Master Servicer shall be deemed to have complied with this provision if one of its respective
Affiliates has such fidelity policy coverage and, by the terms of such fidelity policy, the
coverage afforded thereunder extends to the Master Servicer. Upon the request of the Trustee or
the Control Party,
the Issuer shall cause to be delivered to the Trustee or the Control Party, as applicable, a
certification evidencing coverage under such fidelity policy.
(k)
Transactions With the Issuer
. The Master Servicer shall at all times deal with
the Issuer in a manner consistent with
Section 2.06(m)
.
(l)
Compliance Certifications
. In connection with the delivery of each Monthly
Report, a Servicing Officer of the Master Servicer will certify on behalf of the Master Servicer to
the Trustee for the benefit of the Series 2010-1 Noteholders as to the contents of such Monthly
Report, the form of such certification to be set forth on the form of Monthly Report attached as
Exhibit F
hereto.
(m)
Business Day Notification
. The Master Servicer shall provide written notice to
the Trustee and the Collateral Trustee listing all days (other than any Saturday or Sunday) on
which national banking associations or state banking institutions in New York are authorized or
obligated by law, executive order or governmental decree to be closed, and the Master Servicer
shall promptly notify the Trustee and the Collateral Trustee of any modifications to such listing.
60
SECTION 3.05.
Reports and Records
.
(a)
Daily Report
. By 1:00 p.m. (New York City time) on each Business Day, the Master
Servicer shall deliver to the Trustee and the Collateral Trustee a Daily Report for the Series (A)
specifying the amounts of any Split Payments related to the Series and any Collections relating to
the Trust Assets received in the Master Collection Account on the preceding Business Day, the
Applicable Lock-Box and/or Applicable Lock-Box Account to which such amounts were initially
deposited, and the Series Receivables or Split Payments, as applicable, to which such amounts
relate, (B) directing the Collateral Trustee to (1) transfer to the Series Collection Account those
amounts deposited in the Master Collection Account in respect of Collections relating to the Trust
Assets and (2) transfer to the Issuer Split Payment Account those amounts deposited in the Master
Collection Account owing as Split Payments to Claimants and Individual Annuity Sellers, and (C) if
a Servicer Default shall have occurred and is continuing, directing the Collateral Trustee to
withdraw from the Issuer Split Payment Account and remit to the applicable Claimants and Individual
Annuity Sellers funds on deposit in the Issuer Split Payment Account owing in respect of Split
Payments.
(b)
Monthly Report
. By 3:00 p.m. (New York City time) on each Series Determination
Date preceding the applicable Payment Date, the Master Servicer shall deliver to the Collateral
Trustee, the Trustee, the Paying Agent and the Series 2010-1 Noteholders a Monthly Report for the
Series (including in electronic format or via secure web-access) in respect of the immediately
preceding Collection Period. The Collateral Trustee and the Collateral Trustee shall be entitled
to conclusively rely upon each such Monthly Report and the information contained therein.
(c)
Monthly Reconciliations
. On or prior to the 20
th
day of each month
(or, if such day is not a Business Day, on the immediately succeeding Business Day), the Master
Servicer shall deliver, or cause to be delivered, to the Trustee, the Collateral Trustee and the
Series 2010-1 Noteholders the certificate prepared by the Back-up Servicer pursuant to Exhibit A of
the Back-up Servicing Agreement, which certificate certifies that the Back-up Servicer has
verified all payment information received pursuant to Exhibit A of the Back-up Servicing Agreement
during the preceding calendar month. If the Master Servicer shall not have received such
certificate from the Back-up Servicer on or prior to the 10
th
day of each month, the
Master Servicer shall contact the Back-up Servicer and shall cause such certificate to be delivered
to the Master Servicer promptly, so that the Master Servicer is able to meet the delivery
obligations set forth in the first sentence of this subsection.
(d)
Limited Trustee Obligation
. Except as otherwise specified in the Supplement, the
Trustee shall have no obligation in respect of any Daily Report or Monthly Report received by it
pursuant to this
Section 3.05
other than to file and maintain a record of such reports in a
manner consistent with the standard of care with which it shall perform its duties hereunder as set
forth in
Section 11.01
.
SECTION 3.06.
Servicing Report of Independent Public Accountants
.
(a) On or before April 30
th
of each calendar year, beginning with April 30, 2011,
the Master Servicer shall cause a firm of nationally recognized independent public accountants (who
61
may also render other services to the Master Servicer or the Issuer) to furnish a report (addressed
to the Issuer, the Trustee, the Collateral Trustee, the Master Servicer and each Series 2010-1
Noteholder) to the Issuer, the Trustee, the Collateral Trustee, the Master Servicer and each Series
2010-1 Noteholder to the effect that they have examined certain documents and records relating to
the servicing of Receivables under this Agreement and the Supplement, compared the information
contained in the Master Servicers reports delivered pursuant to
Section 3.05(b)
during the
period covered by such report with such documents and records and that, on the basis of such
examination, such accountants are of the opinion that the servicing has been conducted in
compliance with the terms and conditions as set forth in
Articles III
and
IV
and
Section 8.06
of this Agreement and the applicable provisions of the Supplement, except for
such exceptions as they believe to be immaterial and such other exceptions as shall be set forth in
such statement.
(b) On or before April 30th of each calendar year, beginning with April 30, 2011, the Master
Servicer shall cause a firm of nationally recognized independent public accountants (who may also
render other services to the Master Servicer or the Issuer) to furnish a report (addressed to the
Issuer, the Trustee, the Collateral Trustee, the Master Servicer and each Series 2010-1 Noteholder)
to the Issuer, the Trustee, the Collateral Trustee, the Master Servicer and each Series 2010-1
Noteholder to the effect that they have compared the mathematical calculations of each amount set
forth in the Master Servicers reports delivered pursuant to
Section 3.05(b)
during the
prior calendar year with the Master Servicers computer reports which were the source of such
amounts and that on the basis of such comparison, such accountants are of the opinion that such
amounts are in agreement, except for such exceptions as they believe to be immaterial and such
other exceptions as shall be set forth in such statement.
SECTION
3.07.
Reserved
.
SECTION
3.08.
Adjustments
.
If the Master Servicer makes a mistake with respect to the amount of any Collection, Split
Payment or payment and deposits, pays or causes to be deposited or paid, an amount that is less
than or more than the actual amount thereof, the Master Servicer shall appropriately adjust the
amounts subsequently deposited into the Series Collection Account, Series Reserve Account, Series
Payment Account or Issuer Split Payment Account or paid out to reflect such mistake and account for
such adjustment in the Daily Reports for the date of such adjustment. Any Receivable in respect of
which a dishonored check is received shall be deemed not to have been paid.
SECTION 3.09.
Reserved
.
ARTICLE IV
RIGHTS OF SERIES 2010-1 NOTEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
SECTION 4.01.
Rights of Series 2010-1 Noteholders
. The Series 2010-1 Notes shall
represent debt of the Issuer secured by the Series Trust Assets and shall entitle the holders
thereof to receive, to the extent necessary to make the required payments with respect to the
Series 2010-1 Notes at the times and in the amounts specified in the Supplement, the portion of
Collections of the Series Receivables allocable to the Series 2010-1 Noteholders pursuant to this
62
Agreement and the Supplement from funds on deposit in the Series Collection Account and funds on
deposit in any Series Account.
SECTION 4.02.
Establishment of the Master Collection Account and the Applicable Lock-Box
Accounts; Establishment of the Issuer Split Payment Account.
(a) The Issuer has established prior to the Closing Date and shall maintain or cause to be
maintained, in the name of the Trustee, and on behalf of the Secured Parties, with an Eligible
Institution (x) a segregated non-interest bearing account accessible by the Collateral Trustee
(such account being the
Master Collection Account
and such institution holding such
account being the
Master Collection Account Bank
), such account bearing a designation
clearly indicating that the funds deposited therein are held in the name of the Trustee for the
benefit of the Secured Parties and (y) for the benefit of the Issuer, shall establish or cause to
be established on or prior to the Closing Date and shall maintain or cause to be maintained in the
name of the Collateral Trustee, with an Eligible Institution a segregated non-interest bearing
account accessible by the Collateral Trustee (such account being the
Issuer Split Payment
Account
), such account bearing a designation clearly indicating that the funds deposited
therein as described below are held for the benefit of the Issuer. All Collections of Receivables
that are deposited into Applicable Lock-Box Accounts shall be remitted to the Master Collection
Account on a daily basis. The Collateral Trustee shall possess all right, title and interest in
and to all funds from time to time on deposit in the Master Collection Account and in all proceeds
thereof. The Master Collection Account shall be under the sole dominion and control of the
Collateral Trustee, for the benefit of the Secured Parties;
provided
,
however
,
that, pursuant to the authority granted to the Master Servicer in
Section 3.01
, the Master
Servicer shall have the
power with respect to the amounts from time to time on deposit in the Issuer Split Payment
Account, (i) so long as no Servicer Default shall have occurred and be continuing, to withdraw
money from the Issuer Split Payment Account, or (ii) if a Servicer Default shall have occurred and
is continuing, to instruct the Collateral Trustee in writing to withdraw money from the Issuer
Split Payment Account, and, in each case, to remit or cause the Collateral Trustee to remit such
amounts so withdrawn to the applicable Claimants and Individual Annuity Sellers entitled thereto in
accordance with the terms of the relevant Settlement Purchase Agreements and Annuity Purchase
Agreements, as applicable, (but, in no event, later than two (2) Business Days after the withdrawal
of such funds from the Issuer Split Payment Account). Except as expressly provided in this
Agreement, the Master Servicer shall not have any claim or any right of setoff or bankers lien
against, or any right to otherwise deduct from, any funds held in the Master Collection Account for
any amount owed to it by the Trustee, the Collateral Trustee, the Issuer, any Series 2010-1
Noteholder or any Claimant or any Individual Annuity Seller.
If, at any time, the institution holding the Master Collection Account ceases to be an
Eligible Institution, the Issuer, for the benefit of the Secured Parties, shall (immediately if
such institution is Wilmington Trust Company or within sixty (60) days with respect to any other
institution) establish a new Master Collection Account in accordance with this Agreement meeting
the conditions specified above with an Eligible Institution, transfer any cash and/or any
investments held in the existing Master Collection Account or with respect thereto to such new
Master Collection Account and provide written notice to the Collateral Trustee referring to such
new Master Collection Account. From the date such new Master Collection Account is
63
established, it
shall be considered the Master Collection Account for all purposes of this Agreement and the
other Operative Documents.
If, at any time, the institution holding the Issuer Split Payment Account ceases to be an
Eligible Institution, the Issuer shall within sixty (60) days establish a new Issuer Split Payment
Account meeting the conditions specified above with an Eligible Institution, transfer any cash held
therein to such new Issuer Split Payment Account. From the date such new Issuer Split Payment
Account is established, it shall be the Issuer Split Payment Account for all purposes of this
Agreement and the other Operative Documents.
Funds on deposit in the Master Collection Account that are related to the Trust Assets and
Split Payments shall, at the directions of the Master Servicer in accordance with the information
set forth on the respective Daily Reports, be transferred to the Series Collection Account and
Issuer Split Payment Account, respectively, within one (1) Business Day after receipt of any
Collections in the Master Collection Account. Except as otherwise provided herein, funds on
deposit in the Master Collection Account shall not be invested.
The Master Servicer shall, or shall cause, the funds on deposit in the Issuer Split Payment
Account to be remitted to the applicable Claimant or Individual Annuity Seller in accordance with
the terms of the applicable Settlement Purchase Agreement or Annuity Purchase Agreement.
(b) The Seller has, prior to the execution and delivery of this Agreement, established (or
caused an Affiliated Entity to establish), and from time to time hereafter (in accordance with the
requirements of
Section 3.04(a)
) may establish (i) Settlement Lock-Box Accounts (each such
account, a Settlement Lock-Box Account) and Settlement Lock-Boxes (each such lock-box, a
Settlement Lock-Box) with one or more depository institutions maintained in the name of the
Trustee for the benefit of the Secured Parties (each such institution holding such an lock-box
account being a
Settlement Lock-Box Bank
) into which all Collections received by such
Settlement Lock-Box Bank (as holder of the related Settlement Lock-Box or the recipient of payments
by electronic funds transfers) in respect of Settlement Receivables are to be deposited by such
Settlement Lock-Box Bank by the close of business on each Business Day received, or on the next
Business Day if not received on a Business Day, or by the Master Servicer, the Issuer or the
Seller, as applicable, within one Business Day after such Persons receipt thereof and (ii) Annuity
Lock-Box Accounts (each such account, an Annuity Lock-Box Account) and Annuity Lock-Boxes (each
such lock-box, an Annuity Lock-Box) with one or more depository institutions maintained for the
benefit of the Secured Parties (each such institution holding such a lock-box being an
Annuity
Lock-Box Bank
) into which all Collections received by such Annuity Lock-Box Bank (as holder of
the Annuity Lock-Box or the recipient of payments by electronic funds transfers) in respect of
Annuity Receivables are to be deposited by such Annuity Lock-Box Bank by the close of business on
each Business Day received, or on the next Business Day if not received on a Business Day, or by
the Master Servicer, the Issuer or the Seller, as applicable, within two Business Days after such
Persons receipt thereof. The name and location of each Settlement Lock-Box and Annuity Lock-Box
is set forth on
Schedule III
attached hereto.
(c) Each Settlement Lock-Box Account, and each Annuity Lock-Box Account, and the related
Settlement Lock-Box and Annuity Lock-Box is subject to the applicable letter
64
attached as Exhibit
B-2 hereto (the
Lock-Box Notice
) which has been delivered to the Settlement Lock-Box
Bank, the Annuity Lock-Box Bank and the Collateral Trustee. Pursuant to the applicable Lock-Box
Notice, each Settlement Lock-Box and Annuity Lock-Box will have been assigned by the owners thereof
to the Collateral Trustee, for the benefit of the Secured Parties. Neither the Master Servicer,
the Seller nor the Issuer shall establish any institution as a Settlement Lock-Box Bank or an
Annuity Lock-Box Bank or substitute any Settlement Lock-Box Account or any Settlement Lock-Box or
Annuity Lock-Box Account or Annuity Lock-Box from those listed in
Schedule III
hereto
unless (i) the Master Control Party has provided prior written consent to such additional or
substituted Settlement Lock-Box Account or Settlement Lock-Box or Annuity Lock-Box Account or
Annuity Lock-Box and (ii) the Seller, the Issuer, and the applicable Settlement Lock-Box Bank or
Annuity Lock-Box Bank shall execute and deliver to the Trustee on or prior to the date upon which
Collections of the Series Receivables have been directed to be made to any such new Settlement
Lock-Box Account or Settlement Lock-Box or Annuity Lock-Box Account or Annuity Lock-Box, as
applicable, (1) a Lock-Box Notice substantially similar to the form attached as
Exhibit B
hereto with respect to each such Settlement Lock-Box Account and any related Settlement Lock-Box or
Annuity Lock-Box Account and any related Annuity Lock-Box or (2) if such Settlement Lock-Box Bank
or Annuity Lock-Box Bank has previously executed a Lock-Box Notice, an amendment thereto.
SECTION 4.03.
Series Accounts
.
(a) On or prior to the Closing Date, the Issuer shall establish and maintain with an Eligible
Institution, in the name of the Trustee, on behalf of the Secured Parties, the following segregated
bank accounts:
(i) a non-interest bearing account to be identified as the Series 2010-1 Collection Account
for Imperial Settlements Financing 2010, LLC (the
Series Collection Account
);
(ii) a non-interest bearing account to be identified as the Series 2010-1 Reserve Account for
Imperial Settlements Financing 2010, LLC (the
Series Reserve Account
);
(iii) a non-interest bearing account to be identified as the Series 2010-1 Payment Account
for Imperial Settlements Financing 2010, LLC (the
Series Payment Account
);
(iv) a non-interest bearing account to be identified as the Series 2010-1 Investment Proceeds
Account for Imperial Settlements Financing 2010, LLC (the
Series Investment Proceeds
Account
); and
(v) a non-interest bearing account to be identified as the Series 2010-1 Holdback Account for
Imperial Settlements Financing 2010, LLC (the
Series Holdback Account
).
Wilmington Trust Company hereby agrees to act as Securities Intermediary in respect of each
of the Series Accounts. The Securities Intermediary hereby expressly covenants that at all times
prior to the satisfaction and discharge of this Agreement in accordance with the terms
65
hereof: (i)
all matters relating to the Series Accounts shall be governed by the laws of the State of New York
and that for purposes of Article 8 of the New York UCC the State of New York is the Securities
Intermediarys jurisdiction; (ii) all property, including all cash and all Eligible Investments,
held by the Securities Intermediary on behalf of the Trustee in the Series Accounts shall be
treated as financial assets under and as defined in Article 8 of the New York UCC; (iii) the
Securities Intermediary will treat the Trustee as entitled to exercise the rights comprising the
investments or other financial assets credited to the Series Accounts and will at all times
identify the Trustee on the Securities Intermediarys records as the person having a security
entitlement against the Securities Intermediary; (iv) the financial assets credited to the Series
Accounts shall not be registered in the name of, payable to the order of, or specially indorsed to
Wilmington Trust Company except in its capacity as Securities Intermediary; (v) the Securities
Intermediary will in the ordinary course of its business maintain securities accounts for others
and will be acting in that capacity as Securities Intermediary hereunder; and (vi) the Securities
Intermediary will not comply with entitlement orders originated by any Person other than the
Trustee with respect to the investments or financial assets held in the Series Accounts;
provided
, the Trustee hereby directs the Securities Intermediary, which direction shall be
revocable by the Trustee at any time, to (x) comply with the instructions of the Collateral Trustee
(acting at the direction of the Master Servicer) with respect to Eligible Investments to the extent
such instructions are expressly contemplated hereby and (y) comply with the instructions of the
Master Servicer (or, during the continuance of a Servicer Default, the Collateral Trustee (acting
at the direction of the Master Servicer) with respect to any Series Holdback Account to the extent
such instructions are expressly contemplated by the Supplement.
(b) Out of the proceeds of the issuance and sale of the Series 2010-1 Notes and each Advance
thereunder, the Issuer and/or the Master Servicer shall instruct the Trustee and the Collateral
Trustee, prior to making any payments thereof to the Issuer, to deposit to the Series Reserve
Account an amount equal to the Specified Series Reserve Balance as of the Closing Date or related
Advance Date, as applicable.
(c) At the written direction of the Issuer (which may be a standing order), funds on deposit
in the Series Collection Account, the Series Reserve Account and the Series Investment Proceeds
Account shall be invested by the Collateral Trustee in Eligible Investments selected by the Issuer
(or, if not so instructed, then held by the Trustee on deposit in such account). All such Eligible
Investments shall be held by the Collateral Trustee in the name or for the benefit of the Trustee
for the benefit of the Secured Parties. All interest and other investment earnings (net of losses
and investment expenses, the
Investment Proceeds
) on funds on deposit in the Series
Accounts and all cash and other items on deposit in the Trustees Account, to the extent such cash,
other items and Eligible Investments therein are held by the Collateral Trustee or the Trustee for
the benefit of the Secured Parties, shall upon receipt thereof be deposited in the Series
Investment Proceeds Account and be distributed therefrom in accordance with the Supplement.
Neither funds deposited in the Series Payment Account nor funds deposited to any other Series
Account on the Business Day prior to a Payment Date shall be required to be invested overnight.
Any direction by the Issuer to invest funds on deposit in any applicable Series Account in
accordance with this Section shall be in writing (which may be a standing instruction) and shall
certify that the requested investment is an Eligible Investment which matures (and the proceeds of
which are distributable to the Collateral Trustee for deposit into the applicable Series Account)
no later than the Business Day immediately preceding the next
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Payment Date (or any such earlier
date specified in the Supplement as the latest date on which such Eligible Investment shall
mature). The Collateral Trustee shall have no obligation to invest and reinvest any cash held in
the applicable Series Account in the absence of timely and specific written investment direction
from the Issuer. In no event shall the Collateral Trustee be liable for the failure to be provided
with timely written investment directions, the selection of investments or for investment losses
incurred thereon by reason of investment performance, liquidation prior to stated maturity or
otherwise.
(d) If, at any time, the institution holding any Series Account ceases to be an Eligible
Institution, the Issuer, for the benefit of the Secured Parties, shall within thirty (30) days
establish a new such Series Account meeting the conditions specified in
Section 4.03(a)
with an Eligible Institution, transfer any cash and/or any investment held in such existing Series
Account or with respect thereto to such new Series Account. From the date such new Series Account
is established, it shall constitute such Series Account for all purposes hereunder.
SECTION 4.04.
Establishment of the Trustees Account
. On or prior to the Closing
Date, the Trustee shall establish and maintain or cause to be established and maintained in the
name of the Trustee, on behalf of the Series 2010-1 Noteholders, with an Eligible Institution, a
special account (the
Trustees Account
) for deposits by the Issuer or the Master Servicer
pursuant to the terms of the Supplement. The Trustees Account shall initially be account number
098074-005 established and maintained with
Wilmington Trust Company, 1100 North Market Street, Wilmington, Delaware 19890, Attention:
Corporate Capital Markets.
If, at any time, the institution holding the Trustees Account ceases to be an Eligible
Institution, the Trustee shall (immediately if such institution is Wilmington Trust Company or
within sixty (60) days with respect to any other institution) establish a new Trustees Account
with an Eligible Institution, transfer any cash and/or any investments held therein or with respect
thereto to such new Trustees Account. From the date such new Trustees Account is established, it
shall be the Trustees Account.
SECTION 4.05.
Other Payments
. Indemnification payments and other amounts not
constituting Collections received by the Trustee from time to time, if any, shall be paid by the
Trustee to the intended beneficiary of such payment or amount in accordance with the written
instructions of the Person remitting the relevant payment or amount to the Trustee, and in the
event that such Person shall fail to identify the intended beneficiary or to provide the Trustee
with written payment instructions, the Trustee shall hold such payment or amount in the Trustees
Account until such Person or the Master Servicer shall have provided the Trustee and the Collateral
Trustee with the necessary information to make a distribution thereof.
ARTICLE V
DISTRIBUTIONS AND REPORTS TO SERIES 2010-1 NOTEHOLDERS
(a)
Distributions
. Distributions shall be made to Series 2010-1 Noteholders and
certain other Persons, as set forth in the Supplement.
(b)
Reports
. Reports shall be provided to Series 2010-1 Noteholders and certain other
Persons as set forth in this Agreement and in the Supplement.
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(c)
Tax Forms
. In addition to such other reports that are required to be furnished to
each Series 2010-1 Noteholder under this Agreement and under the Supplement, for 2010 and each
calendar year thereafter, not later than January 31 or such other date as may from time to time be
required under the Code, the Collateral Trustee, or the Paying Agent on its behalf, shall furnish
to each Person that was a Series 2010-1 Noteholder during the preceding Fiscal Year a Form 1099 (or
such other form(s) as may be applicable pursuant to the Code from time to time) setting forth the
aggregate amounts paid to such Series 2010-1 Noteholder in respect of the Series 2010-1 Notes
during such Fiscal Year, together with such other customary information related to the Series
2010-1 Notes as may be necessary to enable such Persons to prepare their federal income tax
returns.
ARTICLE VI
THE SERIES 2010-1 NOTES
SECTION 6.01.
The Series 2010-1 Notes
.
(a)
The Series 2010-1 Notes Generally
. The Series 2010-1 Notes shall be issued in
fully registered form and shall be in substantially the form of the exhibits with respect thereto
attached to the Supplement and shall, upon receipt of an Order to such effect executed by the
Issuer, be authenticated and delivered by the Trustee to the Persons designated in such Order as
provided in
Section 6.02
. Series 2010-1 Notes shall be issued pursuant to the terms of the
Supplement. Each Series 2010-1 Note shall be executed by manual or facsimile signature on behalf
of the Issuer by a Responsible Officer. Series 2010-1 Notes bearing the manual or facsimile
signature of the individual who was, at the time when such signature was affixed, a Responsible
Officer authorized to sign on behalf of the Issuer shall not be rendered invalid, notwithstanding
that such individual thereafter ceased to be a Responsible Officer so authorized. Series 2010-1
Notes shall be issued in U.S. dollars and in minimum denominations of $500,000, and in integral
multiples of $1,000 in excess thereof. No Series 2010-1 Notes shall be entitled to any benefit
under this Agreement or the Supplement or be valid for any purpose, unless there appears on such
Series 2010-1 Note a certificate of authentication in substantially the form provided for herein
executed by or on behalf of the Trustee by a Responsible Officer of the Trustee, and such
certificate upon any Series 2010-1 Note shall be conclusive evidence, and the only evidence, that
such Series 2010-1 Note has been duly authenticated and delivered hereunder. All Series 2010-1
Notes shall be dated the date of their authentication.
(b)
U.S. Global Notes
. Beneficial interests in U.S. Global Notes sold or to be sold
in the United States or to U.S. Persons under Rule 144A of the Securities Act shall be represented
by one or more permanent U.S. Global Notes in the form and substance substantially similar to those
U.S. Global Notes attached to the Supplement as exhibits thereto. U.S. Global Notes shall be
marked with a legend indicating that investors in such Series 2010-1 Notes must be Qualified
Institutional Buyers. U.S. Global Notes shall be held by the Collateral Trustee as custodian for
the Common Depository on behalf of the Series 2010-1 Noteholders whose interests are evidenced by
such U.S. Global Notes. U.S. Global Notes shall be duly executed by the Issuer and authenticated
by or on behalf of the Trustee as provided herein.
(c)
Euroclear/Clearstream Global Notes
. Euroclear/Clearstream Global Notes shall be
issued in the form of Regulation S Global Notes. The Regulation S Global Notes shall be
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deposited
with the Collateral Trustee as custodian for the Common Depository and registered in the name of a
nominee for the Common Depository, for credit to the respective accounts of Euroclear and
Clearstream and for further credit to the accounts of the owners of beneficial interests in such
Series 2010-1 Notes (or to such other accounts as they may direct) at Euroclear or at Clearstream.
During the Restricted Period, the Euroclear/Clearstream Global Notes shall be represented by the
Temporary Regulation S Global Notes. A beneficial interest in a Temporary Regulation S Global Note
may only be transferred to a non-U.S. Person in an offshore transaction (within the meaning of
Regulation S under the Securities Act). Upon the later of (i) the receipt of a Regulation S
Transfer Certificate by the Note Registrar and Transfer Agent from the owner of the beneficial
interest in a Temporary Regulation S Global Note and (ii) the expiration of the Restricted Period
related to such Temporary Regulation S Global Note, a beneficial interest in such Temporary
Regulation S Global Note may be exchanged for a beneficial interest in a Permanent Regulation S
Global Note in an amount equal to the principal amount of such beneficial interest in such
Temporary Regulation S Global Note. Regulation S Global Notes shall be marked with a legend
indicating that investors in such Series 2010-1 Notes must constitute Persons allowed to purchase
such Series 2010-1 Notes under Regulation S of the Securities Act. Regulation S Global Notes shall
be duly executed by the Issuer and authenticated by or on behalf of the Trustee as herein provided.
(d)
Definitive Notes
. Definitive Notes shall only be issued to investors under the
terms and conditions of
Sections 6.03(c)
and
(d)
. No initial issuance of Series
2010-1 Notes under the Supplement shall involve the issuance of Definitive Notes.
(e)
Certificated Notes
. Interests in Series 2010-1 Notes sold or to be sold to
Institutional Accredited Investors or Affiliated Entities that are not Qualified Institutional
Buyers will be issued in the form of permanent certificated Series 2010-1 Notes in registered form.
SECTION 6.02.
Authentication of Series 2010-1 Notes
. In accordance with any Order
directing the Trustee to do so, the Trustee shall, subject to the conditions set forth in
Section 6.09(c)
, authenticate and deliver the Series 2010-1 Notes of each Series to the
Persons specified in such Order against payment to the Issuer of the purchase price therefor. The
Trustees form of authentication on all Series 2010-1 Notes shall be in substantially the following
form:
This is one of the Series 2010-1 Notes referred to in the within-mentioned Indenture.
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WILMINGTON TRUST COMPANY, not in its individual
capacity but solely as Trustee
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By:
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Authorized Officer
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provided
, that, if at any time the Trustee shall appoint an authenticating agent for
any of the Series 2010-1 Notes pursuant to
Section 6.08
, the Series 2010-1 Notes may bear,
in the place of the Trustees certificate of authentication, an alternate certificate of
authentication which shall be in substantially the following form:
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This is one of the Series 2010-1 Notes referred to in the within-mentioned Indenture.
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WILMINGTON TRUST COMPANY, not in its individual
capacity but solely as Trustee
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By:
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as Authenticating Agent
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By:
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Authorized Officer
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SECTION 6.03.
Transfer and Exchange of Series 2010-1 Notes
.
(a)
Generally
. The Collateral Trustee shall cause to be kept at the Collateral
Trustee Office to be maintained in accordance with the provisions of
Section 14.11
a
register (the
Note Register
) in which, subject to such reasonable regulations as it may
prescribe, a transfer agent and registrar (which may be the Collateral Trustee) (the
Note
Registrar and Transfer Agent
)
shall provide for the registration of the Series 2010-1 Notes and of transfers and exchanges
of the Series 2010-1 Notes as herein provided. The Note Registrar and Transfer Agent shall
initially be the Collateral Trustee. The Collateral Trustee (or, if the Collateral Trustee is then
acting as Note Registrar and Transfer Agent, the Control Party) may at any time revoke the
appointment of and remove any Person serving as Note Registrar and Transfer Agent if the Collateral
Trustee (or Control Party, as applicable) determines in its sole discretion that such Person failed
to perform its obligations under this Agreement in any material respect. Any Person serving as
Note Registrar and Transfer Agent shall be permitted to resign as Note Registrar and Transfer Agent
upon 30 days written notice to the Issuer, the Collateral Trustee and the Master Servicer;
provided
,
however
, that such resignation shall not be effective and such Person
shall continue to perform its duties as Note Registrar and Transfer Agent until the Collateral
Trustee (or Control Party, as applicable) has appointed a successor Note Registrar and Transfer
Agent reasonably acceptable to the Issuer and the Person so appointed has given the Issuer and the
Collateral Trustee written notice that it accepts the appointment.
Subject to the restrictions herein and in the applicable Series 2010-1 Note, upon surrender
for registration of transfer of any Series 2010-1 Note at any office or agency of the Note
Registrar and Transfer Agent maintained for such purpose, the Issuer shall execute, and the Trustee
shall authenticate and deliver, in the name of the designated transferee or transferees, one or
more new Series 2010-1 Notes (of the same Series and principal amount).
Subject to the terms and conditions of this
Article VI
and the Supplement, Series
2010-1 Notes may be exchanged for other Series 2010-1 Notes (of the same Series) of authorized
denominations of the same aggregate principal amount, upon surrender of the Series 2010-1 Notes to
be exchanged at any such office or agency. Whenever any Series 2010-1 Notes are so surrendered for
exchange, the Issuer shall execute, and the Trustee shall authenticate and deliver, the Series
2010-1 Notes which the Series 2010-1 Noteholder making the exchange is entitled to receive.
70
In addition to the other restrictions on transfer set forth herein, in the Supplement or in
any applicable Series 2010-1 Note, every Series 2010-1 Note presented or surrendered for
registration of transfer or exchange shall be accompanied by a written instrument of transfer in a
form satisfactory to the Trustee and the Note Registrar and Transfer Agent duly executed by the
Series 2010-1 Noteholder thereof or his attorney-in-fact duly authorized in writing.
Each Series 2010-1 Note shall be registered at all times as herein provided, and any transfer
or exchange of such Series 2010-1 Note will be valid for purposes hereunder only upon registration
of such transfer or exchange by the Note Registrar and Transfer Agent as provided herein.
No service charge shall be made for any registration of transfer or exchange of any Series
2010-1 Note, but the Note Registrar and Transfer Agent may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any such transfer or
exchange.
All Series 2010-1 Notes surrendered for registration of transfer or exchange, or for payment,
shall be canceled and disposed of in a manner satisfactory to the Trustee.
(b)
Limitations on the Initial Issuance and Sales or Transfers of Series 2010-1 Notes
.
Each purchaser of a Series 2010-1 Note on the Closing Date and any other purchaser of a Series
2010-1 Note (whether purchasing a Certificated Note or purchasing beneficial interests in a U.S.
Global Note or a Regulation S Global Note) after such Closing Date, will be required to acknowledge
that the Series 2010-1 Notes purchased by it have not been and will not be registered under the
Securities Act or under any states securities laws.
No Series 2010-1 Note may be sold or transferred (including, without limitation, by pledge or
hypothecation) unless such sale or transfer is exempt from the registration requirements of the
Securities Act and is exempt under applicable state securities laws. No Series 2010-1 Note may be
offered, sold or delivered until 40 days after its date of issue, within the United States or to,
or for the benefit of, U.S. Persons (as defined under Regulation S of the Securities Act), except
to (i) Qualified Institutional Buyers (in each case, for itself or for the account of another
Qualified Institutional Buyer) in accordance with Rule 144A of the Securities Act, (ii) Affiliated
Entities;
provided
that
the Collateral Trustee shall be entitled to request and
receive a favorable Opinion of Counsel of the type described in
Section 6.09(c)(v)
prior to
the consummation of any such sale or transfer or (iii) Institutional Accredited Investors that
have, prior to their purchase of any Series 2010-1 Notes (which shall be Certificated Notes),
delivered to the Collateral Trustee, the Issuer, the Holder of such Series 2010-1 Note and the Note
Registrar and Transfer Agent a signed letter in the form of
Exhibit C
(if such sale is on
the Closing Date) or
Exhibit D
(if such sale is after the Closing Date), as applicable,
and, in each case, is not acquiring the Series 2010-1 Notes for distribution in violation of the
Securities Act and is acquiring the Series 2010-1 Notes for its own account or for the account of
an Institutional Accredited Investor. The Series 2010-1 Notes may be sold or resold, as the case
may be, to non-U.S. Persons in offshore transactions in reliance on Regulation S under the
Securities Act. None of the Issuer, the Trustee or any other person shall be required to register
the Series 2010-1 Notes under the Securities Act or any state securities laws. The Trustee shall
be entitled to rely conclusively on any certificates provided and deemed representations made by
transferees of
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interests in Series 2010-1 Notes, and shall be entitled to presume conclusively the
continuing accuracy thereof from time to time, in each case without further inquiry or
investigation.
Notwithstanding anything to the contrary in this Indenture, (i) no transfer of a Series 2010-1
Note may be made if such transfer would require registration of the Issuer under the Investment
Company Act and (ii) in the event that the Issuer, in consultation with counsel, determines at any
time that an entitys holding of Series 2010-1 Notes may require the Issuer to register as an
investment company under the Investment Company Act, the Issuer will so notify such entity and
the Issuer will require such entity to transfer its Series 2010-1 Notes to such other entities as
may be agreed upon by the Issuer and such entity in accordance with the minimum denominations
relating to the Series 2010-1 Notes. The Note Registrar and Transfer Agent will maintain at its
expense an office or offices or agency or agencies where Series 2010-1 Notes may be surrendered for
registration of transfer or exchange.
Without limiting in any way the restrictions on transfers of interests in any Series of Series
2010-1 Notes in this Article VI, prior to (x) the date that is one year (or such shorter period of
time as permitted by Rule 144 under the Securities Act) after the later of the date of the original
issuance and the last date on which the Issuer or any of the Issuers affiliates was the
owner of any Series 2010-1 Notes of such Series (or any predecessor thereto) and (y) such
later date, if any, as may be required by any subsequent change in applicable law:
(i) no U.S. Note or any beneficial interest therein may be sold, transferred or otherwise
disposed of (any such sale, transfer or other disposition, as defined for purposes of this Section,
being called a
Sale
, with
Sell
and
Sold
having correlative meanings),
unless such Sale is made only in the United States of America and such Sale is not to an
affiliate (as defined in Rule 144 under the Securities Act) and is made to a transferee (A)(1)
that the Holder of such Series 2010-1 Note reasonably believes (x) is a Qualified Institutional
Buyer purchasing such Series 2010-1 Note for its own account or for the account of another Person
that is a Qualified Institutional Buyer in a transaction exempt from the registration requirements
of the Securities Act pursuant to Rule 144A thereunder and (y) is aware that the proposed Sale is
being made in reliance on Rule 144A under the Securities Act and pursuant to an available exemption
from the registration requirements of applicable state securities laws and (2) that has delivered a
Rule 144A Transfer Certificate to the Holder of such Series 2010-1 Note, the Collateral Trustee,
the Issuer and the Note Registrar and the Transfer Agent or (B)(1) that the Holder of such Series
2010-1 Note reasonably believes (x) is an Institutional Accredited Investor acquiring such Series
2010-1 Note for its own account or for the account of another Institutional Accredited Investor for
investment and (y) not with a view to, or for offer or sale in connection with, any distribution in
violation of the Securities Act and (2) that has, prior to the date of such transfer, delivered to
the Holder of such Series 2010-1 Note, the Collateral Trustee, the Issuer and the Note Registrar
and Transfer Agent, a signed letter in form of
Exhibit C
or
Exhibit D
, as
applicable, to this Agreement; and
(ii) none of the Regulation S Notes or any beneficial interest therein may be sold,
transferred or otherwise disposed of (any such sale, transfer or other disposition, as defined for
purposes of this Section, being called a
Sale
, with
Sell
and
Sold
having correlative meanings), unless such Sale is made only outside of the United States of America
pursuant to Rule 903 or Rule 904 of Regulation S, with such Series 2010-1 Notes initially being
issued in the
72
form of beneficial interests in Temporary Regulation S Global Notes. Such beneficial
interests may be exchanged for beneficial interests in a Permanent Regulation S Global Note
pursuant to
Section 6.01(c)
.
Regardless of whether such Sale occurs under clauses (i) or (ii) above, the Note Registrar and
Transfer Agent shall have received, prior to the date of any such proposed Sale, a written
instrument of Sale executed by the transferring Series 2010-1 Noteholder and the Collateral
Trustee.
Without limiting in any way
Section 6.09
,
Section 6.10
or any other Section of
this Agreement, the following restrictions shall apply to all Sales of the Series 2010-1 Notes
(whether such Sale is the initial issuance on the Closing Date or a subsequent sale on any other
date):
(i) Series 2010-1 Notes shall bear a legend regarding the restrictions on transfer as
set forth herein and the Supplement in substantially the form set forth in the form of the
applicable exhibits to the Supplement.
(ii) Except as otherwise provided in the Supplement, the Series 2010-1 Notes,
including, without limitation, beneficial interests in any U.S. Global Note or Regulation S
Global Note, shall not be Sold to any Person that is, and each purchaser by its purchase of
any Series 2010-1 Notes shall be deemed to have represented and covenanted that it is not,
and that it is not acquiring such Series 2010-1 Notes for or on behalf of, and will not
transfer such Series 2010-1 Notes to, any employee benefit plan as defined in Section 3(3)
of ERISA, or any plan as defined in Section 4975 of the Code, except that such purchase
for or on behalf of an employee benefit plan or plan shall be permitted to the extent
such Series 2010-1 Notes are considered indebtedness for purposes of ERISA and:
(A) to the extent such purchase is made by or on behalf of a bank collective
investment fund maintained by the purchaser in which no plan (together with any
other plans maintained by the same employer or employee organization) has an
interest in excess of ten percent (10%) of the total assets in such collective
investment fund, and the other applicable conditions of Prohibited Transaction Class
Exemption 91-38 issued by the Department of Labor are satisfied;
(B) to the extent such purchase is made by or on behalf of an insurance company
pooled separate account maintained by the purchaser in which, at any time while the
applicable Series 2010-1 Notes are outstanding, no plan (together with any other
plans maintained by the same employer or employee organization) has an interest in
excess of ten percent (10%) of the total of all assets in such pooled separate
account, and the other applicable conditions of Prohibited Transaction Class
Exemption 90-1 issued by the Department of Labor are satisfied;
(C) to the extent such purchase is made on behalf of a plan by (1) an
investment adviser registered under the Investment Advisers Act of 1940, as amended
(the
1940 Act
), that had total client assets under its management and
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control, as of the last day of its most recent fiscal year, in excess of $85.0
million ($50.0 million prior to the last day of the investment advisers first
fiscal year beginning on or after August 23, 2005) and had stockholders or
partners equity in excess of $1.0 million ($750,000 prior to the last day of the
investment advisers first fiscal year beginning on or after August 23, 2005), as
shown in its most recent balance sheet prepared in accordance with generally
accepted accounting principles, or (2) a bank as defined in Section 202(a)(2) of the
1940 Act with equity capital in excess of $1.0 million as of the last day of its
most recent fiscal year, or (3) a savings and loan association, the accounts of
which are insured by the Federal Savings and Loan Insurance Corporation, that has
been granted trust powers by the appropriate state or federal authority, and which
has, as of the last day of its most recent fiscal year, equity capital or net worth
in excess of $1.0 million, or (4) an insurance company which is qualified under the
laws of more than one state to manage, acquire or dispose of any assets of a pension
or welfare plan, which insurance company has as of the last of its most recent
fiscal year, net worth in excess of $1.0 million and which is subject to supervision
and examination by a State authority having supervision over
insurance companies and, in any case, such investment adviser, bank, savings
and loan association or insurance company is otherwise a qualified professional
asset manager, as such term is used in Prohibited Transaction Class Exemption 84-14
issued by the Department of Labor, and the assets of such plan when combined with
the assets of other plans established or maintained by the same employer (or
affiliate thereof) or employee organization and managed by such investment adviser,
bank, savings and loan association or insurance company, do not represent more than
twenty percent (20%) of the total client assets managed by such investment adviser,
bank, savings and loan association or insurance company at the time of the
transaction, and the other applicable conditions of such exemption are otherwise
satisfied;
(D) to the extent such plan is not subject to the provisions of Title I of
ERISA or Section 4975 of the Code, or in the case of a governmental or church plan,
is not subject to any federal or state law that is substantially similar to Section
406 of ERISA or Section 4975 of the Code;
(E) to the extent such purchase is made by or on behalf of an insurance company
using the assets of its general account, the reserves and liabilities for the
general account contracts held by or on behalf of any plan, together with any other
plans maintained by the same employer (or its affiliates) or employee organization,
do not exceed ten percent (10%) of the total reserves and liabilities of the
insurance company general account (exclusive of separate account liabilities), plus
surplus as set forth in the National Association of Insurance Commissioners Annual
Statement filed with the state of domicile of the insurer, in accordance with
Prohibited Transaction Class Exemption 95-60, and the other applicable conditions of
such exemption and otherwise satisfied;
(F) the extent such purchase is made by an in-house asset manager within the
meaning of Part IV(a) of Prohibited Transaction Class Exemption 96-
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23, such manager
has made or properly authorized the decision for such plan to purchase the
applicable Series 2010-1 Notes, under circumstances such that Prohibited Transaction
Class Exemption 96-23 is applicable to the purchase and holding of such Series
2010-1 Notes; or
(G) to the extent such purchase will not otherwise give rise to a transaction
described in Section 406 of ERISA, Section 4975(c)(1) of the Code or any other
federal or state law that is substantially similar to Section 406 of ERISA or
Section 4975(c)(1) of the Code for which a statutory or administrative exemption is
unavailable.
(iii) Each Holder of any Series 2010-1 Notes, including, without limitation, owners of
beneficial interests in U.S. Global Notes and Regulation S Global Notes, will notify any
prospective purchaser, pledgee or other transferee of such Series 2010-1 Notes from such
Holder of the transfer restrictions referred to in this
Section 6.03(b)
and in
Section 6.10
, and in the Supplement.
The Issuer shall make available to any selling Holder of U.S. Notes, including, without
limitation, any seller of a beneficial interest in a U.S. Global Note, and any prospective
transferee of such U.S. Notes, if such sale is being made pursuant to Rule 144A of the Securities
Act or Rule 501 of the Securities Act, such information as is required under Rule 144A(d)(4) or
Rule 501, as applicable, under the Securities Act in connection with the resale of any such Series
2010-1 Notes promptly after the same is requested. The Issuer shall make available to any selling
Holder of Regulation S Notes, including, without limitation, any seller of a beneficial interest in
a Regulation S Global Note, and any prospective transferee of such Regulation S Notes, such
information as is required under Regulation S under the Securities Act in connection with the
resale of any such Series 2010-1 Notes promptly after the same is requested.
Notwithstanding anything contained herein to the contrary (and subject to any additional
restrictions set forth in the Supplement), (i) no Issuer Interest Holder (including the Issuer) may
transfer any interest in the Issuer Interest with respect to any Series except (A) for fair
consideration (as determined in the reasonable judgment of such assigning Issuer Interest Holder)
and (B) upon not less than five (5) Business Days prior written notice to each Series 2010-1
Noteholder of the Series 2010-1 Notes and (ii) the Issuer may not transfer any interest in the
Issuer Interest unless it shall have delivered to each such Series 2010-1 Noteholder a new Opinion
of Counsel in form and substance reasonably satisfactory to each such Series 2010-1 Noteholder
confirming that the sale of the Series Settlement Receivables with by the Seller to the Issuer
constitutes an absolute transfer of such Receivables after giving effect to any such transfer of an
Issuer Interest. On or prior to the effectiveness of any transfer by any Issuer Interest Holder of
all or a portion of its interest in the Issuer Interest with respect to any Series, such assigning
Issuer Interest Holder shall deliver to the Trustee and the Collateral Trustee notice of such
assignment and of its and its assignees respective percentage interests in the Issuer Interest
(after giving effect to such assignment).
Each investor in a Regulation S Note shall acknowledge, prior to its investment therein, that
such Series 2010-1 Note shall initially be represented by a Temporary Regulation S Global Note and
that transfers thereof or any interests or participations therein are restricted as described
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in
this Agreement and the Supplement. Each Temporary Regulation S Global Note shall bear a legend to
the following effect unless the Issuer determines otherwise, consistent with applicable law:
THIS REGULATION S GLOBAL NOTE IS A TEMPORARY REGULATION S GLOBAL NOTE FOR PURPOSES OF
REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED. NEITHER THIS
TEMPORARY GLOBAL NOTE NOR ANY INTEREST HEREIN MAY BE OFFERED, SOLD OR DELIVERED, EXCEPT AS
PERMITTED UNDER THE INDENTURE DESCRIBED BELOW.
PRIOR TO THE EXPIRATION OF THE 40-DAY DISTRIBUTION COMPLIANCE PERIOD (AS DEFINED IN
REGULATION S UNDER THE SECURITIES ACT OF 1933 (THE SECURITIES ACT)), THIS NOTE OR ANY
BENEFICIAL INTEREST OR PARTICIPATION HEREIN MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, A U.S. PERSON
WITHIN THE MEANING OF REGULATION S, EXCEPT TO A PERSON REASONABLY BELIEVED TO BE A QUALIFIED INSTITUTIONAL BUYER
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT (RULE 144A)) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144A, OR OTHERWISE IN ACCORDANCE WITH REGULATION S AND SUBJECT TO
THE ISSUERS AND THE COLLATERAL TRUSTEES RIGHT PRIOR TO ANY SUCH TRANSFER TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO
THE ISSUER AND THE COLLATERAL TRUSTEE.
THIS NOTE (OR A BENEFICIAL INTEREST HEREIN) MAY NOT BE TRANSFERRED UNLESS, AFTER GIVING
EFFECT TO THE TRANSFER, THE TRANSFEREE IS HOLDING A PRINCIPAL AMOUNT WHICH IS EQUAL TO
$500,000 OR INTEGRAL MULTIPLES OF $1,000 IN EXCESS THEREOF.
Holders of beneficial interests in Temporary Regulation S Global Notes may not receive
distributions in respect thereof or exchange such interests for interests in Permanent Regulation S
Global Notes unless such distribution or exchange complies with the terms of
Section
6.01(c)
.
(c)
Definitive Notes
. No interest in a U.S. Global Note or a Regulation S Global Note
shall be converted into or otherwise exchanged for a Definitive Note unless (i) the Common
Depository, Euroclear or Clearstream (or its nominee), as applicable, or the Issuer advises the
Trustee and the Collateral Trustee in writing that the Common Depository, Euroclear or Clearstream,
as applicable, is no longer willing, qualified or able to discharge properly its responsibilities
as depository with respect to U.S. Global Notes or Regulation S Global Notes, as applicable, and
the Issuer is unable to locate a qualified successor, (ii) the Issuer, at its sole option, elects
to terminate a book entry system through the Common Depository, Euroclear or Clearstream, as
applicable, or (iii) after the occurrence of a Series Event of Default, Series 2010-1 Noteholders
owning U.S. Global Notes or Regulation S Global Notes, as applicable, representing sixty-six and
two-thirds percent of the Aggregate Principal Balance of such U.S.
76
Global Notes or the Regulation S
Global Notes, as applicable, advise the Trustee and the Collateral Trustee in writing that the
continuation of a book entry system through the Common Depository, Euroclear or Clearstream (or a
successor thereto), as applicable, is no longer in the best interests of the Series 2010-1
Noteholders. Upon the occurrence of any of the foregoing events, the Collateral Trustee shall
notify, through the Common Depository, Euroclear or Clearstream, as applicable, all Common
Depository, Euroclear or Clearstream participants who have ownership of U.S. Global Notes or
Regulation S Global Notes, as applicable, as indicated in the records of the Common Depository,
Euroclear or Clearstream, as applicable, of the occurrence of such event and the availability
through the Common Depository, Euroclear or Clearstream, as applicable, of Definitive Notes in
exchange for such Global Notes. No interest in a Definitive Note shall be converted into or
otherwise exchanged for a U.S. Global Note or a Regulation S Global Note or any interest therein.
(d)
Exchange/Conversion of U.S. Global Notes and Regulation S Global Notes to Definitive
Notes
. Any holder of a beneficial interest in a U.S. Global Note or Regulation S Global Note
that is entitled, pursuant to
Section 6.03(c)
, to receive a Definitive Note evidencing its
investment in Series 2010-1 Notes may effect the issuance of such Definitive Note in its favor
only if: (i) the Common Depository, Euroclear, Clearstream or the Issuer, as applicable,
instructs the Note Registrar and Transfer Agent to issue such Definitive Note in an amount equal to
the corresponding beneficial interest in the U.S. Global Note or Regulation S Global Note, as
applicable and (ii) the Common Depository, Euroclear, Clearstream or the Issuer, as applicable,
confirms that the principal amount of the corresponding U.S. Global Note or Regulation S Global
Note, as applicable, has been decreased by such amount. Upon satisfaction of the foregoing
conditions, the Note Registrar and Transfer Agent shall record such conversion or exchange in the
Note Register, and the Issuer shall deliver to the person specified in such instructions a duly
authenticated Definitive Note in a principal amount equal to the amount specified in the
instructions received pursuant to clause (i) above.
(e)
Exchange of Interest in Regulation S Global Note for Interest in U.S. Global Note
.
If a holder of a beneficial interest in a Regulation S Global Note wishes to transfer all or a part
of its interest in such Regulation S Global Note to a Person who wishes to take delivery thereof in
the form of a beneficial interest in a U.S. Global Note, such holder may, subject to the terms
hereof and the rules and procedures of Euroclear, Clearstream or the Common Depository, as the case
may be, exchange or cause the exchange of such interest for an equivalent beneficial interest in a
U.S. Global Note of the same Series. Upon receipt by the Note Registrar and Transfer Agent of (i)
instructions from Euroclear, Clearstream or the Common Depository, as the case may be, directing
the Note Registrar and Transfer Agent to cause such U.S. Global Note to be increased by an amount
equal to such beneficial interest in such Regulation S Global Note but not less than the minimum
denomination applicable to the Series 2010-1 Notes, and (ii) a Rule 144A Transfer Certificate from
such prospective transferee, then Euroclear, Clearstream or the Note Registrar and Transfer Agent,
as the case may be, will instruct the Common Depository to reduce such Regulation S Global Note by
the aggregate principal amount of the interest in such Regulation S Global Note to be transferred
and increase the U.S. Global Note specified in such instructions by an amount equal to such
reduction in such principal amount of the Regulation S Global Note.
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(f)
Exchange of Interest in U.S. Global Note for Interest in Regulation S Global Note
.
If a holder of a beneficial interest in a U.S. Global Note wishes to transfer all or a part of its
interest in such U.S. Global Note to a Person who wishes to take delivery thereof in the form of a
beneficial interest in a Regulation S Global Note, such holder may, subject to the terms hereof and
the rules and procedures of Euroclear, Clearstream, or the Common Depository, as the case may be,
exchange or cause the exchange of such interest for an equivalent beneficial interest in a
Regulation S Global Note of the same Series. Upon receipt by the Note Registrar and Transfer Agent
of (i) instructions from Euroclear, Clearstream, or the Common Depository, as the case may be,
directing the Note Registrar and Transfer Agent to cause such Regulation S Global Note to be
increased by an amount equal to such beneficial interest in such Regulation S Global Note but not
less than the minimum denomination applicable to the related Series of Series 2010-1 Notes to be
exchanged, and (ii) a Regulation S Transfer Certificate from such prospective transferee, then
Euroclear, Clearstream or the Note Registrar and Transfer Agent, as the case may be, will instruct
the Common Depository to reduce such U.S. Global Note to be transferred and increase the Regulation
S Global Note specified in such instructions by an amount equal to such reduction in the principal
amount of the U.S. Global Note.
(g)
Global Note Transfers
. Transfers between participants in the Common Depository
will be effected in the ordinary way in accordance with their respective rules and operating
procedures; provided that any transfer to a prospective transferee shall only be made upon receipt
by the Note Registrar and the Transfer Agent from such prospective transferee of a Rule 144A
Transfer Certificate (in the case of a transfer pursuant to Rule 144A of the Securities Act) or
Regulation S Transfer Certificate (in the case of a transfer pursuant to Regulation S of the
Securities Act).
SECTION 6.04.
Mutilated, Destroyed, Lost or Stolen Series 2010-1 Notes
. If (a) any
mutilated Series 2010-1 Note is surrendered to the Note Registrar and Transfer Agent, or the Note
Registrar and Transfer Agent receives evidence to its satisfaction of the destruction, loss or
theft of any Series 2010-1 Note; provided that a written statement of such destruction, loss or
theft from any institutional Series 2010-1 Noteholder having a net worth at least equal to
$5,000,000 shall constitute satisfactory evidence thereof, and (b) there is delivered to the Note
Registrar and Transfer Agent, the Trustee and the Issuer such indemnity as may be required by them
to save each of them harmless, then, in the absence of notice to the Note Registrar and Transfer
Agent, the Trustee or the Issuer that such Series 2010-1 Note has been acquired by a bona fide
purchaser, the Issuer shall execute, and upon the request of the Issuer, the Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Series 2010-1 Note, a new Series 2010-1 Note of like Series, tenor and fractional undivided
interest in such Series. In connection with the issuance of any new Series 2010-1 Note under this
Section 6.04
, the Trustee or the Note Registrar and Transfer Agent may require the payment
by the Series 2010-1 Noteholder of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto. Any duplicate Series 2010-1 Note issued pursuant to this
Section 6.04
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all Series 2010-1 Notes of the same Series that are duly issued
hereunder, as if originally issued, whether or not the lost, stolen or destroyed Series 2010-1 Note
shall be found at any time.
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SECTION 6.05.
Persons Deemed Owners; Deemed Representations by Series 2010-1
Noteholders
.
(a) At all times prior to due presentation of a Series 2010-1 Note for registration of
transfer, the Issuer, the Trustee, the Paying Agent, the Note Registrar and Transfer Agent and any
agent of any of them shall treat the Person in whose name any Series 2010-1 Note is registered as
the owner of such Series 2010-1 Note for all purposes whatsoever (such determination to be made for
purposes of distributions pursuant to the terms hereof and of the Supplement as of the applicable
Series Determination Date for the Series 2010-1 Notes), and neither the Issuer, the Trustee, the
Paying Agent, the Note Registrar and Transfer Agent nor any agent of any of them shall be affected
by any notice to the contrary. Notwithstanding the foregoing, in determining whether the requisite
Series 2010-1 Noteholders have given any request, demand, authorization, direction, notice, consent
or waiver hereunder, including without limitation authorizing or consenting to any amendment or
waiver pursuant to
Section 13.01
, and, if applicable, the Supplement, Series 2010-1 Notes
owned by any Affiliated Entity shall be disregarded and deemed not to be outstanding, except that,
in determining whether the Issuer, the Collateral Trustee, the Paying Agent, the Note Registrar and
Transfer Agent and the Trustee
shall be protected in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Series 2010-1 Notes as to which the Note Registrar and Transfer Agent have
actual knowledge of such ownership shall be so disregarded. Series 2010-1 Notes so owned which
have been pledged in good faith shall not be disregarded and may be regarded as outstanding if the
pledgee establishes to the satisfaction of the Issuer and the Trustee the pledgees right to so act
with respect to such Series 2010-1 Notes and that the pledgee is not an Affiliated Entity.
(b) Each Person who invests in the Series 2010-1 Notes will be deemed to have represented and
agreed, in addition to those investor representations and warranties set forth herein, in the
Supplement and in any Rule 144A Transfer Certificate or Regulation S Transfer Certificate furnished
by such Person (and, with respect to an Institutional Accredited Investor, in the letter executed
thereby in the form of
Exhibit C
or
Exhibit D
), as follows:
(i) Neither the Issuer nor any affiliate thereof is acting as a fiduciary or financial or
investment advisor for such Person;
(ii) Such Person is (A) a Qualified Institutional Buyer, (B) an Institutional Accredited
Investor, (C) not a U.S. person under Regulation S of the Securities Act or (D) an Affiliated
Entity;
(iii) With respect to Regulation S Global Notes, such Person is purchasing such Series 2010-1
Notes in an offshore transaction that is not subject to the registration requirements of the
Securities Act pursuant to Regulation S thereunder;
(iv) Such Person is not a participant-directed employee plan, such as a 401(K) plan;
(v) With respect to U.S. Global Notes, such Person is a Qualified Institutional Buyer acting
for its own account or for the account of another Qualified Institutional Buyer;
79
(vi) Such Person was not formed for the specific purpose of investing in the Issuer or the
Series 2010-1 Notes; and
(vii) Such Person, if the transferor of a Series 2010-1 Note, shall notify the related
transferee of the foregoing prior to its purchase of a Series 2010-1 Note.
SECTION 6.06.
Appointment of Paying Agent
. The Paying Agent shall make distributions
to Series 2010-1 Noteholders, the Master Servicer, the Back-up Servicer, the Trustee and the
Collateral Trustee, from the Series Payment Account pursuant to the terms of the Supplement and
shall report the amounts of such distributions to the Trustee. So long as any
Euroclear/Clearstream Global Notes remain outstanding, the Issuer shall cause the Paying Agent to
maintain at least one office in Europe. Any Paying Agent shall have the power, revocable by the
Issuer, to withdraw funds from the Series Collection Account, and the Series Payment Account, in
each case, for the purpose of making the distributions referred to above. The Issuer may revoke
such power and remove the Paying Agent if the Issuer determines in its sole discretion that the
Paying Agent shall have
failed to perform its obligations under this Agreement in any material respect. The Paying
Agent shall initially be the Collateral Trustee. In the event that the Collateral Trustee shall no
longer be the Paying Agent, the Issuer shall appoint a successor to act as Paying Agent (which
shall be a bank or trust company). The Collateral Trustee shall cause each successor Paying Agent
or additional Paying Agent to execute and deliver to the Trustee an instrument in which such
successor or additional Paying Agent shall agree with the Trustee that, as Paying Agent, such
successor or additional Paying Agent will hold all sums, if any, held by it for payment to the
Series 2010-1 Noteholders, the Master Servicer, the Back-up Servicer, the Trustee and the
Collateral Trustee in trust for the benefit of the Persons entitled to payment thereof, until such
sums shall be paid to such Persons. The Paying Agent shall return all funds remaining unclaimed
for six months or more to the Trustee. The Trustee shall retain such unclaimed amounts solely for
the account of the affected Series 2010-1 Noteholder in the Series Collection Account until the
Maturity Date would otherwise have occurred but for such unclaimed payments by the Series 2010-1
Noteholders at which time such unclaimed funds will be distributed to the Issuer and the affected
Series 2010-1 Noteholder shall look solely to the Issuer for reimbursement thereof. Upon removal
of a Paying Agent, such Paying Agent shall also return all funds in its possession to the Trustee.
In the event a Paying Agent resigns or is removed, such Paying Agent shall continue to act as the
Paying Agent until receipt of written notice that the Issuer has appointed a successor.
The Trustee agrees to pay any Paying Agent which the Issuer from time to time may appoint
reasonable compensation for such Paying Agents services under this
Section 6.06
, which fee
shall be payable by the Trustee out of the Trustee Fee payable to it in accordance with the
Supplement.
The provisions of
Sections 14.01
,
14.02
,
14.03
and
14.04
shall
apply to the Collateral Trustee also in its role as Paying Agent, for so long as the Collateral
Trustee shall act as Paying Agent.
SECTION 6.07.
Access to List of Series 2010-1 Noteholders Names and Addresses
. The
Collateral Trustee will furnish or cause to be furnished by the Note Registrar and Transfer Agent a
list of names and addresses of the Series 2010-1 Noteholders (i) to the Paying
80
Agent, not more than
five Business Days after each Record Date, (ii) to the Paying Agent, not more than five days after
each Special Record Date and (iii) to the Master Servicer, any Series 2010-1 Noteholder, the
Issuer, the Trustee or the Paying Agent, within five Business Days after receipt by the Collateral
Trustee of a written request therefor from the Master Servicer, the Issuer, such Series 2010-1
Noteholder, the Trustee or the Paying Agent, respectively;
provided
,
however
, that
so long as the Paying Agent is the Note Registrar and Transfer Agent, no such list shall be
required to be furnished pursuant to clauses (i) and (ii) above.
Every Series 2010-1 Noteholder, by receiving and holding a Series 2010-1 Note, agrees that
none of the Collateral Trustee, the Trustee, the Note Registrar and Transfer Agent, the Issuer, the
Master Servicer, the Back-up Servicer, the Seller or any of their respective agents, shall be held
accountable by reason of the disclosure of any such information as to the names and addresses of
the Series 2010-1 Noteholders hereunder, regardless of the sources from which such information was
derived.
SECTION 6.08.
Authenticating Agent
.
(a) The Trustee may appoint one or more authenticating agents with respect to the Series
2010-1 Notes which shall be authorized to act on behalf of the Trustee in authenticating such
Series 2010-1 Notes in connection with the issuance, execution, delivery, registration of transfer,
exchange or repayment of such Series 2010-1 Notes. Whenever reference is made in this Agreement to
the authentication of any Series 2010-1 Notes by the Trustee or the Trustees certificate of
authentication, such reference shall be deemed to include authentication on behalf of the Trustee
by an authenticating agent and a certificate of authentication executed on behalf of the Trustee by
an authenticating agent. Each authenticating agent must be acceptable to the Trustee and the
Issuer.
(b) Any institution succeeding to the corporate agency business of an authenticating agent
shall continue to be an authenticating agent without the execution or filing of any power or any
further act on the part of the Trustee or such authenticating agent.
(c) An authenticating agent may at any time resign by giving written notice of resignation to
the Trustee and to the Issuer. The Trustee or the Issuer may at any time terminate the agency of
an authenticating agent by giving notice of termination to such authenticating agent and to the
Issuer (in the case of such termination by the Trustee) or the Trustee (in the case of such
Termination by the Issuer). Upon receiving such a notice of resignation or upon such a
termination, or in case at any time an authenticating agent shall cease to be acceptable to the
Trustee or the Issuer, the Trustee may promptly appoint a successor authenticating agent. Any
successor authenticating agent upon acceptance of its appointment hereunder shall become vested
with all the rights, powers and duties of its predecessor hereunder, with like effect as if
originally named as an authenticating agent.
(d) The Issuer agrees to pay to each authenticating agent from time to time reasonable
compensation for its services under this
Section 6.08
pursuant to the Supplement;
provided
,
that
, if at any time the Collateral Trustee is acting as authenticating
agent, such compensation shall be paid out of the Trustee Fee payable to the Trustee.
81
(e) The provisions of
Sections 11.01
,
11.02
and
11.03
shall be
applicable to any authenticating agent.
SECTION 6.09.
Issuance of the Series 2010-1 Notes
.
(a) The Issuer may issue Series 2010-1 Notes pursuant to the Supplement. The Series 2010-1
Notes shall be equally and ratably entitled as provided herein to the benefits of this Agreement
without preference, priority or distinction, all in accordance with the terms and provisions of
this Agreement and the Supplement.
(b) On or before the Closing Date, the parties hereto will execute and deliver the Supplement
which will specify the Principal Terms of the Series 2010-1 Notes. The terms of the Supplement may
modify or amend the terms of this Agreement solely as applied to Series 2010-1.
(c) The obligation of the Trustee to authenticate the Series 2010-1 Notes and to execute and
deliver the Supplement is subject to the satisfaction of the following conditions:
(i) on or before the Business Day immediately preceding the Closing Date, the Issuer shall
have given the Trustee and the Master Servicer, an Order requesting such authentication of Series
2010-1 Notes and setting forth the proposed Closing Date and delivery instructions if the Series
2010-1 Notes are not to be delivered to the Issuer;
(ii) the Issuer shall have delivered to the Trustee and the Collateral Trustee the Supplement,
in form and substance satisfactory to the Trustee, executed by each party hereto other than the
Trustee;
(iii) the Issuer shall have delivered to the Collateral Trustee Series 2010-1 Notes, in form
and substance satisfactory to the Trustee, executed by the Issuer;
(iv) such issuance will not result in the occurrence of an Event of Default, a Potential Event
of Default, a Series Event of Default, or any event that, with the giving of notice or lapse of
time or both, would constitute such a Series Event of Default, and the Issuer shall have delivered
to the Trustee and the Collateral Trustee an Officers Certificate, dated the Closing Date (upon
which the Trustee and the Collateral Trustee may conclusively rely), to the effect that such
issuance will not result in the occurrence of any such Event of Default, Potential Event of
Default, Series Event of Default or other event and will not result in the occurrence of any such
Event of Default, Potential Event of Default, Series Event of Default or other event at any time in
the future;
(v) the Issuer shall have delivered to the Trustee an Opinion of Counsel to the effect that
the issuance of the Series 2010-1 Notes (A) has been, or need not be, registered under the
Securities Act (unless the Issuer has elected, in its sole discretion and at its sole expense, to
register such Series 2010-1 Notes), (B) will not result in the Issuer becoming subject to
registration as an investment company under the Investment Company Act and (C) will not require
this Agreement or the Supplement to be qualified under the Trust Indenture Act of 1939, as amended;
82
(vi) the Issuer shall have delivered to the Trustee a Tax Opinion, dated the Closing Date,
with respect to such issuance;
(vii) the Issuer shall have satisfied such other conditions to the issuance of the Series
2010-1 Notes as are specified in the Supplement as evidenced in an Officers Certificate provided
by the Issuer to the Trustee; and
(viii) the Issuer shall have delivered to the Trustee fully executed copies of the note
purchase agreement(s), if any, pursuant to which initial investors in the Series 2010-1 Notes
acquired their interests therein.
Upon satisfaction of the above conditions, the Trustee shall execute the Supplement and, upon
receipt of, and in accordance with the terms of, an Order to do so, shall authenticate and deliver
the Series 2010-1 Notes to the Persons specified in such Order against receipt of payment by the
Issuer of the purchase price for such Series 2010-1 Notes.
SECTION 6.10.
Transfer of Series 2010-1 Notes
. The obligation of the Trustee to
authenticate and issue any Series 2010-1 Note to any transferee pursuant to any written instrument
of transfer or other direction to do so received by the Trustee pursuant to
Section 6.03
shall be subject to the satisfaction of the following conditions on or prior to the proposed date
of such transfer (the
Transfer Date
):
(i) the Note Registrar and Transfer Agent shall be satisfied with respect to those conditions
set forth in
Sections 6.03
and
6.05
governing transfers or exchanges of interests
in U.S. Global Notes and Regulation S Global Notes or, with respect to Definitive Notes or
Certificated Notes, shall have received a written instrument of transfer of the subject Series
2010-1 Notes executed by the transferring Series 2010-1 Noteholder (or its attorney-in-fact, duly
authorized), and the original Series 2010-1 Notes which are the subject of such transfer;
(ii) the Issuer, with respect to transfers of Definitive Notes, shall have delivered to the
Trustee a Tax Opinion from counsel of the Issuer or the transferring or transferee Series 2010-1
Noteholder, dated as of the Transfer Date, with respect to such transfer;
(iii) the Issuer, with respect to transfers of Definitive Notes or Certificated Notes, shall
have delivered to the Note Registrar fully executed copies of those agreements, documents or
instruments delivered by the transferees of such Series 2010-1 Notes which contain the applicable
representations and warranties required to be made by such transferees pursuant to
Section
6.03
; and
(iv) the Issuer shall have satisfied such other conditions to the transfer thereof as may be
specified in the Supplement.
Notwithstanding anything contained herein or in the Supplement to the contrary, no Series
2010-1 Notes may be transferred to any Person in respect of which the purchase or holding thereof
would constitute a prohibited transaction under ERISA or Section 4975 of the Code, and each
prospective transferee shall be required to represent and warrant that it is not such a Person
prior to the transfer of any such Series 2010-1 Note to it and to the extent any such
representation and warranty is incorrect such transfer shall be rescinded and deemed not to have
83
occurred; provided that the Trustee shall have no duty to perform any independent investigation
with respect to any representation or warranty by a prospective purchaser as to the matters set
forth in this sentence.
Upon satisfaction of the above conditions, the Trustee, if required under the terms of this
Article VI, shall authenticate and deliver the Series 2010-1 Notes so transferred to the Persons so
designated in the written order of transfer (and shall destroy the earlier Series 2010-1 Notes
surrendered to it for transfer) and shall deliver a copy of such order of transfer to the Note
Registrar and Transfer Agent, and the Note Registrar and Transfer Agent shall register such
transfer in the Note Register.
SECTION 6.11.
Provisions Relating to the Regulation S Global Notes
.
(a) Each of the Persons shown in the records of Euroclear and Clearstream as the holder of a
Euroclear/Clearstream Global Note must look solely to Euroclear or Clearstream (as
the case may be) for such Persons share of each payment by the Issuer to the holder of the
applicable Regulation S Global Note and in relation to all other rights arising under such
Regulation S Global Note, subject to and in accordance with the respective rules and procedures of
Euroclear and Clearstream. Save as aforesaid, such Persons shall have no claim directly against
the Issuer in respect of payments due on any Euroclear/Clearstream Global Notes for so long as such
Series 2010-1 Notes are represented by the Regulation S Global Notes, and such obligations of the
Issuer will be discharged by payment to the respective holders of such Regulation S Global Notes in
respect of each amount so paid. Unless and until Definitive Notes have been issued to Series
2010-1 Noteholders pursuant to
Section 6.03
:
(i) the provisions of this
Section 6.11
shall be in full force and effect;
(ii) the Note Registrar and Transfer Agent, the Paying Agent, the Collateral Trustee and the
Trustee shall be entitled to deal with Euroclear and Clearstream for all purposes of this Indenture
(including the distribution of principal of and interest on the Series 2010-1 Notes and the giving
of instructions or directions hereunder) as the sole holder of the Euroclear/Clearstream Global
Notes, and shall have no obligation to the beneficial owners thereof;
(iii) the rights of the beneficial owners of the Regulation S Global Notes shall be exercised
only through Euroclear or Clearstream and shall be limited to those established by law and
agreements between such beneficial owners, Euroclear, Clearstream and/or participants therein.
Unless and until Definitive Notes are issued pursuant to
Section 6.03
, Euroclear and
Clearstream will make book-entry transfers among each of its participants and receive and transmit
distributions of principal of and interest on the Euroclear/Clearstream Global Notes to such
participants; and
(iv) whenever this Indenture requires or permits actions to be taken based upon instructions
or directions of holders of Series 2010-1 Notes evidencing a specified percentage, Euroclear and/or
Clearstream shall be deemed to represent such percentage only to the extent that it has received
instructions to such effect from participants owning or representing, respectively, such required
percentage and has delivered such instructions to the applicable
84
Person required or permitted to
take such action. The Note Registrar may set a record date for the purpose of determining the
identity of holders of Euroclear/Clearstream Global Notes entitled to vote or to consent to any
action by vote as provided in this Indenture.
(b) With respect to the Holders of Regulation S Global Notes, whenever a notice or other
communication to the Series 2010-1 Noteholders is required under this Indenture, unless and until
Definitive Notes shall have been issued to beneficial owners pursuant to
Section 6.03
, the
Collateral Trustee (individually or on behalf of the Trustee) shall give all such notices and
communications specified herein to be given to Series 2010-1 Noteholders to Euroclear and
Clearstream and shall have no further obligation to such Holders.
(c) The Issuer, in the case of each Euroclear Security, shall cause (i) Euroclear to make
appropriate entries on its books transferring each such Euroclear Security to the applicable
depositorys client securities account at Euroclear (the
Euroclear Account
) and to send a
confirmation to such depository that Euroclear is holding such Euroclear Security for the account
of such depository, (ii) such depository to continuously credit by book-entry such Euroclear
Security to the account of the applicable custodian for such account, and, if required by the UCC,
to send a confirmation to such custiodian that such depository is holding such Euroclear Security
for the account of such custodian, (iii) such custodian to continuously credit by book entry such
Euroclear Security to the such account, and (iv) such Euroclear Security to be continuously
registered to Euroclear.
(d) The Issuer, in the case of each Clearstream Security, shall cause (i) Clearstream to make
appropriate entries on its books transferring each such Clearstream Security to the applicable
depositorys client securities account at Clearstream (the
Clearstream Account
) and to
send a confirmation to such depository that Clearstream is holding such Clearstream Security for
the account of such depository, (ii) such depository to continuously credit by book-entry such
Clearstream Security to the account of the custodian for such account, and, if required by the UCC,
to send a confirmation to such custodian that such depository is holding such Clearstream Security
for the account of the such custodian, (iii) such Custodian to continuously credit by book entry
such Clearstream Security to such account, and (iv) such Clearstream Security to be continuously
registered to Clearstream.
ARTICLE VII
OTHER MATTERS RELATING TO THE ISSUER
SECTION 7.01.
Obligations Not Assignable
. The obligations of the Issuer hereunder
shall not be assignable nor shall any Person succeed to the obligations of the Issuer hereunder.
SECTION 7.02.
Limitations on Liability
. None of the members, managers, officers,
employees, agents, or holders of limited liability company interests of or in the Issuer, past,
present or future, shall be under any liability to the Trustee, the Series 2010-1 Noteholders or
any other Person for any action taken or for refraining from the taking of any action in such
capacities or otherwise pursuant to this Agreement or for any obligation or covenant under this
Agreement, it being understood that, with respect to the Issuer, this Agreement and the obligations
created hereunder shall be, to the fullest extent permitted under applicable law, solely the
limited liability company obligations of the Issuer. The Issuer and any member, manager,
85
officer,
employee, agent, or holder of a limited liability company interest of or in the Issuer may rely in
good faith on any document of any kind prima facie properly executed and submitted by any Person
(other than the Issuer or any Affiliate thereof) respecting any matters arising hereunder.
SECTION 7.03.
Indemnification by the Issuer
. Without limiting any other rights which
any of the Indemnified Parties may have hereunder or under applicable law, but without duplication,
the Issuer hereby agrees to indemnify each of the Indemnified Parties from and against any and all
damages, losses, claims, judgments, liabilities and related costs and expenses, including
reasonable attorneys fees and disbursements, awarded against or incurred by any Indemnified Party
(A) as are specified in
Section 11.04(b)
or in the Supplement, and subject to the
limitations set forth herein and therein,
or (B) relating to or resulting from or in connection with the transactions contemplated
herein and the Operative Documents, including, without limitation, any of the following (all of the
foregoing being called the
Issuer Indemnified Losses
), other than any such Issuer
Indemnified Loss (x) constituting recourse for Receivables which are uncollectible for credit
reasons or (y) which arise solely from the gross negligence or willful misconduct of the affected
Indemnified Party:
(i) the pledge by the Issuer to the Trustee of any Series Receivable which was not at the time
of such transfer an Eligible Receivable;
(ii) reliance on any representation or warranty made in writing by the Issuer or the Seller
(or any of their respective officers) under or in connection with this Agreement, the Supplement,
any Issuer Transfer Report (as defined in the Issuer Purchase Agreement) or any Monthly Report,
or reliance on any other information or report delivered by the Issuer or by the Master Servicer
with respect to the Issuer (to the extent based on information provided by the Issuer) pursuant
hereto, which shall have been false, incorrect or materially misleading in any respect when made;
it being agreed that the incorrectness of any such representation or warranty or the determination
that any such representation or warranty was materially misleading, and the indemnification
obligations of the Issuer pursuant to this
clause (ii)
resulting therefrom, shall in each
case, be determined without giving effect to any limitation on the knowledge, best of knowledge
or other similar limitation on the knowledge of the Issuer contained in any such representation or
warranty;
(iii) the failure by the Issuer to comply with (x) any term, provision or covenant contained
in this Agreement, the Supplement, any of the other Operative Documents or any agreement executed
in connection with any of the foregoing or (y) any applicable Requirements of Law with respect to
any Receivable, the related Settlement Purchase Agreement, Annuity Purchase Agreement or the
Related Property, or the nonconformity of any Series Receivable, the related Settlement Purchase
Agreement, Annuity Purchase Agreement or the Related Property relating thereto with any such
applicable Requirements of Law;
(iv) the failure to vest and maintain vested in the Trustee, or to transfer to the Trustee, a
first priority perfected ownership or security interest in, the Series Receivables and the
associated Related Property, free and clear of any Lien (other than Permitted Liens);
86
(v) the failure to file, or any delay in filing, financing statements or other similar
instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with
respect to any Series Receivables and the associated Related Security, whether at the time of the
transfer thereof to the Issuer or otherwise;
(vi) the failure by the Issuer to be duly qualified to do business, to be in good standing or
to have filed appropriate fictitious or assumed name registration documents in any jurisdiction in
which such failure has, or could be reasonably expected to have, a Material Adverse Effect;
(vii) the failure of the Issuer to pay when due any sales taxes or other governmental fees or
charges imposed in connection with the purchase of any Series Receivables by it pursuant to the
Issuer Purchase Agreement;
(viii) the failure of the Issuer or any of its agents, employees or representatives to remit
any Collections or other amounts received by it in respect of the Series in accordance with the
terms of this Agreement and the Supplement;
(ix) any Issuer Indemnified Loss resulting from an assignment by a Claimant, the Seller or the
Issuer of the rights to Scheduled Payments (or any portion thereof) under a Settlement Purchase
Agreement in contravention of an anti-assignment provision in such Settlement Agreement or any
federal or state statute, regulation or judicial precedent that prohibits the transfer of the
rights to such Scheduled Payments (or any portion thereof) if such anti-assignment provision
nullifies or otherwise invalidates the assignment;
provided
,
however
, that no
amount shall be paid in satisfaction of such an Issuer Indemnified Loss until a court with
appropriate jurisdiction has issued a final non-appealable order holding that such anti-assignment
clause is valid;
(x) any Issuer Indemnified Loss arising in connection with a Series Receivable, the underlying
Settlement Agreement related to which was not the subject of a Qualified Assignment, to the extent
such Issuer Indemnified Loss would not have been incurred had such Settlement Agreement been the
subject of a Qualified Assignment (without regard to whether there may have been a different
Annuity Provider had there been a Qualified Assignment and disregarding any rights against any
Person which would have been an Assignee had there been a Qualified Assignment); and
(xi) any Issuer Indemnified Loss of the Trustee or Collateral Trustee by reason of its
participation in the transactions contemplated hereby, other than those arising from its own gross
negligence or willful misconduct.
Subject to
Section 13.18
, any Issuer Indemnified Losses payable by the Issuer under
this
Section 7.03
shall be paid by the Issuer to the requesting Indemnified Party within
five (5) Business Days following such Indemnified Partys written demand therefor, setting forth in
reasonable detail the basis for such demand. The agreements of the Issuer contained in this
Section 7.03
shall survive the Maturity Date of the Series and the termination of the
Supplement. In addition, in no event shall Issuer Indemnified Losses include any consequential,
special or
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punitive damages. The provisions of this
Section 7.03
shall survive the
termination of this Agreement.
SECTION 7.04.
Net Worth of the Issuer
. From the Closing Date until the Maturity Date
for the Series, the Issuer shall be solvent, maintain a net worth sufficient to carry on its
business as then conducted and pay its debts as they generally become due.
SECTION 7.05.
Non-Payment of Settlement Receivables Due to Change in Law
.
Without limiting any other rights which the Trustee or any Series 2010-1 Noteholder or any
Affiliate of any of the foregoing may have hereunder or under applicable Requirements of Law, but
without duplication, if any payment on a Settlement Annuity Contract related to any Series
Receivable for any Series is not made when due, and the applicable Settlement Annuity Provider
shall identify any statute or regulation enacted or promulgated after the Closing Date as the sole
reason for its refusal to make such payment, then, within ninety (90) days after learning of any
such circumstance, the Issuer may, in its sole discretion, commence litigation, and diligently
pursue such litigation in good faith, to require such payment.
ARTICLE VIII
OTHER MATTERS RELATING TO THE MASTER SERVICER
SECTION 8.01.
Liability of the Master Servicer
. The Master Servicer shall be liable
under this Agreement and the Supplement to the extent of the obligations and other duties agreed to
or undertaken by it in its capacity as Master Servicer.
SECTION 8.02.
Merger or Consolidation of, or Assumption of the Obligations of, the Master
Servicer
. The Master Servicer shall not consolidate with or merge into any other Person or
convey or transfer its properties and assets substantially as an entirety to any Person unless:
(a) (i) the Person formed by such consolidation or into which the Master Servicer is merged or
the Person which acquires by conveyance or transfer the properties and assets of the Master
Servicer substantially as an entirety shall be, if the Master Servicer is not the surviving entity,
a corporation, limited partnership or limited liability company organized and existing under the
laws of the United States of America or any State or the District of Columbia, and such entity
shall have expressly assumed, by an agreement supplemental hereto, executed and delivered to the
Trustee, in form reasonably satisfactory to the Trustee, the performance of every covenant and
obligation of the Master Servicer hereunder and the Supplement; (ii) if the Master Servicer is an
Affiliated Entity, the surviving entity of such merger or conveyance or transfer of property and
assets is a consolidated subsidiary of Imperial Holdings; (iii) the Master Servicer shall have
delivered to the Trustee an Officers Certificate in form reasonably satisfactory to the Trustee
stating that such consolidation, merger, conveyance or transfer complies with this
Section
8.02
and that all conditions precedent herein provided for relating to such transaction have
been complied with; and (iv) immediately prior to, and after giving effect to such transaction, no
Event of Default, Potential Event of Default, Series Event of Default or Servicer Default exists or
would exist; and
(b) the corporation, limited partnership or limited liability company formed by such
consolidation or into which the Master Servicer is merged or which acquires by conveyance or
88
transfer the properties and assets of the Master Servicer substantially as an entirety shall have
all licenses and approvals of Governmental Authorities required to service the Series Receivables
for the Series 2010-1 Notes, except to the extent the failure to have any such license does not
have, and could not reasonably be expected to have, a Material Adverse Effect.
SECTION 8.03.
Limitations on Liability
. None of the members, managers, officers,
directors, partners, employees, agents, shareholders, or holders of limited liability company
interests, as applicable, of or in the Master Servicer, past, present or future, shall be under any
liability to the Issuer, the Trustee, the Series 2010-1 Noteholders or any other Person for any
action taken or for refraining from the taking of any action in such capacities or otherwise
pursuant to this Agreement or for any obligation or covenant under this Agreement, it being
understood that, with respect to the Master Servicer, this Agreement and the obligations created
hereunder shall be, to the fullest extent permitted under applicable Requirements of Law, solely
the corporate, partnership or limited liability company, as applicable, obligations of the Master
Servicer. The Master Servicer and any member, manager, officer, director, partner, employee,
agent, shareholder or holder of limited liability company interest of or in the Master Servicer may
rely in good faith on any document of any kind prima facie properly executed and submitted by any
Person (other than any Affiliate thereof) respecting any matters arising hereunder. The Master
Servicer shall not be under any obligation to appear in, prosecute or defend any legal action which
is not incidental to its duties as Master Servicer in accordance with this Agreement and which in
its reasonable judgment may involve it in any material expense or liability.
SECTION 8.04.
Indemnification by Master Servicer
. The Master Servicer, if an
Affiliated Entity, shall indemnify and hold harmless each Indemnified Party from and against any
and all claims, losses and liabilities (including reasonable attorneys fees and any claims, losses
and liabilities in connection with the enforcement of any indemnity or other claims hereunder
against the Master Servicer) (all of the foregoing being collectively referred to as the
Master Servicer Indemnified Losses
) suffered or sustained by reason of any breach by the
Master Servicer of its representations and warranties or obligations under this Agreement or any
other Operative Document, or the Supplement (it being agreed that the breach of any such
representation or warranty by the Master Servicer (to the extent it is an Affiliated Entity), and
the indemnification obligations of the Master Servicer (if an Affiliated Entity) resulting
therefrom, shall in each case, be determined without giving effect to any limitation on the
knowledge, best of knowledge or other similar limitation on the knowledge of the Master
Servicer (if an Affiliated Entity) contained in any such representation or warranty). The
foregoing, however, excludes, (a) Master Servicer Indemnified Losses to the extent resulting from
willful misconduct, bad faith, gross negligence, the reckless disregard by such Indemnified Party
of any of his, her or its obligations and duties, (b) recourse (except as otherwise specifically
provided in this Agreement or the Supplement) for uncollectible Receivables or (c) any net income
taxes or franchise taxes imposed with respect to net income (or any interest or penalties with
respect thereto) incurred by such Indemnified Party arising out of or as a result of this
Agreement, the Supplement or the interest conveyed hereunder or thereunder in Trust Assets or in
respect of any Receivable or the Issuer Purchase Agreement. In addition, in no event shall Master
Servicer Indemnified Losses include any consequential, special or punitive damages.
Indemnification pursuant to this
Section 8.04
shall not be payable from the Trust Assets.
The agreement contained in this
Section 8.04
shall survive the collection of all
Receivables, the termination of
89
this Agreement and the Supplement and the payment of all amounts
otherwise due hereunder and under the Supplement.
SECTION 8.05.
Master Servicer Not to Resign
. The Master Servicer shall not resign
from the obligations and duties imposed on it hereby and under the Supplement except upon
determination that (a) its performance of its duties hereunder and thereunder is no longer
permissible under applicable Requirements of Law and (b) there is no reasonable action which such
Master Servicer could take to make its performance of its duties hereunder permissible under
applicable Requirements of Law. Any determination permitting the resignation of the Master
Servicer shall be evidenced by an Opinion of Counsel who is not an employee of the Master Servicer
or any Affiliate of the Master Servicer with respect to clause (a) above, delivered to, and in form
reasonably satisfactory to, the Trustee. No resignation shall become effective until a Successor
Servicer shall have assumed the responsibilities and obligations of the Master Servicer in
accordance with
Section 10.02
hereof.
SECTION 8.06.
Examination of Records
. The Master Servicer shall not indicate in its
records that the Issuer has granted to the Trustee, for the benefit of the Series 2010-1
Noteholders of the Series secured thereby, a security interest in the Series Receivables and other
Series Trust Assets, for which it acts in such capacity pursuant to this Agreement and the
Supplement.
SECTION 8.07
Miscellaneous
. Notwithstanding anything contained herein to the
contrary:
(a) Master Servicer shall not be responsible for any failure to perform any of its obligations
hereunder (not will it be responsible for any unavailability of funds credited to any account) if
such performance is prevented, hindered or delayed by a Force Majeure Event;
(b) Master Servicer shall have no responsibility or liability for investment losses on
Eligible Investments;
(c) Master Servicer shall not be required to monitor the performance of any party to this
Agreement or the other Operative Documents, including, without limitation, the Back-Up Servicer or
act as a guarantor of the Back-Up Servicers performance.
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.01.
Events of Default
. If any one of the following events shall occur:
(a) (i) an Insolvency Event shall occur with respect to the Issuer (such event, with respect
to any such entity, a
Specified Insolvency Default
); or (ii) an Insolvency Event shall
occur with respect to the Seller; or
(b) any Master Servicer (if an Affiliated Entity), the Seller or the Issuer shall become, or
be controlled by, an entity that is subject to the registration requirements of the Investment
Company Act; or
90
(c) the Issuer shall become an association taxable as a corporation for federal income tax
purposes or shall become a publicly traded partnership within the meaning of Section 7704 of the
Code; or
(d) any Series Event of Default set forth in the Supplement;
then, subject to applicable Requirements of Law, in the case of any event described in
clauses (a)
,
(b)
or
(c)
, an Event of Default shall occur with respect to
the Series without any notice or other action on the part of the Trustee or the Control Party
immediately upon the occurrence of such event, and, in the case of any Series Event of Default, the
Supplement shall set forth provisions which shall determine whether such Series Event of Default
shall constitute an Event of Default for the Series and, if so, such Series Event of Default shall
give rise to an Event of Default for the Series.
The Collateral Trustee, upon the actual receipt of written notice by any of its Responsible
Officers of the occurrence of any event described in
clauses (a)
,
(b)
or
(c)
or of any Series Event of Default, shall promptly notify the Trustee. The Trustee,
upon the actual receipt of written notice by any of its Responsible Officers of the occurrence of
any such event, shall promptly (if such notice is received from a Person other than the Collateral
Trustee) notify the Collateral Trustee and the Control Party of such occurrence.
SECTION 9.02.
Additional Rights Upon the Occurrence of any Event of Default
. Upon the
occurrence and during the continuance of any Event of Default, in addition to all other rights and
remedies under this Agreement, the Supplement or otherwise and all other rights and remedies
provided under the UCC of all applicable jurisdictions and other applicable Requirements of Law
(which rights shall be cumulative):
(a) The Trustee may, and shall upon the direction of the Control Party, in the case of an
Event of Default described in
Section 9.01(a)
,
(b)
,
(c)
or
(d)
,
exercise any and all rights and remedies of the Issuer under or in connection with the Issuer
Purchase Agreement, including, without limitation, any and all rights of the Issuer to demand or
otherwise require payment of any amount under, or performance of any provision of, the Issuer
Purchase Agreement or, to the extent assigned to it under the Issuer Purchase Agreement, any other
Operative Document.
(b) (i) Upon the occurrence and continuation of a Specified Insolvency Default, all amounts
owing under the Series 2010-1 Notes shall automatically become due and payable without any action
or notice on the part of the Series 2010-1 Noteholders, the Control Party or the Trustee. Upon the
occurrence and continuation of any Event of Default other than a Specified Insolvency Default, the
Trustee in its discretion may, or if so requested in writing by the Control Party, shall, declare
all principal and interest and other amounts owing under the Series 2010-1 Notes to be immediately
due and payable.
(ii) Upon the occurrence and continuation of any Event of Default, the Trustee may sell or
otherwise liquidate the related Series Trust Assets, in whole or in part, on any date or dates
following such Event of Default;
provided
,
however
, that the Trustee may not sell
or otherwise liquidate any Series Trust Assets following an Event of Default unless:
91
(A) such Event of Default is a Specified Payment Default and the Control Party
has consented to such sale or liquidation; or
(B) such Event of Default is a Specified Insolvency Default; or
(C) Holders of seventy-five percent (75%) of the Aggregate Principal Balance of
the Series 2010-1 Notes (exclusive of any Series 2010-1 Notes held by an Affiliated
Entity) consent thereto; or
(D) the proceeds of such sale or liquidation distributable to the Holders of
the Series 2010-1 Notes will be sufficient to discharge in full all amounts of
interest and principal then due and unpaid to such Series 2010-1 Noteholders; or
(E) (x) the Trustee determines that such Series Trust Assets will not continue
to provide sufficient funds for the payment of principal of and interest on the
Series 2010-1 Notes as they would have become due if such Series 2010-1 Notes had
not been accelerated, (y) the Trustee provides notice to each Series 2010-1
Noteholder and (z) the Majority Series 2010-1 Noteholders consent thereto.
At any time after the Trustee is directed by the Control Party to sell or otherwise liquidate
the applicable Series Trust Assets pursuant to this
Section 9.02(b)(ii)
following an Event
of Default, the Trustee may or, at the written direction of the Control Party, shall, make the
determination described in clause of this
Section 9.02(b)(ii)(E)(x)
;
provided
, that
in no event shall any such written direction be made more than one time during any ninety (90) day
period, and the Trustee shall have no obligation, liability or duty to act in connection with any
additional written directions made during such ninety (90) day period.
In determining the sufficiency or insufficiency with respect to clauses (ii)(D) or (ii)(E)(x)
of this
Section 9.02(b)
, the Trustee may, but need not, obtain and rely (and shall be fully
protected in relying) upon an opinion of an independent investment banking or independent
accounting firm of national reputation. The Issuer shall be obligated to reimburse the Trustee for
any costs or expenses incurred by the Trustee in connection with such opinion pursuant to
Section 11.04
.
(c) The Trustee shall have any other additional rights with respect to the Series and/or
Series Trust Assets as shall be set forth in the Supplement.
SECTION 9.03.
Certain Specific Rights Upon the Occurrence of an Insolvency Event
. If
an Insolvency Event with respect to the Issuer occurs, all rights hereunder or under the Supplement
to transfer, substitute or exchange any Receivables included in the Trust Assets shall cease, and
the Issuer shall promptly give notice of such event to the Trustee and the Collateral Trustee, and
the Collateral Trustee shall promptly forward such notice to the Series 2010-1 Noteholders and the
Master Servicer.
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ARTICLE X
SERVICER DEFAULTS
SECTION 10.01.
Servicer Defaults
. Upon the occurrence of a Servicer Default, and for
so long as such Servicer Default shall not have been remedied or waived, the Trustee, at the
direction of the Control Party, by notice then given in writing to the Master Servicer (such notice
being a
Termination Notice
), shall terminate all of the rights and obligations of the
Master Servicer as servicer under this Agreement and the Supplement with respect to which such
notice was so given. The Trustee shall not be deemed to have knowledge of a Servicer Default with
respect to any Series until a Responsible Officer has received written notice thereof.
After receipt by the Master Servicer of a Termination Notice, and on the date that a Successor
Servicer shall have been appointed by the Trustee pursuant to
Section 10.02
, all authority
and power of the Master Servicer under this Agreement and the Supplement shall pass to and be
vested in such Successor Servicer (a
Service Transfer
); and, without limitation, the
Trustee is hereby authorized, empowered and instructed (upon the failure of the Master Servicer to
cooperate), at the direction of the Control Party, to execute and deliver, on behalf of the Master
Servicer, as attorney-in-fact or otherwise, all documents and other instruments upon the failure of
the Master Servicer to execute or deliver such documents or instruments, and to do and accomplish
all other acts or things necessary or appropriate to effect the purposes of such Service Transfer.
The Master Servicer hereby agrees to cooperate, at its expense, with the Trustee, such Successor
Servicer and any designated subcontractor of such Successor Servicer in (i) effecting the
termination of the responsibilities and rights of the Master Servicer to conduct servicing
hereunder and under the Supplement, including, without limitation, the transfer to such Successor
Servicer or such subcontractor of all authority of the Master Servicer to service the Receivables
as provided under this Agreement and the Supplement, including all authority over all Collections
which shall on the date of such Service Transfer be held by the Master Servicer for deposit to any
Settlement Lock-Box Account, the Master Collection Account, the Series Collection Account, the
Series Payment Account, the Series Reserve Account, the Trustees Account or the Issuers Account,
for payment to any Claimant in respect of any Split Payment, or which have been deposited by the
Master Servicer to any Settlement Lock-Box Account, the Master Collection Account, the Series
Collection Account, the Series Payment Account, the Series Reserve Account or any other account, or
which shall thereafter be received with respect to the Receivables, and (ii) assisting the
Successor Servicer and any designated subcontractor of such Successor Servicer. The Master
Servicer shall, at its expense, as soon as practicable, and in any event within three Business Days
of such Service Transfer, (A) assemble such documents, instruments and other records (including
computer tapes and disks), which evidence the affected Series Receivables and the other Series
Trust Assets, and which are necessary or desirable to collect the affected Series Receivables, and
shall make the same available to the Successor Servicer or the Trustee or its designee at a place
selected by the Successor Servicer or the Trustee or its designee and in such form as the Successor
Servicer or the Trustee or its designee may reasonably request, and (B) segregate all cash, checks
and other instruments received by it from time to time constituting Collections of Receivables and
Split Payments in a manner acceptable to the Successor Servicer and the Trustee, and, promptly upon
receipt, remit all such cash, checks and instruments to the Successor Servicer or the Trustee or
its designee.
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SECTION 10.02.
Appointment of Successor
.
(a) On and after the receipt by the Master Servicer of a Termination Notice pursuant to
Section 10.01
or upon a resignation by the Master Servicer pursuant to
Section
8.05
, the Master Servicer shall continue to perform all servicing functions under this
Agreement and the Supplement, until (i) in the case of any such receipt, the date specified in such
Termination Notice or otherwise specified by the Trustee, at the direction of the Control Party, in
writing or, if no such date is specified in such Termination Notice or otherwise specified by the
Trustee, until a date mutually agreed upon by the Master Servicer and the Trustee, at the direction
of the Control Party, and (ii) in the case of any such resignation, until a Successor Servicer
shall have assumed the responsibilities and obligations of the Master Servicer pursuant to this
Section 10.02
. The Trustee, at the direction of the Control Party, shall as promptly as
possible after the giving of a Termination Notice or such a resignation appoint an Eligible Master
Servicer in accordance with
Section 10.02(c)
as a successor servicer (the
Successor
Servicer
), and such Successor Servicer shall accept its appointment by a written assumption in
a form acceptable to the Trustee.
(b) Upon its appointment, the Successor Servicer shall be the successor in all respects to the
terminated or resigning Master Servicer with respect to servicing functions for the Series formerly
serviced by such terminated or resigning Master Servicer under this Agreement and the Supplement
and shall be subject to all the responsibilities, duties and liabilities relating thereto placed on
the Master Servicer by the terms and provisions hereof and thereof accruing from and after the
effective date of such appointment. From and after such appointment, all references in this
Agreement and the Supplement to the Master Servicer shall be deemed to refer to such Successor
Servicer (except for references to a resigning Master Servicer in
Section 10.02(a)
and
elsewhere as the context plainly otherwise requires).
(c) In connection with any Termination Notice or resignation by the Master Servicer, the
Trustee shall, at the direction of the Control Party, review any bids which it obtains from
Eligible Master Servicers and appoint an Eligible Master Servicer submitting such a bid as
Successor Servicer for servicing compensation not in excess of the Master Servicing Fee initially
payable to PFSC as Master Servicer, it being understood and agreed that the Trustee, at the
direction of the Control Party, shall be permitted to appoint an Eligible Master Servicer
reasonably acceptable to the Issuer submitting the lowest bid as among all such acceptable Eligible
Master Servicers (such bid not to exceed one hundred twenty percent (120%) of such Eligible Master
Servicers actual reasonable out-of-pocket costs and expenses). Notwithstanding anything else
herein to the contrary, in no event shall the Trustee be liable for any servicing fee or for any
differential in the amount of the servicing fee paid hereunder and the amount necessary to induce
any Successor Servicer to act as successor Master Servicer under this Agreement and the
transactions set forth or provided for herein. No Successor Servicer shall have any liabilities
for the acts, omissions, representations or warranties of any predecessor Servicer.
(d) Upon the appointment of any Successor Servicer with respect to the Series pursuant to
Section 10.02(a)
, such Successor Servicer will, within ninety (90) days after such
appointment, (i) assume in writing (delivered to each of the Trustee and the Back-up Servicer) the
rights and obligations of PFSC, if any, with respect to the Series under the Back-up Servicing
94
Agreement or (ii) in the event it is unable to successfully negotiate the terms of such
assumption after exercising commercially reasonably efforts to do so, appoint a replacement Back-up
Servicer (which successor Back-up Servicer must be consented to by the Control Party) that assumes
the duties of the Back-up Servicer under the Back-up Servicing Agreement.
(e) All authority and power granted to any Successor Servicer under this Agreement shall
automatically terminate upon the earliest of (x) the satisfaction and discharge of this Indenture
and (y) the payment in full in cash of all amounts owing to any Persons (other than the Affiliated
Entities) hereunder and under the Supplement, and shall pass to and be vested in the Issuer (or its
designee) (subject to the
proviso
to
Section 12.01
) and, without limitation, the
Issuer is hereby authorized and empowered to execute and deliver, on behalf of such Successor
Servicer, as attorney-in-fact or otherwise, all documents and other instruments, and to do and
accomplish all other acts or things necessary or appropriate to effect the purposes of such
transfer of servicing rights. Each Successor Servicer agrees to cooperate with the Issuer (or its
designee) in effecting the termination of the responsibilities and rights of such Successor
Servicer to conduct servicing of the Receivables. Each Successor Servicer shall transfer its
electronic records relating to such Series Receivables (and any such electronic records held by any
agent thereof) to the Issuer (or its designee) in such electronic form as the Issuer (or its
designee) may reasonably request and such Successor Servicer (and any agent thereof) shall transfer
all other records, correspondence and documents to the Issuer (or its designee) in the manner and
at such times as the Issuer (or its designee) shall reasonably request.
(f) The Control Party may waive any Servicer Default by the Master Servicer;
provided
,
however
, that any Servicer Default resulting from failure to make a payment or deposit
hereunder shall not be waived. Upon any such waiver of a Servicer Default, such Servicer Default
shall cease to exist and any Servicer Default arising therefrom shall be deemed to be remedied
hereunder. No such waiver shall extend to any subsequent or other Servicer Default or impair any
other right consequent thereto.
SECTION 10.03.
Notification to Series 2010-1 Noteholders
. Promptly and in any event
within one Business Day after the Issuer or the Master Servicer becomes aware of any Servicer
Default with respect to the Master Servicer, the Issuer or the Master Servicer, as applicable,
shall give written notice thereof to a Responsible Officer of each of the Collateral Trustee, the
Trustee and the Series 2010-1 Noteholders. Upon any termination or appointment of a Successor
Servicer pursuant to this
Article X
, the Trustee shall give prompt notice thereof to the
Collateral Trustee, and the Collateral Trustee shall give prompt written notice thereof to the
Issuer and the Series 2010-1 Noteholders.
ARTICLE XI
THE TRUSTEE
SECTION 11.01.
Duties of Trustee
.
(a) The Trustee undertakes to perform such duties and only such duties as are specifically set
forth in this Agreement and each other Operative Document to which it is a party, and no implied
duties shall be read against the Trustee. Without limiting the foregoing,
following the occurrence of an Event of Default, the Trustee shall exercise the rights and
powers
95
vested in the Trustee by this Agreement and the Supplement and use the same degree of care
and skill in the exercise of such rights and powers as is set forth herein, except to the extent
that such standard of care requires the exercise of greater care and skill than a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
Other than as provided herein or in any other Operative Document, neither the Trustee nor any
of its directors, officers, agents or employees shall be liable for any action or omission to act
hereunder or under any other Operative Document except for its or their own negligence or lack of
good faith or willful misconduct. Anything in this Agreement to the contrary notwithstanding, in
no event shall the Trustee be liable for special, indirect or consequential loss or damage of any
kind whatsoever (including but not limited to lost profits), even if the Trustee has been advised
of the likelihood of such loss or damage.
(b) The Trustee, upon receipt of all resolutions, certificates, statements, opinions, reports,
documents, orders or other instruments furnished to the Trustee which are specifically required to
be furnished pursuant to any provision of this Agreement or any other Operative Document, shall
examine them to determine whether they substantially conform on their face to the requirements of
this Agreement or such other Operative Document (without any duty of inquiry or investigation as to
the facts stated therein). The Trustee shall give prompt written notice to the Series 2010-1
Noteholders of any lack of conformity discovered by the Trustee of any such instrument to the
applicable requirements of this Agreement or such other Operative Document.
(c) Subject to
Section 11.01(a)
, no provision of this Agreement shall be construed to
relieve the Trustee from liability for its own negligent action, its own negligent failure to act
or its own willful misconduct;
provided
,
however
, that:
(i) the Trustee shall not be personally liable for an error of judgment made in good faith by
a Responsible Officer or Responsible Officers of the Trustee, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
(ii) the Trustee shall not be personally liable with respect to any action taken, suffered or
omitted to be taken by it in good faith in accordance with the direction of the Control Party (to
the extent the Trustee is authorized or directed to rely on the directions of any such
constituency) relating to the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this
Agreement or any other Operative Document; and
(iii) the Trustee shall not be charged with knowledge of any Event of Default, any Series
Event of Default or any Servicer Default unless in any case a Responsible Officer of the Trustee
obtains actual knowledge of such failure or a Responsible Officer of the Trustee receives written
notice of such failure.
(d) The Trustee shall not be required to expend or risk its own funds or otherwise incur
financial liability in the performance of any of its duties hereunder or under any other Operative
Document or in the exercise of any of its rights or powers, if there is reasonable
ground for believing that the repayment of such funds and/or adequate indemnity (and, to the
96
extent requested by the Trustee, advancement of funds) against such risk or liability is not
assured to it, and none of the provisions contained in this Agreement shall in any event require
the Trustee to perform, or be responsible for the manner of performance of, any obligations of the
Master Servicer under this Agreement or the Supplement.
(e) Except for actions expressly authorized by this Agreement or the Supplement, the Trustee
shall take no action reasonably likely to impair the interests of the Trustee or the Series 2010-1
Noteholders in any Trust Asset now existing or hereafter created or the value of any Trust Asset
now existing or hereafter created.
(f) Except as expressly provided in this Agreement or the Supplement, the Trustee shall have
no right (i) to release its lien (for the benefit of the Series 2010-1 Noteholders) on any Series
Trust Assets, (ii) to accept any substitute obligation for any Series Trust Asset, (iii) to add any
other investment, obligation or security for the benefit of any Series, or (iv) to withdraw any
Series Trust Asset.
(g) The Trustee shall have no responsibility or liability for investment losses on Eligible
Investments.
(h) The Trustee shall have no obligation to invest or reinvest any cash held in the Series
Collection Account, the Series Reserve Account or any other account established pursuant to the
Supplement.
(i) The Trustee hereby agrees to comply with the written instructions of the Control Party in
the exercise of the Trustees rights and obligations under the Back-up Servicing Agreement,
including, without limitation, any decision to (i) waive any Back-up Servicer Default or other
default by the Back-up Servicer thereunder or to terminate the Back-up Servicing Agreement upon any
such occurrence, (ii) request the delivery of any Settlement Package to the Trustee (copies of
which documents shall, at the request of the Control Party, be delivered by the Trustee to the
Control Party) or (iii) request access to the facilities and record-keeping systems of the Back-up
Servicer in order to perform an audit of the Back-up Servicer (which audit shall be conducted by
the employees or agents of the Control Party);
provided
, that the Trustee may in its own
discretion seek reimbursement under the Back-up Servicing Agreement for any indemnities or expenses
owed to the Trustee pursuant to the terms thereof.
(j) The Trustee is hereby authorized and empowered, without the need for further action on the
part of any Person, to execute, deliver and perform its obligations under the Operative Documents
to which it is or will become a party.
SECTION 11.02.
Certain Matters Affecting the Trustee
. Except as otherwise provided in
Section
11.01
:
(a) the Trustee may rely on and shall be protected in acting on, or in refraining from acting
in accord with, any resolution, Officers Certificate, certificate of auditors or any other
certificate, statement, instrument, opinion, report, notice, request, consent, order, appraisal,
bond or other paper or document believed by it to be genuine and to have been signed or presented
to
it pursuant to this Agreement or any other Operative Document by the proper party or parties;
provided
,
however
, that the Trustee may not so rely and shall not be so protected
in the event that
97
it has been negligent in ignoring relevant facts of which it has actual knowledge
or in ascertaining the relevant facts pursuant to
Section 11.02(d)
;
(b) the Trustee may consult with counsel and any advice or opinion of counsel shall be full
and complete authorization and protection in respect of any action taken or suffered or omitted by
it hereunder or under any other Operative Document in good faith and in accordance with such advice
or opinion of counsel;
(c) the Trustee shall be under no obligation to exercise any of the rights or powers vested in
it by this Agreement or any other Operative Document, or to institute, conduct or defend any
litigation hereunder or thereunder or in relation hereto or thereto, at the request, order or
direction of any of the Series 2010-1 Noteholders (or any constituent portion thereof authorized to
give any such directions to the Trustee), pursuant to the provisions of this Agreement or any other
Operative Document, unless such Series 2010-1 Noteholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby;
(d) the Trustee shall not be bound to make any investigation into the facts of matters stated
in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent,
order, appraisal, approval, bond or other paper or document presented to it pursuant to this
Agreement or any other Operative Document, unless requested in writing to do so by the Control
Party, and any such investigation required or permitted to be made by the Trustee shall be limited
to the Trustees receipt of an Officers Certificate or Opinion of Counsel with respect to such
investigation;
(e) the Trustee may execute any of its powers or perform any of its duties hereunder or under
any other Operative Document either directly or by or through agents, attorneys, nominees or
custodians, and the Trustee shall not be responsible for any misconduct or negligence on the part
of any such agent (including, without limitation, the Master Servicer, the Back-up Servicer or any
Successor Servicer), attorney, nominee or custodian appointed with due care by it;
provided
,
however
, that the Trustee may not, without the written consent of the
Control Party, appoint or subcontract with any Person that is an Affiliate of any other party
hereto for any such purpose;
(f) except as may be required by
Section 11.01(b)
, the Trustee shall not be required
to make any initial or periodic examination of any documents or records related to the Receivables
or the Issuer for the purpose of establishing the presence or absence of defects, the compliance by
the Issuer with its representations and warranties or for any other purpose;
(g) nothing in this Agreement shall be construed to require the Trustee to monitor the
performance of any other party hereto or to the Back-up Servicing Agreement, including without
limitation, the Master Servicer and the Back-up Servicer or act as a guarantor of the Master
Servicers or the Back-up Servicers performance;
(h) the Trustee in its individual capacity or otherwise may engage in any business, lending or
other transactions or activities in the ordinary course of its business with any of the Affiliated
Entities, and shall be entitled to exercise all of its rights, powers and remedies in
98
connection therewith to the same extent as if the Trustee were not acting as the Trustee hereunder and without
any duty to account to the Series 2010-1 Noteholders therefor;
(i) any reference in this Agreement or the Supplement to the knowledge of the Trustee with
regard to any matter shall be construed to mean the actual knowledge of any Responsible Officer of
the Trustees corporate trust department with respect to such matter;
(j) in the event that any information transmitted electronically, including without
limitation, through the use of electronic mail or internet or intranet web sites, by the Trustee
pursuant to this Agreement, is untimely, inaccurate or incomplete, to the extent that such
untimeliness, inaccuracy or incompleteness results from systems, software or hardware that are not
owned, leased by or licensed to the Trustee, the parties hereto acknowledge and agree that the
Trustee shall have no liability hereunder in connection with such information transmitted
electronically. The parties hereto further acknowledge that any systems, software or hardware
utilized in posting or retrieving any such information is utilized on an as is basis without
representation or warranty as to the intended uses of such systems, software or hardware; and
(k) the Trustee will not be responsible for any failure to perform any of its obligations
hereunder or under any other Operative Document (nor will it be responsible for any unavailability
of funds credited to any account) if such performance is prevented, hindered or delayed by a Force
Majeure Event.
SECTION 11.03.
Trustee Not Liable for Recitals in Series 2010-1 Notes
. The Trustee assumes no
responsibility for the correctness of the recitals contained herein, in the Supplement and/or in
the Series 2010-1 Notes (other than the certificate of authentication on the Series 2010-1 Notes
executed by it). Except as set forth in
Section 11.14
, the Trustee makes no
representations as to the validity or sufficiency of this Agreement or of the Series 2010-1 Notes
(other than the certificate of authentication on the Series 2010-1 Notes) or of any Receivable or
related document. The Trustee shall not be accountable for the use or application by the Issuer of
any of the Series 2010-1 Notes, or for the use or application of any proceeds of the Series 2010-1
Notes paid to the Issuer in respect of the Series 2010-1 Notes, the Receivables deposited in or
withdrawn from any Settlement Lock-Box Account, the Master Collection Account, the Series
Collection Account, the Series Payment Account, the Series Reserve Account, the Issuers Account,
the Trustees Account or any other account hereafter established to effectuate the transactions
contemplated by and in accordance with the terms of this Agreement and the Supplement. Without
limiting the generality of the foregoing, the Trustee shall have no responsibility or liability for
the content or adequacy of any private placement memorandum or any other offering document.
SECTION 11.04.
Compensation; Trustees Expenses; Indemnification
.
(a) As full compensation for its services hereunder with respect to any Series, the Trustee
shall be entitled to receive, solely out of Collections of Trust Assets and, to the extent
provided in the Supplement, and subject to the priority of payments set forth in the
Supplement, the Trustee Fee.
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(b)
Expenses; Indemnification
. The Issuer will pay or reimburse the Trustee upon its
request for, and will, within thirty (30) days of demand and submission of evidence of such
expenses or other liabilities, indemnify and hold the Trustee and its officers, directors,
employees and agents harmless against, all reasonable out-of-pocket expenses (including fees and
expenses of legal counsel), disbursements, costs, demands, claims, and liabilities incurred or made
by (including in connection with the enforcement of any indemnity or other claims against the
Issuer) or against the Trustee in respect of the Series in accordance with any of the provisions of
this Agreement or any other Operative Document or in connection with any amendment hereto or
thereto or by reason of its participation in the transactions contemplated hereby or thereby
(including, in all such cases, the reasonable fees and expenses of its agents, any co-Trustee and
counsel), except any such expense, disbursement or liability as may arise from the Trustees own
gross negligence, willful misconduct or bad faith and except as provided in the following sentence.
The terms of this
Section 11.04
shall survive the termination of this Agreement or the
earlier resignation or removal of the Trustee. If the Trustee is named as a defendant in any
litigation or other proceedings in respect of which the Issuer would have indemnification
obligations hereunder, the Trustee shall promptly notify the Issuer of the same and afford it (and
the Master Servicer on its behalf) an opportunity to participate in, and (at their expense) direct
the conduct of, any such proceedings. No settlement of any such proceedings shall be agreed by the
Trustee without the consent (which shall not be unreasonably withheld) of the Issuer.
SECTION 11.05.
Eligibility Requirements for Trustee
. The Trustee hereunder shall at all times be an
Eligible Institution. If such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining authority, then,
for the purpose of this
Section 11.05
, the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its most recent report of
condition so published. In case at any time the Trustee shall cease to be an Eligible Institution
in accordance with the provisions of this
Section 11.05
, the Trustee shall resign
immediately in the manner and with the effect specified in
Section 11.06
.
SECTION 11.06.
Resignation or Removal of Trustee
.
(a) The Trustee may at any time resign and be discharged from the trust hereby created by
giving prior written notice thereof to the Issuer, the Series 2010-1 Noteholders, the Master
Servicer and the Collateral Trustee. Upon receiving such notice of resignation, the Issuer shall
promptly appoint a successor trustee acceptable to the Control Party by written instrument, in
duplicate, one copy of which instrument shall be delivered to the resigning Trustee and one copy to
the successor trustee. If no successor trustee shall have been so appointed and have accepted
appointment within thirty (30) days after the giving of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of a successor
trustee.
(b) If at any time the Trustee shall cease to be an Eligible Institution in accordance with
Section 11.05
hereof and shall fail to resign after written request therefor by the Master
Servicer, the Issuer or the Control Party, or if at any time the Trustee shall be legally unable to
act, or shall be adjudged a bankrupt or insolvent, or if a receiver or a trustee for it or for its
property shall be appointed, or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then the
100
Issuer shall remove the Trustee and promptly appoint a successor trustee acceptable to the Control
Party by written instrument, in duplicate, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee.
(c) Any resignation or removal of the Trustee and appointment of a successor trustee pursuant
to any of the provisions of this
Section 11.06
shall not become effective until acceptance
of appointment by the successor trustee as provided in
Section 11.07
hereof.
SECTION 11.07.
Successor Trustee
.
(a) Any successor trustee appointed as provided in
Section 11.06
shall execute,
acknowledge and deliver to the Issuer, to the Master Servicer and to its predecessor Trustee an
instrument accepting such appointment hereunder, and thereupon the resignation or removal of the
predecessor Trustee shall become effective and such successor trustee, without any further act,
deed or conveyance, shall become fully vested with all the rights, powers, duties and obligations
of its predecessor hereunder, with like effect as if originally named as Trustee herein. The
predecessor Trustee shall deliver to the successor trustee all documents or copies thereof and
statements held by it hereunder; and the Issuer and the predecessor Trustee shall execute and
deliver such instruments and do such other things as may reasonably be required for fully and
certainly vesting and confirming in the successor trustee all such rights, powers, duties and
obligations.
(b) No successor trustee shall accept appointment as provided in this
Section 11.07
unless at the time of such acceptance such successor trustee shall be an Eligible Institution in
accordance with
Section 11.05
hereof.
(c) Upon acceptance of appointment by a successor trustee as provided in this
Section
11.07
, such successor trustee shall mail notice of such succession hereunder to the Collateral
Trustee and all Series 2010-1 Noteholders.
SECTION 11.08.
Merger or Consolidation of Trustee
. Any Person into which the Trustee may be merged
or converted or with which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any Person succeeding to all
or substantially all of the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such Person shall be an Eligible Institution in accordance with
Section 11.05
, without the execution or filing of any paper or any further act on the part
of any of the parties hereto, anything herein to the contrary notwithstanding.
SECTION 11.09.
Appointment of Co-Trustee or Separate Trustee
.
(a) Notwithstanding any other provisions of this Agreement, at any time, for the purpose of
meeting any legal requirements of any jurisdiction in which any part of the Trust Assets may at the
time be located, the Trustee shall have the power and may execute and deliver all instruments to
appoint one or more persons to act as a co-trustee or co-trustees, or separate trustee or separate
trustees, of all or any part of the Trust Assets, and to vest in such Person or Persons, in such
capacity and for the benefit of the Series 2010-1 Noteholders, such title to the Trust Assets, or
any part thereof, and, subject to the other provisions of this
Section 11.09
, such
101
powers, duties, obligations, rights and trusts as the Trustee may consider necessary or desirable. No
co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a
successor trustee under
Section 11.05
and no notice to Series 2010-1 Noteholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 11.07
hereof.
(b) Every separate trustee and co-trustee shall, to the extent permitted by law be appointed
and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed upon the Trustee shall be
conferred or imposed upon and exercised or performed by the Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized
to act separately without the Trustee joining in such act), except to the extent that under any law
of any jurisdiction in which any particular act or acts are to be performed, the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties
and obligations shall be exercised and performed singly by such separate trustee or co-trustee, but
solely at the direction of the Trustee; and
(ii) the Trustee may at any time accept the resignation of or remove any separate trustee or
co-trustee.
(c) Any notice, request or other writing given to the Trustee shall be deemed to have been
given to each of the then separate trustees and co-trustees, as effectively as if given to each of
them. Every instrument appointing any separate trustee or co-trustee shall refer to this Agreement
and the conditions of this
Article XI
. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or property specified in its
instrument of appointment, either jointly with the Trustee or separately, as may be provided
therein, subject to all the provisions of this Agreement, specifically including every provision of
this Agreement relating to the conduct of, affecting the liability of, or affording protection to,
the Trustee. Every such instrument shall be filed with the Trustee and a copy thereof given to the
Master Servicer.
(d) Any separate trustee or co-trustee may at any time constitute the Trustee, its agent or
attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any
lawful act under or in respect of this Agreement on its behalf and in its name. If any separate
trustee or co-trustee shall die, become incapable of acting, resign or be removed, all its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the Trustee, to the
extent permitted by law, without the appointment of a new or successor trustee.
SECTION 11.10.
Trustee May Enforce Claims Without Possession of Series 2010-1 Notes
. All rights of
action and claims under this Agreement or the Series 2010-1 Notes may be prosecuted and enforced by
the Trustee without the possession of any of the Series 2010-1 Notes or the production thereof in
any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought
in its own name as Trustee. Any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and
counsel, be for the ratable benefit of the affected Series 2010-1 Noteholders, in respect of which
such judgment has been obtained.
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SECTION 11.11.
Suits for Enforcement
.
(a) If a Servicer Default shall occur and be continuing, the Trustee shall, at the direction
of the Control Party, or may, in its discretion, in either case subject to the provisions of
Sections 11.01
and
11.12
, proceed to protect and enforce its rights and the rights
of the Series 2010-1 Noteholders under this Agreement and the Supplement by suit, action or
proceeding in equity or at law or otherwise, whether for the specific performance of any covenant
or agreement contained in this Agreement or the Supplement or in aid of the execution of any power
granted in this Agreement or the Supplement or for the enforcement of any other legal, equitable or
other remedy as the Trustee, being advised by counsel, shall deem most effectual to protect and
enforce any of the rights of the Trustee or such Series 2010-1 Noteholders.
(b) Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent
to or accept or adopt on behalf of any Series 2010-1 Noteholder any plan of reorganization,
arrangement, adjustment or composition affecting the Series 2010-1 Notes or the rights of any
Series 2010-1 Noteholder, or to authorize the Trustee to vote in respect of the claim of any Series
2010-1 Noteholder in any such proceeding.
SECTION 11.12.
Rights of Series 2010-1 Noteholders to Direct Trustee
. The Trustee will perform its
duties as Trustee hereunder and under each other Operative Document to which it is a party
(including, without limitation, the exercise of any trust, power or remedy conferred on or
available to the Trustee hereunder and under the Supplement) at the direction of the Control Party;
provided
,
however
, that if any provision of this Agreement or the Supplement
imposes a duty on the Trustee and requires the approval or other action of Series 2010-1
Noteholders holding a specified percentage of the Aggregate Principal Balance of the Series 2010-1
Notes, then the Trustee shall perform such duty with respect to the Series only at the direction of
the same percentage of Series 2010-1 Noteholders as is specified in such provision;
provided
further
,
however
, that subject to
Section 11.01
, the
Trustee shall have the right to decline to follow any such direction if the Trustee after being
advised by counsel determines that the action so directed may not lawfully be taken, or if the
Trustee in good faith shall, by a Responsible Officer or Responsible Officers of the Trustee,
determine that the proceedings so directed would be illegal or be unduly prejudicial to the rights
of the Series 2010-1 Noteholders not parties to such direction; and,
provided
,
further
, that nothing in this Agreement shall impair the right of the Trustee to take any
action deemed proper by the Trustee and which is not inconsistent with such direction of any such
constituency of Series 2010-1 Noteholders.
SECTION 11.13.
Representations and Warranties of Trustee
. The Trustee represents and warrants as of
the Closing Date that:
(a) the Trustee is duly organized and validly existing as a banking corporation under the
laws of Delaware;
(b) the Trustee has full power, authority and right to execute, deliver and perform this
Agreement, and has taken all necessary action to authorize the execution, delivery and performance
by it of this Agreement and each other Operative Document to which it is a party; and
103
(c) each of this Agreement and each other Operative Document to which it is a party has been
duly executed and delivered by the Trustee and constitutes a legal, valid and binding obligation of
the Trustee enforceable against it in accordance with its terms except as such enforceability may
be limited by applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting
creditors rights generally, and except as such enforceability may be limited by general principles
of equity (whether considered in a suit at law or in equity).
SECTION 11.14.
Maintenance of Office or Agency
. The Trustee will maintain at its expense in
Wilmington, Delaware, an office or agency where notices and demands to or upon the Trustee in
respect of the Series 2010-1 Notes and this Agreement may be served. The Trustee initially
designates its office located at Rodney Square North, 1100 N. Market Street, Wilmington, Delaware
19890, Attention: Corporate Capital Markets, as such office. The Trustee will give prompt written
notice to the Collateral Trustee, the Master Servicer and to all Series 2010-1 Noteholders of any
change in the location of such office.
SECTION 11.15.
Trustee May Own Series 2010-1 Notes
. The Trustee in its individual or any other
capacity may become the Holder or beneficial owner of any Series 2010-1 Note with the same rights
as it would have if it were not the Trustee hereunder;
provided
,
however
, that, in
addition to any other limitations specified in the Supplement with respect to the Series 2010-1
Notes, the Trustee agrees that it will not in its individual capacity become the Holder or
beneficial owner of more than 33
1
/
3
% of the Aggregate Principal Balance of the Series 2010-1 Notes.
SECTION 11.16
Rights of Trustee in Capacity of Paying Agent, Securities Intermediary,
Note Registrar or Transfer Agent
. In the event that the Trustee is also acting in the capacity
of Paying Agent, Securities Intermediary, Note Registrar or Transfer Agent hereunder, the rights,
protections, immunities or indemnities afforded to the Trustee pursuant to this Indenture shall
also be afforded to the Trustee in its capacity as Paying Agent, Securities Intermediary, Note
Registrar or Transfer Agent, to the extent not inconsistent with Section 4.03 of this Indenture,
Article 8 of the UCC and federal regulations.
ARTICLE XII
SATISFACTION AND DISCHARGE
SECTION 12.01.
Satisfaction and Discharge of the Indenture
. The Indenture and the respective
obligations and responsibilities of the Issuer, the Collateral Trustee, the Master Servicer and the
Trustee created hereby (other than the obligation of the Trustee to make payments to Series 2010-1
Noteholders as hereinafter set forth) shall terminate, except with respect to the duties described
in
Sections 7.03
,
8.04
,
11.04
,
12.02(b)
,
13.06(a)
,
13.10
and
13.13
upon the earlier to occur of (i) at the option of the Issuer
exercisable by an Order to the Trustee to such effect, any day following the Maturity Date of the
Series 2010-1 Notes, and (ii) such earlier time as all outstanding Series 2010-1 Notes theretofore
authenticated and issued hereunder have been delivered (other than any Series 2010-1 Notes which
shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in
Section 6.02
) to the Trustee for cancellation and the Issuer shall have paid all sums
required to be paid hereunder and under the Series 2010-1 Notes;
provided
,
however
,
that if, at any time after the payment that would have otherwise resulted in the satisfaction and
discharge of this Indenture
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and such obligations, such payment is rescinded or must otherwise be
returned for any reason, effective upon such rescission or return such satisfaction and discharge
of this Indenture and such obligations shall automatically be deemed never to have occurred and the
Indenture and such obligations shall be deemed to be in full force and effect.
SECTION 12.02.
Final Distribution
.
(a) The Issuer shall give the Trustee, the Collateral Trustee and each Series 2010-1
Noteholder at least twenty days prior written notice of the date on which (i) the Indenture is
expected to be satisfied and discharged in accordance with
Section 12.01
and (ii) the final
payment on the Series 2010-1 Notes will be made. Not later than five Business Days after the
Collateral Trustee shall receive such notice, the Collateral Trustee shall mail notice to the
Series 2010-1 Noteholders specifying (w) the date upon which such final payment will be made, (x)
the amount of any such final payment, (y) if applicable, that the Payment Date otherwise applicable
to such final payment is not applicable and (z) that following such payment, all outstanding Series
2010-1 Notes shall be deemed canceled. The Collateral Trustee shall give such notice to the Note
Registrar and Transfer Agent and the Paying Agent at the time such notice is given to the Series
2010-1 Noteholders. Each Series 2010-1 Noteholder shall cause the redelivery of its Series 2010-1
Note to the Trustee prior to receipt of the final distribution and on or prior to the date on which
the Indenture is satisfied and discharged. Each such Series 2010-1 Note shall be delivered to the
Trustee marked cancelled or paid in full. In the event any such Series 2010-1 Note is lost or
otherwise unavailable, the holder of such Series 2010-1 Note may deliver a lost note affidavit to
the Trustee in lieu of such Series 2010-1 Note.
(b) Notwithstanding the Issuers delivery to the Collateral Trustee, or the Collateral
Trustees delivery to the Series 2010-1 Noteholders, of the notices required under
Section
12.02(a)
, all funds then on deposit in the Series Collection Account, the Series Payment
Account, the Series Reserve Account or the Trustees Account shall continue to be held in trust
for the benefit of the applicable Series 2010-1 Noteholders, and the Paying Agent, the Collateral
Trustee or the Trustee shall pay such funds to such Series 2010-1 Noteholders and to all other
applicable
parties on the date specified in such notice, subject to the priorities set forth in the
Supplement (as if such distribution occurred on an applicable Payment Date).
SECTION 12.03.
Release of Liens
. Upon irrevocable payment of all amounts due under the Series 2010-1
Notes and all unpaid fees and expenses of the parties hereto and any other secured party designated
in the Supplement, the Trustee, at the written request of the Issuer, shall release (and shall, at
the expense of the Issuer, execute and deliver to the Issuer all necessary UCC releases and other
releases in respect thereof) the Series Trust Assets securing the Series 2010-1 Notes from the lien
of the Trustee effected pursuant to the Granting Clause hereof and pursuant to the Supplement.
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ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.01.
Amendment; Waiver of Default Events
.
(a)
Supplements and Amendments to Indenture Without Consent of Series 2010-1
Noteholders
. This Agreement and the Supplement may be amended from time to time by the Master
Servicer (to the extent such consent is required in accordance with the
first proviso
of
this sentence) and/or the Collateral Trustee (to the extent such consent is required in accordance
with the
final proviso
of this sentence), the Issuer and the Trustee to:
(1) cure any ambiguity or to correct or supplement any provision herein which may be
inconsistent with any other provision herein, but only if such action shall not adversely affect
the interests of any Series 2010-1 Noteholder (other than an Affiliated Entity); or
(2) comply with the requirements of the Securities and Exchange Commission in order to effect
or maintain the qualification of this Indenture under the Trust Indenture Act if and to the extent
such compliance is required by applicable law;
provided
, that the Master Servicers consent shall not be required with respect to any
such amendment which does not modify any of their respective obligations, duties, rights or
benefits hereunder or under any of the other Operative Documents;
provided
,
further
, that the consent of the Collateral Trustee shall not be required with respect to
any such amendment which does not modify any of its respective obligations, duties, rights or
benefits hereunder or under any of the other Operative Documents. The Trustee may require an
Officers Certificate from the Issuer and an Opinion of Counsel from outside counsel of the Issuer,
in each case, with respect to an amendment entered into pursuant to this
Section 13.01(a)
concerning the effect of any such action.
(b)
Supplements and Amendments to Indenture With Consent of Series 2010-1 Noteholders
and/or Control Party
. This Agreement and the Supplement may be amended or any term or
provision thereof waived from time to time by (x) the Master Servicer and the Collateral Trustee
(in each case to the extent such consent to any such amendment would be required pursuant to the
first sentence of
Section 13.01(a)
) and (y) the Issuer for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of this Agreement or
of modifying in any manner the rights of the Series 2010-1 Noteholders;
provided
,
however
, that no such amendment or waiver shall (i) reduce in any manner the amount
of, or delay the timing of, allocations, payments or distributions to be made to any Series 2010-1
Noteholder without the consent of such Series 2010-1 Noteholder in respect of the relevant Series
2010-1 Notes, (ii) change the definition of or the manner of calculating any Series 2010-1
Noteholders interest in any Series 2010-1 Note or any Series Trust Assets without the consent of
each affected Series 2010-1 Noteholder in respect of the relevant Series 2010-1 Notes, (iii) modify
the foregoing consent requirements with respect to any amendment or waiver so as to eliminate the
requirement that each affected Series 2010-1 Noteholder shall have consented to such amendment,
without the consent of each Series 2010-1 Noteholder, (iv) cause any adverse tax effect for any
Series 2010-1 Noteholder without the consent of each affected Series 2010-1 Noteholder in respect
of the relevant Series 2010-1 Notes, (v) release all or any material portion
106
of the Series Trust
Assets without the consent of each Series 2010-1 Noteholder or (vi) reduce the Specified Series
Reserve Balance for the Series without the consent of each Series 2010-1 Noteholder. The Trustee
shall require an Officers Certificate and an Opinion of Counsel (which counsel shall not be an
employee of any Affiliated Entity) with respect to an amendment entered into pursuant to this
Section 13.01(b)
concerning compliance with the requirements of this Agreement.
(c) Notwithstanding anything to the contrary in
Sections 13.01(a)
and
13.01(b)
, neither this Agreement nor the Supplement shall be amended in violation of any
restrictions or limitations set forth in the Supplement.
(d) Promptly after the execution of any such amendment or waiver, the Issuer shall furnish a
copy of such amendment or waiver to each party hereto and each Series 2010-1 Noteholder.
(e) It shall not be necessary for the consent of Series 2010-1 Noteholders under this
Section 13.01
to approve the particular form of any proposed amendment, but it shall be
sufficient if such consent shall approve the substance thereof. The manner of obtaining such
consents and of evidencing the authorization of the execution thereof by Series 2010-1 Noteholders
shall be subject to such reasonable requirements as the Trustee may prescribe.
(f) The Supplement executed in accordance with the provisions of
Section 6.09
shall
not be considered an amendment to this Agreement for the purposes of this Section.
(g) Prior to the execution of any amendment to this Agreement or the Supplement, the Trustee
shall be entitled to receive and rely upon an Opinion of Counsel of outside counsel to the Issuer
stating that the execution of such amendment is authorized or permitted by this Agreement or the
Supplement, as the case may be, and that all conditions precedent to such amendment have been
satisfied. The Trustee may, but shall not be obligated to, enter into any such amendment which
affects the Trustees own rights, duties or immunities under this Agreement, the Supplement or
otherwise.
SECTION 13.02.
Protection of Right, Title and Interest to Trust Assets
.
(a) The Issuer shall cause this Agreement, all amendments hereto and all financing statements
and continuation statements and any other necessary documents covering the Issuers
ownership and the Trustees security interest, for the benefit of the Series 2010-1
Noteholders, in and to the Trust Assets to be promptly recorded, registered and filed, and at all
times to be kept recorded, registered and filed, all in such manner and in such places as may be
required by applicable Requirements of Law to preserve and protect fully the right, title and
interest of the Issuer, the Series 2010-1 Noteholders and the Trustee hereunder in and to all Trust
Assets. The Issuer shall deliver to the Trustee and each Series 2010-1 Noteholder file-stamped
copies of, or filing receipts for, each document recorded, registered or filed by it as required
above, promptly following such recording, registration or filing.
(b) Within thirty (30) days after the Issuer makes any change in its name, identity or
corporate structure which would make any financing statement or continuation statement filed in
accordance with the terms of this Agreement seriously misleading within the meaning of
107
Sections 9-503(a), 9-504 and 9-507 (or any comparable provision) of the UCC as in effect in the jurisdiction
the law of which governs the perfection of the interest in the Trust Assets created hereunder or
under the Supplement, the Issuer shall give the Trustee and each Series 2010-1 Noteholder notice of
such change and shall file such financing statements or amendments as may be necessary to continue
the perfection of the Issuers ownership interest and the Trustees security interest, as
contemplated by
Section 2.01
hereof for the benefit of the Series 2010-1 Noteholders, in
the Trust Assets and the proceeds thereof.
(c) The Issuer and the Master Servicer will give the Trustee and each Series 2010-1 Noteholder
prompt written notice of any relocation of any office from which it services Receivables (or any
portion thereof) or keeps records concerning the Receivables (or any portion thereof) or of its
principal executive office. The Issuer and the Master Servicer will at all times maintain each
office from which it services Receivables and its principal executive offices within the United
States of America.
SECTION 13.03.
Limitation on Rights of Series 2010-1 Noteholders
. No Series 2010-1 Noteholder shall
have any right by virtue of any provisions of this Agreement to file or otherwise institute any
suit, action or proceeding in equity or at law upon or under or with respect to this Agreement or
the Supplement, unless such Series 2010-1 Noteholder, and unless the Control Party if affected
thereby (which, if such action, suit or proceeding relates to this Agreement, shall be deemed to
affect the Control Party) shall have made, a written request to the Trustee to institute such
action, suit or proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to
be incurred therein or thereby, and the Trustee, for 30 days after such request and offer of
indemnity, shall have failed to file or otherwise refused to institute any such action, suit or
proceeding; it being understood and intended, and being expressly covenanted, by each Series 2010-1
Noteholder with every other Series 2010-1 Noteholder and the Trustee, that no one or more Series
2010-1 Noteholders shall have any right in any manner whatever by virtue or by availing itself or
themselves of any provisions of this Agreement or the Supplement to affect, disturb or prejudice
the rights of the holders of any of the Series 2010-1 Notes, or to obtain or seek to obtain
priority over or preference to any such Series 2010-1 Noteholder, or to enforce any right under
this Agreement or the Supplement, except in the manner herein and therein provided and for the
equal, ratable and common benefit of all Series 2010-1 Noteholders affected thereby. For the
protection and
enforcement of the provisions of this
Section 13.03
, each and every Series 2010-1
Noteholder and the Trustee shall be entitled to such relief as can be given either at law or in
equity.
SECTION 13.04.
Governing Law; Jurisdiction; Consent to Service of Process
.
(a)
Governing Law
. THOSE TERMS, CONDITIONS, AND PROVISIONS OF THIS AGREEMENT RELATING
TO THE ATTACHMENT, PERFECTION AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS IN THE TRUST
ASSETS GRANTED BY THE ISSUER IN FAVOR OF THE TRUSTEE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICT OF LAW PROVISIONS) OF THE STATE OF
GEORGIA. ALL OTHER TERMS, CONDITIONS AND PROVISIONS OF THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE LAWS (INCLUDING
108
SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAWS BUT
OTHERWISE WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS) OF THE STATE OF NEW YORK.
(b)
Jurisdiction
. Each of the parties hereto and to the Supplement hereby irrevocably
and unconditionally submits to the nonexclusive jurisdiction of any New York State court sitting in
the borough of Manhattan or Federal court of the United States of America sitting in the Southern
District of New York, and any appellate court from any thereof, in any action or proceeding arising
out of or relating to this Agreement, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or proceeding may be heard and
determined in such New York State court sitting in the borough of Manhattan or, to the extent
permitted by law, in such Federal court sitting in the Southern District of New York. Each of the
parties hereto and to the Supplement agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any
other manner provided by law.
(c)
Consent to Service of Process
. Each party to this Agreement and to the Supplement
irrevocably consents to service of process in the manner provided for notices in
Section
13.05
. Nothing in this Agreement will affect the right of any party to this Agreement or to
any Supplement to serve process in any other manner permitted by law.
SECTION 13.05.
Notices; Payments
.
(a) All demands, notices, instructions, directions, requests, authorizations and
communications (collectively,
Notices
) under this Agreement shall be in writing and shall
be deemed to have been duly given (x) upon delivery, if personally delivered, (y) three Business
Days after being deposited in the mails, postage paid, if mailed by registered mail, return receipt
requested, or (z) one Business Day after being sent for next Business Day delivery by national
overnight courier service, in each case, to (i) in the case of the Issuer, 191 Peachtree Street NE,
Suite 3300, Atlanta, GA 30303, Attention: President, (ii) in the case of the Master Servicer (if
the Master Servicer is the Initial Master Servicer), PFSC Financial Servicing Company, 2121 SW
Broadway, #200, Portland, OR 97201, Attention: President, (iii) in the case of the Collateral
Trustee, the Paying Agent, the Note Registrar and the Transfer Agent, Wilmington Trust Company,
1100 N. Market Street, Wilmington, DE 19890, Attn: Corporate Capital Markets, and
(iv) in the case of the Trustee, 1100 N. Market Street, Wilmington, DE 19890, Attn: Corporate
Capital Markets, with a copy to the Collateral Trustee at its address set forth in (iii) above; or,
as to each party, such other address as shall be designated by such party in a written notice to
each other party. If the Master Servicer is not the Initial Master Servicer, notices shall be
given to the Master Servicer at the address designated by it to the Initial Master Servicer.
(b) Any Notice required or permitted to be mailed to a Series 2010-1 Noteholder shall be given
by first-class mail, postage prepaid or overnight delivery at the address of such Series 2010-1
Noteholder as shown in the Note Register. Notice so mailed within the time prescribed in this
Agreement shall be conclusively presumed to have been duly given, whether or not the Series 2010-1
Noteholder receives such notice.
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SECTION 13.06.
Assignment of the Issuer Purchase Agreement; Substitution Under the
Powers of Attorney
.
(a) In addition to and without limitation of any security interest granted by the Issuer to
the Trustee in any Series Trust Assets, in order to secure, equally and ratably, and without
prejudice, priority and distinction, the payment of the Issuers obligations to the Series 2010-1
Noteholders hereunder and pursuant to the Supplement, the Issuer hereby grants to the Trustee, for
the benefit of the Series 2010-1 Noteholders, a security interest in all of the Issuers right and
title to and interest in the Issuer Purchase Agreement. In addition, at any time and without
limitation of the rights of the Trustee set forth in
Section 9.02
, the Trustee shall have
the right to exercise and enforce, or to direct the Issuer to exercise and enforce, for the benefit
of the Series 2010-1 Noteholders (or any of them), the Issuers rights and remedies under the
Issuer Purchase Agreement (including, without limitation, the right to give or withhold any and all
consents, requests, notices, directions, approvals, demands, extensions or waivers under or with
respect to such agreements), upon the failure of the Issuer to do so, but in no event shall there
be any obligation on the part of the Trustee, any Series 2010-1 Noteholder or any of their
respective Affiliates to perform any of the obligations of the Issuer under any such agreement.
The Trustee shall enforce or refrain from enforcing any of the Issuers rights and remedies under
such agreements to the extent so instructed by the Control Party.
(b) The Issuer also hereby substitutes the Trustee in place of the Issuer under any and all
Powers of Attorney in accordance with the power of substitution provided in each of the Powers of
Attorney whereupon the Trustee shall have all of the Issuers rights, title, interests and powers
under each such Power of Attorney.
(c) The grant to the Trustee of any security interest pursuant to this
Section 13.06
shall terminate upon the satisfaction and discharge of this Indenture in accordance with
Section 12.01
.
SECTION 13.07.
Severability of Provisions
. If any one or more of the covenants, agreements,
provisions or terms of this Agreement shall for any reason whatsoever be held to be invalid, then
such covenants, agreements, provisions or terms shall be deemed severable from the remaining
covenants, agreements, provisions or terms of this Agreement and shall in no way affect the
validity or enforceability of
the other covenants, agreements, provisions or terms of this Agreement or of the Series 2010-1
Notes or rights of the Series 2010-1 Noteholders.
SECTION 13.08.
Assignment
. Notwithstanding anything to the contrary contained herein or in the
Supplement, (i) this Agreement may not be assigned by the Issuer and (ii) except as provided in
Section 8.02
, this Agreement may not be assigned by the Master Servicer without the prior
written consent of the Control Party.
SECTION 13.09.
Further Assurances
. The Issuer agrees to do and perform, from time to time, any and
all acts and to execute any and all further instruments and documents required or reasonably
requested by the Trustee at the direction of the Control Party more fully to effect the purposes of
this Agreement (including without limitation
Section 13.06
hereof) or the Supplement,
including, without limitation, the perfection of all security interests granted hereby, including
the execution of any financing statements or continuation statements relating to the
110
Receivables
(or any portion thereof) for filing under the provisions of the UCC of any applicable jurisdiction.
To the fullest extent permitted by applicable law, the Issuer hereby irrevocably grants to the
Trustee an irrevocable power of attorney, with full power of substitution, coupled with an
interest, to take such action, and/or to sign and file in the name of the Issuer, or in its own
name, such documents, agreements, instruments and financing statements and amendments thereto, in
any case as the Control Party deem(s) necessary to accomplish the purposes set forth in the
preceding paragraph.
SECTION 13.10.
Nonpetition Covenant
. Notwithstanding any prior termination of this Agreement, the
Master Servicer, the Collateral Trustee, the Trustee, the Issuer and by its acceptance of a Series
2010-1 Note each Series 2010-1 Noteholder hereby agrees that it shall not, prior to the date which
is two years and one day after the satisfaction and discharge of this Agreement, acquiesce,
petition or otherwise invoke or cause the Issuer or the Seller to invoke the process of any
Governmental Authority for the purpose of commencing or sustaining a case against the Issuer or the
Seller under any Federal or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Issuer or
the Seller or any substantial part of its property or ordering the winding-up or liquidation of the
affairs of the Issuer or the Seller.
SECTION 13.11.
No Waiver; Cumulative Remedies
. No failure to exercise and no delay in exercising, on
the part of any Person, any right, remedy, power or privilege hereunder or under the Supplement
shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege under this Agreement or under the Supplement preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges provided herein or in the Supplement are cumulative and not
exhaustive of any rights, remedies, powers and privileges provided by law.
SECTION 13.12.
Counterparts
. This Agreement may be executed in two or more counterparts and by
different parties on separate counterparts, each of which shall be an original, but all of which
together shall constitute one and the same instrument.
SECTION 13.13.
Third-Party Beneficiaries
. This Agreement will inure to the benefit of and be binding
upon the parties hereto, the Series 2010-1 Noteholders and their respective successors and
permitted assigns. Except as otherwise provided in this Agreement, no other person will have any
right or obligation hereunder.
SECTION 13.14.
Actions by Series 2010-1 Noteholders
.
(a) Wherever in this Agreement a provision is made that an action may be taken or a Notice
given by Series 2010-1 Noteholders, such action or Notice may be taken or given by any Series
2010-1 Noteholder, unless such provision requires a specific percentage of Series 2010-1
Noteholders.
(b) Any Notice, consent, waiver or other act by the Holder of a Series 2010-1 Note shall bind
such Holder and every subsequent Holder of such Series 2010-1 Note and of any Series 2010-1 Note
issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done or omitted to be done by the Trustee or the Master
111
Servicer in reliance
thereon, whether or not notation of such action is made upon such Series 2010-1 Note.
SECTION 13.15.
Merger and Integration
. Except as specifically stated otherwise herein, this
Agreement sets forth the entire understanding of the parties relating to the subject matter hereof,
and all prior understandings, written or oral, are superseded by this Agreement. This Agreement
may not be modified, amended, waived or supplemented except as provided herein.
SECTION 13.16.
Headings
. The headings herein are for purposes of reference only and shall not
otherwise affect the meaning or interpretation of any provision hereof.
SECTION 13.17.
Tax and Usury Treatment
. The Issuer, the Initial Master Servicer, the Trustee and the
Collateral Trustee have entered into this Agreement, and the Series 2010-1 Notes will be issued to
and acquired by the Series 2010-1 Noteholders, with the intention that, for federal, state and
local income and franchise tax and usury law purposes, the Series 2010-1 Notes be treated as debt
of the Issuer secured by the Trust Assets, and the Issuer will not be treated as an association (or
publicly traded partnership) taxable as a corporation. The Issuer, the Initial Master Servicer,
the Collateral Trustee and the Trustee, by entering into this Agreement, and each Series 2010-1
Noteholder, by the acceptance of its Series 2010-1 Note, agree to treat and report the Series
2010-1 Notes as debt for federal, state and local income and franchise tax and usury law purposes,
unless and until required to do otherwise by a relevant taxing or judicial authority. The Issuer
shall not elect (or cause or permit an election to be made) to be taxed for federal income tax
purposes as a corporation or an association taxable as a corporation.
SECTION 13.18.
Liability of the Issuer
. Notwithstanding any provision to the contrary in this
Agreement or the Supplement, indemnification payments and other amounts described herein as payable
by the Issuer hereunder (including, without limitation, amounts payable pursuant to
Section
7.03
) shall be payable only from Available Issuer Funds (and, as a result, may be payable from
any allocable Trust Asset only if, to the extent that, and after such Trust Asset shall have been
distributed to the Issuer in accordance with the terms of this Agreement and the Supplement
hereto). Unless and until sufficient Available Issuer Funds become available to pay any such
amount in accordance with the immediately preceding sentence, such indemnification payments and
other amounts shall not be due and payable until a year and a day after the Maturity Date for the
Series 2010-1 Notes.
SECTION 13.19.
Offers to Purchase Series 2010-1 Notes
. The Issuer shall not, and shall cause all of
its Affiliates not to, make any offers to purchase the Series 2010-1 Notes from any Series 2010-1
Noteholder without making the same offer to all Series 2010-1 Noteholders on a pro rata basis.
ARTICLE XIV
THE COLLATERAL TRUSTEE
SECTION 14.01.
Duties of Collateral Trustee
.
(a) The Issuer hereby appoints, and the Collateral Trustee hereby undertakes, to perform such
duties and only such duties as are specifically set forth in this Agreement and each
112
other
Operative Document to which it is a party, and no implied duties shall be read against the
Collateral Trustee. The Collateral Trustee shall have no fiduciary obligation to the Series 2010-1
Noteholders or the Trustee. However, the Series 2010-1 Noteholders and the Trustee are
beneficiaries of the obligations of the Collateral Trustee hereunder, and the Trustee shall have
the right to enforce the obligations of the Collateral Trustee specifically set forth herein and in
each other Operative Document to which it is a party directly against the Collateral Trustee.
Other than as provided herein or in any other Operative Document, neither the Collateral
Trustee nor any of its directors, officers, agents or employees shall be liable for any action or
omission to act hereunder or under any other Operative Document except for its or their own
negligence or lack of good faith or willful misconduct. Anything in this Agreement to the contrary
notwithstanding, in no event shall the Collateral Trustee be liable for special, indirect or
consequential loss or damage of any kind whatsoever (including but not limited to lost profits),
even if the Collateral Trustee has been advised of the likelihood of such loss or damage.
(b) The Collateral Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the Collateral Trustee
which are specifically required to be furnished pursuant to any provision of this Agreement or
any other Operative Document, shall examine them to determine whether they substantially conform on
their face to the requirements of this Agreement or such other Operative Document (without any duty
of inquiry or investigation as to the facts stated therein). The Collateral Trustee shall give
prompt written notice to the Series 2010-1 Noteholders of any lack of conformity discovered by the
Collateral Trustee of any such instrument to the applicable requirements of this Agreement or such
other Operative Document.
(c) Subject to
Section 14.01(a)
, no provision of this Agreement shall be construed to
relieve the Collateral Trustee from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct;
provided
,
however
, that:
(i) the Collateral Trustee shall not be personally liable for an error of judgment made in
good faith by a Responsible Officer or Responsible Officers of the Collateral Trustee, unless it
shall be proved that the Collateral Trustee was negligent in ascertaining the pertinent facts; and
(ii) the Collateral Trustee shall not be charged with knowledge of any Event of Default, any
Series Event of Default or any Servicer Default unless in any case a Responsible Officer of the
Collateral Trustee obtains actual knowledge of such failure or a Responsible Officer of the
Collateral Trustee receives written notice of such failure.
(d) The Collateral Trustee shall not be required to expend or risk its own funds or otherwise
incur financial liability in the performance of any of its duties hereunder or under any other
Operative Document or in the exercise of any of its rights or powers, if there is reasonable ground
for believing that the repayment of such funds and/or adequate indemnity (and, to the extent
requested by the Collateral Trustee, advancement of funds) against such risk or liability is not
assured to it, and none of the provisions contained in this Agreement shall in any event require
the Collateral Trustee to perform, or be responsible for the manner of performance of, any
obligations of the Master Servicer under this Agreement or the Supplement.
113
(e) Except for actions expressly authorized by this Agreement or the Supplement, the
Collateral Trustee shall take no action reasonably likely to impair the interests of the Collateral
Trustee or the Series 2010-1 Noteholders in any Trust Asset now existing or hereafter created or
the value of any Trust Asset now existing or hereafter created.
(f) In the event that the Paying Agent, the Authenticating Agent or the Note Registrar and
Transfer Agent (in each case, if other than the Collateral Trustee) shall fail to perform any
obligation, duty or agreement in the manner or on the day required to be performed by the Paying
Agent, the Authenticating Agent or the Note Registrar and Transfer Agent, as the case may be, under
this Agreement or under the Supplement, the Collateral Trustee shall be obligated, promptly upon
the obtaining of actual knowledge thereof by a Responsible Officer of the Collateral Trustee, to
perform such obligation, duty or agreement in the manner so required.
(g) The Collateral Trustee shall have no responsibility or liability for investment losses on
Eligible Investments.
(h) The Collateral Trustee shall have no obligation to invest or reinvest any cash held in the
Series Collection Account, the Series Reserve Account or any other account established pursuant to
the Supplement hereto in the absence of timely and specific written investment direction from the
Issuer. In no event shall the Collateral Trustee be liable for the selection of investments or for
investment losses incurred thereon. The Collateral Trustee shall have no liability in respect of
losses incurred as a result of the liquidation of any investment prior to its stated maturity or
the failure of the Issuer to provide timely written investment direction.
(i) The Collateral Trustee hereby agrees to comply with the written instructions of the
Control Party in the exercise of the Collateral Trustees rights and obligations under the Back-up
Servicing Agreement, including, without limitation, any decision to (i) waive any Back-up Servicer
Default or other default by the Back-up Servicer thereunder or to terminate the Back-up Servicing
Agreement with respect to the applicable Series upon any such occurrence, (ii) request the delivery
of any Settlement Package or Annuity Package to the Collateral Trustee (copies of which documents
shall, at the request of the Control Party, be delivered by the Collateral Trustee to the Control
Party) or (iii) request access to the facilities and record-keeping systems of the Back-up Servicer
in order to perform an audit of the Back-up Servicer (which audit shall be conducted by the
employees or agents of the Control Party);
provided
, that the Collateral Trustee may in its
own discretion seek reimbursement under the Back-up Servicing Agreement for any indemnities or
expenses owed to the Collateral Trustee pursuant to the terms thereof.
SECTION 14.02.
Certain Matters Affecting the Collateral Trustee
. Except as otherwise provided in
Section 14.01
:
(a) the Collateral Trustee may conclusively rely on and shall be fully protected in acting on,
or in refraining from acting in accord with, any resolution, Officers Certificate, certificate of
auditors or any other certificate, statement, instrument, opinion, report, notice, request,
consent, order, appraisal, bond or other paper or document believed by it to be genuine and to have
been signed or presented to it pursuant to this Agreement or any other Operative Document by the
proper party or parties;
provided
,
however
, that the Collateral Trustee may not
114
so rely and shall not be so protected in the event that it has been negligent in ignoring relevant
facts of which it has actual knowledge or in ascertaining the relevant facts pursuant to
Section 14.02(d)
;
(b) the Collateral Trustee may consult with counsel and any advice or opinion of counsel shall
be full and complete authorization and protection in respect of any action taken or suffered or
omitted by it hereunder or under any other Operative Document in good faith and in accordance with
such advice or opinion of counsel;
(c) any reference in this Agreement or the Supplement to the knowledge of the Collateral
Trustee with regard to any matter shall be construed to mean the actual knowledge of any
Responsible Officer of the Collateral Trustees corporate trust department with respect to such
matter;
(d) the Collateral Trustee shall not be bound to make any investigation into the facts of
matters stated in any resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, appraisal, approval, bond or other paper or document presented to it
pursuant to this Agreement or any other Operative Document, unless requested in writing so to do by
the Issuer or the Control Party;
(e) the Collateral Trustee may execute any of its powers or perform any of its duties
hereunder or under any other Operative Document either directly or by or through agents, attorneys,
nominees or custodians, and the Collateral Trustee shall not be responsible for any misconduct or
negligence on the part of any such agent (including, without limitation, the Master Servicer, the
Back-up Servicer or any Successor Servicer), attorney, nominee or custodian appointed with due care
by it;
(f) except as may be required by
Section 14.01(b)
, the Collateral Trustee shall not be
required to make any initial or periodic examination of any documents or records related to the
Receivables or the Issuer for the purpose of establishing the presence or absence of defects, the
compliance by the Issuer with its representations and warranties or for any other purpose;
(g) nothing in this Agreement shall be construed to require the Collateral Trustee to monitor
the performance of any other party hereto or to the Back-up Servicing Agreement, including without
limitation, the Master Servicer and the Back-up Servicer or act as a guarantor of the Master
Servicers or the Back-up Servicers performance;
(h) the Collateral Trustee in its individual capacity or otherwise may engage in any business,
lending or other transactions or activities in the ordinary course of its business with any of the
Affiliated Entities, and shall be entitled to exercise all of its rights, powers and remedies in
connection therewith to the same extent as if the Collateral Trustee were not acting as the
Collateral Trustee hereunder and without any duty to account to the Series 2010-1 Noteholders
therefor;
(i) in the event that any information transmitted electronically, including without
limitation, through the use of electronic mail or internet or intranet web sites, by the Collateral
Trustee pursuant to this Agreement, is untimely, inaccurate or incomplete, to the extent that such
untimeliness, inaccuracy or incompleteness results from systems, software or hardware that are
115
not owned, leased by or licensed to the Collateral Trustee, the parties hereto acknowledge and agree
that the Collateral Trustee shall have no liability hereunder in connection with such information
transmitted electronically. The parties hereto further acknowledge that any systems, software or
hardware utilized in posting or retrieving any such information is utilized on an as is basis
without representation or warranty as to the intended uses of such systems, software or hardware;
(j) the Collateral Trustee will not be responsible for any failure to perform any of its
obligations hereunder or under any other Operative Document (nor will it be responsible for any
unavailability of funds credited to any account) if such performance is prevented, hindered or
delayed by a Force Majeure Event; and
(k) whenever the Collateral Trustee is unable to decide between alternative courses of action
permitted or required by the terms of this Agreement, or in the event that the Collateral Trustee
is unsure as to the application of any provision of this Agreement or any such provision is
ambiguous as to its application, or is, or appears to be, in conflict with any other applicable
provision, or in the event that this Agreement permits any determination by the Collateral Trustee
or is silent or is incomplete as to the course of action that the Collateral Trustee is required to
take with respect to a particular set of facts, the Collateral Trustee may give written notice (in
such form as shall be appropriate under the circumstances) to the Control Party requesting
instruction as to the course of action to be adopted, and to the extent the Collateral Trustee acts
in good faith in accordance with any written instruction of the Control Party received, the
Collateral Trustee shall not be liable on account of such action to any Person. If the Collateral
Trustee shall not have received appropriate instruction within ten (10) days of such notice (or
within such shorter period of time as reasonably may be specified in such written notice or may be
necessary under the circumstances), or shall have received inconsistent or conflicting instructions
from the Control Party (in which case it shall have so notified the Control Party in writing), it
may, but shall be under no duty to, take or refrain from taking such action, not inconsistent with
this Agreement, as it shall deem to be in the best interests of the Control Party and shall have no
liability to any Person for such action or inaction.
SECTION 14.03.
Collateral Trustee Not Liable for Recitals in Series 2010-1 Notes
. The Collateral
Trustee assumes no responsibility for the correctness of the recitals contained herein, in the
Supplement and/or in the Series 2010-1 Notes (other than the certificate of authentication on the
Series 2010-1 Notes). Except as set forth in
Section 14.10
, the Collateral Trustee makes
no representations as to the validity or sufficiency of this Agreement or of any Receivable or
related document. The Collateral Trustee shall not be accountable for the use or application by
the Issuer of any of the Series 2010-1 Notes, or for the use or application of any proceeds of the
Series 2010-1 Notes paid to the Issuer in respect of the Series 2010-1 Notes, the Receivables or
deposited in or withdrawn from any Settlement Lock-Box Account, Annuity Lock-Box Account, the
Master Collection Account, the Series Collection Account, the Series Payment Account, the Series
Reserve Account, the Issuers Account, the Trustees Account or any other account hereafter
established to effectuate the transactions contemplated by and in accordance with the terms of this
Agreement and the Supplement. Without limiting the generality of the foregoing, the Collateral
Trustee shall have no responsibility or liability for the content or adequacy of any private
placement memorandum or any other offering document.
116
SECTION 14.04.
Compensation; Collateral Trustees Expenses; Indemnification
.
(a) As full compensation for its services hereunder, the Collateral Trustee shall be entitled
to receive, solely out of Collections of Trust Assets and, to the extent provided in the
Supplement, and subject to the priority of payments set forth in the Supplement, the fees
separately agreed between the Issuer and the Collateral Trustee by separate letter agreements or in
the Supplement.
(b)
Expenses; Indemnification
. The Issuer will pay or reimburse the Collateral
Trustee upon its request for, and will, within thirty (30) days of demand and submission of
evidence of such expenses or other liabilities, indemnify and hold the Collateral Trustee and its
officers, directors, employees and agents harmless against, all reasonable out-of-pocket
expenses (including fees and expenses of legal counsel), disbursements, costs, demands, claims, and
liabilities incurred or made by or against the Collateral Trustee in respect of such Series in
accordance with any of the provisions of this Agreement or any other Operative Document or in
connection with any amendment hereto or thereto or by reason of its participation in the
transactions contemplated hereby or thereby (including, in all such cases, the reasonable fees and
expenses of its agents, any co-Collateral Trustee and counsel), except any such expense,
disbursement or liability as may arise from the Collateral Trustees own gross negligence, willful
misconduct or bad faith and except as provided in the following sentence. The terms of this
Section 14.04
shall survive the termination of this Agreement or the earlier resignation or
removal of the Collateral Trustee. If the Collateral Trustee is named as a defendant in any
litigation or other proceedings in respect of which the Issuer would have indemnification
obligations hereunder, the Collateral Trustee shall promptly notify the Issuer of the same and
afford it an opportunity to participate in, and (at its expense) direct the conduct of, any such
proceedings. No settlement of any such proceedings shall be agreed by the Collateral Trustee
without the consent (which shall not be unreasonably withheld) of the Issuer.
SECTION 14.05.
Eligibility Requirements for Collateral Trustee
. The Collateral Trustee hereunder
shall at all times be an Eligible Institution. If such corporation publishes reports of condition
at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then, for the purpose of this
Section 14.05
, the combined capital and surplus of
such corporation shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. In case at any time the Collateral Trustee shall cease to
be an Eligible Institution in accordance with the provisions of this
Section 14.05
, the
Collateral Trustee shall resign immediately in the manner and with the effect specified in
Section 14.06
.
SECTION 14.06.
Resignation or Removal of Collateral Trustee
.
(a) The Collateral Trustee may at any time resign from its duties hereunder by giving prior
written notice thereof to the Issuer, the Series 2010-1 Noteholders, the Master Servicer and the
Trustee. Upon receiving such notice of resignation, the Trustee shall, at the direction of the
Control Party, promptly appoint a successor Collateral Trustee acceptable to the Control Party by
written instrument, in duplicate, one copy of which instrument shall be delivered to the resigning
Collateral Trustee and one copy to the successor Collateral Trustee. If no successor Collateral
Trustee shall have been so appointed and have accepted appointment within thirty (30) days after
117
the giving of such notice of resignation, the Control Party may appoint a successor Collateral
Trustee, and if no such successor Collateral Trustee shall have been appointed within sixty (60)
days of the giving of notice of such resignation, the resigning Collateral Trustee may petition any
court of competent jurisdiction for the appointment of a successor Collateral Trustee.
(b) If at any time the Collateral Trustee shall cease to be an Eligible Institution in
accordance with
Section 14.05
hereof and shall fail to resign after written request
therefor by the Master Servicer, the Issuer or the Control Party, or if at any time the Collateral
Trustee shall be legally unable to act, or shall be adjudged a bankrupt or insolvent, or if a
receiver or a Collateral Trustee for it or for its property shall be appointed, or any public
officer shall take charge or
control of the Collateral Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then the Trustee shall, at the direction of the
Control Party, remove the Collateral Trustee and promptly appoint a successor Collateral Trustee
acceptable to the Control Party by written instrument, in duplicate, one copy of which instrument
shall be delivered to the Collateral Trustee so removed and one copy to the successor Collateral
Trustee.
(c) Any resignation or removal of the Collateral Trustee and appointment of a successor
Collateral Trustee pursuant to any of the provisions of this
Section 14.06
shall not become
effective until acceptance of appointment by the successor Collateral Trustee as provided in
Section 14.07
hereof.
SECTION 14.07.
Successor Collateral Trustee
.
(a) Any successor Collateral Trustee appointed as provided in
Section 14.06
shall
execute, acknowledge and deliver to the Issuer, to the Master Servicer and to its predecessor
Collateral Trustee an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor Collateral Trustee shall become effective and such
successor Collateral Trustee, without any further act, deed or conveyance, shall become fully
vested with all the rights, powers, duties and obligations of its predecessor hereunder, with like
effect as if originally named as Collateral Trustee herein. The predecessor Collateral Trustee
shall deliver to the successor Collateral Trustee all documents or copies thereof and statements
held by it hereunder; and the Issuer and the predecessor Collateral Trustee shall execute and
deliver such instruments and do such other things as may reasonably be required for fully and
certainly vesting and confirming in the successor Collateral Trustee all such rights, powers,
duties and obligations.
(b) No successor Collateral Trustee shall accept appointment as provided in this
Section
14.07
unless at the time of such acceptance such successor Collateral Trustee shall be an
Eligible Institution in accordance with
Section 14.05
hereof.
(c) Upon acceptance of appointment by a successor Collateral Trustee as provided in this
Section 14.07
, such successor Collateral Trustee shall mail notice of such succession
hereunder to the Trustee and all Series 2010-1 Noteholders.
SECTION 14.08.
Merger or Consolidation of Collateral Trustee
. Any Person into which the Collateral
Trustee may be merged or converted or with which it may be consolidated, or any Person resulting
from any merger, conversion or consolidation to which the Collateral
118
Trustee shall be a party, or
any Person succeeding to all or substantially all of the corporate trust business of the Collateral
Trustee, shall be the successor of the Collateral Trustee hereunder, provided such Person shall be
an Eligible Institution in accordance with
Section 14.05
, without the execution or filing
of any paper or any further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding.
SECTION 14.09.
Tax Returns
. The Issuer, based on the information provided to it by the Master
Servicer in accordance with the Supplement shall prepare or shall cause to be prepared all tax
information required by
law to be distributed to Series 2010-1 Noteholders and shall deliver such information to the
Collateral Trustee at least twenty (20) Business Days prior to the date it is required by law to be
distributed to such Series 2010-1 Noteholders. The Collateral Trustee, upon written request, will
furnish the Issuer with all such information known to the Collateral Trustee as may be reasonably
required in connection with the preparation of all tax returns of the Issuer.
SECTION 14.10.
Representations and Warranties of Collateral Trustee
. The Collateral Trustee
represents and warrants as of the date hereof and as of the Closing Date that:
(a) the Collateral Trustee is duly organized and validly existing as a banking corporation
under the laws of the State of Delaware;
(b) the Collateral Trustee has full power, authority and right to execute, deliver and perform
this Agreement, and has taken all necessary action to authorize the execution, delivery and
performance by it of this Agreement and each other Operative Document to which it is a party; and
(c) each of this Agreement and each other Operative Document to which it is a party has been
duly executed and delivered by the Collateral Trustee and constitutes a legal, valid and binding
obligation of the Collateral Trustee enforceable against it in accordance with its terms except as
such enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium
or other laws affecting creditors rights generally, and except as such enforceability may be
limited by general principles of equity (whether considered in a suit at law or in equity).
SECTION 14.11.
Maintenance of Office or Agency
. The Collateral Trustee will maintain at its expense
in Wilmington, Delaware, an office or agency (the
Collateral Trustee Office
) where
notices and demands to or upon the Collateral Trustee in respect of the Series 2010-1 Notes and
this Agreement may be served. The Collateral Trustee initially designates 1100 North Market
Street, Wilmington, DE 19890, Attention: Corporate Capital Markets, as such office. The Collateral
Trustee will give prompt written notice to the Trustee, the Master Servicer and to all Series
2010-1 Noteholders of any change in the location of the Note Register or the Collateral Trustee
Office.
SECTION 14.12.
Collateral Trustee May Own Series 2010-1 Notes
. The Collateral Trustee in its
individual or any other capacity may become the Holder or beneficial owner of any Series 2010-1
Note with the same rights as it would have if it were not the Collateral Trustee hereunder.
119
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their
respective officers as of the day and year first above written.
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IMPERIAL SETTLEMENTS FINANCING 2010, LLC, as the Issuer
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By:
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Washington Square Financial, LLC, as its Sole Member
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By:
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Imperial Holdings, LLC, as its Sole Member
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By:
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/s/
Jonathan Neuman
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Name:
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Jonathan Neuman
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Title:
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President
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PORTFOLIO FINANCIAL SERVICING COMPANY, as the Initial Master
Servicer
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By:
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/s/ John
Enyert
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Name:
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John
Enyert
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Title:
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President
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WILMINGTON TRUST COMPANY, not individually but solely in its
capacity as Trustee
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By:
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/s/ J.
Christopher Murphy
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Name:
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J. Christopher Murphy
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Title:
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Financial
Services Officer
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WILMINGTON TRUST COMPANY, not in its individual capacity but
solely in its capacity as Collateral Trustee, and, solely for
the purposes of Section 4.03(a), in its capacity as
Securities Intermediary
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By:
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/s/ J.
Christopher Murphy
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Name:
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J.
Christopher Murphy
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Title:
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Financial
Services Officer
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120
SCHEDULE I
Credit Policy Manual
See Attached
IMPERIAL STRUCTURED SETTLEMENTS
PROCEDURES MAMMAL
Table of Contents
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Structured Settlement Procedures Guide
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List of Forms:
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Lead Intro Letter
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Customer Intro Letter
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Customer Follow up Letter
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Closing Submission Form
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Quote Sheet
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Court Order Application
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Disclosures
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Contract Cover Letter
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Contract
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BIA (Best Interest Affidavit)
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Declaration
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Authorization to Deduct
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MOP (Method of Payment)
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Acknowledgement Legal Expense
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COB (Change of Beneficiary)
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RFB (Request for Beneficiary)
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AC Affidavit
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RS Affidavit
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Email Address
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IPA Statement
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Sworn Statement of Dependents
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Authorization to Release Information
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Funding CO Notice
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Funding Payee Letter
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NY Affidavit
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Pre-Notice
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Annuity Contract
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Release & Settlement Agreement
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Section 1
1.
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DUE DILIGENCE FOR PURCHASES
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The due diligence undertaken in the structured settlement acquisition area is designed to
ensure that the quality of our originations meets investment grade standards.
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Our due diligence protocols are based on qualification criteria in three general areas:
Customer Eligibility, Transaction Size/Characteristics and Obligor Creditworthiness.
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A.
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Customer Eligibility
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Each Customer will be required to meet certain criteria in order to enter into a transaction
with Imperial. Several factors are taken into consideration to determine the eligibility to
transact with each prospective Customer:
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i.
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Capacity to Contract:
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No transactions will be conducted with individuals who have not attained the age of
majority (generally 18 years but several states require 21) nor with any person who has
been adjudged incompetent absent a court order permitting the transaction.
In the case of
individuals who have suffered from a head injury, heightened scrutiny is to be applied
and legal department approval is required to proceed,
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ii.
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Income, Employability & Physical Disabilities:
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Customers having household incomes of less than $10,000/year are subject to limitations
in the sale of their structured settlement payments.
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If a Customer is earning less than $10,000 per year or is physically disabled and
unable to work, or is unemployable and his/her primary source of income consists of
his/her structured settlement payments, Imperial will purchase no more than 50% of the
periodic payments. Exceptions may be made if the Customer can satisfactorily prove that he
is able to meet his daily living expenses and medical bills from other sources of income
or that the Customer is likely to become employed in the near future. (Other sources of
income include spouses income or household income, investments, social security, or other
forms of disability insurance and income, including non-assigned annuity payments).
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Guidelines for evaluating income and financial condition of Customer for Customer
Eligibility purposes:
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If Customer or Spouse is employed and earning in excess of $10,000 per year combined
there are no restrictions on the amount of payments which may be purchased provided
Customer satisfies A (i) above;
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If the Customer is permanently disabled, unemployed or unemployable and the settlement
payments are the primary source of income of the Customer, Imperial will not generally
purchase more than 50% of the future periodic payments (monthly, annually, etc.).
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Guidelines for evaluating a waiver of the SS1 Omit on the purchase of payments from
disabled or unemployable individuals;
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Various factors will be considered when evaluating a request for waiver of the 50%
limit. These include:
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(1)
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Combined family income of Customer inclusive of unsold portion of
settlement;
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(2)
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Proposed use of funds;
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(3)
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Customers other assets (i.e. home, business, etc.)
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(4)
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Customers income greater than $10,000;
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(5)
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Future income prospects;
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(6)
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Type, nature, extent and circumstances of disability;
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(7)
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Other factors which demonstrate ability of Customer to provide for himself
financially without the settlement payments;
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(8)
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Whether payments are earmarked for medical expenses.
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Imperial does not wish to be a party to a transaction where a Customer is unlikely to
be able to care for themselves financially.
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I.
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Maximum Discount Rates
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In most circumstances Imperial will not enter into transactions with Customers where the
discount rate as to the Customer would exceed 25% per annum (compounded monthly) at the
time of the initial quote. Notwithstanding this maximum, we have adopted a 20% max.
subject to some exceptions while we determine the legal process involved in many states
transfer protocols. For Florida, Virginia and Washington customers the max rate is 25%
per annum. In Nebraska the max rate is 16%.
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Liens
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Imperial will satisfy outstanding liens which could attach to the Customers settlement
payments, including but not limited to federal and state tax liens. In the interest of
public policy, Imperial requires that all child support and spousal support arrears are
satisfied prior to or simultaneous with, funding irrespective of whether these claims
actually constitute valid claims against the settlement payments.
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We are conducting UCC searches using Westlaw. If we have a hit on a search be aware
of the following:
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UCC-1 financing statements expire after 5 years.
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If the secured party is a company in the structured settlement business (i.e. Stone
Street, JGW, Settlement Capital, Singer, Encore) we will hold off on further processing
until we determine if we can proceed. In all other cases we will either continue to
process the transaction without delay (i.e. transmit to outside counsel) while we wait
for the UCC statement itself to be pulled and delivered to us for further review or,
based on discretion of processing staff hold the transaction pending review of the
liens. We will then determine if the lien attaches to the structured settlement payments
and if so how to get it discharged or released. We are proceeding in this manner because
it is highly likely that the filing does not cover the structured settlement payments.
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iii.
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Bankruptcy Filings:
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No periodic payments will be purchased in cases where there is a high probability that
the Customer will file for bankruptcy within 90 days or where the Customer is presently
the subject of a bankruptcy proceeding absent a court order from the bankruptcy court
approving the transaction.
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We
are using Westlaw for bankruptcy and lien searches. Use Bankruptcy and Lien
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Evaluation Form for this purpose
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C.
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Transaction Size/Characteristics
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Acquisition of Largesn
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Acquisition of large lump sums are to be reviewed by the SVP. Heightened scrutiny is placed
on transactions where Customers seek to sell large lump sum payments and particularly those
where the lump sum is in excess of $100,000.
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Large Funding Amount:
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Funding amounts greater than $250,000.00 will require the SVP to obtain a second
approval, (i.e. an officer of Imperial), and are also subject to heightened scrutiny.
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Maximum Duration of Payments:
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Payments must be due within 20 years of the date of purchase. While it is possible
to include payments beyond 20 years if necessary, they are ineligible for financing and
will count as a zero for financial purposes. Notwithstanding this it is sometimes necessary
to structure transactions in this fashion to accommodate the circumstances of the Customer
and/or for administrative convenience.
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D.
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Review Cases and Approvals
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Imperials policies will exclude some Customers. Some Customers may be eligible subject to
further review (Review Cases). The following constitute Review Cases.
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Review Cases:
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Customers whose disability renders them unemployable but there is some other
source of income or other exigent circumstance, as determined by the SVP;
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Customers with significant ongoing medical expenses;
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Customers whose income combined with that of spouse but exclusive of the
settlement payments being sold are less than $10,000/year;
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Gases where the funding amount is in excess of $250,000.00; or Cases
where the Customer seeks to assign a lump sum payment in excess of
$100,000.
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Approvals:
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SVP may approve the following:
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Eligible structured settlement claims (i.e., not Review Cases) up to a
funding amount of $250,000;
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Review Cases where the funding amount is not more than $100,000; and
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E.
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Obligor Creditworthiness
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Imperial will determine the identity of the Structured Settlement Obligor (SSO) (i.e. the
party responsible to make the settlement payments) and the Annuity Issuer (AP) (i.e. the
party actually making the payments to the Customer). This is accomplished through a review
of the Release and Settlement Agreement (R&S), the Annuity Contact (AC), and, where
available, the Qualified Assignment (QA). Imperial will then verify that the SSOs and/or
the Als financial strength rating meets the criteria established by Imperials financing
counter party.
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Where the Obligor is an un-rated subsidiary (a Captive Sub) of a rated parent company, the
rating of the parent shall be assumed as the rating for the Captive Sub.
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Generally speaking, either the SSO or the Al must be rated at least Moodys Baa2 or S&P
BBB for the asset to be included in the Credit facility.
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F.
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Professional Advice
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While we urge all customers to seek independent advice, it is only a requirement where
mandated by statute and in the case of FIVTs. Where required by statute a separate
Independent Professional Advisor (IPA) or Independent Legal Advice (ILA) affidavit
should be made part of the contract.
Ohio
and
Maryland
transactions: Where Ohio or Maryland is implicated by residence
of Customer or domicile of SSO or Al, a statement from a professional advisor that they have
provided professional advice must also be obtained.
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G.
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Cash Advances
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Imperial is reasonably liberal in granting $500 cash advances once a COMPLETE contract and
all related documents has been received by the company. However, remember that any cash advance
is a gift (and a total loss to the company) if we are unsuccessful in getting the court order.
Accordingly, in order to grant an Account Executives request for a cash advance, each cash
advance request must first be reviewed using the following criteria:
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H.
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State of Residence of the Customer.
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i.
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No cash advances are permitted in Louisiana,
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ii.
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Does the Customer reside in a jurisdiction where Imperial has had problems
getting court orders approved or in a state where a court order has never been filed
before or a state that has no structured settlement statute?
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iii.
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If yes, please speak to in-house legal counsel to see if the cash advance
can be granted.
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i.
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|
Are either the SSO and/or Al companies that have previously objected to
petitions filed?
|
|
|
ii.
|
|
If yes, please speak to in-house legal counsel to see if the cash advance
can be granted.
|
|
J.
|
|
Has the Structured Settlement Obligor and/or Annuity Issuer stipulated to the transfer
or agreed to enter into an order for this particular transfer or on similarly situated
transfers in the past?
|
|
i.
|
|
If yes, please analyze the cash advance utilizing the criteria in d below to see if
the cash advance request can be granted.
|
|
K.
|
|
Release & Settlement Agreement
|
|
i.
|
|
Does Imperial have a copy of the R&S?
|
|
(1)
|
|
If yes, does the R&S contain anti-assignment language?
|
|
|
(2)
|
|
If yes, does the anti-assignment language contain the words,
power, void and/or right?
|
|
|
(3)
|
|
If yes to (1) or (2), please speak to in-house legal counsel to see
if the cash advance can be granted.
|
|
L.
|
|
Contract Status
|
|
|
|
|
Does Imperial have a signed copy of the contract and
all related documents?
(1) If no, we will not allow a cash advance.
|
|
|
|
|
Please note that a sim pie form of prom issory note is to be used to docum ent the
cash advance in each case,
|
2.
|
|
PROCESS IF ANNUITY CONTRACT OR RELEASE & SETTLEMENT AGREEMENT CAN NOT BE LOCATED:
|
|
A.
|
|
We are required to have a document evidencing the terms of the settlement.
|
|
|
|
|
While we must strive to obtain a clear and legible copy of the actual R&S, circumstances
will occur where the document simply does not exist any longer. In those circumstances, and
subject to sufficient other information to document the actual terms of the settlement, the
following procedure may be utilized:
|
|
i.
|
|
Inquire with customer.
|
|
|
ii.
|
|
Inquire with customers attorney in writing.
|
|
|
iii.
|
|
Inquire with insurance carriers involved in the case.
|
|
|
iv.
|
|
Inquire with court where action was pending.
|
|
|
|
If the document cannot be located after the above steps then proceed as follows:
|
|
i.
|
|
Prepare an in house memorandum regarding the steps taken to locate the
document; essentially summarize steps 1-4 above and attach copies of the letters and
any responses thereto. This needs to be signed by a senior member of the Processing
Department.
|
|
|
ii.
|
|
Prepare an affidavit for the customer to sign detailing the above efforts and
stating the terms of the settlement and further stating that despite diligent inquiry
there is no known copy of the document in existence. This affidavit will be the
document which evidences the terms of the settlement.
|
|
|
|
This procedure should be used sparingly and only after we have exhausted all
reasonable efforts to obtain a copy of the actual R&S and/or Annuity Contract.
|
|
A.
|
|
In addition to UCC lien searches, fraud searches are conducted in the National
Association of Settlement Purchasers (NASP) database in order to determine whether a
Customer has previously sold payments to another NASP member.
Upon approval for
transmittal to Outside Counsel (OC), every transaction is logged into this system, which
will alert other funders about the sale by a particular Customer to Imperial. The NASP
database can be found at
www.naspfraud.com.
A password is required.
|
|
|
B.
|
|
Notice to Other Flinders:
Notice to interested parties MUST include a notice to
Metropolitan Mortgage in Spokane Washington. They funded a great deal of structured
settlement transactions pre-court order required. Furthermore, they do not have their
deals logged into the NASP database. This notice should be served on them as an interested
party in all transactions other than Subsequent deals owned by Imperial Finance Company.
|
Section II
PROCESSING MECHANICS OUTLINE
1.
|
|
INITIAL DEAL PROCESS A.
|
|
|
|
AE handles initial call:
|
|
|
|
Makes initial contact with Customer, explains entire transaction process including new
and wrapped transactions. Once Customer commits, AE proceeds with contract process.
|
|
|
ii.
|
|
Get documents (Annuity Contract and R&S).
|
|
|
iii.
|
|
Fills out the application and affidavit helper.
|
|
|
iv.
|
|
Application is assembled with sufficient information to issue proper
disclosures which are assembled by CBS, AE and Document Retrieval Group. This
information is put together in a folder and handed to the Submissions Group. This
group should also click the submit button in the database. The database will reflect
that the deal has been submitted.
|
2.
|
|
PROCESS FOR SUBMISSIONS
|
|
A.
|
|
The folder which should contain the Annuity Contract, Settlement Agreement
and completed Application is now in the hands of the Submissions Group.
|
|
|
B.
|
|
Before depositing a submission with Processing, the folder will be reviewed by the
Manager for the relevant group.
The Manager should review the submission for completeness
and only pass it along if they think it is sufficient. If the Submissions Group disagrees,
they will give the file back to the AE with a specific list of what the
problems/deficiencies are.
|
3.
|
|
DISCLOSURE OUT PROCESS
|
|
A.
|
|
Assuming sufficient information exists to get a Disclosure out,
the Disclosure must
go out to the Customer the same day provided, as long is it is submitted no later than
5:00 p.m. The Disclosures go with a cover letter and a copy of Imperials privacy policy
(see
attached
Exhibit 1). At this time, the disclosure statement has no signature line
and does not need to be returned to us; neither does the privacy policy.
|
|
|
B.
|
|
If sufficient information does not exist to process the Disclosure,
the person
attempting to prepare the disclosure shall e-mall the AE and carbon copy (cc) the Sales
Manager for immediate follow-up.
|
|
A.
|
|
10 days later (or such lesser time as prescribed by the state statute which can be 3 or
10 days) a contract is prepared with a cover letter and all required documents as follows:
|
|
I.
|
|
Absolute Assignment Agreement.
|
|
|
II.
|
|
Affidavits.
|
|
|
III.
|
|
Acknowledgment of Legal Expense.
|
|
|
IV.
|
|
IPA/ILA Affidavit as required.
|
|
|
V.
|
|
Statement of professional advisor for Ohio & Maryland deals.
|
|
|
VI.
|
|
Change of Beneficiary letters as needed.
|
|
VII.
|
|
Method of Payment Request.
|
|
|
VIII.
|
|
Disclosure Statements.
|
|
|
IX.
|
|
Application.
|
|
B.
|
|
Potential Professional Advisor
|
|
|
|
|
Often customers have advised us that they have difficulty finding someone familiar with these
transactions or do not know how to locate a professional advisor. To assist them in this
regard, contracts should go out with a list of potential professional advisors, state bar
association attorney referral groups and low income legal aid clinic information to assist
customers in locating an IPA if they need one or choose to seek ones advice.
|
5.
|
|
CONTRACT SIGNING INTEGRITY PROCESS
|
|
|
|
Document Retrieval and/or Contract Processing staff will contact each Customer (Customers are
instructed to call Imperial in the contract cover letter as well), which we have sent a
Contract, the day the Customer receives the Contract from Federal Express (FedEx). The
staff will go over the documents with the Customer answering questions as needed. No legal
advice may be provided but background information and what needs to be signed should be
reviewed. Customers should be urged to obtain counsel even if the state transfer statute does
not require counsel. Document Retrieval Group should note the database accordingly and
arrange for MBE/FedEx pick up or instruct the CBS to do this.
|
|
A.
|
|
Contract Processing Group reviews each K Back per the processing checklist
and places
key documents in a yellow folder along with a memo indicating missing documents and
information.
|
|
|
B.
|
|
If Contract Processing is satisfied that the file is ready for transmittal to Outside
Counsel (OC), they will send it out to OC and mark the database accordingly.
If there are
questions present, e.g. customer is under 21 years of age, the file should go to in house
counsel before we transmit to OC. The file is then reviewed by the attorneys in the Court
Order Group to confirm that it is ready for transmittal (K Back Does Ready KBDR) or is
not (K Back Does Needed).
|
|
|
C.
|
|
KBDRs
go immediately to OC along with a standard letter of instruction. All KBDRs
must go out as soon as the determination is made that the file is ready. Only files where
everything needed to file the transfer petition are to be marked KI3DR and sent to OC.
|
|
|
D.
|
|
KBDNs
missing items are noted in the database and an e-mail is sent to AE/CBS with a
carbon copy to the Sales Manager to help retrieve missing items. Follow-up is to be
coordinated between Sales, Contract Processing and Document Retrieval personnel.
|
|
|
E.
|
|
Prepares letter of instruction together with yellow folder and sends same to OC via
FedEx.
A form of pleadings (petition, notices and order) should be included for all new
attorneys.
|
7.
|
|
COURT ORDER PENDING PROCESS
|
|
A.
|
|
New counsel must be instructed to e-mail draft pleadings (petition, notices, order, etc.) to
|
|
|
|
in house counsel for approval before filing.
The Court Order Group (COG) is to follow up
with all outside counsel and track the filing of all petitions, the scheduling of hearing,
coordination of counsel, etc. The COG is also responsible for obtaining actual copies of
the Order when granted and ensuring that they are accurate and contain the requisite
language.
|
|
|
B.
|
|
If an objection to a transfer petition is logged by anyone, the file must
immediately be flagged and referred to the SVP.
|
8.
|
|
ORIGINATION AUTOMATION DATABASE
|
|
A.
|
|
Each origination follows an established path toward an eventual closing.
In order to
provide timely information to all Contract Processors and AEs, Imperial has developed a
contact management and activity management database that tracks all stages of the sales,
contract and closing process. With enhancements being made, this same system will make up
the backbone of the servicing and investor reporting system.
|
|
|
B.
|
|
Each logical step in the origination process has been designed into the database.
Each
Status describes the present stage of each deal in the origination and closing process. This
system is in addition to the system of physical checklists which are part of each file.
|
Section III
CONTRACT PREPARATION AND PROCESSING DOCUMENTS REQUIRED TO PREPARE CONTRACT
|
A.
|
|
In order to prepare a contract we need the Transaction Documents described below.
However, where one is confident of obtaining the documents, a contract should go out as
soon as there is sufficient information to properly prepare the Absolute Assignment
Agreement and UCC Article 9 Security Agreement, assuming that prior notice and required
disclosures have been provided. The balance of the documentation can be policed up
after the contract has been signed.
|
|
|
B.
|
|
Transaction Documents:
|
|
1.
|
|
Completed application including a government issued photo ID (i.e. drivers
license, passport, etc.);
|
|
|
2.
|
|
R&S or sufficient writing evidencing same. The Release must be reviewed and
be satisfactory. This means it cannot contain null and void or invalid language,
In the absence of a release, we can use an affidavit (see the procedure regarding no
Release and/or Annuity Contract in Section
4
above);
|
|
|
3.
|
|
Annuity Contract naming Customer as payee or sufficient writing evidencing
same;
|
|
|
4.
|
|
Qualified Assignment (QA) if liability insurers obligation to
make the periodic payments has been assigned (obtain copy if possible).
|
|
|
5.
|
|
Any of the above documents may or may not be present at a given point in
time while we pursue their production. The required documentation may be gathered at
almost any point in the process before funding (e.g. while it is best to get the
photo ID early it can be retrieved at any time before funding).
|
1.
|
|
TRANSACTION DOCUMENTS REVIEW
|
|
A.
|
|
All of the relevant documents must be carefully reviewed
to ensure that they are
accurate, authentic and do not contain any problematic terms or conditions (i.e.
confidentiality provision in R&S stating that payments are forfeited if this provision is
breached, etc.).
|
|
B.
|
|
Review documents for general accuracy and completeness and specifically as follows:
|
|
|
|
|
Generally, no null and void or invalid language (if such language is present, in house
counsel must review and approve before such a transaction proceeds further);
|
|
2.
|
|
No confidentiality language which would provide damages for breaching
confidentiality;
|
|
|
3
|
|
Who are the parties that are entitled to receive the payments;
|
|
|
4.
|
|
In the clear absence of the Settlement Agreement, do we have an affidavit
from the Customer stating what the terms of the settlement were and providing other
relevant information;
|
|
|
5.
|
|
Are the periodic payments clearly stated;
|
|
|
6.
|
|
Is the name of the payee clearly stated;
|
|
|
7.
|
|
Is the policy number clearly stated;
|
|
|
8.
|
|
Is there more than one Annuity Contract;
|
|
|
9.
|
|
If an Annuity Contract is not available, do we have a benefits letter
indicating all this information;
|
|
|
10.
|
|
Do the payments listed in the Annuity Contract match the payments listed
in the Settlement Agreement;
|
|
|
11.
|
|
Are the Assigned Payments guaranteed during the entire term of
the transaction?
|
|
|
12.
|
|
If payments cease upon the death of the Customer, an acceptable insurance
policy must be obtained with Imperial or its assigns as named beneficiary in an
amount sufficient to satisfy all Assigned Payments.
|
|
C.
|
|
Documents Needed
|
|
|
|
|
At various times during the process of acquiring a structured settlement, the need to
obtain certain documents arises. Locating these documents is crucial to our success. The
duty of the Document Research Department is to locate and obtain copies of the documents we
need to process and close transactions.
|
2.
|
|
DISCLOSURE OUT PROCEDURES
|
|
A.
|
|
Disclosures are to be prepared and sent to all Customers.
Multiple disclosures
are the norm since the Customer, Structured Settlement Obligor and Annuity Issuer may all
implicate the laws of different states. Moreover, where the underlying action was pending
and the stated controlling law of the settlement agreement may implicate other states
laws. To be safe we send disclosures required by any potentially applicable state law. It
is imperative to get this right lest we go back to square one if we do it wrong.
|
|
|
B.
|
|
Need to ensure that:
|
|
1.
|
|
Effective discount rate is within our guidelines or in the case of certain
states (e.g. NC, NE) within statutory maximums.
|
|
|
2.
|
|
Have fees and costs been properly disclosed legal fees, processing fees,
etc.?
|
|
|
3.
|
|
Has status been changed in database to Contract Pending?
|
|
|
4.
|
|
Has tracking date for disclosure out been updated in database?
|
|
C.
|
|
State Specific Requirements:
|
|
1.
|
|
NY specifies how a notice must be served regular and USPS priority mail with return
|
|
|
|
receipt requested. Failure to adhere to these requirements will cause a
monumental waste of time and resources.
|
3.
|
|
CONTRACT OUT PROCEDURES
|
|
1.
|
|
The correct Contract for the state in which the Court Order will be
obtained has been prepared along with all required exhibits, IPAs, ILAs etc.
|
|
|
2.
|
|
Executable copy of all disclosure statements has been provided.
|
|
|
3.
|
|
Status has been changed in the database to K-Out,
|
|
|
4.
|
|
K-Out date has been updated in database in two places.
|
4.
|
|
CONTRACT BACK PROCEDURES
|
|
A.
|
|
Review of signed contract
to ensure that all exhibits have been completed as
applicable and that all signatures have been properly affixed and notarized as needed.
Review questionnaire exhibit to ensure it is adequately completed.
|
|
|
B.
|
|
Checking in Contracts:
As contracts are received from Customers, the
following questions must be answered:
|
|
1.
|
|
Have all signatures been executed properly?
|
|
|
2.
|
|
Have all pertinent pages been notarized?
|
|
|
3.
|
|
Is the total value of the deal greater than $250,000.00?
|
|
|
4.
|
|
Are any of the individual lump sums greater than $100,000?
|
|
|
5.
|
|
Has status been changed in the database to Contract Back?
|
|
|
6.
|
|
Have searches been performed?
|
|
|
7.
|
|
Has the Processing Checklist been reviewed and updated?
|
|
|
8.
|
|
Have any missing documents been located?
|
|
C.
|
|
Order & Review Searches
|
|
1.
|
|
Bankruptcy search;
|
|
|
2.
|
|
State Level UCC Searches Westlaw;
|
|
|
3.
|
|
Tax lien searches, Federal and state tax liens are super liens, meaning they
attach as a matter of law to all assets without the necessity of levying. These must
be paid.
|
|
|
4.
|
|
Ensure that all child support, spousal support or similar obligations have been
researched and satisfied. We want to pay these even though they do not attach to the
settlement payments absent levying. As a matter of policy, we insist that customers
get current on their child and spousal support obligations.
|
|
D.
|
|
Judgments & What to do
|
|
1.
|
|
Judgments (other than for child support or spousal support) may turn up on any
given customer. It is important to note that a judgment does NOT attach to personal
property (i.e. the settlement payments) unless the judgment creditor has levied on the
obligor. The only way we would know If this has been done is to get the information
from the insurance company. Unfortunately, this imposes a very long delay. As a
consequence, unless 130% of the judgment amount exceeds our profit in the deal we will
fund the transaction without waiting to ensure that there is no valid levy on the
payments. Essentially, we are taking the risk that no levy has occurred. Obviously, if
there are any reasons to suspect that the payments have been levied, then do not fund
the transaction. Also, to the extent that 130% of the judgment equals or exceeds our
profit, do not fund the transaction. We will wait for the carrier to confirm that no
levy is in
|
|
|
|
force.
|
|
|
2.
|
|
PRE-FUNDING REVIEW
|
|
|
|
|
Before submitting a file for closing approval, a Court Order Group member should review
the entire file for completeness and accuracy. They should ensure that all documents
necessary to fund are in the file and that all of the above procedures have been followed.
This is the time to catch and correct any errors which may have slipped through. The Court
Order Group should perform the following reviews prior to submitting a file for
Funding/Closing Approval:
|
|
1.
|
|
Review entire file for completeness.
|
|
|
2.
|
|
Check file for proper documentation.
|
|
|
3.
|
|
Have all documents been received?
|
|
|
4.
|
|
Are errors, if any, being corrected?
|
|
|
5.
|
|
Has Processing Checklist been reviewed?
|
|
|
6.
|
|
Has a properly worded Court Order been received from the Court?
|
|
|
7.
|
|
Has Court Order been served on Owner and Issuer?
|
|
|
8.
|
|
A
Closing Memo
must be prepared to discuss anything
peculiar or that needs explanation regarding the transaction (e.g. Two orders were
issued in this matter because on the first Order dated ____________, the court failed to list
the assigned payments correctly, etc.).
|
5.
|
|
SUBMITTING FOR FUNDING/CLOSING APPROVAL
|
|
A.
|
|
All files submitted for closing should be gathered together and presented to the
Underwriting Group.
The processing checklist is to be reviewed by the Underwriting Group if
satisfactory; the file is initialed as approved for Funding/Closing on the processing
checklist. It is important that any advances, deductions or adjustments to the Purchase
Price be made at this point and conspicuously noted. Of particular importance in this
review are:
|
|
1.
|
|
Has Owner and Issuer acknowledged Court Order.
|
|
|
2.
|
|
Have any advances, deductions, or adjustments to the Purchase
Price been conspicuously noted in the file and in database.
|
|
|
3.
|
|
A Funding Form should be prepared. If the file is unsatisfactory, the file is to
be rejected and returned to the relevant processing group for correction of deficiencies.
|
|
B.
|
|
Escrows should be held as follows:
|
|
|
|
|
In order to continue our objective of minimizing the risk of defaults due to court order
administrative issues, but at the same time balancing the needs of our customers, below
please find revised guidelines for holding back escrow on new structured settlement
fundings:
|
|
|
|
|
For deals with all Insurance Companies with stipulations and/ or acknowledgements:
|
|
1.
|
|
Monthly payments already in progress or due within 6 months of fund date:
|
|
|
|
3 months of escrow on total monthly payment (escrow will be released in
full upon receipt of 1 monthly payment to the correct lockbox)
|
|
2.
|
|
Monthly payments due more than 6 months from fund date:
|
|
|
|
Payments due within 6 months of fund date:
|
|
|
|
|
Review of transaction and Escrow to be determined by either
|
|
|
|
CEO/C00 Corporate Counsel/CFO
|
|
|
|
|
No Lump Sums will be sold into any financing facility if due in 6 months or
less from funding date
|
|
|
|
|
Payments more than 6 months from fund date
|
|
|
|
|
No escrow
|
|
4.
|
|
Monthly and Lump sum Payments
|
|
|
|
Escrow per the monthly payment rules above; no escrow on lump sum
payments.
|
|
|
|
For deals with Non-Problematic Insurance Companies with no stipulations or
acknowledgements:
|
|
1.
|
|
Monthly payments already in progress or due within 6 months of fund date:
|
|
|
|
3 months of escrow on total monthly payment (escrow will be released upon receipt
of 2 payments to the correct lockbox)
|
|
2.
|
|
Monthly payments due more than 6 months from fund date:
|
|
|
|
I month of escrow on total monthly payment (escrow will be released upon receipt
of acknowledgement from the insurance company)
|
|
|
|
First Payment due 0 to 6 months from fund date
|
|
|
|
|
20% of 1st lump sum due (escrow released upon receipt of acknowledgement)
and will not be sold into any financing facility
|
|
|
|
|
First Payment due > 6 to 12 months from fund date
|
|
|
|
|
Lesser of 20% of 1st lump sum due or $2,500 (escrow released upon receipt of
acknowledgement)
|
|
|
|
|
First Payment due > 12 months from fund date
|
|
|
|
|
Lesser of 20% of 1st lump sum due or $1,000 (escrow released upon receipt of
acknowledgement)
|
|
4.
|
|
Monthly and Lump sum Payments
|
|
|
|
Escrow per the monthly payment rules above; no escrow on lump sum
payments.
|
|
|
|
For deals with Problematic insurance Companies (as defined on the attached list) with no
stipulations or acknowledgements:
|
|
1.
|
|
Monthly payments already in progress or due within 6 months of fund date:
|
|
|
|
6 months of escrow on total monthly payment (escrow will be released month to month
until receipt of 2 monthly payments to the correct lockbox)
|
|
2.
|
|
Monthly payments due more than 6 months from fund date:
|
|
|
|
1 month of escrow on total monthly payment (escrow will be released upon receipt
of acknowledgement from the insurance company)
|
|
|
|
First Payment due 0 to 6 months from fund date
|
|
|
|
|
100% of 1st lump sum due (escrow released upon receipt of acknowledgement) and will
not be sold into any financing facility
|
|
|
|
|
First Payment due > 6 to 12 months from fund date
|
|
|
|
|
Lesser of 20% of let lump sum due or $2,500 (escrow released upon receipt of
acknowledgement)
|
|
|
|
|
First Payment due > 12 months from fund date
|
|
|
|
Lesser of 20% of 1st lump sum due or $1,000 (escrow released upon
receipt of acknowledgement)
|
|
4.
|
|
Monthly and Lump sum Payments
|
|
|
|
Escrow per the monthly payment rules above; no escrow on lump sum
payments.
|
|
A.
|
|
Once a file has been approved for Closing/Funding,
the file is ready for funding and
then closing into one of our credit facilities.
|
|
|
B.
|
|
Immediately prior to funding, the Closing Group again checks the NASP fraud
prevention database
for a final confirmation that the Customer has not attempted to do a
transaction with a competitor involving the same payments. He will also enter a record
into the NASP database that the Customer has conducted a transaction with Imperial. Once
this is confirmed, and the data entered, the file can be funded and closed.
I.
Escrows:
|
|
I
|
|
The funding form must provide for escrows as follows:
|
|
(a)
|
|
See above referenced Section V Item 7(B)
Examples, according to the transaction type.
|
|
C.
|
|
The Closing Group should then present the Funding Forms to the Accounting Department
which will prepare the checks and enter wire transfer information into accounting/banking
systems.
|
7.
|
|
CLOSING
|
|
|
|
In order for a file to be marked closed, all documents must be in the file.
|
|
A.
|
|
Closed File Should Contain:
|
|
1.
|
|
Purchase Agreement with all exhibits:
|
|
|
2.
|
|
Copy of Identification (government issued);
|
|
|
3.
|
|
Marriage Certificate/ Divorce Agreement/Death Certificate as necessary;
|
|
|
4.
|
|
State UCC searches as required;
|
|
|
5.
|
|
Federal & State Tax Lien searches as required;
|
|
|
6.
|
|
Bankruptcy search as required;
|
|
|
7.
|
|
Court Order approving sale and confirmation of service on the obligors;
|
|
|
8.
|
|
Written acknowledgment from Al and/or SSO confirming compliance with
Court Order;
|
|
|
9.
|
|
Transaction Closing Memo;
|
|
|
10.
|
|
Misc. relevant documents (Life Insurance, Notices, Court Order Pleadings,
etc.);
|
|
|
11.
|
|
Processing transaction checklist; and
|
|
|
12.
|
|
Key Data Merge sheet verifying critical items such as assignment payments,
name of seller, address of seller, Al and SSO name and address, S&P and Moodys
rating for Al and SSO, etc.
|
|
B.
|
|
To close the file, the assignment agreements from Settlement Funding to the relevant SVP
must be prepared and signed.
Receivable files, a closing report, draw requests, etc., are
then prepared according to the facilitys documents.
|
|
|
|
**
|
|
This document may be amended from time to time
|
|
I.
|
|
Account Executive submits file
|
|
A.
|
|
Court Order Application is completed including but not limited to
|
|
1.
|
|
Customer Name: customer provides full legal name to AE including former
names and/or aliases; name including f/k/a and a/k/a are incorporated on all legal
documents.
|
|
|
2.
|
|
Customer Address
|
|
|
3.
|
|
Employer
|
|
|
4.
|
|
Breakdown of use of funds: The detailed breakdown of the use of funds must
add up to the net amount after all legal and processing fees to the customer.
|
|
B.
|
|
AE Submission Checklist: At time of submission, must have:
|
|
1.
|
|
Completed Court Order Application
|
|
|
2.
|
|
Confirmation of Obligor verified via settlement document(s) or conference
call with insurance company.
|
|
|
3.
|
|
Confirmation of Issuer verified via settlement document(s) or conference
call.
|
|
|
4.
|
|
Confirmation of Payment Stream verified via settlement document(s) or
conference call.
|
|
|
5.
|
|
Confirmation of Annuity Contract Number verified via settlement
document(s) or conference call.
|
|
|
6.
|
|
Proof of Residency
|
|
a.
|
|
Driver License (cannot be more than two years expired)
|
|
|
b.
|
|
State-issued ID card
|
|
|
c.
|
|
Unexpired Military ID card
|
|
|
d.
|
|
Prison ID (only if currently incarcerated)
|
|
|
e.
|
|
Recently dated utility bill in customers name with customers current
address (no P.O. Box)
|
|
|
f.
|
|
Recent passport with pre-printed address and state of issue
|
|
7.
|
|
Ad Source named this data is collected for purposes of tracking marketing
effectiveness.
|
|
|
8.
|
|
Insurance companys Administrative Fees
|
|
1.
|
|
Submission date is entered as point of reference for all computations.
|
|
|
2.
|
|
Payment stream being transferred is entered.
|
|
|
3.
|
|
Gross amount to customer is entered.
|
|
D.
|
|
Settlement Documents are obtained. Any or all of the following:
|
|
1.
|
|
Release & Settlement Agreement (R&S) SEE SAMPLE
|
|
|
2.
|
|
Qualified Assignment (QA) SEE SAMPLE
|
|
|
3.
|
|
Annuity Contract (AC) SEE SAMPLE
|
|
|
4.
|
|
Benefits Letter (BL) SEE SAMPLE
|
|
|
5.
|
|
Annuity Pay stub SEE SAMPLE
|
|
E.
|
|
Proof of SSN [Not Required for Submission; REQUIRED FOR FUNDING]:
|
|
1.
|
|
Social Security Card
|
|
|
2.
|
|
Verification Letter from Social Security Administration
|
|
|
3.
|
|
Previous years income tax return
|
|
F.
|
|
Miscellaneous documents are obtained if necessary:
|
|
1.
|
|
Letter of Support and Supporters proof of income: if
customer falls below minimum income requirement of $10K/year.
|
|
|
2.
|
|
Divorce Decree: if customer obtained a divorce after the date
of settlement or annuity; this is necessary to prove that ex-spouse does not
have any claim to payments.
|
|
|
3.
|
|
Proof of name change (e.g. marriage certificate) if the name
on ID does not match the name of settlement and/or annuity documents.
|
II.
|
|
State Disclosures prepared
|
|
A.
|
|
Review Court Order Application (COA), especially the following:
|
|
1.
|
|
Customer Name:
check against ID, settlement
documents, etc. Be sure to include full legal name including any former
and alias names.
|
|
|
2.
|
|
Customer Address:
perform US Postal Service
address check for valid mailing address; immediately notify AE if
mailing address is not valid.
|
|
|
3.
|
|
State where the case was settled:
must send a
disclosure for that state.
|
|
|
4.
|
|
Employer:
check if customer is employed. If not
employed, is customer supported by Spouse? By someone else (e.g. mother;
boyfriend, etc.)? If financially supported by someone else, check for
Letter of Support.
|
|
|
5.
|
|
Use of funds:
The detailed breakdown of the use of
funds must add up to the net amount after all legal and processing fees to
the customer.
|
|
B.
|
|
Review settlement documents submitted:
|
|
1.
|
|
Release & Settlement Agreement (R&S) provides:
|
|
a.
|
|
Payee(s) Name
|
|
|
b.
|
|
Obligor Name
|
|
|
c.
|
|
Issuer Name
|
|
|
d.
|
|
Payment Stream
|
|
2.
|
|
Qualified Assignment (QA) provides:
|
|
a.
|
|
Payee(s) Name
|
|
|
b.
|
|
Obligor Name
|
|
|
c.
|
|
Issuer Name
|
|
|
d.
|
|
Payment Stream
|
|
3.
|
|
Annuity Contract (AC) provides:
|
|
a.
|
|
Payee(s) Name
|
|
|
b.
|
|
Obligor Name (and address)
|
|
|
c.
|
|
Issuer Name (and address)
|
|
|
d.
|
|
Payment Stream
|
|
|
e.
|
|
Annuity Contract Number***←WITHOUT A CONTRACT #, WE CANNOT INCLUDE THE
CONTRACT # ON ALL OF THE CONTRACT DOCUMENTS.
|
|
4.
|
|
Benefits Letter (BL) provides:
|
|
a.
|
|
Payee(s) Name
|
|
|
b.
|
|
Obligor Name (and address)
|
|
|
c.
|
|
Issuer Name (and address)
|
|
|
d.
|
|
Payment Stream
|
|
|
e.
|
|
Annuity Contract Number***
|
|
5.
|
|
Annuity Paystub provides:
|
|
a.
|
|
Payee Name
|
|
|
b.
|
|
Obligor Name sometimes, not always
|
|
|
c.
|
|
Issuer Name (and address)
|
|
|
d.
|
|
Periodic payment amount
|
|
|
e.
|
|
Annuity Contract Number sometimes
|
|
C.
|
|
Select applicable state disclosure(s) for:
|
|
1.
|
|
State where payee resides
See state-specific disclosures for 46 states
with a model act.
|
|
|
2.
|
|
State where Obligor is domiciled
refer to database and/or
Insurance Matrix
|
|
|
3.
|
|
State where Issuer is domiciled
refer to database and/or Insurance Matrix
|
|
|
4.
|
|
State where the underlying case was settled.
|
|
|
5.
|
|
If customer resides in state where no model act exists
(New Hampshire; District of
Columbia; Vermont; Wisconsin)
consult with In-House Counsel for selection of venue which
may be:
|
|
a.
|
|
Obligors state of domicile.
|
|
|
b.
|
|
Issuers state of domicile.
|
|
|
c.
|
|
State where the underlying case was settled.
|
|
D.
|
|
Prepare Quote Sheets [USING ANNUITY CALCULATOR]
|
|
6.
|
|
Enter date of submission to base all
-
figures off of the date of
file submission.
|
|
|
7.
|
|
.Enter Payments that are being transferred.
|
|
a.
|
|
Enter Payment Type (e.g. Monthlies, lump sum, quarterlies,
etc.)
|
|
|
b.
|
|
Enter # of payments.
|
|
|
c.
|
|
Enter start date (if lump sum, just enter the date that the payment is due)
|
|
|
d.
|
|
The end date (if any) will default as long as # of payments and start date are- entered
first.
|
|
a.
|
|
Enter the current months applicable federal rate (e.g.
2.60%
for April, 2009) in the
RAISED AT %
box.
|
|
|
b.
|
|
Hit
CALCULATE
button.
|
|
|
c.
|
|
The resultant amount in the
CASH TODAY
box is the present value of the payment that are
being transferred. This tells us what the transferred
payments are worth on the date of submission.
|
|
a.
|
|
Divide NET AMOUNT by PRESENT VALUE amount.
|
|
|
b.
|
|
The resultant percentage is the Quotient. This tells us what percentage of the current,
value of the transferred payments the customer will net. E.g. if quotient is.0:6000 or 60%
|
|
|
|
and payments present value is $10,000.00, the customer will net 60% of $10,000.00 or
$6,000.00. The net amount is the amount to the customer-after legal and processing
fees(usually
$2..200.00) are paid out of the customers gross proceeds.
|
|
10.
|
|
Compute Nominal Rate and Effective Rate on Gross Amount
|
|
a.
|
|
Clear both the RAISED AT % box and the CASH TODAY box.
|
|
|
b.
|
|
Enter the gross amount in the CASH TODAY box.
|
|
|
c.
|
|
Hit CALCULATE button.
|
|
|
d.
|
|
The annuity calculator will compute both a Nominal Rate and Effective Rate on the
gross amount.
|
|
11.
|
|
Compute Nominal Rate and Effective Rate on Net Amount.
|
|
a.
|
|
Clear both the RAISEDAT % box and the CASH TODAY box.
|
|
|
b.
|
|
Enter the gross Amount in the CASH TODAY box.
|
|
|
c.
|
|
Hit CALCULATE button.
|
|
|
d.
|
|
The annuity calculator will compute both a Nominal Rate and Effective Rate on the net
amount.
|
|
12.
|
|
[New York deals only] Compute two (2) comparable quotes using quotes, from the internet.
|
|
a.
|
|
. Clear both the
RAISED AT%
box and the CASH TODAY box.
|
|
|
b.
|
|
Enter one of the rates obtained in the RAISED AT % box.
|
|
|
c.
|
|
Hit CALCULATE button.
|
|
|
d.
|
|
the resultant amount in the CASH TODAY box is the cost of purchasing a comparable
annuity.
|
|
|
e.
|
|
Repeat steps a through d. for the cost of a second comparable .
annuity.
|
|
13.
|
|
Enter figures from quote sheets into selected state disclosures.
|
|
E.
|
|
Prepare Required Documents Checklist
|
|
|
F.
|
|
Add Privacy Policy and AEs business card to the Disclosures Out package
|
|
|
G.
|
|
Prepare FedEx labels and FedEx package.
|
|
|
|
|
For transactions that require sending a New York disclosure statement:
Also send disclosures via U.S.P.S. regular mail and U.S.P.S. Certified Mail with
return receipt in order to comply with the New York state statute.
|
|
|
H.
|
|
Scan all documents for placement into an O: drive folder and organize brown
classification folder
|
|
I.
|
|
Prepare Disclosure Affidavit
(if applicable)
SEE AFFIDAVIT
WHICH STATES:
|
|
1.
|
|
Customer Address
|
|
|
2.
|
|
Customer Email Address
|
|
|
3.
|
|
Date disclosures were emailed
|
III. Contract Documents prepared. [IN ORDER OF STACKING]
|
A.
|
|
Disclosures
with signature lines SEE SAMPLE
|
|
|
|
|
Refers to the payments being transferred as life contingent payments; e.g.:
|
|
|
|
|
SIXTY (60)
life contingent
monthly payments of EIGHT HUNDRED and 00/100
DOLLARS ($800.00) commencing on or about....
|
|
|
B.
|
|
Best Interest Affidavit specific for Life Contingent transactions
|
|
|
C.
|
|
Authorization for Deductions/Authorization to Release Information SEE
DOCUMENT, allows us to conduct the following searches:
|
|
1.
|
|
Account search (for bankruptcies, liens, judgments, criminal records, etc.)
|
|
|
2.
|
|
Credit search
|
|
|
3.
|
|
NASP (National Association of Settlement Purchasers) search on national
database for prior transactions with other NASP members
|
|
|
|
Add appropriate language for MVR reports and RX Authorization
|
|
|
D.
|
|
Request for Benefits addressed to Issuer SEE LETTER, ASKS FOR:
|
|
1.
|
|
Annuity Owner
|
|
|
2.
|
|
Payment Amount (s)
|
|
|
3.
|
|
Start date of monthly payments due
|
|
|
4.
|
|
Due date(s) of lump sum payment(s) due
|
|
|
..5.
|
|
Current beneficiary listed
|
|
|
6.
|
|
The above documents to be faxed to: [Transmittal teams fax ill
|
|
|
7.
|
|
The current address on file to be updated
|
|
E.
|
|
Request for Benefits addressed to Obligor SEE LETTER, ASKS FOR:
|
|
1.
|
|
Qualified Assignment
|
|
|
2.
|
|
Release and Settlement Agreement
|
|
|
3.
|
|
Court Order approving the settlement (if applicable)
|
|
|
4.
|
|
Current beneficiary listed
|
|
|
5.
|
|
Any additional documentation
|
|
|
6.
|
|
The above documents to be faxed to: [Transmittal Dept. / Gregs fax
#}
|
|
|
7.
|
|
The current address on file to be updated
|
|
F.
|
|
Request for Benefits addressed to Allstate
(if applicable)
SEE
LETTER, ASKS FOR:
|
|
1.
|
|
Annuity Contract, if unavailable then Income Verification letter which
includes Owner, Issuer
&
Contract Number.
|
|
|
2.
|
|
Release and Settlement Agreement
|
|
3.
|
|
The above documents to be faxed to: [Transmittal Dept. / Gregs fax #1
|
|
|
4.
|
|
Includes $20 Money Order
|
|
G.
|
|
Annuity Contract Affidavit SEE AFFIDAVIT WHICH STATES:
|
|
1.
|
|
Current address
|
|
|
2.
|
|
Social Security Number
|
|
|
3.
|
|
Policy Number
|
|
|
4.
|
|
R&S date
|
|
|
5.
|
|
Issuer
|
|
|
6.
|
|
Payment stream
|
|
|
7.
|
|
Payments to be transferred
|
|
|
8.
|
|
Owner
|
|
H.
|
|
Release & Settlement Affidavit SEE AFFIDAVIT WHICH STATES:
|
|
1.
|
|
Current address
|
|
|
2.
|
|
Social Security Number
|
|
|
3.
|
|
Policy Number
|
|
|
4.
|
|
Obligor
|
|
|
5.
|
|
Issuer
|
|
|
6.
|
|
Payment stream
|
|
|
7.
|
|
Payments to be transferred
|
|
I.
|
|
Change of Beneficiary addressed to Issuer SEE LETTER Need:
|
|
1.
|
|
Issuer Name & Address
|
|
|
2.
|
|
Annuity Contract Number
|
|
|
3.
|
|
Social Security Number
|
|
J.
|
|
Change of Beneficiary addressed to Obligor SEE LETTER Need:
|
|
1.
|
|
Obligor Name & Address
|
|
|
2.
|
|
Annuity Contract Number
|
|
|
3.
|
|
Social Security Number
|
|
K.
|
|
Acknowledgement of Legal Fees SEE INTERNAL FORM
|
|
|
|
Legal Fees are typically
$2,000.00
per transfer
|
|
L.
|
|
Method of Payment forms (2 types) SEE INTERNAL FORMS:
|
|
1.
|
|
Used for both Final Funding and for Cash Advance(s)
|
|
|
2.
|
|
Customer selects one of two forms of payments:
|
|
a.
|
|
Check
CHECK MUST BE IN CUSTOMERS NAME, NO ONE ELSES NAME
|
|
|
b.
|
|
Wire transfer
WIRE MUST GO TO CUSTOMERS (SOLE/JOINT) ACCOUNT,
|
NO ONE ELSES ACCOUNT
|
M.
|
|
IPA Statement
(if applicable)
SEE FORM
applicable
for customers who receive a disclosure from one or more of the following ten (10)
states:
|
|
1.
|
|
Alaska
|
|
|
2.
|
|
Delaware
|
|
|
3.
|
|
Louisiana
|
|
|
4.
|
|
Maine
|
|
|
5.
|
|
Maryland
|
|
|
6.
|
|
Minnesota
|
|
|
7.
|
|
New York (Bronx County Only)
|
|
|
8.
|
|
Chicago
|
Contract Back Specialists (CBSs) reviews file with customer.
1.
|
|
CONTRACT BACK PROCEDURES
|
|
A.
|
|
Review of signed contract to ensure that all exhibits have been completed as
applicable and that all signatures have been properly affixed and notarized as
needed. Review questionnaire exhibit to ensure it is adequately completed.
|
|
|
B.
|
|
Checking in Contracts: As contracts are received from Customers, the following
questions must be answered:
|
|
1.
|
|
Have all signatures been executed properly?
|
|
|
2.
|
|
Have all pertinent pages been notarized?
|
|
|
3.
|
|
Is the total value of the deal greater than $250,000.00?
|
|
|
4.
|
|
Are any of the individual lump sums greater than $100,000?
|
|
|
5.
|
|
Has status been changed in the database to Contract Back?
|
|
|
6.
|
|
Have searches been performed?
|
|
|
7.
|
|
Has the Processing Checklist been reviewed and updated?
|
|
|
8.
|
|
Have any missing documents been located?
|
|
C.
|
|
Order & Review Searches
|
|
1.
|
|
Bankruptcy search (Deals in excess of $30,000 P.P.);
|
|
|
2.
|
|
State Level UCC Searches Westlaw;
|
|
|
3.
|
|
Tax lien searches (Deals in excess of $30,000 P.P.). Federal
and state tax liens are
|
Contract Review
|
|
|
Explain in detail all of the contents in the Contract package.
|
|
|
|
Do Not Sign Letter
This is to show that we are in compliance
with the state statute requirements for the Transfer of Structured Settlements.
|
|
|
|
|
Contract
This is the agreement between the customer and
Imperial
|
|
|
|
Structured Settlements, LLC.
|
|
|
|
|
Disclosure(s) This is a statement in connection with the customers
agreement that discloses the Schedule of Payments Transferred, Aggregate Value,
Discounted Present Value, Gross Purchase Price, Net Purchase Price, Right to Cancel,
Fees & Expenses, Quotient (if state requires), IPA Requirement.
|
|
|
|
|
BIA This is the Best Interest Affidavit which explains the reasons why the
customer is transferring their annuity.
|
|
|
|
|
Auth for Deductions
This is to authorize us to deduct from the
purchase price the full amount due to any and all third party creditors, judgment
|
|
|
|
holders, child support obligations and any other outstanding lien or judgment.
This also gives the right to get information from the Insurance companies,
Attorneys office, and conduct credit and criminal background checks.
|
|
|
|
|
RFB (Issuer)
This is a request for benefits from the customer to the
issuing insurance company for a copy of all settlement documents such as the Annuity
Contract, current Benefits Letter, Uniform Qualified Assignment and Settlement
Agreement and Release.
|
|
|
|
|
RFB (Obligor)
This is a request for benefits from the customer to the
assigning insurance company for a copy of all settlement documents such as the
Annuity Contract, current Benefits Letter, Uniform Qualified Assignment and
Settlement Agreement and Release.
|
|
|
|
|
Annuity Contract Affidavit
This is a written declaration from the
customer explaining in the event that we are not able to procure the AC, the customer
is stating that he or she made diligent efforts to obtain it and certifying that these
payments are being received from issuer.
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Release and Settlement Agreement Affidavit
This is a written
declaration from the customer explaining in the event that we are not able to procure
the R&S, the customer is stating that he or she made diligent efforts to obtain it and
these payments were awarded in the settlement.
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Change of Beneficiary
This is a request to change the beneficiary to
their estate during this transaction period.
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Acknowledge of Legal Expenses
This to confirm that the customer is
aware of all legal fees.
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Method of Payment
This is a form requesting that after the court
approval of the transfer we should remit payment by check or bank wire to the
customer.
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IPA Statement
In the event that we are not able to obtain a letter
from the Independent Professional Advisor on their letterhead, this will take the
place of the letter. Not all state statutes require IPAs.
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Court Order Application
This is the application that was taken over
the phone with the Account Executive.
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Annuity Verification Calls
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Conduct away calls with customers and Insurance companies to confirm or verify
annuitants correct policy number, availability of payment stream, and confirm owner and
issuer of policy. We would only conduct these calls in absence of complete set of
annuity documents.
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Notary Orders
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Once we have reviewed the contract package with the customer we set up a traveling
notary to execute the contract package on their signing date. The Notary service we use
is called Statous and the cost for each traveling notary is $120.00, this service
expedites the process of returning documents.
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Follow Up
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Follow up with all requests for benefits for the customers: Confirm
receipt of request, turn time for processing request, and verifying documents
sent via mail or facsimile once processed.
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Follow up daily with customers to obtain missing IDs or Social
Security cards or proof of social security.
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Confirm with customer that they are still in possession of the missing
contract documents. If not, inform customer that we will be resending any
missing documents via FedEx with return envelope.
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Because we do not refer independent professional advice we do
consistently follow up with all customers that are in states that require
Independent Professional Advice to seek this advice.
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Once IPA has been received, we obtain an IPA letter and invoice.
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The average cost of an IPA is $150.00417
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V. Transmit to Outside Counsel (OC)
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A.
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Review for proper execution
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1.
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Sign date must be within compliance of applicable state statutes
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2.
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Documents that require notarization are notarized correctly
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3.
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All documents of a Contract Package are returned
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a.
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If any documents are missing or
not executed properly I will notate Salesforce, and email
the AE and CBS to obtain the documents needed
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B.
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Review accuracy of documents
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1.
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Names of Payee, Dependents, Obligor, and Issuer are correct
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2.
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Annuity Policy numbers must be accurate on all documents
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3.
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Addresses are correct for Payee, Obligor, and Issuer
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a.
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If there is a typographical error on
the name of the Payee we will create the Name Verification
Declaration to be executed by the Payee
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b.
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If the policy number is incorrect or
addresses are incorrect I will notate Salesforce, email the AE
and CBS and send out corrected documents for execution
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C.
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Review of Petition Documents
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1.
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Absolute Assignment and Security Agreement with Disclosures
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a.
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All Payment Streams filled in
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b.
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Net Purchase Price filled in
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c.
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Obligor and Issuer completed
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d.
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Disclosure Complete including
requirement of IPA (dependent on state statute)
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If IPA is required Payee must seek this advise and
provide a Letter on the IPA letterhead confirming review of
documents with the Payee and that Payee fully
understands the transaction
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2.
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Best Interest Affidavit must explain the Payees current status
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a.
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Marital
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b.
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Dependents
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c.
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Employment
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d.
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Use of funds
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3.
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Court Order Application must be completed
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a.
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Name
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b.
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Address
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c.
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Contact Numbers
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d.
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Marital Status (current and previous)
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If divorced we require Divorce Decree with Property
Settlement
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If unemployed or making less than $10,000 we require a Letter of
Support with proof of income from someone who provides financial
support to Payee
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f.
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Child Support (if applicable)
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g.
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Bankruptcy (if applicable)
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If Payee has filed for Bankruptcy we require all
Bankruptcy paperwork
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D.
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Non Petition Documents
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1.
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All documents are reviewed, scanned, and fastened into customers folder
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a.
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Authorization for Deductions
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b.
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Annuity Contract Affidavit
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c.
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Settlement Agreement Affidavit
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d.
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Method of Payment
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e.
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Acknowledgment of Legal Expenses
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f.
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Request for Benefits
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Sent to Obligor and Issuer to obtain settlement documents
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Sent to Obligor and Issuer to designate the Beneficiary as the
Estate of the Payee
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a.
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Search database for any previous deals by other NASP members.
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b.
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Inform Court Order group if any deals show up
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a.
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Based on names, AKAs and address found on the credit
report we will
run the UCCs. All relevant hits will be researched.
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a.
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Credit pull to see if there are any public records, and
verify social security number, name, address
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a.
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Pull any bankruptcy filings
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b.
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Verifies current status
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The file is transmitted to one of our Outside Counsel.
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F.
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Requirements for Transmittal to Outside Counsel
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I . Complete Contract Documents executed properly
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a.
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Absolute Assignment and Security Agreement
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b.
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Disclosures
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c.
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Best Interest Affidavit
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d.
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Court Order Application
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2.
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One of the following Settlement Documents
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a.
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Settlement Agreement and Release
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b.
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Annuity Contract
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c.
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Benefits Letter
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3.
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IPA letter (if applicable)
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4.
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Letter of Support with Proof of Income (if applicable)
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5.
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Divorce Paperwork (if applicable)
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6.
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Bankruptcy Paperwork or verification of Termination (if applicable)
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7.
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All Searches performed and clear
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a.
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In the event of any tax liens we will
require them to be paid and customer must agree to this prior to
transmittal
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G.
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Transmittal Package includes
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1.
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Cover Letter to Outside Counsel
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2.
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Absolute Assignment and Security Agreement with Disclosures
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3.
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Best Interest Affidavit
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4.
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Court Order Application
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5.
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IPA Letter (if applicable)
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6.
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Pre-Notice (if applicable)
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a.
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Several states require a notice of a
pending transfer of payments to be sent to the Obligor and Issuer
prior to filing of a Petition, a copy of this letter is provided to
our Outside Counsel
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7.
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Any Settlement Documents obtained
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a.
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This package will be scanned and emailed to the Outside Counsel
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b.
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Original documents are kept in the customers folder
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VI. Court Order Group
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Receive conformation that a file has been transmitted to Outside Counsel via email
from the Transmittal Group.
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Verify that the transmitted file displays in the Outside Council Web Portal.
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Outside Counsel receives the file and conducts a conflict check.
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Outside counsel drafts a Petition which is then forwarded to our In-House Counsel for
review and revisions if necessary.
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Outside Counsel then files the Petition and inputs the Court information via the Web
Portal.
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Court Order Group emails the floor notifying them of the filed petition.
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Court Order Group verifies that the entries are accurate and match the
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information provided in the filed pleadings.
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Court Order Group receives a Web Portal alert via email that a hearing date has been
scheduled for a file and verifies the hearing date matches the date on the notice of
hearing.
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Court Order Group emails the floor notifying them of the scheduled hearing
date.
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If applicable, In-House Counsel forwards a follow up NASP Fraud Alert email to the
factoring company reported on the NASP report make sure there are no conflicts with the
payments we are purchasing. Also, the Court Oder Group reviews any UCC filings. If there
is a filed UCC-1, we negotiate with the appropriate factoring company a release of said
lien.
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Court Order Group checks the file to make sure that a copy of the filed petition,
notice of hearing, and proof of service are located in the electronic and physical file.
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Weeks prior to the hearing, In-House Counsel drafts the Orders and submits same to the
appropriate Insurance Company for review prior to submitting it to the Judge. There are
several Insurance Companies that draft orders and Stipulations to In-House Counsel for
review.
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Weeks prior to the hearing, Court Order Group verifies that all parties are in
agreement with the proposed transfer. This includes but not limited to Insurance
Companies, beneficiaries, dependents, and child support arrearages.
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One week before the hearing date, Court Order Group verifies that the Outside
Counsel has communicated wit the customer regarding the transfer.
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Two days before the hearing date, Court Order Group confirms that matter is ready for
the hearing and makes sure that the Outside Counsel has a copy of the agrees upon Order.
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One day before the hearing date, Court Order Group confirms that the Outside Counsel
has consulted with the customer regarding what to expect at the hearing and has answered
any questions the customer may have.
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On the day of the hearing, the In-House Counsel and Court Order Group await a
response from the Outside Counsel regarding the Judges decision.
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When an approval is granted, Court Oder Group receives a signed order and
forwards the same to Funding Group for begin the funding process.
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When the matter is denied, Court Order Group schedules a conference call with the
Outside Counsel, In-House Counsel and Senior Vice President to discuss the judges
decision.
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Court Order Procedur6s.
Per Relevant Insurance Companies
AEGON Assignment Corporation / AEGON Structured Settlements, Inc. / Transamerica Annuity
Service Corporation
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Transamerica Assurance Company / Transamerica Financial
Life Insurance Company / Transamerica Insurance Company / Transamerica Insurance Company
of America / Transamerica Life Insurance & Annuity company! Transamerica Life Insurance
Company / Transamerica Life Insurance Company of NY / Transamerica Accidental Life
Insurance Company / Monumental Life Insurance Company
These insurance companies prepare the Stipulated Orders and forward to Imperial for
review/ changes. We generally receive the proposal Stipulated Order 3-5 business days
prior to the hearing.
Current Contacts: Laura Alger /319-355-6959 lalger@Aegonusa.corn
Robin McVeigh / 319-355-5467 rmcveigh@aegonusa.com
Special Notes: Once the order is agreed upon between Imperi.al. and Aegon, they will forward
stipulated order with their signature to OC via email. Imperial begins to touch base with the
insurance companies 7-10 business days prior to the hearing requesting a proposed
stipulated other.
A fully executed Stipulated order is required for Funding purposes.
Aetna Casualty & Surety Co.
See Travelers Casualty and Surety
American General Annuity Insurance Company / American General Annuity Service Corporation /
American General Assignment Corporation / American General Assignment Corporation of New
York / American International Life Insurance Company / AIG Insurance Company / AIG Life
Insurance Company / AIG Annuity Insurance Company
Generally, MG drafts the Order and Settlement Agreement Letter (SA) and forwards to Imperial,
for review/ changes. If we are informed these insurance companies intend to object to the
transfer
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OC will provide the
proposed Order to Imperial for review.
Current Contacts:
strtictu.res
®
ernhIlp.com
Special Notes: Imperial begins to touch base with AIG 7-10 business days prior to
the hearing asking if they want us to draft the Order/SA.
For most transactions in Texas, AO Gen is not represented by DBR. but are
represented by Bracewell & Guliani Bracewell & C3ihani drafts those orders/ SAs.
A fully executed Settlement Agreement letter is required for Funding:
purposes.
OC must obtain customers, signature on the SA at the hearing.
Allstate Assignment Company /Allstate Indemnity Company / Allstate. Insurance
Company / Allstate Life Insurance Company / Allstate Life Insurance Company Of NY /
Allstate Settlement Corporation
Imperial drafts .a proposed Stipulation and Order and forward to Allstates Counsel, Drinker &
Reath (DBR), for their review/ changes.
Current Contacts: Ingrid Hopkinson, Esq. (DBR)/ 610-993-2225
ingridlopkinson@dbr.com
, Lisa Stern (DBR) / 610-993-1236
lisa.stern
dbr.com
Special Notes: A fully executed. Stipulation is required for Funding
purposes. OC must obtain customers signature on stipulation at the hearing.
Aviva Assignment Corporation / Aviva Life Insurance Company / Aviva Life Insurance Company of
NY / Aviva London Assignment Corporation.
DBR drafts Stipulation and Order and forwards to Imperial for review/ changes.
Current Contacts: Jenifer Smith, Esq.. (DBR)/ 215-988-3397 jennifer.smith@dbr.com
Special Notes: A fully executed Indemnification Agreement is required for Funding Purposes., OC
must obtain customers signature on the Indemnification Agreement at the hearing.
CNA Group Life Assurance Company / CNA Structured. Settlements, Inc. /
Continental Assurance Company / Continental Casualty Company / Continental Insurance
Company Continental. Insurance Company of NJ / Continental loss
Adjusting Services, Inc.
These insurance companies counsel, Drinker Biddle & Reath, will draft the Stipulation and
Order and forward to imperial for review/ changes.
Current Contacts: Kevin Golden,,Esq. /215-988-3367 kevin.golden@dbr.com
Special Notes: imperial begins to touch base with Kevin 7-10 business days prior to the hearing
requesting the proposed Stipulation and Order. A fully executed Stipulation is required for Funding
purposes.
OC must obtain customers signature on the Stipulation at the hearing
Farmers Insurance company / Farmers Fire Insurance Company
Farmers drafts the Stipulation and Order. Petition and Order must contain Washington compliance/
findings.
Current Contacts: structured.settlements@farmersinsurance.com; Steven Driggers/ 206-275-8142
steven.driggers@farmersinsurance.com
Firemans Fund Insurance Company! Firemans Insurance Company
of Newark, NJ
Firemans is either represented by Vicki Astorga or Drinker Biddle & Reath, When represented
by Vicki Astorga, Imperial will draft the Stipulation and Order. If represented by Drinker Biddle
and Reath, specifically, Nicole Lanzalotti, Esquire, she will provide Stipulation and Order for
Imperials review.
Current Contacts: Vicki Astorga/ 415-899-2951 vastorga@ffic.com;. Nicole Lanzalotti, Esquire /
610-993,3415-nicole.lanzalotti@dbr.com
Special Notes: Imperial begins to touch base with Vicki Astorga and/or Nicole Lanzalotti 10-15
business days prior to the hearing to determine which one of them is handling the matters for
Firemens.
If a Stipulation is required, it must be fully executed for Funding purposes and OC must obtain the
customers signature on. the Stipulation at the hearing.
Hartford Accident &;Indemnity-Company 1 Hartford Casualty
Insurance Company / Hartford Fire insurance Company! Hartford
Insurance Company(s) / Hartford Life and Accident Insurance Company /
Hartford Life Insurance Company/ Hartford Lloyds Insurance Company /
Hartford
Underwriters Insurance Company / Hartford Comprehensive Employee Ben. Svc. Company
Petition and Order must contain Connecticut compliance/ findings. If Hartford is being represented
by LeBoeuf, Lamb, Green & MacRae, they will prepare the Order and forward for Imperials review/
changes. If not represented by LeBoeuf, Imperial will draft a proposed Hartford type Order.
Current Contacts at Hartford sscompliance@hartfordlife.com; at LeBoeuf: Kevin Lenehan /
860-293-3732 klenehan@llgm.corn and/or Johanna Nejamy/ 860-293-3 598 jnajamy@llgm.com
Special Notes Imperial contacts Hartford 10-15 business days prior to the hearing to verify if
LeBoeuf is representing Hartford in a transaction. If not, Imperial is to provide proposed order as
soon as possible.
Insurance Company of North America / Life Insurance Company of New York.
Drinker Biddle & Reath prepares the proposed Stipulation and Order and forwards it to Imperial for
review/ changes.
Current Contacts: Jennifer Smith / 215-988-3397 jennifer.smith@dbr.com
Special Notes: Imperial begins to touch base with Jennifer 7-10 business days prior to the hearing
requesting the proposed Stipulation and Order. A fully executed Stipulation is required for Funding
purposes. OC must obtain the customers signature on the stipulation at the hearing.
Liberty Assignment Corporation/ Liberty Life Insurance Company of
Boston/ Liberty Life Insurance Company! Liberty Mutual Insurance
Company / Sun Life Assurance Company of Canada / LM Property and
Casualty Insurance Company (where Prudential is not the issuer)
Prudential Assignment Settlement Services: Corporation / Prudential Insurance Company of
America I Prudential Property & Casualty/ Prudential Structured Settlements! LM Property and
Casualty Insurance Company where Prudential is the annuity issuer
Imperial drafts the Stipulation and Order and forwards it to Libertys representatives for review.
Current Contacts for Liberty: Jayson Paquette/ 800-451-7065 ext 30862
jaysonpaquette®LibertyMutual.com for LM Property: Steve Rusconi/ 617-757-46673
Steven.Ruscotti@LibertyMutual.com
Special Notes: A fully executed Stipulation is required for Funding purposes. OC must obtain the
customers signature on the stipulation at the hearing.
Reliance Insurance Company (In Liquidation)
Imperial prepares. Order. Reliance requires special language in the Order. Imperial forwards the
proposed Order to Reliance for their review/ changes.
Current contact: Claire Rocco, Esq./ Claire.rocco@relianceinsurance.com
Special notes: Imperial must-forward 6 proposed Order to Reliance as soon as possible.
Royal Insurance Company of America / Royal Life Insurance Company of
America.
Their counsel, Drinker, Biddle & Reath will draft the Stipulation and Order and forward to Imperial
for review/ changes.
Current Contacts: Nicole Lanzalotti, Esquire / 215-988-652 nicolelanzalotti@dbr.com
Special Notes: Imperial begins to touch base with Nicole 740 business days prior to the hearing
requesting the proposed Stipulation and Order.
A fully executed Stipulation is required for Funding purposes.
OC must obtain customers signature on the stipulation at the hearing.
State Farm Fire & Casualty Company / State Farm General Insurance
Company / State Farm Insurance Company/ State Farm Life Assurance
Company / State Farm Mutual Automobile Insurance Company
OC prepares Order. State. Farm. prepares and forwards the Stipulation to OC and Imperial.
Current Contacts: home.law-structure-settlement.566o00@statefarm.com
Special Notes: A fully executed Stipulation is required for Funding purposes. OC must obtain
customers signature on the stipulation at the hearing.
Transamerica see AEGON
Travelers Casualty & Surety / Travelers Indemnity Company / Travelers Property & Casualty and Aetna
Property & Casualty Insurance
Travelers will provide Imperial the propped Order for review/ changes.
Current Contact: Meri Beth Shakespeare/ 443-353-1935
mshakesp@travelers.com
Special Notes: Imperial begins to touch base with Meri Beth 7-10 business
days prior to the hearing to request proposed Order
Travelers Life & Annuity Company and Travelers Insurance Company (Citigroup)
Travelers prepares Order with. Travelers language and forwards proposed Order to Imperial for
review/changes
Current Contact: Merl Beth Shakespeare/ 443-353-1935 rnsbakesp@travelers.com
United States Fidelity & Guarantee Company (USF&G)
Travelers Counsel, Hogan & Hartsin, LLP will provide the proposed Order to Imperial for
review/changes
Current Contacts: Dennis Robinson, Esquire / 410-659-2722 dmrobinson@hhlaw.com
Special Notes: Imperial begins to touch base with Dennis 7-10 business days
prior to the hearing to request proposed Order.
All other Insurance Companies
For all other insurance companies, will say when they choose to make an appearance in a case,
Imperial shall draft the proposed Orders and forward to insurance company representatives for
review and approval prior to the hearing.
STATE-OF:MICHIGAN
IN THE CIRCUIT COURT FOR THE COUNTY OF INGHAM
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WASHINGTON SQUARE FINANCIAL, LLC,
d/b/a Imperial Structured Settlements, LLC,
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File No. 08-1581-CZ
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a Florida Limited Liability Company authorized
to transact business in Michigan
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Hon. James R. Giddings
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Petitioner,
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In re: ,
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Transferor,
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Final Order Approving Transfer of
Structured Settlement Payments
AND NOW, this day of January, 2008, upon consideration of the unopposed
petition of Washington Square Financial, LLC d/b/a Imperial Structured Settlements, LLC
(Imperial) the Court hereby finds as follows:
1. The transfer of the structured settlement proceeds, specifically, One
Hundred Twenty (120) monthly payments of Four Hundred Seventeen and 79/100 Dollars ($417.79)
commencing on December 4, 2015 through and including November 4, 2025 (the Assigned
Life-Contingent Payments) by
(Mr.
) to Imperial as described in the
petition in. this matter (the Proposed Transfer) (i) does not contravene any applicable Federal
or State statute or the order of any court or responsible governmental or administrative authority,
and ii) is in the best interest of Mr.
, taking into account the welfare and support of
Mr.
dependents, if any.
2. The. Proposed Transfer complies With the requirements of the Revised
Michigan Structured Settlement Protection Act, MCL §691.130.1, et seq. (the Michigan Transfer
Act):
3. Not less than three (3) days before Mr.
signed the transfer.
agreement (the Transfer Agreement), Imperial provided to Mr:
a separate disclosure
statement, in bold type.* least 14 Points in Size, setting forth:
(a): amounts and -due dates of the Assigned Life-Contingent
Payments;
(b) the aggregate amount of the Assigned Life-Contingent Payments;
(c) the discounted present value of the Assigned Life-Contingent,
identified as the calculation of the current value of the transferred structured settlement
Payments under federal standards for valuing annuities and the amount of the applicable federal
rate used in calculating such discounted present value;
(d) the gross advance amount;
(e) an itemized listing all applicable transfer expenses, other than attorneys fees and
related disbursements payable in connection with Imperials application for approval of the
Proposed Transfer, and Imperials best estimate of the amount of those expenses;
(f) the net advance amount;
(g) the amount of any penalties or liquidated damages payable by Mr.
in the event of
any breach of the Transfer Agreement by Mr.
; and
(h) a statement that Mr.
has the right to cancel the Transfer
Agreement, without penalty or further obligation, not later than the
third, business day after the Transfer Agreement is signed by Mr.
4. Mr.
as established that the Proposed Transfer is in the best
interests of Mr.
, taking into account the welfare and support of Mr.
dependants, if
any.
5. Mr.
has been advised in writing by Imperial to seek independent professional advice
regarding the Proposed. Transfer and has either received such or knowingly waived his right to such
advice in writing.
6. The discount rate or rates used in determining the discounted present value of the
Structured Settlement payments to be transferred do not exceed 25% per year.
5. At least twenty days prior to the scheduled hearing on the application, for authorization
of the transfer of structured settlement Payments rights, Imperial filed with, the Court and served
on all interested parties, a. notice of the Proposed Transfer and the application for its
authorization, including in such notice:
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(a)
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a copy of Imperials application;
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(b)
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a copy of the Transfer Agreement;
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(c)
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a copy of the disclosure statement rewired under section 3;
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(d)
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a hating of each of Mr.
dependents, together with
each dependents age;
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(e)
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notice that any interested party entitled to support, oppose, or otherwise
respond to Imperials application., either in person or by counsel, by submitting
written comments : to the court or by participating in the hearing; and
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(f)
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notice of the time and place of the hearing and notification of the Manner in which and
the time by Which written responses to the application must be filed to be considered by the Court.
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6. Imperial has assigned to Imperial Receivables I, LLC (Imperial Receivables) all of its
rights under the Transfer Agreement and the right to receive the Assigned Life-Contingent Payments.
Based on the foregoing findings, IT IS HEREBY ORDERED THAT:
1. Pursuant to the Michigan Transfer Act, the Proposed Transfer is approved.
During the period the structured settlement payment rights are being assigned or
encumbered pursuant to the transaction at issue; the designated beneficiary under annuity contract
number
issued by Auto-Owners Life Insurance Company (Auto-Owners Life) and owned by
Auto-Owners Insurance Company (Auto-Owners Insurance) (Auto-Owners Life and. Auto Owners Insurance
are referred to collectively as Auto-Owners) shall be the Estate of
.
2. Auto-Owners shall forward the Assigned Life-Contingent Payments;
within 7 days of the date due, by check made payable to Imperial Receivables I, LLC 701 Park of
Commerce Blvd, Suite 301, Boca Raton, Florida. 33487 (Tax T.D. No. 26- 3762492) (Designated
Address), as follows:
|
|
|
One Hundred Twenty (120)monthly payments of Four Hundred Seventeen and 79/100 Dollars
0417.119) commencing an December 4, 2015, through and including November 4, 2025.
|
3. Imperial Receivables is authorized to make-subsequent assignments (a
Reassignment) or transfers of the Assigned life-Contingent Payments. However, if Imperial
Receivables is merged with or acquired by -another individual or entity, or for traditional address
change purposes the Designated Address is no longer valid (i.e., if Imperial Receivables moves or
for other reasons the Designated Address is no longer a viable address for Imperial Receivables to
receive payment), Auto-owners will make the Assigned Like-Contingent Payments to a new address,
only if Mr.
is alive at the time the Assigned Life-Contingent Payments are due,
4. All remaining Periodic Payments (and/or portions thereof), if any, that are not the subject
of the Proposed Transfer and not previously assigned shall be made payable to Mr.
and will
be forwarded by Auto-Owners as they become: due, to
Mr.
most recent known address or any payment address designated by Mr.
, subject to
the Consent of Auto-Owners.
5. Concurrent with this order, every One Hundred Twenty (120) days
thereafter, Imperial shall provide Auto-Owners with written confirmation, contemporaneously signed
by and notarized, that Mr.
is alive
(the Required Confirmation). Each Required Confirmation will be sent to the attention of
Auto-Owners, 6101 Anacapri Boulevard; P.0, Box 30660, Lansing, MI 48909 (or such other address
designated by Auto-Owners in a written notice to Imperial) Mr.
and Imperial shall cooperate
with one another and with Auto-Owners far purposes of providing each Required Confirmation.
6. In the event that Imperial acquired information indicating that Mr.
has died,
Imperial shall immediately provide Auto-Owners with this information in writing.
7. If Imperial fails to provide the Required Confirmation that Mr.
is alive, or if
Auto-Owners has any reasonable basis to believe that Mr.
died, Auto-Owners may suspend the
Assigned Life-Contingent Payments until Auto-Owners has received the Required Confirmation of
Mr.
survival.
8. In any event, to the extent that any Assigned Life-Contingent Payments are made by
Auto-Owners to Imperial after the death of Mr.
, Imperial will reimburse Auto-Owners with
funds in the amount of those Assigned Life-Contingent Payments.
9. Imperial, on its own behalf and on behalf of imperial Receivables, shall defend, indemnify,
and hold harmless Auto-Owners and their directors, shareholders,
officers, agents, employees, servants, successors and assigns, and any parent, subsidiary, or
affiliate thereof, and their directors, shareholders, officers, agents, employees, servants,
successors, and assigns, past and present, from and against any and all liability, including but
not limited to costs and reasonable attorneys fees, for any and all claims made in connection
with, related to, or arising out of the Transfer Agreement, the Proposed Transfer, the Assigned
Life-Contingent Payments, any Reassignment, or Auto-Owners compliance with this other, except with
respect. to claims Imperial or Imperial Receivables against the Auto-Owners to enforce the
Auto-Owners obligations to Imperial an Imperial Receivables under this Order.
10. Auto-Owners lack of opposition to this matter, or their or Imperials or
Imperial Receivables stipulation hereto or compliance herewith, shall not constitute evidence in
this or any matter; and is not intended to constitute evidence in this or any matter, that:
a. payment§ under a structured :settlement contract or annuity or
related contracts can be assigned or that anti-assignment or anti-encumbrance provisions in
structured settlement contracts or annuities or -related contracts are not valid and enforceable;
or
b. other transactions entered into by Imperial and Imperial
Receivables and their customers constitute valid sales and/or secured transactions; or
c. Auto-Owners have waived any right in connection with any other
litigation or claims; or
d. Imperial or Imperial Receivables has waived any right other than
as expressly set forth in this Order.
11. Imperial, Imperial Receivables, and Mr.
, for themselves and for their respective
directors, shareholders, officers, agents, employees, servants, successors,
heirs, beneficiaries; contingent beneficiaries, executors, trustees, administrators, and
assigns, and any parent, subsidiary, or affiliate thereof. And their directors, shareholders,
officers, agents, employees, servants, successors, heirs; beneficiaries, contingent beneficiaries,
executors, trustees, administrators; and assigns, past and present (the Releasors), hereby
remise, releaseand forever discharge Auto-Owners, and their directors, shareholders, officers,
agents, employees, servants, successors and assigns, and any parent, subsidiary, or affiliate
thereof, and their directors, shareholders, officers, agents, employees, Servants, successors, and
assign, past and present (the Releasees) of and from any and all manner of actions, and causes of
action, suits, debts, dues, accounts, bonds, covenants, contracts,. agreements, judgments,
settlements, damage claims, and demands whatsoever, in law or in equity, in connection with,
related to, or arising out of any claim or allegation that was or could have been asserted in
connection with, related to, or arising out of the Transfer Agreement the Assigned Life-Contingent
Payments, the Proposed Transfer, which against each other or the releasees, the Releasors have or
had from the beginning of the world through the date of this Order, except for claims of Releasors
against the Releasees to enforce the Releasees obligations to Releasors, if any, under this Order.
DONE IN OPEN COURT this
day of January, 2008.
DISCLOSURE :
***
(ME)::, Aaineir30 days10***
20 days
20 days
10
(MA) Massachusetts
20 days
(MI) Michigan
3
Yes
20 days
(MN) Minnesota
10
20 days
3
(MS) Mississippi
20 days
10
(MO) Missouri
20 days
3
(MT) Montana
***
20 days
(NE) Nebraska
Age of MaJority IO:
7 days
(NV) Nevada
(NHY: , NeW. , :flaMatiir
e;:1t
NO STATUTE
20 days
(NJ) New Jersey
3
20 days
3
(NM) New Mexico
Disclosures sent 3 ways
Bronx County: need IPA
20 days
(NY) New York
10
Post 1999 settlements:
Rate on Net < Prime + 5%
30 days
(NC) North Carolina
10
20 days
(ND) North Dakota 3
Jackson County: need R&S
Franklin County: need ILA
instead of IPA
20 days
10
20 days
(OK) Oklahoma
3
20 days
(OR) Oregon
3
20 days
(PA) Pennsylvania
10
20 days
3
SRI) Rhode Island
20 days
(SC) South Carolina
3
20 days
3
(SD) South Dakota
20 days
10
(TN) Tennessee
20 days
3
(TX) Texas
20 days
(UT) Utah (VT) Vermqnt
3
ISTATUTE
20 days
3
(VA) Virginia
20 days
3
(WA) Washington
***
14
(WV) West Virginia
NO STATUTE
1 20 days
3
(WY) Wyoming
|
Insurance Company Matrix
Updated 4/2/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Split
|
|
Conference
|
|
Do We
|
|
Who drafts
|
|
Admin
|
|
|
insurance Company_
|
|
Payments?
|
|
Calls
|
|
atie
|
|
order?
|
|
Fees
|
|
Comments
|
AEGON /Transamerica
/
Monument
|
|
ONLY ONCE
|
|
NO
|
|
YES
|
|
THEM
|
|
$
|
750.00
|
|
|
Will split between customer and ONE
company only
|
AIG / AinGen
|
|
NO
|
|
YES
|
|
YES
|
|
THEM
|
|
$
|
500.00
|
|
|
*AIG/ArnGen domiciled in DE will
split; AIG/AmGen in NY will split if
thru DE entity
|
Allstate
|
|
YES
|
|
NO
|
|
YES
|
|
US
|
|
$
|
750.00
|
|
|
|
Arnica
|
|
NO
|
|
|
|
NO
|
|
US
|
|
$
|
500.00
|
|
|
|
Arrowood Indemnity
|
|
|
|
|
|
YES
|
|
US
|
|
$
|
500.00
|
|
|
|
Aurora
|
|
YES
|
|
NO
|
|
YES
|
|
THEM
|
|
|
|
|
|
|
Aviva
|
|
**
|
|
|
|
YES
|
|
THEM
|
|
$
|
750.00
|
|
|
**Will split lumps but not monthlies
|
Berkshire & Hathaway
|
|
|
|
NO
|
|
NO
|
|
US
|
|
|
|
|
|
BHG will try to steal the deal at
petition filed
|
Canada Life
|
|
YES
|
|
Will fax to us in
3-5 business
days
|
|
NO
|
|
US
|
|
|
|
|
|
|
Cigna
|
|
|
|
NO
|
|
NO
|
|
THEM
|
|
$
|
750.00
|
|
|
If INA is involved, double admin fees
of $625/ea apply ($1250 in total Res)
|
Confederation Life
|
|
|
|
|
|
YES
|
|
US
|
|
$
|
500.00
|
|
|
|
Continental Assurance
|
|
|
|
NO
|
|
YES
|
|
THEM
|
|
$
|
500.00
|
|
|
|
Farmers
|
|
YES
|
|
YES
|
|
YES
|
|
THEM
|
|
$
|
500.00
|
|
|
Additional $250 admin
fee
required for any split payments
PER SPLIT
|
Firemans Fund
|
|
NO
|
|
|
|
YES
|
|
US
|
|
|
|
|
|
|
Genworth
|
|
YES
|
|
YES
|
|
NO
|
|
US
|
|
|
|
|
|
Will not split payments if stream
involves a COLA
|
Hartford
|
|
YES
|
|
YES
|
|
NO
|
|
US
|
|
|
|
|
|
|
Household Life
|
|
NO
|
|
|
|
YES
|
|
THEM
|
|
$
|
500.00
|
|
|
|
ENG
|
|
|
|
NO
|
|
NO
|
|
US
|
|
|
|
|
|
|
Integrity
|
|
NO
|
|
|
|
NO
|
|
US
|
|
$
|
500.00
|
|
|
|
John Hancock
|
|
NO
|
|
NO
|
|
NO
|
|
THEM
|
|
$
|
600.00
|
|
|
|
Liberty Mutual
|
|
NO
|
|
NO
|
|
YES
|
|
US
|
|
$
|
500.00
|
|
|
Will not
sign
stip until we
send them signed order
|
Life Insurance Co of
North America
|
|
|
|
|
|
YES
|
|
THEM
|
|
$
|
750.00
|
|
|
|
Lincoln National
|
|
NO
|
|
|
|
YES
|
|
THEM
|
|
$
|
600.00
|
|
|
|
Met Life
|
|
YES
|
|
NO
|
|
NO
|
|
US
|
|
$
|
750.00
|
|
|
Does not review order prior to hearing
|
Mutual of Omaha
|
|
YES
|
|
YES
|
|
NO
|
|
US
|
|
|
|
|
|
If a stream has a COLA, they require
us to buy it
|
Nationwide
|
|
YES
|
|
YES
|
|
NO
|
|
US
|
|
$
|
750.00
|
|
|
Does not review order prior to hearing
|
NY Life
|
|
YES
|
|
NO
|
|
NO
|
|
US
|
|
$
|
500,00
|
|
|
Will not split payments if stream
involves a COLA
|
OM Financial
|
|
NO
|
|
YES
|
|
NO
|
|
US
|
|
|
|
|
|
|
Pacific Life
|
|
NO
|
|
NO
|
|
YES
|
|
US
|
|
$
|
500.00
|
|
|
|
Presidential Life
|
|
YES
|
|
|
|
NO
|
|
US
|
|
|
|
|
|
Will not split payments if stream
involves a COLA
|
Prudential
|
|
NO
|
|
YES
|
|
YES
|
|
THEM
|
|
$
|
750.00
|
|
|
|
State Farm
|
|
ONLY ONCE
|
|
NO
|
|
YES
|
|
US
|
|
$
|
750.00
|
|
|
Admin fee does not apply if State
Farm is ONLY the obligor
|
Symetra
|
|
YES
|
|
NO
|
|
NO
|
|
US
|
|
$
|
900.00
|
|
|
Additional admit) fees are required
for any split payments, and for ALL
life-contingent deals
|
Tennessee Farmers
|
|
NO
|
|
YES
|
|
NO
|
|
US
|
|
|
|
|
|
|
Travelers
|
|
|
|
NO
|
|
NO
|
|
THEM
|
|
|
|
|
|
|
Lead Introduction Letter
Tuesday, June 08, 2010
Dear ,
Let me take a moment to introduce myself and Imperial Structured Settlements,
At
Imperial, we strive to help individuals who are receiving payments from a structured
settlement (personal injury, car accident, wrongful death or malpractice) or self owned annuity
get a lump sum of money now.
We understand that people, through no fault of their own sometimes find themselves in tough
financial situations. With great success, we have helped people in a variety of circumstances and
want to do the same for you. Whether you need money to reduce credit card debt, pay medical bills,
funds for education, or purchase a vehicle, let us provide you with the best cash option for your
financial needs.
If you want top dollar for your current and/or future payments, please contact me on my toll-free
direct line at (561) 982-3322 between 9:00 a.m. 6:00 p.m. EST, Monday through Friday, or e-mail
me at
tfleming@imprl.com
To learn more about our company, please visit our
website at
www.ImperialStructuredSettlements.com.
Thank you for your time and
I
look forward
to
speaking with you soon.
We work for you, because youre worth it!
Best regards,
Tracy Fleming
Account Executive
(561) 982-3322.Toll Free Direct
Toll Free Fax
tfleming®
imprl.com
Customer Intro Letter
June 14, 2010
Dear ,
It was a pleasure speaking with you. I am writing to remind you that I am here to provide you
suitable cash options for your future payments. At Imperial we continually help people who,
through no fault of their own, find themselves in tough financial situations.
We can help you meet your financial needs and goals. Our senior management team has a combined
25+ years of experience. As pioneers in the industry, Imperial has revolutionized the time
required for the Structured Settlement process by shortening it from 120 days down to 40.
Please feel free to contact me on my toll-free direct line at 850-475-8384 between 9:00
6:00 p.m. or email at
tfleming@imprl.com
. To learn more about our company, visit
us on the web at
www.ImperialStructuredSettlements.com.
Warmest Regards,
Tracy Fleming
Account Executive
(561) 982-3322 Toll Free Direct
866-704-0772 Toll Free Fax
Account Executive Customer Follow up Letter
Tuesday, June 08, 2010
Dear ,
Let me take a moment to introduce myself and Imperial Structured Settlements. At Imperial, we
strive to help individuals who are receiving payments from a structured settlement (personal
injury, car accident, wrongful death or malpractice) or self owned annuity get a lump sum of
money now.
We understand that people, through no fault of their own sometimes find themselves in tough
financial situations. With great success, we have helped people in a variety of circumstances and
want to do the same for you. Whether you need money to reduce credit card debt, pay medical bills,
funds for education, or purchase a vehicle, let us provide you with the best cash option for your
financial needs.
If you want top dollar for your current and/or future payments, please contact me on my toll-free
direct line at (561) 982-3322 between 9:00 a.m. 6:00 p.m. EST, Monday through Friday, or e-mail
me at
tfleming@imprl.com
. To learn more about our company, please visit our website at
www.ImperialStructuredSettlements.com.
Thank you for your time and I look forward to speaking with you soon.
We work for you, because youre worth it!
Best regards,
Tracy Fleming
Account Executive
(561) 982-3322 Toll Free Direct
Toll Free Fax
tfleming@imprl.com
CLOSING SUBMISSION FORM
C Submitted to Funding
By:
C Approved For Funding
By:
0 Prehearing Review
C Rejected from funding for:
O Resubmitted to Funding
By:
|
|
|
Date: 5/2012010 12:00:00 AM
Account Executive:
Danis Inesedy
CustomerNa e:
CustomerID:
|
|
|
|
|
|
|
|
|
|
General Information:
|
|
Guaranteed Summary:
|
|
Life Contingent Summary:
|
|
Deal Totals Summary:
|
Gender: Male
|
|
Gross Amount: Net
|
|
Gross Amount $25,439.43
|
|
Gross Amount $25,439.43
|
Date of Birth:11.11
|
|
Amount:
|
|
Net Amount $24,239.43
|
|
Net Amount $24,239.43
|
Owner INA Surplus Insurance
|
|
Eff Rate: %
|
|
Eff Rate: 23.99%
|
|
Profit: $9,966.29
|
Company
|
|
Avg Dur:
|
|
Avg Dur:
|
|
Legal Fees: $1,000.00
|
Issuer: First Colony Life Insurance
|
|
Legal Fees:
|
|
Legal Fees: $1,000.00
|
|
Processing Fees: $200.00
|
Company
|
|
Processing Fees:
|
|
Processing Fees: $200.00
|
|
Total Fees: 1200.00
|
Issuer Code: GEL
|
|
Quotient %
|
|
Quotient: 34.53%
|
|
|
State: FL
|
|
IRS Rate: 3.40%
|
|
IRS Rate: 3.40%
|
|
Chards
Eligibility:
|
# of Funded Deals:
|
|
IRS PV:
|
|
IRS PV: $70,206.52
|
|
Age:
|
Purchase Type: Life Contingent
|
|
Profit:
|
|
Profit: $9,966.29
|
|
Income:
|
Head Injury: No
|
|
|
|
|
|
Last Payment
|
35% Total: 42000
|
|
|
|
|
|
Quad/Para: No
|
|
|
|
|
|
|
Approved Issuer: R4kS
|
|
|
|
|
|
|
Date: 5/16/1983
|
|
|
|
|
|
|
R&S State: FL
|
|
|
|
|
|
|
|
|
|
|
|
Comments:
|
|
|
|
|
|
|
|
|
|
No
|
|
|
|
|
Approved
|
|
for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Processing:
|
|
Yes
|
|
Date
|
|
_______________
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approved :
|
|
|
|
|
|
_______________
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approved by:
|
|
|
|
|
|
_______________
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature:
|
|
|
|
|
|
|
AWARDED PAYMENT STREAMS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment Type
|
|
Amount
|
|
# of PMTS
|
|
Start Date
|
|
End Date
|
|
Life Cont
|
|
COLA
|
|
Cola Adj
|
Monthly
|
|
$
|
500.00
|
|
|
|
240
|
|
|
|
6/1/1998
|
|
|
|
5/1/2003
|
|
|
|
0
|
|
|
|
0.00
|
|
|
Annual
|
Monthly
|
|
$
|
500.00
|
|
|
|
720
|
|
|
|
6/1/2003
|
|
|
|
5/1/2063
|
|
|
|
1
|
|
|
|
0.00
|
|
|
Annual
|
AWARDED PAYMENT STREAMS PURCHASED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment Type
|
|
Amount
|
|
# of PMTS
|
|
Start Date
|
|
End Date
|
|
Life Cont
|
|
COLA
|
|
Cola Adj
|
Monthly
|
|
$
|
500.00
|
|
|
|
180
|
|
|
|
9/1/2010
|
|
|
|
8/1/2025
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
Structured Settlement
COURT ORDER APPLICATION
Background Info:
|
|
|
|
|
|
|
|
|
Your name:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
Middle
|
|
Last
|
|
|
Maiden name or alias: ____________________
|
|
|
|
|
|
|
|
|
Name on your SS card or Tax Return:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
Middle
|
|
Last
|
|
|
|
|
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Address:
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Street Address
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City
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State Zip
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Home:
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Work:
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Cell:
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Alternate:
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E-mail address:
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Social Security Number:
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Date of Birth:
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Emergency contact name:
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Phone:
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Relationship: ____
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Structured Settlement info:
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Name of attorney that handled this matter for you:
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Phone Number:
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City/State where attorney practices:
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Who did you sue?
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What year did the accident happen in?
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Where was the case settled (city, county, state)?,
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Who is the current beneficiary of your payments?
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Income & Dependent Info:
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Income:
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Job $
SSI $
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Annuity $ Spouse $
Disability $
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Total Monthly $
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Rental $
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Child Support $
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Alimony $
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Pension $
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Total Annual $
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Do you own or rent?
Mortgage/Rent payment: $/mo
Do you live rent-free?
If YES, who do you live with?
relationship:
Do you have any minor children or dependents?
Do they live with you?
If NO, who do they live with?
(name)
(address)
Do you pay child support?
If YES, how much? $ /ma
Paid to (individual):
Paid to (agency):
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____________________
(address)
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2
Do you owe any money in back child support?
If YES, how much. do you owe? $
Are your annuity payments being deducted/garnished to pay for child support or arrearages?
If YES, how much is being deducted? $ /mo
Employment Info:
Are you working?
If YES:
Current Occupation:
How long?
Employees Full Business Name: __________
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Employees Address:
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address
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city
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state
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zip
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What is your current annual salary?: $ /year
If NO:
Why?
Are you employable?
Employment history what other jobs have you had?
Are you disabled?
If YES, what is the nature of the disability?
Do you support yourself without relying on anyone elses salary or income?
If YES, how?
For how long?
How far did you get In school?
3
Marriage
Info:
Marital Status (please check one)
Spouses name:
Spouses address:
What is your spouses occupation?
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Employers Address:
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city
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state
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What is their current annual salary? $ /year
Have you ever been divorced? If YES, how many times:
Former spouses name:
Location of filing of divorce (City/State):
Date of filing (month/year):
Former spouses name:
Location of filing of divorce (City/State):
Date of filing (month/year):
4
Miscellaneous Info:
Do you have any liens or judgments against you?
If YES, amount? $ per
By who?
Have you ever filed for bankruptcy?
If YES, when? _____
What state?
Do you have any tax liens? If
YES, how much? $
What state?
Have you previously sold any of your structured settlement payments? If
YES, to who?
Have your annuity payments ever previously been garnished?
Is there any other individual entitled to a portion of any of your payments?
If YES, who?
Where do they live?
Have you received any payments from your structured settlement in the past 12 months?
if YES, how much? $
What did you do with the money?
Medical Info:
Do you currently depend on your annuity payments for any medical
necessities?
Have you ever been in a coma?
Have you ever had a serious head injury?
If YES, please explain:
If YES, please supply the name, relationship and contact information of 2 personal references that Imperial may contact.
IF YOU HAVE NOT HAD A SERIOUS HEAD INJURY PLEASE SKIP THE REST OF THIS SECTION.
Name of proposed reference:
How long have you known him/her years.
Whats their relationship to you
(ex: Parent! Spouse/ Brother! Sister/ Daughter/ Son/ Aunt/ Uncle! Employer! Co-Worker/Priest/ Rabbi! Physician)
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Address:
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address
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city state zip
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Phone 1) Phone 2)
Name of proposed reference:
How long have you known him/her? years.
Whats their relationship to you:
(ex: Parent/ Spouse/ Brother/ Sister/ Daughter/ Son/ Aunt/ Uncle! Employer/ Co-Worker/Priest/ Rabbi! Physician)
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Address:
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address
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city state zip
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Phone 1)
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Phone 2)
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6
It is understood and agreed by you that (a) To the best of your knowledge and belief all of
the statements and answers on this application are true, complete and accurately stated; (b) These
statements and answers are used in accordance with the proposed transfer of your structured
settlement benefits, subject to the terms and conditions of the applicable Absolute Assignment
entered into between you and us, and in so doing, we will rely on the truthfulness of your
statements and answers.
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Signature of applicant:
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Date:
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7
AFFIDAVIT HELPER SECTION
Please describe
in detail
what led to your structured settlement:
WHY DO YOU NEED THE MONEY WHAT WILL YOU DO WITH IT?
(Please be
*VERY
DETAILED*
in exactly how this money will be spent
down to the dollar or
this will be returned to you.
Ask the customer
WHO,
WHAT,
WHEN,
WHERE,
WHY
and
HOW III)
8
DISCLOSURE STATEMENT
ALABAMA
DATE PROVIDED: 05/20/2010
PAYEE:
This Disclosure Statement is being provided by Washington Square Financial, LLC dba IMPERIAL
STRUCTURED SETTLEMENTS Imperial or Us) to
, (Payee or You) in connection with
Payees agreement to transfer and sell to Imperial certain structured settlement payment
rights due Payee.
1.
Schedule of Payments Transferred
. The Payee intends to transfer
or sell to Imperial all of Payees rights, title and interest in the following payments:
2.
Aggregate Amount of Payments Transferred
. The aggregate amount of payments
to be sold and transferred to Imperial totals .
3.
Discounted Present Value
. The discounted present value of the
aggregate payments sold and transferred at 3.40% is . The discounted present value is the
calculation of current value of the sold and transferred structured settlement payments
under federal standards for valuing annuities. THIS IS NOT THE RATE USED TO CALCULATE THE
PURCHASE PRICE.
4.
Calculation of Discounted Present Value
. The discounted present
value of payments shall be calculated as follows: The applicable federal rate used in
calculating the discounted present value is 3.40%.
5.
Gross Amount Payable
. In exchange for these payments, the
Payee will receive the gross amount of , which represents a nominal annual discount rate of
% assuming monthly compounding and an assumed funding date of 05/20/2010. Funding will not
occur until everything necessary under the Absolute Sale and Security Agreement has taken
place.
6.
Fees and Expenses.
The Payee will be responsible for the following
approximate commissions, charges, fees, expenses, and costs in connection with the closing of this
transaction:
Legal Fees
Processing Fees
7.
Net Amount Payable.
The net amount payable to Payee after the
deduction of all commissions, fees, costs, expenses and charges described in paragraph 6 of this
disclosure is .
8. .
Right To Cancel.
The Payee shall have the right to cancel the
Absolute Sale and Security Agreement, without penalty or further obligation, not later than the
third (3
rd
) business day, after the Absolute Sale and Security Agreement is
signed by the Payee.
9.
Penalty In The Event Of Breach Of Contract.
The amount of any penalty
and the aggregate amount of any liquidated damages (inclusive of penalties), payable to Imperial,
by the Payee in the event of the Payees breach of the transfer agreement are NONE.
10.
Independent Professional Advice.
The Payee understands that Payee
should consult with Payees own attorney, certified public accountant, actuary, or other
professional adviser concerning the legal, tax, and financial implications of a sale and transfer
of structured settlement payment rights, including the federal and state income tax consequences of
a sale and transfer if he/she or the Settlement Obligor/Issuer is domiciled in a State that
requires the payee to receive such consultation.
I have read and understand everything set forth in this Disclosure Statement.
Dated:
[The remainder of this page intentionally left blank]
2
June 11, 2010
Pensaco a, F 3253
Dear
As discussed, your state requires that we jointly obtain a court order approving the
transfer of your settlement payments. With your assistance we can get this done as
quickly as possible.
First, before you begin to sign anything we recommend that you speak with your
Contract Specialist, Jen Keller, at the following toll free number (866) 428-7977.
Ms. Keller will go over the documents with you to ensure that all of the documents are
explained to you and signed correctly.
Please read all of the documents carefully to confirm that you understand and agree to
them. We suggest that if you have additional questions or concerns that your attorney
or other professional advisor review them with you further, including but not limited
to the following documents:
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1.
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Absolute Assignment & Security Agreement
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2.
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Disclosure Statement(s)
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3.
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Affidavit
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4.
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Acknowledgement of Legal Expense
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5.
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Method of Payment Request
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6.
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Court Order Application
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Once you have all of your documents completed (along with any other documents that
have been requested) please use the enclosed Fed& prepaid return envelope to return
the documents to our office.
Thank you for your time and please do not hesitate in calling us with any questions or
concerns.
Sincerely,
Imperial Structured Settlements
Forms in this packet
must be notarized.
Please
DO NOT SIGN
until a notary is present.
ABSOLUTE SALE AND SECURITY AGREEMENT
(THE AGREEMENT)
06102/2010
I,
am en e o 40
guaranteed monthly paymenn $500.00
(I, Me or Seller) residing at
commencing on or a o une 1, 1983 with the last guaranteed payment ending on or about May 1,
2003 then continuing for life
thereafter (the Periodic Payments), which I am receiving as a
result of the settlement of a personal injury claim. The terms of the settlement are set forth in
an agreement (the Settlement Agreement). The Periodic Payments are due to Me from
INA
Surplus
Insurance Company
(the Settlement Obligor). The Settlement Agreement provides for the
Periodic Payments to be paid to Me through an annuity issued by
Genworth Life and Annuity
Insurance Company (the Annuity issuer), bearing
Annuity Contract Number
.
A. I agree to sell and transfer to Washington Square Financial, LLC dba Imperial Structured
Settlements (You or Purchaser) all of my rights to and interest in the following payments,
which I am due to receive under the Settlement Agreement
180 life contingent monthly payments of $600.00
commencing on or about September 1, 2010 and ending on
or about
August 1, 2025
(the Settlement Payments)
In consideration for selling and transferring to You my rights to receive these payments, You shall
pay Me the sum of:
$26,439.43
(the Purchase Price).
B. I hereby make the following unconditional representations, warranties and promises:
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1.
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No one other than Me has any interest or claim of any kind or nature in, to or under
the Settlement Payments.
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2.
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I am not indebted to anyone that would in any way affect either the sale and transfer
of the Settlement Payments referenced above or Purchasers absolute rights to receive the
Settlement Payments.
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3.
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I agree to conduct my affairs so as to ensure that You receive the Settlement Payments
exactly as described in Paragraph A above.
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C. I understand and agree that I will be in breach of this Agreement it
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1.
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Any of the representations set forth in Paragraphs B (1) and 13 (2) at any time turn
out to be untrue.
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2.
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I fail to perform the promise set forth in Paragraph B (3) above.
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3.
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Either the Settlement Obligor or the Annuity Issuer refuses or fails to make any one or
more of the Settlement Payments as a result of any act by Me, my estate, my
representatives, or any of my heirs.
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4.
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1 fail to promptly forward to You any of the Settlement Payments that might be received
by Me from the Settlement Obligor or the Annuity Issuer after the sale and transfer to You
has been completed.
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5.
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I fail to fulfill any other obligation of mine under this Agreement.
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D. Your obligation to complete this transaction, and to pay Me the Purchase Price depends upon
the following conditions being satisfied unless waived by You.
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1.
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You shall be satisfied, in Your sole reasonable judgment, that there are no claims
or interests of any kind or nature that do or could affect rights to or interest in
the Settlement Payments and/or prevent or interfere with Your receipt of the Settlement
Payments on the dates and in the amounts described above Paragraph A, exactly In such
amounts and at the times set forth therein.
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2.
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You have received a final non-appealable court order and/or a signed acknowledgment
from Settlement Obligor and Annuity Issuer satisfactory to the Purchaser in its sole
discretion (collectively referred to as the Order), which You, in Your sole Judgment,
consider sufficient to recognize, authorize, and provide for the transfer by sale of the
Settlement Payments (which may continue to be made out to my name) to You, Purchaser, and
to insure that the Periodic Payments due on or after the day of the Order will be forwarded
directly to You.
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E. Security Interest, Seller and Purchaser intend that the sale of the Settlement Payments
referenced above shall constitute a sale from the Seller to the Purchaser under applicable law,
which sales are absolute and irrevocable and provide the Purchaser with all indicia and rights of
ownership of the Settlement Payments. Neither the Seller nor the Purchaser intends the transactions
contemplated hereunder to be, or for any purpose to be characterized as, loans from the Purchaser
to the Seller secured by the Settlement Payments. lf, notwithstanding the intention of the parties
expressed above, any sale by the Seller to the Purchaser of the Settlement Payments shall be
characterized as a secured loan and not a valid sale or absolute transfer or such sale or transfer
shall for any reason be ineffective or unenforceable, then this Agreement shall be deemed to
constitute a security agreement under the UCC and other applicable law in the rights to and
interest in payments due to Me under the Settlement Agreement which I am selling to You under this
Agreement. This security interest secures payment of the rights sold by Seller to Purchaser and the
performance of Sellers obligations above. Seller authorizes Purchaser to direct any account debtor
or obligor on an instrument, without limitation, Settlement Obligor or Annuity Issuer, to make
periodic payments directly to Purchaser and as contemplated by the Uniform Commercial Code.
Purchaser is authorized to file a UCC-1 Financing Statement to perfect Purchasers rights and the
security interest intended to be created under this Agreement.
F. Except as otherwise required by applicable statutory law, this Agreement shall be governed by
and interpreted in accordance with the law of the state of residence of the Seller on the date of
this Agreement.
G. I hereby grant You an Irrevocable Power of Attorney with full powers of substitution to do all
acts and things that I might do regarding the Settlement Payments, and any and all rights I have
under the Settlement Agreement. I understand and intend that by doing so, I am giving You all of
the power and right I currently have under the Settlement Agreement to endorse checks, drafts or
other instruments, to alter, edit and change payment instructions and/or beneficiary designations,
and/or to perform any other act in my name that in Your sole discretion as my Attorney-in-Fact is
necessary or expedient for You to obtain all of the benefits of the bargain contemplated by this
transaction. This power of attorney is coupled with an interest and shall survive my death or
disability.
H. Payments Received by Party Other Than the Party Intended to Receive the Payments.
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1.
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if prior to the completion of the transfer provided for in this Agreement, I receive
any of the Settlement Payments or any portion thereof, I understand and agree an equal
amount shall be deducted from the Purchase Price, and the Purchase Price shall be reduced
in the same amount as these payments, and that the terms of this Agreement regarding the
payments to be assigned, shall be treated as amended to reflect for the adjusted amount.
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2.
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In the event You receive or otherwise come into possession of any of the Periodic
Payment(s) or portion(s) thereof which are not included in the payments being
absolutely sold to You pursuant to this Agreement, You agree to forward such amount(s)
to Me at the address set forth above within seven (7) days of receipt of such
amount(s).
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I. You shall be entitled to, and are authorized by Me to discharge any liens or adverse
claims against Me or any of the Settlement Payments, whether of not such adverse claims are
disclosed, and You are further authorized by Me, provided You furnish prior written notice to
Me, to pay any and all amounts necessary or if the Purchase Price has been deposited into an
escrow account, to instruct the escrow agent to pay any and all amounts necessary to discharge
such liens or other adverse claims. I understand and agree that any such amounts that You pay
are piyments You are making on my behalf and shall reduce the Purchase Price. Adverse claims
may include disclosed amounts to be deducted by You from the Purchase Price to pay You, as
servicer for Washington Square Financial, LLC dba Imperial Structured Settlements, to enable
Me to obtain Washington Square Financial, LLC dba Imperial Structured Settlements release of
its encumbrance on a portion of the Settlement Payments relating to a prior transfer
transaction(s) that occurred before the enactment of the applicable statue (Transfer Act)
regulating such transfers. I understand and acknowledge that the law currently in effect
requires that such encumbrance be released in order to complete the transfer that is the
subject of this Agreement.
J. This Agreement shall take effect on the date it is signed by Me (the Seller) or on
such later date prescribed by applicable law.
K. All disclosure statements I receive from You in connection with this transaction are a
material part of this Agreement and shall be considered part of the terms of this Agreement
and shall be read as if the contents of the disclosure statement were set forth in full in the
body of this Agreement.
L. I know that it will take some time for the Settlement Obligor and the Annuity issuer to
receive and process the court order once it is granted, I would like to receive the Purchase Price or a
portion thereof as soon as possible thereafter. Accordingly, I hereby request Purchaser to pay Me a
portion of the Purchase Price as soon as possible after the court order is granted and authorize
Purchaser to hold in escrow an amount it deems necessary or advisable from the Purchase Price (the
Escrow Amount) until all conditions precedent have been satisfied, including, without limitation,
the receipt by Purchaser of the Settlement Obligor and the Annuity Issuers acknowledgment of the
terms of the court order in writing and their agreement to honor and comply with same. At such time
or earlier as Purchaser may determine, I understand that Purchaser will send the Escrow Amount to
Me minus any Settlement Payments that the Annuity Issuer and/or Settlement Obligor sent to Me while
the Settlement Obligor and the Annuity Issuer were processing the court order.
M. i have the right to cancel this Agreement, without penalty or further obligation,
within the first three business days after the date the Agreement is signed, by providing You
with written notice within three (3) day period, as provided for in Paragraph N.
N. All notices, demands, and other communications required or permitted under this Agreement
must be made in writing, and delivered by hand, via the United States Post Office, Certified
Mail, Return Receipt Requested, or by overnight delivery service, to You or Me as the recipient
at the address set forth in the beginning of this Agreement and must be evidenced by a receipt
showing time, date of delivery and the person receiving the delivery.
In
witness
whereof! hereunto set my hand.
STATE OF
COUNTY OR CITY OF
On the
day of
, in the year
before me, the undersigned,
personally appear William 0. Thompson a/k/a William O. Thompson, Sr. personally known to me or
proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are)
subscribed to the within Instrument, and acknowledged to me that he/she/they executed the same in
his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the
individual(s), or the person upon behalf of which the individuals) acted, executed the
instrument.
PLEASE DO NOT SIGN THIS
DOCUMENT UNTIL 06/0212010
My Commission expires on:
Accepted:
Washington Square Financial, LLC dba Imperial Structured Settlements
AFFIDAVIT
I,
., of full age, being duly sworn
according to t e aw, upon my oath depose to say:
1. I currently reside at
.
2. I am the recipient of certain guaranteed payments under a structured settlement. The
entity presently obligated to make the payments due under the structured settlement is INA Surplus
Insurance Company. In order to fund its payment obligations under the structured settlement INA
Surplus Insurance Company purchased an annuity contract
from Genworth Life and Annuity Insurance
Company.
3, I voluntarily entered into an Absolute Sale and Security Agreement (the
Agreement) dated 06/02/2010 with Washington Square Financial LLC d/b/a imperial Structured
Settlements (Imperial). Under that Agreement, I agreed to sell and transfer to Imperial the
following payments due to me under the structured settlement:
180 life contingent monthly payments of $500.00 commencing
on or about September 1, 2010 and ending on or about August 1, 2025
4. I understand I will forego receipt of the Settlement Payments under the Agreement. I
understand that my beneficiaries/heirs and 1 will no longer receive any of the Settlement Payments
or any portion of the Settlement Payments. I understand that all of the Settlement Payments will
go to Imperial or the assigns of Imperial.
5. I also understand that this Affidavit is submitted for use in the court approval process
initiated by Imperial and myself to seek court approval of the sale and transfer of payments to
Imperial.
6. I also received from Imperial a Disclosure Statement detailing the terms of the
Agreement, which I signed and returned to Imperial. I carefully reviewed the Disclosure
Statement and fully and completely understand all terms of the Disclosure Statement.
7. In the Disclosure Statement, Imperial advised me to seek professional advice
regarding the Agreement from an attorney, accountant or other professional of my choice.
_______
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I have either received said advice or fully intend to receive independent
professional advice regarding this transaction.
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_______
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I have decided to waive the independent professional advice regarding this transaction.
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8. I am
with no dependents and 1 have supported myself
for the past 37 years. I am currently unemployed due to my disability. My wife is currently
employed
as a
with an annual salary of
I do
not believe that approval of this transfer will negatively affect my standard of living, make
it difficult to pay my living expenses or otherwise harm me in any way.
9. I have thoroughly considered this transaction, my alternatives and the use to
which 1 will put the proceeds of this sale and transfer. I have considered the impact of this
transaction on myself. I will be able to improve my present standard of living if I am permitted to
transfer and sell my right to receive the Settlement Payments to Imperial as described in this
Affidavit. After considering these factors I believe that this transaction is in my best interest.
10. I intend to use the proceeds I receive from Imperial under the Agreement for
home improvement.
I will use the entire proceeds of this transaction, approximately
$24,239.43, for home improvement. My home is approximately 20 years old and is in desperate need of
remodeling. I plan on updating the flooring, new cabinetry, remodeling all of the bathrooms,
painting and purchasing new furniture. I believe that this project will serve to boost the market
value of my home, which is my primary asset. Without the proceeds of this transaction, I lack the
wherewithal from my current finances to improve my life in the capacities described herein.
Therefore, I have decided to pursue this transaction with Imperial.
11. I will not be using any portion of the proceeds from the Agreement for day-to-day
expenses. I haite never assigned, transferred, sold, or any of the structured settlement payments
that I am proposing to transfer and sell herein to any party or entity. I do not believe that
approval of this sale and transfer will negatively affect my standard of living or harm me in any
way. Therefore, I have determined that completing this transaction with Imperial is in my best
interest and will improve the quality of my life.
STATE OF
COUNTY OR CITY OF
On the
day of
, in the year
before me, the undersigned,
personally appeared
., personally known to me or proved to me on the basis of satisfactory evidence
to be the individual(s) whose name(s) is (are) subscribed to the within instrument, and acknowledge
to me that he/she/they executed the same In his/her/their capacity(ies), and that by his/her/their
signature(s) on the instrument, the individual(s), or the person upon behalf of which the
individual(s) acted, executed the instrument.
PLEASE DO NOT SIGN THIS
DOCUMENT UNTIL 06102/2010
My commission expires on
AFFID,AVIT
I,
being of legal age and of sound mind,
and not under the influence of drugs or alcohol or duress of any
kind depose and say:
I. I acknowledge and agree with this transaction;
2. I am [AGE] years old;
3. I currently reside at
4. I am the recipient of certain guaranteed payments under a specific annuity purchased by
me
having a contract number of (Annuity), which is not a structured settlement annuity. The entity
presently making the payments due under the Annuity is
Insurance Company. The
current owner of the Annuity is Insurance Company of North America;
5. I voluntarily entered into an Absolute Sale and Security Agreement (the Agreement) dated
06/02/2010 with Washington Square Financial LLC d/b/a Imperial Structured Settlements (Imperial).
Under that Agreement, I agree to change the ownership of the Annuity, and transfer and/or assign to
Imperial the following payments due to me under the Annuity:
(Assigned Payments);
6. I acknowledge and understand I will forego receipt of the Assigned Payments under the
Agreement. I also acknowledge, agree and understand that my beneficiaries/heirs and I will no
longer have a legal right to any of the Assigned Payments or any portion of the Assigned Payments
from the Annuity. I understand that all of the Assigned Payments will go to Imperial or the assigns
of Imperial. Furthermore, my death prior to the date of any of the Assigned Payment(s) shall not
affect the transfer of the Assigned Payments to Imperial, and subsequently thereafter to Imperials
assignee. Moreover, I understand that
Imperial
will now be the owner of the
Annuity;
7. I also understand that this Affidavit is submitted for use in the court approval process
initiated by Imperial and myself to seek court approval of the sale of the Assigned Payments,
change of ownership and change of beneficiary to Imperial;
8. I have thoroughly considered this transaction, my alternatives and the use to which I will
put the proceeds of this sale. I have considered the impact of this transaction on my dependents,
if any, and myself. I will be able to improve the present standard of living, for myself and my
dependents, if any, if I am permitted to transfer the Assigned Payments to Imperial as described in
this Affidavit. After considering these factors I believe that this transaction is in my best
interest and in the best interests of my dependents, if any;
9. I will not be using any portion of the proceeds from the Transaction for day-to-day
expenses. I have never assigned, sold, or pledged any of the Assigned Payments that I am proposing
to transfer and assign herein to any party or entity. I do not believe that approval of this
transfer will negatively affect my or my dependents, if any; standard of living or harm us in any
way. Therefore, I have determined that completing this transaction with Imperial is in my best
interest and will improve the quality of my life; and
10. I declare under penalty of perjury under the laws of the State of FL that the foregoing is
true and correct and that this Affidavit was executed on the date set forth below.
On this
day of,
20
, before me the above signed personally appeared before me and
produced for identification
or personally known to me to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed it.
SEA
STATE OF
COUNTY OF
AFFIDAVIT
Before me, the undersigned authority, personally
(Affiant), who, being duly sworn according to law, deposes and says:
Please circle the applicable answer
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1.
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Am I under the influence of alcohol
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Yes
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No
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2.
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Am I under the influence of illegal drugs
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Yes
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No
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3.
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Am I under duress
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Yes
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No
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4.
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Do I suffer from dementia
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Yes
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No
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5.
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Do I suffer from bi-polar disorder
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Yes
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No
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6.
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Do I suffer from schizophrenia
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Yes
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No
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7.
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Do I suffer from any other psychotic disorders
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Yes
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No
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8.
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Have I ever been in a coma
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Yes
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No
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9.
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Have I ever had brain surgery
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Yes
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No
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10.
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Are my medical decisions being determined by a third party
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Yes
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No
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Affiant is familiar with the nature of an oath and makes this Affidavit for the purpose of
inducing Washington Square Financial, LLC doing business as Imperial Structured Settlements (WSF)
to purchase structured settlements payments from me under the Absolute Sale and Security Agreement.
Sworn to and subscribed before me this
day of
, by
who is personally known to me or produced a
drivers license as identification.
Notary Public
[Print or Type Name]
Commission Number:
My Commission Expires:
Authorization For Deductions
Pursuant to the terms of the Agreement, Assignee may deduct from the Purchase Price, the full
amount due to any and all third party creditors, judgment holders, holders of child support
obligations, the holder of any other outstanding lien or claim (collectively the
Judgments/Claims) including life insurance policy payment(s) or any attorney fees in connection
with the consummation of this transaction.
If Assignee is able to satisfy in full the Judgments/Claims for less than the full amount due,
Assignee shall be entitled to keep the difference between the amount deducted and the amount
actually paid.
Authorization to Conduct Credit and Criminal Background Checks
I, residing at hereby authorize Washington Square Financial, LLC dba Imperial Structure Settlements
or any of its agents or designees, to conduct any and all criminal background reports, searches or
checks and any and all credit history reports, searches or checks which it in its sole discretion
and judgment deems necessary or advisable.
Authorization to Release Information
I,
,
hereby request and authorize INA Surplus
Insurance Company, Genworth life and Annuity Insurance Company, or any of their successors,
assigns, designees, agents or administrators, or my attorney to disclose, or any other parties
that my possess any information deemed necessary by Washington Square Financial, LLC dba Imperial
Structured Settlements, or any of its agents or designees to be disclosed, make available and
furnish to Washington Square Financial, LLC dba Imperial Structured Settlements, or any of its
agents or designees and all information pertaining to my personal injury settlement as set forth
in a certain Release, or any other documents deemed necessary by Washington Square Financial, LLC
dba Imperial Structured Settlements, or any of its agents or designees. I specifically direct that
INA Surplus Insurance Company, Genworth Life and Annuity Insurance Company, or any ,of their
successors, assigns, designees, agents or administrators or any other person or entity that this
authorization is given to, cooperate with Imperial or any of their agents or designees regarding
disclosure of information pertaining or related to my settlement or other required documentation.
Please provide copies via fax or otherwise of any and all documents requested by Washington Square
Financial, LLC dba Imperial Structured Settlements, or their agents or designees regarding my
settlement.
Dated:
STATE OF
COUNTY OR CITY OF
On the
day of
in the year
before me, the undersigned, personally appeared personally known
to me, or proved on the basis of satisfactory evidence to the individual(s) whose name(s) is (are)
subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in
his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, and the
individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.
Notary
My Commission expires on
06/02/2010
RE:
METHOD OF PAYMENT REQUEST
Dear
We appreciate you doing business with Imperial Structured Settlements. At the close of this
transaction, we will remit your funds by check as you indicate below. Please complete this form to
receive your lump sum in exchange for the assigned payments set forth in our agreement.
AT FUNDING, I WANT TO RECEIVE A CHECK AT THE FOLLOWING ADDRESS:
Please acknowledge that the information above is correct by signing below. If you have any
questions about completing this form please do not hesitate to call us.
Acknowledgement:
Date:
08/02/2010
RE:
METHOD OF PAYMENT REQUEST
Dear
We appreciate you doing business with Imperial Structured Settlements. At the close of this
transaction, we will remit your funds by direct deposit as you indicate below. Please complete
this form to receive your lump sum in exchange for the assigned payments set forth in our
agreement.
AT FUNDING, I WANT MY FUNDS TO BE TRANSFERRED TO THE FOLLOWING ACCOUNT:
Bank Transit/ABA# for Wire:
Bank Name:
Exact Name(s) on Bank Account
Type of Account:
o
Checking or
o
Savings 4
(please check only one)
Bank Account # :
Bank Phone :
( )
Further credit to:
Bank Transit/ABA# for
Wire:
Bank Name:
Bank Phone :
( )
Please acknowledge that the information above Is correct by signing below. If you have any
questions about completing this form please do not hesitate to call us.
Acknowledgement:
Date:
ACKNOWLEDGEMENT OF LEGAL EXPENSE
You acknowledge that Washington Square Financial, LLC dba Imperial Structured Settlements
will be incurring certain legal costs and expenses on your behalf to ensure that the Structured
Settlement Obligor forwards your checks or causes your checks to be forwarded in accordance with
your instructions and that the proposed transaction complies with any applicable state law. The
legal work includes all necessary court appearances, investigations, correspondence, preparation
and filing of required documents, and related work to properly seek court approval of this matter.
You acknowledge that an estimated fee of $1,000.00 to include all legal work in connection with
completing this transaction shall be deducted from your lump sum payment when you are entitled to
receive same.
You acknowledge that you must fully cooperate with Washington Square Financial, LLC dba Imperial
Structured Settlements by providing all information relevant to the issues involved in this
matter.
Date
06/02/2010
Genwortb Life and Annuity Insurance Company
3100 Albert Lankford Drive Mail stop CSC-1-030
Lynchburg, VA 24501
Re: Annuity Contract No.
Claimant:
SS#:
Dear Sirs:
Please change your records to show the Estate of as the beneficiary after my
death under the above-captioned settlement agreement and annuity contract.
Kindly confirm that you have made this modification to your records, by using the space
provided below, and mailing to: Washington Square Financial, LLC dba Imperial Structured
Settlements, 701 Park of Commerce Blvd., Suite 301, Boca Raton, Florida 33487.
Regards,
Dated:
STATE OF
COUNTY OR CITY OF
On the day of in the year
before me, the undersigned, personally appeared
personally known
to me, or proved on the basis of satisfactory evidence to the individual(s) whose name(s) is (are)
subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in
his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, and the
individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.
Notary
My Commission expires on
Genworth Life and Annuity Insurance Company
06/02/2010
INA Surplus Insurance Company
1601 Chestnut Street
Philadelphia, PA 19103
Re: Annuity Contract No.
Claimant:
SS#:
Dear Sirs:
Please change your records to show the Estate of
as the beneficiary after my
death under the above-captioned settlement agreement and annuity contract.
Kindly confirm that you have made this modification to your records, by using the space provided
below, and mailing to: Washington Square Financial, LLC dba Imperial Structured Settlements, 701
Park of Commerce Blvd., Suite 301, Boca Raton, Florida 33487.
Regards,
Dated:
STATE OF
COUNTY OR CITY OF
On the
day of
in the year
before me, the undersigned, personally appeared
personally known
to me, or proved on the basis of satisfactory evidence to the individual(s) whose name(s) is (are)
subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in
his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, and the
individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.
Notary
My Commission expires on
INA Surplus Insurance Company
By:
Dated:
06/02/2010
Genworth Life and Annuity Insurance Company
3100 Albert Lankford Drive Mail stop CSC-1-030
Lynchburg, VA 24501
Re: Annuity Contract No.
Claimant:
SS#
I am writing to request information on the above referenced annuity contract under which I
am the named payee. Please provide me with the name of the annuity owner as well as a detailed
description of the payments I am entitled to receive. Please be sure to include the payment amount
and the start date of the payments, as well as the date the payments are due. It is important that
I receive as much of the requested information as you can provide, as soon as possible.
Additionally, please provide me with the name of the current beneficiary. Once you have processed
this request, lease fax the documents to (866) 704-0772. Please make sure your records reflect my
current address as If you are unable to comply with this request, please inform me in writing. You
may contact me if you have any questions, or if I may otherwise be of assistance.
Sincerely,
Dated:
STATE OF
COUNTY OR CITY OF
On the
day of
in the year
before me, the undersigned, personally appeared personally known
to me, or proved on the basis of satisfactory evidence to the individual(s) whose name(s) is (are)
subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in
his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, and the
individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.
Notary
My Commission expires on
06/02/2010
INA Surplus Insurance
Company
1601 Chestnut Street
Philadelphia, PA 19103
Re: Annuity Contract No.
Claimant:
SS#
I am writing to request information on the above referenced structured settlement and
annuity contract, under which I am the named payee. Please provide me with the following
information:
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Qualified Assignment of the payment obligation (if applicable)
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Release and Settlement Agreement giving rise to the structured settlement
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Court Order approving the settlement (if applicable)
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Name of the current beneficiary
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It is important that I receive as much of the above information as you can provide, as soon as
possible. Once you have processed this request, please fax the documents to 866 704-0772. Please
make sure your records reflect my current address as Please contact me if you have any questions,
or if I may otherwise be of assistance.
Sincerely,
STATE OF
COUNTY OR CITY OF
On the day of in the year before me, the undersigned, personally appeared personally known
to me, or proved on the basis of satisfactory evidence to the individual(s) whose name(s) is (are)
subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in
his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, and the
individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.
Notary
My Commission expires on
ANNUITY CONTRACT AFFIDAVIT
I,
, being duly sworn according to aw upon my oath depose and say:
1. My current address is:
2. My social security number is:
3. Concerning the Annuity Contract, bearing policy number INN! issued in connection with the
underlying SettleMent Agreement, I am not in possession of this document. The Settlement Agreement
states the company, Genworth Life and Annuity Insurance Company, shall pay as follows:
240 guaranteed monthly payments of $600.00 commencing on or about June 1, 1983 with the last
guaranteed payment ending on or about May 1, 2003 then continuing for life thereafter.
4. I am assigning the following payments to Washington Square Financial, LLC dba imperial
Structured Settlements
180 life contingent monthly payments of $500.00 commencing on
or about September 1, 2010 and ending on or about August 1, 2025
5. The issuer, Genworth Life and Annuity Insurance Company, and the owner, INA Surplus Insurance
Company, of the above referenced policy have refused my every attempt to obtain the annuity
contract.
6. I HEREBY CERTIFY THAT THE FOREGOING STATEMENTS MADE BY ME ARE TRUE. I AM AWARE THAT IF ANY OF
THE FOREGOING STATEMENTS MADE BY ME ARE FALSE, I AM SUBJECT TO PUNISHMENT.
STATE OF
COUNTY OR CITY OF
On the
day of
in the year
before me, the undersigned, personally appeared
, personally known
to me, or proved on the basis of satisfactory evidence to the individual(s) whose name(s) is (are)
subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in
his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, and the
individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.
Notary
My Commission expires on
SETTLEMENT AGREEMENT AFFIDAVIT
I,
., being duly sworn according to
law upon my oath depose an say:
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1.
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My current address is:
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2.
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My social security number is:
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3.
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The annuity policy number
which is owned by INA Surplus Insurance
Company, and is issued by Genworth Life and Annuity Insurance Company authorizes
me to receive the following payments:
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240
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guaranteed monthly payments of $600.00 commencing on or about
June 1, 1983 with the last guaranteed payment ending on or about May 1, 2003
then continuing for life thereafter.
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4.
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I am assigning the following payments to Washington Square Financial, LLC
dba Imperial Structured Settlements:
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180
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life contingent monthly payments of $500.00 commencing on or
about September 1, 2010 and ending on or about August 1, 2025
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5.
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I am entitled to these payments, under policy number 111.111, pursuant to
a tort action and they are not a result of a Workers Compensation claim.
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6.
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The owner, INA Surplus Insurance Company, of the above referenced policy
has not responded to my request for a copy of the Release and Settlement.
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7.
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I am not in possession of a copy of the Release and Settlement Agreement.
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8.
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I HEREBY CERTIFY THAT THE FOREGOING STATEMENTS MADE BY ME ARE TRUE. I
AM AWARE THAT IF ANY OF THE FOREGOING STATEMENTS MADE BY ME ARE FALSE, I AM SUBJECT
TO PUNISHMENT.
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STATE OF
COUNTY OR CITY OF
On the
day of
in the year
before me, the undersigned, personally appeared
, personally known
to me, or proved on the basis of satisfactory evidence to the individual(s) whose name(s) is (are)
subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in
his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, and the
individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.
Notary
My Commission expires on
E-MAIL ADDRESS
PLEASE FILL OUT THE BELOW INFORMATION AND SIGN THIS PAGE AT THE BOTTOM; PLEASE PRINTNVRITE
LEGIBLY
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o
I have an e-mail address as listed below.
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o
I do not have an e-mail address.
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Date
IPA STATEMENT
I,
(hereinafter I or Me), being duly sworn upon my oath depose and say:
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1.
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I am over the age of 18 and am of sound and disposing mind.
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2.
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I reside at
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3.
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I am aware that, pursuant to the [STATE STATUTE Structured Settlement Transfer Act,
I must obtain independent professional advice regarding the legal, tax and
financial implications of the proposed transfer that I Would like to have occur with
Washington Square Financial, LLC dba Imperial Structured Settlements (Imperial), its
successors and assigns.
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4.
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I state that on
I received the required independent professional
advice from
(Attorney, Licensed Financial Planner, or CPA) of
located at
phone (
regarding the Sellers
Agreement dated 06/02/2010.
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5.
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I am aware of the legal, tax and financial implications of the proposed transfer and
I desire to have the court approve said transfer of structured settlement payment rights
as proposed in the Sellers Agreement dated 06/02/2010 before the court.
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SWORN STATEMENT OF DEPENDENT(S)
(hereinafter 9 or Me) states as Follows:
|
1.
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I am over the age of 18 and Im of a sound and disposing mind.
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2.
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I reside at
, and I am the
parent of [DEPENDENT] an [husband wife] of [ SPOUSE] .
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3.
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I am aware that my (child/children) and (husband/wife] are classified as
dependent(s) pursuant to Delaware Structured Settlement
Transfer Act and that a court reviewing the proposed transfer that
dependent(s) pursuant to Delaware Structured a court reviewing the proposed
transfer that. would like to have occur with Washington Square Financial, LLC dba
Imperial Structured Settlements must find the sale and transfer in my childs/childrens
and spouses best interests as a dependent.
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4.
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I state that I, as parent to m child/children and spouse to m [husband/wife] , am
aware that
, proposing to sell and transfer 180 Life contingent monthly payments of 0. 0 commencing on or about
September 1, 2010 and ending on or about August 1, 2025 to Washington Square Financial, LLC
dba Imperial Structured Settlements, or its assigns in exchange for a lump sum in the
amount of $25,439.43.
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5.
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I state that such proposed sale and transfer is in the best interest of my
[child/children) and spouse because the money would greatly help our familys standard of
living, as the [FATHER/MOTHER) of [DEPENDENT] and [husband/wife] of [SPOUSE] , I request
the court approve the sale and transfer of structured settlement payment rights as
proposed in the Absolute Sale and Security Agreement dated, 06/02/2010 before this court
|
as [FATHER/MOTHER] of
[DEPENDENT] and [husband/wife] of [SPOUSE]
STATE OF
COUNTY OR CITY OF
On the
day of
in the year
before me, the undersigned, personally appeared
, personally known to me, or proved on the basis of satisfactory evidence to the
individual(s) whose name(s) is (are) subscribed to the within instrument, and acknowledged to me
that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their
signature(s) on the instrument, and the individual(s), or the person upon behalf of which the
individual(s) acted, executed the instrument.
My Commission expires on
Authorization to Release Information
I,
hereby request and authorize INA Surplus Insurance Company, Genworth ife and Annuity insurance
Company, or any of their successors, assigns, designees, agents or administrators, to disclose any
and all information pertaining to my personal injury case and structured settlement deemed
necessary by Washington Square Financial, LLC dba Imperial Structured Settlements, or any of its
agents or designees. Please make available and furnish to Washington Square Financial, LLC dba
Imperial Structured Settlements, or any of its agents or designees and all information pertaining
to my structured settlement and the underlying annuity. Said authorization expressly includes but
is not limited to a copy of my release and settlement agreement, any and all orders
approving, governing or limiting said agreement, and the annuity contract, itself. I specifically
direct that the above named entities and individuals cooperate with Washington Square Financial,
LLC dba Imperial Structured Settlements or any of its agents or designees regarding the disclosure
of the aforementioned documents and provide any relevant information requested. Please provide
copies of any and all documents requested via fax to (866) 704-0772 or via U.S. Mail to:
Imperial Structured Settlements
701 Park of Commerce Blvd, Suite 301
Boca Raton, FL 33487
Attn: M.J.
Dated:
Funding CO Notice
June 8, 2010
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Via Federal Express
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INA Surplus Insurance Company
1601 Chestnut Street
Philadelphia, PA 19103
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Genworth Life and Annuity Insurance Company
3100 Albert Lankford Drive
Mail stop CSC-I-030
Lynchburg, VA 24501
|
RE: Annul Contract Number:
Dear Sir/Madam:
Enclosed please find a copy of the above Captioned Order regarding the Transfer of Structured
Settlement Payments to Washington Square Financial, LLC d/b/a Imperial Structured Settlements, LLC
(or its designated assignee). Please mark your records accordingly.
Kindly verify by signing where indicated at the end of this letter that the requested change has
been made to your records and
return to:
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Jerome Parsley, Controller
Funding Department
Imperial
Structured Settlements
701 Park of Commerce Blvd., Suite 301
Boca Raton, FL 33487
Direct Line: 561.995.4308 Far: 561.995.4309
Email:
jparsiergimpri.com
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THIS WILL ACKNOWLEDGE THAT THE UNDERSIGNED IS IN RECEIPT OF THIS LETTER AND HAS REVISED ITS RECORDS
TO REFLECT THE NFORMATION THEREIN.
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INA.
Surplus Insurance Company
Genworth Life and Annuity Insurance Company
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Dated:
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By:
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Authorized signatory
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Printed:
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May 3, 2010
Dear,
Congratulations on the court approval of your transaction on April 29, 2010!
This letter
confirms that you have received or will receive the amount of
$20,670.84
pursuant to
the terms of the Absolute Assignment and Security Agreement.
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Here is an itemized breakdown of the total amount:
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Purchase Price:
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$
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Legal Fee
|
$
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Processing Fee:
|
$
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Escrow Held:
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$
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Cash
Advances:
|
$
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Total due to you:
|
$
|
We have forwarded or will be forwarding your funds according to your most recent method of payment
form. If you have any questions, please contact your Account Executive®.
It was a pleasure working with you on this matter. If we can be of any assistance in the future,
please do not hesitate to give us a call!
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Thank you,
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Stacey Mastenbaurn
Funding Manager
Imperial Structured Settlements
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AFFIDAVIT
I,
, being duly sworn, depose and say as follows:
I am over the age of (18) years old and am competent to testify.
I make this affidavit upon my own
personal knowledge.
I am a Compliance Analyst of Washington Square Financial, LLC dba Imperial Structured Settlements
(Imperial), the proposed purchaser of the structured settlement payments being sold by
By Absolute Sale and Security. Agreement dated 05/15/2009 (the Agreement),
agreed to sell the following payments:
On May 5, 2009, at least ten (10) days prior to the date on which
signed the Agreement, Imperial prepared and mailed via United States Postal Service Certified Mail,
Return Receipt Requested, United States Postal Service First Class Mail, and Federal Express
Standard Overnight Delivery, to
, Sr. a separate disclosure statement.
Further, the affidavit sayeth not,.
Further, the affidavit sayeh not.
Subscribed and Sworn to before me this
day of
, 201
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NOTARY PUBLIC for the State of Florida
My Commission expires:
|
Notice to Annuity Issuer and Structured Settlement Obligor
|
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INA Surplus Insurance Company
1601 Chestnut Street,
Philadelphia, PA 19103
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Genwortb Life and Annuity Insurance
Company
3100 Albert Lankford Drive, Mail stop
CSC-1-030
Lynchburg, VA 24501
|
RE: Transfer of structured settlement rights by
Annuity Contract #:
DOB:
Payments to be Transferred:
This letter shall serve as formal notice too as required by FL ST §626.99296 (3)(a) 5 of
pending transfer of certain structured settlement payment rights.
Pursuant to FL ST §626.99296 (3)(a) 5, the transferees name and address is:
|
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Name:
|
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Washington Square Financial, LLC d/b/a
Imperial Structured Settlements
|
Address:
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701 Park of Commerce Blvd., Suite 301
Boca Raton, FL 33487
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Tax 1.D.:
|
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Any other statutory requirements that may apply to this transaction will also be complied with.
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The Prudential Insurance Company of America
|
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Home Office: Prudential Plaza, Newark, New Jersey
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07102-3777
|
In consideration of the receipt of the Purchase Payment, we issue this Annuity Certificate
to the Certificate Holder named below, effective on the Certificate Date, subject to the
terms of the Contract,
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Certificate Holder:
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Certificate No.:
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Certificate Date:
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August 31, 2006
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Payee:
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Measuring Life:
|
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Measuring Lifes Sex:
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Measuring Lifes Date of Birth:
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Annuity Payments:
|
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See Payment Schedule
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This Certificate describes the Annuity Payments guaranteed under the Contract,
Anpuity Payment Dates and amounts of the Annuity Payments are shown in the
Payment Schedule. Please read this Certificate carefully. if there is a question,
contact us at the Designated Office for Communications;
Right to Cancel:
The Certificate Holder may cancel this Certificate within
ten days after the date it receives it by giving notice in writing and by mailing the
Certificate to the Designated Office for Communications. This notice must be postmarked on
or before the tenth day after you receive the Certificate. The Certificate will be
canceled as of the Certificate Date and the Purchase Payment will be refunded, in accordance
with applicable state law,
STRUCTURED gTTLEMFN1 CEFSTIFICATE NON-PARTICIPATING
This Certificate does not provide for any lump sum death benefit protected by non forfeiture law
or
any
cash surrender value, or any way
to
convert
life contingent
payments into a paid-up annuity.
Upon the death of any Measuring Life, all life contingent payments determined by such Measuring
Life
will
cease.
Prudential will
make
Annuity Payments to the person(s) or entity(les), In the
amount(s), and on the date(s) specified under the terms of this Certificate.
DEFINITIONS
We define below some of the terms used in this Certificate,
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Annuity Payments; Annuity payments to be
made under this Certificate, in the amounts shown on the Payment Schedule(s).
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Certificate Holder: The Certificate Holder is the party identified on the first page of this
Certificate, unless we have endorsed this Certificate to show otherwise. The Certificate Holder
has certain rights and duties under this Certificate.
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Contract: Group Annuity Contract Number GA-40059.
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Designated Office for Communications: The following address, or any other office we may specify in writing:
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Prudential Financial
2101 Welsh Road
Dresher, Pennsylvania 19025-5001
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Measuring Life: The person(s) identified as
Measuring Life on the first page of this Annuity Certificate whose life expectancy is used to
determine the Annuity Payments.
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Payee: The entity identified as Payee on the first page of this Certificate.
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Payment Date: The date each Annuity Payment
stated in the Payment Schedule is due.
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Payment Schedule: The schedule(s) attached
and made part of this Certificate showing Annuity Payments and Payment Dates.
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Purchase Payment: Amount agreed to be paid to us in connection with this Certificate. The
Purchase Payment is the amount that, when improved with interest and/or mortality and morbidity
contingencies, is sufficient to provide the Annuity Payments,
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We, our, and us: The Prudential insurance Company of America (Prudential).
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You and yours: The Certificate Holder of this Certificate,
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GENERAL PROVISIONS
Assignment of Certificate: This Certificate may not be assigned by the Certificate
Holder without our consent. The Certificate Holder shall have sole and exclusive
ownership rights in this Certificate. No other person shall have any right to
anticipate, sell or absolutely assign (by any means, regardless of form) payments
under this Certificate and any attempted assignment will be void at the outset.
Certificate Errors: Please review this Certificate carefully and notify us promptly if
you feel any information Is incorrect. We are not bound by any incorrect information
in this Certificate. We may issue a corrected Certificate in the same manner the
original Certificate was issued, but we will clearly Indicate on the face of the new
Certificate that it is a CORRECTED AND REISSUED Certificate (or other words to that
effect).
Certificate Overview: This Certificate, including all its provisions and any
attachments, endorsements, and schedules, forms the entire Certificate, This
Certificate takes effect on the Certificate Date as shown on the first page only if
the Purchase Payment has been made to us. If the Purchase Payment is not made to us,
this Certificate will be void at the outset We will own the Purchase Payment at the
earlier of either the First Annuity Payment Date or the date on which we Issue the
Certificate for delivery.
Communications: Any communication contemplated by this Certificate is subject to this
provision. Unless we otherwise consent in writing, Beneficiary designations and
revocations, and other notices, instructions, or consents related to this Certificate,
must be (r) in writing, (ii) in form and content acceptable to us in our reasonable
opinion, and (ill) delivered to our Designated Office for Communications,
Currency: Any money we pay or which is paid to us, must be in United States currency.
2
GENERAL PROVISIONS
(Continued)
Minimum Benefits: The commuted value of payments or lump sum death benefit, if so provided under
this Certificate, is not protected by none forfeiture law and may be less than the benefit that
would be payable if such law applied, Otherwise, all benefits provided under this Certificate are
not less than the minimum benefits required in the state of New Jersey.
Misstatement of Age and/or
Sex;
if either the Date of Birth or Sex of any Measuring Life,
or both, as stated on the first page, is incorrect, we will adjust the Annuity Payment amount(s) to
that which the Purchase Payment would have bought using the corrected date of birth or sex, or
both. This adjustment will take into account Annuity Payments) made as well as Annuity Payment(s)
due. This will be done as follows: (1) we will deduct any overpayment, with interest at 5% per
year, from any payment(s) due; and/or (2) we will add any underpayment, with interest at 5% per
year, to the next payment we make after we receive proof of the correct date of birth arid/or sex,
No Surrender and No Loan: You may neither surrender this Certificate to us for cash nor borrow from
us on this Certificate.
Non-participation of Certificate: This Certificate Is not eligible for dividends.
Ownership and Control: The Certificate Holder is entitled to any Certificate benefit and the
exercise of any right or privilege granted by or related to the Certificate.
As a convenience to the Certificate Holder, the Certificate Holder may instruct us to make Annuity
Payments directly to (i) a corresponding person entitled to periodic payments under a Settlement,
(ii) such persons guardian, (iii) a beneficiary entitled to payments following such persons death
(Beneficiary), or (iv) a person named in a Qualified Order under section 5591(b)(2) of the
internal Revenue Code that otherwise complies with applicable state law. The Certificate Holder may
instruct us to accept Beneficiary designations and revocations from such person without further
authorization. it no Beneficiary is designated, remaining payments due to such person will be made
to his or her estate.
All Beneficiary designations may be revoked by the designating party. Beneficiary designations and
revocations must be made by notice. This notice must be in form and content acceptable to us in our
reasonable opinion. We may refuse to put into effect Beneficiary designations and revocations that
do not comply with applicable law or any court order that has been provided to us at our Designated
Office for Communications.
Proof of Status as to
Life, Death, Legal
Capacity, and Legal Authority; We have
the right to require proof satisfactory to us of the life or death of any person whose life or
death is a factor determining whether and/or to whom we are obligated to make payment. We also have
the right to require proof satisfactory to us of the legal capacity and/or the legal authority of
any person (e.g.,
Payee,
guardian, representative, power-of-attorney, estate administrator, etc.)
claiming any right to payment under this Certificate or altering any right of payment. We may delay
or otherwise withhold any payment, without interest, until we have received such proof or proofs of
status, specified in this provision, that we may request.
END
3
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PAYMENT SCHEDULE
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CERTIFICATE NO.:
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All payments under this Certificate are payable to the Payee, But pursuant to the Ownership and
Control provisions, the Certificate Holder has instructed us to make payments
under this Certificate directly to the person(s) named below.
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All payments under this Certificate are subject to the Certificate Holders
right to direct payments as we describe in the Ownership and Control provision of this
Certificate.
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We will make Guaranteed Period Certain Annuity Payments under this Certificate as
follows:
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Periodic
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First
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Last Guaranteed
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Guarantee
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Amount
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Payment Date
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122m
ant, gat
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Periodic Date
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Period
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$1,900.00
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February 1, 2010
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January 1, 2015
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1
St
day of each month
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5 years
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$2,500.00
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February 1, 2015
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January 1, 2020
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1
E
day of each month
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5 years
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For each Period Certain Annuity shown above, starting on the
First Payment Date, we Mil pay the Periodic Amount on each Periodic Date. Payments
end with the last Periodic Amount due on the Last Guaranteed Payment Date.
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We will make Life with Guaranteed Period Certain Annuity Payments under this
Certificate as follows;
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Periodic
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First
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Last Guaranteed
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Guarantee
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Amount
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Payment Date
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Payment Date
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Periodic Date
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Period
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$2,825.00
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February 1, 2020
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January 1, 2030
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1
st
day
of each month
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10 years
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Starting on the First Payment Date, we will pay the Periodic Amount. Thereafter, we
will continue to pay this amount on each Periodic Date for as long as the Measuring
Life lives. Payments end with the lest Periodic Amount due before the death of the
Measuring Life if such date occurs after the Last Guaranteed Payment Date.
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We will make Guaranteed Lump Sum Payment(s) under this
Certificate as follows:
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Lump Sum Payment Amount(s)
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payment Date(s)
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$
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42,500.00
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February 1, 2015
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$
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70,000.00
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February 1, 2025
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On the Payment Date(s) we will pay the Lump Sum Payment Amount(s).
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If before all of the Guaranteed Payments become due, we will make the rest
of them on their due dates to Beneficiary, his wife, if living on such due date,
otherwise to such of and his children, as may be living on such due date,
Beneficiaries in equal shares, or to the survivor of them, if any, otherwise to the estate of the
last to die of and the Beneficiaries shown in this schedule.
End of Provision
5
SETTLBMENT AORESMENT RELVASB
This Settlement Agreement and Release (the Settlement Agreement) is made and entered into this
day of
,
1996, by and between:
Plaintiff,
Insurer,
Recitals
A. Plaintiff filed a complaint against
(Defendant) in the Supreme Court, County of Bronx, State of New York, Court Action No. , (the
Complaint), which Complaint arose out of certain, alleged negligent acts or omissions by
Defendant. In the Complaint, Plaintiff sought to recover monetary damages as a result of that
Certain occurrence on or about at near or at county of Bronx, City and State of New York which
resulted in physical injuries and death for and personal injuries to Plaintiff, .
B. Insurer is the liability insurer of the Defendant, and as such, would be obligated to pay any
claim made or judgment obtained against Defendant which is covered by its policy with Defendant.
C. The parties desire to enter into this Settlement Agreement in order to provide for certain
payments in full settlement and
discharge of all claims which are or might have been, the subject of the Complaint upon the terms
and conditions set forth below.
AGREEMENT
The parties are as follows:
1. Release and Discharge
In consideration of the payments set forth in Section 2,
Plaintiff hereby completely releases and forever discharges Defendant
and Insurer from any and all past, present or future claims,
demands, obligations, actions, causes of action, wrongful death claims,
rights, damages, costs,
*
losses of service, expenses
and compensation of any nature whatsoever, whether based on a
tort, contract or other theory of recovery, which the Plaintiff now
has,
or which may hereafter accrue or otherwise be
acquired, on account of, or may in any way grow out of, or which
are the subject of the Complaint (and all related
pleadings) including, without limitation, any and all known
or unknown claims for bodily and Personal injuries to
Plaintiff, or any future wrongful death claim of Plaintiffs
representatives or heirs, which have resulted or may result from the
alleged acts or omissions of the Defendant.
This release and discharge shall. also apply to Defendants and
Insurers past, present and future officers, directors,
stockholders, attorneys, agents, servants, representatives,
employees, subsidiaries,. affiliates, partners, predecessors and
successors in interest, and assigns and all the persons, firms or
corporations with whom any of the former have been, art now, or may
hereafter be affiliated.
This release, on the part of the Plaintiff, shall be a
fully binding and complete settlement among the Plaintiff,
the Defendant
2
and the Insurer, and their heirs, assigns and successors. The Plaintiff agrees
to defend, indemnify and hold the Defendant and Insurer harmless from and against
all such claims, demands, obligations; actions, causes of action, damages,, coats
and expenses.
The Plaintiff acknowledges and agrees that the release and
discharge set forth above is a general release. Plaintiff expressly
waives and assumes the risk of any and all claims for damages which exist as of this
date, but of which the Plaintiff does not know or suspect to exist, whether through
ignorance, oversight, error, negligence, or otherwise, and which, if known, would
materially affect Plaintiffs decision to enter into this Settlement Agreement. The
Plaintiff further agrees that Plaintiff has accepted payment of the sums specified
herein as a complete compromise of matters involving disputed issues of law and
fact. Plaintiff assumes the risk that the facts or law may be other than plaintiff
believes. It is understood and agreed to by the parties that this settlement is a
compromise of a doubtful and. disputed claim, and the payments are not to be
construed as an admission of liability on the part of the Defendant, by
whom liability is expressly denied.
2.
Payments
In consideration of the release set forth above, the Insurer
on behalf of the Defendant agrees to pay to the individual(s) named below (Payee (s))
the sums outlined below:
3
RE:
as and for attorneys fees the sum
The Infant Somora Ponn is receive:
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(a)
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$1,265.00 per month for life for 30 years guaranteed payment to begin on May 11, 2007;
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(b)
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$20,000.00 per year for four consecutive years beginning May 11, 2007;
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(c)
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$25, 000.00 payable on May 11, 2011, guaranteed;
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(d)
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$40,000.00 payable on May 11, 2016, guaranteed;
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(e)
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$50,000.00 payable on May 11, 2021, guaranteed;
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(f)
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$70,000.00 payable on May 11, 2026, guaranteed;
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(g)
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$146,000.00 payable on May 11, 2031, guaranteed;
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RE:
as and for attorneys fees the sum of $290,667.00.
balance of funeral bill in the sum of $900.00.
is to receive:
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(a)
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$232,432.00 in cash;
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(b)
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$1,460.00 per month for life with 30 years guaranteed, commencing December 25, 1995;
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(c)
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$12,5.00 payable on December 25, 2000, guaranteed;
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(d)
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$20,000.00 payable on December 25, 2005, guaranteed;
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(e)
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$40,000.00 payable on December 25, 2010, guaranteed;
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(f)
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$75,000.00 payable on December 25, 2015, guaranteed;
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(g)
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$100,000.00 payable on December 25, 2026, guaranteed;
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All sums set forth herein constitute damages on account of personal injuries or sickness, within
the meaning of Section 104(a)(2) of the Internal Revenue Code of 1986, as amended.
3.
Payees Rights to Payments
Plaintiff acknowledges that the Periodic Payments cannot be accelerated,
deferred, increased or decreased by the Plaintiff or any Payee; nor shall
the Plaintiff or any Payee have the power to
sell, mortgage, encumber, or anticipate the Periodic
Payments, or any part thereof, by assignment or otherwise.
4.
Pavees Beneficiary
Any payments to be made after the death of any Payee pursuant
to the terms of this settlement Agreement shall be made
to such person or entity as shall be designated in writing by
Plaintiff to the Insurer or the Insurers Assignee. If no person
or entity is so designated by Plaintiff, or if the person
designated is not living at the time of the Payees death,
such payments shall, be made to the estate of the Payee. No
such designation, not any revocation thereof, shall be effective unless it
is in writing and delivered to the Insurer or the insurers
Assignee. The
designation must be in a form acceptable to the Insurer or the Insurers
Assignee before such payments are made.
5
,
Consent to Qualified Assignment
Plaintiff acknowledges and agrees that the Defendant and/or
the Insurer may make a qualified assignment, within the meaning
of section 130(o) of the Internal Revenue Code of 1986,
as emended, of the Defendants and/or the Insurers
liability to make the Periodic Payments set forth in Section 2
to
COMPANY (the Assignee). The Assignees Obligation for payment of
the Periodic Payments shall be no greater than that of Defendant
and/or the Insurer {whether by judgment or agreement}
immediately Pre0eding the assignment of the Periodic Payments obligation.
Any such assignment if made, shall be accepted by the
Plaintiff without right of rejection and shall completely release
.A
and discharge the Defendant and the Insurer from the Periodic
Payments obligation assigned to the Assignee. The Plaintiff recognizes
that, in the event of such an assignment, the Assignee shall be the sole
obligor with respect to the Periodic Payments obligation, and that all
other releases with respect to the Periodic Payments obligation that
pertain to the liability of the Defendant and the Insurer shall thereupon
become final, irrevocable and absolute, except that the will issue a
surety bond guaranteeing payment of all such periodic payments,
6.
Right to Purchase an Annuity
The Defendant and/or the Insurer, itself or through its Assignee, reserve the right to
fund the liability to make the Periodic Payments through the purchase of an annuity
policy from (Annuity Issuer). The Defendant, the Insurer or the Assignee shell be the
sole owner of the annuity policy and shall have all rights of ownership. The Defendant,
the insurer or the Assignee may have (Annuity Issuer) mail payments directly to the
Payee(s). The Plaintiff shall be responsible for maintaining a current mailing address
for Payee(s) with (Annuity Issuer).
7.
Discharge of Obligation
The obligation of the Defendant, the Insurer and/or Assignee
to make each Periodic Payment shall be discharged upon the mailing
of a valid check in the amount of such payment to the designated address of the Payee(s1 named in
Section 2 of this Settlement Agreement.
8.
Attorneys Fees
Each party hereto shall bear all attorneys fees-and costs arising from the actions of its
own counsel, in connection with the Complaint, this Settlement Agreement and the matter* and
documents referred to herein, the filing of a Dismissal of the Complaint, and all related
matters.
9.
Delivery of Dismissal with Prejudice
Concurrently with the execution of this Settlement Agreement, counsel for the Plaintiff shall
deliver to counsel for the Defendant or counsel for the Insurer, an executed Stipulation of
Discontinuance with Prejudice of the Complaint. Plaintiff hereby authorize* counsel for the
Defendant and or counsel for the Insurer to file said Stipulation of Discontinuance with the Court
and enter it as a matter of record.
10.
Representation of Comprehension of Document
In entering into this Settlement Agreement the Plaintiff represents that Plaintiff has relied
upon the advice of his/her attorneys, who are the attorneys of his/her own choice, concerning the
legal and income tax consequences of this Settlement Agreement; that the terms of this Settlement
Agreement have been completely read and explained to Plaintiff by his/her attorneys; and that the
terms of this Settlement Agreement are fully understood and voluntarily accepted by Plaintiff,
11.
Warranty of Capacity to Execute Agreement
Plaintiff represents and warrants that no other person or entity has, or has had, any interest
in the claims, demands, obligations, or causes of action referred to in this Settlement Agreement,
except as otherwise set forth herein, that the Plaintiff has the sole right and exclusive authority
to execute this Settlement Agreement and receive the sums specified in it; and that the plaintiff
has not sold, assigned; transferred, conveyed or otherwise disposed of any of the claims, demands,
obligations or causes of action referred to in this Settlement Agreement.
12.
Confidentiality
The parties agree that neither they nor their attorneys or representatives shall reveal to
anyone, other than as may be mutually agreed to in writing, any of the terms of this settlement
Agreement or any of the amounts, numbers or terns end. 8onditione of any gums payable to Payee(s)
hereunder-
13.
Governing Law
This Settlement Agreement shall be construed and interpreted in accordance with the laws of
the State of New York.
14.
Additional Documents
All parties agree to cooperate fully and execute any and all supplementary documents and to
tan all additional actions which may be necessary or appropriate to give full force and effect to
the basic terms and intent of this Settlement Agreement.
15.
Entire Agreement and Successors in Interest
This Settlement Agreement contains the entire agreement between the plaintiff, [the Defendant)
and the Insurer with regard to the matters set forth in. it and shall be binding upon and ensure to
the benefit of the executors, administrators, personal representatives, heirs, successors and
assigns of each.
18.
Effectiveness
This Settlement Agreement shall b400me effective immediately following execution by each of
the parties.
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Plaintiff
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By:
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Date:
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Plaintiffs Attorney
______________________________
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By:
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Date:
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Insurer:
______________________________
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By:
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Date:
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SCHEDULE II
Issuers Chief Executive Office and Location of Records
Chief Executive Office
701 Park of Commerce Boulevard, Suite 301
Boca Raton, Florida 33487
Locations of Records
701 Park of Commerce Boulevard, Suite 301
Boca Raton, Florida 33487
SCHEDULE III
Applicable Lock-Box Banks; Applicable Lock-Box Accounts;
Applicable Lock-Box Numbers
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Settlement Lock-Box Accounts
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Settlement Lock-Box Bank
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Settlement Lock-Box Number
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Imperial Settlements Financing 2010, LLC
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SunTrust Bank
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P.O. Box 116158
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Atlanta, GA 30368-6158
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For Overnight:
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Imperial Settlements Financing 2010, LLC
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SunTrust Bank
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Attn: Box Number 116158
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100 South Crest Drive
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Stockbridge, GA 30281
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Annuity Lock-Box Accounts
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Annuity Lock-Box Bank
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Annuity Lock-Box Number
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Imperial Settlements Financing 2010, LLC
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SunTrust Bank
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P.O. Box 102776
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Atlanta, GA 30368-2776
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For Overnight:
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Imperial Settlements Financing 2010, LLC
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SunTrust Bank
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Attn: Box Number 102776
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100 South Crest Drive
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Stockbridge, GA 30281
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SCHEDULE IV
ERISA Matters
None
124
EXHIBIT A
Form of Settlement Purchase Agreements
See Attached
ABSOLUTE SALE AND SECURITY AGREEMENT
(THE AGREEMENT)
[Sign Date]
I,
[Customer Name],
(I, Me or Seller) residing at
[ADDRESS, CITY, STATE ZIP]
am entitled
to
[Periodic Payments]
(the Periodic Payments), which I am receiving as a result of the
settlement of a personal injury claim. The terms of the settlement are set forth in an agreement
(the Settlement Agreement). The Periodic Payments are due to Me from
[OBLIGOR]
(the Settlement
Obligor). The Settlement Agreement provides for the Periodic Payments to be paid to Me through an
annuity issued by
[ISSUER]
(the Annuity Issuer), bearing Annuity Contract Number
[CONTRACT
NUMBER] .
A. I agree to sell and transfer to Washington Square Financial, LLC dba Imperial Structured
Settlements (You or Purchaser) all of my rights to and interest in the following payments,
which I am due to receive under the Settlement Agreement:
[PAYMENT STREAM]
(the Settlement Payments)
In consideration for selling and transferring to You my rights to receive these payments, You
shall pay Me the sum of:
$[GROSS PURCHASE PRICE]
(the Purchase Price).
B. I hereby make the following unconditional representations, warranties and promises:
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1.
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No one other than Me has any interest or claim of any kind or nature in, to or under
the Settlement Payments.
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2.
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I am not indebted to anyone that would in any way affect either the sale and transfer
of the Settlement Payments referenced above or Purchasers absolute rights to receive the
Settlement Payments.
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3.
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I agree to conduct my affairs so as to ensure that You receive the Settlement Payments
exactly as described in Paragraph A above.
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C. I understand and agree that I will be in breach of this Agreement if:
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1.
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Any of the representations set forth in Paragraphs B (1) and B (2) at any time turn
out to be untrue.
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2.
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I fail to perform the promise set forth in Paragraph B (3) above.
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3.
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Either the Settlement Obligor or the Annuity Issuer refuses or fails to make any one
or more of the Settlement Payments as a result of any act by Me, my estate, my
representatives, or any of my heirs.
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4.
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I fail to promptly forward to You any of the Settlement Payments that might be
received by Me from the Settlement Obligor or the Annuity Issuer after the sale and
transfer to You has been completed.
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5.
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I fail to fulfill any other obligation of mine under this Agreement.
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D. Your obligation to complete this transaction, and to pay Me the Purchase Price depends
upon
the following conditions being satisfied unless waived by You.
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1.
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You shall be satisfied, in Your sole reasonable judgment, that there are no claims
or interests of any kind or nature that do or could affect rights to or interest in the
Settlement Payments and/or prevent or interfere with Your receipt of the Settlement
Payments on the dates and in the amounts described above Paragraph A, exactly in such
amounts and at the times set forth therein.
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2.
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You have received a final non-appealable court order and/or a signed acknowledgment
from Settlement Obligor and Annuity Issuer satisfactory to the Purchaser in its sole
discretion (collectively referred to as the Order), which You, in Your sole judgment,
consider sufficient to recognize, authorize, and provide for the transfer by sale of the
Settlement Payments (which may continue to be made out to my name) to You, Purchaser, and
to insure that the Periodic Payments due on or after the day of the Order will be
forwarded directly to You.
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E.
Security Interest.
Seller and Purchaser intend that the sale of the Settlement
Payments
referenced above shall constitute a sale from the Seller to the Purchaser under applicable law,
which sales are absolute and irrevocable and provide the Purchaser with all indicia and rights of
ownership of the Settlement Payments. Neither the Seller nor the Purchaser intends the
transactions contemplated hereunder to be, or for any purpose to be characterized as, loans from
the Purchaser to the Seller secured by the Settlement Payments. If, notwithstanding the intention
of the parties expressed above, any sale by the Seller to the Purchaser of the Settlement Payments
shall be characterized as a secured loan and not a valid sale or absolute transfer or such sale or
transfer shall for any reason be ineffective or unenforceable, then this Agreement shall be deemed
to constitute a security agreement under the UCC and other applicable law in the rights to and
interest in payments due to Me under the Settlement Agreement which I am selling to You under this
Agreement. This security interest secures payment of the rights sold by Seller to Purchaser and
the performance of Sellers obligations above. Seller authorizes Purchaser to direct any account
debtor or obligor on an instrument, without limitation, Settlement Obligor or Annuity Issuer, to
make periodic payments directly to Purchaser and as contemplated by the Uniform Commercial Code.
Purchaser is authorized to file a UCC-1 Financing Statement to perfect Purchasers rights and the
security interest intended to be created under this Agreement.
F. Except as otherwise required by applicable statutory law, this Agreement shall be governed by
and interpreted in accordance with the law of the state of residence of the Seller on the date of
this Agreement.
ARBITRATION
Any and all controversies, claims, disputes, rights, interests, suits or causes of action
arising out of or relating to this Agreement and the negotiations related thereto, or the breach
thereof, shall be settled by binding arbitration administered by the American Arbitration
Association. The demand for arbitration shall be filed in writing with the other party to this
Agreement and with the American Arbitration Association offices in your state of residence. The
arbitration shall be held in the largest city in your state of residence. The arbitration shall be
held before a single arbitrator selected in accordance with the Commercial Arbitration Rules of
the American Arbitration Association in effect at the time that the demand for arbitration is
filed. Discovery, specifically including interrogatories, production of documents and depositions
shall be at the discretion of the arbitrator and to the extent
permitted shall be conducted in accordance with, and governed by the Federal Rules of Civil
Procedure.
A demand for arbitration shall be made within a reasonable time after the claim, dispute or other
matter in question has arisen. In no event, shall the demand for arbitration be made after the
date when institution of legal or equitable proceedings based on such claim, dispute or other
matter in question, would be barred by the applicable statute of limitations.
No arbitration arising out of or relating to this Agreement shall include, by consolidation or
joinder or in any other manner, an additional person or entity not a party to this Agreement,
except by written consent of the parties hereto, containing a specific reference to this Agreement
and signed by the entity sought to be joined. Consent to arbitration involving an additional
person or entity shall not constitute consent to arbitration of any claim, dispute or other matter
in question not described in the written consent or with a person or entity not named or described
therein. The foregoing agreement to arbitrate and other agreements to arbitrate with an additional
person or entity duly consented to by parties to this Agreement, shall be specifically enforceable
in accordance with applicable law in any court having jurisdiction thereof.
The award rendered by the arbitrator shall be final, and judgment may be entered upon it in
accordance with applicable law in any court having jurisdiction thereof. Such arbitrator shall
identify the substantially prevailing party and shall include legal fees and expenses for the
substantially prevailing party.
This provision does not apply to the extent inconsistent with applicable state law regarding the
transfer of structured settlement payments. In such case any disputes between the parties will be
governed in accordance with the laws of the domicile state of the payee and the domicile state of
the payee is the proper venue
G. I hereby grant You an Irrevocable Power of Attorney with full powers of substitution to do
all acts and things that I might do regarding the Settlement Payments, and any and all rights I
have under the Settlement Agreement. I understand and intend that by doing so, I am giving You all
of the power and right I currently have under the Settlement Agreement to endorse checks, drafts
or other instruments, to alter, edit and change payment instructions and/or beneficiary
designations, and/or to perform any other act in my name that in Your sole discretion as my
Attorney-in-Fact is necessary or expedient for You to obtain all of the benefits of the bargain
contemplated by this transaction. This power of attorney is coupled with an interest and shall
survive my death or disability.
H. Payments Received by Party Other Than the Party Intended to Receive the Payments.
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1.
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If prior to the completion of the transfer provided for in this Agreement, I receive
any of the Settlement Payments or any portion thereof, I understand and agree an equal
amount shall be deducted from the Purchase Price, and the Purchase Price shall be reduced
in the same amount as these payments, and that the terms of this Agreement regarding the
payments to be assigned, shall be treated as amended to reflect for the adjusted amount.
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2.
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In the event You receive or otherwise come into possession of any of the Periodic
Payment(s) or portion(s) thereof which are not included in the payments being absolutely
sold to You pursuant to this Agreement, You agree to forward such amount(s) to Me at the
address set forth above within seven (7) days of receipt of such amount(s).
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I. You shall be entitled to, and are authorized by Me to discharge any liens or adverse
claims against Me or any of the Settlement Payments, whether of not such adverse claims are
disclosed, and You are further authorized by Me, provided You furnish prior written notice to Me,
to pay any and all amounts necessary or if the Purchase Price has been deposited into an escrow
account, to instruct the escrow agent to pay any and all amounts necessary to discharge such liens
or other adverse claims. I understand and agree that any such amounts that You pay are payments
You are making on my behalf and shall reduce the Purchase Price. Adverse claims may include
disclosed amounts to be deducted by You from the Purchase Price to pay You, as servicer for
Washington Square Financial, LLC dba Imperial Structured Settlements, to enable Me to obtain
Washington Square Financial, LLC dba Imperial Structured Settlements release of its encumbrance
on a portion of the Settlement Payments relating to a prior transfer transaction(s) that occurred
before the enactment of the applicable statue (Transfer Act) regulating such transfers. I
understand and acknowledge that the law currently in effect requires that such encumbrance be
released in order to complete the transfer that is the subject of this Agreement.
J. This Agreement shall take effect on the date it is signed by Me (the Seller) or on such
later date prescribed by applicable law.
K. All disclosure statements I receive from You in connection with this transaction are a
material part of this Agreement and shall be considered part of the terms of this Agreement and
shall be read as if the contents of the disclosure statement were set forth in full in the body of
this Agreement.
L. I know that it will take some time for the Settlement Obligor and the Annuity Issuer to
receive and process the court order once it is granted. I would like to receive the Purchase Price
or a portion thereof as soon as possible thereafter. Accordingly, I hereby request Purchaser to
pay Me a portion of the Purchase Price as soon as possible after the court order is granted and
authorize Purchaser to hold in escrow an amount it deems necessary or advisable from the Purchase
Price (the Escrow Amount) until all conditions precedent have been satisfied, including, without
limitation, the receipt by Purchaser of the Settlement Obligor and the Annuity Issuers
acknowledgment of the terms of the court order in writing and their agreement to honor and comply
with same. At such time or earlier as Purchaser may determine, I understand that Purchaser will
send the Escrow Amount to Me minus any Settlement Payments that the Annuity Issuer and/or
Settlement Obligor sent to Me while the Settlement Obligor and the Annuity Issuer were processing
the court order.
M. I have the right to cancel this Agreement, without penalty or further obligation, within
the first three business days after the date the Agreement is signed, by providing You with
written notice within three (3) day period, as provided for in Paragraph
N.
N. All notices, demands, and other communications required or permitted under this
Agreement must be made in writing, and delivered by hand, via the United States Post Office,
Certified Mail, Return Receipt Requested, or by overnight delivery service, to You or Me as the
recipient at the address set forth in the beginning of this Agreement and must be evidenced by a
receipt showing time, date of delivery and the person receiving the delivery.
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In witness whereof I hereunto set my hand.
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[CUSTOMER NAME]
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STATE OF
COUNTY OR CITY OF
On the
day of
,
in the year
before me, the undersigned,
personally appeared [Customer Name] personally known to me or proved to me on the basis of
satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within
instrument, and acknowledged to me that he/she/they executed the same in his/her/their
capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or
the person upon behalf of which the individual(s) acted, executed the instrument.
PLEASE DO NOT SIGN THIS
DOCUMENT UNTIL [Sign Date]
My Commission expires on:
Accepted:
Washington Square Financial, LLC dba Imperial Structured Settlements
AFFIDAVIT
I, [Customer] , of full age, being duly sworn according to the law, upon my oath depose to say:
1. I currently reside at [ADDRESS, CITY, STATE ZIP] .
2. I am the recipient of certain guaranteed payments under a structured settlement. The entity
presently obligated to make the payments due under the structured settlement is [OBLIGOR] . In
order to fund its payment obligations under the structured settlement [OBLIGOR] purchased an
annuity contract [POLICY NUMBER] from [ISSUER] .
3. I voluntarily entered into an Absolute Sale and Security Agreement (the Agreement) dated
[CONTRACT SIGN DATE] with Washington Square Financial LLC d/b/a Imperial Structured Settlements
(Imperial). Under that Agreement, I agreed to sell and transfer to Imperial the following
payments due to me under the structured settlement:
[PAYMENT STREAM]
4. I understand I will forego receipt of the Settlement Payments under the Agreement. I
understand that my beneficiaries/heirs and I will no longer receive any of the Settlement Payments
or any portion of the Settlement Payments. I understand that all of the Settlement Payments will go
to Imperial or the assigns of Imperial.
5. I also understand that this Affidavit is submitted for use in the court approval process
initiated by Imperial and myself to seek court approval of the sale and transfer of payments to
Imperial.
6. I also received from Imperial a Disclosure Statement detailing the terms of the Agreement,
which I signed and returned to Imperial. I carefully reviewed the Disclosure Statement and fully
and completely understand all terms of the Disclosure Statement.
7. In the Disclosure Statement, Imperial advised me to seek professional advice regarding the
Agreement from an attorney, accountant or other professional of my choice.
I have either received said advice or fully intend to receive independent professional
advice regarding this transaction.
I have decided to waive the independent professional advice regarding this transaction.
8. [CUSTOMER SELF DESCRIPTION]
9. I have thoroughly considered this transaction, my alternatives and the use to which I will
put the proceeds of this sale and transfer. I have considered the impact of this transaction on [MY
DEPENDENT(S) if any AND/OR] myself. I will be able to improve [MY and/or OUR (IF
DEPENDENTS)] present standard of living if I am permitted to transfer and sell my right to receive
the Settlement Payments to Imperial as described in this Affidavit. After considering these factors
I believe that this transaction is in my best interest [and/or the best interest of my
dependent(s)] .
10. I intend to use the proceeds I receive from Imperial under the Agreement to [Elaborate
here on what the $ will be broken down and used for] . Therefore, I have decided to pursue this
transaction with Imperial.
11. I will not be using any portion of the proceeds from the Agreement for day-to-day
expenses. [I HAVE or HAVE NEVER] assigned, transferred, sold, or pledged [ANY or A PORTION] of
the structured settlement payments that I am proposing to transfer and sell herein to any party or
entity. [I have child support / alimony or other obligation] I do not believe that approval of
this sale and transfer will negatively affect [our or my] standard of living or harm us in any
way. Therefore, I have determined that completing this transaction with Imperial is in my best
interest and will improve the quality of my life.
[CUSTOMERS NAME]
STATE OF
COUNTY OR CITY OF
On the
day of
, in the year
before me,
the undersigned, personally
appeared [CUSTOMERS NAME] , personally known to me or proved to me on the basis of satisfactory
evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument, and
acknowledge to me that he/she/they executed the same in his/her/their capacity(ies), and that by
his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of
which the individual(s) acted, executed the instrument.
Notary
PLEASE DO NOT SIGN THIS
DOCUMENT UNTIL [
Sign Date
]
My commission expires on
Authorization to Release Information
I, [CUSTOMER] , hereby request and authorize [OBLIGOR] , [ISSUER] , or any of their successors,
assigns, designees, agents or administrators, to disclose any and all information pertaining to my
personal injury case and structured settlement deemed necessary by Washington Square Financial, LLC
dba Imperial Structured Settlements, or any of its agents or designees. Please make available and
furnish to Washington Square Financial, LLC dba Imperial Structured Settlements, or any of its
agents or designees and all information pertaining to my structured settlement and the underlying
annuity. Said authorization expressly includes but is not limited to a copy of my release and
settlement agreement, any and all orders approving, governing or limiting said agreement, and the
annuity contract, itself. I specifically direct that the above named entities and individuals
cooperate with Washington Square Financial, LLC dba Imperial Structured Settlements or any of its
agents or designees regarding the disclosure of the aforementioned documents and provide any
relevant information requested. Please provide copies of any and all documents requested via fax to
(866) 704-0772 or via U.S. Mail to:
Imperial Structured Settlements
701 Park of Commerce Blvd, Suite 301
Boca Raton, FL 33487
Attn: M.J.
[CUSTOMER]
Dated:
[Sign Date]
[ISSUER]
[ADDRESS]
[CITY, STATE ZIP]
Re: Annuity Contract No. [CONTRACT NUMBER]
Claimant: [CUSTOMERS NAME]
SS#: [SSN]
Dear Sirs:
Please change your records to show the Estate of [Customer] as the beneficiary after my death
under the above-captioned settlement agreement and annuity contract.
Kindly confirm that you have made this modification to your records, by using the space provided
below, and mailing to: Washington Square Financial, LLC dba Imperial Structured Settlements, 701
Park of Commerce Blvd., Suite 301, Boca Raton, Florida 33487.
Regards,
[Customer]
STATE OF
COUNTY OR CITY OF
On the
day of
, in the year
before me, the undersigned,
personally appeared [Customer], personally known to me, or proved to me on the basis of satisfactory evidence to the individual(s)
whose name(s) is (are) subscribed to the within instrument, and acknowledged to me that he/she/they
executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the
instrument, and the individual(s), or the person upon behalf of which the individual(s) acted,
executed the instrument.
Notary
My Commission expires on
[ISSUER]
By:
Dated:
[Sign Date]
[OBLIGOR]
[ADDRESS]
[CITY, STATE ZIP]
Re: Annuity Contract No. [CONTRACT NUMBER]
Claimant: [CUSTOMERS NAME]
SS#: [SSN]
Dear Sirs:
Please change your records to show the Estate of [Customer] as the beneficiary after my death
under the above-captioned settlement agreement and annuity contract.
Kindly confirm that you have made this modification to your records, by using the space provided
below, and mailing to: Washington Square Financial, LLC dba Imperial Structured Settlements, 701
Park of Commerce Blvd., Suite 301, Boca Raton, Florida 33487.
Regards,
[Customer]
STATE OF
COUNTY OR CITY OF
On the
day of
, in the year
before me, the undersigned,
personally appeared [Customer], personally known to me, or proved to me on the basis of satisfactory evidence to the individual(s)
whose name(s) is (are) subscribed to the within instrument, and acknowledged to me that he/she/they
executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the
instrument, and the individual(s), or the person upon behalf of which the individual(s) acted,
executed the instrument.
Notary
My Commission expires on
[OBLIGOR]
By:
Dated:
Structured Settlement
COURT ORDER APPLICATION
Background Info.:
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Your name
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First
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Middle
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Last
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Name on your SS card
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First
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Middle
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Last
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Address
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Street
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City
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State
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Zip
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Home phone:
Work:
Cell:
Alt:
Social Security Number:
Date of Birth:
Emergency contact name:
Phone:
Structured Settlement Info:
Name of attorney that handled this matter for you:
City/State where attorney practices:
Phone Number:
Where you a minor?
o
Yes
o
No Who sued on your behalf?
I=1 Accident happened in
(year) and I dont recall the attorneys name.
Where was the case settled (city, county, state)?
Who is the current beneficiary of your payments?
Income & Dependent Info.:
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Income:
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Job $ «[income]» Annuity $ «[income]» Spouse $ «[income]»
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Total Monthly $
«[income]»
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SSI $ «[income]» Disability $ «[income]»
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Rental $ «[income]» Child Support $ «[income]»
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Total Annual $
«[income]»
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Alimony $ «[income]» Pension $ «[income]»
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Do you own or rent?
o
Own
o
Rent Mortgage/Rent payment:$
/mo
Do you live rent-free?
o
Yes
o
No
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If YES, who do you live with?
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relationship:
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Do you have any children?
o
Yes
o
No
Do they live with you?
o
Yes
o
No
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If NO, who do they live with?:
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(name)
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(address)
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(city/state/zip)
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2
Do you pay child support?
o
Yes
o
No
If YES, how much? $
/mo
Do you owe any money in back child support?
o
Yes
o
No
If YES, how much do you owe? $
Are your annuity payments being deducted/garnished to pay for child support or arrearages?
o
Yes
o
No
If YES, how much is being deducted? $
/mo
Employment Info.:
Are you working?
o
Yes 1=1 No
If YES:
Current Occupation:
How long?:
Employers Full Business Name:
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Employers Address:
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address
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city
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state
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zip
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What is your current annual salary?: $
/year
If NO:
Are you employable?
o
Yes
o
No
Employment history what other jobs have you had?:
Are you disabled
o
Yes
o
No
If YES, what is the nature of the disability?
Do you support yourself without relying on anyone elses salary or income? 1=1 Yes
o
No
How far did you get in school?:
3
Marriage Info.:
Marital Status (please check one)
o
Single
o
Married
o
Divorced
o
Widowed
o
Separated
o
Life-Partner Spouses name:
What does is your spouses occupation?
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Employers Address:
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city
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state
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What is their current annual salary?: $
/year
Have you ever been divorced?
o
Yes
o
No If YES, how many times:
Former spouses name:
Location of filing of divorce (City/State):
Date of filing (month/year):
Former spouses name:
Location of filing of divorce (City/State):
Date of filing (month/year):
Miscellaneous Info:
Do you have any liens or judgments against you?
o
Yes
o
No
If YES, amount? $
per
Have you ever filed for bankruptcy?
o
Yes
o
No
If YES, when?:
What state?:
Do you have any tax liens?
o
Yes
o
No
If YES, how much? $
What state?:
4
Have you previously sold any of your structured settlement payments?
o
Yes
o
No If YES, to who?:
Have your annuity payments ever previously been garnished?
o
Yes
o
No
Is there any other individual entitled to a portion of any of your payments? 1=1
o
Yes
o
No
If YES, who?
Where do they live?
Have you received any payments from your structured settlement in the past 12 months?
o
Yes
o
No
If YES, how much? $
What did you do with the money?
Do you currently depend on your annuity payments for any medical necessities?
o
Yes
o
No
Have you ever had a serious head injury?
o
Yes
o
No
Have you ever been in a coma?
o
Yes
o
No
If YES, please explain further:
5
If YES, please supply the name, relationship and contact information of 2
personal references that Imperial may contact.
IF YOU HAVE NOT HAD A SERIOUS HEAD INJURY PLEASE SKIP THE REST OF THIS SECTION.
Name of
proposed
reference:
How long have you known him/her?:
years.
Whats their relationship to you:
(ex: Parent/ Spouse/ Brother/ Sister/ Daughter/ Son/ Aunt/ Uncle/ Employer/ Co-Worker/ Priest/ Rabbi/ Physician)
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Address:
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address
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city
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state
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zip
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Phone 1)
Phone 2)
Name of proposed reference:
How long have you known him/her?:
years.
Whats their relationship to you:
(ex: Parent/ Spouse/ Brother/ Sister/ Daughter/ Son/ Aunt/ Uncle/ Employer/ Co-Worker/ Priest/ Rabbi/ Physician)
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Address:
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address
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city
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state
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zip
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Phone 1)
Phone 2)
6
It is understood and agreed by you that: (a) To the best of your knowledge and belief all of the
statements and answers on this application are true, complete and accurately stated; (b) These
statements and answers are used in accordance with the proposed transfer of your structured
settlement benefits, subject to the terms and conditions of the applicable Absolute Assignment
entered into between you and us, and in so doing, we will rely on the truthfulness of your
statements and answers.
Signature of applicant:
Date:
7
AFFIDAVIT HELPER SECTION
Please describe
in detail
what led to your structured settlement:
WHY DO YOU NEED THE MONEY WHAT WILL YOU DO WITH IT?
(Please be
*VERY DETAILED*
in exactly how this money will be spent down to
the dollar
or this will be returned to you.
Ask the customer
WHO
,
WHAT,
WHEN,
WHERE,
WHY
and
HOW
!!
8
DISCLOSURE AFFIDAVIT
I,
[Customer Name],
being of full age and duly sworn according to law, upon my
oath depose and say:
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1.
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I am over the age of 18 and am of sound and deposing mind.
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2.
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I reside at [ADDRESS, CITY, STATE ZIP] .
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3.
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I received all of the statutorily required Disclosures on [DATE], by E-mail, at
the following Email address: [EMAIL]
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STATE OF
COUNTY OR CITY OF
On the
day of
, in the year
before me, the
undersigned, personally appeared [Customer Name] , personally known to me or proved to me on the
basis of satisfactory evidence to be the individual(s) whose names(s) is (are) subscribed to the
within instrument, and acknowledged to me that he/she/they executed the same in his/her/ their
capacity(ies), and that by his/her/ their signature(s) on the instrument, the individual(s), or the
person upon behalf of which the individual(s) acted, executed the instrument.
My Commission expires on
[Sign Date]
[CUSTOMERS NAME]
[ADDRESS]
[CITY, STATE ZIP]
RE:
METHOD OF PAYMENT REQUEST
Dear [CUSTOMERS NAME]:
We appreciate you doing business with Imperial Structured Settlements. At the close of this
transaction, we will remit your funds by check as you indicate below. Please complete this form to
receive your lump sum in exchange for the assigned payments set forth in our agreement.
AT FUNDING, I WANT TO RECEIVE A CHECK AT THE FOLLOWING ADDRESS:
Please acknowledge that the information above is correct by signing below. If you have any
questions about completing this form please do not hesitate to call us.
Acknowledgement:
Date:
[Sign Date]
[CUSTOMERS NAME]
[ADDRESS]
[CITY, STATE ZIP]
RE:
METHOD OF PAYMENT REQUEST
Dear [CUSTOMERS NAME]:
We appreciate you doing business with Imperial Structured Settlements. At the close of this
transaction, we will remit your funds by direct deposit as you indicate below. Please complete
this form to receive your lump sum in exchange for the assigned payments set forth in our
agreement.
AT FUNDING, I WANT MY FUNDS TO BE TRANSFERRED TO THE FOLLOWING ACCOUNT:
Bank
Exact Name(s) on Bank Account:
Type of Account:
o
Checking or
o
Savings
(please check only one)
Bank Account #:
Bank Phone : (
)
Further credit to:
Bank Transit/ABA# for
Wire:
Bank Phone : (
)
Please acknowledge that the information above is correct by signing below. If you have any
questions about completing this form please do not hesitate to call us.
Acknowledgement:
Date:
[Customer Name]
[Address]
[City, State Zip]
[Date]
[ISSUER]
[Address]
[City, State Zip]
Re: Annuity Contract No. [CONTRACT NUMBER]
Social Security Number: [SSN]
Date of Birth: [DOB]
I am writing to request a complete copy of the original documents pertaining to my structured
settlement and annuity contract which I am the named payee. Please provide me with the name of the
annuity owner as well as a detailed description of the payments I am entitled to receive. Please be
sure to include the payment amount and the start date of the payments, as well as the date the
payments are due. It is important that I receive as much of the requested information as you can
provide, as soon as possible. Additionally, please provide me with the name of the current
beneficiary(s). Once you have processed this request, please fax the documents
to 1-866-704-0772.
Please make sure your records reflect my current address as[ADDRESS, CITY, STATE ZIP] .
If you
are unable to comply with this request, please inform me in writing. You may contact me if you have
any questions, or if I may otherwise be of assistance.
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Sincerely,
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[Customer Name]
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STATE OF
COUNTY OR CITY OF
On the
day of
, in the year
before me, the undersigned, personally appeared
[Customer Name] , personally known to me, or proved to me on the basis of satisfactory evidence
to the individuals(s) whose name(s) is (are) subscribed to the within instrument, and acknowledged
to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their
signature(s) on the instrument, the individuals(s), or the person upon behalf of which the
individual (s) acted, executed the instrument.
My Commission expires on
[Customer Name]
[Address]
[City, State Zip]
[Date]
[OBLIGOR]
[Address]
[City, State Zip]
Re: Annuity Contract No. [CONTRACT NUMBER]
Social Security Number: [SSN]
Date of Birth: [DOB]
I am writing to request a complete copy of the original documents pertaining to my structured
settlement and annuity contract, under which I am the named payee. Please provide me with the
following information:
Release and Settlement Agreement giving rise to the structured settlement
Court Order approving the settlement (if applicable)
Qualified Assignment of the payment obligation (if applicable)
Name of the current beneficiary(s)
It is important that I receive as much of the above information as you can provide, as soon as
possible. Once you have processed this request, please fax the documents to
1-866-704-0772. Please make sure your records reflect
my current address as [ADDRESS, CITY, STATE ZIP] . Please contact me if you have any
questions, or if I may otherwise be of assistance.
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Sincerely,
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[Customer Name]
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STATE OF
COUNTY OR CITY OF
On the
day of
, in the year
before me, the undersigned, personally
appeared [Customer Name] , personally known to me, or proved to me on the basis of satisfactory
evidence to be the individual(s), whose name(s) is (are) subscribed to within the instrument, and
acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by
his/her/their signature(s) on the instrument, the individuals(s), or the person upon behalf of
which the individual(s) acted, executed the instrument.
My Commission expires on
STRUCTURED SETTLEMENT REQUIRED
DOCUMENT CHECKLIST
PLEASE PROVIDE THE FOLLOWING CHECKED ITEMS. THESE ITEMS
AND DOCUMENTS ARE EXTREMELY IMPORTANT TO THIS TRANSACTION:
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SETTLEMENT AGREEMENT AND RELEASE
(If you do not have this document, please
contact your personal injury attorney)
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ANNUITY CONTRACT or BENEFITS LETTER
(If you do not have this
document, please contact the insurance company)
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THE ENCLOSED CONTRACT
(All documents must be signed and notarized where
indicated)
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UNIFORM QUALIFIED ASSIGNMENT
(If you do not have this document, please
contact the insurance company)
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LEGIBLE COPY OF DRIVERS LICENSE, STATE I.D. or PASSPORT
(If the name on your ID does not match the name on your settlement and/or
annuity documents you will need to provide proof of your name change)
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COPY OF SOCIAL SECURITY CARD
(You may substitute with your previous
years income tax return)
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IPA STATEMENT
(If you are required or have elected to obtain
independent professional advice regarding this transaction)
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DIVORCE DECREE
(If you obtained your divorce after the date of your
settlement or annuity, we will be required to prove your ex-spouse has no claim to
your payments)
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LETTER OF SUPPORT/PROOF OF INCOME
(If you fall below minimum income
requirements)
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WE MUST HAVE TWO CLEAR FORMS OF IDENTIFICATION AS SOON AS POSSIBLE TO AVOID DELAYING THIS TRANSACTION.
PLEASE RETURN THE REQUESTED DOCUMENTS WITH YOUR ENTIRE CONTRACT PACKAGE.
PRIVACY POLICY
Washington Square Financial, LLC d/b/a Imperial Structured Settlements (hereinafter
ISS), a family of companies recognizes the importance of protecting your nonpublic personal
information. Because your privacy is our concern, we have developed this Privacy Policy to inform
you about our privacy practices. The examples in this Privacy Policy are illustrative only and are
not intended to be exclusive.
We obtain information about you directly from you, from applications, contracts, documents and
forms you complete or sign, or in telephone conversations with you. We may obtain additional
information about you or, with your authorization, others who may have an interest in your
insurance policy or annuity contract, from additional sources, including your insurance company,
insurance producer, health care providers, credit reporting agencies, and your representatives or
advisors. We may also obtain information about you from public records and, with your
authorization, other persons. We may obtain the following nonpublic personal information about
you:
Personal Information:
Name, address, social security number, drivers license number, occupation and employer.
Financial Information:
Assets, income, credit history, banking information and account numbers.
Legal Information:
Judgments, liens, bankruptcies, divorces, probate, and other civil and criminal court
proceedings.
Other identifying information:
Birth date, telephone and fax numbers, email, street, and mailing addresses.
Insurance or Annuity Policy Information:
Policy terms, conditions and limits; named beneficiaries; premiums and payment history.
Medical Information:
Current health status and prior health care treatments.
ISS will not rent or sell your nonpublic personal information to anyone. However, we will disclose
your information if we are required by law to do so. Additionally, with your authorization, we
will disclose your nonpublic personal health information to our affiliates and non-affiliated
companies that provide services for us related to a transaction you request. Additionally, as
permitted by law and with your authorization, we may disclose your health information to allow our
authorized representative to contact you for purposes of determining your current health status.
As permitted by law or with your authorization, we will share your nonpublic personal financial
information to our affiliates and non-affiliated companies that provide services for us related to
a transaction you request; establish or exercise our legal rights or defend against legal claims;
in connection with a proposed or actual sale, merger, transfer, exchange or consolidation of ISS
or any portion of our business; to secure services and advice from our attorneys, accountants and
auditors; and, to permit our affiliates to contact you about other products and services offered by
Imperial companies.
We may also disclose your nonpublic personal financial information for other purposes or to other
persons with your authorization or otherwise as required or permitted by law.
FORMER CUSTOMERS
We treat information about our former customers in the same manner as we treat
information about our current customers.
CONFIDENTIALITY AND SECURITY
We restrict access to the nonpublic personal information we receive
about you. Only employees of ISS companies who need to know that information to provide products or
services to you have access to your information. We also maintain physical, electronic and
procedural safeguards to guard your nonpublic personal information against unauthorized access or
use. Non-affiliated companies to whom we disclose your nonpublic personal information are obligated
to maintain your privacy under confidentiality agreements and do not have any independent right to
use your information.
Maintaining the accuracy of your information is a shared responsibility. We maintain the integrity
of the information you provide us and will update your records when you notify us of a change.
Please contact us at the address or phone number listed below when information concerning your
changes.
UPDATES TO OUR PRIVACY POLICY
From time to time we may change our Privacy Policy. We reserve the
right to change this policy at any time.
CONTACT INFORMATION
The ISS companies include:
Washington Square Financial, LLC d/b/a Imperial Structured Settlements
Haverhill Receivables, LLC
Imperial Receivables V, LLC
Imperial Receivables VI, LLC
Imperial Annuities, LLC
Imperial SRC I, LLC
Imperial SRC II, LLC
Imperial SRC III, LLC
Imperial SRC IV, LLC
Imperial SRC V, LLC
If you have questions about the information in this notice, please write us at:
Imperial Structured Settlements
Customer Service
701 Park of Commerce Blvd., Suite 301
Boca Raton FL 33487
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This policy is effective June 2007
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2
DISCLOSURE STATEMENT
[STATE]
DATE PROVIDED: [FULL DATE]
PAYEE: [PAYEES NAME]
This Disclosure Statement is being provided by Washington Square Financial, LLC dba IMPERIAL
STRUCTURED SETTLEMENTS (Imperial or Us) to [PAYEES NAME], (Payee or You) in connection
with Payees agreement to transfer and sell to Imperial certain structured settlement payment
rights due Payee.
1.
Schedule of Payments Transferred.
The Payee intends to transfer or sell to
Imperial all of Payees rights, title and interest in the following payments:
[Payment stream(s)]
2.
Aggregate Amount of Payments Transferred.
The aggregate amount of payments
to be sold and transferred to Imperial totals $ [Amount] .
3.
Discounted Present Value.
The discounted present value of the aggregate
payments sold and transferred at [Percent] % is $ [Amount] . The discounted present value is the
calculation of current value of the sold and transferred structured settlement payments under
federal standards for valuing annuities. THIS IS NOT THE RATE USED TO CALCULATE THE PURCHASE PRICE.
4.
Calculation of Discounted Present Value.
The discounted present value of
payments shall be calculated as follows: The applicable federal rate used in calculating the
discounted present value is [Percent] %.
5.
Gross Amount Payable.
In exchange for these payments, the Payee will
receive the gross amount of $[Amount] , which represents a nominal annual discount rate of
[Percent] % and an effective annual discount rate of [Percent] %, assuming monthly compounding and
an assumed funding date of [Amount] . Funding will not occur until everything necessary under the
Absolute Sale and Security Agreement has taken place.
6.
Fees and Expenses.
The Payee will be responsible for the
following approximate commissions, charges, fees, expenses, and costs in connection with the
closing of this transaction:
Legal Fees $2,000.00
Processing Fees $200.00
7.
Net Amount Payable.
The net amount payable to Payee after the
deduction of all commissions, fees, costs, expenses and charges described in paragraph 6 of this
disclosure is $[Amount] .
8.
Quotient.
The net amount that you will receive from us in
exchange for your future structured settlement payments represents [Percent] % of the estimated
current value of the payments based upon the discounted value using the applicable federal rate.
The quotient is [Percent] %.
9.
Effective Annual Interest Rate:
Based on the net amount that
you receive from us and the amounts and timing of the structured settlement payments that you are
selling to us, you will, in effect, be paying interest to us at a rate of [Percent] % per year.
10.
Right To Cancel.
The Payee shall have the right to cancel the
Absolute Sale and Security Agreement, without penalty or further obligation, not later than the [#
of days per statute] business day, after the Absolute Sale and Security Agreement is signed by
the Payee.
11.
Penalty In The Event Of Breach Of Contract.
The amount of any
penalty and the aggregate amount of any liquidated damages (inclusive of penalties), payable to
Imperial, by the Payee in the event of the Payees breach of the transfer agreement are NONE.
12.
Independent Professional Advice.
The Payee understands that
Payee should consult with Payees own attorney, certified public accountant, actuary, or other
professional adviser concerning the legal, tax, and financial implications of a sale and transfer
of structured settlement payment rights, including the federal and state income tax consequences
of a sale and transfer if he/she or the Settlement Obligor/Issuer is domiciled in a State that
requires the payee to receive such consultation.
I have read and understand everything set forth in this Disclosure Statement.
2
[The remainder of this page intentionally left blank]
EXHIBIT B
Lock-Box Notices
See Attached
IMPERIAL SETTLEMENTS FINANCING 2010, LLC
701 Park of Commerce Blvd,, Ste. 301
Boca Raton, FL 33487
September 24, 2010
SunTrust Bank
501 South Hagler Drive
2nd Floor
West Palm Beach, FL 33401
Attn: Mr. Amish Patel
Ladies and Gentlemen:
Reference is made to each of (i) that certain Master Trust Indenture (as the same may be
amended, restated, supplemented or otherwise modified from time to time, the Master Trust
Indenture) among Imperial Settlements Financing 2010, LLC (ISF), Portfolio Financial Servicing
Company, as Master Servicer (PFSC) and Wilmington Trust Company, as Trustee and Collateral
Trustee (Trustee) dated as of September 24, 2010, (ii) that certain Series 2010-1 Supplement
(Supplement) to and under the Master Trust Indenture among ISF, PFSC and the Trustee and (iii)
those certain Restricted Blocked Account Agreements (Restricted Blocked Account Agreements) by
and among 1SF, Trustee and SunTrust Bank, in connection with your maintenance of ISFs account
AO. 1 0000894966 80 and account no. 1000114180937 (the Accounts).
Capitalized terms used but not defined herein shall have the meanings assigned thereto in
the Restricted Blocked Account Agreements.
By executing this letter agreement, SunTrust Bank affirms that, pursuant to the provisions of
the Blocked Account Agreements, the SunTrust Bank (a) will not honor any drafts, demand withdrawal
requests or remittance instructions by the Company related to the Accounts, and (b) shall hold all
such monies and instruments and operate such Accounts for the benefit of, and subject to the
security interest of, the Trustee. Such countersignature will also constitute your confirmation
that you have received no prior notice of the assignment or pledge of, or the creation of any
other security interest in or any attachment in respect of, the Accounts.
SunTrust Bank further agrees that unless otherwise instructed by the Trustee, SunTrust Bank
shall, pursuant to the terms of the Restricted Blocked Account Agreements, together with the
Lockbox Service, Profile of the SunTrust Treasury Management Master Agreement, to which the
Company is a party: (i) collect all monies, checks, instruments and other items of payment mailed
to or coming into the Lockboxes, (ii) deposit into the Accounts all such monies, checks,
instruments and other items of payment; and (iii) remit on a daily basis all collected and
available funds in the Accounts to the Trustee in accordance with the Restricted Blocked Account
Agreements.
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Very truly yours,
IMPERIAL SETTLEMENTS FINANCING 2010, INC.
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By:
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Name:
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Jonathan Neuman
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Title:
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President
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Acknowledged and agreed to this
24th day of September, 2010
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SUNTRUST BANK
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By:
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/s/ Amish S Patel
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Name:
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Amish S Patel
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Title:
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Vice President
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2-
EXHIBIT C
Form of Letter to be Delivered by Accredited Investors to the Trustee
and Issuer on the Closing Date
Wilmington Trust Company
Rodney Square North
1100 N. Market Street
Wilmington, DE 19890
Attn: Corporate Capital Markets
Imperial Settlements Financing 2010, LLC
191 Peachtree Street NE, Suite 3300
Atlanta, GA 30303
Attn: President
Re:
Series 2010-1 Notes
Ladies and Gentlemen:
We are delivering this letter in connection with an offering of notes (the
Series 2010-1
Notes
) of Imperial Settlements Financing 2010, LLC, a Georgia limited liability company (the
Issuer
).
We hereby confirm that:
(i) we are an institutional accredited investor within the meaning of Rule 501(a)(l), (2),
(3) or (7) under the Securities Act of 1933, as amended (the
Securities Act
) (an
institutional accredited investor
);
(ii) any purchase of the Series 2010-1 Notes by us will be for our own account or for the
account of one or more other institutional accredited investors for which we exercise sole
investment discretion;
(iii) we have such knowledge and experience in financial and business matters that we are
capable of evaluating the merits and risks of purchasing the Series 2010-1 Notes;
(iv) we are not acquiring the Series 2010-1 Notes with a view to, or for offer or sale in
connection with, any distribution in violation of the Securities Act; provided that the disposition
of our property and the property of any accounts for which we are acquiring Series 2010-1 Notes
shall remain at all times within our and their control; and
(v) we acknowledge that we have had access to such financial and other information, and have
been afforded the opportunity to ask such questions of representatives of the Issuer and receive
answers thereto, as we deem necessary in connection with our decision to purchase the Series 2010-1
Notes.
We understand that the Series 2010-1 Notes are being offered within the United States in a
transaction not involving any public offering within the meaning of the Securities Act and that the
Series 2010-1 Notes have not been registered under the Securities Act, and we agree, on our own
behalf and on behalf of each account for which we acquire any Series 2010-1 Notes, that if in the
future we decide to offer, resell, pledge or otherwise transfer such Series 2010-1 Notes prior to
(x) the date that is one year (or such shorter period of time as permitted by Rule 144 under the
Securities Act) after the later of the date of the original issuance of the Series 2010-1 Notes and
the last date on which the Issuer or any of the Issuers affiliates was the owner of the Series
2010-1 Notes (or any predecessor thereto) and (y) such later date, if any, as may be required by
any subsequent change in applicable law, such Series 2010-1 Notes may be offered, resold, pledged
or otherwise transferred only (i) to the Issuer, (ii) to a person whom we reasonably believe is a
qualified institutional buyer (as defined in Rule 144A under the Securities Act) and to whom
notice is given that the transfer is being made in reliance on Rule 144A, (iii) to a person who we
reasonably believe is an institutional accredited investor in a transaction in which the
institutional accredited investor, prior to the transfer, furnishes to the trustee a signed letter
containing certain representations and agreements relating to the restrictions on transfer of the
Series 2010-1 Notes (the form of which letter can be obtained from the trustee for the Series
2010-1 Notes), (iv) outside the United States in a transaction in accordance with Rule 904 under
the Securities Act, (v) pursuant to an effective registration statement under the Securities Act or
(vi) pursuant to an exemption from registration provided by Rule 144 under the Securities Act (if
available), in each case, in accordance with any applicable securities laws of any State of the
United States or any other applicable jurisdiction and subject to the Issuers and the Trustees
right prior to any such transfer pursuant to clauses (iii) and (vi) to require the delivery of an
opinion of counsel, certifications and/or other information satisfactory to the Issuer and the
Trustee.
We acknowledge and agree to the terms and conditions of (i) the Master Trust Indenture (the
Indenture) among the Issuer, Portfolio Financial Servicing Company, as Master Servicer (Master
Servicer) and Wilmington Trust Company, as Trustee and Collateral Trustee (Trustee) and (ii) the
Series 2010-1 Supplement (Supplement) to and under the Indenture among the Issuer, the Master
Servicer and the Trustee, to the extent applicable to the initial Series 2010-1 Noteholder.
We acknowledge that you, the Issuer and others will rely upon our confirmations,
acknowledgments and agreements set forth here, and we agree to notify you promptly in writing if
any of our representations or warranties herein eases to be accurate and complete.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
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Date:
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(Name of Purchaser)
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By:
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Name:
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Title:
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Address:
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EXHIBIT D
Form of Letter to be Delivered by Accredited Investors to the Trustee, the Issuer
and the Transferor in Connection with Subsequent Transfers
Wilmington Trust Company
Rodney Square North
1100 N. Market Street
Wilmington, DE 19890
Attn: Corporate Capital Markets
Imperial Settlements Financing 2010, LLC
191 Peachtree Street NE, Suite 3300
Atlanta, GA 30303
Attn: President
Re:
Series 2010-1 Notes (the Notes)
Ladies and Gentlemen:
In
connection with our proposed purchase of $ __________ aggregate principal amount of the
Notes, we confirm that:
1. We understand that any subsequent transfer of the Notes is subject to certain restrictions
and conditions set forth in the Master Trust Indenture dated as of September 24, 2010 (the
Indenture
) relating to the Notes and the undersigned agrees to be bound by, and not to
resell, pledge or otherwise transfer the Notes except in compliance with such restrictions and
conditions and the Securities Act of 1933, amended (the
Securities Act
).
2. We understand that the offer and sale of the Notes have not been registered under the
Securities Act, and that the Notes may not be offered, sold, pledged or otherwise transferred
except as permitted in the following sentence. We agree, on our own behalf and on behalf of any
accounts for which we are acting as hereinafter stated, that if we should sell any Notes prior to
(x) the date that is one year (or such shorter period of time as permitted by Rule 144 under the
Securities Act) after the later of the date of the original issuance of the Notes and the last date
on which the Issuer or any of the Issuers affiliates was the owner of the Notes (or any
predecessor thereto) and (y) such later date, if any, as may be required by any subsequent change
in applicable law, we will do so only (A) to the Issuer, (B) in accordance with Rule 144A under the
Securities Act to a qualified institutional buyer (as defined therein) and to whom notice is
given that the transfer is being made in reliance on Rule 144A, (C) inside the United States to an
institutional accredited investor (as defined below) that, prior to such transfer, furnishes (or
has furnished on its behalf by a U.S. broker-dealer) to you and to the Issuer a signed letter
substantially in the form of this letter, (D) outside the United States in accordance with Rule 904
of Regulation S under the Securities Act, (E) pursuant to the exemption from registration provided
by Rule 144 under the Securities Act (if available) or (F) pursuant to an effective registration
statement under the Securities Act, in each case in accordance with any applicable
securities laws of any State of the United States or any other applicable jurisdiction, and we
further agree to provide to any person purchasing any of the Notes from us a notice advising such
purchaser that resales of the Notes are restricted as stated herein.
3. We understand that, on any proposed resale of any Notes, we will be required to furnish to
you and the Issuer such certifications, legal opinions and other information as you and the Issuer
may reasonably require to confirm that the proposed sale complies with the foregoing restrictions.
We further understand that the Notes purchased by us will bear a legend to the foregoing effect.
4. We are an institutional accredited investor (as defined in Rule 501(a)(1), (2), (3) or
(7) of Regulation D under the Securities Act) and have such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of our investment in the
Notes, and we and any accounts for which we are acting are each able to bear the economic risk of
our or its investment.
5. We are acquiring the Notes purchased by us for our own account or for one or more accounts
(each of which is an institutional accredited investor) as to each of which we exercise sole
investment discretion.
We acknowledge and agree to the terms and conditions of (i) the Master Trust Indenture (the
Indenture) among the Issuer, Portfolio Financial Servicing Company, as Master Servicer (Master
Servicer) and Wilmington Trust Company, as Trustee and Collateral Trustee (Trustee) and (ii) the
Series 2010-1 Supplement (Supplement) to and under the Indenture among the Issuer, the Master
Servicer and the Trustee, to the extent applicable to the Series 2010-1 Noteholder.
The Trustee, the Issuer and the transferor of the Notes are entitled to rely upon this letter
and are irrevocably authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the matters covered
hereby.
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Very truly yours,
[Name of Transferee]
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By:
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Authorized Signature
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EXHIBIT E
Form of Daily Report
See Attached
Exhibit A
Imperial Settlements Finanancing 2010-1, LLC
Daily Report
Data Cutoff Date: 09/28/10
Report Date: 09/28/10
Series Settlement and Annuity Collections I Split Payments
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Recieived By
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. SunTrust Settlement
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Trust Annuity
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from: Issuer; `r4
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To: issuer Split
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Contract #
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Name:
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.Servicer? (Y/N)
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Lockbox
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!
.Lockbox
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(Tao)
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F.ipint!lteeer Annuity
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To. tssuer Series
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Payment Account
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See Attached Details
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See Attached Details
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$
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0.00
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Y
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125
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136
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$
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0.00
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$
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0.00
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$0.00
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$
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0.00
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Check
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I, Authorized Officer, hereby request a transfer from the Issuer Settlement Lockbox (# TBD) and/or the Issuer Annuity Lockbox
(#
TBD) to the Issuer Series Collection Account (# TBD)
and/or Issuer Seller Split Payment Account (# TBD) in the amounts identified above.
EXHIBIT B Annuity Series Collections
Wilmington Trust Company
Sept 28, 2010
Attention:
Re: Wire $ from Imperial Settlements Financing 2010-1 Annuity Lockbox Account
to the Imperial Settlements Financing 2010-1 Series Collection Account
In accordance with the Servicing Agreement dated Month Day, 2010, Portfolio Financial Servicing
Company PFSC (the Initial Master-Servicer) is instructing Wilmington Trust Company (the
Collateral Trustee) to wire $ from Imperial
Settlements Financing 2010-1 Annuity Lockbox Account to the Imperial Settlements Financing 2010-1
Series Collection Account
From:
Wilmington Trust Company:
Imperial Settlement Financing 2010-1 Annuity Lockbox Account
To:
SunTrust:
Imperial Settlement Financing Series 2010-1 Collection Account
I
Authorized Signor
hereby request that $ be wired from Imperial
Settlements Financing 2010-1 Annuity Lockbox Account to the Imperial Settlements Financing
2010-1 Series Collection Account.
EXHIBIT B Settlement Series Collections
Wilmington Trust Company
Sept 28, 2010
Attention:
Re: Wire $ from Imperial Settlements Financing 2010-1 Settlement Lockbox Account to the Imperial Settlements Financing 2010-1 Series Collection Account
In accordance with the Servicing Agreement dated Month Day, 2010, Portfolio Financial Servicing
Company PFSC (the Initial Master-Servicer) is instructing Wilmington Trust Company (the
Collateral Trustee) to wire $ from Imperial Settlements
Financing 2010-1 Settlement Lockbox Account to the Imperial Settlements Financing 2010-1 Series
Collection Account
From:
Wilmington Trust Company:
Imperial Settlements Financing 2010-1 Settlement Lockbox Account
To:
SunTrust:
Imperial Settlements Financing 2010-1 Series Collection Account
I
Authorized Signor
hereby request that $ be wired from Imperial Settlements
Financing 2010-1 Settlement Lockbox Account to the Imperial Settlement Financing 2010-1 Series
Collection Account.
EXHIBIT B Settlement Split Payments
Wilmington Trust Company
September 28, 2010
Attention:
Re: Wire $ from Imperial Settlements Financing 2010-1 Settlement Lockbox
Account to the Imperial Settlements Financing 2010 Issuer Split Payment Account
In accordance with the Servicing Agreement dated Month Day, 2010, Portfolio Financial Servicing
Company PFSC (the Initial Master-Servicer) is instructing Wilmington Trust Company (Collateral
Trustee) to wire $ from Imperial Settlements
Financing 2010-1 Settlement Lockbox Account to the Imperial Settlements Financing 2010, LLC Issuer
Split Payment Account
From:
Wilmington Trust Company:
Imperial Settlement Financing 2010-1 Settlement Lockbox Account
To:
SunTrust:
Imperial Settlement Financing 2010, LLC Issuer Split Payment Account
I
Authorized Signor
hereby request that $
be wired from the Imperial
Settlements Financing 2010-1 Settlement Lockbox Account to the Imperial Settlement Financing
2010, LLC Issuer Split Payment Account
EXHIBIT F
Form of Monthly Report and Compliance Certificate
See Attached
Imperial Settlements Financing 2010, LLC
Monthly Remittance Report
Series 2010-1
Wilmington Trust Company
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Series Issuance Date:
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Collection Period:
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Record Date:
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Distribution Date:
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Previous Advance Date:
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Next Advance Date:
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Re: Imperial Settlements Financing 2010, LLC Structured Settlement and Annuity
Backed Notes (the Notes)
Ladies and Gentlemen:
In connection with the Notes and the related distribution to be made on
2010 (the Remittance
Date), set forth below is the remittance information required pursuant to
Section 3.05(b) of the Master Trust Indenture, dated September 24, 2010, by and
among Imperial Settlements Financing 2010, LLC (the Issuer), Portfolio
Financial Services Company, as initial master servicer, and Wilmington Trust
Company, as Collateral Trustee (the Collateral Trustee),
Aggregate Discounted Receivables Balance (ADRB) of the Issuer:
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Original ADRB as of the Series Issuance Date
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Original Class A Note Principal Balance
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ADRB as of the beginning of the Collection Period:
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(+) ADRB of Receivables added on the previous Advance Date as of the previous Advance Date
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(+) ADRB of Receivables to be added on the next Advance Date as of the next Advance Date
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(-) ADRB of Receivables that became Defaulted Receivables during Collection Period
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(+) ADRB of Receivables that became Rehabilitated Receivables during Collection Period
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(-) ADRB of Receivables repurchased by the Issuer during Collection Period
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(+) ADRB of Receivables contributed by the Issuer as substituted Receivables during Collection Period
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(-) Amortization of ADRB during Collection Period resulting from the passage of time of Receivable not
specified in the four line items directly above
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ADRB as of the end of the Collection Period
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Cumulative Defaults as of the beginning of the Collection Period
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(+) Defaults during the Collection Period
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(-) Defaulted Receivables that became Rehabilitated Receivables during the Collection Period
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Cumulative Defaults at the end of the Collection Period
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Note Principal Balance as of the beginning of the Collection Period
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(+) Note principal added on the previous Advance Date
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(+) Note principal to be added on the next Advance Date
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(-) Note principal distribution
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Note Principal Balance subsequent to this Payment Date
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Overcollateralization Shortfall Test
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1) ADRB as of the end of the Collection Period less Defaulted (non-rehabilitated) Receivables
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2) Notes Principal Balance subsequent to this Payment Date less
Reserve account balance after any reduction on Payment Date
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Collateral/Principal Ratio of (1) to (2) must be greater than 102.5%
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Distribution of Collections in accordance with Section 6.03 of the Series 2010-1 Supplement:
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Funds to be transferred to the Series Collection Account as collections
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Funds to be transferred from the Borrowers Account to the Series Collection Account
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Funds not distributed from the Series Collection Account
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Total funds to be distributed from the Series Collection Account
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Annuity Receivables Limit Amount Ratio
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Annuity Receivables Amount
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Settlement Receivables Amount
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Annuity Receivables/Settlement Receivables Ratio must be less than or equal to 8%
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Imperial Settlements Financing 2010, LLC
Monthly Remittance Report
Series 2010-1
Wilmington Trust Company
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Series Issuance Date:
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Collection Period:
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Record Date:
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Distribution Date:
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Previous Advance Date:
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Next Advance Date:
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I. Distribution
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A.
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Collateral Trustee
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Balance of unpaid Collateral Trustee Fee from preceding Collection Periods
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Collateral Trustee Fee for current Collection Period (1/12 of .07% of the
Beg. ADRB for the Collection Period)
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Total Fee due
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Total Fee distributed to Collateral Trustee
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Final balance of unpaid Collateral Trustee Fee
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B.
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Master Servicing Fee Distribution (if other than an Affiliated Entity)
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Balance of unpaid Master Servicing Fee from preceding Collection Periods
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Master Servicing Fee for current Collection Period (1/12 of .18% of the
Beg. ADRB for the Collection Period)
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Total Fee distributed to Master Servicer
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Final balance of unpaid Master Servicing Fee
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C.
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Back-up Servicer Fee Distribution
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Balance of unpaid Back-up Servicing Fee from preceding Collection Periods
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Back-up Servicing Fee for current Collection Period (1/12 of .02% of the
Beg. ADRB for the Collection Period)
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Total Fee distributed to Back-up Servicer
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Final balance of unpaid Back-up Servicing Fee
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II. Fixed Interest Distribution Amount
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A.
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Notes
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Balance of unpaid Fixed Interest Distribution Amounts from preceding Collection Periods
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Notes Principal Balance following the preceding Distribution Date
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Fixed Interest Distribution Amount due (sum of the Daily Interest
Expense accrued during the Collection Period)
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Fixed Interest Distribution Amount due
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Balance available for Fixed Interest Distribution Amount due
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Fixed Interest due from Issuer Reserve Account
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Fixed Interest Distribution amount distributed
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Final balance of unpaid Fixed Interest Distribution Amount
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B.
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Reserve Account Distribution
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Specified Reserve Balance (1% of current ADRB prior to maximum funding
of $50,000,000; 1% of maximum funding thereafter)
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Current balance of Reserve Account
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Withdrawals to be made on the Payment Date (in accordance with Section
6.02 of the Supplement)
Deposits to be made on the Payment Date
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Ending balance subsequent to this Payment Date
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III. Master Servicing Fee Distribution
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A. Master Servicing Fee Distribution
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Balance of unpaid master Servicing Fee from preceding Collection Periods
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Master Servicing Fee for current Collection Period (1/12 of .18% of the Beg. ADRB for the
Collection Period)
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Total Fee to be distributed to Master Servicer
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Final balance of unpaid Master Servicing Fee
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IV. Notes Principal Distribution
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Series 2010-1 Notes
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Imperial Settlements Financing 2010, LLC
Monthly Remittance Report
Series 2010-1
Wilmington Trust Company
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Series Issuance Date:
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Collection Period:
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Record Date:
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Distribution Date:
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Previous Advance Date:
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Next Advance Date:
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V.
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Other Distributions
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A. Subsequent to distribution of Collections stated in Items I through IV above,
remaining Collection ratably, in satisfaction of remaining obligations, to
Collateral Trustee, Master Servicer and Lenders
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VI.
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Issuer Return Amount
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Issuer Return Amount due for current Collection Period (sum of the
Daily Issuer Return Amount accrued during the Collection Period)
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Issuer Return Amount paid for current Collection Period
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Master Servicer
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Imperial Settlements Financing 2010, LLC
Annex A
Cumulative Defaulted Receivables, reason for default and current status
Total Missed Payments, date of expected payment date and reason for non-payment or delay
EXHIBIT G
Model Structured Settlement Statute
See Attached
Version Agreed to by National Structured
Settlements Trade Association and Natives,
Association of Settlement Purchaser = 9/11/2000
Proposed
MODEL STATE STRUCTURED SETTLEMENT
PROTECTION ACT
SECTION 1. TITLE. This Act shall be known and referred to as the Structured
Settlement Protection Act.
SECTION 2. DEFINITIONS. For purposes of this Act
(a) annuity issuer means an insurer that has issued a contract to fund periodic
payments under a structured settlement;
(b) dependents include a payees spouse and minor children and all other persons
for whom the payee is legally obligated to provide support, including alimony;
(c) discounted present value means the present value of future payments determined
by discounting such payments to the present using the most
recently published Applicable Federal Rate for determining the present value of an
annuity, as issued by the United States Internal Revenue Service;
(G) gross advance amount means the sum payable to the payee or
for the payees account as consideration for a transfer of structured settlement payment
rights before any reductions for transfer expenses or other deductions to be made fmm
such consideration:
(e) independent professional advice means advice of an attorney,
certified public accountant, actuary or other licensed professional adviser,
(f) interested parties means, with respect to any
structured settlement, the payee, any beneficiary irrevocably designated under the
annuity contract to receive payments following the payees death, the annuity issuer, the
structured settlement obligor, and any other party that has continuing rights or
obligations under such structured settlement;
(g) net advance amount means the gross advance amount less the aggregate amount
of the actual and estimated transfer expenses required to be disclosed under Section
3(c) of this Act;
(H) payee means an individual who is receiving tax free payments
under a structured settlement and proposes to make a transfer of payment rights
thereunder;
(i) periodic payments includes both recurring payments
and scheduled future lump stun payments:
(j) qualified assignment agreement means an agreement providing for a qualified
assignment within the meaning of section 130 of the United States Internal Revenue Code,
United States Code Title 26. as amended from time to time;
(k) responsible administrative authority means, with respect to a structured
settlement, any government authority vested by law with exclusive jurisdiction over
the settled claim resolved by such structured settlement;
(1) settled claim means the original tort claim or workers
compensation claim resolved by a structured settlement;
(m) structured settlement"
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means an arrangement for periodic payment of
damages for personal injuries or sickness established by settlement or judgment in
resolution of a ton claim or for periodic payments in settlement of a
workers
compensation claim;
(n) structured settlement agreement means the agreement, judgment,
stipulation, or release embodying the terms of a structured settlement;
(o) structured settlement obligor means, with respect to any
structured settlement, the patty that has the continuing obligation to make periodic
payments to the payee under a structured settlement agreement or a qualified assignment
agreement;
(p) structured settlement payment rights means rights to receive
periodic payments under a structured settlement, whether from the structured
settlement obligor or the annuity issuer, where
(i) the payee is domiciled in, or the domicile or principal place of business
of the structured settlement obligor or the annuity issuer is located in. this
State; or
(ii) the structured settlement agreement was approved by. a court or
responsible administrative authority in this State; or
(iii) the structured settlement agreement is expressly governed by the laws
of this State;
(q) terms of the structured settlement include, with respect to any
structured settlement, the terms of the structured settlement agreement, the
-2-
annuity contract, any qualified assignment agreement and any order or
other approval of any court or responsible administrative authority or other
government authority that authorized or approved such structured settlement:
(r) transfer means any sale, assignment., pledge, hypothecation
or other alienation or encumbrance of structured settlement payment rights made by
a payee for consideration; provided that the term transfer does not include
the creation or perfection of a security interest in structured settlement
payment rights under a blanket security agreement entered into with an insured
depository institution, in the absence of any action to redirect the structured
settlement
payments to such insured depository institution, or an agent or successor in
interest thereof, or otherwise to enforce such blanket security interest
against the structured settlement payment lights;
(s) transfer agreement means the agreement providing for a transfer
of structured settlement payment rights..
(t) transfer expenses means all expenses of a transfer that arc
required under the transfer agreement to be paid by the payee or deducted
from the gross advance amount, including, without limitation, coon filing.fees,
attorneys fees, escrow fees, lien recordation fees, judgment and lien search
fees
,
finders fees, commissions, and other payments to a broker or other
intermediary; transfer expenses do not include preexisting obligations of the
payee payable for the payees account from the proceeds of a transfer:
(u) transferee means a patty acquiring or
proposing to acquire structured settlement payment rights through a transfer,
SECTION 3- REQUIRED DISCLOSURES TO PAYEE. Not less than three (3) days prior to
the date on which a payee signs a transfer agreement, the transferee shall
provide to the payee a separate disclosure statement, in bold type no smaller
than 14 points, setting forth-
(a) the amounts and due dates of the structured settlement payments to
be transferred;
(b) the aggregate amount of such payments;
-3-
(c) the discounted present value of the payments to be transfened.
which shall be identified as the calculation of current value of the
transferred structured settlement payments under federal standards for valuing
annuities. and the amount of the Applicable Federal Rate used in calculating
such discounted present value;
(d) the gross advance amount;
(e) an itemized listing of all applicable transfer expenses, other
than attorneys fees and related disbursements payable in connection with
the transferees application for approval of the transfer, and the
transferees best estimate of the amount of any such fees and
disbursements;
(f) the net advance amount;
(g) the amount of any penalties or liquidated damages payable by the
payee in the event of any breach of the transfer agreement by the
payee; and
(h) a statement that the payee has the right to cancel the transfer
agreement, without penalty or further obligation, not later than the
third business day after the date the agreement is signed by the payee.
SECTION 4. APPROVAL OF TRANSFERS OF STRUCTURED SETTLEMENT
PAYMENT RIGHTS.
(a) No direct or indirect transfer of structured settlement payment
rights shall be effective and no structured settlement obligor or
annuity issuer shall be required to make any payment directly or indirectly
to any transferee of structured settlement payment rights unless the
transfer has been approved in advance in a final court order or
order of a responsible administrative authority based on express findings by
such court or responsible administrative authority that
(i) the transfer is in the best interest of the payee, taking
into account the welfare and support of the payees dependents;
(ii) the payee has been advised in writing by the transferee to
seek independent professional advice regarding the transfer and has
either received such advice or knowingly waived such advice in writing;
and
(iii) the transfer does not contravene any applicable statute
or the order of any court or other government authority;
-4-
SECTION 5. EFFECTS OF TRANSFER OF STRUCTURED SETTLEMENT PAYMENT RIGHTS. Following a
transfer of structured settlement payment rights under this Act:
(a) The structured settlement obligor and the annuity issuer shall, as to
all parties except the transferee be discharged and released from any and all
liability for the transferred payments;
(b) The transferee shall be liable to the structured settlement obligor
and the annuity issuer
(i) if the transfer contravenes the terms of the structured settlement, for
any taxes incurred by such parties as a consequence of the transfer, and
(ii) for any other liabilities or costs, including reasonable costs and
attorneys fees, arising from compliance by such parties with the order of the
court or responsible administrative authority or arising as a consequence of the
transferees failure to comply with this Act:
(c) Neither the annuity issuer nor the structured settlement obligor
may be required to divide any periodic payment between the payee and any
transferee or assignee or between two (or more) transferees or assignees; and
(d) Any further transfer of structured settlement payment rights by the payee may
be made only after compliance with all of the requirements of this Act.
SECTION 6. PROCEDURE FOR APPROVAL OF TRANSFERS.
(a) An application under this Act for approval of a transfer of structured settlement
payment rights shall be made by the transferee and may be brought in the (county) in which
the payee resides, in the (county) in which the structured settlement obligor or the
annuity issues maintains its principal place of business, or in any court or before any
responsible administrative authority which approved the structured settlement agreement.
(b) Not less than twenty (20) days prior to the scheduled hearing on any application
for approval of a transfer of structured settlement payment rights under Section 4 of
t
his
Act, the transferee shall file with the court or responsible administrative authority and
serve on all interested parties a notice of the proposed transfer and the application for
its authorization, including with such notice:
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(i) a copy of the transferees application;
(ii) a copy of the transfer agreement;
(iii) a copy of the disclosure statement required under Section of this
Act;
(iv) a listing of each of the payees dependents, together with each
dependents age;
(v) notification that any interested party is entitled to support. oppose or
otherwise respond to the transferees application, either in person or by counsel.
by submitting written comments to the court or responsible administrative
authority or by participating in the hearing; and
(vi) notification of the time and place of the hearing and notification of
the manner in which and the time by which written responses to the application
must be filed (which shall be not less than (fifteen (15)) days alter service
of the transferees notice) in order to be considered by the court or
responsible administrative authority.
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SECTION 7_ GENERAL PROVISIONS; CONSTRUCTION.
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(a) The provisions of this Act may not be waived by any payee.
(b) Any
transfer
agreement entered into on or after the effective date of this
Act by a payee who resides in this state shall
provide the disputes under such transfer
agreement, including any claim that the payee has breached the agreement, shall be determined
in and under the laws of this State
. No such transfer agreement shall authorize the
transferee or any other party to confess judgment or consent to entry of judgment against the
payee.
(c) No transfer of structured settlement payment rights shall extend to
any payments that are life-contingent unless, prior to the date on
which the payee signs the transfer agreement, the transferee has established and
has agreed to maintain procedures reasonably satisfactory to the annuity issuer and the
structured settlement obligor for (i) periodically confirming the payees survival. and
(ii) giving the annuity issuer and the structured settlement obligor prompt
written notice in the event of the payees death.
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(d) No payee who proposes to make a transfer of structured settlement
payment rights shall incur any penalty, forfeit any application fee or other
payment, or otherwise incur any liability to the proposed transferee or any
assignee based on any failure of such transfer to satisfy the conditions of this
Act.
(e) Nothing contained in this Act shall be construed to authorize any
transfer of structured settlement payment rights in contravention of any law or
to imply
that
any transfer under a transfer agreement entered into prior to the
effective date of this Act is valid or invalid.
(f) Compliance with the requirements set forth in Section 3 of this
Act and fulfillment of the conditions set forth in Section 4 of this Act shall
be solely the responsibility of the transferee in any transfer of
structured settlement. payment rights, and neither the structured settlement
obligor nor the annuity issuer shall bear any responsibility for, or any
liability arising front, noncompliance with such requirements or failure to
fulfill such conditions.
EFFECTIVE DATE. This Act shall apply to any transfer of structured settlement payment rights
under a transfer agreement entered into on or after the [thirtieth (30th) day after the date of
enactment of this Act; provided, however, that nothing contained herein shall imply that any
transfer under a transfer agreement reached prior to such data is either effective or
ineffective.
-7-
EXHIBIT H
Form of Rule 144A Transfer Certificate
[_____], as Note Registrar and Transfer Agent
Reference is hereby made to the Master Trust Indenture, dated as of September 24, 2010, among
Imperial Settlements Financing 2010, LLC (the
Issuer
), Portfolio Financial Servicing
Company and Wilmington Trust Company (as amended, restated, supplemented or otherwise modified from
time to time, the
Indenture
), as supplemented by the Series 2010-1 Supplement to the
Indenture, dated as of September 24, 2010, among the Issuer, Portfolio Financial Servicing Company
and Wilmington Trust Company (as amended, restated, supplemented or otherwise modified from time to
time, the
Series 2010-1 Supplement
and, collectively with the Indenture, the
Agreement
). Capitalized terms used but not defined herein are used as defined in the
Agreement.
The undersigned (the
Transferor
) owns and proposes to transfer the interest[s] in
the [Regulation S Global Note[s]] [and/or] [U.S. Global Note[s]] [and/or] [Definitive Note[s]]
[and/or] [Certificated Note[s]] specified in Annex A hereto (the
Notes
), in the principal
amount[s] specified in Annex A hereto (the
Transfer
), to _____________________ (the
Transferee
), as further specified in Annex A hereto. In connection with the Transfer,
the Transferor hereby certifies that:
(a) the Transfer is being effected in accordance with transfer restrictions set forth in the
Agreement and the Notes;
(b) the Transfer is being effected pursuant to and in accordance with Rule 144A under the
Securities Act of 1933, as amended (the
Securities Act
), and, accordingly, the Transferor
hereby further certifies that:
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the Transferee is purchasing the beneficial interest for its own account, or
for one or more accounts with respect to which the Transferee exercises sole
investment discretion; and
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the Transferor reasonably believes that the Transferee and each such account
is a qualified institutional buyer within the meaning of Rule 144A.
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Upon consummation of the proposed Transfer in accordance with the terms of the Agreement, the
transferred beneficial interest will be subject to the restrictions on transfer enumerated in the
legends printed on the U.S. Global Notes by which the Transferee shall hold its interest and in the
Agreement and the Securities Act.
This certificate and the statements contained herein are made for your benefit.
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Dated:
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[Transferor]
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By:
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Name:
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Title:
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ANNEX A
The Transferor owns and proposes to transfer a beneficial interest in the following:
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Type of Note or beneficial interest to be transferred
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Principal Amount
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TRANSFEREE CERTIFICATION
FOR SERIES 2010-1 NOTES
This letter relates to the proposed acquisition by the undersigned investor (you or the
Purchaser) of $[_____] aggregate outstanding principal amount of a Series 2010-1 Note (Series
2010-1 Note) of Imperial Settlements Financing 2010, LLC (the Issuer) identified on the
signature page of this letter. Terms in this letter in
bold and italics
have the respective
meanings set forth in Annex A attached hereto.
By signing this letter, you acknowledge receipt of the offering memorandum relating to the offering
of the Series 2010-1 Notes provided by or on behalf of the Issuer, and you represent, warrant and
covenant as follows:
1. Investor certifications
Confirm the following by checking the box below:
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o
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The Purchaser is a
qualified institutional
buyer
and is aware that the acquisition of the
Notes is being made in reliance on Rule 144A
under the Securities Act
.
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2. Representations, warranties and covenants
Securities law requirements and transfer restrictions on the Series 2010-1 Notes
You understand that:
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the Series 2010-1 Notes have not been and will not be registered under the
Securities Act
,
and, if in the future you decide to offer, resell, pledge or otherwise transfer the Series
2010-1 Notes, you may do so only in the manner described in the
Agreement
relating to the
offering of the Series 2010-1 Notes, including the requirement for written certifications
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the Series 2010-1 Notes may be transferred only to a person that is an
eligible holder
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you are not acquiring the Series 2010-1 Notes with a view to the resale, distribution or
other disposition thereof in violation of the
Securities Act
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you must hold and transfer at least the minimum denomination of the Series 2010-1 Notes set
forth in the
Agreement
relating to the offering of the Series 2010-1 Notes and you must
provide notice of the relevant transfer restrictions to subsequent transferees
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Your power and authority to purchase and the enforceability of this letter
You represent that:
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you have the power and authority to execute this letter and any other document required to
be executed and delivered by you in connection with your purchase of the Series 2010-1 Notes,
and consummate the purchase of the Series 2010-1 Notes
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the person signing this letter and each document in connection with the purchase of the
Series 2010-1 Notes on behalf of the Purchaser has been duly authorized to execute and deliver
such documents
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this letter has been duly executed by the Purchaser and constitutes a valid and legally
binding agreement of the Purchaser, enforceable against the Purchaser in accordance with its
terms
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The undersigned purchaser hereby executes this letter as of the date set forth below
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(Print or type name of Purchaser)
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By:
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Name:
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Title:
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Date:
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Principal amount of Series [_____] Notes to be purchased:
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Annex A Defined Terms
Agreement
means the
Indenture
, as supplemented by the Series 2010-1 Supplement to the Indenture,
dated as of September 24, 2010, among Imperial Settlements Financing 2010, LLC, Portfolio Financial
Servicing Company and Wilmington Trust Company, as amended, restated, supplemented or otherwise
modified from time to time.
eligible holder
means (a) a
qualified institutional buyer
who purchases such Series 2010-1 Notes
in reliance on the exemption from
Securities Act
registration provided by Rule 144A thereunder, or
(b) a person that is not a
U.S. person
and is acquiring the Series 2010-1 Notes in an
offshore
transaction
in reliance on the exemption from registration provided by Regulation S thereunder or
(c) is an
institutional accredited investor
that is acquiring the Series 2010-1 Notes for its own
account or for the account of another institutional accredited investor for investment and not with
a view to, or for offer or sale in connection with, any distribution in violation of the
Securities
Act
.
Indenture
means that certain Master Trust Indenture, dated as of September 24, 2010, among
Imperial Settlements Financing 2010, LLC, Portfolio Financial Servicing Company and Wilmington
Trust Company, as amended, restated, supplemented or otherwise modified from time to time.
institutional accredited investor
means an institution that is an accredited investor as such
term is defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act
.
offshore transaction
has the meaning set forth in Regulation S under the
Securities Act
.
qualified institutional buyer
has the meaning set forth in Rule 144A under the
Securities Act
.
Securities Act
means the Securities Act of 1933, as amended.
U.S. person
has the meaning set forth in Regulation S under the
Securities Act
.
EXHIBIT I
Form of Regulation S Transfer Certificate
[_____], as Note Registrar and Transfer Agent
Reference is hereby made to the Master Trust Indenture, dated as of September 24, 2010, among
Imperial Settlements Financing 2010, LLC (the Issuer), Portfolio Financial Servicing Company, and
Wilmington Trust Company (as amended, restated, supplemented or otherwise modified from time to
time, the Indenture), as supplemented by the Series 2010-1 Supplement to the Indenture, dated as
of September 24, 2010, among the Issuer, Portfolio Financial Servicing Company and Wilmington Trust
Company (as amended, restated, supplemented or otherwise modified from time to time, the Series
2010-1 Supplement and, collectively with the Indenture, the Agreement). Capitalized terms used
but not defined herein are used as defined in the Agreement.
The undersigned (the Transferor) owns and proposes to transfer the interest[s] in the [U.S.
Global Note[s]] [and/or] [Regulation S Global Note[s]] [and/or] [Definitive Note[s]] [and/or]
[Certificated Note[s]] [and/or] [Temporary Regulation S Global Note[s]] specified in Annex A hereto
(the Notes), in the principal amount[s] specified in Annex A hereto (the Transfer), to
___________________ (the Transferee), as further specified in Annex A hereto. In connection with
the Transfer, the Transferor hereby certifies that:
(a) the Transfer is being effected in accordance with transfer restrictions set forth in the
Agreement and the Notes;
(b) the Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904
under the Securities Act of 1933, as amended (the Securities Act), and, accordingly, the
Transferor hereby further certifies that:
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(i)
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the Transfer is not being made to a U.S. Person and (x) at the
time the buy order was originated, the Transferee was outside the United States
or such Transferor and any Person acting on its behalf reasonably believed and
believes that the Transferee was outside the United States or (y) the
transaction was executed in, on or through the facilities of a designated
offshore securities market and neither such Transferor nor any Person acting on
its behalf knows that the transaction was prearranged with a buyer in the
United States; and
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(ii)
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no directed selling efforts have been made in contravention of
the requirements of Regulation S under the Securities Act.
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Upon consummation of the proposed transfer in accordance with the terms of the Agreement, the
transferred beneficial interest will be subject to the restrictions on Transfer enumerated in the
legends printed on the Regulation S Note by which the Transferee shall hold its interest and in the
Agreement and the Securities Act.
This certificate and the statements contained herein are made for your benefit.
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Dated:
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[Transferor]
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By:
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Name:
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Title:
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ANNEX A
The Transferor owns and proposes to transfer a beneficial interest in the following:
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Type of Note or beneficial interest to be transferred
|
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Principal Amount
|
TRANSFEREE CERTIFICATION
FOR SERIES 2010-1 NOTES
This letter relates to the proposed acquisition by the undersigned investor (you or the
Purchaser) of $[_____] aggregate outstanding principal amount of a Series 2010-1 Note (Series
2010-1 Note) of Imperial Settlements Financing 2010, LLC (the Issuer) identified on the
signature page of this letter. Terms in this letter in bold and italics have the respective
meanings set forth in Annex A attached hereto.
By signing this letter, you acknowledge receipt of the offering memorandum relating to the offering
of the Series 2010-1 Notes provided by or on behalf of the Issuer, and you represent, warrant and
covenant as follows:
1. Investor certifications
Confirm the following by checking the box below:
|
o
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The Purchaser is not a U.S.
Person
|
2. Representations, warranties and covenants
Securities law requirements and transfer restrictions on the Series 2010-1 Notes
You understand that:
o
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the Series 2010-1 Notes have not been and will not be registered under the Securities Act, and, if in the future you decide
to offer, resell, pledge or otherwise transfer the Series 2010-1 Notes, you may do so only in the manner described in the
Agreement relating to the offering of the Series 2010-1 Notes, including the requirement for written certifications
|
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o
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the Series 2010-1 Notes may be transferred only to a person that is an eligible holder
|
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o
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you are not acquiring the Series 2010-1 Notes with a view to the resale, distribution or other disposition thereof in
violation of the Securities Act
|
|
o
|
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you must hold and transfer at least the minimum denomination of the Series 2010-1 Notes set forth in the Agreement relating
to the offering of the Series 2010-1 Notes and you must provide notice of the relevant transfer restrictions to subsequent
transferees
|
Your power and authority to purchase and the enforceability of this letter
You represent that:
o
|
|
you have the power and authority to execute this letter and any other
document required to be executed and delivered by you in connection
with your purchase of the Series 2010-1 Notes, and consummate the
purchase of the Series 2010-1 Notes
|
|
o
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the person signing this letter and each document in connection with
the purchase of the Series 2010-1 Notes on behalf of the Purchaser has
been duly authorized to execute and deliver such documents
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|
o
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this letter has been duly executed by the Purchaser and constitutes a
valid and legally binding agreement of the Purchaser, enforceable
against the Purchaser in accordance with its terms
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The undersigned purchaser hereby executes this letter as of the date set forth below
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(Print or type name of Purchaser)
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By:
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Name:
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Title:
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Date:
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Principal amount of Series 2010-1 Notes to be purchased:
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Annex A Defined Terms
Agreement
means the Indenture, as supplemented by the Series 2010-1 Supplement to the
Indenture, dated as of September 24, 2010, among Imperial Settlements Financing 2010, LLC,
Portfolio Financial Servicing Company and Wilmington Trust Company, as amended, restated,
supplemented or otherwise modified from time to time.
eligible holder
means (a) a qualified institutional buyer who purchases such Series 2010-1 Notes
in reliance on the exemption from Securities Act registration provided by Rule 144A thereunder, or
(b) a person that is not a U.S. person and is acquiring the Series 2010-1 Notes in an offshore
transaction in reliance on the exemption from registration provided by Regulation S thereunder or
(c) is an institutional accredited investor that is acquiring the Series 2010-1 Notes for its own
account or for the account of another institutional accredited investor for investment and not with
a view to, or for offer or sale in connection with, any distribution in violation of the Securities
Act.
Indenture
means that certain Master Trust Indenture, dated as of September 24, 2010, among
Imperial Settlements Financing 2010, LLC, Portfolio Financial Servicing Company and Wilmington
Trust Company, as amended, restated, supplemented or otherwise modified from time to time.
institutional accredited investor
means an institution that is an accredited investor as such
term is defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
offshore transaction
has the meaning set forth in Regulation S under the Securities Act.
qualified institutional buyer
has the meaning set forth in Rule 144A under the Securities Act.
Securities Act
means the Securities Act of 1933, as amended.
U.S. person
has the meaning set forth in Regulation S under the
Securities Act
.
Exhibit 10.18
FINANCING AGREEMENT
Dated as of March 13, 2009
by and among
IMPERIAL LIFE FINANCING II, LLC,
as Borrower,
THE LENDERS FROM TIME TO TIME PARTY HERETO,
as Lenders,
CTL HOLDINGS II LLC,
as Collateral Agent and Administrative Agent
TABLE OF CONTENTS
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Page
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ARTICLE I DEFINITIONS; CERTAIN TERMS
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1
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Section 1.01
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Definitions
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1
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Section 1.02
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Terms Generally
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24
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Section 1.03
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Accounting and Other Terms
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25
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Section 1.04
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Time References
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25
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ARTICLE II THE LOANS
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25
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Section 2.01
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Commitments
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25
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Section 2.02
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Making the Loans
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26
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Section 2.03
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Repayment of Loans; Evidence of Debt
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27
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Section 2.04
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Interest
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27
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Section 2.05
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Reduction of Commitment; Prepayment of Loans
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28
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Section 2.06
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Fees
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30
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Section 2.07
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Securitization
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30
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Section 2.08
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Taxes
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31
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Section 2.09
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Increase in Term Loan Commitments
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33
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ARTICLE III INTENTIONALLY OMITTED
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34
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ARTICLE IV FEES, PAYMENTS AND OTHER COMPENSATION
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34
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Section 4.01
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Payments; Computations and Statements
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34
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Section 4.02
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Sharing of Payments, Etc.
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35
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Section 4.03
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Apportionment of Payments
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35
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Section 4.04
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Increased Costs and Reduced Return
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36
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ARTICLE V CONDITIONS TO LOANS
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38
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Section 5.01
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Conditions Precedent to Effectiveness
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38
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Section 5.02
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Conditions Precedent to All Loans
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41
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ARTICLE VI REPRESENTATIONS AND WARRANTIES
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43
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Section 6.01
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Representations and Warranties
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43
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ARTICLE VII COVENANTS OF THE BORROWER
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50
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Section 7.01
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Affirmative Covenants
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50
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Section 7.02
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Negative Covenants
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60
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ARTICLE VIII MANAGEMENT, COLLECTION AND STATUS OF COLLATERAL
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66
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Section 8.01
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Collections; Management of Collateral
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66
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Section 8.02
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Collateral Custodian
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68
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ARTICLE IX EVENTS OF DEFAULT
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69
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Section 9.01
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Events of Default
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69
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- i -
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Page
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ARTICLE X AGENTS
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73
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Section 10.01
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Appointment
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73
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Section 10.02
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Nature of Duties
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74
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Section 10.03
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Rights, Exculpation, Etc.
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74
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Section 10.04
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Reliance
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75
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Section 10.05
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Indemnification
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75
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Section 10.06
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Agents Individually
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76
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Section 10.07
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Successor Agent
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76
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Section 10.08
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Collateral Matters
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76
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Section 10.09
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Agency for Perfection
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78
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Section 10.10
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No Reliance on any Agents Customer Identification Program
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78
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ARTICLE XI SERVICER TERMINATION EVENTS
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78
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Section 11.01
|
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Servicer Termination Event
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78
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ARTICLE XII MISCELLANEOUS
|
|
79
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Section 12.01
|
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Notices, Etc.
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79
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Section 12.02
|
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Amendments, Etc.
|
|
80
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Section 12.03
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No Waiver; Remedies, Etc.
|
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81
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Section 12.04
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Expenses; Taxes; Attorneys Fees
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81
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Section 12.05
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|
Right of Set-off
|
|
82
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Section 12.06
|
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Severability
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|
82
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Section 12.07
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Assignments and Participations
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83
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Section 12.08
|
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Counterparts
|
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85
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Section 12.09
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GOVERNING LAW
|
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85
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Section 12.10
|
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CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE
|
|
85
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Section 12.11
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WAIVER OF JURY TRIAL, ETC.
|
|
86
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Section 12.12
|
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Consent by the Agents and Lenders
|
|
87
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Section 12.13
|
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No Party Deemed Drafter
|
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87
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Section 12.14
|
|
Reinstatement; Certain Payments
|
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87
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Section 12.15
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Indemnification
|
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87
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Section 12.16
|
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Records
|
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88
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Section 12.17
|
|
Binding Effect
|
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88
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Section 12.18
|
|
Interest
|
|
88
|
|
Section 12.19
|
|
Confidentiality
|
|
89
|
|
Section 12.20
|
|
Public Disclosure
|
|
90
|
|
Section 12.21
|
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Integration
|
|
90
|
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Section 12.22
|
|
USA PATRIOT Act
|
|
90
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- ii -
SCHEDULE AND EXHIBITS
|
|
|
Schedule 1.01(A)
|
|
Lenders and Lenders Commitments
|
Schedule 1.01(B)
|
|
Applicable Non-Licensed States
|
Schedule 1.01(C)
|
|
Applicable Licensed States
|
Schedule 1.01(D)
|
|
Loan Schedule
|
Schedule 5.02(e)
|
|
Delivery of Documents
|
Schedule 6.01(e)
|
|
Capitalization
|
Schedule 6.01(q)
|
|
Insurance
|
Schedule 6.01(t)
|
|
Bank Accounts
|
Schedule 6.01(u)
|
|
Intellectual Property
|
Schedule 6.01(v)
|
|
Material Contracts
|
Schedule 6.01(aa)
|
|
Name; Jurisdiction of Organization; Organizational ID
Number; Chief Place of Business; Chief Executive Office;
FEIN
|
Schedule 6.01(bb)
|
|
Collateral Locations
|
Schedule 8.01
|
|
Cash Management Bank and Collection Account
|
|
|
|
Exhibit A
|
|
Form of Security Agreement
|
Exhibit B
|
|
Form of Notice of Borrowing
|
Exhibit C
|
|
Form of Assignment and Acceptance
|
Exhibit D
|
|
Form of Individual Guaranty
|
Exhibit E
|
|
Form of Guarantor Security Agreement
|
Exhibit F
|
|
Loan Document Package
|
Exhibit G
|
|
Form of Borrowing Base Certificate
|
Exhibit H
|
|
Form of Local Counsel Opinion
|
Exhibit I
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Form of Insurance Premium Loan Sale and Assignment Agreement
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Exhibit J
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Form of Master Participation Agreement
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FINANCING AGREEMENT
Financing Agreement, dated as of March 13, 2009 by and among Imperial Life Financing II, LLC,
a Georgia limited liability company (the
Borrower
), the lenders from time to time party
hereto (each a
Lender
and collectively, the
Lenders
), CTL Holdings II LLC, a
Georgia limited liability company (
CTL
), as collateral agent for the Lenders (in such
capacity, the
Collateral Agent
), and CTL Holdings II, LLC, a Georgia limited liability
company, as administrative agent for the Lenders (in such capacity, the
Administrative
Agent
and together with the Collateral Agent, each an
Agent
and collectively, the
Agents
).
RECITALS
The Borrower has asked the Lenders to extend credit to the Borrower consisting of a multi-draw
term loan in the aggregate principal amount not to exceed $15,000,000. The proceeds of the term
loan shall be used to purchase participations in Eligible Insurance Premium Loans (as defined
herein) pursuant to the Master Participation Agreement (as defined herein), purchase Eligible
Insurance Premium Loans pursuant to each Insurance Premium Loan Sale and Assignment Agreement (as
defined herein) and to pay fees and expenses related to this Agreement. The Lenders are severally,
and not jointly, willing to extend such credit to the Borrower subject to the terms and conditions
hereinafter set forth.
In consideration of the premises and the covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS; CERTAIN TERMS
Section 1.01
Definitions
. As used in this Agreement, the following terms shall have
the respective meanings indicated below, such meanings to be applicable equally to both the
singular and plural forms of such terms:
Action
has the meaning specified therefor in Section 12.12.
Additional Amount
has the meaning specified therefor in Section 2.08(a).
Administrative Agent
has the meaning specified therefor in the preamble hereto.
Administrative Agents Account
means an account at a bank designated by the
Administrative Agent from time to time as the account into which the Borrower shall make all
payments to the Administrative Agent for the benefit of the Agents and the Lenders under this
Agreement and the other Loan Documents.
Affiliate
means, with respect to any Person, any other Person that directly or
indirectly through one or more intermediaries, controls, is controlled by, or is under common
control with, such Person. For purposes of this definition, control of a Person means the power,
directly or indirectly, either to (a) vote 10% or more of the Equity Interests having ordinary
voting power for the election of members of the Board of Directors of such Person or (b) direct or
cause
the direction of the management and policies of such Person whether by contract or otherwise.
Notwithstanding anything herein to the contrary, in no event shall any Agent or any Lender be
considered an Affiliate of any Credit Party.
Agent
has the meaning specified therefor in the preamble hereto.
Agreement
means this Financing Agreement, including all amendments, modifications
and supplements and any exhibits or schedules to any of the foregoing, and shall refer to the
Agreement as the same may be in effect at the time such reference becomes operative.
Aggregate Interest Amount
means the maximum amount of interest payable with respect
to a Covered Loan in accordance with the Collateral Value Policy.
Anti-Terrorism Laws
means any laws relating to terrorism or money laundering,
including Executive Order No. 13224, the USA PATRIOT Act, the laws comprising or implementing the
Bank Secrecy Act, and the laws administered by the United States Treasury Departments Office of
Foreign Asset Control (as any of the foregoing laws may from time to time be amended, renewed,
extended, or replaced).
Applicable Licensed State
means each State within the United States wherein the
Originator is duly licensed and authorized by all applicable law to originate life insurance
premium finance loans and otherwise conduct the business and activities related thereto and as
contemplated by the Loan Documents and the Transaction Documents, as evidenced by a Local Counsel
Opinion delivered to the Collateral Agent. Each Applicable Licensed State on the Effective Date is
listed on Schedule 1.01(C) attached hereto.
Applicable Non-Licensed State
means each State within the United States wherein the
Originator is not required to be duly licensed and authorized by all applicable law to originate
life insurance premium finance loans and otherwise conduct the business and activities related
thereto and as contemplated by the Loan Documents and the Transaction Documents, as evidenced by a
Local Counsel Opinion delivered to the Collateral Agent. Each Applicable Non-Licensed State on the
Effective Date is listed on Schedule 1.01(B) attached hereto.
Assignment and Acceptance
means an assignment and acceptance entered into by an
assigning Lender and an assignee in accordance with Section 12.07 hereof and substantially in the
form of Exhibit C hereto.
Authorized Officer
means, with respect to any Person, the chief executive officer,
chief financial officer, or president of such Person.
Back-Up Servicer
means an institutional servicer or financial institution acceptable
to the Agents.
Back-Up Servicing Agreement
means the Back-Up Servicing Agreement, by and among the
Back-Up Servicer and the Borrower, in form and substance satisfactory to the Agents, as the same
may be amended, amended and restated, supplemented or otherwise modified from time to time in
accordance with this Agreement.
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Bankruptcy Code
means the United States Bankruptcy Code (11 U.S.C. § 101,
et
seq
.), as amended, and any successor statute.
Blocked Person
has the meaning assigned to such term in Section 6.01(dd).
Board
means the Board of Governors of the Federal Reserve System of the United
States.
Board of Directors
means, (i) with respect to any corporation, the board of
directors of the corporation or any committee thereof duly authorized to act on behalf of such
board, (iii) with respect to a partnership, the board of directors of the general partner of the
partnership, (iii) with respect to a limited liability company, the managing member or members or
any controlling committee or board of directors of such company or the sole member or the managing
member thereof, and (iv) with respect to any other Person, the board or committee of such Person
serving a similar function.
Borrower
has the meaning specified therefor in the preamble hereto.
Borrowing Base
means, at any time of determination, an amount equal to one hundred
percent (100%) of the present value of the aggregate of: (i) the aggregate outstanding principal
balance of all Eligible Insurance Premium Loans financed hereunder at such time, plus (ii) the sum
of all financed Origination Fees with respect to such Insurance Premium Loans, plus (iii) the
aggregate of the Collateral Value Policy and Contingent Collateral Value Policy premium
reimbursement amounts payable, directly or indirectly, by the Premium Finance Borrowers to the
Originator or the Borrower in respect of such Insurance Premium Loans, to the extent financed
hereunder, plus (iv) the amount of interest that is reasonably expected to be due on the scheduled
maturity dates of the Eligible Insurance Premium Loans financed hereunder at such time; provided
that, the Borrowing Base shall not at anytime exceed 100% of the present value of the sum of (A)
the aggregate of the Covered Loan Amount of all Eligible Insurance Premium Loans owned (actually,
beneficially or through a participation) by the Borrower and pledged as Collateral for the Loans
hereunder and the Loan Documents and in which the Collateral Agent has for the benefit of the
Agents and the Lenders a perfected first priority lien and (B) the Aggregate Interest Amount of
each Insurance Premium Loan at the maturity date of each such Insurance Premium Loan. For purposes
of determining present value, a discount rate of twenty-two and 25/1000 percent (22.025%) shall be
used and the amounts shall be present valued back to (i) in the case of the Eligible Insurance
Premium Loans to be financed by Loans hereunder on such date, January 30, 2009 and (ii) in all
other cases, the date of the determination.
Borrowing Base Certificate
means a certificate signed by an Authorized Officer of
the Borrower and setting forth the calculation of the Borrowing Base in compliance with Section
7.01(a)(vi), substantially in the form of Exhibit G.
Borrowing Base Deficit
means, at any time of determination, the extent to which (a)
the aggregate outstanding principal balance of all Loans hereunder at such time (including the PIK
Interest Amount), exceeds (b) an amount equal to the sum of the Borrowing Base, plus amounts then
on deposit in the Collection Account and available for application to the payment of principal in
respect of the Loans outstanding at such time.
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Business Day
means any day other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required to close.
Capital Expenditures
means, with respect to any Person for any period, the sum of
(i) the aggregate of all expenditures by such Person and its Subsidiaries during such period that
in accordance with GAAP are or should be included in property, plant and equipment or in a
similar fixed asset account on its balance sheet, whether such expenditures are paid in cash or
financed and including all Capitalized Lease Obligations paid or payable during such period, and
(ii) to the extent not covered by clause (i) above, the aggregate of all expenditures by such
Person and its Subsidiaries during such period to acquire by purchase or otherwise the business or
fixed assets of, or the Equity Interests of, any other Person.
Capitalized Lease
means, with respect to any Person, any lease of real or personal
property by such Person as lessee which is (i) required under GAAP to be capitalized on the balance
sheet of such Person or (ii) a transaction of a type commonly known as a synthetic lease (i.e. a
lease transaction that is treated as an operating lease for accounting purposes but with respect to
which payments of rent are intended to be treated as payments of principal and interest on a loan
for Federal income tax purposes).
Capitalized Lease Obligations
means, with respect to any Person, obligations of such
Person and its Subsidiaries under Capitalized Leases, and, for purposes hereof, the amount of any
such obligation shall be the capitalized amount thereof determined in accordance with GAAP.
Cash Management Agreement
means a deposit account control agreement, in form and
substance reasonably satisfactory to the Agents, each of which is among the Collateral Agent and
the Cash Management Bank.
Cash Management Bank
has the meaning specified therefor in Section 8.01(a).
Change in Law
has the meaning specified therefor in Section 4.04(a).
Change of Control
means each occurrence of any of the following:
(a) Imperial or Affiliates of Imperial cease beneficially and of record to own, directly or
indirectly, 100% of the aggregate outstanding voting power of the Equity Interests of the
Originator and Borrower free and clear of any Lien;
(b) any sale, exchange, lease or transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of the Borrower or the Originator;
(c) during any period of two consecutive years, individuals who at the beginning of such
period constituted the Board of Directors of the Borrower (together with any new directors whose
election by such Board of Directors or whose nomination for election by the shareholders of the
Borrower was approved by a vote of at least a majority the directors of the Borrower then still in
office who were either directors at the beginning of such period, or whose election or nomination
for election was previously approved) cease for any reason to constitute a majority of the Board of
Directors of the Borrower;
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(d) (i) any of the Borrower or the Originator consolidates or amalgamates with or merges into
another entity, or (ii) any entity consolidates or amalgamates with or merges into any of the
Borrower or the Originator in a transaction pursuant to which the outstanding voting Equity
Interests of such Person is reclassified or changed into or exchanged for cash, securities or other
property, other than any such transaction described in this clause (ii) in which either (A) in the
case of any such transaction involving the Originator, no person or group (within the meaning of
Section 13(d)(3) of the Exchange Act) other than the Person holding a majority of the aggregate
outstanding voting Equity Interests of the Originator prior to such transaction has, directly or
indirectly, acquired beneficial ownership of more than a majority of the aggregate outstanding
voting Equity Interests of such Person or (B) in the case of any such transaction involving the
Borrower, Imperial has, or Affiliates of Imperial have, beneficial ownership of 100% of the
aggregate voting power of all Equity Interests of the resulting, surviving or transferee entity; or
(e) either Jonathan Neuman or Antony Mitchell shall cease to be involved in the day to day
operations and management of the business of the Originator and/or the Borrower, and a successor
reasonably acceptable to the Collateral Agent and the Lenders is not appointed on terms reasonably
acceptable to the Collateral Agent and the Lenders within 30 days of such cessation of involvement.
Collateral
means all of the property and assets and all interests therein and
proceeds thereof now owned or hereafter acquired by any Person upon which a Lien is granted or
purported to be granted by such Person as security for all or any part of the Obligations.
Collateral Agent
has the meaning specified therefor in the preamble hereto.
Collateral Agent Advances
has the meaning specified therefor in Section 10.08(a).
Collateral Agency Agreement
means the Collateral Agency Agreement, dated as of the
date hereof, among the Originator, the Borrower, the Insurance Collateral Agent and the Collateral
Agent, as such agreement may be amended, supplemented or otherwise modified from time to time in
accordance with this Agreement.
Collateral Value Insurer
means (i) Lexington Insurance Company and (ii) any other
insurance company organized and licensed in the United States or any State, whose claims paying
ability is rated at least A- by Standard & Poors and at least A- by Fitch, Inc. and that is
acceptable to the Agents and the Required Lenders.
Collateral Value Policy
means that certain Lender Protection Insurance Policy
7113486, dated March 13, 2009, issued by the Collateral Value Insurer with respect to the Insurance
Premium Loans, in form and substance satisfactory to the Agents, as the same may be amended or
supplemented, from time to time in accordance with the terms thereof and this Agreement, and all
Coverage Certificates and other documents executed in connection therewith and related thereto.
Collection Account
means that certain bank account, referred to as the Imperial
Life Financing II, LLC Collection Account and pledged pursuant to the Security Agreement,
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maintained at the Cash Management Bank, for the purpose of receiving Collections and which is
subject to a Cash Management Agreement, or with respect to which a security interest has otherwise
been created and perfected in a manner acceptable to the Collateral Agent.
Collections
means, with respect to any Insurance Premium Loan, all funds (a) that
are received by the Servicer, the Originator, the Borrower and the Insurance Collateral Agent or
any other Person on their behalf, from or on behalf of the related Premium Finance Borrowers in
payment or repayment of any amounts owed to the Borrower (including, without limitation, principal,
finance charges, interest, prepayment fees, termination fees, prepayments by any Premium Finance
Borrower and all other amounts and charges) in respect of such Insurance Premium Loan or the
related Life Insurance Policy, (b) applied to such amounts owed by such Premium Finance Borrowers
(including, without limitation, as a result of the sale or other disposition of, or receipt of
death benefits in connection with, the related Life Insurance Policy securing such Insurance
Premium Loan or other collateral or property of the Premium Finance Borrower or any other party
directly or indirectly liable for payment of such Insurance Premium Loan and available to be
applied thereon), (c) that are received by Servicer, the Originator, the Borrower, the Insurance
Collateral Agent, any of their Affiliates or any other Person on their behalf, from or on behalf of
the related Premium Finance Borrowers in payment of amounts refunded by the Insurance Provider in
respect of premiums, (d) received by the Borrower from the Collateral Value Insurer under the
Collateral Value Policy or from the Contingent Collateral Value Insurer under the Contingent
Collateral Value Policy, and (e) any and all other collections or proceeds received on or in
respect of the sale, disposition, repayment, prepayment, or otherwise in connection with any such
Insurance Premium Loan and/or the related Life Insurance Policy (including, without limitation, all
principal or interest payments, sale or purchase price payments, and all broker, agent and other
fees received by or payable to the Servicer, the Originator, the Borrower, the Insurance Collateral
Agent or any of their Affiliates, in connection with such sale, disposition or otherwise, together
with all amounts, if any, payable in respect thereof and maintained in or distributed from any
escrow or similar account).
Commitment Increase
has the meaning specified therefor in Section 2.09.
Commitments
means, with respect to each Lender, such Lenders Term Loan Commitment.
Contingent Collateral Value Insurer
means (i) National Fire & Marine Insurance
Company and (ii) any other insurance company organized and licensed in the United States or any
State, whose claims paying ability is rated at least AA+ by Standard & Poors and at least AA+ by
Fitch, Inc. and that is acceptable to the Agents and the Required Lenders.
Contingent Collateral Value Policy
means that certain Contingent Lender Protection
Insurance Policy No. 92 SRD 102507, dated March 13, 2009, issued by the Contingent Collateral Value
Insurer with respect to the Insurance Premium Loans, in form and substance satisfactory to the
Agents, as the same may be amended or supplemented, from time to time in accordance with the terms
thereof and this Agreement.
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Contingent Obligation
means, with respect to any Person, any obligation of such
Person guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other
obligations (primary obligations) of any other Person (the primary obligor) in any manner,
whether directly or indirectly, including, without limitation, (i) the direct or indirect guaranty,
endorsement (other than for collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of the obligation of a primary
obligor, (ii) the obligation to make take-or-pay or similar payments, if required, regardless of
nonperformance by any other party or parties to an agreement, (iii) any obligation of such Person,
whether or not contingent, (A) to purchase any such primary obligation or any property constituting
direct or indirect security therefor, (B) to advance or supply funds (1) for the purchase or
payment of any such primary obligation or (2) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (C) to
purchase property, assets, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make payment of such
primary obligation or (D) otherwise to assure or hold harmless the holder of such primary
obligation against loss in respect thereof;
provided
,
however
, that the term
Contingent Obligation shall not include any product warranties extended in the ordinary course of
business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation with respect to which such Contingent
Obligation is made (or, if less, the maximum amount of such primary obligation for which such
Person may be liable pursuant to the terms of the instrument evidencing such Contingent Obligation)
or, if not stated or determinable, the maximum reasonably anticipated liability with respect
thereto (assuming such Person is required to perform thereunder), as determined by such Person in
good faith.
Contractual Obligation
means, as to any Person, any provision of any security issued
by such Person or of any agreement, instrument or other undertaking to which such Person is a party
or by which it or any of its property is bound.
Coverage Certificate
means, with respect to any Covered Loan, the certificate issued
by the Collateral Value Insurer with respect thereto certifying coverage for such Covered Loan
under the terms of the Collateral Value Policy.
Covered Loan
means each Insurance Premium Loan which is specified by the Collateral
Value Insurer as being covered under the Collateral Value Policy as evidenced by a Coverage
Certificate.
Credit Event
has the meaning assigned thereto in the Collateral Value Policy.
Credit Party
means the Borrower, any Individual Guarantor and the Equity Guarantor.
Covered Loan Amount
means with respect to each Covered Loan, the amount set forth as
such on the related Coverage Certificate;
provided
that the Covered Loan Amount for any
Covered Loan shall not include any portion of the proceeds of the related Insurance Premium Loan
used to pay the insurance premium on the related Life Insurance Policy for any period after the
sixtieth (60th) day after the related Insurance Premium Loan Maturity Date.
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Covered Portion of an Insurance Premium Loan
means that portion of an Eligible
Insurance Premium Loan that is a Covered Loan under the Collateral Value Policy.
Default
means an event which, with the giving of notice or the lapse of time or
both, would constitute an Event of Default.
Disposition
means any transaction, or series of related transactions, pursuant to
which any Person or any of its Subsidiaries sells, assigns, transfers or otherwise disposes of any
property or assets (whether now owned or hereafter acquired) to any other Person, in each case,
whether or not the consideration therefor consists of cash, securities or other assets owned by the
acquiring Person.
Dollar
,
Dollars
and the symbol
$
each means lawful money of the
United States of America.
Effective Date
means the date, on or before March 31, 2009, on which all of the
conditions precedent set forth in Section 5.01 are satisfied or waived or the initial Loans are
made.
Eligible Insurance Premium Loan
means an Insurance Premium Loan:
(a) that (i) accrues interest at a
per
annum
rate of not less than 11%, (ii)
that has an Origination Fee of (x) not less than 0% and (y) not greater than 10% (in either case,
multiplied by the maximum principal balance of the Insurance Premium Finance Loan), (iii) permits
the pass-through, directly or indirectly, of the premiums payable to the Collateral Value Insurer
and the Contingent Collateral Value Insurer in respect of such Insurance Premium Loan (for
avoidance of doubt, an indirect pass-through which includes adding the premiums to the amount of
the Origination Fee is permissible) and (iv) if repaid or prepaid prior to the applicable maturity
thereof and not as a result of the death of the Underlying Life, requires, to the extent permitted
by applicable law, the payment of a yield maintenance fee designed to capture the yield spread
between the interest rate payable under the Insurance Premium Finance Loan (absent repayment or
prepayment) and the interest rate receivable on U.S. government obligations having maturities
closely matching the original maturity date of the related Insurance Premium Finance Loan;
provided
, that such yield maintenance fee does not result in the Premium Finance Borrower
paying more than it would have paid in full satisfaction of such Insurance Premium Loan at the
original maturity date of such Insurance Premium Finance Loan;
(b) for which the Underlying Life is a United States resident or has a United States social
security number and is not an Affiliate or employee of the Originator, the Borrower or any of their
Affiliates;
(c) the assignment of which (or any interest therein) to the Borrower or the Lenders does not
contravene or conflict with any law, rule or regulation or any contractual or other restriction,
limitation or encumbrance, and the sale or assignment of which to the Borrower or the Lenders does
not require the consent of the Premium Finance Borrower thereof;
(d) that is denominated and payable only in Dollars;
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(e) that is in full force and effect and constitutes the legal, valid and binding obligation
of the Premium Finance Borrower of such Insurance Premium Loan enforceable against such Premium
Finance Borrower in accordance with its terms and is not subject to any dispute, offset,
counterclaim or defense whatsoever;
(f) that does not, and the origination thereof did not, contravene any laws, rules or
regulations applicable thereto (including, without limitation, laws, rules and regulations relating
to usury, truth in lending, fair credit billing, fair credit reporting, equal credit opportunity,
fair debt collection practices and privacy) and with respect to which, no party thereto is in
violation of any such law, rule or regulation if such violation would impair the collectability of
such Insurance Premium Loan or any related security (including the applicable Life Insurance
Policy);
(g) as to which the Insurance Collateral Agents and/or the Collateral Agents (in each case,
for the benefit of the Agents and the Lenders) first priority security interest in such Insurance
Premium Loan and all the Originators and the Borrowers rights in the related security, has been
perfected under the applicable UCC and other applicable laws;
(h) as to which, the Insurance Collateral Agent shall be in possession of the original of such
Insurance Premium Loan and all other items in the Loan Documentation Package with respect thereto;
(i) for which the principal balance thereof plus anticipated finance charges through maturity,
including origination fees discounted at 22.025% from January 30, 2009 to the scheduled maturity
date, totals at least $50,000, but is not in excess of $1,000,000;
(j) that has a term to maturity of no greater than 48 calendar months from the date of
origination thereof;
provided
,
however
, that no Insurance Premium Loan or portion
thereof financed or to be financed hereunder shall have a maturity date later than the earlier of
(i) 26 months from the date such Insurance Premium Loan first becomes an Eligible Insurance Premium
Loan and (ii) the Final Maturity Date;
provided
that no Insurance Premium Loan or portion
thereof shall be an Eligible Insurance Premium Loan for purposes hereof unless it is a Covered Loan
or a Covered Portion of an Insurance Premium Loan, as the case may be, at all times until its
maturity date;
(k) as to which the issuing insurance company of the related Life Insurance Policy is
organized in the United States or any State and licensed by the United States or any State and
whose claims paying ability is rated at least A+ by Standard & Poors, at least A3 by Moodys, at
least A by AM Best or at least A+ by Fitch;
provided
, that such issuing insurance companys
claims paying ability must satisfy the applicable ratings set forth in this clause (k) of at least
two of the rating agencies set forth herein;
(l) as to which the Maturity Principal Balance of all Insurance Premium Loans secured by Life
Insurance Policies issued by any single issuing insurance company does not exceed 20% of the
Maturity Principal Balance of all Eligible Insurance Premium Loans;
provided
, that such
percentage shall be increased to 30% of the Maturity Principal Balance of all Eligible Insurance
Premium Loans if such issuing insurance companys claims paying ability is
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rated at least one level higher than the applicable ratings set forth in clause (k) above by
at least two of the rating agencies set forth therein;
provided
further
, that this
clause (l) shall be inapplicable until the principal amount of Loans outstanding under the
Financing Agreement equals or exceeds $5,000,000;
(m) as to which all documents within the related Loan Document Package are, by their terms,
governed by the laws of one or more Applicable Licensed States or Applicable Non-Licensed States
and the related Premium Finance Borrower and irrevocable life insurance trust are, in each case,
duly organized and existing under the laws of one or more Applicable Licensed States or Applicable
Non-Licensed States;
(n) which is evidenced by a Note and Security Agreement, collateral assignment and other
documents in the related Loan Document Package substantially in the form of Exhibit F, or in such
other form consented to in writing by the Agents;
(o) for which the related Premium Finance Borrower (or if the borrower is a trust, then the
grantor, settlor, or beneficiary thereof), or the life covered by the insurance, or the spouse or
beneficiary of such life, must be (i) a Code Section 501(c)(3) corporation or similar business
trust or partnership with assets in excess of $5 million and that is organized in an Applicable
Licensed State or Applicable Non-Licensed State, (ii) a natural person or spouses whose net worth
exceeds $1,000,000, or (iii) (a) a natural person whose net income exceeded $200,000 in the last
two years or (b) spouses with joint income exceeding $300,000 in the last two years, in either
case, with a reasonable expectation of reaching that level in the current year;
(p) as to which the aggregate face amounts of Life Insurance Policies securing such loan shall
be denominated and payable in Dollars and not be less than $500,000 and shall not exceed $50
million;
(q) for which the Insurance Collateral Agent shall have received either (1) a collateral
assignment of the related Life Insurance Policy (which assignment shall be made as contemplated by
the Loan Document Package and shall be free and clear of all adverse claims) or (2) a pledge of the
beneficial interests in the Premium Finance Borrower, and the related Premium Finance Borrower
and/or Insurance Provider shall have been instructed, and shall have agreed, to make payments with
respect thereto to the Collection Account;
(r) as to which the applicable insured, on the date of the issuance of the Life Insurance
Policy with respect to such Insurance Premium Loan, has a minimum net worth of at least $1,000,000
and must be at least 60 years old on the maturity date of the related Insurance Premium Loan;
(s) as to which the related Life Insurance Policy with respect to such Insurance Premium Loan
is any form or blend of coverage, provided that a term policy has a term conversion privilege;
(t) as to which pursuant to the express terms of the related contract for life insurance there
is at least a 30-day grace period from the date any premiums are due and the date such Life
Insurance Policy (and right to the related death benefit) expires, during which such Life Insurance
Policy will remain in full force and effect;
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(u) that is, and at all times continues to be, a Covered Loan or the Covered Portion of an
Insurance Premium Loan under the Collateral Value Policy and the Contingent Collateral Value
Policy, the Coverage Certificate with respect to the Collateral Value Policy has been delivered to
the Collateral Agent and the applicable Free Look Period (as defined in the Collateral Value
Policy) has expired;
(v) as to which the owner of the related Life Insurance Policy with respect to such Insurance
Premium Loan and the related Borrower had an insurable interest in the life of the applicable
insured at the time such Life Insurance Policy was issued and delivered by the issuing insurance
company and became effective and on the date such Insurance Premium Loan was made;
(w) for which that the Borrower, the Originator or any of their Affiliates have not previously
(i) provided an insurance premium loan or similar product to the Premium Finance Borrower or (ii)
financed a Life Insurance Policy on the same Underlying Life, except pursuant to a series of
related transactions on the same Underlying Life, but excluding any Insurance Premium Loan that
refinances another Insurance Premium Loan; provided, that an Insurance Premium Loan that refinances
another Insurance Premium Loan to the Premium Finance Borrower shall be permitted under this clause
(w) so long as (A) such Insurance Premium Loan being refinanced was never a Covered Loan and (B)
the Insurance Premium Loan Maturity Date of such new Insurance Premium Loan is not later than the
minimum maturity date required by the Collateral Value Insurer for such Insurance Premium Loan to
qualify as a Covered Loan;
(x) that has been made to the Insurance Premium Borrower prior to the date of the applicable
Tranche of Term Loan to be made under this Agreement, the proceeds of which will be used to
purchase by participation or assignment such Insurance Premium Loan;
(y) for which the related Premium Finance Borrower must be a trust that has an institutional
trustee or financial institution acceptable to the Agents as trustee or co-trustee under the
related Trust Agreement and such Trust Agreement has not been amended, supplemented or otherwise
modified after the making of the related Insurance Premium Loan without the consent of the Agents;
(z) financed hereunder the payment obligations with respect to which, for any reason, have
been not disputed or are otherwise enforceable and for which insurance coverage is provided by the
Collateral Value Insurer and the Contingent Collateral Value Insurer;
(aa) for which the premium with respect to the related Life Insurance Policy shall have either
(i) been paid to the applicable Insurance Provider or (ii) placed into escrow under the Trust
Agreement pursuant to escrow arrangements satisfactory to the Agents, in each case, in an amount
sufficient to result in such Life Insurance Policy remaining continuously in effect through the
sixtieth (60th) day after the Insurance Premium Loan Maturity Date;
provided
,
however
, that this condition shall be deemed to be satisfied if the aggregate amount of
premium paid to the applicable Insurance Provider with respect to the related Life
11
Insurance Policy prior to the lapse of such Life Insurance Policy equals the Total Life
Insurance Premium set forth in the applicable Coverage Certificate;
(bb) that satisfies all terms and conditions set forth in the Master Participation Agreement
and/or an Insurance Premium Loan Sale and Assignment Agreement; and
(cc) for which the Agents shall have received a duly executed certificate from the related
Premium Finance Borrower certifying that such Premium Finance Borrower has (i) no knowledge of the
commission of a Prohibited Act (as defined in the Collateral Value Policy) in connection with such
Insurance Premium Loan and (ii) not participated in any Prohibited Act in connection with such
Insurance Premium Loan.
Eligibility Certification
means the written certification of the Originator and the
Borrower stating that a specific Insurance Premium Loan satisfies the elements of the definition of
Eligible Insurance Premium Loan set forth herein.
Employee Plan
means an employee benefit plan (other than a Multiemployer Plan)
covered by Title IV of ERISA and maintained (or that was maintained at any time during the six (6)
calendar years preceding the date of any borrowing hereunder) for employees of the Borrower.
Equity Guarantor
means Imperial Premium Finance, LLC, a Florida limited liability
company, which owns 100% of the Equity Interests of the Borrower.
Equity Interest
means (a) with respect to any Person that is a corporation, any and
all shares, interests, participations or other equivalents (however designated and whether or not
voting) of corporate stock, and (b) with respect to any Person that is not a corporation, any and
all partnership, membership or other equity interests of such Person.
Equity Issuance
means either (a) the sale or issuance by the Borrower of any shares
of its Equity Interests or (b) the receipt by the Borrower of any cash capital contributions.
ERISA
means the Employee Retirement Income Security Act of 1974, as amended, and any
successor statute of similar import, and regulations thereunder, in each case, as in effect from
time to time. References to sections of ERISA shall be construed also to refer to any successor
sections.
Escrow Agreement
means an Escrow Agreement, by and among a financial institution
reasonably acceptable to the Agents, a Premium Finance Borrower and the Originator, in form and
substance satisfactory to the Agents, as the same may be amended, amended and restated,
supplemented or otherwise modified from time to time in accordance with this Agreement.
Event of Default
means any of the events set forth in Section 9.01.
Exchange Act
means the Securities Exchange Act of 1934, as amended.
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Executive Order No. 13224
means the Executive Order No. 13224 on Terrorist
Financing, effective September 24, 2001, as the same has been, or shall hereafter be, renewed,
extended, amended or replaced.
Federal Funds Rate
means, for any period, a fluctuating interest rate per annum
equal to, for each day during such period, the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the quotations for
such day on such transactions received by the Administrative Agent from three Federal funds brokers
of recognized standing selected by it.
Final Maturity Date
means the earliest of (i) September 30, 2011, (ii) the date on
which all Loans shall become due and payable in accordance with the terms of this Agreement, and
(iii) the payment in full of all Obligations and the termination of all Commitments.
Financial Statements
means (i) the audited consolidated balance sheet of Imperial
and its Subsidiaries for the Fiscal Year ended December 31, 2007, and the related consolidated
statement of operations, shareholders equity and cash flows for the Fiscal Year then ended, (ii)
the unaudited consolidated balance sheet of Imperial and its Subsidiaries for the Fiscal Year ended
December 31, 2008, and the related consolidated statement of operations, shareholders equity and
cash flows for the Fiscal Year then ended, and (iii) the unaudited consolidated balance sheet of
the Imperial and its Subsidiaries for the one month ended January 31, 2009, and the related
consolidated statement of operations, shareholders equity and cash flows for the month then ended.
Fiscal Year
means the fiscal year of the Borrower ending on December 31st of each
year.
GAAP
means generally accepted accounting principles in effect from time to time in
the United States, applied on a consistent basis.
Governing Documents
means, (a) with respect to any corporation, the certificate or
articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with
respect to any non-U. S. jurisdiction); (b) with respect to any limited liability company, the
certificate or articles of formation or organization, and the operating agreement; (c) with respect
to any partnership, joint venture, trust or other form of business entity, the partnership, joint
venture agreement, declaration or other applicable agreement or documentation evidencing or
otherwise relating to its formation or organization; and (d) with respect to any of the entities
described above, any other agreement, instrument, filing or notice with respect thereto filed in
connection with its formation or organization with the applicable Governmental Authority in the
jurisdiction of its formation or organization.
Governmental Authority
means any nation or government, any Federal, state, city,
town, municipality, county, local or other political subdivision thereof or thereto and any
department, commission, board, bureau, instrumentality, agency or other entity exercising
13
executive, legislative, judicial, taxing, regulatory or administrative powers or functions of
or pertaining to government.
Guarantor Security Agreement
means a pledge and security agreement made by the
Equity Guarantor in favor of the Collateral Agent for the benefit of the Agents and the Lenders,
substantially in the form of Exhibit E.
Hedging Agreement
means any interest rate, foreign currency, commodity or equity
swap, collar, cap, floor or forward rate agreement, or other agreement or arrangement designed to
protect against fluctuations in interest rates or currency, commodity or equity values (including,
without limitation, any option with respect to any of the foregoing and any combination of the
foregoing agreements or arrangements), and any confirmation executed in connection with any such
agreement or arrangement.
Highest Lawful Rate
means, with respect to any Agent or any Lender, the maximum
non-usurious interest rate, if any, that at any time or from time to time may be contracted for,
taken, reserved, charged or received on the Obligations under laws applicable to such Agent or such
Lender which are currently in effect or, to the extent allowed by law, under such applicable laws
which may hereafter be in effect and which allow a higher maximum non-usurious interest rate than
applicable laws now allow.
Holdout Lender
has the meaning specified therefor in Section 12.02(b).
Imperial
means Imperial Holdings, LLC, a Florida limited liability company.
Increase Effective Date
has the meaning specified therefor in Section 2.09.
Indebtedness
means, with respect to any Person, without duplication, (i) all
indebtedness of such Person for borrowed money; (ii) all obligations of such Person for the
deferred purchase price of property or services (other than trade payables or other accounts
payable incurred in the ordinary course of such Persons business and not outstanding for more than
90 days after the date such payable was created); (iii) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments or upon which interest payments are
customarily made; (iv) all reimbursement, payment or other obligations and liabilities of such
Person created or arising under any conditional sales or other title retention agreement with
respect to property used and/or acquired by such Person, even though the rights and remedies of the
lessor, seller and/or lender thereunder may be limited to repossession or sale of such property;
(v) all Capitalized Lease Obligations of such Person; (vi) all obligations and liabilities,
contingent or otherwise, of such Person, in respect of letters of credit, acceptances and similar
facilities; (vii) all obligations and liabilities, calculated on a basis satisfactory to the
Collateral Agent and in accordance with accepted practice, of such Person under Hedging Agreements;
(viii) all monetary obligations under any receivables factoring, receivable sales or similar
transactions and all monetary obligations under any synthetic lease, tax ownership/operating lease,
off-balance sheet financing or similar financing; (ix) all Contingent Obligations; and (x) all
obligations referred to in clauses (i) through (ix) of this definition of another Person secured by
(or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) a Lien upon property owned by such Person, even
14
though such Person has not assumed or become liable for the payment of such Indebtedness. The
Indebtedness of any Person shall include the Indebtedness of any partnership of or joint venture in
which such Person is a general partner or a joint venturer.
Indemnified Matters
has the meaning specified therefor in Section 12.15.
Indemnitees
has the meaning specified therefor in Section 12.15.
Independent Manager
has the meaning specified therefor in Section 7.02(x).
Initial Servicer
means Portfolio Financial Servicing Company, a Delaware
corporation.
Initial Servicing Agreement
means the Servicing Agreement, dated as of the date
hereof, by and among the Initial Servicer and the Borrower, in form and substance satisfactory to
the Agents, as the same may be amended, amended and restated, supplemented or otherwise modified
from time to time in accordance with this Agreement.
Individual Guarantor
means each of Jonathan Neuman and Antony Mitchell.
Individual Guaranty
means each guaranty, substantially in the form of Exhibit D,
made by an Individual Guarantor in favor of the Collateral Agent for the benefit of the Agents and
the Lenders.
Insolvency Proceeding
means any proceeding commenced by or against any Person under
any provision of the Bankruptcy Code or under any other bankruptcy or insolvency law, assignments
for the benefit of creditors, formal or informal moratoria, compositions, or extensions generally
with creditors, or proceedings seeking reorganization, arrangement, or other similar relief.
Insurance Collateral Agent
means Portfolio Financial Servicing Company, a Delaware
corporation, in its capacity as collateral agent under the Collateral Agency Agreement, together
with its successors and permitted assigns in such capacity.
Insurance Premium Loan Sale and Assignment Agreement
means each sale and assignment
agreement, dated as of the date of a drawing of the Term Loan, by and among the Originator and the
Borrower, in form and substance satisfactory to the Agents, pursuant to which the Borrower
purchases Eligible Insurance Premium Loans originated by the Originator in the Applicable
Non-Licensed States, substantially in the form of Exhibit I.
Insurance Premium Loan
means each loan made by the Originator in connection with the
transactions contemplated by the Transaction Documents, evidenced by a Note and Security Agreement
and the other documents in the Loan Document Package (or other documentation in form and substance
satisfactory to the Agent) and secured by one or more Life Insurance Policies or all of the
beneficial interests in an entity which owns the Life Insurance Policies.
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Insurance Premium Loan Maturity Date
means, with respect to an Insurance Premium
Loan, the date specified in the related Note and Security Agreement as the date on which all
outstanding interest and principal thereon is due and payable from the Premium Finance Borrower to
the Originator and/or the Borrower (or its assigns).
Insurance Provider
means, with respect to a Life Insurance Policy, the insurance
company providing such policy.
Internal Revenue Code
means the Internal Revenue Code of 1986, as amended (or any
successor statute thereto) and the regulations thereunder.
Lease
means any lease of real property to which the Borrower is a party as lessor or
lessee.
Lender
has the meaning specified therefor in the preamble hereto.
Lien
means any mortgage, deed of trust, pledge, lien (statutory or otherwise),
security interest, charge or other encumbrance or security or preferential arrangement of any
nature, including, without limitation, any conditional sale or title retention arrangement, any
Capitalized Lease and any assignment, deposit arrangement or financing lease intended as, or having
the effect of, security.
Life Insurance Policy
means with respect to any Insurance Premium Loan, the life
insurance policy or policies financed by the related Premium Finance Borrower under the related
Note and Security Agreement.
Loan
means the Term Loans made by an Agent or a Lender to the Borrower pursuant to
Article II hereof.
Loan Account
means an account maintained hereunder by the Administrative Agent on
its books of account at the Payment Office, and with respect to the Borrower, in which the Borrower
will be charged with all Loans made to, and all other Obligations incurred by, the Borrower.
Loan Document
means this Agreement, any Individual Guaranty, any Guarantor Security
Agreement, any Security Agreement, any UCC Filing Authorization Letter, the Collateral Agency
Agreement, the Collateral Value Policy, the Contingent Collateral Value Policy, any Cash Management
Agreement, any Servicing Agreement, any Coverage Certificate and any other agreement, instrument,
and other document executed and delivered pursuant hereto or thereto or otherwise evidencing or
securing any Loan or any other Obligation.
Loan Documentation Package
means with respect to each Insurance Premium Loan, each
document, in form and substance substantially similar to the forms attached hereto as Exhibit F, or
otherwise acceptable to the Agents.
Loan Management Fee
has the meaning specified therefor in Section 2.06.
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Loan Schedule
means the schedule, maintained by the Servicer and attached hereto as
Schedule 1.01(D) (as such schedule will be updated from time to time as new Insurance Premium Loans
are financed by the Borrower in accordance with the Loan Documents), of Insurance Premium Loans as
to which participations and/or assignments are purchased by the Borrower from time to time and
pledged to the Collateral Agent for the benefit of the Agents and the Lenders;
provided
that the entry of each Insurance Premium Loan on Schedule 1.01(D) shall, among other things,
identify all Insurance Premium Loans by the name of the Premium Finance Borrower thereof, and as to
each Insurance Premium Loan, set forth the amount financed, the related loan number, the applicable
interest rate and the applicable Insurance Premium Maturity Date.
Local Counsel Opinion
means a legal opinion or memorandum from outside local counsel
to the Originator or any Affiliate of the Originator qualified to practice in each jurisdiction in
which the Originator intends to make Eligible Insurance Premium Loans addressed to the Originator
or such Affiliate and dated, with the respect to a Local Counsel Opinion related to the first
Eligible Insurance Premium Loan to be issued in a particular jurisdiction, no earlier than sixty
days prior to the date on which the Originator first makes an Eligible Insurance Premium Loan, and
which shall be updated not less than once each year, addressing each of the questions set forth on
Exhibit H hereto pursuant to the laws, rules and regulations of such jurisdiction as in effect as
of the date of such Local Counsel Opinion.
Master Participation Agreement
means the Master Participation Agreement, dated as of
the date hereof, by and among the Originator and the Borrower, pursuant to which the Borrower
purchases participations in the Eligible Insurance Premium Loans originated in the Applicable
Licensed States as the same may be amended, amended and restated, supplemented or otherwise
modified from time to time in accordance with this Agreement, substantially in the form of Exhibit
J.
Material Adverse Effect
means a material adverse effect on any of (i) the
operations, business, assets, properties, condition (financial or otherwise) or prospects of the
Servicer, the Originator or the Borrower, (ii) the ability of the Originator or the Borrower to
perform any of its obligations under any Loan Document or any Transaction Document to which it is a
party, (iii) the legality, validity or enforceability of this Agreement, any other Loan Document or
any Transaction Document (excluding any Transaction Documents evidencing Insurance Premium Loans
not exceeding more than 2% of the aggregate Maturity Principal Balance of all Eligible Insurance
Premium Loans of the Borrower), (iv) the rights and remedies of any Agent or any Lender under any
Loan Document or any Transaction Document of which the Originator or the Borrower or any of their
Affiliates is a party (excluding any Transaction Documents evidencing Insurance Premium Loans not
exceeding more than 2% of the aggregate Maturity Principal Balance of all Eligible Insurance
Premium Loans of the Borrower), (v) the validity, perfection or priority of (A) a Lien in favor of
the Collateral Agent for the benefit of the Agents and the Lenders on any of the Collateral or (B)
the Borrowers ownership interest in the Insurance Premium Loans or (vi) the validity,
enforceability or collectability of the Insurance Premium Loans and related Collateral (including
the applicable Life Insurance Policies) (excluding any Transaction Documents evidencing Insurance
Premium Loans not exceeding more than 2% of the aggregate Maturity Principal Balance of all
Eligible Insurance Premium Loans of the Borrower).
17
Material Contract
means, with respect to any Person, (a) the Transaction Documents
and (b) all other contracts or agreements material to the business, operations, condition
(financial or otherwise), performance, prospects or properties of such Person or such Subsidiary.
Maturity Principal Balance
means with respect to any Insurance Premium Loan, at any
time of determination, the projected final principal balance of such Insurance Premium Loan on the
related maturity date therefore,
plus
all accrued interest and fees thereon.
Maximum Tranche Amount
means, with respect to each Tranche of the Term Loan in
connection with an Insurance Premium Loan on any date of delivery of a Notice of Borrowing, an
amount not to exceed an amount equal to one hundred percent (100%) of present value of the sum of:
(i) the outstanding principal balance of the Insurance Premium Loan to be financed hereunder by
such requested Term Loan, plus (ii) the Origination Fee with respect to such Insurance Premium
Loan, plus (iii) the Collateral Value Policy and the Contingent Collateral Value Policy premium
reimbursement amounts payable, directly or indirectly, by the Premium Finance Borrower to the
Originator in respect of such Insurance Premium Loan, to the extent financed by such requested Term
Loan, plus (iv) the amount of interest that is reasonably expected to be due on the scheduled
maturity date of the Insurance Premium Loan to be financed hereunder by such requested Term Loan;
provided, however, that the Maximum Tranche Amount with respect to any Insurance Premium Loan shall
at no time exceed one hundred percent (100%) of the present value of the sum of (A) Covered Loan
Amount with respect to the Insurance Premium Loan to be financed hereunder by such Term Loan and
(B) the Aggregate Interest Amount at the maturity of such Insurance Premium Loan. For purposes of
determining present value, a discount rate of twenty-two and 25/1000 percent (22.025%) shall be
used and the amounts shall be present valued back to January 30, 2009.
Moodys
means Moodys Investors Service, Inc. and any successor thereto.
Multiemployer Plan
means a multiemployer plan as defined in Section 4001(a)(3) of
ERISA to which the Borrower has contributed to, or has been obligated to contribute, at any time
during the preceding six (6) years.
New Lending Office
has the meaning specified therefor in Section 2.08(d).
Non-U. S. Lender
has the meaning specified therefor in Section 2.08(d).
Notice of Borrowing
has the meaning specified therefor in Section 2.02(a).
Note and Security Agreement
means, with respect to each Insurance Premium Loan, a
note and security agreement or similar agreement (however defined) between the Originator and the
Premium Finance Borrower evidencing the indebtedness of the Premium Finance Borrower to the
Originator.
Obligations
means all present and future indebtedness, obligations, and liabilities
of the Borrower to the Agents and the Lenders arising under or in connection with this Agreement or
any other Loan Document, whether or not the right of payment in respect of such claim is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, disputed,
18
undisputed, legal, equitable, secured, unsecured, and whether or not such claim is discharged,
stayed or otherwise affected by any proceeding referred to in Section 9.01. Without limiting the
generality of the foregoing, the Obligations of the Borrower under the Loan Documents include
(a) the obligation (irrespective of whether a claim therefor is allowed in an Insolvency
Proceeding) to pay principal, interest (including the PIK Interest Amount), charges, expenses,
fees, attorneys fees and disbursements, indemnities and other amounts payable by such Person under
the Loan Documents, and (b) the obligation of such Person to reimburse any amount in respect of any
of the foregoing that any Agent or any Lender (in its sole discretion) may elect to pay or advance
on behalf of such Person.
Origination Fees
means those amounts payable by the Premium Finance Borrower to the
Originator (and netted out of the related Insurance Premium Loan) in respect of origination,
upfront or similar fees.
Originator
means Imperial Premium Finance, LLC, a Florida limited liability company,
as an originator and seller under the Master Participation Agreement and/or the Insurance Premium
Loan Sale and Assignment Agreements.
Other Taxes
has the meaning specified therefor in Section 2.08(b).
Participant Register
has the meaning specified therefor in Section 12.07(g).
Payment Office
means the Administrative Agents office located at 6615 West Boynton
Beach Blvd, #394, Boynton Beach, FL 33437, or at such other office or offices of the Administrative
Agent as may be designated in writing from time to time by the Administrative Agent to the
Collateral Agent and the Borrower.
Permitted Indebtedness
means:
(a) any Indebtedness owing to any Agent or any Lender under this Agreement and the other Loan
Documents; and
(b) Subordinated Indebtedness.
Permitted Investments
means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by any agency thereof and
backed by the full faith and credit of the United States, in each case, maturing within six months
from the date of acquisition thereof; (ii) commercial paper, maturing not more than 270 days after
the date of issue rated P-1 by Moodys or A-1 by Standard & Poors; (iii) certificates of deposit
maturing not more than 270 days after the date of issue, issued by commercial banking institutions
and money market or demand deposit accounts maintained at commercial banking institutions, each of
which is a member of the Federal Reserve System and has a combined capital and surplus and
undivided profits of not less than $500,000,000; (iv) repurchase agreements having maturities of
not more than 90 days from the date of acquisition which are entered into with major money center
banks included in the commercial banking institutions described in clause (iii) above and which are
secured by readily marketable direct obligations of the United States Government or any agency
thereof, (v) money market accounts maintained with mutual funds having assets in excess of
$2,500,000,000; and
19
(vi) marketable tax exempt securities rated A or higher by Moodys or A+ or higher by Standard
& Poors, in each case, maturing within six months from the date of acquisition thereof.
Permitted Liens
means:
(a) Liens securing the Obligations; and
(b) Liens for taxes, assessments and governmental charges the payment of which is not required
under Section 7.01(c).
Person
means an individual, corporation, limited liability company, partnership,
association, joint-stock company, trust, unincorporated organization, joint venture or other
enterprise or entity or Governmental Authority.
PIK Interest Amount
means, as of any date of determination, the amount of all
interest accrued with respect to the Loan that has been paid in kind by being added to the balance
thereof in accordance with Section 2.04(a).
Plan
means any Employee Plan or Multiemployer Plan.
Premium Finance Borrower
means an insurance trust, with either an institutional
trustee or financial institution acceptable to the Agents, as a trustee or co-trustee, obligated to
make payments with respect to an Insurance Premium Loan.
Pro Rata Share
means:
(a) with respect to a Lenders obligation to make the Term Loan, the percentage obtained by
dividing (i) the sum of such Lenders Term Loan Commitment, by (ii) the sum of the Total Term Loan
Commitment,
(b) with respect to a Lenders right to receive payments of interest, fees, and principal with
respect to the Term Loans, the percentage obtained by dividing (i) the unpaid principal amount of
such Lenders portion of the Term Loan, by (ii) the aggregate unpaid principal amount of the Term
Loan, and
(c) with respect to all other matters (including, without limitation, the indemnification
obligations arising under Section 10.05), the percentage obtained by dividing (i) the sum of such
Lenders Term Loan Commitment and the unpaid principal amount of such Lenders portion of the Term
Loan, by (ii) the sum of the Total Term Loan Commitment and the aggregate unpaid principal amount
of the Term Loan,
provided
that if the Total Term Loan Commitment has been reduced to zero,
the numerator shall be the aggregate unpaid principal amount of such Lenders portion of the Term
Loan and the denominator shall be the aggregate unpaid principal amount of the Term Loan.
Rating Agencies
has the meaning specified therefor in Section 2.07.
Register
has the meaning specified therefor in Section 12.07(d).
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Registered Loans
has the meaning specified therefor in Section 12.07(d).
Regulation T
,
Regulation U
and
Regulation X
mean, respectively,
Regulations T, U and X of the Board or any successor, as the same may be amended or supplemented
from time to time.
Related Fund
means, with respect to any Person, an Affiliate of such Person, or a
fund or account managed by such Person or an Affiliate of such Person.
Replacement Lender
has the meaning specified therefor in Section 12.02(b).
Required Lenders
means (i) prior to the Term Loan Commitment Termination Date,
Lenders whose Pro Rata Shares (calculated in accordance with clause (c) of the definition thereof)
aggregate 100% and (ii) after the Term Loan Commitment Termination Date, Lenders whose Pro Rata
Shares (calculated in accordance with clause (c) of the definition thereof) aggregate at least
50.1%.
Required Funded Lenders
means Lenders whose Pro Rata Shares (calculated in
accordance with clause (b) of the definition thereof) aggregate 100%,
provided
that, for
purposes of this definition, only Specified Term Loans shall be used to determine Pro Rata Shares.
Requirements of Law
means, with respect to any Person, collectively, the common law
and all federal, state, provincial, local, foreign, multinational or international laws, statutes,
codes, treaties, standards, rules and regulations, guidelines, ordinances, orders, judgments,
writs, injunctions, decrees (including administrative or judicial precedents or authorities) and
the interpretation or administration thereof by, and other determinations, directives, requirements
or requests of, any Governmental Authority, in each case that are applicable to or binding upon
such Person or any of its property or to which such Person or any of its property is subject.
Salvage Collections
means, with respect to any Insurance Premium Loan, and solely to
the extent that the Collateral Value Insurer or Contingent Collateral Value Insurer has paid a
claim to the Borrower with respect to such Insurance Premium Loan pursuant to the Collateral Value
Policy or Contingent Collateral Value Policy, all Collections received from any Person with respect
to such Insurance Premium Loan (or the related collateral) after the Collateral Value Insurers or
Contingent Collateral Value Insurers payment in an amount equal to the lesser of (a) such
Collections with respect to such Insurance Premium Loan and (b) the amount paid by the Collateral
Value Insurer or Contingent Collateral Value Insurer to the Borrower in respect thereof under the
Collateral Value Policy or Contingent Collateral Value Policy, plus the Collateral Value Insurers
or Contingent Collateral Value Insurers ratable share (based on the amount of such expenses) of
enforcement and subrogation-related expenses (to the extent such amounts may be recovered under the
applicable law) incurred by the Collateral Value Insurer or Contingent Collateral Value Insurer and
interest on such payments and expenses at the Loan Rate (as defined in the Collateral Value Policy)
determined in accordance with the terms for calculating such rate specified in the Collateral Value
Policy from and including the date of the Collateral Value Insurers or Contingent Collateral Value
Insurers
21
payment to but excluding the date on which such amounts are paid to the Collateral Value
Insurer or Contingent Collateral Value Insurer.
SEC
means the Securities and Exchange Commission or any other similar or successor
agency of the Federal government administering the Securities Act.
Securities Act
means the Securities Act of 1933, as amended, or any similar Federal
statute, and the rules and regulations of the SEC thereunder, all as the same shall be in effect
from time to time.
Securitization
has the meaning specified therefor in Section 2.07.
Security Agreement
means a Pledge and Security Agreement made by the Borrower in
favor of the Collateral Agent for the benefit of the Agents and the Lenders, substantially in the
form of Exhibit A, securing the Obligations and delivered to the Collateral Agent.
Servicer
means (i) prior to the termination of the Initial Servicing Agreement, the
Initial Servicer and (ii) anytime thereafter, the Back-Up Servicer or any other servicer approved
in writing by the Agents.
Servicer Termination Event
means the occurrence of any of the following events: (i)
any report which the Servicer delivers under the terms of any Transaction Document shall be
incorrect in any material respect, (ii) the Servicer assigns to any other Person any of its duties
or obligations other than as otherwise permitted by the Servicing Agreement, (iii) the occurrence
of an Event of Default, or (iv) the occurrence of any event which, in the reasonable business
judgment of the Agents, could reasonably be expected to be adverse to the interests of the
Originator, the Borrower, the Agents and/or the Lenders.
Servicing Agreement
means (i) prior to the termination of the Initial Servicing
Agreement, the Initial Servicing Agreement and (ii) anytime thereafter, the Back-Up Servicing
Agreement or any other servicing agreement in form and substance satisfactory to the Agents.
Solvent
means, with respect to any Person on a particular date, that on such date
(i) the fair value of the property of such Person is not less than the total amount of the
liabilities of such Person, (ii) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of such Person on its
existing debts as they become absolute and matured, (iii) such Person is able to realize upon its
assets and pay its debts and other liabilities, contingent obligations and other commitments as
they mature in the normal course of business, (iv) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Persons ability to pay as such debts
and liabilities mature, and (v) such Person is not engaged in business or a transaction, and is not
about to engage in business or a transaction, for which such Persons property would constitute
unreasonably small capital.
Specified Term Loan
means a Term Loan that is used to finance an Insurance Premium
Loan that is an Eligible Insurance Premium Loan on the date such Term Loan was made.
22
Standard & Poors
means Standard & Poors Ratings Services, a division of
The McGraw-Hill Companies, Inc. and any successor thereto.
Subordinated Indebtedness
means Indebtedness of the Borrower the terms of which are
satisfactory to the Collateral Agent and the Required Lenders and which has been expressly
subordinated in right of payment to all Indebtedness of the Borrower under the Loan Documents
(i) by the execution and delivery of a subordination agreement, in form and substance satisfactory
to the Collateral Agent and the Required Lenders, or (ii) otherwise on terms and conditions
(including, without limitation, subordination provisions, payment terms, interest rates, covenants,
remedies, defaults and other material terms) satisfactory to the Collateral Agent and the Required
Lenders.
Subsidiary
means, with respect to any Person at any date, any corporation, limited
or general partnership, limited liability company, trust, estate, association, joint venture or
other business entity (i) the accounts of which would be consolidated with those of such Person in
such Persons consolidated financial statements if such financial statements were prepared in
accordance with GAAP or (ii) of which more than 50% of (A) the outstanding Equity Interests having
(in the absence of contingencies) ordinary voting power to elect a majority of the Board of
Directors of such Person, (B) in the case of a partnership or limited liability company, the
interest in the capital or profits of such partnership or limited liability company or (C) in the
case of a trust, estate, association, joint venture or other entity, the beneficial interest in
such trust, estate, association or other entity business is, at the time of determination, owned or
controlled directly or indirectly through one or more intermediaries, by such Person.
Tax Distributions
has the meaning specified therefor in Section 7.02(h).
Taxes
has the meaning specified therefor in Section 2.08(a).
Term Loan
means, collectively, the loans made by the Lenders to the Borrower
pursuant to Section 2.01(a).
Term Loan Commitment
means, with respect to each Lender, the commitment of such
Lender to make the Term Loan to the Borrower in the amount set forth in Schedule 1.01(A) hereto, as
the same may be terminated or reduced from time to time in accordance with the terms of this
Agreement.
Term Loan Commitment Termination Date
means the earliest to occur of (i) the date
the Term Loan Commitments are permanently reduced to zero pursuant to Section 2.01(b), (ii) the
date of the termination of the Term Loan Commitments pursuant to Section 9.01, (iii) April 27, 2009
and (iv) the date of any change in law that makes it illegal or imposes adverse conditions on
Premium Finance Loans as contemplated by the Transaction Documents.
Total Term Loan Commitment
means the sum of the amounts of the Lenders Term Loan
Commitments.
Tranche
means, without duplication, all or any portion of any Loan used to finance
one or more specific Insurance Premium Loans in respect of this Agreement.
23
Transaction Documents
means the Master Participation Agreement, each Insurance
Premium Loan Sale and Assignment Agreement, any Servicing Agreement, any Escrow Agreement, the
Trust Agreements and such other instruments, certificates, agreements, reports and documents to be
executed and delivered under and or in connection with the Insurance Premium Loans (including each
applicable Loan Document Package), as any of the foregoing may be amended, amended and restate,
supplemented or otherwise modified from time to time in accordance with this Agreement.
Transferee
has the meaning specified therefor in Section 2.08.
Trust Agreement
means an irrevocable life insurance trust agreement entered into by
the Underlying Life and the Premium Finance Borrower, in form and substance satisfactory to the
Agents, pursuant to which an institutional trustee or financial institution acceptable to the
Agents acts as the trustee or a co-trustee thereunder.
UCC Filing Authorization Letter
means a letter duly executed by each Credit Party
authorizing the Collateral Agent to file appropriate financing statements on Form UCC-1 without the
signature of such Credit Party in such office or offices as may be necessary or, in the opinion of
the Collateral Agent, desirable to perfect the security interests purported to be created by each
Security Agreement and each Guarantor Security Agreement.
Uncovered Portion of an Insurance Premium Loan
means that portion of an Eligible
Insurance Premium Loan that is not a Covered Loan under the Collateral Value Policy.
Underlying Life
with respect to any Life Insurance Policy means the Person or
Persons whose life or lives are insured by such Life Insurance Policy.
Uniform Commercial Code
has the meaning specified therefor in Section 1.03.
USA PATRIOT Act
has the meaning specified therefor in Section 12.21.
WARN
has the meaning specified therefor in Section 6.01(z).
Section 1.02
Terms Generally
. The definitions of terms herein shall apply equally to
the singular and plural forms of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms. The words include,
includes and including shall be deemed to be followed by the phrase without limitation. The
word will shall be construed to have the same meaning and effect as the word shall. Unless the
context requires otherwise, (a) any definition of or reference to any agreement, instrument or
other document herein shall be construed as referring to such agreement, instrument or other
document as from time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Persons successors and assigns, (c) the
words herein, hereof and hereunder, and words of similar import, shall be construed to refer
to this Agreement in its entirety and not to any particular provision hereof, (d) all references
herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words asset and property
shall be construed to have the same
24
meaning and effect and to refer to any right or interest in or to assets and properties of any
kind whatsoever, whether real, personal or mixed and whether tangible or intangible. References in
this Agreement to determination by any Agent include good faith estimates by such Agent (in the
case of quantitative determinations) and good faith beliefs by such Agent (in the case of
qualitative determinations).
Section 1.03
Accounting and Other Terms
. Unless otherwise expressly provided herein,
each accounting term used herein shall have the meaning given it under GAAP applied on a basis
consistent with those used in preparing the Financial Statements. All terms used in this Agreement
which are defined in Article 8 or Article 9 of the Uniform Commercial Code as in effect from time
to time in the State of New York (the
Uniform Commercial Code
) and which are not
otherwise defined herein shall have the same meanings herein as set forth therein, provided that
terms used herein which are defined in the Uniform Commercial Code as in effect in the State of New
York on the date hereof shall continue to have the same meaning notwithstanding any replacement or
amendment of such statute except as any Agent may otherwise determine.
Time
References
. Unless otherwise indicated herein, all references to time of day refer to Eastern
Standard Time or Eastern daylight saving time, as in effect in New York City on such day. For
purposes of the computation of a period of time from a specified date to a later specified date,
the word from means from and including and the words to and until each means to but
excluding;
provided
,
however
, that with respect to a computation of fees or
interest payable to any Agent or any Lender, such period shall in any event consist of at least one
full day.
ARTICLE II
THE LOANS
Section 2.01
Commitments
.
(a) Subject to the terms and conditions and relying upon the representations and warranties
herein set forth, each Lender severally agrees to make one or more Term Loans to the Borrower (i)
on the Effective Date and (ii) prior to the Term Loan Commitment Termination Date, not more than
one time each week thereafter (unless an additional weekly borrowing date is consented to by the
Agent and the Required Lenders), in the case of all Term Loans, in an aggregate principal amount
not to exceed the amount of such Lenders initial Term Loan Commitment.
(b) Notwithstanding the foregoing, (i) the aggregate principal amount of the Term Loan made on
the Effective Date and on any borrowing date shall not exceed the lesser of (x) the undrawn Total
Term Loan Commitment at such time and (y) the Maximum Tranche Amount with respect to any applicable
Insurance Premium Loans being acquired by the Borrower with the proceeds of such Term Loan, (ii)
the aggregate principal amount of all Term Loans made at any time pursuant to this Agreement shall
not exceed the lesser of (x) the initial Total Term Loan Commitment on the Effective Date and (y)
an amount which will not result in any Borrowing Base Deficit existing at such time,
provided
, that, for purposes of this Section
2.01(b)(ii)(y), the PIK Interest Amount shall be included in the principal amount of the Term
Loans. Any amounts paid directly or indirectly by the Agents and the Lenders to the Collateral
25
Value Insurer or the Contingent Collateral Value Insurer for coverage under the Collateral Value
Policy or the Contingent Collateral
Value Policy, as applicable, shall be deemed to be, and shall
for all purposes of this Agreement be treated as, Term Loans made to the Borrower hereunder. Any
principal amount of the Term Loan which is repaid or prepaid may not be reborrowed. The Total Term
Loan Commitment shall be permanently reduced immediately and without further action on the date of
funding of each Term Loan in an amount equal to such funded Term Loan. Each Lenders Term Loan
Commitment shall be permanently reduced immediately and without further action on the date of
funding of each Term Loan in an amount equal to such Lenders Pro Rata Share of such funded Term
Loan. Each Lenders Term Loan Commitment shall terminate immediately and without further action on
the Term Loan Commitment Termination Date after giving effect to the funding of such Lenders Term
Loan Commitment, if any, on such date.
Section 2.02
Making the Loans
.
(a) The Borrower shall give the Administrative Agent prior telephonic notice (immediately
confirmed in writing, in substantially the form of Exhibit B hereto (a
Notice of
Borrowing
)), not later than 12:00 noon (New York City time) on the date which is three (3)
Business Days prior to the date of the proposed Loan (or such shorter period as the Administrative
Agent is willing to accommodate from time to time, but in no event later than 12:00 noon (New York
City time) on the borrowing date of the proposed Loan). Such Notice of Borrowing shall (i) be
irrevocable, (ii) specify (A) the principal amount of the proposed Loan, (B) the use of the
proceeds of such proposed Loan, and (C) the proposed borrowing date, which must be a Business Day
and shall not occur more than one time each week unless an additional weekly borrowing date is
consented to by the Agent and the Required Lenders and (iii) be delivered to the Administrative
Agent together with the documents required by Section 5.02(e). The Administrative Agent and the
Lenders may act without liability upon the basis of written, telecopied or telephonic notice
believed by the Administrative Agent in good faith to be from the Borrower (or from any Authorized
Officer thereof designated in writing purportedly from the Borrower to the Administrative Agent).
The Borrower hereby waives the right to dispute the Administrative Agents record of the terms of
any such telephonic Notice of Borrowing. The Administrative Agent and each Lender shall be
entitled to rely conclusively on any Authorized Officers authority to request a Loan on behalf of
the Borrower until the Administrative Agent receives written notice to the contrary. The
Administrative Agent and the Lenders shall have no duty to verify the authenticity of the signature
appearing on any written Notice of Borrowing.
(b) Each Notice of Borrowing pursuant to this Section 2.02 shall be irrevocable and the
Borrower shall be bound to make a borrowing in accordance therewith.
(c) Except as otherwise provided in this subsection 2.02(c), all Loans under this Agreement
shall be made by the Lenders simultaneously and proportionately to their Pro Rata Shares of the
Total Term Loan Commitment, it being understood that no Lender shall be responsible for any default
by any other Lender in that other Lenders obligations to make a Loan requested hereunder, nor
shall the Commitment of any Lender be increased or decreased as a result of the default by any
other Lender in that other Lenders obligation to make a Loan requested
hereunder, and each Lender shall be obligated to make the Loans required to be made by it by
the terms of this Agreement regardless of the failure by any other Lender.
26
Section 2.03
Repayment of Loans; Evidence of Debt
. The outstanding principal of the
Term Loans (including the PIK Interest Amount) shall be due and payable on the Final Maturity Date.
(b) Each Lender shall maintain in accordance with its usual practice an account or accounts
evidencing the Indebtedness of the Borrower to such Lender resulting from each Loan made by such
Lender, including the amounts of principal and interest payable and paid to such Lender from time
to time hereunder.
(c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount
of each Loan made hereunder, (ii) the amount of any principal or interest due and payable or to
become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum
received by the Administrative Agent hereunder for the account of the Lenders and each Lenders
share thereof.
(d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this
Section shall be
prima
facie
evidence of the existence and amounts of the
obligations recorded therein;
provided
that the failure of any Lender or the Administrative
Agent to maintain such accounts or any error therein shall not in any manner affect the obligation
of the Borrower to repay the Loans in accordance with the terms of this Agreement.
(e) Any Lender may request that Loans made by it be evidenced by a promissory note. In such
event, the Borrower shall execute and deliver to such Lender a promissory note payable to the order
of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) in a
form furnished by the Collateral Agent and reasonably acceptable to the Borrower. Thereafter, the
Loans evidenced by such promissory note and interest thereon shall at all times (including after
assignment pursuant to Section 12.07) be represented by one or more promissory notes in such form
payable to the order of the payee named therein (or, if such promissory note is a registered note,
to such payee and its registered assigns).
Section 2.04
Interest
.
(a) The Term Loan shall bear interest on the principal amount thereof from time to time
outstanding, from January 1, 2009 until such principal amount becomes due, at a rate per annum
equal to 20.00%; provided, however, that, subject to paragraph (c) of this Section 2.04, all of
such interest (the
PIK Interest Amount
) shall be paid-in-kind by being added to the
outstanding principal balance of such Term Loan. Any interest to be capitalized shall be
capitalized on the first day of each month, commencing on the first day of the month following the
Effective Date and added to the then outstanding principal amount of the Term Loans and,
thereafter, shall bear interest as provided hereunder as if it had originally been part of the
outstanding principal of the Term Loans.
(b)
Default Interest
. To the extent permitted by law and notwithstanding anything to
the contrary in this Section, upon the occurrence and during the continuance of an Event of
Default, the principal of, and all accrued and unpaid interest on, all Loans, fees, indemnities or
any other Obligations of the Borrower under this Agreement and the other Loan
27
Documents, shall bear interest, from the date such Event of Default occurred until the date such Event of Default is
cured or waived in writing in accordance herewith, at a rate per annum equal at all times to
23.00%.
(c)
Interest Payment
. Notwithstanding paragraph (a) of this Section 2.04, interest on
each Loan shall be payable, without duplication:
(i) on each date Collections are received if sufficient Collections or other funds are
available hereunder for the payment of interest pursuant to Section 2.05(d); and
(ii) on the Final Maturity Date;
provided
, that interest payable pursuant to paragraph (b) of this Section 2.04 shall
be payable on demand. The Borrower hereby authorizes the Administrative Agent to, and the
Administrative Agent may, from time to time, charge the Loan Account pursuant to Section 4.01 with
the amount of any interest payment due hereunder.
(d)
General
. All interest shall be computed on the basis of a year of 360 days for
the actual number of days, including the first day but excluding the last day, elapsed.
Section 2.05
Reduction of Commitment; Prepayment of Loans
.
(a)
Reduction of Commitments
. The Total Term Loan Commitment shall terminate at
5:00 p.m. (New York City time) on the Term Loan Commitment Termination Date. In addition, the
Total Term Loan Commitment and the Term Loan Commitment of each Lender shall be reduced in
accordance with Section 2.01(b).
(b)
Optional Prepayment
.
(i)
Term Loan
. The Borrower may, upon at least sixty (60) Business Days prior
written notice to the Administrative Agent, prepay the principal of the Term Loan, in whole or in
part. Each prepayment made pursuant to this clause 2.05(b)(i) shall be accompanied by the payment
of accrued interest to the date of such payment on the amount prepaid.
(ii)
Prepayment In Full
. The Borrower may, upon at least sixty (60) days prior
written notice to the Administrative Agent, terminate this Agreement by paying to the
Administrative Agent, in cash, the Obligations, in full. If the Borrower has sent a notice of
termination pursuant to this clause (ii), then the Lenders obligations to extend credit hereunder
shall terminate and the Borrower shall be obligated to repay the Obligations, in full, on the date
set forth as the date of termination of this Agreement in such notice.
(c)
Mandatory Prepayment
. (i) On each date on which Collections are received by the
Borrower or the Servicer with respect to any Insurance Premium Loan, Borrower shall repay the
principal amount of the related Tranche of the Term Loan, to the extent of Collections available
therefor in accordance with Section 2.05(d) hereof.
28
(ii) If on any day a Borrowing Base Deficit exists, on such date Borrower shall make a
prepayment of the principal amount of the Loans in an amount equal to such Borrowing Base Deficit.
Notwithstanding anything to the contrary in this Section 2.05(c), during the period from the
Effective Date to the Term Loan Commitment Termination Date payments received by any Agent shall
held by such Agent and delivered to the Lender entitled to receive such payment only upon the
consent of the Required Funded Lenders.
(d)
Application of Payments
. On each day that Collections (other than Salvage
Collections, but including all payments made by the Collateral Value Insurer or Contingent
Collateral Value Insurer to the Borrower under the Collateral Value Policy or Contingent Collateral
Value Policy) are received by the Servicer, the Originator, the Borrower, or the Insurance
Collateral Agent or any other Person on their behalf in respect of any Insurance Premium Loan (or
related Life Insurance Policy) financed hereunder or the Collateral Value Policy or Contingent
Collateral Value Policy, the Borrower shall (or shall cause such other Person to) on the Business
Day of such receipt, transfer such amounts to the Collection Account for distribution in accordance
with this Section 2.05(d). On each such date, as long as no Default or Event of Default has
occurred and is continuing, the Borrower shall distribute (from such amounts so deposited in the
Collection Account with respect thereto) such Collections with respect to the Covered Portion of an
Insurance Premium Loan (other than Salvage Collections) in the following order of priority:
(i)
first
, to pay the Servicer an amount equal to the accrued and unpaid Servicing
Fees then due and payable in accordance with the Transaction Documents until paid in full;
(ii)
second
, to pay interest then due and payable in respect of the Loans until paid
in full, including all previously accrued and capitalized interest thereon (including, without
limitation, the PIK Interest Amount),
(iii)
third
, to pay the Insurance Collateral Agent an amount equal to any fees,
expense reimbursements, indemnities and other amounts then due and payable to the Insurance
Collateral Agent in accordance with the Transaction Documents until paid in full;
(iv)
fourth
, to pay principal of the Loans until paid in full, and
(v)
fifth
, any remaining Collections with respect to the Covered Portion of an
Insurance Premium Loan on such date shall be paid to the Borrower, for its own account.
On each such date, after giving effect to the application of Collections with respect to the
Covered Portion of an Insurance Premium Loan set forth above, as long as no Default or Event of
Default has occurred and is continuing, the Borrower shall retain (from such amounts so deposited
in the Collection Account with respect thereto) such Collections with respect to the Uncovered
Portion of an Insurance Premium Loan (other than Salvage Collections).
29
At any time a Default or Event of Default has occurred and is continuing, all Collections
shall be distributed and applied pursuant to Section 4.03(b).
Notwithstanding anything to the contrary in this Section 2.05(d), (A) during the period from
the Effective Date to the Term Loan Commitment Termination Date payments received by any Agent
shall held by such Agent and delivered to the applicable Lender entitled to receive such payment
only upon the consent of the Required Funded Lenders and (B) (x) Collections with respect to an
Insurance Premium Loan that is financed by a Specified Term Loan shall be applied first, to
Obligations with respect to Specified Term Loans and second, to Obligations with respect to all
other Terms Loans and (y) Collections with respect to an Insurance Premium Loan that is financed by
a Term Loan that is not a Specified Term Loan shall be applied first, to Obligations with respect
to Term Loans that are not Specified Term Loans and second, to Obligations with respect to
Specified Terms Loans.
(e)
Salvage Collections
. Notwithstanding the provisions of Section 2.05(d), Section
4.03(b) or any other provision of this Agreement, on each date which Collections are received with
respect to any Insurance Premium Loan for which there are Salvage Collections, the Borrower, the
Lenders or the Agents shall, to the extent received by them, distribute such Salvage Collections on
such date to the Collateral Value Insurer or the Contingent Collateral Value Insurer that paid the
claim to the Borrower.
(f)
Interest and Fees
. Any prepayment made pursuant to this Section 2.05 shall be
accompanied by accrued interest on the principal amount being prepaid to the date of prepayment and
if such prepayment would reduce the amount of the outstanding Loans to zero, such prepayment shall
be accompanied by the payment of all fees accrued to such date pursuant to Section 2.06.
(g)
Cumulative Prepayments
. Except as otherwise expressly provided in this Section
2.05, payments with respect to any subsection of this Section 2.05 are in addition to payments made
or required to be made under any other subsection of this Section 2.05.
Section 2.06
Fees
. From and after the Effective Date and until the later of (i) the
Final Maturity Date and (ii) the date on which all Obligations are paid in full, the Borrower shall
pay to the Administrative Agent for the account of the Agents a non-refundable loan management fee
(the
Loan Management Fee
) equal to (x) $15,000 each calendar year if at any time during
or prior to the start of such calendar year the aggregate amount of the Loans provided under this
Agreement is greater than or equal to $15,000,000 but less than $20,000,000 and (y) $20,000 each
calendar year if at any time during or prior to the start of such calendar year the aggregate
amount of the Loans provided under this Agreement is greater than or equal to $20,000,000.
Section 2.07
Securitization
. The Borrower hereby acknowledges that the Lenders and
their Affiliates may sell or securitize the Loans (a
Securitization
) through the pledge
of the Loans as collateral security for loans to the Lenders or their Affiliates or through the
sale of the Loans or the issuance of direct or indirect interests in the Loans, which loans to the
Lenders or their Affiliates or direct or indirect interests will be rated by Moodys, Standard &
Poors or one or more other rating agencies (the
Rating Agencies
). The Borrower shall
30
cooperate with the Lenders and their Affiliates to effect the Securitization including, without
limitation, by (a) amending this Agreement and the other Loan Documents, and executing such
additional documents, as reasonably requested by the Lenders in connection with the Securitization,
provided
that
(i) any such amendment or additional documentation does not impose
material additional costs on the Borrower and (ii) any such amendment or additional documentation
does not materially adversely affect the rights, or materially increase the obligations, of the
Borrower under the Loan Documents or change or affect in a manner adverse to the Borrower the
financial terms of the Loans and (b) providing such information as may be reasonably requested by
the Lenders in connection with the rating of the Loans or the Securitization.
Section 2.08
Taxes
.
(a) Any and all payments by the Borrower hereunder or under any other Loan Document shall be
made free and clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect thereto,
excluding
taxes imposed on the net income of any Agent, any Lender (or any transferee or
assignee thereof, including a participation holder (any such entity, a
Transferee
)) by
the jurisdiction in which such Person is organized or has its principal lending office (all such
nonexcluded taxes, levies, imposts, deductions, charges withholdings and liabilities, collectively
or individually,
Taxes
). If the Borrower shall be required to deduct any Taxes from or
in respect of any sum payable hereunder to any Agent, any Lender (or any Transferee), (i) the sum
payable shall be increased by the amount (an
Additional Amount
) necessary so that after
making all required deductions (including deductions applicable to additional sums payable under
this Section 2.08) such Agent, such Lender (or such Transferee) shall receive an amount equal to
the sum it would have received had no such deductions been made, (ii) the Borrower shall make such
deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law.
(b) In addition, the Borrower agrees to pay to the relevant Governmental Authority in
accordance with applicable law any present or future stamp or documentary taxes or any other excise
or property taxes, charges or similar levies that arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this Agreement or any other
Loan Document (
Other Taxes
). The Borrower shall deliver to each Agent and each Lender
official receipts in respect of any Taxes or Other Taxes payable hereunder promptly after payment
of such Taxes or Other Taxes.
(c) The Borrower hereby indemnifies and agrees to hold each Agent and each Lender harmless
from and against Taxes and Other Taxes (including, without limitation, Taxes and Other Taxes
imposed on any amounts payable under this Section 2.08) paid by such Person, whether or not such
Taxes or Other Taxes were correctly or legally asserted. Such
indemnification shall be paid within 10 days from the date on which any such Person makes
written demand therefore specifying in reasonable detail the nature and amount of such Taxes or
Other Taxes.
(d) Each Lender (or Transferee) that is organized under the laws of a jurisdiction outside the
United States (a
Non-U. S. Lender
) agrees that it shall, no later than the
31
Effective Date (or, in the case of a Lender which becomes a party hereto pursuant to Section 12.07 hereof after
the Effective Date, promptly after the date upon which such Lender becomes a party hereto) deliver
to the Agents one properly completed and duly executed copy of either U.S. Internal Revenue Service
Form W-8BEN, W-8ECI or W-8IMY or any subsequent versions thereof or successors thereto, in each
case claiming complete exemption from, or reduced rate of, U.S. Federal withholding tax and
payments of interest hereunder. In addition, in the case of a Non-U. S. Lender claiming exemption
from U.S. Federal withholding tax under Section 871(h) or 881(c) of the Internal Revenue Code, such
Non-U. S. Lender hereby represents to the Agents and the Borrower that such Non-U. S. Lender is not
a bank for purposes of Section 881(c) of the Internal Revenue Code, is not a 10-percent shareholder
(within the meaning of Section 871(h)(3)(B) of the Internal Revenue Code) of the Borrower and is
not a controlled foreign corporation related to the Borrower (within the meaning of Section
864(d)(4) of the Internal Revenue Code), and such Non-U. S. Lender agrees that it shall promptly
notify the Agents in the event any such representation is no longer accurate. Such forms shall be
delivered by each Non-U. S. Lender on or before the date it becomes a party to this Agreement (or,
in the case of a Transferee that is a participation holder, on or before the date such
participation holder becomes a Transferee hereunder) and on or before the date, if any, such Non-U.
S. Lender changes its applicable lending office by designating a different lending office (a
New Lending Office
). In addition, such Non-U. S. Lender shall deliver such forms within
20 days after receipt of a written request therefor from any Agent, the assigning Lender or the
Lender granting a participation, as applicable. Notwithstanding any other provision of this
Section 2.08, a Non-U. S. Lender shall not be required to deliver any form pursuant to this Section
2.08(d) that such Non-U. S. Lender is not legally able to deliver.
(e) The Borrower shall not be required to indemnify any Non-U. S. Lender, or pay any
Additional Amounts to any Non-U. S. Lender, in respect of United States Federal withholding tax
pursuant to this Section 2.08 to the extent that (i) the obligation to withhold amounts with
respect to United States Federal withholding tax existed on the date such Non-U .S. Lender became a
party to this Agreement (or, in the case of a Transferee that is a participation holder, on the
date such participation holder became a Transferee hereunder) or, with respect to payments to a New
Lending Office, the date such Non-U. S. Lender designated such New Lending Office with respect to a
Loan;
provided
,
however
, that this clause (i) shall not apply to the extent the
indemnity payment or Additional Amounts any Transferee, or Lender (or Transferee) through a New
Lending Office, would be entitled to receive (without regard to this clause (i)) do not exceed the
indemnity payment or Additional Amounts that the Person making the assignment, participation or
transfer to such Transferee, or Lender (or Transferee) making the designation of such New Lending
Office, would have been entitled to receive in the absence of such assignment, participation,
transfer or designation, or (ii) the obligation to pay such Additional Amounts would not have
arisen but for a failure by such Non-U. S. Lender to comply with the provisions of clause (d)
above.
(f) Any Agent or any Lender (or Transferee) claiming any indemnity payment or additional
payment amounts payable pursuant to this Section 2.08 shall use reasonable efforts (consistent with
legal and regulatory restrictions) to file any certificate or document reasonably requested in
writing by the Borrower or to change the jurisdiction of its applicable lending office if the
making of such a filing or change would avoid the need for or reduce the amount of any such
indemnity payment or additional amount that may thereafter
32
accrue, would not require such Agent or such Lender (or Transferee) to disclose any information such Agent or such Lender (or Transferee)
deems confidential and would not, in the sole determination of such Agent or such Lender (or
Transferee), be otherwise disadvantageous to such Agent or such Lender (or Transferee).
(g) The obligations of the Borrower under this Section 2.08 shall survive the termination of
this Agreement and the payment of the Loans and all other amounts payable hereunder.
Section 2.09
Increase in Term Loan Commitments
.
(a)
Request for Increase
. Provided no Default or Event of Default then exists or
would arise therefrom, upon notice to the Administrative Agent (which shall promptly notify the
Lenders), the Borrower may, prior to September 13, 2009, request an increase in the Term Loan
Commitments by an amount not exceeding $45,000,000 in the aggregate (the
Commitment
Increase
);
provided
that
any such request for a Commitment Increase shall be
in a minimum amount of $5,000,000. Following the delivery by the Borrower of the request, the
Administrative Agent and the Lenders shall, by notice to the Borrower given not more than 30
Business Days after the date of receipt of the Offer Notice, either accept the Offer or reject the
Offer, provided that, the Lenders hall have no obligation to accept any request.
(b)
Lender Elections to Increase
. Each Lender shall notify the Administrative Agent
within such time period whether or not it agrees to increase its Term Loan Commitment and, if so,
whether by an amount equal to, greater than, or less than its Pro Rata Share of such requested
Commitment Increase. Any Lender not responding within such time period shall be deemed to have
declined to increase its Term Loan Commitment.
(c)
Effective Date and Allocations
. If the Term Loan Commitments are increased in
accordance with this Section 2.09, the Administrative Agent shall determine the effective date (the
Increase Effective Date
) and the final allocation of such Commitment Increase. The
Administrative Agent shall promptly notify the Borrower and the Lenders of the final allocation of
such Commitment Increase and the Increase Effective Date and, on the Increase Effective Date, (i)
the Term Loan Commitments under, and for all purposes of, this Agreement shall be increased by the
aggregate amount of such Commitment Increase, and (ii) Schedule 1.01(A) shall be deemed modified,
without further action, to reflect the revised Term Loan Commitments of the Lenders.
(d)
Conditions to Effectiveness of Commitment Increase
. As a condition precedent to
such Commitment Increase: (i) the Borrower shall have delivered to the Administrative Agent a
certificate of each Credit Party dated as of the Increase Effective Date (in sufficient copies for
each Lender) signed by an Authorized Officer of such Credit Party (A)
certifying and attaching the resolutions adopted by such Credit Party approving or consenting
to such Commitment Increase, and (B) in the case of the Borrower, certifying that, before and after
giving effect to such Commitment Increase, the representations and warranties contained in Article
VI and the other Loan Documents are true and correct in all material respects on and as of the
Increase Effective Date, except to the extent that such representations and warranties specifically
refer to an earlier date, in which case they are true and correct in all material respects
33
as of such earlier date, and except that for purposes of this Section 2.09, the representations and
warranties contained in subsections (g)(i) and (g)(ii) of Section 6.01 shall be deemed to refer to
the most recent statements furnished pursuant to subsections (a)(i) and (a)(ii), respectively, of
Section 7.01
; (ii) the Borrower shall have paid such fees and other compensation to the
Agents and Lenders as they require; (iii) the Borrower shall have delivered to the Administrative
Agent and the Lenders an opinion or opinions substantially similar to the opinions delivered on the
Effective Date from counsel to the Credit Parties reasonably satisfactory to the Administrative
Agent and dated such date; (iv) the Borrower shall have delivered such other instruments, documents
and agreements as the Administrative Agent may reasonably have requested including, without
limitation, an amendment to this Agreement and the other Loan Documents, if required by the
Administrative Agent; and (v) no Default or Event of Default shall have occurred and be continuing.
ARTICLE III
INTENTIONALLY OMITTED
ARTICLE IV
FEES, PAYMENTS AND OTHER COMPENSATION
Section 4.01
Payments; Computations and Statements
. The Borrower will make each
payment under this Agreement not later than 12:00 noon (New York City time) on the day when due, in
lawful money of the United States of America and in immediately available funds, to the
Administrative Agents Account. All payments received by the Administrative Agent after 12:00 noon
(New York City time) on any Business Day will be credited to the Loan Account on the next
succeeding Business Day. All payments shall be made by the Borrower without set-off, counterclaim,
deduction or other defense to the Agents and the Lenders. Except as provided in Section 2.02,
after receipt, the Administrative Agent will promptly thereafter cause to be distributed like funds
relating to the payment of principal ratably to the Lenders in accordance with their Pro Rata
Shares and like funds relating to the payment of any other amount payable to any Lender to such
Lender, in each case to be applied in accordance with the terms of this Agreement, provided that
the Administrative Agent will cause to be distributed all interest and fees received from or for
the account of the Borrower not less than once each month and in any event promptly after receipt
thereof. The Lenders and the Borrower hereby authorize the Administrative Agent to, and the
Administrative Agent may, from time to time, charge the Loan Account of the Borrower with any
amount due and payable by the Borrower under any Loan Document. Each of the Lenders and the
Borrower agrees that the Administrative Agent shall have the right to make such charges
whether or not any Default or Event of Default shall have occurred and be continuing or
whether any of the conditions precedent in Section 5.02 have been satisfied. Any amount charged to
the Loan Account of the Borrower shall be deemed an Obligation hereunder, which shall bear interest
at the rate applicable to Term Loans. The Lenders and the Borrower confirm that any charges which
the Administrative Agent may so make to the Loan Account of the Borrower as herein provided will be
made as an accommodation to the Borrower and solely at the Administrative Agents discretion,
provided that the Administrative Agent shall from time to time upon the request of the Collateral
Agent,
34
charge the Loan Account of the Borrower with any amount due and payable under any Loan
Document. Whenever any payment to be made under any such Loan Document shall be stated to be due
on a day other than a Business Day, such payment shall be made on the next succeeding Business Day
and such extension of time shall in such case be included in the computation of interest or fees,
as the case may be. All computations of fees shall be made by the Administrative Agent on the
basis of a year of 360 days for the actual number of days (including the first day but excluding
the last day) occurring in the period for which such fees are payable. Each determination by the
Administrative Agent of an interest rate or fees hereunder shall be conclusive and binding for all
purposes in the absence of manifest error. The Administrative Agent shall provide the Borrower,
promptly after the end of each calendar month, a summary statement (in the form from time to time
used by the Administrative Agent) of the opening and closing daily balances in the Loan Account of
the Borrower during such month, the amounts and dates of all Loans made to the Borrower during such
month, the amounts and dates of all payments on account of the Loans to the Borrower during such
month and the Loans to which such payments were
applied, the amount of interest accrued on the
Loans to the Borrower during such month, and the amount and nature of any charges to the Loan
Account made during such month on account of fees, commissions, expenses and other Obligations.
All entries on any such statement shall be presumed to be correct and, thirty (30) days after the
same is sent, shall be final and conclusive absent manifest error.
Section 4.02
Sharing of Payments, Etc.
Except as provided in Section 2.02 hereof, if
any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) on account of any Obligation in excess of its ratable share of
payments on account of similar obligations obtained by all the Lenders, such Lender shall forthwith
purchase from the other Lenders such participations in such similar obligations held by them as
shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of
them;
provided
,
however
, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded
and such Lender shall repay to the purchasing Lender the purchase price to the extent of such
recovery together with an amount equal to such Lenders ratable share (according to the proportion
of (i) the amount of such Lenders required repayment to (ii) the total amount so recovered from
the purchasing Lender of any interest or other amount paid by the purchasing Lender in respect of
the total amount so recovered). The Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to this Section 4.02 may, to the fullest extent permitted by law,
exercise all of its rights (including the Lenders right of set-off) with respect to such
participation as fully as if such Lender were the direct creditor of the Borrower in the amount of
such participation.
Section 4.03
Apportionment of Payments
. Subject to Section 2.02 hereof:all
payments of principal and interest in respect of outstanding Loans, all payments of fees and all
other payments in respect of any other Obligations, shall be allocated by the Administrative Agent
among such of the Lenders as are entitled thereto, in proportion to their respective Pro Rata
Shares or otherwise as provided herein or, in respect of payments not made on account of Loans, as
designated by the Person making payment when the payment is made.
(b) After the occurrence and during the continuance of a Default or an Event of Default, the
Administrative Agent may, and upon the direction of the Required Lenders
35
shall, apply all proceeds of the Collateral (including all Collections other than Salvage Collections), subject to the
provisions of this Agreement, (i)
first
, to pay the Servicer an amount equal to the accrued
and unpaid Servicing Fees then due and payable in accordance with the Transaction Documents until
paid in full; (ii)
second
, to pay the Obligations in respect of any fees, expense
reimbursements, indemnities and other amounts then due and payable to the Agents until paid in
full; (iii)
third
, to pay the Insurance Collateral Agent an amount equal to any fees,
expense reimbursements, indemnities and other amounts then due and payable to the Insurance
Collateral Agent in accordance with the Transaction Documents until paid in full;
(iv)
fourth
, to pay the Obligations in respect of any fees, expense reimbursements,
indemnities and other amounts then due and payable to the Lenders until paid in full; (v)
fifth
, to pay interest then due and payable in respect of the Collateral Agent Advances
until paid in full; (vi)
sixth
, to pay principal of the Collateral Agent Advances until
paid in full, (vii)
seventh
, to pay interest then due and payable in respect of the Loans
until paid in full, (viii)
eighth
, to pay principal of the Loans until paid in full, (ix)
ninth
, to the payment of all other Obligations then due and payable, and (x)
tenth
,
any remaining Collections on such date shall be paid to the Borrower, for its own account.
(c) In each instance, so long as no Event of Default has occurred and is continuing, Section
4.03(b) shall not be deemed to apply to any payment by the Borrower specified by the Borrower to
the Administrative Agent to be for the payment of the Obligations then due and payable under any
provision of this Agreement or the prepayment of all or part of the principal of the Term Loan in
accordance with the terms and conditions of Section 2.05.
(d) For purposes of Section 4.03(b), paid in full means payment in cash of all amounts owing
under the Loan Documents and the Transaction Documents according to the terms thereof, including
loan fees, servicing fees, professional fees, interest (and specifically including interest accrued
after the commencement of any Insolvency Proceeding), default interest, interest on interest, and
expense reimbursements, whether or not same would be or is allowed or disallowed in whole or in
part in any Insolvency Proceeding.
(e) In the event of a direct conflict between the priority provisions of this Section 4.03 and
other provisions contained in any other Loan Document, it is the intention of the parties hereto
that both such priority provisions in such documents shall be read together and construed, to the
fullest extent possible, to be in concert with each other. In the event of any actual,
irreconcilable conflict that cannot be resolved as aforesaid, the terms and provisions of this
Section 4.03 shall control and govern.
Section 4.04
Increased Costs and Reduced Return
. (a) If any Lender or any Agent
shall have determined that the adoption or implementation of, or any change in, any law, rule,
treaty or regulation, or any policy, guideline or directive of, or any change in, the
interpretation or administration thereof by, any court, central bank or other administrative or
Governmental Authority, or compliance by any Lender or any Agent or any Person controlling any such
Agent or any such Lender with any directive of, or guideline from, any central bank or other
Governmental Authority or the introduction of, or change in, any accounting principles applicable
to any Lender or any Agent or any Person controlling any such Agent or any such Lender (in each
case, whether or not having the force of law) (each a
Change in Law
), shall (i) subject
such Agent or such Lender, or any Person controlling such Agent or such Lender to any
36
tax, duty or other charge with respect to this Agreement or any Loan made by such Agent or
such Lender, or change the basis of taxation of payments to such Agent or such Lender or any Person
controlling such Agent or such Lender of any amounts payable hereunder (except for taxes on the
overall net income of such Agent or such Lender or any Person controlling such Agent or such
Lender), (ii) impose, modify or deem applicable any reserve, special deposit or similar requirement
against any Loan or against assets of or held by, or deposits with or for the account of, or credit
extended by, such Agent or such Lender or any Person controlling such Agent or such Lender or
(iii) impose on such Agent or such Lender or any Person controlling such Agent or such Lender any
other condition regarding this Agreement or any Loan, and the result of any event referred to in
clauses (i), (ii) or (iii) above shall be to increase the cost to such Agent or such Lender of
making any Loan or agreeing to make any Loan or to reduce any amount received or receivable by such
Agent or such Lender hereunder, then, upon demand by such Agent or such Lender, the Borrower shall
pay to such Agent or such Lender such additional amounts as will compensate such Agent or such
Lender for such increased costs or reductions in amount.
(b) If any Agent or any Lender shall have determined that any Change in Law either (i) affects
or would affect the amount of capital required or expected to be maintained by such Agent or such
Lender or any Person controlling such Agent or such Lender, and such Agent or such Lender
determines that the amount of such capital is increased as a direct or indirect consequence of any
Loans made or maintained, such Agents or such Lenders or such other controlling Persons other
obligations hereunder, or (ii) has or would have the effect of reducing the rate of return on such
Agents or such Lenders such other controlling Persons capital to a level below that which such
Agent or such Lender or such controlling Person could have achieved but for such circumstances as a
consequence of any Loans made or maintained or any agreement to make Loans or such Agents or such
Lenders or such other controlling Persons other obligations hereunder (in each case, taking into
consideration, such Agents or such Lenders or such other controlling Persons policies with
respect to capital adequacy), then, upon demand by such Agent or such Lender, the Borrower shall
pay to such Agent or such Lender from time to time such additional amounts as will compensate such
Agent or such Lender for such cost of maintaining such increased capital or such reduction in the
rate of return on such Agents or such Lenders or such other controlling Persons capital.
(c) All amounts payable under this Section 4.04 shall bear interest from the date that is ten
(10) days after the date of demand by any Agent or any Lender until payment in full to such Agent
or such Lender at the interest rate per annum equal to 20%. A certificate of such Agent or such
Lender claiming compensation under this Section 4.04, specifying the event herein above described
and the nature of such event shall be submitted by such Agent or such Lender to the Administrative
Borrower, setting forth the additional amount due and an explanation of the calculation thereof,
and such Agents or such Lenders reasons for invoking the provisions of this Section 4.04, and
shall be final and conclusive absent manifest error.
37
ARTICLE V
CONDITIONS TO LOANS
Section 5.01
Conditions Precedent to Effectiveness
. This Agreement shall become
effective as of the Business Day (the
Effective Date
) when each of the following
conditions precedent shall have been satisfied in a manner satisfactory to the Agents:
(a)
Payment of Fees, Etc.
The Borrower shall have paid on or before the date of this
Agreement all fees, costs, expenses and taxes then payable pursuant to Section 12.04.
(b)
Representations and Warranties; No Event of Default
. The following statements
shall be true and correct: (i) the representations and warranties contained in Article VI and in
each other Loan Document, certificate or other writing delivered to any Agent or any Lender
pursuant hereto or thereto on or prior to the Effective Date are true and correct on and as of the
Effective Date as though made on and as of such date, except to the extent that any such
representation or warranty expressly relates solely to an earlier date (in which case such
representation or warranty shall be true and correct on and as of such earlier date) and (ii) no
Default or Event of Default shall have occurred and be continuing on the Effective Date or would
result from this Agreement or the other Loan Documents becoming effective in accordance with its or
their respective terms.
(c)
Legality
. The making of the initial Loans or the issuance of any Letters of
Credit shall not contravene any law, rule or regulation applicable to any Agent or any Lender.
(d)
Delivery of Documents
. The Collateral Agent shall have received on or before the
Effective Date the following, each in form and substance satisfactory to the Collateral Agent and,
unless indicated otherwise, dated the Effective Date:
(i) a Security Agreement, duly executed by the Borrower;
(ii) the Guarantor Security Agreement, duly executed by the Equity Guarantor, together with
the original stock certificates representing all of the common stock of the Borrower owned by the
Equity Guarantor, accompanied by undated transfer powers executed in blank and other proper
instruments of transfer;
(iii) each Individual Guaranty, duly executed by the applicable Individual Guarantor;
(iv) a UCC Filing Authorization Letter, duly executed by the Borrower and the Equity
Guarantor, together with (A) appropriate financing statements on Form UCC-1 duly filed in such
office or offices as may be necessary or, in the opinion of the Collateral Agent, desirable to
perfect the security interests purported to be created by created by the Security Agreement and the
Guarantor Security Agreement and (B) evidence satisfactory to the Collateral Agent of the filing of
such UCC-1 financing statements;
38
(v) certified copies of request for copies of information on Form UCC-11, listing all
effective financing statements which name as debtor any Credit Party and the Originator and which
are filed in the offices referred to in paragraph (iv) above, together with copies of such
financing statements, none of which, except as otherwise agreed in writing by the Collateral Agent,
shall cover any of the Collateral and the results of searches for any tax Lien and judgment Lien
filed against such Person or its property, which results, except as otherwise agreed to in writing
by the Collateral Agent, shall not show any such Liens;
(vi) the Master Participation Agreement, duly executed by the Originator and the Borrower;
(vii) the Collateral Value Policy, duly executed by the Collateral Value Insurer and in full
force and effect;
(viii) the Contingent Collateral Value Policy, duly executed by the Contingent Collateral
Value Insurer and in full force and effect;
(ix) a copy of the resolutions of the Equity Guarantor, the Borrower and the Originator,
certified as of the Effective Date by an Authorized Officer thereof, authorizing (A) the borrowings
hereunder and the transactions contemplated by the Loan Documents and the Transaction Documents to
which such Person is or will be a party, and (B) the execution, delivery and performance by such
Person of each Loan Document and Transaction Document to which such Person is or will be a party
and the execution and delivery of the other documents to be delivered by such Person in connection
herewith and therewith;
(x) a certificate of an Authorized Officer of the Equity Guarantor, the Borrower and the
Originator, certifying the names and true signatures of the representatives of the Equity
Guarantor, the Borrower and the Originator authorized to sign each Loan Document and Transaction
Document to which such Person is or will be a party and the other documents to be executed and
delivered by such Person in connection herewith and therewith, together with evidence of the
incumbency of such authorized officers;
(xi) a certificate of the appropriate official(s) of the jurisdiction of organization and each
jurisdiction of foreign qualification of the Equity Guarantor, the Borrower and the Originator
certifying as of a recent date not more than 30 days prior to the Effective Date as to the
subsistence in good standing of the Equity Guarantor, the Borrower and the Originator in such
jurisdictions;
(xii) a true and complete copy of the charter, certificate of formation, certificate of
limited partnership or other publicly filed organizational document of the Equity Guarantor, the
Borrower and the Originator certified as of a recent date not more than 30 days prior to the
Effective Date by an appropriate official of the jurisdiction of organization of the Equity
Guarantor, the Borrower and the Originator which shall set forth the same complete name of such
Person as is set forth herein and the organizational number of such Person, if an organizational
number is issued in such jurisdiction;
(xiii) a copy of the Governing Documents of the Equity Guarantor, the Borrower and the
Originator, together with all amendments thereto, certified as of
39
the Effective Date by an
Authorized Officer of the Equity Guarantor, the Borrower and the Originator;
(xiv) opinions of Foley & Lardner, LLP and Locke Lord Bissell & Liddell LLP counsel to the
Credit Parties and the Originator, in form and substance satisfactory to the Agents, and as to such
other matters as the Collateral Agent may reasonably request, including, without limitation,
non-consolidation, true sale and true participation opinions;
(xv) a certificate of an Authorized Officer of the Equity Guarantor, the Borrower and the
Originator, certifying as to the matters set forth in subsection (b) of this Section 5.01;
(xvi) a copy of (A) the Financial Statements and (B) the financial projections described in
Section 6.01(g)(ii) hereof, certified as of the Effective Date as complying with the
representations and warranties set forth in Section 6.01(g)(ii) by an Authorized Officer of
Imperial;
(xvii) a certificate of the chief financial officer of the Borrower and the Originator,
certifying as to the solvency of the Borrower and the Originator, which certificate shall be
satisfactory in form and substance to the Collateral Agent;
(xviii) evidence of the insurance coverage required by Section 7.01 and the terms of each
Security Agreement and such other insurance coverage with respect to the business and operations of
the Borrower as the Collateral Agent may reasonably request, in each case, where requested by the
Collateral Agent, with such endorsements as to the named insureds or loss payees thereunder as the
Collateral Agent may request and providing that such policy may be terminated or canceled (by the
insurer or the insured thereunder) only upon 30 days prior written notice to the Collateral Agent
and each such named insured or loss payee, together with evidence of the payment of all premiums
due in respect thereof for such period as the Collateral Agent may request;
(xix) a certificate of an Authorized Officer of the Equity Guarantor, the Borrower and the
Originator, certifying the names and true signatures of the persons that are authorized to provide
Notices of Borrowing and all other notices under this Agreement, the other Loan Documents and the
Transaction Documents;
(xx) the Collateral Agency Agreement, duly executed by the Originator, the Borrower, the
Insurance Collateral Agent and the Collateral Agent;
(xxi) the Initial Servicing Agreement, duly executed by the Borrower and the Initial Servicer;
(xxii) copies of the Transaction Documents and the other Material Contracts as in effect on
the Effective Date, certified as true and correct copies thereof by an Authorized Officer of the
Borrower, together with a certificate of an Authorized Officer of the Borrower stating that such
agreements remain in full force and effect and that the Borrower has not breached or defaulted in
any of its obligations under such agreements;
40
(xxiii) such depository account, blocked account, lockbox account and similar agreements and
other documents, each in form and substance satisfactory to the Agents, as the Agents may request
with respect to the Borrowers cash management system; and such other agreements, instruments,
approvals, opinions and other documents, each satisfactory to the Collateral Agent in form and
substance, as the Collateral Agent may reasonably request.
(e)
Material Adverse Effect
. The Collateral Agent shall have determined, in its sole
judgment, that no event or development shall have occurred since December 31, 2008 which could
reasonably be expected to have a Material Adverse Effect.
(f)
Approvals
. All consents, authorizations and approvals of, and filings and
registrations with, and all other actions in respect of, any Governmental Authority or other Person
required in connection with the making of the Loans, the execution and performance of the
Transaction Documents or the conduct of the Borrowers business shall have been obtained and shall
be in full force and effect.
(g)
Proceedings; Receipt of Documents
. All proceedings in connection with the making
of the initial Loans and the other transactions contemplated by this Agreement, the other Loan
Documents and the Transaction Documents, and all documents incidental hereto and thereto, shall be
satisfactory to the Collateral Agent and its counsel, and the Collateral Agent and such counsel
shall have received all such information and such counterpart originals or certified or other
copies of such documents as the Collateral Agent or such counsel may reasonably request.
(h)
Management Reference Checks
. The Collateral Agent shall have received
satisfactory reference checks for, and shall have had an opportunity to meet with, key management
of Imperial, the Borrower and the Originator.
(i)
Due Diligence
. The Agents shall have completed their business, legal and
collateral due diligence with respect to the Imperial, the Originator and the Borrower, including,
without limitation, (A) a review of Imperials and its Subsidiaries books and records, (B) a
review of Imperials and its Subsidiaries licenses to engage in making insurance premium finance
loans, (C) a review of Fiscal Year 2007, Fiscal Year 2008 and monthly 2009 financials of Imperial
and its Subsidiaries by the Lenders, (D) review of all legislative issues effecting and regulating
the premium finance industry and (E) review of third party loan servicing companies by the Lenders,
in each case, the results thereof shall be acceptable to the Agents and the Lenders, in their sole
and absolute discretion.
Section 5.02
Conditions Precedent to All Loans
. The obligation of any Agent or any
Lender to make any Loan on or after the Effective Date is subject to the fulfillment, in a manner
satisfactory to the Administrative Agent, of each of the following conditions precedent:
(a)
Payment of Fees, Etc.
The Borrower shall have paid all fees, costs, expenses and
taxes then payable by the Borrower pursuant to this Agreement and the other Loan Documents,
including, without limitation, Section 12.04 hereof.
41
(b)
Representations and Warranties; No Event of Default
. The following statements
shall be true and correct in all material respects (except such materiality qualifier shall not be
applicable with respect to matters involving (i) the Collateral, (ii) the ability of the Agents and
the Lenders to realize upon the Collateral, or (iii) the ability of the Agents and the Lenders to
receive Collections from the Collateral), and the submission by the Borrower to the Administrative
Agent of a Notice of Borrowing with respect to each such Loan, and the Borrowers acceptance of the
proceeds of such Loan, shall each be deemed to be a representation and warranty by the Borrower on
the date of such Loan that: (i) the representations and warranties contained in Article VI and in
each other Loan Document, certificate or other writing delivered to any Agent or any Lender
pursuant hereto or thereto on or prior to the date of such Loan are true and correct in all
material respects on and as of such date as though made on and as of such date (except such
materiality qualifier shall not be applicable with respect to matters involving (i) the Collateral,
(ii) the ability of the Agents and the Lenders to realize upon the Collateral, or (iii) the ability
of the Agents and the Lenders to receive Collections from the Collateral), except to the extent
that any such representation or warranty expressly relates solely to an earlier date (in which case
such representation or warranty shall be true and correct on and as of such earlier date), (ii) at
the time of and after giving effect to the making of such Loan and the application of the proceeds
thereof, no Default or Event of Default has occurred and is continuing or would result from the
making of the Loan to be made, on such date and (iii) the conditions set forth in this Section 5.02
have been satisfied as of the date of such request.
(c)
Legality
. The making of such Loan shall not contravene any law, rule or
regulation applicable to any Agent or any Lender.
(d)
Notices
. The Administrative Agent shall have received a Notice of Borrowing
pursuant to Section 2.02 hereof.
(e)
Delivery of Documents
. The Administrative Agent shall have received the following
items, as more fully set forth on Schedule 5.02(e) attached hereto, three (3) Business Days prior
to any borrowing date: (i) (A) a true and correct copy of an updated Loan Schedule identifying the
Insurance Premium Loans to be financed with the proceeds of such Loan, (B) the related Life
Insurance Policy and evidence of receipt by the insurance carrier of the related premium, (C) the
Eligibility Certification for the Insurance Premium Loan to be purchased, (D) the executed Trust
Agreement for each Insurance Premium Loan to be financed with the proceeds of such Loan, which
shall evidence that an institutional trustee or financial institution acceptable to the Agents is
the trustee or co-trustee under such Trust Agreement and that the premium with respect to the
related Life Insurance Policy shall have either (x) been paid to the applicable Insurance Provider
or (y) placed into escrow under the Trust Agreement pursuant to escrow arrangements satisfactory to
the Agents, in each case, in an amount sufficient to result in such Life Insurance Policy remaining
continuously in effect through the sixtieth (60th) day after the Insurance Premium Loan Maturity
Date;
provided
,
however
, that this condition shall be deemed to be satisfied if the
aggregate amount of premium paid to the applicable Insurance Provider with respect to the related
Life Insurance Policy prior to the lapse of such Life Insurance Policy equals the Total Life
Insurance Premium set forth in the applicable Coverage Certificate, (E) a true and correct copy of
the Borrowers completed internal compliance checklist for each Insurance Premium Loan to be
financed with the proceeds of such Loan and (F) all other documents comprising the Loan
Documentation Package for such
42
Insurance Premium Loan, (ii) the related Coverage Certificate from
the Collateral Value Insurer for the Insurance Premium Loan being financed with the proceeds of a
Loan, (iii) if an Insurance Premium Loan is financed in an Applicable Non-Licensed State, a fully
executed Insurance Premium Loan Sale and Assignment Agreement, (iv) if an Insurance Premium Loan or
portion thereof is financed in an Applicable Licensed State, a fully executed participation
certificate entered into pursuant to the Master Participation Agreement, (v) evidence satisfactory
to the Administrative Agent that Borrower shall have paid all premiums under the Collateral Value
Policy and the Contingent Collateral Value Policy covering each Insurance Premium Loan to be
financed with the proceeds of such Loan, which shall in any event include copies of wire transfers,
fed reference numbers and emails from the Collateral Value Insurer and the Contingent Collateral
Value Insurer confirming receipt of such payments, and (vi) the Agents shall have received such
other agreements, instruments, approvals, opinions and other documents, each in form and substance
satisfactory to the Agents, as any Agent may reasonably request.
(f)
Proceedings; Receipt of Documents
. All proceedings in connection with the making
of such Loan and the other transactions contemplated by this Agreement and the other Loan
Documents, and all documents incidental hereto and thereto, shall be satisfactory to the Agents and
their counsel, and the Agents and such counsel shall have received all such information and such
counterpart originals or certified or other copies of such documents, in form and substance
satisfactory to the Agents, as the Agents or such counsel may reasonably request.
(g)
Performance by the Collateral Value Insurer
. The Collateral Value Insurer, or
following the occurrence of a Credit Event, the Contingent Collateral Value Insurer, shall not have
failed to pay any claim properly submitted under the Collateral Value Policy or Contingent
Collateral Value Policy, as applicable, within the applicable time period, or pursuant to the
procedures for paying claims, in either case, as set forth therein (regardless of whether or not
there are any defenses to any such payment). The claims paying ability of the Collateral Value
Insurer shall be rated at least A- by Standard & Poors and at least A- by Fitch, Inc. The claims
paying ability of the Contingent Collateral Value Insurer shall be rated at least AA+ by Standard &
Poors and at least AA+ by Fitch, Inc.
(h)
Prohibited Acts.
An Agent or a Lender shall not have actual knowledge that either
(a) any Prohibited Act (as defined in the Collateral Value Policy) has been committed by any Person
or (b) any Covered Loan has failed at any time to comply in any material respect with any
applicable laws, statutes, rules or regulations.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Section 6.01
Representations and Warranties
. The Borrower hereby represents and
warrants to the Agents and the Lenders as follows:
(a)
Organization, Good Standing, Etc.
The Borrower (i) is a limited liability company
duly organized, validly existing and in good standing under the laws of the state or jurisdiction
of its organization, (ii) has all requisite power and authority to conduct its
43
business as now
conducted and as presently contemplated and to make the borrowings hereunder, and to execute and
deliver each Loan Document to which it is a party, and to consummate the transactions contemplated
thereby, and (iii) is duly qualified to do business and is in good standing in each jurisdiction in
which the character of the properties owned or leased by it or in which the transaction of its
business makes such qualification necessary.
(b)
Authorization, Etc.
The execution, delivery and performance by the Borrower of
each Loan Document and each Transaction Document to which it is or will be a party, (i) have been
duly authorized by all necessary action, (ii) do not and will not contravene any of its Governing
Documents or any applicable Requirement of Law or any Contractual Obligation binding on or
otherwise affecting it or any of its properties, (iii) do not and will not result in or require the
creation of any Lien (other than pursuant to any Loan Document) upon or with respect to any of its
properties, and (iv) do not and will not result in any default, noncompliance, suspension,
revocation, impairment, forfeiture or nonrenewal of any permit, license, authorization or approval
applicable to its operations or any of its properties.
(c)
Governmental Approvals
. No authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority is required in connection with the due
execution, delivery and performance by the Borrower of any Loan Document to which it is or will be
a party.
(d)
Enforceability of Loan Documents
. This Agreement is, and each other Loan Document
to which the Borrower is or will be a party, when delivered hereunder, will be, a legal, valid and
binding obligation of such Person, enforceable against such Person in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors rights generally.
(e)
Capitalization; Subsidiaries
. On the Effective Date, after giving effect to the
transactions contemplated hereby to occur on the Effective Date, the authorized Equity Interests of
the Borrower and the issued and outstanding Equity Interests of the Borrower are as set forth on
Schedule 6.01(e). All of the issued and outstanding shares of Equity Interests of the Borrower
have been validly issued and are fully paid and nonassessable, and the holders thereof are not
entitled to any preemptive, first refusal or other similar rights. Except as described on Schedule
6.01(e), as of the Effective Date, there are no outstanding debt or equity securities of the
Borrower and no outstanding obligations of the Borrower convertible into or exchangeable for, or
warrants, options or other rights for the purchase or acquisition from the Borrower, or other
obligations of the Borrower to issue, directly or indirectly, any shares of Equity Interests of the
Borrower. The Borrower has no Subsidiaries.
(f)
Litigation; Commercial Tort Claims
. There is no pending or, to the best knowledge
of the Borrower, threatened action, suit or proceeding affecting the Borrower or any of its
properties before any court or other Governmental Authority or any arbitrator that (A) if adversely
determined, could reasonably be expected to have a Material Adverse Effect or (B) relates to this
Agreement or any other Loan Document or any transaction contemplated hereby or thereby and (ii) as
of the Effective Date, the Borrower does not hold any commercial tort claims in respect of which a
claim has been filed in a court of law or a written notice by an attorney has been given to a
potential defendant.
44
(g)
Financial Condition
.
(i) The Financial Statements, copies of which have been delivered to each Agent and each
Lender, fairly present the consolidated financial condition of Imperial and its Subsidiaries as at
the respective dates thereof and the consolidated results of operations of Imperial and its
Subsidiaries for the fiscal periods ended on such respective dates, all in accordance with GAAP,
and since December 31, 2008 no event or development has occurred that has had or could reasonably
be expected to have a Material Adverse Effect.
(ii) The Borrower has heretofore furnished to each Agent and each Lender (A) projected monthly
balance sheets, income statements and statements of cash flows of the Borrower for the period from
January 31, 2009, through December 31, 2009, and (B) projected annual balance sheets, income
statements and statements of cash flows of the Borrower for the Fiscal Years ending in 2010 through
2011, which projected financial statements shall be updated from time to time pursuant to Section
7.01(a)(vii). Such projections, as so updated, shall be believed by the Borrower at the time
furnished to be reasonable, shall have been prepared on a reasonable basis and in good faith by the
Borrower, and shall have been based on assumptions believed by the Borrower to be reasonable at the
time made and upon the best information then reasonably available to the Borrower, and the Borrower
shall not be aware of any facts or information that would lead it to believe that such projections,
as so updated, are incorrect or misleading in any material respect.
(h)
Compliance with Law, Etc.
The Borrower is not in violation of (i) any of its
Governing Documents, (ii) any domestic or foreign Requirement of Law, including, without
limitation, any statute, legislation or treaty, any guideline, directive, rule, standard,
requirement, policy, order, judgment, injunction, award or decree of any Governmental Authority, in
each case, applicable to it or any of its property or assets (including any insurance premium
financing laws), or (iii) any material term of any Contractual Obligation (including, without
limitation, any Material Contract) binding on or otherwise affecting it or any of its properties,
and no Default or Event of Default has occurred and is continuing.
(i)
ERISA
. The Borrower does not contribute to, sponsors, maintains or has an
obligation to contribute to or maintain any Multiemployer Plan or any defined benefit plan and has
not at any time prior to the date hereof established, sponsored or maintained, been a party to and
has not at any time prior to the date hereof contributed or been obligated to contribute to or
maintain any Multiemployer Plan or any defined benefit plan.
(j)
Taxes, Etc.
All Federal, state and local tax returns and other reports required
by applicable Requirements of Law to be filed by the Borrower have been filed, or extensions have
been obtained, and all taxes, assessments and other governmental charges imposed upon the Borrower
or any property of the Borrower and which have become due and payable on or prior to the date
hereof have been paid.
(k)
Regulations T, U and X
. The Borrower is not or will not be engaged in the
business of extending credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation T, U or X), and no proceeds of any Loan will be used to purchase or
45
carry any
margin stock or to extend credit to others for the purpose of purchasing or carrying any margin
stock.
(l)
Nature of Business
. The Borrower is not engaged in any business other than the
purchase or other acquisition of Insurance Premium Loans from the Originator.
(m)
Adverse Agreements, Etc.
The Borrower is not a party to any Contractual
Obligation or subject to any restriction or limitation in any Governing Document or any judgment,
order, regulation, ruling or other requirement of a court or other Governmental Authority, which
(either individually or in the aggregate) has, or in the future could reasonably be expected
(either individually or in the aggregate) to have, a Material Adverse Effect.
(n)
Permits, Etc.
Each of the Originator and the Borrower has, and is in compliance
with, all permits, licenses, authorizations, approvals, entitlements and accreditations required
for such Person lawfully to own, lease, manage or operate, or to acquire, each business currently
owned, leased, managed or operated, or to be acquired, by such Person (including, without
limitation, all insurance premium financing permits and licenses required in the Applicable
Licensed States). No condition exists or event has occurred which, in itself or with the giving of
notice or lapse of time or both, would result in the suspension, revocation, impairment, forfeiture
or non-renewal of any such permit, license, authorization, approval, entitlement or accreditation,
and there is no claim that any thereof is not in full force and effect.
(o)
Properties
. The Borrower has good and marketable title to, or valid participation
interests, in all of its property and assets, free and clear of all Liens, except Permitted Liens.
(p)
Full Disclosure
. The Borrower has disclosed to the Agents all agreements,
instruments and corporate or other restrictions to which it is subject, and all other matters known
to it, that, individually or in the aggregate, could reasonably be expected to result in a Material
Adverse Effect. None of the other reports, financial statements, certificates or other information
furnished by or on behalf of the Borrower to the Agents in connection with the negotiation of this
Agreement or delivered hereunder (as modified or supplemented by other information so furnished)
contains any material misstatement of fact or omits to state any material fact necessary to make
the statements therein, in the light of the circumstances under which it was made, not misleading;
provided
that, with respect to projected financial information, the Borrower represents
only that such information was prepared in good faith based upon assumptions believed to be
reasonable at the time prepared. There is no contingent liability or fact that could reasonably be
expected to have a Material Adverse Effect which has not been set forth in a footnote included in
the Financial Statements or a Schedule hereto.
(q)
Insurance
. The Borrower keeps its property adequately insured and maintains
(i) insurance to such extent and against such risks, including fire, as is customary with companies
in the same or similar businesses, (ii) workmens compensation insurance in the amount required by
applicable law, (iii) public liability insurance, which shall include product liability insurance,
in the amount customary with companies in the same or similar business against claims for personal
injury or death on properties owned, occupied or controlled by it, and (iv) such other insurance as
may be required by law or as may be reasonably required by the Collateral Agent
46
(including, without
limitation, against larceny, embezzlement or other criminal misappropriation). Schedule 6.01(q)
sets forth a list of all insurance maintained by the Borrower on the Effective Date.
(r)
Use of Proceeds
. The proceeds of the Loans shall be used to (a) to purchase or
otherwise acquire Eligible Insurance Premium Loans from the Originator in accordance with and as
contemplated this Agreement, the Master Participation Agreement, the Insurance Premium Loan Sale
and Assignment Agreements and the other Loan Documents and (b) pay fees and expenses in connection
with the transactions contemplated hereby.
(s)
Solvency
. After giving effect to the transactions contemplated by this Agreement
and before and after giving effect to each Loan, the Borrower is Solvent.
(t)
Location of Bank Accounts
. Schedule 6.01(t) sets forth a complete and accurate
list as of the Effective Date of all deposit, checking and other bank accounts, all securities and
other accounts maintained with any broker dealer and all other similar accounts maintained by the
Borrower, together with a description thereof (
i.e.
, the bank or broker dealer at which
such deposit or other account is maintained and the account number and the purpose thereof).
(u)
Intellectual Property
. Set forth on Schedule 6.01(u) is a complete and accurate
list as of the Effective Date of all material licenses, permits, patents, patent applications,
trademarks, trademark applications, service marks, tradenames, copyrights, copyright applications,
franchises, authorizations, non-governmental licenses and permits and other intellectual property
rights of the Borrower.
(v)
Material Contracts
. Set forth on Schedule 6.01(v) is a complete and accurate list
as of the Effective Date of all Material Contracts of the Borrower, showing the parties and subject
matter thereof and amendments and modifications thereto. Each such Material Contract (i) is in
full force and effect and is binding upon and enforceable against the Borrower that is a party
thereto and, to the best knowledge of the Borrower, all other parties thereto in accordance with
its terms, (ii) has not been otherwise amended or modified, and (iii) is not in default due to the
action of the Borrower or, to the best knowledge of the Borrower, any other party thereto.
(w)
Investment Company Act
. The Borrower is not (i) an investment company or an
affiliated person or promoter of, or principal underwriter of or for, an investment
company, as such terms are defined in the Investment Company Act of 1940, as amended, or (ii)
subject to regulation under any Requirement of Law that limits in any respect its ability to incur
Indebtedness or which may otherwise render all or a portion of the Obligations unenforceable.
(x)
Bulk Sales Act
. No transaction contemplated by this Agreement or any of the other
Transaction Documents requires compliance with, or will be subject to avoidance under, any bulk
sales act or similar law.
(y)
No Bankruptcy Filing
. The Borrower is not contemplating either an Insolvency
Proceeding or the liquidation of all or a major portion of the Borrowers assets or
47
property, and
the Borrower has no knowledge of any Person contemplating an Insolvency Proceeding against it.
(z)
Separate Existence
.
(i) All customary formalities regarding the corporate existence of the Borrower has been at
all times since its formation and will continue to be observed.
(ii) The Borrower has at all times since its formation accurately maintained, and will
continue to accurately maintain, its financial statements, accounting records and other
organizational documents separate from those of any Affiliate of the Borrower and any other Person.
The Borrower has not at any time since its formation commingled, and will not commingle, its
assets with those of any of its Affiliates or any other Person. The Borrower has at all times
since its formation accurately maintained, and will continue to accurately maintain its own bank
accounts and separate books of account.
(iii) The Borrower has at all times since its formation paid, and will continue to pay, its
own liabilities from its own separate assets.
(iv) The Borrower has at all times since its formation identified itself, and will continue to
identify itself, in all dealings with the public, under its own name and as a separate and distinct
Person. The Borrower has not at any time since its formation identified itself, or will identify
itself, as being a division or a part of any other Person.
(aa)
Name; Jurisdiction of Organization; Organizational ID Number; Chief Place of
Business; Chief Executive Office; FEIN
. Schedule 6.01(aa) sets forth a complete and accurate
list as of the date hereof of (i) the exact legal name of the Borrower, (ii) the jurisdiction of
organization of the Borrower, (iii) the organizational identification number of the Borrower (or
indicates that the Borrower has no organizational identification number), (iv) each place of
business of the Borrower, (v) the chief executive office of the Borrower and (vi) the federal
employer identification number of the Borrower.
(bb)
Locations of Collateral
. There is no location at which the Borrower has any
Collateral other than those locations listed on Schedule 6.01(bb).
(cc)
Security Interests
. Each Security Agreement and Guarantor Security Agreement
creates in favor of the Collateral Agent, for the benefit of the Lenders, a legal, valid and
enforceable security interest in the Collateral secured thereby. Upon the filing of the UCC-1
financing statements described in Section 5.01(d)(iv), such security interests in and Liens on the
Collateral granted thereby shall be perfected, first priority security interests, and no further
recordings or filings are or will be required in connection with the creation, perfection or
enforcement of such security interests and Liens, other than the filing of continuation statements
in accordance with applicable law.
(dd)
Anti-Terrorism Laws
.
(i)
General
. Neither the Borrower nor or any Affiliate of the Borrower, is in
violation of any Anti-Terrorism Law or engages in or conspires to engage in any
48
transaction that
evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the
prohibitions set forth in any Anti-Terrorism Law.
(ii)
Executive Order No. 13224
. Neither the Borrower, nor or any Affiliate of the
Borrower, or their respective agents acting or benefiting in any capacity in connection with the
Loans or other transactions hereunder, is any of the following (each, a
Blocked Person
):
(A) a Person that is listed in the annex to, or is otherwise subject to the provisions of, the
Executive Order No. 13224;
(B) a Person owned or controlled by, or acting for or on behalf of, any Person that is listed
in the annex to, or is otherwise subject to the provisions of, the Executive Order No. 13224;
(C) a Person or entity with which any Lender is prohibited from dealing or otherwise engaging
in any transaction by any Anti-Terrorism Law;
(D) a Person or entity that commits, threatens or conspires to commit or supports terrorism
as defined in the Executive Order No. 13224;
(E) a Person or entity that is named as a specially designated national on the most current
list published by the U.S. Treasury Department Office of Foreign Asset Control at its official
website or any replacement website or other replacement official publication of such list, or
(F) a Person or entity who is affiliated or associated with a person or entity listed above.
(iii) Neither the Borrower or to the knowledge of the Borrower, any of its agents acting in
any capacity in connection with the Loans or other transactions hereunder (i) conducts any business
or engages in making or receiving any contribution of funds, goods or services to or for the
benefit of any Blocked Person, or (ii) deals in, or otherwise engages in any transaction relating
to, any property or interests in property blocked pursuant to the Executive Order No. 13224.
(ee)
Loan Origination
. All Insurance Premium Loans are originated in accordance with
the requirements of this Agreement, the Collateral Value Policy, the Contingent Collateral Value
Policy, the Loan Documents, the Transactions Documents, all Requirements of Law and the investment
procedures and criteria of the Originator and the Borrower consistent with past practices.
(ff)
Schedules
. All of the information which is required to be scheduled to this
Agreement is set forth on the Schedules attached hereto, is correct and accurate and does not omit
to state any information material thereto.
(gg)
Representations and Warranties in Documents; No Default
. All representations and
warranties set forth in this Agreement and the other Loan Documents are true
49
and correct in all material respects at the time as of which such representations were
made and on the Effective Date (except such materiality qualifier shall not be applicable with respect
to matters involving (i) the Collateral, (ii) the ability of the Agents and the Lenders to realize upon
the Collateral, or (iii) the ability of the Agents and the Lenders to receive Collections from the Collateral).
No Event of Default has occurred and is continuing and no condition exists which constitutes a Default or an Event of Default.
ARTICLE VII
COVENANTS OF THE BORROWER
Section 7.01
Affirmative Covenants
. So long as any principal of or interest on any
Loan or any other Obligation (whether or not due) shall remain unpaid or any Lender shall have any
Commitment hereunder, the Borrower will, unless the Required Lenders shall otherwise consent in
writing:
(a)
Reporting Requirements
. Furnish to each Agent and each Lender:
(i) as soon as available and in any event within 45 days after the end of each fiscal quarter
of Imperial and its Subsidiaries and the Borrower commencing with the first fiscal quarter of
Imperial and its Subsidiaries and the Borrower ending after the Effective Date, (A) consolidated
and consolidating balance sheets, consolidated and consolidating statements of operations and
retained earnings and consolidated and consolidating statements of cash flows of Imperial and its
Subsidiaries as at the end of such quarter and (B) balance sheets, statements of operations and
retained earnings and cash flows of the Borrower as at the end of such quarter, for the period
commencing at the end of the immediately preceding Fiscal Year and ending with the end of such
quarter, setting forth in each case in comparative form the figures for the corresponding date or
period set forth in (x) the financial statements for the immediately preceding Fiscal Year and (y)
the projections delivered pursuant to clause (vii) of this Section 7.01(a), all in reasonable
detail and certified by an Authorized Officer of Imperial and the Borrower, as applicable, as
fairly presenting, in all material respects, the financial position of Imperial and its
Subsidiaries and the Borrower, as applicable, as of the end of such quarter and the results of
operations and cash flows of Imperial and its Subsidiaries for such quarter, in accordance with
GAAP applied in a manner consistent with that of the most recent audited financial statements of
Imperial and its Subsidiaries and the Borrower, as applicable, furnished to the Agents and the
Lenders, subject to the absence of footnotes and normal year-end adjustments;
(ii) (x) as soon as available, and in any event within 120 days after the end of each other
Fiscal Year of the Borrower, balance sheets, statements of operations and retained earnings and
cash flows of the Borrower at the end of such Fiscal Year, setting forth in each case in
comparative form the figures for the corresponding date or period set forth in the financial
statements for the immediately preceding Fiscal Year, all in reasonable detail and prepared in
accordance with GAAP, and accompanied by a report and an unqualified opinion, prepared in
accordance with generally accepted auditing standards, of independent certified public accountants
of recognized standing selected by the Borrower and satisfactory to the Agents (which opinion shall
be without (A) a going concern or like qualification or exception,
50
(B) any qualification or exception as to the scope of such audit, or (C) any qualification
which relates to the treatment or classification of any item and which, as a condition to the
removal of such qualification, would require an adjustment to such item), together with a written
statement of such accountants (1) to the effect that, in making the examination necessary for their
certification of such financial statements, they have not obtained any knowledge of the existence
of an Event of Default or a Default and (2) if such accountants shall have obtained any knowledge
of the existence of an Event of Default or such Default, describing the nature thereof, and (y) as
soon as available, and in any event within 180 days after the end of each Fiscal Year of Imperial
and its Subsidiaries, consolidated and consolidating balance sheets, consolidated and consolidating
statements of operations and retained earnings and consolidated and consolidating statements of
cash flows of Imperial and its Subsidiaries as at the end of such Fiscal Year, setting forth in
each case in comparative form the figures for the corresponding date or period set forth in the
financial statements for the immediately preceding Fiscal Year, all in reasonable detail and
prepared in accordance with GAAP, and accompanied by a report and an unqualified opinion, prepared
in accordance with generally accepted auditing standards, of independent certified public
accountants of recognized standing selected by Imperial and satisfactory to the Agents (which
opinion shall be without (A) a going concern or like qualification or exception, (B) any
qualification or exception as to the scope of such audit, or (C) any qualification which relates to
the treatment or classification of any item and which, as a condition to the removal of such
qualification, would require an adjustment to such item), together with a written statement of such
accountants (1) to the effect that, in making the examination necessary for their certification of
such financial statements, they have not obtained any knowledge of the existence of an Event of
Default or a Default and (2) if such accountants shall have obtained any knowledge of the existence
of an Event of Default or such Default, describing the nature thereof;
(iii) as soon as available, and in any event within 30 days after the end of each fiscal month
of Imperial and its Subsidiaries and the Borrower commencing with the first fiscal month of
Imperial and its Subsidiaries and the Borrower ending after the Effective Date, (A) internally
prepared consolidated and consolidating balance sheets, consolidated and consolidating statements
of operations and retained earnings and consolidated and consolidating statements of cash flows of
Imperial and its Subsidiaries as at the end of such fiscal month and (B) internally prepared
consolidated and consolidating balance sheets, consolidated and consolidating statements of
operations and retained earnings and consolidated and consolidating statements of cash flows of the
Borrower as at the end of such fiscal month, and for the period commencing at the end of the
immediately preceding Fiscal Year and ending with the end of such fiscal month, all in reasonable
detail and certified by an Authorized Officer of Imperial and the Borrower, as applicable, as
fairly presenting, in all material respects, the financial position of Imperial and its
Subsidiaries and the Borrower as at the end of such fiscal month and the results of operations,
retained earnings and cash flows of the Imperial and its Subsidiaries and the Borrower for such
fiscal month, in accordance with GAAP applied in a manner consistent with that of the most recent
audited financial statements furnished to the Agents and the Lenders, subject to the absence of
footnotes and normal year-end adjustments;
(iv) simultaneously with the delivery of the financial statements of Imperial and its
Subsidiaries and the Borrower required by clauses (i), (ii) and (iii) of this Section 7.01(a), a
certificate of an Authorized Officer of Imperial and the Borrower, as applicable, stating that such
Authorized Officer has reviewed the provisions of this Agreement
51
and the other Loan Documents and
has made or caused to be made under his or her supervision a review of the condition and operations
of Imperial and its Subsidiaries and the Borrower during the period covered by such financial
statements with a view to determining whether Imperial and its Subsidiaries and the Borrower were
in compliance with all of the provisions of this Agreement and such Loan Documents at the times
such compliance is required hereby and thereby, and that such review has not disclosed, and such
Authorized Officer has no knowledge of, the existence during such period of an Event of Default or
Default or, if an Event of Default or Default existed, describing the nature and period of
existence thereof and the action which Imperial and its Subsidiaries and the Borrower propose to
take or have taken with respect thereto;
(v) as soon as available and in any event within 10 days after the end of each fiscal month of
the Borrower commencing with the first fiscal month of the Borrower ending after the Effective
Date, a report in form and detail satisfactory to the Agents and certified by an Authorized Officer
of the Borrower as being accurate and complete (A) listing all Insurance Premium Loans owned by the
Borrower and identifying whether such Insurance Premium Loan is owned pursuant to the Master
Participation Agreement or an Insurance Premium Loan Sale and Assignment Agreement and (B)
attaching the most recently updated Loan Schedule, which shall include, without limitation, the
Insurance Premium Maturity Date and each insurance premium payment date, in each case, for the
applicable Insurance Premium Loan;
(vi) as soon as available and in any event within 3 Business Days after the end of each week
commencing with the first week ending after the Effective Date, a Borrowing Base Certificate,
current as of the close of business on the Friday of the immediately preceding week, supported by
schedules showing the derivation thereof and containing such detail and other information as any
Agent may request from time to time, provided that (A) the Borrowing Base set forth in the
Borrowing Base Certificate shall be effective from and including the date such Borrowing Base
Certificate is duly received by the Agents but not including the date on which a subsequent
Borrowing Base Certificate is received by the Agents, unless any Agent disputes the eligibility of
any property included in the calculation of the Borrowing Base or the valuation thereof by notice
of such dispute to the Borrower and (B) in the event of any dispute about the eligibility of any
property included in the calculation of the Borrowing Base or the valuation thereof, such Agents
good faith judgment shall control;
(vii) (A) as soon as available and in any event not later than 60 days prior to the end of
each Fiscal Year, financial projections for the Borrower, supplementing and superseding the
financial projections referred to in Section 6.01(g)(ii)(A), prepared on a monthly basis and
otherwise in form and substance satisfactory to the Agents, for the immediately succeeding Fiscal
Year for the Borrower and (B) as soon as available and in any event not later than 30 days prior to
the end of each fiscal quarter, financial projections for the Borrower, supplementing and
superseding the financial projections referred to in Section
6.01(g)(ii)(B), prepared on a monthly basis and otherwise in form and substance satisfactory
to the Agents, for each remaining quarterly period in such Fiscal Year, all such financial
projections to be reasonable, to be prepared on a reasonable basis and in good faith, and to be
based on
52
assumptions believed by the Borrower to be reasonable at the time made and from the best
information then available to the Borrower;
(viii) promptly after submission to any Governmental Authority, all documents and information
furnished to such Governmental Authority in connection with any investigation of the Borrower or
the Originator other than routine inquiries by such Governmental Authority;
(ix) as soon as possible, and in any event within 3 days after the occurrence of an Event of
Default or Default or the occurrence of any event or development that could reasonably be expected
to have a Material Adverse Effect, the written statement of an Authorized Officer of the Borrower
setting forth the details of such Event of Default or Default or other event or development having
a Material Adverse Effect and the action which the Borrower proposes to take with respect thereto;
(x) (A) promptly after the commencement thereof but in any event not later than 5 days after
service of process with respect thereto on, or the obtaining of knowledge thereof by, the Borrower,
notice of each action, suit or proceeding before any court or other Governmental Authority or other
regulatory body or any arbitrator which, if adversely determined, could reasonably be expected have
a Material Adverse Effect and (B) as soon as possible and in any event within three Business Days
of Borrowers knowledge thereof, notice of (x) material litigation, investigation or proceeding
related to the Borrower or any Affiliate of the Borrower, and in connection with its insurance
premium or life settlement business, the Insurance Premium Finance Loans or any of the Transaction
Documents and in each case, not previously disclosed to the Lender, and (y) any material adverse
development in previously disclosed litigation, investigation or proceeding relating to the
Borrower or any of its Affiliates and in connection with its insurance premium or life settlement
business, the Insurance Premium Finance Loans or any of the Transaction Documents;
(xi) as soon as possible and in any event within 5 days after execution, receipt or delivery
thereof, copies of any material notices that the Borrower executes or receives in connection with
any Material Contract;
(xii) as soon as possible and in any event within 5 days after the delivery thereof to the
Borrowers Board of Directors, copies of the monthly board reports so delivered;
(xiii) promptly upon receipt thereof, copies of all financial reports (including, without
limitation, management letters), if any, submitted to the Borrower by its auditors in connection
with any annual or interim audit of the books thereof;
(xiv) promptly upon receipt thereof, copies of all notices, reports and other information
received from the Originator pursuant to the Master Participation Agreement;
(xv) promptly upon receipt thereof, copies of all notices, reports and other information from
the trustee under each Trust Agreement, of any such other event or circumstance to which such
Person has actual knowledge or notice that could reasonably be
53
expected to materially and adversely
affect the validity, collectability or enforceability of any Life Insurance Policy, including,
without limitation, any notices from an Insurance Provider with respect to terminations,
exclusions, default notices and cancellations of such Life Insurance Policy;
(xvi) promptly upon receipt thereof, copies of all notices, reports and other information from
the Collateral Value Insurer or the Contingent Collateral Value Insurer, of any such other event or
circumstance to which such Person has actual knowledge or notice that could reasonably be expected
to materially and adversely affect the validity, collectability or enforceability of the Collateral
Value Policy or the Contingent Collateral Value Policy, including, without limitation, any notices
from the Collateral Value Insurer or the Contingent Collateral Value Insurer with respect to
terminations, exclusions, default notices and cancellations of such Collateral Value Policy or the
Contingent Collateral Value Policy or the commission of any Prohibited Act (as defined in the
Collateral Value Policy);
(xvii) promptly upon receipt thereof, copies of all notices, reports and other information
from the Servicer of any such other event or circumstance to which such Person has actual knowledge
or notice that could reasonably be expected to materially and adversely affect the financing,
collectability or enforceability of any Insurance Premium Loan, including without limitation, by
any fraudulent activity or Prohibited Acts (as defined in the Collateral Value Policy) on the part
of any insurance agent or broker related to the origination of the related Insurance Premium Loan;
(xviii) promptly after becoming aware thereof, notice of any other event or circumstance
relating to the Borrower, the Originator or any their Affiliates, and in connection with its
insurance premium or life settlement business, the Insurance Premium Finance Loans, any of the
Transaction Documents, the Collateral Value Policy (including the occurrence of a Credit Event) or
the Contingent Collateral Value Policy that could reasonably be expected to have a Material Adverse
Effect (including any change in law with respect to the origination, financing, acquisition of
insurance premium loans and/or life insurance policies in any Applicable Licensed State or
Applicable Non-Licensed State otherwise);
(xix) promptly upon receipt thereof, copies of all notices, reports and other information
received by the Originator from the escrow agent under each Escrow Agreement;
(xx) as soon as available and in any event within 3 Business Days after the end of each week
commencing with the first week ending after the Effective Date, a report setting forth the details
of each Eligible Insurance Premium Loan for which the related Premium Finance Borrower is a trust
that does not have an institutional trustee or financial institution acceptable to the Agents as
trustee or co-trustee under the related Trust Agreement, including, without limitation, the
issuance date, maturity date and outstanding principal amount of each such Eligible Insurance
Premium Loan;
(xxi) promptly upon receipt thereof, and in any event within 5 days of the anniversary
thereof, a copy of each updated Local Counsel Opinion prepared by
54
outside local counsel to the
Originator or any Affiliate of the Originator qualified to practice in each jurisdiction in which
the Originator intends to make Eligible Insurance Premium Loans; and
(xxii) promptly upon request, such other information concerning the condition or operations,
financial or otherwise, of the Borrower as any Agent may from time to time may reasonably request.
(b)
Intentionally Omitted
.
(c)
Compliance with Laws, Etc.
Comply with all Requirements of Law (including,
without limitation, all those which relate to the origination, financing, acquisition and/or
transfer of Insurance Premium Loans), judgments and awards (including any settlement of any claim
that, if breached, could give rise to any of the foregoing), such compliance to include, without
limitation, (i) paying before the same become delinquent all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or profits or upon any of its properties, and
(ii) paying all lawful claims which if unpaid might become a Lien or charge upon any of its
properties, except to the extent contested in good faith by proper proceedings which stay the
imposition of any penalty, fine or Lien resulting from the non-payment thereof and with respect to
which adequate reserves have been set aside for the payment thereof in accordance with GAAP.
(d)
Preservation of Existence, Etc.
Maintain and preserve its existence, rights and
privileges, and become or remain duly qualified and in good standing in each jurisdiction in which
the character of the properties owned or leased by it or in which the transaction of its business
makes such qualification necessary.
(e)
Keeping of Records and Books of Account
. Keep adequate records and books of
account, with complete entries made to permit the preparation of financial statements in accordance
with GAAP. Cause the Servicer to maintain and implement administrative and operating procedures
(including, without limitation, an ability to re-create records evidencing the Insurance Premium
Loans in the event of the destruction of the originals thereof) and keep and maintain all
documents, books, records and other information reasonably necessary or advisable for the
collection of all Insurance Premium Loans and related security (including the applicable Life
Insurance Policies).
(f)
Inspection Rights
. Permit the agents and representatives of any Agent at any time
and from time to time during normal business hours, at the expense of the Borrower, to examine and
make copies of and abstracts from its records and books of account (including, without limitation,
to review and obtain copies of or make abstracts of the items comprising the Loan Documentation
Packages, and discuss matters relating to the Insurance Premium Loans and Life Insurance Policies
and the performance by such Person of its duties hereunder and under the Transaction Documents to
which it is a party), to visit and inspect its properties, to verify materials, leases, notes,
accounts receivable, deposit accounts and its other assets, to conduct audits or examinations and
to discuss its affairs, finances and accounts with any of its directors, officers, managerial
employees, independent accountants or any of its other representatives. In
furtherance of the foregoing, the Borrower hereby authorizes its independent accountants to
discuss the affairs, finances and accounts of such Person (independently or together with
55
representatives of such Person) with the agents and representatives of any Agent in accordance with
this Section 7.01(f).
(g)
Maintenance of Properties, Etc.
Maintain and preserve all of its properties which
are necessary or useful in the proper conduct of its business in good working order and condition,
ordinary wear and tear excepted, and comply at all times with the provisions of all leases to which
it is a party as lessee or under which it occupies property, so as to prevent any loss or
forfeiture thereof or thereunder.
(h)
Maintenance of Insurance
. Maintain insurance with responsible and reputable
insurance companies or associations (including, without limitation, comprehensive general
liability, hazard, rent and business interruption insurance) with respect to its properties
(including all real properties leased or owned by it) and business, in such amounts and covering
such risks as is required by any Governmental Authority having jurisdiction with respect thereto or
as is carried generally in accordance with sound business practice by companies in similar
businesses similarly situated and in any event in amount, adequacy and scope reasonably
satisfactory to the Collateral Agent. All policies covering the Collateral are to be made payable
to the Collateral Agent for the benefit of the Agents and the Lenders, as its interests may appear,
in case of loss, under a standard non-contributory lender or secured party clause and are to
contain such other provisions as the Collateral Agent may require to fully protect the Lenders
interest in the Collateral and to any payments to be made under such policies. All certificates of
insurance are to be delivered to the Collateral Agent and the policies are to be premium prepaid,
with the loss payable and additional insured endorsement in favor of the Collateral Agent and such
other Persons as the Collateral Agent may designate from time to time, and shall provide for not
less than 30 days prior written notice to the Collateral Agent of the exercise of any right of
cancellation. If the Borrower fails to maintain such insurance, the Collateral Agent may arrange
for such insurance, but at the Borrowers expense and without any responsibility on the Collateral
Agents part for obtaining the insurance, the solvency of the insurance companies, the adequacy of
the coverage, or the collection of claims. Upon the occurrence and during the continuance of an
Event of Default, the Collateral Agent shall have the sole right, in the name of the Lenders, the
Borrower, to file claims under any insurance policies, to receive, receipt and give acquittance for
any payments that may be payable thereunder, and to execute any and all endorsements, receipts,
releases, assignments, reassignments or other documents that may be necessary to effect the
collection, compromise or settlement of any claims under any such insurance policies.
(i)
Obtaining of Permits, Etc.
Obtain, maintain and preserve and take all necessary
action to timely renew, all permits, licenses, authorizations, approvals, entitlements and
accreditations which are necessary or useful in the proper conduct of its business.
(j)
Trust Agreement
. Cause the Originator to require that the Premium Finance
Borrower shall have either (i) paid to the applicable Insurance Provider or (ii) placed into escrow
under the Trust Agreement pursuant to escrow arrangements satisfactory to the Agents, in each case,
insurance premium payments in an amount sufficient to result in the applicable Life Insurance
Policy remaining continuously in effect through the sixtieth (60th) day
after the Insurance Premium Loan Maturity Date;
provided
,
however
, that this
covenant shall be deemed to be satisfied if the aggregate amount of premium paid to the applicable
Insurance
56
Provider with respect to the related Life Insurance Policy prior to the lapse of such
Life Insurance Policy equals the Total Life Insurance Premium set forth in the applicable
Coverage Certificate.
(k)
Further Assurances
. Take such action and execute, acknowledge and deliver to take
such action and execute, acknowledge and deliver, at its sole cost and expense, such agreements,
instruments or other documents as any Agent may require from time to time in order (i) to carry out
more effectively the purposes of this Agreement and the other Loan Documents, (ii) to subject to
valid and perfected first priority Liens any of the Collateral or any other property of the
Borrower, (iii) to establish and maintain the validity and effectiveness of any of the Loan
Documents and the validity, perfection and priority of the Liens intended to be created thereby,
and (iv) to better assure, convey, grant, assign, transfer and confirm unto each Agent and each
Lender the rights now or hereafter intended to be granted to it under this Agreement or any other
Loan Document. In furtherance of the foregoing, to the maximum extent permitted by applicable law,
the Borrower (i) authorizes each Agent to execute any such agreements, instruments or other
documents in the Borrowers name and to file such agreements, instruments or other documents in any
appropriate filing office, (ii) authorizes each Agent to file any financing statement required
hereunder or under any other Loan Document, and any continuation statement or amendment with
respect thereto, in any appropriate filing office without the signature of the Borrower, and (iii)
ratifies the filing of any financing statement, and any continuation statement or amendment with
respect thereto, filed without the signature of the Borrower prior to the date hereof.
(l)
Change in Collateral; Collateral Records
. (i) Give the Collateral Agent not less
than 30 days prior written notice of any change in the location of any Collateral, other than to
locations set forth on Schedule 6.01(bb) and with respect to which the Collateral Agent has filed
financing statements and otherwise fully perfected its Liens thereon, (ii) advise the Collateral
Agent promptly, in sufficient detail, of any material adverse change relating to the type, quantity
or quality of the Collateral or the Lien granted thereon and (iii) execute and deliver to the
Collateral Agent for the benefit of the Agents and the Lenders from time to time, solely for the
Collateral Agents convenience in maintaining a record of Collateral, such written statements and
schedules as the Collateral Agent may reasonably require, designating, identifying or describing
the Collateral.
(m)
Subordination
. Cause all Indebtedness and other obligations now or hereafter owed
by it to any of its Affiliates other than the Obligations, to be subordinated in right of payment
and security to the Indebtedness and other Obligations owing to the Agents and the Lenders in
accordance with a subordination agreement in form and substance satisfactory to the Agents.
(n)
Fiscal Year
. Cause the Fiscal Year of the Borrower to end on December 31st of
each calendar year unless the Agents consent to a change in such Fiscal Year (and appropriate
related changes to this Agreement).
(o)
Collections
.
57
(i) On the Business Day of such receipt, remit (or cause to be remitted) to the Collection
Account all Collections with respect to Insurance Premium Loans owned by the Borrower and the
Collateral Value Policy and the Contingent Collateral Value Policy, if any, received directly by
the Borrower, the Originator or the Servicer; and
(ii) cause the Servicer to include in the Loan Documentation Package an instruction that all
Premium Finance Borrowers and Insurance Providers will cause all payments and Collections in
respect of the Insurance Premium Loans to be deposited directly to the Collection Account.
(p)
Servicer
. Cause all Servicing Fees owing to the Servicer under the Servicing
Agreement to be timely paid when due and payable under the Servicing Agreement. Maintain the
Servicing Agreement in full force and effect.
(q)
Insurance Collateral Agent
. Cause all fees owing to the Insurance Collateral
Agent under the Collateral Agency Agreement to be timely paid when due and payable under the
Collateral Agency Agreement. Maintain the Collateral Agency Agreement in full force and effect.
(r)
Use of Proceeds / Purchase of Loans
. Use the proceeds of the Term Loans made
hereunder (including Loans made by the Lender and deposited into an account of the Borrower pending
use by the Borrower subject to the terms hereof) solely to purchase or otherwise acquire Insurance
Premium Loans from the Originator in accordance with and as contemplated by the terms of the Master
Participation Agreement, the Insurance Premium Loan Sale and Assignment Agreements and the other
Loan Documents and, subject to Section 5.02;
provided
, however, that the Borrower may not
and shall not use the proceeds of any Term Loan herein to acquire any Insurance Premium Loans
unless such Insurance Premium Loan is an Eligible Insurance Premium Loan and is a Covered Loan or
the Covered Portion of an Insurance Premium Loan as evidenced by a Coverage Certificate in an
amount equal to the full amount of the Term Loan requested with respect thereto.
(s)
Separateness
. The Borrower shall (i) have the Servicer act as agent of the
Borrower solely through the Servicing Agreement or express agencies created by arms-length
agreement, as the case may be; provided that the Servicer fully discloses to any third party the
agency relationship with the Borrower; provided further that it receives fair compensation or
compensation consistent with regulatory requirements, as appropriate, from the Borrower for the
services provided;
(ii) allocate all overhead on the basis of actual use to the extent practicable and, to the
extent such allocation is not practicable, on a basis reasonably related to actual use;
(iii) ensure that all of its actions are duly authorized by its authorized personnel, as
appropriate and in accordance with its Governing Documents;
(iv) maintain the Borrowers books and records separately from those of any other Person, use
separate stationery bearing the name Imperial Life Financing II, LLC in all correspondence and
use separate invoices and checks, as applicable;
58
(v) prepare financial statements for itself, and for itself on a consolidated basis, in each
case separate from the financial statements of any other Person;
(vi) at all times, act solely in its own name and through its duly authorized officers or
agents, in order to maintain an arms-length relationship with all other Persons and shall not
enter into any contract, agreement or arrangement with any other Person except (A) as contemplated
by or provided for under the terms of any of the Loan Documents, or (B) on terms and conditions at
least as favorable to the Borrower as would be obtainable by the Borrower at the relevant time in a
comparable arms-length transaction or series of transactions with a Person other than an Affiliate
thereof, as determined by the Borrower;
(vii) conduct its business solely in its own name so as to not mislead third parties as to the
identity of the entity with which such third parties are conducting business, and shall use all
reasonable efforts to avoid the appearance that it is conducting business on behalf of any other
Person or that the assets of the Borrower are directly available to pay the creditors of any other
Person;
(viii) maintain its assets in such a manner that it is not costly or difficult to segregate,
identify or ascertain such assets;
(ix) correct any misunderstanding known to it regarding its separate identity from any other
Person;
(x) as of the Effective Date and the date of delivery of any Notice of Borrowing, have
adequate capital in light of its then contemplated business operations and for the normal
obligations reasonably foreseeable in a business of its then size and character; and
(xi) observe strictly all organizational and procedural formalities required by this
Agreement, its Governing Documents, and any Requirement of Law, as the case may be.
(t)
Collateral Value Policy Payments
. Cause all payments made by the Collateral Value
Insurer or Contingent Collateral Value Insurer under the Collateral Value Policy or Contingent
Collateral Value Policy, as applicable, to be directly deposited in the Collection Account and be
applied pursuant to Section 2.05(d) or Section 4.03(b), as applicable.
(u)
Collateral Value Policy and Contingent Collateral Value Policy
. Take all actions
necessary or required by the Agents to maintain the Collateral Value Policy and Contingent
Collateral Value Policy in full force and effect and receive timely payment from the Collateral
Value Insurer or Contingent Collateral Value Insurer pursuant to the Collateral Value Policy or
Contingent Collateral Value Policy, including, without limitation, (i) filing each Proof of Loss
(as defined in the Collateral Value Policy) at the times and in the proper form required by the
Collateral Value Policy or Contingent Collateral Value Policy, (ii) maintaining the related Life
Insurance Policy with respect to the applicable Insurance Premium Loan in full force and effect at
all times required by the Collateral Value Policy and the Contingent Collateral Value Policy, (iii)
notifying and instructing the Remarketing Agent (as defined in the Collateral Value Policy) to sell
or otherwise dispose of the related Life Insurance Policy with respect to the
59
applicable Insurance Premium Loan at the times required by the Collateral Value Policy and the
Contingent Collateral Value Policy; and (iv) delivering to the Collateral Value Insurer and
Contingent Collateral Value Insurer all notices required pursuant to the Collateral Value Policy
and Contingent Collateral Value Policy, each at the times required thereunder, including without
limitation, pursuant to Section VI of the Collateral Value Policy.
(v)
Back-Up Servicing Agreement
. Not later than thirty (30) days after the Effective
Date, the Borrower shall have entered into the Back-Up Servicing Agreement with the Back-Up
Servicer.
(w)
Landlord Waiver
. Not later than thirty (30) days after the Effective Date, the
Borrower shall have delivered to the Collateral Agent a landlord waiver, in form and substance
satisfactory to the Collateral Agent and which may be included as a provision contained in the
relevant Lease executed by each landlord with respect to the Originators corporate headquarters
located at 701 Park of Commerce Blvd., Suite 301, Boca Raton, Florida 33487.
Section 7.02
Negative Covenants
. So long as any principal of or interest on any Loan
or any other Obligation (whether or not due) shall remain unpaid or any Lender shall have any
Commitment hereunder, the Borrower shall not, unless the Required Lenders shall otherwise consent
in writing:
(a)
Liens, Etc.
Create, incur, assume or suffer to exist any Lien upon or with
respect to any of its properties, whether now owned or hereafter acquired; file or suffer to exist
under the Uniform Commercial Code or any Requirement of Law of any jurisdiction, a financing
statement (or the equivalent thereof) that names it as debtor; sign or suffer to exist any security
agreement authorizing any secured party thereunder to file such financing statement (or the
equivalent thereof); sell any of its property or assets subject to an understanding or agreement,
contingent or otherwise, to repurchase such property or assets (including sales of accounts
receivable) with recourse to it or assign or otherwise transfer any account or other right to
receive income; other than, as to all of the above, Permitted Liens.
(b)
Indebtedness
. Create, incur, assume, guarantee or suffer to exist, or otherwise
become or remain liable with respect to any Indebtedness other than Permitted Indebtedness.
(c)
Fundamental Changes; Dispositions
. Wind-up, liquidate or dissolve, or merge,
consolidate or amalgamate with any Person, or convey, sell, lease or sublease, transfer or
otherwise dispose of, whether in one transaction or a series of related transactions, all or any
part of its business, property or assets, whether now owned or hereafter acquired (or agree to do
any of the foregoing), or purchase or otherwise acquire, whether in one transaction or a series of
related transactions, all or substantially all of the assets of any Person (or any division
thereof) (or agree to do any of the foregoing);
provided
,
however
, that the
Borrower may re-market and dispose of any Life Insurance Policy pursuant to the Transaction
Documents so long as (i) such disposition occurs within 60 days after the date of foreclosure of
such Life Insurance Policy and (ii) the proceeds from such disposition are paid to the
Administrative Agent for the benefit of the Agents and the Lenders pursuant to Section 2.05(c).
60
(d)
Change in Nature of Business
. Make any change in the nature of its business as
described in Section 6.01(l).
(e)
Loans, Advances, Investments, Etc.
Make or commit or agree to make any loan
(other than an Eligible Insurance Premium Loan), advance guarantee of obligations, other extension
of credit or capital contributions to, or hold or invest in or commit or agree to hold or invest
in, or purchase or otherwise acquire or commit or agree to purchase or otherwise acquire any shares
of the Equity Interests, bonds, notes, debentures or other securities of, or make or commit or
agree to make any other investment in, any other Person (other than the acquisition of any
Insurance Premium Loans pursuant to the Transaction Documents), or purchase or own any futures
contract or otherwise become liable for the purchase or sale of currency or other commodities at a
future date in the nature of a futures contract.
(f)
Lease Obligations
. Create, incur or suffer to exist any obligations as lessee (i)
for the payment of rent for any real or personal property in connection with any sale and leaseback
transaction, or (ii) for the payment of rent for any real or personal property under leases or
agreements to lease.
(g)
Capital Expenditures
. Make or commit or agree to make any Capital Expenditure (by
purchase or Capitalized Lease).
(h)
Restricted Payments
. (i) Declare or pay any dividend or other distribution,
direct or indirect, on account of any Equity Interests of the Borrower, now or hereafter
outstanding, (ii) make any repurchase, redemption, retirement, defeasance, sinking fund or similar
payment, purchase or other acquisition for value, direct or indirect, of any Equity Interests of
the Borrower or any direct or indirect parent of the Borrower, now or hereafter outstanding, (iii)
make any payment to retire, or to obtain the surrender of, any outstanding warrants, options or
other rights for the purchase or acquisition of shares of any class of Equity Interests of the
Borrower, now or hereafter outstanding, (iv) return any Equity Interests to any shareholders or
other equity holders of the Borrower, or make any other distribution of property, assets, shares of
Equity Interests, warrants, rights, options, obligations or securities thereto as such or (v) pay
any management fees or any other fees or expenses (including the reimbursement thereof by the
Borrower) pursuant to any management, consulting or other services agreement to any of the
shareholders or other equityholders of the Borrower or other Affiliates or Affiliates of the
Borrower;
provided
,
however
, (A) the Borrower may make tax distributions (
Tax
Distributions
) with respect to each Fiscal Year, in an aggregate amount equal to the amount of
income tax liability the Borrower would have had for such Fiscal Year if the Borrower were an
individual subject to Federal or state (in which its chief executive office or principal place of
business is located) income tax at the highest applicable marginal tax rates in effect in each
jurisdiction for such year and taking into account the deductibility of the state income taxes for
Federal purposes and the characterization of the income of the Borrower as ordinary income or
capital gains, as appropriate,
provided
that the Tax Distribution with respect to a Fiscal
Year of the Borrower is paid by the Borrower within 20 days of (x) the estimated tax payment date,
in the amount of the estimated tax due on such date calculated in accordance with this proviso, (y)
the date the tax return with respect to such taxes is due, or (z) the date the tax return with
respect to such tax issue is due taking into account valid extensions, in the amount of such taxes
less all prior Tax Distributions applicable to such Fiscal Year, provided, further, that at the
61
election of the Collateral Agent, which the Collateral Agent may and, upon the direction of
the Required Lenders, shall make by notice to the Borrower, no such payment shall be made if an
Event of Default shall have occurred and be continuing or would result from the making of any such
payment and (B) after giving effect to the application of Collections with respect to the Covered
Portion of Insurance Premium Loans in accordance with Section 2.05(d), so long as no Default or
Event of Default has occurred and is continuing or would result from the making of any such
payment, the Borrower may declare and pay dividends or distributions on account of any Equity
Interests of the Borrower with any Collections with respect to the Uncovered Portion of an
Insurance Premium Loan (other than Salvage Collections).
(i)
Federal Reserve Regulations
. Permit any Loan or the proceeds of any Loan under
this Agreement to be used for any purpose that would cause such Loan to be a margin loan under the
provisions of Regulation T, U or X of the Board.
(j)
Transactions with Affiliates
. Enter into, renew, extend or be a party to any
transaction or series of related transactions (including, without limitation, the purchase, sale,
lease, transfer or exchange of property or assets of any kind or the rendering of services of any
kind) with any Affiliate, except (i) in the ordinary course of business in a manner and to an
extent consistent with past practice and necessary or desirable for the prudent operation of its
business, for fair consideration and on terms no less favorable to it than would be obtainable in a
comparable arms length transaction with a Person that is not an Affiliate thereof, (ii) the
transactions contemplated by this Agreement and the Loan Documents, (iii) the Insurance Premium
Loan Sale and Assignment Agreements and (iv) the transactions contemplated by the Master
Participation Agreement.
(k)
Limitation on Issuance of Equity Interests
. Issue or sell or enter into any
agreement or arrangement for the issuance and sale of any shares of its Equity Interests, any
securities convertible into or exchangeable for its Equity Interests or any warrants.
(l)
Modifications of Indebtedness, Organizational Documents and Certain Other Agreements;
Etc.
(i) Amend, modify or otherwise change (or permit the amendment, modification or other
change in any manner of) any of the provisions of any of its Indebtedness or of any instrument or
agreement (including, without limitation, any purchase agreement, indenture, loan agreement or
security agreement) relating to any such Indebtedness if such amendment, modification or change
would shorten the final maturity or average life to maturity of, or require any payment to be made
earlier than the date originally scheduled on, such Indebtedness, would increase the interest rate
applicable to such Indebtedness, would change the subordination provision, if any, of such
Indebtedness, or would otherwise be adverse to the Lenders or the issuer of such Indebtedness in
any respect,
(ii) except for the Obligations, make any voluntary or optional payment (including, without
limitation, any payment of interest in cash that, at the option of the issuer, may be paid in cash
or in kind), prepayment, redemption, defeasance, sinking fund payment or other acquisition for
value of any of its Indebtedness (including, without limitation, by way of depositing money or
securities with the trustee therefor before the date required for the purpose of paying any portion
of such Indebtedness when due), or refund, refinance, replace or exchange any other Indebtedness
for any such Indebtedness (except to the extent such
62
Indebtedness is otherwise expressly permitted by the definition of Permitted Indebtedness),
make any payment, prepayment, redemption, defeasance, sinking fund payment or repurchase of any
Subordinated Indebtedness in violation of the subordination provisions thereof or any subordination
agreement with respect thereto, or make any payment, prepayment, redemption, defeasance, sinking
fund payment or repurchase of any Indebtedness as a result of any asset sale, change of control,
issuance and sale of debt or equity securities or similar event, or give any notice with respect to
any of the foregoing.
(iii) amend, modify or otherwise change its name, jurisdiction of organization, organizational
identification number or FEIN;
(iv) amend, modify or otherwise change any of its Governing Documents, including, without
limitation, by the filing or modification of any certificate of designation, or any agreement or
arrangement entered into by it, with respect to any of its Equity Interests (including any
shareholders agreement), or enter into any new agreement with respect to any of its Equity
Interests; or
(v) amend, modify or otherwise change any Transaction Document.
(m)
Investment Company Act of 1940
. Engage in any business, enter into any
transaction, use any securities or take any other action, that would cause it to become subject to
the registration requirements of the Investment Company Act of 1940, as amended, by virtue of being
an investment company or a company controlled by an investment company not entitled to an
exemption within the meaning of such Act.
(n)
Certain Agreements
. Agree to any material amendment or other material change to
or material waiver of any of its rights under any Material Contract.
(o)
Anti-Terrorism Laws
. Neither shall the Borrower or any of their Affiliates or
agents:
(i) conduct any business or engage in any transaction or dealing with any Blocked Person,
including the making or receiving any contribution of funds, goods or services to or for the
benefit of any Blocked Person,
(ii) deal in, or otherwise engage in any transaction relating to, any property or interests in
property blocked pursuant to the Executive Order No. 13224 or
(iii) engage in or conspire to engage in any transaction that evades or avoids, or has the
purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in the
Executive Order No. 13224, the USA PATRIOT Act or any other Anti-Terrorism Law.
(iv) The Borrower shall deliver to the Lenders any certification or other evidence requested
from time to time by any Lender in its sole discretion, confirming the Borrowers compliance with
this Section 7.02(o).
63
(p)
Amendments or Consents to Loan Document Package
. (i) Amend, supplement, amend and
restate, or otherwise modify, (ii) agree to any waiver of any provision contained in or (iii) to
the extent provided for or required therein, consent to or otherwise authorize or acknowledge, any
action or otherwise in respect of, in any such case described in
clauses (i)
through
(iii)
, above, any Loan Document Package with respect to any Insurance Premium Loan, except
with the prior written consent of the Agents and the Required Lenders.
(q)
Method of Finance
. Finance with funds (other than the proceeds of any Term Loan
hereunder and equity proceeds) any Insurance Premium Loan (or interest therein).
(r)
Separateness
. The Borrower shall not:
(i) have any employees except for a single part time employee in the Borrowers Georgia
office;
provided
, that, the Borrower may enter into the Servicing Agreement with the
Servicer to the effect that the employees of such entity shall act on behalf of the Borrower;
provided that such employees shall at all times hold themselves out to third parties as
representatives of the Borrower while performing duties under such service agreement (including,
without limitation, by means of providing such persons with business or identification cards
identifying such employees as agents of the Borrower);
(ii) act as an agent for any other Person;
(iii) commingle its funds or other assets with those of any other Person and shall not
maintain bank accounts or other depository accounts to which any other Person is an account party,
into which any other Person makes deposits or from which any other Person has the power to make
withdrawals;
(iv) permit any other Person to pay any of the Borrowers operating expenses unless such
operating expenses are paid by such Person pursuant to an agreement between the Borrower and such
other Person providing for the allocation of such expenses and such expenses are reimbursed by the
Borrower out of the Borrowers own funds;
(v) consent to be liable for, or hold itself out to be responsible for any money borrowed by,
or any Indebtedness incurred by, any other Person;
(vi) assume, guarantee, become obligated for, pay, or hold itself out to be responsible for,
the debts or obligations of any other Person;
(vii) acquire obligations or securities of its Affiliates other than its acquisition of
participations in loans, as contemplated by this Agreement;
(viii) hold out its credit to any Person as available to satisfy the obligation of any other
Person;
(ix) pledge its assets for the benefit of any other entity or make any loans or advances to
any Person or entity except as provided in this Agreement and the other Loan Documents;
64
(x) buy or hold evidence of Indebtedness issued by any of its Affiliates;
(xi) permit less than one member of the Borrowers Board of Directors (the
Independent
Manager
) to be an individual who has not been, (a) a direct or indirect legal or beneficial
owner in the Borrower or any of its Affiliates, (b) a creditor, supplier, employee, officer,
director, family member, manager or contractor of the Borrower or its Affiliates, (b) a creditor,
supplier, employee, officer, director, family member, manager or contractor of the Borrower or its
Affiliates (other than as an independent manager for such entity), or (c) a Person who control
(whether directly, indirectly, or otherwise) the Borrower or its Affiliates (other than as an
independent manager for such entity);
(xii) permit the Independent Manager at any time to serve as a trustee in bankruptcy for the
Borrower, the Service, the Originator or any Affiliate thereof;
(xiii) identify itself as a division of any other Person; or
(xiv) except for the Loan Documents, enter into agreements with its Affiliates or agreements
with third parties that in the aggregate would be material, if such agreements do not contain the
provision that such Affiliates or third parties, in their respective capacities as counterparties
under such agreements, will not seek to initiate bankruptcy or insolvency proceedings in respect of
the Borrower. The Borrower shall include the provision described in the preceding sentence (or a
substantially similar provision) in all agreements with third parties, to the extent practicable
without interfering with the conduct of the business affairs of the Borrower, and take into
consideration the willingness of third parties to enter into agreements containing such provision.
(s)
Deposits to the Collection Account
. Deposit or otherwise credit, or cause or
permit to be so deposited or credited by any Person, to the Collection Account cash or cash
proceeds other than Collections or proceeds of the Collateral.
(t)
Change in Business Policy
. Make, or permit the Originator to make, any change in
the character of its business or credit and collection policy which would impair in any material
respect the collectibility of any Insurance Premium Loan or related security (including any
applicable Life Insurance Policy).
(u)
Change in Payment Instructions to the Collateral Value Insurer; Contingent Collateral
Value Insurer and/or the Premium Finance Borrowers
. Make any change in its instructions to the
Collateral Value Insurer, Contingent Collateral Value Insurer and/or the Premium Finance Borrowers
regarding Collections or payments to be made to the Collection Account, unless (i) the Agents and
the Servicer shall have received notice of such change and (ii) the Agents previously shall have
consented in writing to such change.
(v)
Amendments or Consents to Collateral Value Policy or Contingent Collateral Value
Policy
. (i) Amend, supplement, amend and restate, or otherwise modify, (ii) agree to any
waiver of any provision contained in or (iii) to the extent provided for or required therein,
consent to or otherwise authorize or acknowledge, any action or otherwise in respect of, in any
such case described in
clauses (i)
through
(iii)
, above, the Collateral Value
Policy or
65
Contingent Collateral Value Policy, except with the prior written consent of the Agents and
the Required Lenders.
ARTICLE VIII
MANAGEMENT, COLLECTION AND STATUS OF COLLATERAL
Section 8.01
Collections; Management of Collateral
. (a) The Borrower shall (i)
establish and maintain cash management services of a type and on terms reasonably satisfactory to
the Agents at the bank set forth on Schedule 8.01, the
Cash Management Bank
, and shall
take such reasonable steps to enforce, collect and receive all amounts owing on the Insurance
Premium Loans of the Borrower, and (ii) deposit or cause to be deposited promptly, and in any event
no later than the next Business Day after the date of receipt thereof, all proceeds in respect of
any Collateral and all Collections (of a nature susceptible to a deposit in a bank account) and
other amounts received by the Borrower (including payments made by any Premium Finance Borrower
directly to the Borrower) into the Collection Account.
(b) On or prior to the Effective Date, the Borrower shall, with respect to the Collection
Account, deliver to the Collateral Agent a Cash Management Agreement with respect to the Collection
Account.
(c) All amounts received in the Collection Account shall at the Administrative Agents
direction be wired each Business Day into the Administrative Agents Account to be applied pursuant
to Section 2.05(d) or Section 4.03(b), as applicable.
(d) So long as no Default or Event of Default has occurred and is continuing, the Borrowers
may amend Schedule 8.01 to add or replace the Cash Management Bank or the Collection Account;
provided
,
however
, that (i) such prospective Cash Management Bank shall be
reasonably satisfactory to the Collateral Agent and the Collateral Agent shall have consented in
writing in advance to the opening of such Collection Account with the prospective Cash Management
Bank, and (ii) prior to the time of the opening of such Collection Account, the Borrower and such
prospective Cash Management Bank shall have executed and delivered to the Collateral Agent a Cash
Management Agreement. The Borrower shall close its Collection Account (and establish replacement
cash management accounts in accordance with the foregoing sentence) promptly and in any event
within 30 days of notice from the Collateral Agent that the creditworthiness of any Cash Management
Bank is no longer acceptable in the Collateral Agents reasonable judgment, or that the operating
performance, funds transfer, or availability procedures or performance of such Cash Management Bank
with respect to the Collection Account or the Collateral Agents liability under any Cash
Management Agreement with such Cash Management Bank is no longer acceptable in the Collateral
Agents reasonable judgment.
(e) The Collection Account shall be a cash collateral account, with all cash, checks and
similar items of payment in such accounts securing payment of the Obligations, and in which the
Borrower is hereby deemed to have granted a Lien to Collateral Agent for the benefit of the Agents
and the Lenders. All checks, drafts, notes, money orders, acceptances, cash and other evidences of
Indebtedness received directly by the Borrower from any of the Premium Finance Borrowers or any
other Person, as proceeds from the Insurance Premium Loans or as
66
proceeds of any other Collateral shall be held by the Borrower in trust for the Agents and the
Lenders and if of a nature susceptible to a deposit in a bank account, upon receipt be deposited by
the Borrower in original form and no later than the next Business Day after receipt thereof into
the Collection Account;
provided
,
however
, all Collections received directly by the
Borrower shall be held by the Borrower in trust for the Agents and the Lenders and upon receipt be
deposited by the Borrower in original form and no later than the next Business Day after receipt
thereof into the Administrative Agents Account. The Borrower shall not commingle such collections
with the proceeds of any assets not included in the Collateral. No checks, drafts or other
instrument received by the Administrative Agent shall constitute final payment to the
Administrative Agent unless and until such instruments have actually been collected.
(f) After the occurrence and during the continuance of an Event of Default, the Collateral
Agent may send a notice of assignment and/or notice of the Lenders security interest to any and
all Insurance Premium Borrowers, the Collateral Value Insurer, the Contingent Collateral Value
Insurer or third parties holding or otherwise concerned with any of the Collateral, and thereafter
the Collateral Agent or its designee shall have the sole right to collect the Insurance Premium
Loans and/or take possession of the Collateral and the books and records relating thereto. The
Borrower shall not, without prior written consent of the Collateral Agent, grant any extension of
time of payment of any Insurance Premium Loan or payments under the Collateral Value Policy or
Contingent Collateral Value Policy, compromise or settle any Insurance Premium Loan for less than
the full amount thereof, release, in whole or in part, any Person or property liable for the
payment thereof, or allow any credit or discount whatsoever thereon.
(g) The Borrower hereby appoints each Agent or its designee on behalf of such Agent as the
Borrowers attorney-in-fact with power exercisable during the continuance of an Event of Default to
endorse the Borrowers name upon any notes, acceptances, checks, drafts, money orders or other
evidences of payment relating to the Insurance Premium Loans and the Collateral Value Policy and
the Contingent Collateral Value Policy, to sign the Borrowers name on any invoice or bill of
lading relating to any of the Insurance Premium Loans, the Collateral Value Policy and the
Contingent Collateral Value Policy, drafts against Insurance Premium Borrowers with respect to
Insurance Premium Loans and the Collateral Value Policy and the Contingent Collateral Value Policy,
assignments and verifications of the Insurance Premium Loans, the Collateral Value Policy and the
Contingent Collateral Value Policy and notices to Insurance Premium Borrowers with respect to
Insurance Premium Loans and the Collateral Value Insurer or Contingent Collateral Value Insurer
with respect to the Collateral Value Policy or the Contingent Collateral Value Policy, as
applicable, to send verification of Insurance Premium Loans, the Collateral Value Policy and the
Contingent Collateral Value Policy, and to notify the Postal Service authorities to change the
address for delivery of mail addressed to the Borrower to such address as such Agent or its
designee may designate and to do all other acts and things necessary to carry out this Agreement.
All acts of said attorney or designee are hereby ratified and approved, and said attorney or
designee shall not be liable for any acts of omission or commission (other than acts of omission or
commission constituting gross negligence or willful misconduct as determined by a final judgment of
a court of competent jurisdiction), or for any error of judgment or mistake of fact or law; this
power being coupled with an interest is irrevocable until all of the Loans and other Obligations
under the Loan Documents are paid in full and all of the Loan Documents are terminated.
67
(h) Nothing herein contained shall be construed to constitute any Agent as agent of the
Borrower for any purpose whatsoever, and the Agents shall not be responsible or liable for any
shortage, discrepancy, damage, loss or destruction of any part of the Collateral wherever the same
may be located and regardless of the cause thereof (other than from acts of omission or commission
constituting gross negligence or willful misconduct as determined by a final judgment of a court of
competent jurisdiction). The Agents shall not, under any circumstance or in any event whatsoever,
have any liability for any error or omission or delay of any kind occurring in the settlement,
collection or payment of any of the Insurance Premium Loans or any instrument received in payment
thereof or for any damage resulting therefrom (other than acts of omission or commission
constituting gross negligence or willful misconduct as determined by a final judgment of a court of
competent jurisdiction). The Agents, by anything herein or in any assignment or otherwise, do not
assume any of the obligations under any contract or agreement assigned to any Agent and shall not
be responsible in any way for the performance by the Borrower of any of the terms and conditions
thereof.
(i) If any Insurance Premium Loan includes a charge for any tax payable to any Governmental
Authority, each Agent is hereby authorized (but in no event obligated) in its discretion to pay the
amount thereof to the proper taxing authority for the Borrowers account and to charge the Borrower
therefor. The Borrower shall notify the Agents if any Insurance Premium Loan includes any taxes
due to any such Governmental Authority and, in the absence of such notice, the Agents shall have
the right to retain the full proceeds of such Insurance Premium Loan and shall not be liable for
any taxes that may be due by reason of the sale and delivery creating such Insurance Premium Loan.
(j) Notwithstanding any other terms set forth in the Loan Documents, the rights and remedies
of the Agents and the Lenders herein provided, and the obligations of the Borrower set forth
herein, are cumulative of, may be exercised singly or concurrently with, and are not exclusive of,
any other rights, remedies or obligations set forth in any other Loan Document or as provided by
law.
Section 8.02
Collateral Custodian
. Upon the occurrence and during the continuance of
any Default or Event of Default, the Collateral Agent or its designee may at any time and from time
to time employ and maintain on the premises of the Borrower a custodian selected by the Collateral
Agent or its designee who shall have full authority to do all acts necessary to protect the Agents
and the Lenders interests. The Borrower hereby agrees to cooperate with any such custodian and to
do whatever the Collateral Agent or its designee may reasonably request to preserve the Collateral.
All costs and expenses incurred by the Collateral Agent or its designee by reason of the
employment of the custodian shall be the responsibility of the Borrower and charged to the Loan
Account.
68
ARTICLE IX
EVENTS OF DEFAULT
Section 9.01
Events of Default
. If any of the following Events of Default shall occur
and be continuing:
(a) the Borrower shall fail to pay any principal of or interest on any Loan, any Collateral
Agent Advance or any fee, indemnity or other amount payable under this Agreement or any other Loan
Document when due (whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise);
(b) any representation or warranty made or deemed made by or on behalf of any Credit Party,
the Originator or the Servicer or by any officer of the foregoing under or in connection with any
Loan Document or Transaction Document or under or in connection with any report, certificate or
other document delivered to any Agent or any Lender pursuant to any Loan Document or Transaction
Document, which representation or warranty is subject to a materiality or a Material Adverse Effect
qualification, shall have been incorrect in any respect when made or deemed made; or any
representation or warranty made or deemed made by or on behalf of any Credit Party, the Originator
or the Servicer or by any officer of the foregoing under or in connection with any Loan Document or
Transaction Document or under or in connection with any report, certificate or other document
delivered to any Agent or any Lender pursuant to any Loan Document or Transaction Document, which
representation or warranty is not subject to a materiality or a Material Adverse Effect
qualification, shall have been incorrect in any material respect when made or deemed made;
(c) any Credit Party shall fail to perform or comply with any covenant or agreement contained
in paragraphs (a), (c), (d), (f), (g), (h), (j), (o), (p), (q), (r), (s), (t), (u), (v) or (w) of
Section 7.01, Section 7.02 or Article VIII, or any Credit Party shall fail to perform or comply
with any covenant or agreement contained in any Security Agreement to which it is a party or any
Guarantor Security Agreement to which it is a party;
(d) any Credit Party shall fail to perform or comply with any term, covenant or agreement
contained in Section 7.01 of this Agreement (to the extent not otherwise provided in paragraph (c)
of this Section 9.01) and such failure, if capable of being remedied, shall remain unremedied for a
period of 10 days after the earlier of the date a senior officer of any Credit Party becomes aware
of such failure and the date written notice of such default shall have been given by any Agent to
such Credit Party;
(e) any Credit Party, the Originator or the Servicer shall fail to perform or comply with any
other term, covenant or agreement contained in any Loan Document or Transaction Document to be
performed or observed by it and, except as set forth in subsections (a), (b), (b) and (d) of this
Section 9.01, such failure, if capable of being remedied, shall remain unremedied for 15 days after
the earlier of the date a senior officer of any Credit Party, the Originator or the Servicer
becomes aware of such failure and the date written notice of such default shall have been given by
any Agent to such Credit Party, the Originator or the Servicer; provided that, notwithstanding the
foregoing, the failure of the Servicer to perform or comply
69
with any term, covenant or agreement contained in any Transaction Document or any Loan
Document shall not constitute an Event of Default under this Section 9.01(e) so long as within
thirty (30) days of the occurrence of any such failure, the Servicer is replaced by a replacement
servicer acceptable to the Agents;
provided
, that the Borrower shall use best efforts to
replace the Servicer as soon as possible after the occurrence of any such failure;
(f) the Borrower or the Originator shall fail to pay any of its Indebtedness (excluding
Indebtedness evidenced by this Agreement) in excess of $1,000,000, or any payment of principal,
interest or premium thereon, when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument relating to such Indebtedness, or any
other default under any agreement or instrument relating to any such Indebtedness, or any other
event, shall occur and shall continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such default or event is to accelerate, or to permit the
acceleration of, the maturity of such Indebtedness; or any such Indebtedness shall be declared to
be due and payable, or required to be prepaid (other than by a regularly scheduled required
prepayment), redeemed, purchased or defeased or an offer to prepay, redeem, purchase or defease
such Indebtedness shall be required to be made, in each case, prior to the stated maturity thereof;
(g) any Credit Party, the Originator, the Servicer or Imperial (i) shall institute any
proceeding or voluntary case seeking to adjudicate it a bankrupt or insolvent, or seeking
dissolution, liquidation, winding up, reorganization, arrangement, adjustment, protection, relief
or composition of it or its debts under any law relating to bankruptcy, insolvency, reorganization
or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver,
trustee, custodian or other similar official for any such Person or for any substantial part of its
property, (ii) shall be generally not paying its debts as such debts become due or shall admit in
writing its inability to pay its debts generally, (iii) shall make a general assignment for the
benefit of creditors, or (iv) shall take any action to authorize or effect any of the actions set
forth above in this subsection (g);
(h) any proceeding shall be instituted against any Credit Party, the Originator, the Servicer
or Imperial seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar
official for any such Person or for any substantial part of its property, and either such
proceeding shall remain undismissed or unstayed for a period of 30 days or any of the actions
sought in such proceeding (including, without limitation, the entry of an order for relief against
any such Person or the appointment of a receiver, trustee, custodian or other similar official for
it or for any substantial part of its property) shall occur;
(i) any provision of any Loan Document or Transaction Document shall at any time for any
reason (other than pursuant to the express terms thereof) cease to be valid and binding on or
enforceable against any Credit Party, the Originator or the Servicer intended to be a party
thereto, or the validity or enforceability thereof shall be contested by any party thereto
(excluding any Transaction Documents evidencing Insurance Premium Loans not exceeding more than 2%
of the aggregate Maturity Principal Balance of all Eligible Insurance Premium
70
Loans of the Borrower), or a proceeding shall be commenced by any Credit Party, the Originator
or the Servicer or any Governmental Authority having jurisdiction over any of them, seeking to
establish the invalidity or unenforceability thereof, or any Credit Party, the Originator or the
Servicer shall deny in writing that it has any liability or obligation purported to be created
under any Loan Document;
(j) any Security Agreement, any Guarantor Security Agreement or any other security document,
after delivery thereof pursuant hereto, shall for any reason fail or cease to create a valid and
perfected and, except to the extent permitted by the terms hereof or thereof, first priority Lien
in favor of the Collateral Agent for the benefit of the Agents and the Lenders on any Collateral
purported to be covered thereby;
(k) any Cash Management Bank at which the Collection Account of the Borrower is maintained
shall fail to comply with any of the terms of any Cash Management Agreement to which such bank is a
party or any securities intermediary, commodity intermediary or other financial institution at any
time in custody, control or possession of any investment property of the Borrower shall fail to
comply with any of the terms of any investment property control agreement to which such Person is a
party;
(l) one or more judgments, orders or awards (or any settlement of any claim that, if breached,
could result in a judgment, order or award) for the payment of money exceeding $1,000,000 in the
aggregate shall be rendered against the Borrower or the Originator and remain unsatisfied and
either (i) enforcement proceedings shall have been commenced by any creditor upon any such
judgment, order, award or settlement, (ii) there shall be a period of 10 consecutive days after
entry thereof during which a stay of enforcement of any such judgment, order, award or settlement,
by reason of a pending appeal or otherwise, shall not be in effect, or (iii) at any time during
which a stay of enforcement of any such judgment, order, award or settlement, by reason of a
pending appeal or otherwise, is in effect, such judgment, order, award or settlement is not bonded
in the full amount of such judgment, order, award or settlement;
provided
,
however
,
that any such judgment, order, award or settlement shall not give rise to an Event of Default under
this subsection (l) if and for so long as (A) the amount of such judgment, order, award or
settlement is covered by a valid and binding policy of insurance between the defendant and the
insurer covering full payment thereof and (B) such insurer has been notified, and has not disputed
the claim made for payment, of the amount of such judgment, order, award or settlement;
(m) the Borrower, the Originator or the Servicer is enjoined, restrained or in any way
prevented by the order of any court or any Governmental Authority from conducting all or any
material part of its business for more than fifteen (15) days;
(n) any material loss or theft of any Collateral, whether or not insured, or any act of God or
public enemy, or other casualty which causes, for more than fifteen (15) consecutive days, the
cessation or substantial curtailment of revenue producing activities of the Borrower or the
Originator, if any such event or circumstance could reasonably be expected to have a Material
Adverse Effect;
71
(o) any cessation of a substantial part of the business of the Borrower or the Originator for
a period which materially and adversely affects the ability of such Person to continue its business
on a profitable basis;
(p) the loss, suspension or revocation of, or failure to renew, any license or permit now held
or hereafter acquired by the Borrower, the Originator or the Servicer, if such loss, suspension,
revocation or failure to renew could reasonably be expected to have a Material Adverse Effect;
(q) the indictment, or the threatened indictment of any Credit Party or the Originator under
any criminal statute, or commencement or threatened commencement of criminal or civil proceedings
against any Credit Party or the Originator pursuant to which statute or proceedings the penalties
or remedies sought or available include forfeiture to any Governmental Authority of any material
portion of the property of such Person;
(r) a Change of Control shall have occurred;
(s) the Collateral Value Policy or the Contingent Collateral Value Policy shall cease to be
effective with respect to any portion of the Insurance Premium Loans (or interests therein)
acquired by the Borrower with the proceeds of any Term Loan hereunder or cease to be the legally
valid, binding and enforceable obligation of the Collateral Value Insurer or the Contingent
Collateral Value Insurer, or the Collateral Value Insurer or Contingent Collateral Value Insurer
shall contest, defend against or otherwise dispute, in any manner, such effectiveness, validity,
binding nature or enforceability, or otherwise assert any defense to a claim made thereunder
(including without limitation any defense, exception or exclusion to payment permitted by the terms
of such Collateral Value Policy or Contingent Collateral Value Policy);
(t) any event or circumstance shall have occurred that may reasonably be expected to cause the
Borrower, the Originator or the Servicer to suffer materially adverse regulatory consequences
(including as may be applicable to its insurance premium finance, life settlement or related
business);
(u) any event or circumstance under Section V.A or Section V.B of the Collateral Value Policy
shall have occurred or the Borrower, the Originator or any of their Affiliates commits a Prohibited
Act (as defined in the Collateral Value Policy); or
(v) an event or development occurs which could reasonably be expected to have a Material
Adverse Effect (including, without limitation, any change or proposed change in any relevant law,
rule or regulation, in any Applicable Non-Licensed State or Applicable Licensed State or otherwise,
which (i) makes the financing, origination or transfer of any Insurance Premium Loan or life
insurance policy in accordance with the transactions contemplated by the Loan Documents and/or the
Transaction Documents unlawful or economically or procedurally disadvantageous or (ii) limits,
alters or otherwise compromises, or could be reasonably expected to compromise, the insurable
interest in the related Life Insurance Policy, as contemplated by the Loan Documents, the
Transaction Documents and the Loan Document Package);
72
then, and in any such event, the Collateral Agent may, and shall at the request of the
Required Lenders, by notice to the Borrower, (i) terminate or reduce all Commitments, whereupon all
Commitments shall immediately be so terminated or reduced, (ii) declare all or any portion of the
Loans then outstanding to be due and payable, whereupon all or such portion of the aggregate
principal of all Loans, all accrued and unpaid interest thereon, all fees and all other amounts
payable under this Agreement and the other Loan Documents shall become due and payable immediately,
without presentment, demand, protest or further notice of any kind, all of which are hereby
expressly waived by the Borrower and (iii) exercise any and all of its other rights and remedies
under applicable law, hereunder and under the other Loan Documents;
provided
,
however
, that upon the occurrence of any Event of Default described in subsection (g) or
(h) of this Section 9.01 with respect to the Borrower, without any notice to the Borrower or any
other Person or any act by any Agent or any Lender, all Commitments shall automatically terminate
and all Loans then outstanding, together with all accrued and unpaid interest thereon, all fees and
all other amounts due under this Agreement and the other Loan Documents shall become due and
payable automatically and immediately, without presentment, demand, protest or notice of any kind,
all of which are expressly waived by the Borrower.
ARTICLE X
AGENTS
Section 10.01
Appointment
. Each Lender (and each subsequent maker of any Loan by its
making thereof) hereby irrevocably appoints and authorizes the Administrative Agent and the
Collateral Agent to perform the duties of each such Agent as set forth in this Agreement including:
(i) to receive on behalf of each Lender any payment of principal of or interest on the Loans
outstanding hereunder and all other amounts accrued hereunder for the account of the Lenders and
paid to such Agent, and, subject to Section 2.02 of this Agreement, to distribute promptly to each
Lender its Pro Rata Share of all payments so received; (ii) to distribute to each Lender copies of
all material notices and agreements received by such Agent and not required to be delivered to each
Lender pursuant to the terms of this Agreement, provided that the Agents shall not have any
liability to the Lenders for any Agents inadvertent failure to distribute any such notices or
agreements to the Lenders; (iii) to maintain, in accordance with its customary business practices,
ledgers and records reflecting the status of the Obligations, the Loans, and related matters and to
maintain, in accordance with its customary business practices, ledgers and records reflecting the
status of the Collateral and related matters; (iv) to execute or file any and all financing or
similar statements or notices, amendments, renewals, supplements, documents, instruments, proofs of
claim, notices and other written agreements with respect to this Agreement or any other Loan
Document; (v) to make the Loans and Collateral Agent Advances, for such Agent or on behalf of the
applicable Lenders as provided in this Agreement or any other Loan Document; (vi) to perform,
exercise, and enforce any and all other rights and remedies of the Lenders with respect to the
Borrower, the Obligations, or otherwise related to any of same to the extent reasonably incidental
to the exercise by such Agent of the rights and remedies specifically authorized to be exercised by
such Agent by the terms of this Agreement or any other Loan Document; (vii) to incur and pay such
fees necessary or appropriate for the performance and fulfillment of its functions and powers
pursuant to this Agreement or any other Loan Document; and (viii) subject to Section 10.03 of this
Agreement, to take such action as such Agent deems appropriate on its behalf to administer
73
the Loans and the Loan Documents and to exercise such other powers delegated to such Agent by
the terms hereof or the other Loan Documents (including, without limitation, the power to give or
to refuse to give notices, waivers, consents, approvals and instructions and the power to make or
to refuse to make determinations and calculations) together with such powers as are reasonably
incidental thereto to carry out the purposes hereof and thereof. As to any matters not expressly
provided for by this Agreement and the other Loan Documents (including, without limitation,
enforcement or collection of the Loans), the Agents shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of the Required
Lenders, and such instructions of the Required Lenders shall be binding upon all Lenders and all
makers of Loans.
Section 10.02
Nature of Duties
. The Agents shall have no duties or responsibilities
except those expressly set forth in this Agreement or in the other Loan Documents. The duties of
the Agents shall be mechanical and administrative in nature. The Agents shall not have by reason
of this Agreement or any other Loan Document a fiduciary relationship in respect of any Lender.
Nothing in this Agreement or any other Loan Document, express or implied, is intended to or shall
be construed to impose upon the Agents any obligations in respect of this Agreement or any other
Loan Document except as expressly set forth herein or therein. Each Lender shall make its own
independent investigation of the financial condition and affairs of the Borrower in connection with
the making and the continuance of the Loans hereunder and shall make its own appraisal of the
creditworthiness of the Borrower and the value of the Collateral, and the Agents shall have no duty
or responsibility, either initially or on a continuing basis, to provide any Lender with any credit
or other information with respect thereto, whether coming into their possession before the initial
Loan hereunder or at any time or times thereafter, provided that, upon the reasonable request of a
Lender, each Agent shall provide to such Lender any documents or reports delivered to such Agent by
the Borrower pursuant to the terms of this Agreement or any other Loan Document. If any Agent
seeks the consent or approval of the Required Lenders to the taking or refraining from taking any
action hereunder, such Agent shall send notice thereof to each Lender. Each Agent shall promptly
notify each Lender any time that the Required Lenders have instructed such Agent to act or refrain
from acting pursuant hereto.
Section 10.03
Rights, Exculpation, Etc.
The Agents and their directors, officers,
agents or employees shall not be liable for any action taken or omitted to be taken by them under
or in connection with this Agreement or the other Loan Documents, except for their own gross
negligence or willful misconduct as determined by a final judgment of a court of competent
jurisdiction. Without limiting the generality of the foregoing, the Agents (i) may treat the payee
of any Loan as the owner thereof until the Collateral Agent receives written notice of the
assignment or transfer thereof, pursuant to Section 12.07 hereof, signed by such payee and in form
satisfactory to the Collateral Agent; (ii) may consult with legal counsel (including, without
limitation, counsel to any Agent or counsel to the Borrower), independent public accountants, and
other experts selected by any of them and shall not be liable for any action taken or omitted to be
taken in good faith by any of them in accordance with the advice of such counsel or experts; (iii)
make no warranty or representation to any Lender and shall not be responsible to any Lender for any
statements, certificates, warranties or representations made in or in connection with this
Agreement or the other Loan Documents; (iv) shall not have any duty to
74
ascertain or to inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement or the other Loan Documents on the part of any Person, the existence
or possible existence of any Default or Event of Default, or to inspect the Collateral or other
property (including, without limitation, the books and records) of any Person; (v) shall not be
responsible to any Lender for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or the other Loan Documents or any other instrument or
document furnished pursuant hereto or thereto; and (vi) shall not be deemed to have made any
representation or warranty regarding the existence, value or collectibility of the Collateral, the
existence, priority or perfection of the Collateral Agents Lien thereon, or any certificate
prepared by the Borrower in connection therewith, nor shall the Agents be responsible or liable to
the Lenders for any failure to monitor or maintain any portion of the Collateral. The Agents shall
not be liable for any apportionment or distribution of payments made in good faith pursuant to
Section 4.03, and if any such apportionment or distribution is subsequently determined to have been
made in error the sole recourse of any Lender to whom payment was due but not made, shall be to
recover from other Lenders any payment in excess of the amount which they are determined to be
entitled. The Agents may at any time request instructions from the Lenders with respect to any
actions or approvals which by the terms of this Agreement or of any of the other Loan Documents the
Agents are permitted or required to take or to grant, and if such instructions are promptly
requested, the Agents shall be absolutely entitled to refrain from taking any action or to withhold
any approval under any of the Loan Documents until they shall have received such instructions from
the Required Lenders. Without limiting the foregoing, no Lender shall have any right of action
whatsoever against any Agent as a result of such Agent acting or refraining from acting under this
Agreement or any of the other Loan Documents in accordance with the instructions of the Required
Lenders.
Section 10.04
Reliance
. Each Agent shall be entitled to rely upon any written
notices, statements, certificates, orders or other documents or any telephone message believed by
it in good faith to be genuine and correct and to have been signed, sent or made by the proper
Person, and with respect to all matters pertaining to this Agreement or any of the other Loan
Documents and its duties hereunder or thereunder, upon advice of counsel selected by it.
Section 10.05
Indemnification
. To the extent that any Agent is not reimbursed and
indemnified by the Borrower, the Lenders will reimburse and indemnify such Agent from and against
any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses, advances or disbursements of any kind or nature whatsoever which may be imposed on,
incurred by, or asserted against such Agent in any way relating to or arising out of this Agreement
or any of the other Loan Documents or any action taken or omitted by such Agent under this
Agreement or any of the other Loan Documents, in proportion to each Lenders Pro Rata Share,
including, without limitation, advances and disbursements made pursuant to Section 10.08;
provided
,
however
, that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses,
advances or disbursements for which there has been a final judicial determination that such
liability resulted from such Agents gross negligence or willful misconduct. The obligations of
the Lenders under this Section 10.05 shall survive the payment in full of the Loans and the
termination of this Agreement.
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Section 10.06
Agents Individually
. With respect to its Pro Rata Share of the Total
Commitment hereunder and the Loans made by it, each Agent shall have and may exercise the same
rights and powers hereunder and is subject to the same obligations and liabilities as and to the
extent set forth herein for any other Lender or maker of a Loan. The terms Lenders or Required
Lenders or any similar terms shall, unless the context clearly otherwise indicates, include each
Agent in its individual capacity as a Lender or one of the Required Lenders. Each Agent and its
Affiliates may accept deposits from, lend money to, and generally engage in any kind of banking,
trust or other business with the Borrower as if it were not acting as an Agent pursuant hereto
without any duty to account to the other Lenders.
Section 10.07
Successor Agent
. (a) (i) Each Agent may resign from the performance of
all its functions and duties hereunder and under the other Loan Documents at any time by giving at
least ten (10) Business Days prior written notice to the Borrower and each Lender, and (ii) on or
after the Term Loan Commitment Termination Date, the Required Funded Lenders may remove each Agent
without cause at any time by giving at least five (5) Business Days prior written notice to such
Agent, the Borrower and each other Lender. Such resignation or removal shall take effect upon the
acceptance by a successor Agent of appointment pursuant to clauses (b) and (c) below or as
otherwise provided below.
(b) Upon any such notice of resignation or removal, the Required Lenders (or the Required
Funded Lenders in the case of a removal under clause (ii) of paragraph (a) of this Section 10.07)
shall appoint a successor Agent. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations under this Agreement and the other Loan Documents.
After any Agents resignation or removal hereunder as an Agent, the provisions of this Article X
shall inure to its benefit as to any actions taken or omitted to be taken by it while it was an
Agent under this Agreement and the other Loan Documents.
(c) If a successor Agent shall not have been so appointed within said ten (10) Business Day
period, the retiring Agent, with the consent of the other Agent shall then appoint a successor
Agent who shall serve as an Agent until such time, if any, as the Required Lenders, with the
consent of the other Agent, appoint a successor Agent as provided above.
Section 10.08
Collateral Matters
.
(a) The Collateral Agent may from time to time on or after the Term Loan Commitment
Termination Date make such disbursements and advances (
Collateral Agent Advances
) which
the Collateral Agent, in its sole discretion, deems necessary or desirable to preserve, protect,
prepare for sale or lease or dispose of the Collateral or any portion thereof, to enhance the
likelihood or maximize the amount of repayment by the Borrower of the Loans and other Obligations
or to pay any other amount chargeable to the Borrower pursuant to the terms of this Agreement,
including, without limitation, costs, fees and expenses as described in Section 12.04. Without
limiting the foregoing, the Collateral Agent shall be permitted at anytime to make Collateral Agent
Advances to pay insurance premiums due under the Life Insurance Policies. The Collateral Agent
Advances shall be repayable on demand and be secured by the Collateral. The Collateral Agent
Advances shall constitute Obligations hereunder which may be
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charged to the Loan Account in accordance with Section 4.01. The Collateral Agent shall
notify each Lender and the Borrower in writing of each such Collateral Agent Advance, which notice
shall include a description of the purpose of such Collateral Agent Advance. Without limitation to
its obligations pursuant to Section 10.05, each Lender agrees that it shall make available to the
Collateral Agent, upon the Collateral Agents demand, in Dollars in immediately available funds,
the amount equal to such Lenders Pro Rata Share of each such Collateral Agent Advance. If such
funds are not made available to the Collateral Agent by such Lender, the Collateral Agent shall be
entitled to recover such funds on demand from such Lender, together with interest thereon for each
day from the date such payment was due until the date such amount is paid to the Collateral Agent,
at the Federal Funds Rate for three Business Days and thereafter at the interest rate per annum
equal to 20%.
(b) The Lenders hereby irrevocably authorize the Collateral Agent, at its option and in its
discretion, to release any Lien granted to or held by the Collateral Agent upon any Collateral upon
termination of the Total Commitment and payment and satisfaction of all Loans, Reimbursement
Obligations, Letter of Credit Obligations, and all other Obligations in accordance with the terms
hereof; or constituting property being sold or disposed of in the ordinary course of the Borrowers
business or otherwise in compliance with the terms of this Agreement and the other Loan Documents;
or constituting property in which the Borrower owned no interest at the time the Lien was granted
or at any time thereafter; or if approved, authorized or ratified in writing by the Lenders. Upon
request by the Collateral Agent at any time, the Lenders will confirm in writing the Collateral
Agents authority to release particular types or items of Collateral pursuant to this Section
10.08(b).
(c) Without in any manner limiting the Collateral Agents authority to act without any
specific or further authorization or consent by the Lenders (as set forth in Section 10.08(b)),
each Lender agrees to confirm in writing, upon request by the Collateral Agent, the authority to
release Collateral conferred upon the Collateral Agent under Section 10.08(b). Upon receipt by the
Collateral Agent of confirmation from the Lenders of its authority to release any particular item
or types of Collateral, and upon prior written request by the Borrower, the Collateral Agent shall
(and is hereby irrevocably authorized by the Lenders to) execute such documents as may be necessary
to evidence the release of the Liens granted to the Collateral Agent for the benefit of the Agents
and the Lenders upon such Collateral;
provided
,
however
, that (i) the Collateral
Agent shall not be required to execute any such document on terms which, in the Collateral Agents
opinion, would expose the Collateral Agent to liability or create any obligations or entail any
consequence other than the release of such Liens without recourse or warranty, and (ii) such
release shall not in any manner discharge, affect or impair the Obligations or any Lien upon (or
obligations of the Borrower in respect of) all interests in the Collateral retained by the
Borrower.
(d) The Collateral Agent shall have no obligation whatsoever to any Lender to assure that the
Collateral exists or is owned by the Borrower or is cared for, protected or insured or has been
encumbered or that the Lien granted to the Collateral Agent pursuant to this Agreement or any other
Loan Document has been properly or sufficiently or lawfully created, perfected, protected or
enforced or is entitled to any particular priority, or to exercise at all or in any particular
manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the
rights, authorities and powers granted or available to the Collateral Agent
77
in this Section 10.08 or in any other Loan Document, it being understood and agreed that in
respect of the Collateral, or any act, omission or event related thereto, the Collateral Agent may
act in any manner it may deem appropriate, in its sole discretion, given the Collateral Agents own
interest in the Collateral as one of the Lenders and that the Collateral Agent shall have no duty
or liability whatsoever to any other Lender, except as otherwise provided herein.
Section 10.09
Agency for Perfection
. Each Agent and each Lender hereby appoints each
other Agent and each other Lender as agent and bailee for the purpose of perfecting the security
interests in and liens upon the Collateral in assets which, in accordance with Article 9 of the
Uniform Commercial Code, can be perfected only by possession or control (or where the security
interest of a secured party with possession or control has priority over the security interest of
another secured party) and each Agent and each Lender hereby acknowledges that it holds possession
of or otherwise controls any such Collateral for the benefit of the Agents and the Lenders as
secured party. Should the Administrative Agent or any Lender obtain possession or control of any
such Collateral, the Administrative Agent or such Lender shall notify the Collateral Agent thereof,
and, promptly upon the Collateral Agents request therefor shall deliver such Collateral to the
Collateral Agent or in accordance with the Collateral Agents instructions. In addition, the
Collateral Agent shall also have the power and authority hereunder to appoint such other sub-agents
as may be necessary or required under applicable state law or otherwise to perform its duties and
enforce its rights with respect to the Collateral and under the Loan Documents. The Borrower by
its execution and delivery of this Agreement hereby consents to the foregoing.
Section 10.10
No Reliance on any Agents Customer Identification Program
. Each Lender
acknowledges and agrees that neither such Lender, nor any of its Affiliates, participants or
assignees, may rely on any Agent to carry out such Lenders, Affiliates, participants or
assignees customer identification program, or other obligations required or imposed under or
pursuant to the USA PATRIOT Act or the regulations thereunder, including the regulations contained
in 31 CFR 103.121 (as hereafter amended or replaced, the
CIP Regulations
), or any other
Anti-Terrorism Law, including any programs involving any of the following items relating to or in
connection with the Borrower, their Affiliates or their agents, the Loan Documents or the
transactions hereunder or contemplated hereby: (1) any identity verification procedures, (2) any
recordkeeping, (3) comparisons with government lists, (4) customer notices or (5) other procedures
required under the CIP Regulations or such other laws. Each Lender, Affiliate, participant or
assignee subject to Section 326 of the USA PATRIOT Act will perform the measures necessary to
satisfy its own responsibilities under the CIP Regulations.
ARTICLE XI
SERVICER TERMINATION EVENTS
Section 11.01
Servicer Termination Event
. If a Servicer Termination Event has
occurred and is continuing, the Agents, by notice in writing to the Servicer and the Borrower, may
terminate the Servicing Agreement pursuant to the terms forth in the Servicing Agreement. On and
after the effective time of any notice of termination, a replacement servicer approved in
78
writing by the Agents shall be the successor Servicer, as more fully set forth in a
replacement servicing agreement in form and substance satisfactory to the Agents.
ARTICLE XII
MISCELLANEOUS
Section 12.01
Notices, Etc.
All notices and other communications provided for
hereunder shall be in writing and shall be mailed (certified mail, postage prepaid and return
receipt requested), telecopied or delivered by hand, Federal Express or other reputable overnight
courier, if to the Borrower, at the following address:
Imperial Life Financing II, LLC
191 Peachtree Street NE
Suite 3300
Atlanta, Georgia 30303
Attention: Chief Financial Officer
Telephone: 404.736.3630
Telecopier: 404.736.3620
with a copy to:
Foley & Lardner LLP
One Independent Drive, Suite 1300
Jacksonville, FL 32202
Attention: Robert S. Bernstein, Esq..
Telephone: 904.359.2000
Telecopier: 904.359.8700
if to the Administrative Agent, to it at the following address:
CTL Holdings II LLC
6615 West Boynton Beach Blvd, #394
Boynton Beach, FL 33437
Attention: President
Telephone: 561.373.2475
Telecopier: 561.892.6313
if to the Collateral Agent, to it at the following address:
CTL Holdings II LLC
6615 West Boynton Beach Blvd, #394
Boynton Beach, FL 33437
Attention: President
Telephone: 561.373.2475
Telecopier: 561.892.6313
79
or, as to each party, at such other address as shall be designated by such party in a written
notice to the other parties complying as to delivery with the terms of this Section 12.01. All
such notices and other communications shall be effective, (i) if mailed (certified mail, postage
prepaid and return receipt requested), when received or 3 days after deposited in the mails,
whichever occurs first, (ii) if telecopied, when transmitted and confirmation received, or (iii) if
delivered by hand, Federal Express or other reputable overnight courier, upon delivery, except that
notices to any Agent pursuant to Article II shall not be effective until received by such Agent.
Section 12.02
Amendments, Etc
(a) No amendment or waiver of any provision of this
Agreement or any other Loan Document, and no consent to any departure by the Borrower therefrom,
shall in any event be effective unless the same shall be in writing and signed by the Required
Lenders or by the Collateral Agent with the consent of the Required Lenders, and then such waiver
or consent shall be effective only in the specific instance and for the specific purpose for which
given,
provided
,
however
, that no amendment, waiver or consent shall (i) increase
the Commitment of any Lender, reduce the principal of, or interest on, the Loans payable to any
Lender, reduce the amount of any fee payable for the account of any Lender, or postpone or extend
any scheduled date fixed for any payment of principal of, or interest or fees on, the Loans payable
to any Lender, in each case without the written consent of any Lender affected thereby, (ii)
increase the Total Commitment without the written consent of each Lender, (iii) change the
percentage of the Commitments or of the aggregate unpaid principal amount of the Loans that is
required for the Lenders or any of them to take any action hereunder without the written consent of
each Lender, (iv) amend the definition of Required Lenders or Pro Rata Share without the
written consent of each Lender, (v) release all or a substantial portion of the Collateral (except
as otherwise provided in this Agreement and the other Loan Documents), subordinate any Lien granted
in favor of the Collateral Agent for the benefit of the Agents and the Lenders, or release the
Borrower or any Guarantor without the written consent of each Lender, (vi) amend, modify or waive
Section 4.03 or this Section 12.02 of this Agreement without the written consent of each Lender, or
(vii) amend the definition of Borrowing Base, Borrowing Base Deficit, Collateral Value
Policy, Collateral Value Insurer, Collections, Contingent Collateral Value Policy,
Contingent Collateral Value Insurer, Coverage Certificate, Covered Loan Amount or Eligible
Insurance Premium Loan, in each case, without the written consent of each Lender. Notwithstanding
the foregoing, no amendment, waiver or consent shall, unless in writing and signed by an Agent,
affect the rights or duties of such Agent (but not in its capacity as a Lender) under this
Agreement or the other Loan Documents. Notwithstanding the foregoing, the parties hereto hereby
agree that any amendment, modification or waiver of, or consent with respect to the definitions of
Collateral Value Insurer, Collateral Value Policy, Collections, Coverage Certificate,
Person and Salvage Collections in Section 1.01, Section 2.05(e), Section 12.19 and the last
three sentences in this Section 12.02(a) shall require the written consent of the Collateral Value
Insurer (prior to the occurrence of a Credit Event) or the Contingent Collateral Value Insurer
(after the occurrence of a Credit Event) to be effective. In all events, copies of any amendments
to this Agreement, any other Loan Document or any Transaction Document shall be promptly provided
by the Borrower to the Collateral Value Insurer following execution thereof. Each of the parties
hereto agrees that the Collateral Value Insurer (prior to the occurrence of a Credit Event) or the
Contingent Collateral Value Insurer (after the occurrence of a Credit Event) is a third party
80
beneficiary solely with respect to Section 2.05(e), Section 12.19 and the last three sentences
in Section 12.02(a) of this Agreement
(b) If any action to be taken by the Lenders hereunder requires the unanimous consent,
authorization, or agreement of all of the Lenders, and a Lender other than the Collateral Agent and
the Administrative Agent (the
Holdout Lender
) fails to give its consent, authorization,
or agreement, then the Collateral Agent, upon at least 5 Business Days prior irrevocable notice to
the Holdout Lender, may permanently replace the Holdout Lender with one or more substitute Lenders
(each, a
Replacement Lender
), and the Holdout Lender shall have no right to refuse to be
replaced hereunder. Such notice to replace the Holdout Lender shall specify an effective date for
such replacement, which date shall not be later than 15 Business Days after the date such notice is
given. Prior to the effective date of such replacement, the Holdout Lender and each Replacement
Lender shall execute and deliver an Assignment and Acceptance, subject only to the Holdout Lender
being repaid its share of the outstanding Obligations without any premium or penalty of any kind
whatsoever. If the Holdout Lender shall refuse or fail to execute and deliver any such Assignment
and Acceptance prior to the effective date of such replacement, the Holdout Lender shall be deemed
to have executed and delivered such Assignment and Acceptance. The replacement of any Holdout
Lender shall be made in accordance with the terms of Section 12.07(b). Until such time as the
Replacement Lenders shall have acquired all of the Obligations, the Commitments, and the other
rights and obligations of the Holdout Lender hereunder and under the other Loan Documents, the
Holdout Lender shall remain obligated to make its Pro Rata Share of Loans.
Section 12.03
No Waiver; Remedies, Etc.
No failure on the part of any Agent or any
Lender to exercise, and no delay in exercising, any right hereunder or under any other Loan
Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right
under any Loan Document preclude any other or further exercise thereof or the exercise of any other
right. The rights and remedies of the Agents and the Lenders provided herein and in the other Loan
Documents are cumulative and are in addition to, and not exclusive of, any rights or remedies
provided by law. The rights of the Agents and the Lenders under any Loan Document against any
party thereto are not conditional or contingent on any attempt by the Agents and the Lenders to
exercise any of their rights under any other Loan Document against such party or against any other
Person.
Section 12.04
Expenses; Taxes; Attorneys Fees
. The Borrower will pay on demand, all
costs and expenses incurred by or on behalf of each Agent (and, in the case of clauses (b) through
(m) below, each Lender), regardless of whether the transactions contemplated hereby are
consummated, including, without limitation, reasonable fees, costs, client charges and expenses of
counsel for each Agent (and, in the case of clauses (b) through (m) below, each Lender),
accounting, due diligence, periodic field audits, physical counts, valuations, investigations,
searches and filings, monitoring of assets, appraisals of Collateral and title searches,
miscellaneous disbursements, examination, travel, lodging and meals, arising from or relating to:
(a) the negotiation, preparation, execution, delivery, performance and administration of this
Agreement and the other Loan Documents (including, without limitation, the preparation of any
additional Loan Documents pursuant to Section 7.01(b) or the review of any of the agreements,
instruments and documents referred to in Section 7.01(f)), (b) any requested amendments, waivers or
consents to this Agreement or the other Loan Documents
81
whether or not such documents become effective or are given, (c) the preservation and
protection of the Agents or any of the Lenders rights under this Agreement or the other Loan
Documents, (d) the defense of any claim or action asserted or brought against any Agent or any
Lender by any Person that arises from or relates to this Agreement, any other Loan Document, the
Agents or the Lenders claims against the Borrower, or any and all matters in connection
therewith, (e) the commencement or defense of, or intervention in, any court proceeding arising
from or related to this Agreement or any other Loan Document, (f) the filing of any petition,
complaint, answer, motion or other pleading by any Agent or any Lender, or the taking of any action
in respect of the Collateral or other security, in connection with this Agreement or any other Loan
Document, (g) the protection, collection, lease, sale, taking possession of or liquidation of, any
Collateral or other security in connection with this Agreement or any other Loan Document, (h) any
attempt to enforce any Lien or security interest in any Collateral or other security in connection
with this Agreement or any other Loan Document, (i) any attempt to collect from the Borrower, or
(i) the receipt by any Agent or any Lender of any advice from professionals with respect to any of
the foregoing. Without limitation of the foregoing or any other provision of any Loan Document:
(x) the Borrower agrees to pay all stamp, document, transfer, recording or filing taxes or fees and
similar impositions now or hereafter determined by any Agent or any Lender to be payable in
connection with this Agreement or any other Loan Document, and the Borrower agrees to save each
Agent and each Lender harmless from and against any and all present or future claims, liabilities
or losses with respect to or resulting from any omission to pay or delay in paying any such taxes,
fees or impositions, (y) the Borrower agrees to pay all broker fees that may become due in
connection with the transactions contemplated by this Agreement and the other Loan Documents, and
(z) if the Borrower fails to perform any covenant or agreement contained herein or in any other
Loan Document, any Agent may itself perform or cause performance of such covenant or agreement, and
the expenses of such Agent incurred in connection therewith shall be reimbursed on demand by the
Borrower.
Section 12.05
Right of Set-off
. Upon the occurrence and during the continuance of any
Event of Default, any Agent or any Lender may, and is hereby authorized to, at any time and from
time to time, without notice to the Borrower (any such notice being expressly waived by the
Borrower) and to the fullest extent permitted by law, set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and other Indebtedness
at any time owing by such Agent or such Lender to or for the credit or the account of the Borrower
against any and all obligations of the Borrower either now or hereafter existing under any Loan
Document, irrespective of whether or not such Agent or such Lender shall have made any demand
hereunder or thereunder and although such obligations may be contingent or unmatured. Each Agent
and each Lender agrees to notify the Borrower promptly after any such set-off and application made
by such Agent or such Lender provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of the Agents and the Lenders under this
Section 12.05 are in addition to the other rights and remedies (including other rights of set-off)
which the Agents and the Lenders may have under this Agreement or any other Loan Documents of law
or otherwise.
Section 12.06
Severability
. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating the remaining portions
hereof or affecting the validity or enforceability of such provision in any other jurisdiction.
82
Section 12.07
Assignments and Participations
.
(a) This Agreement and the other Loan Documents shall be binding upon and inure to the benefit
of the Borrower and each Agent and each Lender and their respective successors and assigns;
provided
,
however
, that Borrower may not assign or transfer any of its rights
hereunder or under the other Loan Documents without the prior written consent of each Lender and
any such assignment without the Lenders prior written consent shall be null and void.
(b) Each Lender may with the written consent of the Collateral Agent, assign to one or more
other lenders or other entities all or a portion of its rights and obligations under this Agreement
with respect to all or a portion of its Term Loan Commitment and any Term Loan made by it and;
provided
,
however
, that (i) such assignment is in an amount which is at least
$1,000,000 (or the remainder of such Lenders Commitment), (ii) that the parties to each such
assignment shall execute and deliver to the Collateral Agent an Assignment and Acceptance, together
with any promissory note subject to such assignment. Upon such execution, delivery and acceptance,
from and after the effective date specified in each Assignment and Acceptance and recordation on
the Register, (A) the assignee thereunder shall become a Lender hereunder and, in addition to the
rights and obligations hereunder held by it immediately prior to such effective date, have the
rights and obligations hereunder that have been assigned to it pursuant to such Assignment and
Acceptance and (B) the assigning Lender thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its
rights and be released from its obligations under this Agreement (and, in the case of an Assignment
and Acceptance covering all or the remaining portion of an assigning Lenders rights and
obligations under this Agreement, such Lender shall cease to be a party hereto).
(c) By executing and delivering an Assignment and Acceptance, the assigning Lender and the
assignee thereunder confirm to and agree with each other and the other parties hereto as follows:
(i) other than as provided in such Assignment and Acceptance, the assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any statements, warranties
or representations made in or in connection with this Agreement or any other Loan Document or the
execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement
or any other Loan Document furnished pursuant hereto; (ii) the assigning Lender makes no
representation or warranty and assumes no responsibility with respect to the financial condition of
the Borrower or the performance or observance by the Borrower of any of its obligations under this
Agreement or any other Loan Document furnished pursuant hereto; (iii) such assignee confirms that
it has received a copy of this Agreement and the other Loan Documents, together with such other
documents and information it has deemed appropriate to make its own credit analysis and decision to
enter into such Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the assigning Lender, any Agent or any Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Loan Documents; (v) such
assignee appoints and authorizes the Agents to take such action as agents on its behalf and to
exercise such powers under this Agreement and the other Loan Documents as are delegated to the
Agents by the terms hereof and thereof, together with such powers as are reasonably
83
incidental
hereto and thereto; and (vi) such assignee agrees that it will perform in accordance with their
terms all of the obligations which by the terms of this Agreement and the other Loan Documents are
required to be performed by it as a Lender.
(d) The Administrative Agent shall, acting solely for this purpose as a non-fiduciary agent of
the Borrower, maintain, or cause to be maintained at the Payment Office, a copy of each Assignment
and Acceptance delivered to and accepted by it and a register (the
Register
) for the
recordation of the names and addresses of the Lenders and the Commitments of, and the principal
amount of the Loans (and stated interest thereon) (the
Registered Loans
). The entries in
the Register shall be conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Agents and the Lenders may treat each Person whose name is recorded in the Register
as a Lender hereunder for all purposes of this Agreement. The Register shall be available for
inspection by the Borrower and any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(e) Upon receipt by the Administrative Agent of a completed Assignment and Acceptance, the
Administrative Agent shall accept such assignment and record the information contained therein in
the Register.
(f) A Registered Loan (and the registered note, if any, evidencing the same) may be assigned
or sold in whole or in part only by registration of such assignment or sale on the Register (and
each registered note shall expressly so provide). Any assignment or sale of all or part of such
Registered Loan (and the registered note, if any, evidencing the same) may be effected only by
registration of such assignment or sale on the Register, together with the surrender of the
registered note, if any, evidencing the same duly endorsed by (or accompanied by a written
instrument of assignment or sale duly executed by) the holder of such registered note, whereupon,
at the request of the designated assignee(s) or transferee(s), one or more new registered notes in
the same aggregate principal amount shall be issued to the designated assignee(s) or transferee(s).
Prior to the registration of assignment or sale of any Registered Loan (and the registered note,
if any, evidencing the same), the Agents shall treat the Person in whose name such Registered Loan
(and the registered note, if any, evidencing the same) is registered on the Register as the owner
thereof for the purpose of receiving all payments thereon, notwithstanding notice to the contrary.
(g) In the event that any Lender sells participations in a Registered Loan, such Lender shall,
acting for this purpose as a non-fiduciary agent on behalf of the Borrower, maintain, or cause to
be maintained, a register on which it enters the name of all participants in the Registered Loans
held by it and the principal amount (and stated interest thereon) of the portion of the Registered
Loan that is the subject of the participation (the
Participant Register
). A Registered
Loan (and the registered note, if any, evidencing the same) may be participated in whole or in part
only by registration of such participation on the Participant Register (and each registered note
shall expressly so provide). Any participation of such Registered Loan (and the registered note,
if any, evidencing the same) may be effected only by the registration of such participation on the
Participant Register. The Participant Register shall be available for
inspection by the Borrower and any Lender at any reasonable time and from time to time upon
reasonable prior notice.
84
(h) Any Non-U. S. Lender who purchases or is assigned or participates in any portion of such
Registered Loan shall comply with Section 2.08(d).
(i) Each Lender may sell participations to one or more banks or other entities in or to all or
a portion of its rights and obligations under this Agreement and the other Loan Documents
(including, without limitation, all or a portion of its Commitments, the Loans made by it);
provided, that (i) such Lenders obligations under this Agreement (including without limitation,
its Commitments hereunder) and the other Loan Documents shall remain unchanged; (ii) such Lender
shall remain solely responsible to the other parties hereto for the performance of such
obligations, and the Borrower, the Agents and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lenders rights and obligations under this
Agreement and the other Loan Documents; and (iii) a participant shall not be entitled to require
such Lender to take or omit to take any action hereunder except (A) action directly effecting an
extension of the maturity dates or decrease in the principal amount of the Loans, (B) action
directly effecting an extension of the due dates or a decrease in the rate of interest payable on
the Loans or the fees payable under this Agreement, or (C) actions directly effecting a release of
all or a substantial portion of the Collateral or the Borrower (except as set forth in Section
10.08 of this Agreement or any other Loan Document). The Borrower agrees that each participant
shall be entitled to the benefits of Section 2.08 and Section 4.04 of this Agreement with respect
to its participation in any portion of the Commitments and the Loans as if it was a Lender.
Section 12.08
Counterparts
. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of which shall be
deemed to be an original, but all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of this Agreement by telefacsimile or electronic
mail shall be equally as effective as delivery of an original executed counterpart of this
Agreement. Any party delivering an executed counterpart of this Agreement by telefacsimile or
electronic mail also shall deliver an original executed counterpart of this Agreement but the
failure to deliver an original executed counterpart shall not affect the validity, enforceability,
and binding effect of this Agreement. The foregoing shall apply to each other Loan Document
mutatis mutandis
.
Section 12.09
GOVERNING LAW
. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS
EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH OTHER LOAN DOCUMENT)
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE
TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK.
Section 12.10
CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE
. ANY LEGAL ACTION
OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE
COURTS OF THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK OR OF THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY IRREVOCABLY ACCEPTS IN RESPECT OF ITS PROPERTY,
GENERALLY
85
AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE BORROWER HEREBY
IRREVOCABLY APPOINTS THE SECRETARY OF STATE OF THE STATE OF NEW YORK AS ITS AGENT FOR SERVICE OF
PROCESS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING AND FURTHER IRREVOCABLY CONSENTS TO THE SERVICE
OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS AND IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER AT ITS
ADDRESS FOR NOTICES AS SET FORTH IN SECTION 12.01 AND TO THE SECRETARY OF STATE OF THE STATE OF NEW
YORK, SUCH SERVICE TO BECOME EFFECTIVE TEN (10) DAYS AFTER SUCH MAILING. THE BORROWER AGREES THAT
A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF THE AGENTS AND THE LENDERS TO SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER IN ANY OTHER
JURISDICTION. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE JURISDICTION OR LAYING OF
VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY
SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER HAS OR
HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS
(WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR
OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES SUCH
IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
Section 12.11
WAIVER OF JURY TRIAL, ETC.
THE BORROWER, EACH AGENT AND EACH LENDER
HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY
RIGHTS UNDER THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, OR UNDER ANY AMENDMENT, WAIVER, CONSENT,
INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE DELIVERED IN
CONNECTION THEREWITH, OR ARISING FROM ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH THIS
AGREEMENT, AND AGREES THAT ANY SUCH ACTION, PROCEEDINGS OR COUNTERCLAIM SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY. THE BORROWER CERTIFIES THAT NO OFFICER, REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY AGENT OR ANY LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT ANY AGENT OR ANY
LENDER WOULD NOT, IN THE EVENT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM, SEEK TO ENFORCE THE
FOREGOING WAIVERS. THE BORROWER HEREBY
ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENTS AND THE LENDERS
ENTERING INTO THIS AGREEMENT.
86
Section 12.12
Consent by the Agents and Lenders
. Except as otherwise expressly set
forth herein to the contrary or in any other Loan Document, if the consent, approval, satisfaction,
determination, judgment, acceptance or similar action (an
Action
) of any Agent or any
Lender shall be permitted or required pursuant to any provision hereof or any provision of any
other agreement to which the Borrower is a party and to which any Agent or any Lender has succeeded
thereto, such Action shall be required to be in writing and may be withheld or denied by such Agent
or such Lender, in its sole discretion, with or without any reason, and without being subject to
question or challenge on the grounds that such Action was not taken in good faith.
Section 12.13
No Party Deemed Drafter
. Each of the parties hereto agrees that no
party hereto shall be deemed to be the drafter of this Agreement.
Section 12.14
Reinstatement; Certain Payments
. If any claim is ever made upon any
Agent or any Lender for repayment or recovery of any amount or amounts received by such Agent or
such Lender in payment or on account of any of the Obligations, such Agent or such Lender shall
give prompt notice of such claim to each other Agent and Lender and the Borrower, and if such Agent
or such Lender repays all or part of such amount by reason of (i) any judgment, decree or order of
any court or administrative body having jurisdiction over such Agent or such Lender or any of its
property, or (ii) any good faith settlement or compromise of any such claim effected by such Agent
or such Lender with any such claimant, then and in such event the Borrower agrees that (A) any such
judgment, decree, order, settlement or compromise shall be binding upon it notwithstanding the
cancellation of any Indebtedness hereunder or under the other Loan Documents or the termination of
this Agreement or the other Loan Documents, and (B) it shall be and remain liable to such Agent or
such Lender hereunder for the amount so repaid or recovered to the same extent as if such amount
had never originally been received by such Agent or such Lender.
Section 12.15
Indemnification
.
(a)
General Indemnity
. In addition to the Borrowers other Obligations under this
Agreement, the Borrower agrees to, jointly and severally, defend, protect, indemnify and hold
harmless each Agent, each Lender and all of their respective officers, directors, employees,
attorneys, consultants and agents (collectively called the
Indemnitees
) from and against
any and all losses, damages, liabilities, obligations, penalties, fees, reasonable costs and
expenses (including, without limitation, reasonable attorneys fees, costs and expenses) incurred
by such Indemnitees, whether prior to or from and after the Effective Date, whether direct,
indirect or consequential, as a result of or arising from or relating to or in connection with any
of the following: (i) the negotiation, preparation, execution or performance or enforcement of
this Agreement, any other Loan Document or of any other document executed in connection with the
transactions contemplated by this Agreement, (ii) any Agents or any Lenders furnishing of funds
to the Borrower for the account of the Borrower under this Agreement or the other Loan Documents,
including, without limitation, the management of any such Loans, (iii) any matter relating to the
financing transactions contemplated by this Agreement or the other Loan
Documents or by any document executed in connection with the transactions contemplated by this
Agreement or the other Loan Documents, or (iv) any claim, litigation, investigation or proceeding
relating to any of the foregoing, whether or not any Indemnitee is a party thereto
87
(collectively,
the
Indemnified Matters
);
provided
,
however
, that Borrower shall not have
any obligation to any Indemnitee under this subsection (a) for any Indemnified Matter caused by the
gross negligence or willful misconduct of such Indemnitee, as determined by a final judgment of a
court of competent jurisdiction.
(b) The indemnification for all of the foregoing losses, damages, fees, costs and expenses of
the Indemnitees are chargeable against the Loan Account. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in this Section 12.15 may be unenforceable because it is
violative of any law or public policy, the Borrower shall, jointly and severally, contribute the
maximum portion which it is permitted to pay and satisfy under applicable law, to the payment and
satisfaction of all Indemnified Matters incurred by the Indemnitees. The indemnities set forth in
this Section 12.15 shall survive the repayment of the Obligations and discharge of any Liens
granted under the Loan Documents.
Section 12.16
Records
. The unpaid principal of and interest on the Loans, the
interest rate or rates applicable to such unpaid principal and interest, the duration of such
applicability, the Commitments shall at all times be ascertained from the records of the Agents,
which shall be conclusive and binding absent manifest error.
Section 12.17
Binding Effect
. This Agreement shall become effective when it shall
have been executed by the Borrower, each Agent and each Lender and when the conditions precedent
set forth in Section 5.01 hereof have been satisfied or waived in writing by the Agents, and
thereafter shall be binding upon and inure to the benefit of the Borrower, each Agent and each
Lender, and their respective successors and assigns, except that the Borrower shall not have the
right to assign their rights hereunder or any interest herein without the prior written consent of
each Agent and each Lender, and any assignment by any Lender shall be governed by Section 12.07
hereof.
Section 12.18
Interest
. It is the intention of the parties hereto that each Agent and
each Lender shall conform strictly to usury laws applicable to it. Accordingly, if the
transactions contemplated hereby or by any other Loan Document would be usurious as to any Agent or
any Lender under laws applicable to it (including the laws of the United States of America and the
State of New York or any other jurisdiction whose laws may be mandatorily applicable to such Agent
or such Lender notwithstanding the other provisions of this Agreement), then, in that event,
notwithstanding anything to the contrary in this Agreement or any other Loan Document or any
agreement entered into in connection with or as security for the Obligations, it is agreed as
follows: (i) the aggregate of all consideration which constitutes interest under law applicable to
any Agent or any Lender that is contracted for, taken, reserved, charged or received by such Agent
or such Lender under this Agreement or any other Loan Document or agreements or otherwise in
connection with the Obligations shall under no circumstances exceed the maximum amount allowed by
such applicable law, any excess shall be canceled automatically and if theretofore paid shall be
credited by such Agent or such Lender on the principal amount of the Obligations (or, to the extent
that the principal amount of the Obligations shall have been or would thereby be paid in full,
refunded by such Agent or such
Lender, as applicable, to the Borrower); and (ii) in the event that the maturity of the
Obligations is accelerated by reason of any Event of Default under this Agreement or otherwise, or
in the event of any required or permitted prepayment, then such consideration that constitutes
interest
88
under law applicable to any Agent or any Lender may never include more than the maximum
amount allowed by such applicable law, and excess interest, if any, provided for in this Agreement
or otherwise shall be canceled automatically by such Agent or such Lender, as applicable, as of the
date of such acceleration or prepayment and, if theretofore paid, shall be credited by such Agent
or such Lender, as applicable, on the principal amount of the Obligations (or, to the extent that
the principal amount of the Obligations shall have been or would thereby be paid in full, refunded
by such Agent or such Lender to the Borrower). All sums paid or agreed to be paid to any Agent or
any Lender for the use, forbearance or detention of sums due hereunder shall, to the extent
permitted by law applicable to such Agent or such Lender, be amortized, prorated, allocated and
spread throughout the full term of the Loans until payment in full so that the rate or amount of
interest on account of any Loans hereunder does not exceed the maximum amount allowed by such
applicable law. If at any time and from time to time (x) the amount of interest payable to any
Agent or any Lender on any date shall be computed at the Highest Lawful Rate applicable to such
Agent or such Lender pursuant to this Section 12.18 and (y) in respect of any subsequent interest
computation period the amount of interest otherwise payable to such Agent or such Lender would be
less than the amount of interest payable to such Agent or such Lender computed at the Highest
Lawful Rate applicable to such Agent or such Lender, then the amount of interest payable to such
Agent or such Lender in respect of such subsequent interest computation period shall continue to be
computed at the Highest Lawful Rate applicable to such Agent or such Lender until the total amount
of interest payable to such Agent or such Lender shall equal the total amount of interest which
would have been payable to such Agent or such Lender if the total amount of interest had been
computed without giving effect to this Section 12.18.
For purposes of this Section 12.18, the term applicable law shall mean that law in effect
from time to time and applicable to the loan transaction between the Borrower, on the one hand, and
the Agents and the Lenders, on the other, that lawfully permits the charging and collection of the
highest permissible, lawful non-usurious rate of interest on such loan transaction and this
Agreement, including laws of the State of New York and, to the extent controlling, laws of the
United States of America.
The right to accelerate the maturity of the Obligations does not include the right to
accelerate any interest that has not accrued as of the date of acceleration.
Section 12.19
Confidentiality
. Each Agent and each Lender agrees (on behalf of itself
and each of its affiliates, directors, officers, employees and representatives) to use reasonable
precautions to keep confidential, in accordance with its customary procedures for handling
confidential information of this nature and in accordance with safe and sound practices of
comparable commercial finance companies, any non-public information supplied to it by the Borrower
pursuant to this Agreement or the other Loan Documents which is identified in writing by the
Borrower as being confidential at the time the same is delivered to such Person (and which at the
time is not, and does not thereafter become, publicly available or available to such Person from
another source not known to be subject to a confidentiality obligation to such Person not to
disclose such information),
provided
that nothing herein shall limit the disclosure
of any such information (i) to the extent required by any Requirement of Law or judicial
process or as otherwise requested by any Governmental Authority, (ii) to counsel for any Agent or
any Lender, (iii) to examiners, auditors, accountants or Securitization parties;
provided
,
that the
89
Agents and the Lenders shall not be entitled to disclose the identity of the Collateral
Value Insurer to the Rating Agencies or, except as provided below, provide a copy of the Collateral
Value Policy to the Rating Agencies, in each case, without the prior written consent of the
Collateral Value Insurer;
provided
,
further
, that the Agents and the Lenders shall
be permitted to disclose a copy of the Collateral Value Policy to the Rating Agencies so long as
the identity of the Collateral Value Insurer is redacted, (iv) in connection with any litigation to
which any Agent or any Lender is a party or (v) to any assignee or participant (or prospective
assignee or participant) so long as such assignee or participant (or prospective assignee or
participant) first agrees, in writing, to be bound by confidentiality provisions similar in
substance to this Section 12.19.
Section 12.20
Public Disclosure
. The Borrower agrees that neither it nor any of its
Affiliates will now or in the future issue any press release or other public disclosure using the
name of an Agent, any Lender or any of their respective Affiliates or referring to this Agreement
or any other Loan Document without the prior written consent of such Agent or such Lender, except
to the extent that the Borrower or such Affiliate is required to do so under applicable law (in
which event, the Borrower or such Affiliate will consult with such Agent or such Lender before
issuing such press release or other public disclosure). The Borrower hereby authorizes each Agent
and each Lender, after consultation with the Borrower, to advertise the closing of the transactions
contemplated by this Agreement, and to make appropriate announcements of the financial arrangements
entered into among the parties hereto, as such Agent or such Lender shall deem appropriate,
including, without limitation, announcements commonly known as tombstones, in such trade
publications, business journals, newspapers of general circulation and to such selected parties as
such Agent or such Lender shall deem appropriate.
Section 12.21
Integration
. This Agreement, together with the other Loan Documents,
reflects the entire understanding of the parties with respect to the transactions contemplated
hereby and shall not be contradicted or qualified by any other agreement, oral or written, before
the date hereof.
Section 12.22
USA PATRIOT Act
. Each Lender that is subject to the requirements of the
USA PATRIOT Act (Title 111 of Pub. L. 107-56 (signed into law October 26, 2001)) (as amended, the
USA PATRIOT Act) hereby notifies the Borrower that pursuant to the requirements of the USA
PATRIOT Act, it is required to obtain, verify and record information that identifies the entities
composing the Borrower, which information includes the name and address of each such entity and
other information that will allow such Lender to identify the entities composing the Borrower in
accordance with the USA PATRIOT Act. The Borrower agrees to take such action and execute,
acknowledge and deliver at its sole cost and expense, such instruments and documents as any Lender
may reasonably require from time to time in order to enable such Lender to comply with the USA
PATRIOT Act.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
90
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their
respective officers thereunto duly authorized, as of the date first above written.
|
|
|
|
|
|
BORROWER
:
IMPERIAL LIFE FINANCING II, LLC
|
|
|
By:
|
/s/ Jonathan Neuman
|
|
|
|
Name:
|
Jonathan Neuman
|
|
|
|
Title:
|
President
|
|
|
|
COLLATERAL AGENT, ADMINISTRATIVE AGENT AND LENDER
:
CTL HOLDINGS II LLC
|
|
|
By:
|
/s/ Antony Mitchell
|
|
|
|
Name:
|
Antony Mitchell
|
|
|
|
Title:
|
President
|
|
|
Schedule 1.01(A)
Lenders and Lenders Commitments
|
|
|
|
|
Lender
|
|
Commitment
|
|
CTL Holdings II, LLC
|
|
$
|
15,000,000
|
|
Total
|
|
$
|
15,000,000
|
|
Schedule 1.01(B)
Applicable Non-Licensed States
1. Utah
Schedule 1.01(C)
Applicable Licensed States
None
Schedule 1.01(D)
Loan Schedule
None
Schedule 5.02(e)
Delivery of Documents
2.
|
|
Life Insurance Policy and evidence of receipt by insurance carrier of the related premium
|
3.
|
|
Eligibility Certification
|
6.
|
|
Completed compliance checklist for Insurance Premium Loan
|
7.
|
|
Loan Documentation Package for Insurance Premium Loan
|
9.
|
|
Insurance Premium Loan Assignment Agreement or Participation Certificate from Master
Participation Agreement
|
10.
|
|
All other deliveries required by the Agents, including all documents and certificates
required for an Insurance Premium Loan to be an Eligible Insurance Premium Loan
|
Schedule 6.01(e)
Capitalization
100% of the issued and outstanding Equity Interests are owned by Imperial Premium Finance, LLC
Schedule 6.01(q)
Insurance
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance
|
|
|
|
|
|
|
|
|
Company
|
|
Type
|
|
Policy Period
|
|
Limit of Liability
|
|
Policy #
|
American Intl.
Specialty Lines
Ins. Co.
|
|
Professional
Liability E&O
|
|
12/19/08 12/19/09
|
|
|
10,000,000.00
|
|
|
|
013777922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Navigators
Insurance Company
|
|
Director and
Officer Liability
|
|
8/20/08 8/20/09
|
|
|
5,000,000
|
|
|
NY08DOL601410IV
|
Schedule 6.01(t)
Bank Accounts
|
|
|
Bank
|
|
SunTrust Bank
|
Account Name
|
|
Imperial Life Financing II, LLC
|
Type of Account
|
|
Collection
|
|
|
|
Bank
|
|
SunTrust Bank
|
Account Name
|
|
Imperial Life Financing II, LLC
|
Type of Account
|
|
Checking
|
Schedule 6.01(u)
Intellectual Property
None
Schedule 6.01(v)
Material Contracts
Transaction Documents.
Schedule 6.01(aa)
Name; Jurisdiction of Organization; Organizational ID Number; Chief Place of
Business; Chief Executive Office; FEIN
|
|
|
|
|
Name
|
|
Imperial Life Financing II, LLC
|
Jurisdiction of Organization
|
|
Georgia
|
Organizational Identification Number
|
|
|
09008743
|
|
Chief Place of Business
|
|
701 Park of Commerce Blvd., Suite 301 Boca Raton, FL 33487
|
Chief Executive Office
|
|
191 Peachtree Street NE, Suite 3300 Atlanta, Georgia 30303
|
Schedule 6.01(bb)
Collateral Locations
701 Park of Commerce Blvd., Suite 301, Boca Raton FL 33487
Schedule 8.01
Cash Management Bank and Collection Account
|
|
|
Bank
|
|
SunTrust Bank
|
Account Name
|
|
Imperial Life Financing II, LLC
|
Type of Account
|
|
Collection
|
EXHIBIT A
FORM OF SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT, dated as of February ___, 2009 made by the Grantor referred to
below, in favor of CTL Holdings II, LLC, a Georgia limited liability company, in its capacity as
collateral agent for the Secured Parties referred to below (in such capacity, together with its
successors and assigns in such capacity, if any, the
Collateral Agent
).
W
I
T
N
E
S
S
E
T
H
:
WHEREAS, Imperial Life Financing II, LLC, a Georgia limited liability company (the
Borrower
and the
Grantor
, the lenders from time to time party thereto (each a
Lender
and collectively, the
Lenders
), the Collateral Agent and CTL Holdings
II, LLC, as administrative agent for the Lenders (in such capacity, together with its successors
and assigns in such capacity, if any, the
Administrative Agent
and together with the
Collateral Agent, each an
Agent
and collectively, the
Agents
) are parties to a
Financing Agreement, dated as of February ___, 2009 (such agreement, as amended, restated,
supplemented, modified or otherwise changed from time to time, including any replacement agreement
therefor, being hereinafter referred to as the
Financing Agreement
);
WHEREAS, pursuant to the Financing Agreement, the Lenders have agreed to make term loans (each
a
Loan
and collectively, the
Loans
), to the Borrower in an aggregate principal
amount at any one time outstanding not to exceed the Total Term Loan Commitment (as defined in the
Financing Agreement);
WHEREAS, it is a condition precedent to the Lenders making any Loan to the Borrower pursuant
to the Financing Agreement that the Grantor shall have executed and delivered to the Collateral
Agent a pledge to the Collateral Agent, for the benefit of the Secured Parties, and the grant to
the Collateral Agent, for the benefit of the Secured Parties, of (a) a security interest in and
Lien on the outstanding shares of Equity Interests (as defined in the Financing Agreement) and
indebtedness from time to time owned by the Grantor of each Person now or hereafter existing and in
which the Grantor has any interest at any time, and (b) a security interest in all other personal
property and fixtures of the Grantor; and
WHEREAS, Grantor has determined that the execution, delivery and performance of this Agreement
directly benefit, and are in the best interest of, the Grantor;
NOW, THEREFORE, in consideration of the premises and the agreements herein and in order to
induce the Collateral Agent and the Lenders to make and maintain the Loans to the Borrower pursuant
to the Financing Agreement, the Grantor agrees with the Collateral Agent, for the benefit of the
Secured Parties, as follows:
SECTION 1.
Definitions
.
(a) Reference is hereby made to the Financing Agreement for a
statement of the terms thereof.
All capitalized terms used in this Agreement and the recitals
hereto which are defined in the Financing Agreement or in Article 8 or 9 of the Uniform
Commercial Code as in effect from time to time in the State of New York (the
Code
) and
which are not otherwise defined herein shall have the same meanings herein as set forth therein;
provided
that terms used herein which are defined in the Code as in effect in the State of
New York on the date hereof shall continue to have the same meaning notwithstanding any replacement
or amendment of such statute except as the Collateral Agent may otherwise determine.
(b) The following terms shall have the respective meanings provided for in the Code:
Accounts, Account Debtor, Cash Proceeds, Certificate of Title, Chattel Paper, Commercial
Tort Claim, Commodity Account, Commodity Contracts, Deposit Account, Documents,
Electronic Chattel Paper, Equipment, Fixtures, General Intangibles, Goods, Instruments,
Inventory, Investment Property, Letter-of-Credit Rights, Noncash Proceeds, Payment
Intangibles, Proceeds, Promissory Notes, Record, Security Account, Software, Supporting
Obligations and Tangible Chattel Paper.
(c) As used in this Agreement, the following terms shall have the respective meanings
indicated below, such meanings to be applicable equally to both the singular and plural forms of
such terms:
Additional Collateral
has the meaning specified therefor in Section 4(a)(i) hereof.
Certificated Entities
has the meaning specified therefor in Section 5(m) hereof.
Existing Issuer
has the meaning specified therefor in the definition of the term
Pledged Shares.
Intellectual Property
means all U.S and non-U.S. (i) published and unpublished works
of authorship (including, without limitation, computer software), copyrights therein and thereto,
and registrations and applications therefor, and all renewals, extensions, restorations and
reversions thereof, including, without limitation, all copyright registrations and applications
listed in Schedule II hereto (collectively,
Copyrights
); (ii) inventions, discoveries,
ideas and all patents, registrations, and applications therefor, including, without limitation,
divisions, continuations, continuations-in-part and renewal applications, and all renewals,
extensions and reissues, including, without limitation, all patents and patent applications listed
in Schedule II hereto (collectively,
Patents
); (iii) trademarks, service marks, brand
names, certification marks, collective marks, d/b/as, Internet domain names, logos, symbols, trade
dress, assumed names, fictitious names, trade names, and other indicia of origin, all applications
and registrations for all of the foregoing, and all goodwill associated therewith and symbolized
thereby, and all extensions, modifications and renewals of same, including, without limitation, all
trademark registrations and applications listed in Schedule II hereto (collectively,
Trademarks
); (iv) confidential and proprietary information, trade secrets and know-how,
including, without limitation, processes, schematics, databases, formulae, drawings, prototypes,
models, designs and customer lists (collectively,
Trade Secrets
); and (v) all other
intellectual property or
-2-
proprietary rights and claims or causes of action arising out of or
related to any infringement,
misappropriation or other violation of any of the foregoing, including, without limitation,
rights to recover for past, present and future violations thereof (collectively,
Other
Proprietary Rights
).
Pledged Debt
means the indebtedness described in Schedule VII hereto and all
indebtedness from time to time owned or acquired by the Grantor, the promissory notes and other
Instruments evidencing any or all of such indebtedness, and all interest, cash, Instruments,
Investment Property, financial assets, securities, Equity Interests, other equity interests, stock
options and commodity contracts, notes, debentures, bonds, promissory notes or other evidences of
indebtedness and all other property from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of such indebtedness.
Pledged Interests
means, collectively, (a) the Pledged Debt, (b) the Pledged Shares
and (c) all security entitlements in any and all of the foregoing.
Pledged Issuer
has the meaning specified therefor in the definition of the term
Pledged Shares.
Pledged Shares
means (a) the shares of Equity Interests described in Schedule VIII
hereto, whether or not evidenced or represented by any stock certificate, certificated security or
other Instrument, issued by the Persons described in such Schedule VIII (the
Existing
Issuers
), (b) the shares of Equity Interests at any time and from time to time acquired by the
Grantor of any and all Persons now or hereafter existing (such Persons, together with the Existing
Issuers, being hereinafter referred to collectively as the
Pledged Issuers
and each
individually as a
Pledged Issuer
), whether or not evidenced or represented by any stock
certificate, certificated security or other Instrument, and (c) the certificates representing such
shares of Equity Interests, all options and other rights, contractual or otherwise, in respect
thereof and all dividends, distributions, cash, Instruments, Investment Property, financial assets,
securities, Equity Interests, other equity interests, stock options and commodity contracts, notes,
debentures, bonds, promissory notes or other evidences of indebtedness and all other property
(including, without limitation, any stock dividend and any distribution in connection with a stock
split) from time to time received, receivable or otherwise distributed in respect of or in exchange
for any or all of such Equity Interests.
Secured Parties
means, collectively, the Agents and the Lenders.
Secured Obligations
has the meaning specified therefor in Section 3 hereof.
SECTION 2.
Grant of Security Interest
. As collateral security for the payment,
performance and observance of all of the Secured Obligations, the Grantor hereby pledges and
assigns to the Collateral Agent (and its agents and designees), and grants to the Collateral Agent
(and its agents and designees), for the benefit of the Secured Parties, a continuing security
interest in, all personal property and Fixtures of the Grantor, wherever located and whether now or
hereafter existing and whether now owned or hereafter acquired, of every kind and description,
tangible or intangible, including, without limitation, the following (all being collectively
referred to herein as the
Collateral
):
-3-
(a) all Accounts;
(b) all Chattel Paper (whether tangible or electronic);
(c) the Commercial Tort Claims specified on Schedule VI hereto;
(d) all Deposit Accounts, all cash, and all other property from time to time deposited therein
or otherwise credited thereto and the monies and property in the possession or under the control of
any Agent or any Lender or any affiliate, representative, agent or correspondent of any Agent or
any Lender;
(e) all Documents;
(f) all General Intangibles (including, without limitation, all Payment Intangibles and
Intellectual Property);
(g) all Goods, including, without limitation, all Equipment, Fixtures and Inventory;
(h) all Instruments (including, without limitation, Promissory Notes);
(i) all Investment Property;
(j) all Letter-of-Credit Rights;
(k) all Pledged Interests;
(l) all Supporting Obligations;
(m) all Insurance Premium Loans;
(n) all other tangible and intangible personal property of the Grantor (whether or not subject
to the Code), including, without limitation, all bank and other accounts and all cash and all
investments therein, all proceeds, products, offspring, accessions, rents, profits, income,
benefits, substitutions and replacements of and to any of the property of the Grantor described in
the preceding clauses of this Section 2 hereof (including, without limitation, any proceeds of
insurance thereon and all causes of action, claims and warranties now or hereafter held by the
Grantor in respect of any of the items listed above), and all books, correspondence, files and
other Records, including, without limitation, all tapes, disks, cards, Software, data and computer
programs in the possession or under the control of the Grantor or any other Person from time to
time acting for the Grantor that at any time evidence or contain information relating to any of the
property described in the preceding clauses of this Section 2 hereof or are otherwise necessary or
helpful in the collection or realization thereof; and
(o) all Proceeds, including all Cash Proceeds and Noncash Proceeds, and products of any and
all of the foregoing Collateral;in each case howsoever the Grantors interest therein may arise or appear (whether by ownership,
-4-
security interest, claim or otherwise).
Notwithstanding anything herein to the contrary, the term Collateral shall not include, and the
Grantor is not pledging, nor granting a security interest hereunder in, any of the Grantors right,
title or interest in any license, contract or agreement to which the Grantor is a party as of the
date hereof or any of its right, title or interest thereunder to the extent, but only to the
extent, that such a grant would, under the express terms of such license, contract or agreement on
the date hereof result in a breach of the terms of, or constitute a default under, such license,
contract or agreement (other than to the extent that any such term (i) has been waived or (ii)
would be rendered ineffective pursuant to Sections 9-406, 9-408, 9-409 of the Code or other
applicable provisions of the Uniform Commercial Code of any relevant jurisdiction or any other
applicable law (including the Bankruptcy Code) or principles of equity);
provided
, that (x)
immediately upon the ineffectiveness, lapse, termination or waiver of any such provision, the
Collateral shall include, and the Grantor shall be deemed to have granted a security interest in,
all such right, title and interest as if such provision had never been in effect and (y) the
foregoing exclusion shall in no way be construed so as to limit, impair or otherwise affect the
Collateral Agents unconditional continuing security interest in and liens upon any rights or
interests of the Grantor in or to the proceeds of, or any monies due or to become due under, any
such license, contract or agreement.
SECTION 3.
Security for Secured Obligations
. The security interest created hereby in
the Collateral constitutes continuing collateral security for all of the following obligations,
whether now existing or hereafter incurred (the
Secured Obligations
):
(a) the prompt payment by the Grantor, as and when due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise), of all amounts from time to time
owing by it in respect of the Financing Agreement and/or the other Loan Documents, including,
without limitation, (i) all Obligations and (ii) all interest, fees, commissions, charges, expense
reimbursements, indemnifications and all other amounts due or to become due under any Loan Document
(including, without limitation, all interest, fees, commissions, charges, expense reimbursements,
indemnifications and other amounts that accrue after the commencement of any Insolvency Proceeding
of any Credit Party, whether or not the payment of such interest, fees, commissions, charges,
expense reimbursements, indemnifications and other amounts are unenforceable or are not allowable,
in whole or in part, due to the existence of such Insolvency Proceeding); and
(b) the due performance and observance by the Grantor of all of its other obligations from
time to time existing in respect of the Loan Documents.
SECTION 4.
Delivery of the Pledged Interests
.
(a) (i) All promissory notes currently evidencing the Pledged Debt and all certificates
currently representing the Pledged Shares shall be delivered to the Collateral Agent on or prior to
the execution and delivery of this Agreement. All other promissory notes, certificates and
Instruments constituting Pledged Interests from time to time required to be pledged to the
Collateral Agent pursuant to the terms of this Agreement or the Financing Agreement (the
Additional Collateral
) shall be delivered to the Agent promptly upon, but in
-5-
any event
within five (5) days of, receipt thereof by or on behalf of the Grantor. All such promissory
notes, certificates and Instruments shall be held by or on behalf of the Collateral
Agent pursuant hereto and shall be delivered in suitable form for transfer by delivery or
shall be accompanied by duly executed instruments of transfer or assignment or undated stock powers
executed in blank, all in form and substance reasonably satisfactory to the Collateral Agent. If
any Pledged Interests consists of uncertificated securities, unless the immediately following
sentence is applicable thereto, the Grantor shall cause the Collateral Agent (or its designated
custodian or nominee) to become the registered holder thereof, or cause each issuer of such
securities to agree that it will comply with instructions originated by the Collateral Agent with
respect to such securities without further consent by the Grantor. If any Pledged Interests
consists of security entitlements, the Grantor shall transfer such security entitlements to the
Collateral Agent (or its custodian, nominee or other designee), or cause the applicable securities
intermediary to agree that it will comply with entitlement orders by the Collateral Agent without
further consent by the Grantor.
(i) Within five (5) days of the receipt by the Grantor of any Additional Collateral, a Pledge
Amendment, duly executed by the Grantor, in substantially the form of Exhibit A hereto (a
Pledge Amendment
), shall be delivered to the Collateral Agent, in respect of the
Additional Collateral that must be pledged pursuant to this Agreement and the Financing Agreement.
The Pledge Amendment shall from and after delivery thereof constitute part of Schedules VII and
VIII hereto. The Grantor hereby authorizes the Collateral Agent to attach each Pledge Amendment to
this Agreement and agrees that all promissory notes, certificates or Instruments listed on any
Pledge Amendment delivered to the Collateral Agent shall for all purposes hereunder constitute
Pledged Interests and the Grantor shall be deemed upon delivery thereof to have made the
representations and warranties set forth in Section 5 hereof with respect to such Additional
Collateral.
(b) If the Grantor shall receive, by virtue of the Grantors being or having been an owner of
any Pledged Interests, any (i) stock certificate (including, without limitation, any certificate
representing a stock dividend or distribution in connection with any increase or reduction of
capital, reclassification, merger, consolidation, sale of assets, combination of shares, stock
split, spin-off or split-off), promissory note or other Instrument, (ii) option or right, whether
as an addition to, substitution for, or in exchange for, any Pledged Interests, or otherwise, (iii)
dividends payable in cash (except such dividends permitted to be retained by the Grantor pursuant
to Section 7 hereof) or in securities or other property or (iv) dividends, distributions, cash,
Instruments, Investment Property and other property in connection with a partial or total
liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in
surplus, the Grantor shall receive such stock certificate, promissory note, Instrument, option,
right, payment or distribution in trust for the benefit of the Collateral Agent, shall segregate it
from the Grantors other property and shall deliver it forthwith to the Collateral Agent, in the
exact form received, with any necessary indorsement and/or appropriate stock powers duly executed
in blank, to be held by the Collateral Agent as Pledged Interests and as further collateral
security for the Secured Obligations.
-6-
SECTION 5.
Representations and Warranties
. The Grantor represents and warrants as
follows:
(a) Schedule I hereto sets forth (i) the exact legal name of the Grantor, (ii) the state or
jurisdiction of organization of the Grantor, (iii) the type of organization of the
Grantor and (iv) the organizational identification number of the Grantor or states that no
such organizational identification number exists.
(b) This Agreement is, and each other Loan Document to which the Grantor is or will be a
party, when executed and delivered, will be, a legal, valid and binding obligation of the Grantor,
enforceable against the Grantor in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws and principles
of equity.
(c) There is no pending or, to the knowledge of the Grantor, threatened action, suit,
proceeding or claim before any court or other Governmental Authority or any arbitrator, or any
order, judgment or award by any court or other Governmental Authority or any arbitrator, that, if
adversely determined, may adversely affect the grant by the Grantor, or the perfection, of the
security interest purported to be created hereby in the Collateral, or the exercise by the
Collateral Agent of any of its rights or remedies hereunder.
(d) All Collateral now existing are, and all Collateral hereafter existing will be, located at
the addresses specified therefor in Schedule III hereto. The Grantors chief place of business and
chief executive office, the place where the Grantor keeps its Records concerning Accounts,
Insurance Premium Loans and all originals of all Chattel Paper are located at the addresses
specified therefor in Schedule III hereto (as amended, supplemented or otherwise modified from time
to time in accordance with the terms hereof). None of the Accounts is evidenced by Promissory
Notes or other Instruments. Set forth in Schedule IV hereto is a complete and accurate list, as of
the date of this Agreement, of each Deposit Account, Securities Account and Commodities Account of
the Grantor, together with the name and address of each institution at which each such Account is
maintained, the account number for each such Account and a description of the purpose of each such
Account. Set forth in Schedule II hereto is (i) a complete and correct list of each trade name
used by the Grantor and (ii) the name of, and each trade name used by, each Person from which the
Grantor has acquired any substantial part of the Collateral within five years of the date hereof.
(e) (i) The Grantor owns and controls, or otherwise possesses adequate rights to use, all
Intellectual Property necessary to conduct their business in substantially the same manner as
conducted as of the date hereof. Schedule II hereto sets forth a true and complete list of all
issued, registered, renewed, applied-for or otherwise material Intellectual Property owned or used
by the Grantor as of the date hereof. All such Intellectual Property is valid, subsisting and
enforceable, and none of such Intellectual Property has been abandoned in whole or in part and is
not subject to any outstanding order, judgment or decree restricting its use in any material
respect or adversely affecting the Grantors rights thereto in any material respect. Except as set
forth in Schedule II hereto, no such Intellectual Property is the subject of any licensing or
franchising agreement.
-7-
(ii) Grantor is not violating and Grantor has not received a written notice that it has
violated any Intellectual Property rights. There are no suits, actions, reissues, reexaminations,
public protests, interferences, arbitrations, mediations, oppositions, cancellations, Internet
domain name dispute resolutions or other proceedings (collectively,
Suits
) pending,
decided, to Grantors knowledge, threatened or asserted concerning any claim
or position that the Grantor or any of its indemnitees have violated any Intellectual Property
rights. There are no Suits or claims pending, decided, threatened or asserted concerning the
Intellectual Property owned or controlled by the Grantor, and, to the Grantors knowledge, no valid
basis for any such Suits or claims exists.
(f) The Existing Issuers set forth in Schedule VIII identified as a Subsidiary of the Grantor
are the Grantors only Subsidiaries existing on the date hereof. The Pledged Shares have been duly
authorized and validly issued and are fully paid and nonassessable and the holders thereof are not
entitled to any preemptive, first refusal or other similar rights. Except as noted in Schedule
VIII hereto, the Pledged Shares constitute 100% of the issued shares of Equity Interests of the
Pledged Issuers as of the date hereof. All other shares of Equity Interests constituting Pledged
Interests will be duly authorized and validly issued, fully paid and nonassessable.
(g) The promissory notes currently evidencing the Pledged Debt have been, and all other
promissory notes from time to time evidencing Pledged Debt, when executed and delivered, will have
been, duly authorized, executed and delivered by the respective makers thereof, and all such
promissory notes are or will be, as the case may be, legal, valid and binding obligations of such
makers, enforceable against such makers in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws and
principles of equity.
(h) The Grantor is and will be at all times the sole and exclusive owners of, or otherwise
have and will have adequate rights in, the Collateral free and clear of any Lien except for the
Permitted Liens. No effective financing statement or other instrument similar in effect covering
all or any part of the Collateral is on file in any recording or filing office except such as may
have been filed to perfect or protect any Permitted Lien.
(i) The exercise by the Collateral Agent of any of its rights and remedies hereunder will not
contravene any Requirement of Law or any contractual restriction binding on or otherwise affecting
the Grantor or any of its properties and will not result in, or require the creation of, any Lien
upon or with respect to any of its properties.
(j) No authorization or approval or other action by, and no notice to or filing with, any
Governmental Authority or other regulatory body, or any other Person, is required for (i) the due
execution, delivery and performance by the Grantor of this Agreement, (ii) the grant by the Grantor
of the security interest purported to be created hereby in the Collateral or (iii) the exercise by
the Collateral Agent of any of its rights and remedies hereunder, except, in the case of this
clause (iii), as may be required in connection with any sale of any Pledged Interests by laws
affecting the offering and sale of securities generally. No authorization or approval or other
action by, and no notice to or filing with, any Governmental Authority or any other Person, is
required for the perfection of the security interest purported to
-8-
be created hereby in the
Collateral, except (A) for the filing under the Uniform Commercial Code as in effect in the
applicable jurisdiction of the financing statements described in Schedule V hereto, all of which
financing statements have been duly filed and are in full force and effect, , (B) with respect to
any action that may be necessary to obtain control of Collateral constituting Deposit Accounts,
Electronic Chattel Paper, Investment Property or Letter-of-Credit Rights, the
taking of such actions, and (C the Collateral Agents having possession of all Documents,
Chattel Paper, Instruments and cash constituting Collateral (subclauses (A), (B) and (C), each a
Perfection Requirement
and collectively, the
Perfection Requirements
).
(k) This Agreement creates a legal, valid and enforceable security interest in favor of the
Collateral Agent, for the benefit of the Secured Parties, in the Collateral, as security for the
Secured Obligations. The Perfection Requirements result in the perfection of such security
interests. Such security interests are, or in the case of Collateral in which the Grantor obtains
rights after the date hereof, will be, perfected, first priority security interests, subject in
priority only to the Permitted Liens that, pursuant to the definition of the term Permitted
Liens, are not prohibited from being prior to the Liens in favor of the Collateral Agent, for the
benefit of the Secured Parties, and the recording of such instruments of assignment described
above. Such Perfection Requirements and all other action necessary or desirable to perfect and
protect such security interest have been duly made or taken, except for (i) the Collateral Agents
having possession of all Instruments, Documents, Chattel Paper and cash constituting Collateral
after the date hereof, (ii) the Collateral Agents having control of all Deposit Accounts,
Electronic Chattel Paper, Investment Property or Letter-of-Credit Rights constituting Collateral
after the date hereof, and (iii) the other filings and recordations and actions described in
Section 5(j) hereof.
(l) As of the date hereof, the Grantor does not hold any Commercial Tort Claims or is not
aware of any such pending claims, except for such claims described in Schedule VI.
(m) The Grantor has irrevocably opted into Article 8 of the Uniform Commercial Code
(collectively, the
Certificated Entities
). Such interests are securities for purposes of
Article 8 of any relevant Uniform Commercial Code.
SECTION 6.
Covenants as to the Collateral
. So long as any of the Secured Obligations
(whether or not due) shall remain unpaid or any Lender shall have any Commitment under the
Financing Agreement, unless the Collateral Agent shall otherwise consent in writing:
(a)
Further Assurances
. The Grantor will at its expense, at any time and from time to
time, promptly execute and deliver all further instruments and documents and take all further
action that may be necessary or reasonably desirable or that the Collateral Agent may request in
order (i) to perfect and protect, or maintain the perfection of, the security interest and Lien
purported to be created hereby; (ii) to enable the Collateral Agent to exercise and enforce its
rights and remedies hereunder in respect of the Collateral; or (iii) otherwise to effect the
purposes of this Agreement, including, without limitation: (A) marking conspicuously all Chattel
Paper and Instruments and, at the request of the Collateral Agent, all of its Records pertaining to
the Collateral with a legend, in form and substance reasonably satisfactory to the Collateral
Agent, indicating that such Chattel Paper, Instrument or Collateral is subject to the
-9-
security
interest created hereby, (B) if any Account shall be evidenced by a Promissory Note or other
Instrument or Chattel Paper, delivering and pledging to the Collateral Agent such Promissory Note,
other Instrument or Chattel Paper, duly endorsed and accompanied by executed instruments of
transfer or assignment, all in form and substance satisfactory to the Collateral Agent,
(C) executing and filing (to the extent, if any, that the Grantors signature is
required thereon) or authenticating the filing of, such financing or continuation statements,
or amendments thereto, (D) with respect to Intellectual Property hereafter existing and not covered
by an appropriate security interest grant, the executing and recording in the United States Patent
and Trademark Office or the United States Copyright Office, as applicable, appropriate instruments
granting a security interest, as may be necessary or desirable or that the Collateral Agent may
request in order to perfect and preserve the security interest purported to be created hereby, (E)
delivering to the Collateral Agent irrevocable proxies in respect of the Pledged Interests,
(F) furnishing to the Collateral Agent from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection with the Collateral
as the Collateral Agent may reasonably request, all in reasonable detail, (G) if any Collateral
shall be in the possession of a third party, notifying such Person of the Collateral Agents
security interest created hereby and obtaining a written agreement, in form and substance
reasonably satisfactory to the Collateral Agent, providing access to such Collateral in order to
remove such Collateral from such premises during an Event of Default and acknowledging that such
Person holds possession of the Collateral for the benefit of the Collateral Agent
,
(H) if at any
time after the date hereof, the Grantor acquires or holds any Commercial Tort Claim, immediately
notifying the Collateral Agent in a writing signed by the Grantor setting forth a brief description
of such Commercial Tort Claim and granting to the Collateral Agent a security interest therein and
in the proceeds thereof, which writing shall incorporate the provisions hereof and shall be in form
and substance reasonably satisfactory to the Collateral Agent, and (I) taking all actions required
by law in any relevant Uniform Commercial Code jurisdiction, or by other law as applicable in any
foreign jurisdiction. No Grantor shall take or fail to take any action which would in any manner
impair the validity or enforceability of the Collateral Agents security interest in and Lien on
any Collateral.
(b)
Taxes, Etc.
The Grantor agrees to pay promptly when due all property and other
taxes, assessments and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Collateral, except to the extent otherwise
provided in the Financing Agreement.
(c)
Insurance
. The Grantor will, at its own expense, maintain insurance with respect
to the Collateral in accordance with the terms of the Financing Agreement. The Grantor will, if so
requested by the Collateral Agent, deliver to the Collateral Agent original or duplicate insurance
policies and, as often as the Collateral Agent may reasonably request, a report of a reputable
insurance broker with respect to such insurance. The Grantor will also, at the request of the
Collateral Agent, execute and deliver instruments of assignment of such insurance policies and
cause the respective insurers to acknowledge notice of such assignment.
(d)
Provisions Concerning the Insurance Premium Loans
. The Grantor will, except as
otherwise provided in this subsection (d), continue to collect, at its own expense, all amounts due
or to become due under the Insurance Premium Loans. In connection
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with such collections, the
Grantor may (and, at the Collateral Agents direction, will) take such action as the Grantor (or,
if applicable, the Collateral Agent) may reasonably deem necessary or advisable to enforce
collection or performance of the Insurance Premium Loans;
provided
,
however
, that
the Collateral Agent shall have the right at any time, upon the occurrence and during the
continuance of an Event of Default, to notify the Premium Finance Borrower or
obligors under any Insurance Premium Loans of the assignment of such Insurance Premium Loans
to the Collateral Agent and to direct such Premium Finance Borrower or obligors to make payment of
all amounts due or to become due to the Grantor thereunder directly to the Collateral Agent or its
designated agent and, upon such notification and at the expense of the Grantor and to the extent
permitted by law, to enforce collection of any such Insurance Premium Loans and to adjust, settle
or compromise the amount or payment thereof, in the same manner and to the same extent as the
Grantor might have done. After receipt by the Grantor of a notice from the Collateral Agent that
the Collateral Agent has notified, intends to notify, or has enforced or intends to enforce the
Grantors rights against the Premium Finance Borrower or obligors under any Premium Finance
Borrower as referred to in the proviso to the immediately preceding sentence, (A) all amounts and
proceeds (including Instruments) received by the Grantor in respect of the Premium Finance Loans
shall be received in trust for the benefit of the Collateral Agent hereunder, shall be segregated
from other funds of the Grantor and shall be forthwith paid over to the Collateral Agent or its
designated agent in the same form as so received (with any necessary endorsement) to be held as
cash collateral and either (x) credited to the Loan Account so long as no Event of Default shall
have occurred and be continuing or (y) if any Event of Default shall have occurred and be
continuing, applied as specified in Section 9(d) hereof, and (B) the Grantor will not adjust,
settle or compromise the amount or payment of any Insurance Premium Loan or release wholly or
partly any Premium Finance Borrower or obligor thereof or allow any credit or discount thereon.
The Collateral Agent may (in its sole and absolute discretion) direct any or all of the banks and
financial institutions with which the Grantor either maintains a Deposit Account or a lockbox or
deposits the proceeds of any Insurance Premium Loan to send immediately to the Collateral Agent or
its designated agent by wire transfer (to such account as the Collateral Agent shall specify, or in
such other manner as the Collateral Agent shall direct) all or a portion of such securities, cash,
investments and other items held by such institution. Any such securities, cash, investments and
other items so received by the Collateral Agent or its designated agent shall (in the sole and
absolute discretion of the Collateral Agent) be held as additional Collateral for the Secured
Obligations or distributed in accordance with Section 9 hereof.
(e)
Provisions Concerning the Pledged Interests
. The Grantor will
(i) at the Grantors expense, promptly deliver to the Collateral Agent a copy of each notice
or other communication received by it in respect of the Pledged Interests;
(ii) at the Grantors expense, defend the Collateral Agents right, title and security
interest in and to the Pledged Interests against the claims of any Person;
(iii) not make or consent to any amendment or other modification or waiver with respect to any
Pledged Interests or enter into any agreement or permit to exist any restriction with respect to
any Pledged Interests other than pursuant to the
-11-
Loan Documents; and
(iv) not permit the issuance of (A) any additional shares of any class of Equity Interests of
any Pledged Issuer, (B) any securities convertible voluntarily by the holder thereof or
automatically upon the occurrence or non-occurrence of any event or condition
into, or exchangeable for, any such shares of Equity Interests or (C) any warrants, options,
contracts or other commitments entitling any Person to purchase or otherwise acquire any such
shares of Equity Interests.
(f)
Transfers and Other Liens
.
(i) Except to the extent expressly permitted by Section 7.02(c) of the Financing Agreement,
the Grantor will not sell, assign (by operation of law or otherwise), lease, license, exchange or
otherwise transfer or dispose of any of the Collateral.
(ii) Except to the extent expressly permitted by Section 7.02(a) of the Financing Agreement,
the Grantor will not create, suffer to exist or grant any Lien upon or with respect to any
Collateral.
(g)
Intellectual Property
.
(i) The Grantor (either itself or through its licensees or its sublicensees) will, for each
Trademark used in the conduct of the Grantors business, (i) maintain such Trademark in full force
free from any claim of abandonment or invalidity for non-use, (ii) maintain the quality of products
and services offered under such Trademark, (iii) display such Trademark with notice of U.S. or
non-U.S. registration to the extent necessary to establish and preserve its rights under applicable
law, and (iv) not knowingly use or knowingly permit the use of such Trademark in violation of any
third party rights.
(ii) The Grantor shall notify the Collateral Agent promptly if it knows or has reason to know
that any Intellectual Property material to the conduct of its business may become abandoned, lost
or dedicated to the public, or of any final materially adverse determination (including the
institution of, or any such determination in, any proceeding in the United States Patent and
Trademark Office, United States Copyright Office or any court or similar office of any country)
regarding the Grantors ownership of any Intellectual Property, its right to register the same, or
its right to keep and maintain the same.
(iii) In the event that the Grantor (i) files an application or registration for any
Intellectual Property with the United States Patent and Trademark Office, United States Copyright
Office or any office or agency in any political subdivision of the United States or in any other
country or any political subdivision thereof, either itself or through any agent, employee,
licensee or designee or (ii) obtains rights to or develop any new Intellectual Property or any
reissue, division, continuation, renewal, extension or continuation-in-part of any existing
Intellectual Property, whether pursuant to any license or otherwise; the provisions of Section 2
hereof shall automatically apply thereto and the Grantor shall give to the Collateral Agent prompt
notice thereof, and, upon request of the Collateral Agent, execute and deliver any and all
agreements, instruments, documents and papers as the Collateral Agent may reasonably request to
evidence the Collateral Agents security interest in such Intellectual Property, and
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Grantor hereby appoints the Collateral Agent as its attorney-in-fact to execute and file such
writings for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed;
such power, being coupled with an interest, is irrevocable.
(iv) The Grantor will take all necessary steps that are consistent with the practice in any
proceeding before the United States Patent and Trademark Office, United States Copyright Office or
any office or agency in any political subdivision of the United States or in any other country or
any political subdivision thereof, to maintain and pursue each application relating to the
Intellectual Property of the Grantor (and to obtain the relevant grant or registration) and to
maintain each issued Patent and each registration of the Trademarks and Copyrights that is used in
the conduct of the Grantors business as conducted or proposed to be conducted, including timely
filings of applications for renewal, affidavits of use, affidavits of incontestability and payment
of maintenance fees, and, if consistent with good business judgment, to initiate opposition,
interference and cancellation proceedings against third parties.
(v) In the event that the Grantor has reason to believe that any Collateral consisting of
Intellectual Property used in the conduct of the Grantors business has been infringed,
misappropriated or diluted by a third party, the Grantor shall if consistent with good business
judgment, promptly sue for infringement, misappropriation or dilution and to recover any and all
damages for such infringement, misappropriation or dilution, and take such other actions as are
appropriate under the circumstances to protect such Collateral and promptly shall notify the
Collateral Agent of the initiation of such suit.
(vi) Upon and during the continuance of an Event of Default, (i) the Grantor shall not abandon
or otherwise permit any Intellectual Property to become invalid and (ii) the Grantor shall use
commercially reasonable efforts to obtain all requisite consents or approvals by the licensor of
each License that constitutes Collateral owned by the Grantor to effect the assignment of all the
Grantors right, title and interest thereunder to the Collateral Agent or its designee.
(vii) The Grantor shall execute, authenticate and deliver any and all assignments, agreements,
instruments, documents and papers as the Collateral Agent may reasonably request to evidence the
Collateral Agents security interest hereunder in such Intellectual Property and the General
Intangibles of the Grantor relating thereto or represented thereby, the Grantor hereby appoints the
Collateral Agent as its attorney-in-fact to execute and file such writings for the foregoing
purposes, all acts of such attorney being hereby ratified and confirmed; such power, being coupled
with an interest, is irrevocable.
(h)
Deposit, Commodities and Securities Accounts
. On or prior to the date hereof, the
Grantor shall cause each bank and other financial institution with an account referred to in
Schedule IV hereto to execute and deliver to the Collateral Agent (or its designee) a control
agreement, in form and substance satisfactory to the Collateral Agent, duly executed by the Grantor
and such bank or financial institution, or enter into other arrangements in form and substance
satisfactory to the Collateral Agent, pursuant to which such institution shall irrevocably agree,
among other things, that (i) it will comply at any time with the instructions originated by the
Collateral Agent (or its designee) to such bank or financial institution directing the disposition
of cash, Commodity Contracts, securities, Investment Property and other items
-13-
from time to time credited to such account, without further consent of the Grantor, (ii) all
cash, Commodity Contracts, securities, Investment Property and other items of the Grantor deposited
with such institution shall be subject to a perfected, first priority security interest in favor of
the Collateral Agent (or its designee), (iii) any right of set off, bankers Lien or other similar
Lien, security interest or encumbrance shall be fully waived as against the Collateral Agent (or
its designee) and (iv) upon receipt of written notice from the Collateral Agent during the
continuance of an Event of Default, such bank or financial institution shall immediately send to
the Collateral Agent (or its designee) by wire transfer (to such account as the Collateral Agent
(or its designee) shall specify, or in such other manner as the Collateral Agent shall direct) all
such cash, the value of any Commodity Contracts, securities, Investment Property and other items
held by it. Without the prior written consent of the Collateral Agent, the Grantor shall not make
or maintain any Deposit Account, Commodity Account or Securities Account except for the accounts
set forth in Schedule IV hereto. The provisions of this Section 6(h) shall not apply to Deposit
Accounts for which the Collateral Agent is the depositary.
(i)
Control
. The Grantor hereby agrees to take any or all action that may be
necessary or desirable or that the Collateral Agent may request in order for the Collateral Agent
to obtain control in accordance with Sections 9-104, 9-105, 9-106, and 9-107 of the Code with
respect to the following Collateral: (i) Deposit Accounts, (ii) Electronic Chattel Paper and (iii)
Investment Property. The Grantor hereby acknowledges and agrees that any agent or designee of the
Collateral Agent shall be deemed to be a secured party with respect to the Collateral under the
control of such agent or designee for all purposes.
(j)
Records; Inspection and Reporting
.
(i) The Grantor shall keep reasonably adequate records concerning the Accounts, Insurance
Premium Loans, Chattel Paper and Pledged Interests. The Grantor shall permit any Agent or any
agents or representatives thereof or such professionals or other Persons as any Agent may designate
(A) unless an Event of Default has occurred and is continuing, upon reasonable prior notice and
during normal business hours, to examine and make copies of and abstracts from the Grantors books
and records, (B) unless an Event of Default has occurred and is continuing, upon reasonable prior
notice and during normal business hours, to visit and inspect its properties, (C) to verify
materials, leases, notes, Accounts, Insurance Premium Loans and other assets of the Grantor from
time to time, (D) to conduct audits, physical counts, appraisals and/or valuations or examinations
at the locations of the Grantor and (E) to discuss the Grantors affairs, finances and accounts
with any of its directors, officers, managerial employees, independent accountants or any of its
other representatives, in each case as provided in the Financing Agreement.
(ii) Except as otherwise expressly permitted by Section 7.02(m) of the Financing Agreement,
the Grantor shall not, without the prior written consent of the Collateral Agent, change (A) its
name, identity or organizational structure, (B) its jurisdiction of incorporation or organization
as set forth in Schedule I hereto or (C) its chief executive office as set forth in Schedule III
hereto. The Grantor shall immediately notify the Collateral Agent upon obtaining an organizational
identification number, if on the date hereof the Grantor did not have such identification number.
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(k)
Partnership and Limited Liability Company Interest
. Each interest in any limited
liability company or partnership controlled by the Grantor and pledged hereunder shall be (i)
represented by a certificate, (ii) deemed a security within the meaning of Article 8 of the UCC
and (iii) shall be governed by Article 8 of the UCC.
SECTION 7.
Voting Rights, Dividends, Etc. in Respect of the Pledged Interests
.
(a) So long as no Event of Default shall have occurred and be continuing:
(i) the Grantor may exercise any and all voting and other consensual rights pertaining to any
Pledged Interests for any purpose not inconsistent with the terms of this Agreement, the Financing
Agreement or the other Loan Documents;
provided
,
however
, that (A) the Grantor will
give the Collateral Agent at least five (5) Business Days written notice of the manner in which it
intends to exercise, or the reasons for refraining from exercising, any such right that could
reasonably be expected to adversely affect in any material respect the value, liquidity or
marketability of any Collateral or the creation, perfection and priority of the Collateral Agents
Lien; and (B) the Grantor will not exercise or refrain from exercising any such right, as the case
may be, if the Collateral Agent gives the Grantor written notice that, in the Collateral Agents
reasonable business judgment, such action (or inaction) could reasonably be expected to adversely
affect in any material respect the value, liquidity or marketability of any Collateral or the
creation, perfection and priority of the Collateral Agents Lien; and
(ii) the Grantor may receive and retain any and all dividends, interest or other distributions
paid in respect of the Pledged Interests to the extent permitted by the Financing Agreement;
provided
,
however
, that any and all (A) dividends and interest paid or payable
other than in cash in respect of, and Instruments and other property received, receivable or
otherwise distributed in respect of or in exchange for, any Pledged Interests, (B) dividends and
other distributions paid or payable in cash in respect of any Pledged Interests in connection with
a partial or total liquidation or dissolution or in connection with a reduction of capital, capital
surplus or paid-in surplus, and (C) cash paid, payable or otherwise distributed in redemption of,
or in exchange for, any Pledged Interests, together with any dividend, interest or other
distribution or payment which at the time of such payment was not permitted by the Financing
Agreement, shall be, and shall forthwith be delivered to the Collateral Agent, to hold as, Pledged
Interests and shall, if received by the Grantor, be received in trust for the benefit of the
Collateral Agent, shall be segregated from the other property or funds of the Grantor, and shall be
forthwith delivered to the Collateral Agent in the exact form received with any necessary
indorsement and/or appropriate stock powers duly executed in blank, to be held by the Collateral
Agent as Pledged Interests and as further collateral security for the Secured Obligations; and
(iii) the Collateral Agent will execute and deliver (or cause to be executed and delivered) to
the Grantor all such proxies and other instruments as the Grantor may reasonably request for the
purpose of enabling the Grantor to exercise the voting and other rights which it is entitled to
exercise pursuant to Section 7(a)(i) hereof and to receive the dividends, interest and/or other
distributions which it is authorized to receive and retain pursuant to Section 7(a)(ii) hereof.
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(b) Upon the occurrence and during the continuance of an Event of Default:
(i) all rights of the Grantor to exercise the voting and other consensual rights which it
would otherwise be entitled to exercise pursuant to Section 7(a)(i) hereof, and to receive the
dividends, distributions, interest and other payments that it would otherwise be authorized to
receive and retain pursuant to Section 7(a)(ii) hereof, shall cease, and all such rights shall
thereupon become vested in the Collateral Agent, which shall thereupon have the sole right to
exercise such voting and other consensual rights and to receive and hold as Pledged Interests such
dividends, distributions and interest payments;
(ii) the Collateral Agent is authorized to notify each debtor with respect to the Pledged Debt
to make payment directly to the Collateral Agent (or its designee) and may collect any and all
moneys due or to become due to the Grantor in respect of the Pledged Debt, and the Grantor hereby
authorizes each such debtor to make such payment directly to the Collateral Agent (or its designee)
without any duty of inquiry;
(iii) without limiting the generality of the foregoing, the Collateral Agent may at its option
exercise any and all rights of conversion, exchange, subscription or any other rights, privileges
or options pertaining to any of the Pledged Interests as if it were the absolute owner thereof,
including, without limitation, the right to exchange, in its discretion, any and all of the Pledged
Interests upon the merger, consolidation, reorganization, recapitalization or other adjustment of
any Pledged Issuer, or upon the exercise by any Pledged Issuer of any right, privilege or option
pertaining to any Pledged Interests, and, in connection therewith, to deposit and deliver any and
all of the Pledged Interests with any committee, depository, transfer agent, registrar or other
designated agent upon such terms and conditions as it may reasonably determine; and
(iv) all dividends, distributions, interest and other payments that are received by the
Grantor contrary to the provisions of Section 7(b)(i) hereof shall be received in trust for the
benefit of the Collateral Agent, shall be segregated from other funds of the Grantor, and shall be
forthwith paid over to the Collateral Agent as Pledged Interests in the exact form received with
any necessary indorsement and/or appropriate stock powers duly executed in blank, to be held by the
Collateral Agent as Pledged Interests and as further collateral security for the Secured
Obligations.
SECTION 8.
Additional Provisions Concerning the Collateral
.
(a) To the maximum extent permitted by applicable law, and for the purpose of taking any
action that the Collateral Agent may deem necessary or advisable to accomplish the purposes of this
Agreement, the Grantor hereby (i) authorizes the Collateral Agent to execute any such agreements,
instruments or other documents in the Grantors name and to file such agreements, instruments or
other documents in the Grantors name and in any appropriate filing office, (ii) authorizes the
Collateral Agent at any time and from time to time to file, one or more financing or continuation
statements and amendments thereto, relating to the Collateral (including, without limitation, any
such financing statements that (A) describe the Collateral as all assets or all personal
property (or words of similar effect) or that describe or
-16-
identify the Collateral by type or in any other manner as the Collateral Agent may determine,
regardless of whether any particular asset of the Grantor falls within the scope of Article 9 of
the Uniform Commercial Code or whether any particular asset of the Grantor constitutes part of the
Collateral, and (B) contain any other information required by Part 5 of Article 9 of the Code for
the sufficiency or filing office acceptance of any financing statement, continuation statement or
amendment, including, without limitation, whether the Grantor is an organization, the type of
organization and any organizational identification number issued to the Grantor) and (iii) ratifies
such authorization to the extent that the Collateral Agent has filed any such financing statements,
continuation statements, or amendments thereto, prior to the date hereof. A photocopy or other
reproduction of this Agreement or any financing statement covering the Collateral or any part
thereof shall be sufficient as a financing statement where permitted by law.
(b) The Grantor hereby irrevocably appoints the Collateral Agent as its attorney-in-fact and
proxy, with full authority in the place and stead of the Grantor and in the name of the Grantor or
otherwise, from time to time in the Collateral Agents discretion after the occurrence and during
the continuance of an Event of Default, to take any action and to execute any instrument that the
Collateral Agent may deem necessary or advisable to accomplish the purposes of this Agreement
(subject to the rights of the Grantor under Section 6 hereof and Section 7(a) hereof), including,
without limitation, (i) to obtain and adjust insurance required to be paid to the Collateral Agent
pursuant to the Financing Agreement, (ii) to ask, demand, collect, sue for, recover, compound,
receive and give acquittance and receipts for moneys due and to become due under or in respect of
any Collateral, (iii) to receive, endorse, and collect any drafts or other Instruments, Documents
and Chattel Paper in connection with clause (i) or (ii) above, (iv) to receive, indorse and collect
all Instruments made payable to the Grantor representing any dividend, interest payment or other
distribution in respect of any Pledged Interests and to give full discharge for the same, (v) to
file any claims or take any action or institute any proceedings which the Collateral Agent may deem
necessary or desirable for the collection of any Collateral or otherwise to enforce the rights of
the Collateral Agent and the Lenders with respect to any Collateral, (vi) to execute assignments,
licenses and other documents to enforce the rights of the Collateral Agent and the Lenders with
respect to any Collateral, (vii) to pay or discharge taxes or Liens levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the amounts necessary to
discharge the same to be determined by the Collateral Agent in its sole discretion, and such
payments made by the Collateral Agent to become Obligations of the Grantor to the Collateral Agent,
due and payable immediately without demand, and (viii) to sign and endorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts, assignments, verifications and
notices in connection with Accounts, Chattel Paper and other documents relating to the Collateral.
This power is coupled with an interest and is irrevocable until the date on which all of the
Secured Obligations have been indefeasibly paid in full in cash after the termination of each
Lenders Commitment and each of the Loan Documents.
(c) For the purpose of enabling the Collateral Agent to exercise rights and remedies
hereunder, at such time as the Collateral Agent shall be lawfully entitled to exercise such rights
and remedies, and for no other purpose, the Grantor hereby (i) grants to the Collateral Agent an
irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to
the Grantor) to use, assign, license or sublicense any Intellectual Property now or hereafter owned
by the Grantor, wherever the same may be located, including in such license reasonable access to
all media in which any of the licensed items may be recorded
-17-
or stored and to all computer programs used for the compilation or printout thereof; and (ii)
assigns to the Collateral Agent, to the extent assignable, all of its rights to any Intellectual
Property now or hereafter licensed or used by the Grantor. Notwithstanding anything contained
herein to the contrary, but subject to the provisions of the Financing Agreement that limit the
right of the Grantor to dispose of its property and Section 6(g) hereof, so long as no Event of
Default shall have occurred and be continuing, the Grantor may exploit, use, enjoy, protect,
license, sublicense, assign, sell, dispose of or take other actions with respect to the
Intellectual Property in the ordinary course of its business. In furtherance of the foregoing,
unless an Event of Default shall have occurred and be continuing, the Collateral Agent shall from
time to time, upon the request of the Grantor, execute and deliver any instruments, certificates or
other documents, in the form so requested, which the Grantor shall have certified are appropriate
(in the Grantors judgment) to allow it to take any action permitted above (including
relinquishment of the license provided pursuant to this clause (c) as to any Intellectual
Property). Further, upon the date on which all of the Secured Obligations have been indefeasibly
paid in full in cash after the termination of each Lenders Commitment and each of the Loan
Documents, the Collateral Agent (subject to Section 13(e) hereof) shall release and reassign to the
Grantor all of the Collateral Agents right, title and interest in and to the Intellectual
Property, all without recourse, representation or warranty whatsoever and at the Grantors sole
expense. The exercise of rights and remedies hereunder by the Collateral Agent shall not terminate
the rights of the holders of any licenses or sublicenses theretofore granted by the Grantor in
accordance with the second sentence of this clause (c). The Grantor hereby releases the Collateral
Agent from any claims, causes of action and demands at any time arising out of or with respect to
any actions taken or omitted to be taken by the Collateral Agent under the powers of attorney
granted herein other than actions taken or omitted to be taken through the Collateral Agents gross
negligence or willful misconduct, as determined by a final determination of a court of competent
jurisdiction.
(d) If the Grantor fails to perform any agreement or obligation contained herein, the
Collateral Agent may itself perform, or cause performance of, such agreement or obligation, in the
name of the Grantor or the Collateral Agent, and the expenses of the Collateral Agent incurred in
connection therewith shall be payable by the Grantor pursuant to Section 10 hereof and shall be
secured by the Collateral.
(e) The powers conferred on the Collateral Agent hereunder are solely to protect its interest
in the Collateral and shall not impose any duty upon it to exercise any such powers. Other than
the exercise of reasonable care to assure the safe custody of any Collateral in its possession and
the accounting for moneys actually received by it hereunder, the Collateral Agent shall have no
duty as to any Collateral or as to the taking of any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral and shall be relieved of all
responsibility for any Collateral in its possession upon surrendering it or tendering surrender of
it to the Grantor (or whomsoever shall be lawfully entitled to receive the same or as a court of
competent jurisdiction shall direct). The Collateral Agent shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral in its possession if such
Collateral is accorded treatment substantially equal to that which the Collateral Agent accords its
own property, it being understood that the Collateral Agent shall not have responsibility for
ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or
other matters relating to any Collateral, whether or not the Collateral Agent has or is deemed to
have knowledge of such matters. The Collateral Agent shall not be liable or
-18-
responsible for any loss or damage to any of the Collateral, or for any diminution in the
value thereof, by reason of the act or omission of any warehouseman, carrier, forwarding agency,
consignee or other agent or bailee selected by the Collateral Agent in good faith.
(f) The Collateral Agent may at any time in its discretion (i) without notice to the Grantor,
transfer or register in the name of the Collateral Agent or any of its nominees any or all of the
Pledged Interests, subject only to the revocable rights of the Grantor under Section 7(a) hereof,
and (ii) exchange certificates or Instruments constituting Pledged Interests for certificates or
Instruments of smaller or larger denominations.
SECTION 9.
Remedies Upon Default
. If any Event of Default shall have occurred and be
continuing:
(a) The Collateral Agent may exercise in respect of the Collateral, in addition to any other
rights and remedies provided for herein or otherwise available to it, all of the rights and
remedies of a secured party upon default under the Code (whether or not the Code applies to the
affected Collateral), and also may (i) take absolute control of the Collateral, including, without
limitation, transfer into the Collateral Agents name or into the name of its nominee or nominees
(to the extent the Collateral Agent has not theretofore done so) and thereafter receive, for the
benefit of the Collateral Agent and the Lenders, all payments made thereon, give all consents,
waivers and ratifications in respect thereof and otherwise act with respect thereto as though it
were the outright owner thereof, (ii) require the Grantor to, and the Grantor hereby agrees that it
will at its expense and upon request of the Collateral Agent forthwith, assemble all or part of the
Collateral as directed by the Collateral Agent and make it available to the Collateral Agent at a
place or places to be designated by the Collateral Agent that is reasonably convenient to both
parties, and the Collateral Agent may enter into and occupy any premises owned or leased by the
Grantor where the Collateral or any part thereof is located or assembled for a reasonable period in
order to effectuate the Collateral Agents rights and remedies hereunder or under law, without
obligation to the Grantor in respect of such occupation, and (iii) without notice except as
specified below and without any obligation to prepare or process the Collateral for sale, (A) sell
the Collateral or any part thereof in one or more parcels at public or private sale, at any of the
Collateral Agents offices, at any exchange or brokers board or elsewhere, for cash, on credit or
for future delivery, and at such price or prices and upon such other terms as the Collateral Agent
may deem commercially reasonable and/or (B) lease, license or otherwise dispose of the Collateral
or any part thereof upon such terms as the Collateral Agent may deem commercially reasonable. The
Grantor agrees that, to the extent notice of sale or any other disposition of the Collateral shall
be required by law, at least five (5) Business Days prior written notice to the Grantor of the
time and place of any public sale or the time after which any private sale or other disposition of
the Collateral is to be made shall constitute reasonable notification. The Collateral Agent shall
not be obligated to make any sale or other disposition of Collateral regardless of notice of sale
having been given. The Collateral Agent may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned. The Grantor hereby waives any claims
against the Collateral Agent and the Lenders arising by reason of the fact that the price at which
the Collateral may have been sold at a private sale was less than the price which might have been
obtained at a public sale or was less than the aggregate amount of the Secured Obligations, even if
the Collateral Agent
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accepts the first offer received and does not offer the Collateral to more than one offeree,
and waives all rights that the Grantor may have to require that all or any part of the Collateral
be marshaled upon any sale (public or private) thereof. The Grantor hereby acknowledges that (i)
any such sale of the Collateral by the Collateral Agent shall be made without warranty, (ii) the
Collateral Agent may specifically disclaim any warranties of title, possession, quiet enjoyment or
the like, (iii) the Collateral Agent may bid (which bid may be, in whole or in part, in the form of
cancellation of indebtedness), if permitted by law, for the purchase, lease, license or other
disposition of the Collateral or any portion thereof for the account of the Collateral Agent (on
behalf of itself and the Lenders) and (iv) such actions set forth in clauses (i), (ii) and (iii)
above shall not adversely affect the commercial reasonableness of any such sale of the Collateral.
In addition to the foregoing, (i) upon written notice to the Grantor from the Collateral Agent, the
Grantor shall cease any use of the Intellectual Property or any trademark, patent or copyright
similar thereto for any purpose described in such notice; (ii) the Collateral Agent may, at any
time and from time to time, upon five (5) Business Days prior written notice to the Grantor,
license, whether general, special or otherwise, and whether on an exclusive or non-exclusive basis,
any of the Intellectual Property, throughout the universe for such term or terms, on such
conditions, and in such manner, as the Collateral Agent shall in its sole discretion determine; and
(iii) the Collateral Agent may, at any time, pursuant to the authority granted in Section 8 hereof
(such authority being effective upon the occurrence and during the continuance of an Event of
Default), execute and deliver on behalf of the Grantor, one or more instruments of assignment of
the Intellectual Property (or any application or registration thereof), in form suitable for
filing, recording or registration in any country.
(b) In the event that the Collateral Agent determines to exercise its right to sell all or any
part of the Pledged Interests pursuant to Section 9(a) hereof, the Grantor will, at the Grantors
expense and upon request by the Collateral Agent: (i) execute and deliver, and cause each issuer
of such Pledged Interests and the directors and officers thereof to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts and things, as may be
necessary or, in the reasonable opinion of the Collateral Agent, advisable to register such Pledged
Interests under the provisions of the Securities Act, and to cause the registration statement
relating thereto to become effective and to remain effective for such period as prospectuses are
required by law to be furnished, and to make all amendments and supplements thereto and to the
related prospectus which, in the reasonable opinion of the Collateral Agent, are necessary or
advisable, all in conformity with the requirements of the Securities Act and the rules and
regulations of the SEC applicable thereto, (ii) cause each issuer of such Pledged Interests to
qualify such Pledged Interests under the state securities or Blue Sky laws of each jurisdiction,
and to obtain all necessary governmental approvals for the sale of the Pledged Interests, as
requested by the Collateral Agent, (iii) cause each Pledged Issuer to make available to its
securityholders, as soon as practicable, an earnings statement which will satisfy the provisions of
Section 11(a) of the Securities Act, and (iv) do or cause to be done all such other acts and things
as may be necessary to make such sale of such Pledged Interests valid and binding and in compliance
with applicable law. The Grantor acknowledges the impossibility of ascertaining the amount of
damages which would be suffered by the Collateral Agent by reason of the failure by the Grantor to
perform any of the covenants contained in this Section 9(b) and, consequently, agrees that, if the
Grantor fails to perform any of such covenants, it shall pay, as liquidated damages and not as a
penalty, an amount equal to the value of the Pledged Interests on the date the Collateral Agent
demands compliance with this Section 9(b);
provided
,
-20-
however
, that the payment of such amount shall not release the Grantor from any of its
obligations under any of the other Loan Documents.
(c) Notwithstanding the provisions of Section 9(b) hereof, the Grantor recognizes that the
Collateral Agent may deem it impracticable to effect a public sale of all or any part of the
Pledged Shares or any other securities constituting Pledged Interests and that the Collateral Agent
may, therefore, determine to make one or more private sales of any such securities to a restricted
group of purchasers who will be obligated to agree, among other things, to acquire such securities
for their own account, for investment and not with a view to the distribution or resale thereof.
The Grantor acknowledges that any such private sale may be at prices and on terms less favorable to
the seller than the prices and other terms which might have been obtained at a public sale and,
notwithstanding the foregoing, agrees that such private sales shall be deemed to have been made in
a commercially reasonable manner and that the Collateral Agent shall have no obligation to delay
the sale of any such securities for the period of time necessary to permit the issuer of such
securities to register such securities for public sale under the Securities Act. The Grantor
further acknowledges and agrees that any offer to sell such securities which has been (i) publicly
advertised on a bona fide basis in a newspaper or other publication of general circulation in the
financial community of New York, New York (to the extent that such an offer may be so advertised
without prior registration under the Securities Act) or (ii) made privately in the manner described
above to not less than fifteen
bona
fide
offerees shall be deemed to involve a
public disposition for the purposes of Section 9-610(c) of the Code (or any successor or similar,
applicable statutory provision) as then in effect in the State of New York, notwithstanding that
such sale may not constitute a public offering under the Securities Act, and that the Collateral
Agent may, in such event, bid for the purchase of such securities.
(d) Any cash held by the Collateral Agent (or its agent or designee) as Collateral and all
Cash Proceeds received by the Collateral Agent (or its agent or designee) in respect of any sale of
or collection from, or other realization upon, all or any part of the Collateral may, in the
discretion of the Collateral Agent, be held by the Collateral Agent (or its agent or designee) as
collateral for, and/or then or at any time thereafter applied (after payment of any amounts payable
to the Collateral Agent pursuant to Section 10 hereof) in whole or in part by the Collateral Agent
against, all or any part of the Secured Obligations in such order as the Collateral Agent shall
elect, consistent with the provisions of the Financing Agreement. Any surplus of such cash or Cash
Proceeds held by the Collateral Agent (or its agent or designee) and remaining after the date on
which all of the Secured Obligations have been indefeasibly paid in full in cash after the
termination of each Lenders Commitment and each of the Loan Documents, shall be paid over to
whomsoever shall be lawfully entitled to receive the same or as a court of competent jurisdiction
shall direct.
(e) In the event that the proceeds of any such sale, collection or realization are
insufficient to pay all amounts to which the Collateral Agent and the Lenders are legally entitled,
the Grantor shall be liable for the deficiency, together with interest thereon at the highest rate
specified in any applicable Loan Document for interest on overdue principal thereof or such other
rate as shall be fixed by applicable law, together with the costs of collection and the reasonable
fees, costs, expenses and other client charges of any attorneys employed by the Collateral Agent to
collect such deficiency.
-21-
(f) The Grantor hereby acknowledges that if the Collateral Agent complies with any applicable
requirements of law in connection with a disposition of the Collateral, such compliance will not
adversely affect the commercial reasonableness of any sale or other disposition of the Collateral.
(g) The Collateral Agent shall not be required to marshal any present or future collateral
security (including, but not limited to, this Agreement and the Collateral) for, or other
assurances of payment of, the Secured Obligations or any of them or to resort to such collateral
security or other assurances of payment in any particular order, and all of the Collateral Agents
rights hereunder and in respect of such collateral security and other assurances of payment shall
be cumulative and in addition to all other rights, however existing or arising. To the extent that
the Grantor lawfully may, the Grantor hereby agrees that it will not invoke any law relating to the
marshalling of collateral which might cause delay in or impede the enforcement of the Collateral
Agents rights under this Agreement or under any other instrument creating or evidencing any of the
Secured Obligations or under which any of the Secured Obligations is outstanding or by which any of
the Secured Obligations is secured or payment thereof is otherwise assured, and, to the extent that
it lawfully may, the Grantor hereby irrevocably waives the benefits of all such laws.
SECTION 10.
Indemnity and Expenses
.
(a) The Grantor agrees to defend, protect, indemnify and hold harmless each Agent and each
other Indemnitee from and against any and all claims, losses, damages, liabilities, obligations,
penalties, fees, reasonable costs and expenses (including, without limitation, reasonable
attorneys fees, costs, expenses and disbursements) incurred by such Agent or such Indemnitee to
the extent that they arise out of or otherwise result from or relate to or are in connection with
this Agreement (including, without limitation, enforcement of this Agreement), except claims,
losses or liabilities resulting solely and directly from such Agents or any such Indemnitees
gross negligence or willful misconduct, as determined by a final judgment of a court of competent
jurisdiction.
(b) The Grantor agrees to pay to the Agents upon demand the amount of any and all costs and
expenses, including the reasonable fees, costs, expenses and disbursements of counsel for the
Agents and of any experts and agents (including, without limitation, any collateral trustee which
may act as agent of the Agents), which the Agents may incur in connection with (i) the preparation,
negotiation, execution, delivery, recordation, administration, amendment, waiver or other
modification or termination of this Agreement, (ii) the custody, preservation, use or operation of,
or the sale of, collection from, or other realization upon, any Collateral, (iii) the exercise or
enforcement of any of the rights of the Agents hereunder, or (iv) the failure by the Grantor to
perform or observe any of the provisions hereof.
-22-
SECTION 11.
Notices, Etc.
All notices and other communications provided for hereunder
shall be given in accordance with the notice provision of the Financing Agreement.
SECTION 12.
Security Interest Absolute; Joint and Several Obligations
.
(a) All rights of the Secured Parties, all Liens and all obligations of the
Grantor hereunder shall be absolute and unconditional irrespective of (i) any lack of validity
or enforceability of the Financing Agreement or any other Loan Document, (ii) any change in the
time, manner or place of payment of, or in any other term in respect of, all or any of the Secured
Obligations, or any other amendment or waiver of or consent to any departure from the Financing
Agreement or any other Loan Document, (iii) any exchange or release of, or non-perfection of any
Lien on any Collateral, or any release or amendment or waiver of or consent to departure from any
guaranty, for all or any of the Secured Obligations, or (iv) any other circumstance that might
otherwise constitute a defense available to, or a discharge of, the Grantor in respect of the
Secured Obligations. All authorizations and agencies contained herein with respect to any of the
Collateral are irrevocable and powers coupled with an interest.
(b) The Grantor hereby waives (i) promptness and diligence, (ii) notice of acceptance and
notice of the incurrence of any Obligation by any Borrower, (iii) notice of any actions taken by
any Agent, any Lender, any Guarantor or any other Person under any Loan Document or any other
agreement, document or instrument relating thereto, (iv) all other notices, demands and protests,
and all other formalities of every kind in connection with the enforcement of the Obligations, the
omission of or delay in which, but for the provisions of this subsection (b), might constitute
grounds for relieving the Grantor of any of Grantors obligations hereunder and (v) any requirement
that any Agent or any Lender protect, secure, perfect or insure any security interest or other lien
on any property subject thereto or exhaust any right or take any action against the Grantor or any
other Person or any collateral.
SECTION 13.
Miscellaneous
.
(a) No amendment of any provision of this Agreement (including any Schedule attached hereto)
shall be effective unless it is in writing and signed by the Grantor affected thereby and the
Collateral Agent, and no waiver of any provision of this Agreement, and no consent to any departure
by the Grantor therefrom, shall be effective unless it is in writing and signed by the Collateral
Agent, and then such waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
(b) No failure on the part of the Secured Parties to exercise, and no delay in exercising, any
right hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The rights and remedies of the Secured Parties provided herein and in
the other Loan Documents are cumulative and are in addition to, and not exclusive of, any rights or
remedies provided by law. The rights of the Secured Parties under any Loan Document against any
party thereto are not conditional or contingent on any attempt by such Person to exercise any of
its rights under any other Loan Document against such party or against any other Person, including
but not limited to, the Grantor.
-23-
(c) This Agreement shall create a continuing security interest in the Collateral and shall (i)
remain in full force and effect, subject to paragraph (e) below, until the date on which all of the
Secured Obligations have been indefeasibly paid in full in cash after the termination of each
Lenders Commitment and each of the Loan Documents and (ii) be binding on the Grantor all other
Persons who become bound as debtor to this Agreement in accordance with
Section 9-203(d) of the Code, and shall inure, together with all rights and remedies of the
Secured Parties hereunder, to the benefit of the Secured Parties and their respective successors,
transferees and assigns. Without limiting the generality of clause (ii) of the immediately
preceding sentence, the Secured Parties may assign or otherwise transfer their respective rights
and obligations under this Agreement and any other Loan Document to any other Person pursuant to
the terms of the Financing Agreement, and such other Person shall thereupon become vested with all
of the benefits in respect thereof granted to the Secured Parties and herein or otherwise. Upon
any such assignment or transfer, all references in this Agreement to any Secured Party shall mean
the assignee of any such Secured Party. None of the rights or obligations of the Grantor hereunder
may be assigned or otherwise transferred without the prior written consent of the Collateral Agent,
and any such assignment or transfer shall be null and void.
(d) Upon the date on which all of the Secured Obligations have been indefeasibly paid in full
in cash after the termination of each Lenders Commitment and each of the Loan Documents, (i)
subject to paragraph (e) below, this Agreement and the security interests and licenses created
hereby shall terminate and all rights to the Collateral shall revert to the Grantor and (ii) the
Collateral Agent will, upon the Grantors request and at the Grantors expense, without any
representation, warranty or recourse whatsoever, (A) return to the Grantor (or whomsoever shall be
lawfully entitled to receive the same or as a court of competent jurisdiction shall direct) such of
the Collateral as shall not have been sold or otherwise disposed of or applied pursuant to the
terms hereof and (B) execute and deliver to the Grantor such documents as the Grantor shall
reasonably request to evidence such termination.
(e) This Agreement shall remain in full force and effect and continue to be effective should
any petition be filed by or against the Grantor for liquidation or reorganization, should the
Grantor become insolvent or make an assignment for the benefit of any creditor or creditors or
should a receiver or trustee be appointed for all or any significant part of the Grantors assets,
and shall continue to be effective or be reinstated, as the case may be, if at any time payment or
performance of the Secured Obligations, or any part thereof, is, pursuant to applicable law,
rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the
Secured Obligations, whether as a voidable preference, fraudulent conveyance, or otherwise, all
as though such payment or performance had not been made. In the event that any payment, or any
part thereof, is rescinded, reduced, restored or returned, the Secured Obligations shall be
reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or
returned.
(f)
THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE
EXTENT THAT THE VALIDITY AND PERFECTION OR THE PERFECTION AND THE EFFECT OF PERFECTION OR
-24-
NON-PERFECTION OF THE SECURITY INTEREST CREATED HEREBY, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
(g) In addition to and without limitation of any of the foregoing, this Agreement shall be
deemed to be a Loan Document and shall otherwise be subject to all of terms and conditions
contained in Sections 12.10 and 12.11 of the Financing Agreement,
mutatis mutandi
.
(h) The Grantor irrevocably and unconditionally waives any right it may have to claim or
recover in any legal action, suit or proceeding with respect to this Agreement any special,
exemplary, punitive or consequential damages.
(i) Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining portions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
(j) Section headings herein are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
(k) This Agreement may be executed in any number of counterparts and by the different parties
hereto on separate counterparts, each of which shall be deemed an original, but all of such
counterparts taken together shall constitute one and the same agreement. Delivery of an executed
counterpart of this Agreement by facsimile or electronic mail shall be equally effective as
delivery of an original executed counterpart.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-25-
IN WITNESS WHEREOF, the Grantor has caused this Agreement to be executed and delivered by its
officer thereunto duly authorized, as of the date first above written.
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GRANTOR
:
IMPERIAL LIFE FINANCING II, LLC
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By:
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Imperial Premium Finance, LLC, its sole member
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By:
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Imperial Holdings, LLC, its managing member
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By:
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Name:
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Jonathan Neuman
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Title:
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President
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Pledge and
Security Agreement
SCHEDULE I
LEGAL NAME; ORGANIZATIONAL IDENTIFICATION NUMBER; STATE OR
JURISDICTION OF ORGANIZATION
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Legal Name
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Imperial Life Financing II, LLC
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State or Jurisdiction of Organization
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Georgia
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Type of Organization
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Limited Liability Company
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Organizational Identification Number
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09008743
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Sched. I-1
SCHEDULE II
INTELLECTUAL PROPERTY; TRADE NAMES
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1.
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Registered Copyrights
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2.
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Copyright Applications
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1.
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Patents
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2.
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Patent Applications
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1.
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Registered Trademarks
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2.
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Trademark Applications
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D.
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OTHER PROPRIETARY RIGHTS
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E.
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TRADE NAMES
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F.
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NAME OF, AND EACH TRADE NAME USED BY, EACH PERSON FROM WHICH THE GRANTOR HAS ACQUIRED ANY
SUBSTANTIAL PART OF THE COLLATERAL WITHIN THE PRECEDING FIVE YEARS
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Sched. II-1
SCHEDULE III
LOCATIONS OF GRANTOR
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LOCATION
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Description of Location (state if Location
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(i) contains Collateral
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(ii) is chief place of business and
chief executive office, or
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(iii) contains Records concerning Accounts,
Insurance Premium Loans and originals of
Chattel Paper)
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Chief Place of Business
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701 Park of Commerce Blvd., Suite 301
Boca Raton, FL 33487
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Chief Executive Office
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Location of Records concerning
Accounts, Insurance Premium Loans
and originals of Chattel Paper
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701 Park of Commerce Blvd., Suite 301
Boca Raton, FL 33487
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Location of Collateral
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701 Park of Commerce Blvd., Suite 301
Boca Raton, FL 33487
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Sched. III-1
SCHEDULE IV
DEPOSIT ACCOUNTS, SECURITIES ACCOUNTS AND COMMODITIES ACCOUNTS
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Name and Address of Institution
Maintaining Account
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Account Number
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Account Name
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Imperial Life Financing II, LLC
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Type of Account
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Collection
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Sched. IV-1
SCHEDULE V
UCC FINANCING STATEMENTS
UCC Financing Statements have been filed in the jurisdictions below against the Grantor:
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Name of Grantor
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Secretary of State
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Sched. V-1
SCHEDULE VI
COMMERCIAL TORT CLAIMS
Sched. VI-1
SCHEDULE VII
PLEDGED DEBT
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Principal Amount
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Grantor
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Name of Maker
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Description
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Outstanding as of
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Sched. VII-1
SCHEDULE VIII
PLEDGED SHARES
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Name of Pledged
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Percentage of
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Grantor
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Issuer
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Number of Shares
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Outstanding Shares
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Class
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Certificate Number
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Sched. VIII-1
EXHIBIT A
PLEDGE AMENDMENT
This Pledge Amendment, dated
___, ___
, is delivered pursuant to Section 4
of the Pledge and Security Agreement referred to below. The undersigned hereby agrees that this
Pledge Amendment may be attached to the Pledge and Security Agreement, dated February ___. 2009, as
it may heretofore have been or hereafter may be amended, restated, supplemented, modified or
otherwise changed from time to time (the
Security Agreement
) and that the promissory
notes or shares listed on this Pledge Amendment shall be hereby pledged and assigned to the
Collateral Agent and become part of the Pledged Interests referred to in such Pledge Agreement and
shall secure all of the Secured Obligations referred to in such Security Agreement.
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Pledged Debt
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Grantor
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Name of Maker
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Description
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Principal Amount Outstanding as of
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Pledged Shares
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Name of
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Percentage of
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Grantor
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Pledged Issuer
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Number of Shares
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Outstanding Shares
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Class
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Certificate Number
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[GRANTOR]
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By:
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Name:
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Title:
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CTL Holdings II, LLC,
as the Collateral Agent
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By:
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Name:
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Title:
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Exh. A-1
EXHIBIT B
NOTICE OF BORROWING
[LETTERHEAD OF THE BORROWER]
CTL Holdings II, LLC, as Administrative Agent
under the below-referenced Financing Agreement
701 Park of Commerce Blvd., Suite 301
Boca Raton, FL 33487
Ladies and Gentlemen:
The undersigned, Imperial Life Financing II, LLC, a Georgia limited liability company (the
Borrower
), refers to the Financing Agreement, dated as of March ___, 2009 (as the same
may be further amended, supplemented or otherwise modified from time to time, the
Financing
Agreement
), by and among the Borrower, the lenders from time to time party thereto (each a
Lender
and collectively, the
Lenders
), CTL Holdings II, LLC, a Georgia limited
liability company (
CTL
), as collateral agent for the Lenders (in such capacity, the
Collateral Agent
), and CTL, as administrative agent for the Lenders (in such capacity,
the
Administrative Agent
and together with the Collateral Agent, each an
Agent
and collectively, the
Agents
), and hereby gives you notice pursuant to Section 2.02 of
the Financing Agreement that the undersigned hereby requests a Loan under the Financing Agreement,
and in that connection sets forth below the information relating to such Loan (the
Proposed
Loan
) as required by Section 2.02(a) of the Financing Agreement. All capitalized terms used
but not defined herein have the same meanings herein as set forth in the Financing Agreement.
(i) The aggregate principal amount of the Proposed Loan is $
.
(ii) The borrowing date of the Proposed Loan is
.
1
(iii) The proceeds of the Proposed Loan should be made available to the undersigned by wire
transferring such proceeds in accordance with the payment instructions attached hereto as Exhibit
A.
[signature page follows]
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1
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This date must be a Business Day and not
occur more than once each week.
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The undersigned certifies that (i) the representations and warranties contained in Article VI
of the Financing Agreement and in each other Loan Document and certificate or other writing
delivered to any Agent or any Lender pursuant thereto on or prior to the date hereof are true and
correct on and as of the date hereof as though made on and as of the date hereof (except that any
representation and warranty made as of a specific date shall be true and correct as of such
specific date), (ii) no Default or Event of Default has occurred and is continuing or will result
from the making of the Proposed Loan or will occur or will be continuing on the date of the
Proposed Loan and (iii) all applicable conditions set forth in Article V of the Financing Agreement
have been satisfied as of the date hereof.
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Very truly yours,
IMPERIAL LIFE FINANCING II, LLC
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By:
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Imperial Premium Finance, LLC, its sole member
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By:
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Imperial Holdings, LLC, its managing member
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By:
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Name:
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Jonathan Neuman
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Title:
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President
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-2-
EXHIBIT A
Payment Instructions
EXHIBIT C
FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
This
ASSIGNMENT AND ACCEPTANCE AGREEMENT
(
Assignment Agreement
) is entered into as of
______, 20___between
(
Assignor
) and
(
Assignee
).
Reference is made to the agreement described in
Item 2
of
Annex I
annexed hereto
(as amended, restated, modified or otherwise supplemented from time to time, the
Financing
Agreement
). Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to them in the Financing Agreement.
1. In accordance with the terms and conditions of
Section 12.07
of the Financing
Agreement and
Section 7
of this Assignment Agreement, the Assignor hereby sells and assigns
to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, that interest in
and to the Assignors rights and obligations under the Loan Documents as of the date hereof and the
Commitments with respect to the Obligations owing to the Assignor, and the Assignors portion of
the Loans as specified on
Annex I
.
2. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of
the interest being assigned by it hereunder and that such interest is free and clear of any adverse
claim and (ii) it has full power and authority, and has taken all action necessary, to execute and
deliver this Assignment Agreement and to consummate the transactions contemplated hereby; (b)
except as set forth in this Assignment Agreement, makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or representations made in or in
connection with the Loan Documents or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Loan Documents or any other instrument or document
furnished pursuant thereto; and (c) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any Loan Party or the performance or
observance by any Loan Party of any of its obligations under the Loan Documents or any other
instrument or document furnished pursuant thereto.
3. The Assignee (a) confirms that it has received copies of the Financing Agreement and the
other Loan Documents, together with copies of the financial statements referred to therein and such
other documents and information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment Agreement; (b) agrees that it will, independently and
without reliance upon the Administrative Agent, the Collateral Agent, the Assignor, or any other
Lender, based on such documents and information as it shall deem appropriate at the time, continue
to make its own credit decisions in taking or not taking action under the Loan Documents; (c)
appoints and authorizes each of the Administrative Agent and the Collateral Agent to take such
action as the Administrative Agent or the Collateral Agent (as the case may be) on its behalf and
to exercise such powers under the Loan Documents as are delegated to the Administrative Agent or
the Collateral Agent (as the case may be) by the terms thereof, together with such powers as are
reasonably incidental thereto; (d) agrees that it will perform in accordance with their terms all
of the obligations which by the terms of the Loan Documents are required to be performed by it as a
Lender; and (e) attaches the forms prescribed
1
by the Internal Revenue Service of the United States certifying as to the Assignees status
for purposes of determining exemption from United States withholding taxes with respect to all
payments to be made to the Assignee under the Financing Agreement or such other documents as are
necessary to indicate that all such payments are subject to such rates at a rate reduced by an
applicable tax treaty.
4. Following the execution of this Assignment Agreement by the Assignor and the Assignee, it
will be delivered by the Assignor to the Collateral Agent for recording by the Administrative
Agent. The effective date of this Assignment Agreement (the Settlement Date) shall be
the latest of (a) the date of the execution hereof by the Assignor and the Assignee, (b) the
settlement date specified on Annex I, and (c) the_receipt by Assignor of the Purchase Price
specified in Annex I. In addition to the Purchase Price, as additional consideration for
the sale and purchase set forth in this Assignment Agreement, interest due under the Escrow
Interest Letter, dated as of January 30, 2009, between Assignor and Assignee on the principal
amount of Loans sold and purchased under this Assignment Agreement for the period from January 1,
2009 and ending on the Settlement Date shall be waived and shall not be required to be paid by
Assignor to Assignee.
5. As of the Settlement Date (a) the Assignee shall be a party to the Financing Agreement and,
to the extent of the interest assigned pursuant to this Assignment Agreement, have the rights and
obligations of a Lender thereunder and under the other Loan Documents, and (b) the Assignor shall,
to the extent of the interest assigned pursuant to this Assignment Agreement, relinquish its rights
and be released from its obligations under the Financing Agreement and the other Loan Documents.
6. Upon recording by the Administrative Agent, from and after the Settlement Date, the
Administrative Agent shall make all payments under the Financing Agreement and the other Loan
Documents in respect of the interest assigned hereby (including, without limitation, all payments
of principal, interest and commitment fees (if applicable) with respect thereto) to the Assignee.
The Assignor and the Assignee shall make all appropriate adjustments in payments under the
Financing Agreement and the other Loan Documents for periods prior to the Settlement Date directly
between themselves on the Settlement Date.
7. Any purchase and assumption by the Assignee under this Assignment Agreement is
subject to (i) the fulfillment, in a manner satisfactory to the Assignee, of each condition
precedent in Section 5.02 of the Financing Agreement in connection with each Insurance Premium Loan
financed with the proceeds of any Loan to be assigned hereunder, and (ii) receipt by the
Assignee, three (3) Business Days prior to the Settlement Date, of copies of all documents
required to be delivered to the Administrative Agent pursuant to
,
or which the
Administrative Agent is entitled to receive in accordance with, Section 5.02(e) of the
Financing Agreement.
8. Representations and Warranties of the Assignor. The Assignor hereby represents and
warrants to the Assignee as of the Settlement Date-that no amendment, waiver or other
modification has been made to any Loan Document or any Transaction Document, unless the
Assignee has consented thereto in writing prior to the Settlement Date.
2
9.
Remedies
.
(a)
Repurchase of interests for Certain Breaches
. In the event of a breach of any
representations and warranties set forth in Section 8, upon the earlier to occur of the discovery
of such breach by the Assignor or receipt by the Assignor of written notice of such breach given by
or on behalf of the Assignee, the Assignees interest in the Loan relating to such breach shall be
repurchased by the Assignor from the Assignee and upon such repurchase the Assignees interest
shall terminate and be extinguished.
(b)
Reconveyed Insurance Premium Loans
. Upon the repurchase by the Assignor of any
interest under this Assignment Agreement, then, on the date required for such repurchase, the
Assignor shall deposit into the an account identified by the Assignee in immediately available
funds an amount equal to the outstanding principal balance of the affected Loans on the date of
such repurchase, together with accrued and unpaid interest thereon through such date. Such deposit
shall be considered payment in full for such interest.
In connection with the preceding paragraph, the Assignee shall execute such documents and
instruments of transfer or assignment as shall be prepared by the Assignor, and shall take such
other actions as shall reasonably be requested by the Assignor, to effect the repurchase of the
interests from the Assignee. Upon repurchase of the interests in Loans from the Assignee, the
Assignee shall automatically and without further action be deemed to transfer, assign, set over and
otherwise convey to or upon the order of the Assignor, without recourse, representation or
warranty, all the right, title and interest of the Assignee in and to the reconveyed interest and
all Collections with respect thereto and all proceeds thereof received after the date of such
repurchase.
10. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
11. EACH PARTY HERETO HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BASED UPON OR ARISING OUT OF THIS ASSIGNMENT AGREEMENT OR ANY OF THE TRANSACTIONS
RELATED HERETO, AND AGREES THAT ANY SUCH ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY.
12. This Assignment Agreement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of this Assignment Agreement by facsimile or electronic mail
shall be equally effective as delivery of an original executed counterpart.
[Remainder of page left intentionally blank.]
3
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by
their respective officers thereunto duly authorized, as of the date first above written.
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[ASSIGNOR]
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By:
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Name:
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Title:
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Date:
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NOTICE ADDRESS FOR ASSIGNOR
[INSERT ADDRESS]
Telephone No.:
Telecopy No.:
[ASSIGNEE]
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By:
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Name:
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Title:
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Date:
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NOTICE ADDRESS FOR ASSIGNEE
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[INSERT ADDRESS]
Telephone No.:
Telecopy No.:
4
ANNEX FOR ASSIGNMENT AND ACCEPTANCE
ANNEX I
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1.
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Borrower: Imperial Life Financing II, LLC
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2.
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Name and Date of Financing Agreement:
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Financing Agreement,
dated as of March ________. 2009 by and among Imperial
Life Financing II, LLC, a Georgia limited liability company (the
Borrower
), the lenders from time to time party thereto
(each a
Lender
and collectively, the
Lenders
),
CTL Holdings II, LLC, a Georgia limited liability company
(
CTL
), as collateral agent for the Lenders (in such
capacity, the
Collateral Agent
), and CTL, as
administrative agent for the Lenders (in such capacity, the
Administrative Agent
and together with the Collateral
Agent, each an
Agent
and collectively, the
Agents
).
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3.
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Date of Assignment Agreement:
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4.
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Amount of Commitments:
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5.
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Amount of Loans:
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6.
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Purchase Price (excluding all interest, including the PIK Interest Amount):
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7.
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Settlement Date:
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5
EXHIBIT D
FORM OF INDIVIDUAL GUARANTY
INDIVIDUAL GUARANTY, dated as of
, 2009, made by [Jonathan Neuman] [Antony
Mitchell], an individual with a principal address at [
] (the
Guarantor
),
in favor of each of the Lenders (as hereinafter defined) and CTL Holdings II, LLC (
CTL
),
as Collateral Agent for the Lenders (in such capacity, the
Collateral Agent
) pursuant to
the Financing Agreement referred to below.
W
I
T
N
E
S
S
E
T
H
:
WHEREAS, Imperial Life Financing II, LLC, an Georgia limited liability company (the
Borrower
), the lenders from time to time party thereto (each a
Lender
and
collectively, the
Lenders
), the Collateral Agent, and CTL, as administrative agent for
the Lenders (in such capacity, the
Administrative Agent
and together with the Collateral
Agent, each an
Agent
and collectively, the
Agents
) are parties to a Financing
Agreement, dated as of March ___, 2009 (such agreement, as amended, restated or otherwise modified
from time to time, being hereinafter referred to as the
Financing Agreement
);
WHEREAS, pursuant to the Financing Agreement, the Lenders have agreed to make term loans (each
a
Loan
and collectively, the
Loans
) to the Borrower;
WHEREAS, pursuant to Section 5.01(d) of the Financing Agreement, the Guarantor is required to
execute and deliver to the Agents a guaranty guaranteeing the Loans and all other Obligations under
the Financing Agreement under certain limited circumstances set forth in this Guaranty; and
WHEREAS, the Guarantor has determined that his execution, delivery and performance of this
Guaranty directly benefit, and are within the purposes and in the best interests of, the Guarantor;
NOW, THEREFORE, in consideration of the premises and the agreements herein and in order to
induce the Lenders to enter into the Financing Agreement and to make the Loans pursuant thereto,
the Guarantor hereby agrees with the Lenders and the Agents as follows:
SECTION 1.
Definitions
. Reference is hereby made to the Financing Agreement for a
statement of the terms thereof. All terms used in this Guaranty which are defined in the Financing
Agreement and not otherwise defined herein shall have the same meanings herein as set forth
therein.
SECTION 2.
Guaranty
. (a) The Guarantor hereby (i) irrevocably, absolutely and
unconditionally guarantees the prompt payment by the Borrower, as and when due and payable (whether
by scheduled maturity, required prepayment, acceleration, demand or otherwise), of all Obligations
from time to time owing in respect of the Financing Agreement or any other Loan Document, whether
for principal, interest (including, without limitation, all interest that accrues after the
commencement of any Insolvency Proceeding with respect to the
Borrower, whether or not a claim for post-filing interest is allowed in such proceeding),
fees, commissions, expense reimbursements, indemnifications or otherwise, and whether accruing
before or subsequent to the commencement of any Insolvency Proceeding with respect to the Borrower
(notwithstanding the operation of the automatic stay under Section 362(a) of the U.S. Bankruptcy
Code), and the due performance and observance by the Borrower of its other obligations now or
hereafter existing in respect of the Loan Documents (the
Guaranteed Obligations
), and
(ii) agrees to pay any and all expenses (including reasonable counsel fees and expenses) incurred
by the Agents and the Lenders in enforcing any rights under this Guaranty. Without limiting the
generality of the foregoing, the Guarantors liability shall extend to all amounts that constitute
part of the Guaranteed Obligations and would be owed by the Borrower to the Agents and the Lenders
under any Loan Document but for the fact that they are unenforceable or not allowable due to the
existence of a bankruptcy, reorganization or similar proceeding involving any Credit Party.
(b) Notwithstanding anything contained in this Guaranty, except as provided in clause (ii) of
this Section 2(b) and Section 2(c), (x) the Guarantor shall not have any liability under this
Guaranty for the payment or performance of the Guaranteed Obligations, (y) the Guarantor shall not
have any obligation to expend its own funds in the performance of any provision of any Loan
Document, and (z) no Agent nor any Lender shall obtain any deficiency judgment against the
Guarantor with respect to any of the foregoing;
provided
,
however
, that:
(i) nothing contained herein shall limit or otherwise restrict (A) any Agents or any Lenders
rights and remedies against any of the Collateral under any other Loan Document, either at law or
equity, including, without limitation, any rights or remedies with respect to the Equity Interests
of the Borrower owned by the Guarantor, (B) the Agent or any Lender from bringing any action, suit
or proceeding for specific performance against the Guarantor to perform any obligation imposed on
the Guarantor hereunder, (C) recourse to or liability of the Guarantor for any fraud committed by
the Guarantor or material misrepresentation by the Guarantor in any Loan Document to which the
Guarantor is a party, or (D) the obligations of the Guarantor under any Loan Document which
obligations are either directly in favor of any Agent or any Lender or have been assigned to any
Agent or any Lender, each of which may be enforced by and for the benefit of the Agents and
Lenders, and
(ii) the Guarantor shall have (A) full liability and responsibility for the Guaranteed
Obligations and other obligations hereunder if (x) any act (or omission to act) constituting fraud
or willful misconduct on the part of the Guarantor that impairs the Agents and the Lenders
ability to be repaid under the Loan Documents occurs, or (y) the Guarantor authorizes, approves,
participates in or assists the Borrower or the Originator in commencing a voluntary or involuntary
case under the Bankruptcy Code or any other Insolvency Proceeding, and (B) liability and
responsibility for the Guaranteed Obligations and other obligations hereunder if (x) any
Collections are not promptly deposited directly into the Collection Account (other than Collections
(i) delivered to the Servicer pursuant to the Servicing Agreement or (ii) inadvertently deposited
into an account of the Originator or any Affiliate and promptly removed from such account and
deposited into the Collection Account);
provided
, that in the case of this clause (B)(x),
such liability and responsibility of the Guarantor shall not exceed the aggregate amount of the
Collections not promptly deposited directly into the Collection Account or (y) the Guarantor and/or
an agent or employee of Imperial and/or its Subsidiaries or any Person
- 2 -
appointed by the Borrower to perform any duties on behalf of the Borrower in connection with
the Collateral Value Policy or Contingent Collateral Value Policy shall refer any claim to the
Collateral Value Insurer or Contingent Collateral Value Insurer knowing the same to be fraudulent
and at the time, the Borrower is not owned by a Lender or its Affiliates;
provided
, that in
the case of this clause (B)(y), such liability and responsibility of the Guarantor shall not exceed
the aggregate amount of the loss relating to the applicable Coverage Certificate related to such
fraudulent claim and shall only arise if the action involved was taken by the Guarantor and/or an
agent or employee of Imperial and/or its Subsidiaries or any Person appointed by the Borrower to
perform any duties on behalf of the Borrower in connection with the Collateral Value Policy or the
Contingent Collateral Value Policy or (z) the applicable Premium Finance Borrower, the Originator
or the Borrower ceases to be the legal owner of a Covered Policy (as defined in the Collateral
Value Policy or Contingent Collateral Value Policy) and the Guarantor and/or an employee of
Imperial and/or its Subsidiaries (collectively, the Guarantor Responsible Parties), directly or
indirectly, caused, or assisted another Person in, the transfer of legal title of such Covered
Policy from the applicable Premium Finance Borrower, the Originator or the Borrower to another
Person other than the Collateral Value Insurer or the Contingent Collateral Value Insurer (or a
designee of the Collateral Value Insurer or the Contingent Collateral Value Insurer);
provided
, that in the case of this clause (B)(z), such liability and responsibility of the
Guarantor shall not exceed the aggregate amount of the loss relating to the applicable Coverage
Certificate related to such Covered Policy;
provided further
, and for greater clarity, in
the case of this clause (B)(z), any transfer or change in legal ownership caused solely by a Person
other than a Guarantor Responsible Party that is permitted by the Transaction Documents shall not
result in liability or responsibility hereunder for the Guarantor.
(c) Nothing in subsection (b) of this Section 2 shall limit or otherwise restrict in any
manner the rights, powers and privileges of any Agent against the Guarantor under any other Loan
Document to which the Guarantor is a party.
SECTION 3.
Guaranty Absolute; Continuing Guaranty; Assignments
.
(a) Subject to Sections 2(b) and 2(c) of this Agreement, the Guarantor hereby guarantees that
the Guaranteed Obligations will be paid strictly in accordance with the terms of the Loan
Documents, regardless of any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of the Agents or the Lenders with respect
thereto. The Guarantor agrees that, subject to Sections 2(b) and 2(c) of this Agreement, his
guarantee constitutes a guaranty of payment when due and not of collection and waives any right to
require that any resort be made by the Agents or the Lenders to any Collateral. The obligations of
the Guarantor under this Guaranty are independent of the obligations under the Financing Agreement
and the other Loan Documents, and a separate action or actions may be brought and prosecuted
against the Guarantor to enforce this Guaranty, irrespective of whether any action is brought
against any Credit Party or whether any Credit Party is joined in any such action or actions.
Subject to Sections 2(b) and 2(c) of this Agreement, the liability of the Guarantor under this
Guaranty shall be irrevocable, absolute and unconditional irrespective of, and the Guarantor hereby
irrevocably waives any defenses it may now or hereafter have in any way relating to, any or all of
the following:
- 3 -
(i) any lack of validity or enforceability of any Loan Document or any agreement or instrument
relating thereto;
(ii) any change in the time, manner or place of payment of, or in any other term in respect
of, all or any of the Guaranteed Obligations, or any other amendment or waiver of or any consent to
departure from any Loan Document, including, without limitation, any increase in the Guaranteed
Obligations resulting from the extension of additional credit to any Credit Party or otherwise;
(iii) any taking, exchange, release or non-perfection of any Collateral, or any taking,
release or amendment or waiver of or consent to departure from any other guaranty, for all or any
of the Guaranteed Obligations;
(iv) the existence of any claim, set-off, defense or other right that the Guarantor may have
against any Person, including, without limitation, any Agent or any Lender;
(v) any change, restructuring or termination of the limited liability company structure or
existence of the Borrower; or
(vi) any other circumstance (including any statute of limitations) or any existence of or
reliance on any representation by the Agents or the Lenders that might otherwise constitute a
defense available to, or a discharge of, any Credit Party or any other guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time
any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by the
Agents, the Lenders or any other Person upon the insolvency, bankruptcy or reorganization of any
Credit Party or otherwise, all as though such payment had not been made.
(b) This Guaranty is a continuing guaranty and shall (i) remain in full force and effect until
the later of (x) the cash payment in full of the Guaranteed Obligations and all other amounts
payable under this Guaranty and (y) the Final Maturity Date, (ii) be binding upon the Guarantor,
his heirs, executors, administrators, legal representatives, successors and assigns and (iii) inure
to the benefit of and be enforceable by the Agents, the Lenders and their successors, pledgees,
transferees and assigns. Without limiting the generality of the foregoing clause (iii), any Lender
may pledge, assign or otherwise transfer all or any portion of his rights and obligations under any
Loan Document to any other Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to such Lender herein or otherwise, in each case as provided in
the Financing Agreement.
SECTION 4.
Waivers
. The Guarantor hereby waives, to the full extent permitted by
applicable law, (i) promptness and diligence; (ii) notice of acceptance and notice of the
incurrence of any Obligation by the Borrower; (iii) notice of any actions taken by any Agent, the
Borrower, any Credit Party or any Lender under any Loan Document or any other agreement or
instrument related thereto; (iv) all other notices, demands and protests, and all other formalities
of every kind in connection with the enforcement of the Obligations or of the obligations of the
Guarantor hereunder, the omission of or delay in which, but for the provisions of this Section 4,
might constitute grounds for relieving the Guarantor of his obligations
- 4 -
hereunder; (v) any right to compel or direct any Agent or any Lender to seek payment or
recovery of any amounts owed under this Guaranty from any one particular fund or source; (vi) any
requirement that any Agent or any Lender protect, secure, perfect or insure any security interest
or Lien or any property subject thereto or exhaust any right or take any action against the
Borrower, any other Credit Party or any other Person or any Collateral; and (vii) any other defense
available to the Guarantor. The Guarantor acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated herein and that the waiver set forth in this
Section 4 is knowingly made in contemplation of such benefits. The Guarantor hereby waives any
right to revoke this Guaranty, and acknowledges that this Guaranty is continuing in nature and
applies to all Guaranteed Obligations, whether existing now or in the future.
SECTION 5.
Subrogation
. (a) Until the final payment in cash and performance in full
of all of the Obligations, the Guarantor shall not exercise any rights against the Borrower or any
other guarantor arising as a result of payment by the Borrower or such guarantor hereunder, by way
of subrogation, reimbursement, restitution, contribution or otherwise, and will not prove any claim
in competition with any Agent or any Lender in respect of any payment hereunder in any Insolvency
Proceedings; the Guarantor will not claim any set-off, recoupment or counterclaim against the
Borrower or any other guarantor in respect of any liability of the Guarantor to the Borrower or
guarantor; and the Guarantor, the Borrower and each guarantor waives any benefit of and any right
to participate in any collateral security which may be held by any Agent or any Lender. Anything
to the contrary contained in the foregoing notwithstanding, the Guarantor shall not exercise any
such rights against the Borrower (including after payment in full of the Obligations) if all or any
portion of the Obligations shall have been satisfied in connection with an exercise of remedies by
the Collateral Agent in respect of the Equity Interests of the Borrower whether pursuant to the
Individual Guarantor Security Agreement or otherwise.
(b) The payment of any amounts due with respect to any Indebtedness of the Borrower or the
Guarantor for money borrowed or credit received now or hereafter owed to the Guarantor is hereby
subordinated to the prior payment in full of all of the Obligations. The Guarantor agrees that,
after the occurrence of any default in the payment or performance of any of the Obligations, the
Guarantor will not demand, sue for or otherwise attempt to collect any such indebtedness of the
Borrower or other guarantor to the Guarantor until all of the Obligations shall have been paid in
full. If, notwithstanding the foregoing sentence, the Guarantor shall collect, enforce or receive
any amounts in respect of such indebtedness while any Obligations are still outstanding, such
amounts shall be collected, enforced and received by the Guarantor as trustee for the Agents and
the Lenders and be paid over to the Collateral Agent, for the benefit of the Agents and the
Lenders, on account of the Obligations without affecting in any manner the liability of the
Guarantor under the other provisions of this Guaranty.
SECTION 6.
Representations, Warranties
. The Guarantor hereby represents and warrants
as follows:
(a) The Guarantor has the legal capacity and right to execute, deliver and perform this
Guaranty and each other Loan Document to which the Guarantor is a party.
- 5 -
(b) The execution, delivery and performance by the Guarantor of this Guaranty and each other
Loan Document to which the Guarantor is a party (i) do not and will not contravene any Requirements
of Law or any contractual restriction binding on or otherwise affecting the Guarantor or his
properties, (ii) do not and will not result in or require the creation of any Lien (other than
pursuant to any Loan Document) upon or with respect to any of his properties, and (iii) do not and
will not result in any default, noncompliance, suspension, revocation, impairment, forfeiture or
nonrenewal of any permit, license, authorization or approval applicable to any of his properties.
(c) No authorization or approval or other action by, and no notice to or filing with, any
Governmental Authority is required in connection with the due execution, delivery and performance
by the Guarantor of this Guaranty or any of the other Loan Documents to which the Guarantor is a
party, except for the filing of any UCC financing statement or such other registrations, filings or
recordings as may be necessary to perfect the Lien purported to be created by any Loan Documents to
which the Guarantor is a party.
(d) Each of this Guaranty and the other Loan Documents to which the Guarantor is or will be a
party, when delivered, will be, a legal, valid and binding obligation of the Guarantor, enforceable
against the Guarantor in accordance with its terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws.
(e) There are no pending or written notices threatening any action, suit or proceeding
affecting the Guarantor before any court or other Governmental Authority or any arbitrator that (x)
if adversely determined could reasonably be expected to have a material adverse effect to the
Guarantors financial condition or (y) relates to this Guaranty or any of the other Loan Documents
to which the Guarantor is a party or any transaction contemplated hereby or thereby.
(f) The Guarantor is not in violation of any Requirements of Law or any material term of any
agreement or instrument (including, without limitation, any contract) binding on or otherwise
affecting him or any of his properties.
(g) The Guarantor is not a party to any agreement or instrument, or subject to any restriction
or any judgment, order, regulation, ruling or other requirement of a court or other Governmental
Authority, which has, or in the future could have, a material adverse effect to the Guarantors
financial condition.
(h) The Guarantor has filed or caused to be filed all tax returns which he is required to file
and has paid all taxes shown to be due and payable on such returns or on any assessments made
against the Guarantor or any of he property by any Governmental Authority except to the extent any
such taxes are being contested in good faith. No tax Lien has been filed with respect to any
material tax liability against the Guarantor, and, to the knowledge of the Guarantor, no tax
assessment is pending against the Guarantor.
(i) The Guarantor (i) has read and understands the terms and conditions of the Financing
Agreement and the other Loan Documents, and (ii) now has and will continue to have independent
means of obtaining information concerning the affairs, financial condition and
- 6 -
business of the Borrower and the other Credit Parties, and has no need of, or right to obtain
from any Agent or any Lender, any credit or other information concerning the affairs, financial
condition or business of the Borrower or the other Credit Parties that may come under the control
of any Agent or any Lender.
(j) All representations and warranties set forth in this Guaranty are true and correct in all
respects at the time as of which such representations were made and on the Effective Date.
SECTION 7.
Covenants
. The Guarantor hereby covenants and agrees that, until full and
final payment of the Obligations in cash and the termination of the Total Term Loan Commitment, the
Guarantor will:
(a) Not accept or retain any distribution or other payment from the Borrower if the making of
such distribution or other payment by the Borrower violates, or may reasonably be expected to
result in a violation of, the Financing Agreement or any other Loan Document.
(b) Comply in all material respects with all Requirements of Law (including any settlement of
any claim that, if breached, could give rise to any of the foregoing).
(c) Promptly notify the Agents of:
(i) (A) any breach or non-performance of, or any default under, any Contractual Obligation of
such Guarantor which could reasonably be expected to have a material adverse effect to the
Guarantors financial condition, and (B) any action, suit, litigation or proceeding which may exist
at any time which could reasonably be expected to have a material adverse effect to the Guarantors
financial condition; and
(ii) the occurrence of any event or development that could have a material adverse effect to
the Guarantors financial condition;
provided
that (A) each notice pursuant to this Section 7(c) shall be accompanied by a
written statement signed by such Guarantor, setting forth details of the occurrence referred to
therein, and stating what action the Guarantors propose to take with respect thereto and at what
time. Each notice under Section 7(c)(i) shall describe with particularity the provisions of this
Guaranty or other Loan Document that have been breached.
(d) Pay all taxes, assessments, governmental charges and other obligations when due, except as
may be contested in good faith or those as to which a bona fide dispute may exist.
(e) Execute and deliver to the Agents such further instruments and do such other further acts
as the Agent may reasonably request to carry out more effectively the purposes of this Guaranty,
the other Loan Documents and any agreements and instruments referred to herein.
(f) Not knowingly commit, and not knowingly permit any of its Affiliates, including the
Borrower, to knowingly commit, a Prohibited Act (as defined in the Collateral
- 7 -
Value Policy or Contingent Collateral Value Policy) or any other act that results in the
liability of the Collateral Value Insurer or Contingent Collateral Value Insurer under the
Collateral Value Policy or Contingent Collateral Value Policy being reduced or terminated.
(g) On the Effective Date, deliver to the Agents, for the benefit of the Lenders, a personal
financial statement of the Guarantor, in form and substance reasonably satisfactory to the Agents,
accompanied by a signed representation by the Guarantor that such personal financial statement is
complete and accurate in all material respects and fairly presents the financial condition of the
Guarantor as of the Effective Date and that the Guarantor has no contingent obligations or
liabilities (for taxes or otherwise) or any unusual long term commitment except as set forth in
such financial statement or the notes thereto.
SECTION 8.
Right of Set-off
. Upon the occurrence and during the continuance of any
Event of Default, and subject to Sections 2(b) and 2(c) of this Agreement, the Agents and the
Lenders may, and are hereby authorized to, at any time and from time to time, without notice to the
Guarantor (any such notice being expressly waived by the Guarantor) and to the fullest extent
permitted by law, set-off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing by any Agent or any
Lender to or for the credit or the account of the Guarantor against any and all obligations of the
Guarantor either now or hereafter existing under this Guaranty or any other Loan Document,
irrespective of whether or not any Agent or any Lender shall have made any demand under this
Guaranty or any other Loan Document and although such obligations may be contingent or unmatured.
Each of the Agents and Lenders agrees to notify the Guarantor promptly after any such set-off and
application made by such Agent or Lender,
provided
that the failure to give such notice
shall not affect the validity of such set-off and application. The rights of the Agents and the
Lenders under this Section 8 are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Agents and the Lenders may have under this Guaranty
or any other Loan Document in law or otherwise.
SECTION 9.
Notices, Etc.
All notices and other communications provided for hereunder
shall be in writing and shall be mailed (by certified mail, postage prepaid and return receipt
requested), telecopied or delivered, if to the Guarantor, to it at his address set forth on the
signature page hereto, or if to the Collateral Agent, to it at its address set forth in the
Financing Agreement; or as to either such Person at such other address as shall be designated by
such Person in a written notice to such other Person complying as to delivery with the terms of
this Section 9. All such notices and other communications shall be effective (i) if mailed
(certified mail, postage prepaid and return receipt requested), when received or 3 days after
deposited in the mails, whichever occurs first, (ii) if telecopied, when transmitted and
confirmation received, or (iii) if delivered by hand, Federal Express or other reputable overnight
courier, upon delivery.
SECTION 10.
CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE
. ANY LEGAL ACTION
OR PROCEEDING WITH RESPECT TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS
OF THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK OR OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE GUARANTOR
HEREBY IRREVOCABLY ACCEPTS IN RESPECT OF HIS PROPERTY, GENERALLY
- 8 -
AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE GUARANTOR HEREBY
IRREVOCABLY APPOINTS FOLEY & LARDNER LLP AS HIS AGENT FOR SERVICE OF PROCESS IN RESPECT OF ANY SUCH
ACTION OR PROCEEDING AND FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS AND IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, CARE OF THE ADMINISTRATIVE BORROWER AT ITS ADDRESS
FOR NOTICES AS SET FORTH IN THE FINANCING AGREEMENT AND TO FOLEY & LARDNER, 90 PARK AVENUE, NEW
YORK, NEW YORK 10016, SUCH SERVICE TO BECOME EFFECTIVE TEN (10) DAYS AFTER SUCH MAILING. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF ANY AGENT AND THE LENDERS TO SERVICE OF PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE GUARANTOR
IN ANY OTHER JURISDICTION. THE GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE JURISDICTION OR
LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM
THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE
GUARANTOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID
OF EXECUTION OR OTHERWISE) WITH RESPECT TO HIM OR HIS PROPERTY, THE GUARANTOR HEREBY IRREVOCABLY
WAIVES SUCH IMMUNITY IN RESPECT OF HIS OBLIGATIONS UNDER THIS GUARANTY AND THE OTHER LOAN
DOCUMENTS.
SECTION 11.
WAIVER OF JURY TRIAL, ETC
. THE GUARANTOR HEREBY WAIVES ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS GUARANTY
OR THE OTHER LOAN DOCUMENTS, OR UNDER ANY AMENDMENT, WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR OTHER
AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR
ARISING FROM ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH THIS GUARANTY OR THE OTHER LOAN
DOCUMENTS, AND AGREES THAT ANY SUCH ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY. THE GUARANTOR CERTIFIES THAT NO OFFICER, REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY AGENT OR ANY LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE AGENT OR ANY
LENDER WOULD NOT, IN THE EVENT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM, SEEK TO ENFORCE THE
FOREGOING WAIVERS. THE GUARANTOR HEREBY ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT
FOR THE AGENTS AND THE LENDERS ENTERING INTO THIS AGREEMENT.
- 9 -
SECTION 12.
Miscellaneous
.
(a) The Guarantor will make each payment hereunder in lawful money of the United States of
America and in immediately available funds to the Collateral Agent, for the benefit of the Lenders,
at such address specified by the Collateral Agent from time to time by notice to the Guarantor.
(b) No amendment of any provision of this Guaranty shall be effective unless it is in writing
and signed by the Guarantor and the Collateral Agent, and no waiver of any provision of this
Guaranty, and no consent to any departure by the Guarantor therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Guarantor and the Collateral Agent,
and then such waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
(c) No failure on the part of any Agent or any Lender to exercise, and no delay in exercising,
any right hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall
any single or partial exercise of any right hereunder or under any other Loan Document preclude any
other or further exercise thereof or the exercise of any other right. The rights and remedies of
the Agents and the Lenders provided herein and in the other Loan Documents are cumulative and are
in addition to, and not exclusive of, any rights or remedies provided by law. The rights of the
Agents and the Lenders under any Loan Document against any party thereto are not conditional or
contingent on any attempt by the Agents and the Lenders to exercise any of their rights under any
other Loan Document against such party or against any other Person.
(d) Any provision of this Guaranty which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining portions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
(e) This Guaranty shall (i) be binding on the Guarantor and his heirs, executors,
administrators, legal representatives, successors and assigns, and (ii) inure, together with all
rights and remedies of the Agents and the Lenders hereunder, to the benefit of the Agents and the
Lenders and their respective successors, transferees and assigns. Without limiting the generality
of clause (ii) of the immediately preceding sentence, to the extent permitted by Section 12.07 of
the Financing Agreement, any Lender may assign or otherwise transfer its rights under the Financing
Agreement or any other Loan Document to any other Person, and such other Person shall thereupon
become vested with all of the benefits in respect thereof granted to the Lenders herein or
otherwise. The Guarantor agrees that each participant shall be entitled to the benefits of
Section 8 with respect to its participation in any portion of the Loans as if it was a Lender.
None of the rights or obligations of the Guarantor hereunder may be assigned or otherwise
transferred without the prior written consent of the Collateral Agent.
(f) This Guaranty and the other Loan Documents reflect the entire understanding of the
transactions contemplated hereby and thereby and shall not be contradicted or qualified by any
other agreement, oral or written, before the date hereof.
- 10 -
(g) Section headings herein are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
(h) Delivery of an executed counterpart of this Guaranty by telefacsimile or electronic mail
shall be equally as effective as delivery of an original executed counterpart of this Guaranty.
Any party delivering an executed counterpart of this Guaranty by telefacsimile or electronic mail
also shall deliver an original executed counterpart of this Guaranty but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability, and binding effect of
this Guaranty.
(i) This Guaranty and the other Loan Documents (unless expressly provided to the contrary in
another Loan Document in respect of such other Loan Document) shall be governed by, and construed
in accordance with, the laws of the State of New York applicable to contracts made and to be
performed in the State of New York.
[signature page follows]
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IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed by an officer
thereunto duly authorized, as of the date first above written.
On this
day of March, 2009, before me personally came
, to me known to be
the person who executed the foregoing instrument, and who, being duly sworn by me, did depose and
say to me that s/he executed the foregoing instrument.
EXHIBIT E
FORM OF GUARANTOR SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT, dated as of February ___, 2009 (this
Agreement
),
made by Imperial Premium Finance, LLC, a Florida limited liability company (the
Pledgor
),
in favor of CTL Holdings II, LLC, a Georgia limited liability company (
CTL
), in its
capacity as collateral agent (in such capacity, together with any successors or assigns in such
capacity, if any, the
Collateral Agent
) on behalf of the Lenders referred to below.
W
I
T
N
E
S
S
E
T
H
:
WHEREAS, Imperial Life Financing II, LLC, a Georgia limited liability company (the
Borrower
), the lenders from time to time party thereto (each a
Lender
and
collectively, the
Lenders
), the Collateral Agent, and CTL, as administrative agent for
the Lenders (in such capacity, the
Administrative Agent
and together with the Collateral
Agent, each an
Agent
and collectively, the
Agents
) are parties to a Financing
Agreement, dated as of February ___, 2009 (such agreement, as amended, restated or otherwise
modified from time to time, being hereinafter referred to as the
Financing Agreement
);
WHEREAS, pursuant to the Financing Agreement the Lenders have agreed to make term loans (each
a
Loan
and collectively, the
Loans
) to the Borrower in an aggregate principal
amount at any one time outstanding not to exceed the Total Term Loan Commitment (as defined in the
Financing Agreement);
WHEREAS, the Pledgor owns 100% of the Equity Interests (as defined in the Financing Agreement)
of the Borrower, as set forth in Schedule I hereto;
WHEREAS, it is a condition precedent to the Lenders making any Loan to the Borrower pursuant
to the Financing Agreement that the Pledgor shall have executed and delivered to the Collateral
Agent a pledge and security agreement providing for the pledge to the Collateral Agent, for the
benefit of the Agents and the Lenders, and the grant to the Collateral Agent, for the benefit of
the Agents and the Lenders, of a security interest in and Lien on the outstanding shares of the
Equity Interests (as defined in the Financing Agreement) owned by the Pledgor of the Borrower, and
in which such Pledgor has any interest at any time;
WHEREAS, the Pledgor has determined that the execution, delivery and performance of this
Agreement directly benefits, and is in the best interest of, the Pledgor.
NOW, THEREFORE, in consideration of the premises and the agreements herein and in order to
induce the Lenders to make and maintain the Loans to the Borrower pursuant to the Financing
Agreement, the Pledgor hereby agrees with the Collateral Agent, for the benefit of the Agents and
the Lenders, as follows:
SECTION 1.
Definitions
. Reference is hereby made to the Financing Agreement for a
statement of the terms thereof. All terms used in this Agreement which are defined in the
Financing Agreement or in Article 8 or Article 9 of the Uniform Commercial Code (the
Code
) as in effect from time to time in the State of New York and which are not otherwise
defined
herein shall have the same meanings herein as set forth therein;
provided
, that terms
used herein which are defined in the Code as in effect in the State of New York on the date hereof
shall continue to have the same meaning notwithstanding any replacement or amendment of such
statute except as the Collateral Agent may otherwise determine.
SECTION 2.
Pledge and Grant of Security Interest
. As collateral security for all of
the Obligations (as defined in Section 3 hereof), the Pledgor hereby pledges and assigns to the
Collateral Agent, and grants to the Collateral Agent, for the benefit of the Agents and the
Lenders, a continuing security interest in and Lien on the Pledgors right, title and interest in
and to the following (collectively, the
Pledged Collateral
):
(a) the shares of stock, partnership interests, member interests and other equity interests
described in Schedule I hereto (the
Pledged Shares
), whether or not evidenced or
represented by any stock certificate, certificated security or other instrument, issued by the
Borrower described in such Schedule I (the
Pledged Issuers
), the certificates
representing the Pledged Shares, all options and other rights, contractual or otherwise, in respect
thereof and all dividends, distributions, cash, instruments, investment property and other property
(including but not limited to, any stock dividend and any distribution in connection with a stock
split) from time to time received, receivable or otherwise distributed in respect of or in exchange
for any or all of the Pledged Shares;
(b) all additional shares of stock, partnership interests, member interests or other equity
interests from time to time acquired by the Pledgor, of the Pledged Issuers, the certificates
representing such additional shares, all options and other rights, contractual or otherwise, in
respect thereof and all dividends, distributions, cash, instruments, investment property and other
property from time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such additional shares, interests or equity;
(c) all security entitlements of the Pledgor in any and all of the foregoing; and
(d) all proceeds (including proceeds of proceeds) of any and all of the foregoing;
in each case, whether now owned or hereafter acquired by the Pledgor and howsoever its interest
therein may arise or appear (whether by ownership, security interest, Lien, claim or otherwise).
SECTION 3.
Obligations
. (a) The Pledgor hereby (i) irrevocably, absolutely and
unconditionally guarantees the prompt payment by the Borrower, as and when due and payable (whether
by scheduled maturity, required prepayment, acceleration, demand or otherwise), of all amounts from
time to time owing in respect of the Financing Agreement or any other Loan Document, whether for
principal, interest (including, without limitation, all interest that accrues after the
commencement of any Insolvency Proceeding with respect to the Borrower, whether or not a claim for
post-filing interest is allowed in such proceeding), fees, commissions, expense reimbursements,
indemnifications or otherwise, and whether accruing before or subsequent to the commencement of any
Insolvency Proceeding with respect to the Borrower
2
(notwithstanding the operation of the automatic stay under Section 362(a) of the U.S.
Bankruptcy Code), and the due performance and observance by the Borrower of its other obligations
now or hereafter existing in respect of the Loan Documents (the
Obligations
), and (ii)
agrees to pay any and all expenses (including reasonable counsel fees and expenses) incurred by the
Agents and the Lenders in enforcing any rights under this Agreement.
(b) The security interest created hereby in the Pledged Collateral constitutes continuing
collateral security for (x) Obligations and (y) the due performance and observance by the Pledgor
of all of its other obligations from time to time existing in respect of the Loan Documents.
(c) Notwithstanding anything to the contrary contained in this Agreement, the recourse of the
Agent and the Lenders with respect to the liability of the Pledgor under this Agreement solely with
respect to the Obligations shall be limited to the Pledged Collateral.
SECTION 4.
Delivery of the Pledged Collateral
.
(a) (i) All certificates currently representing the Pledged Shares shall be delivered to the
Collateral Agent contemporaneously with or prior to the execution and delivery of this Agreement.
All other certificates and instruments constituting Pledged Collateral from time to time or
required to be pledged to the Collateral Agent, pursuant to the terms of this Agreement or the
Financing Agreement (the
Additional Collateral
), shall be delivered to the Collateral
Agent promptly upon receipt thereof by or on behalf of the Pledgor. All such certificates and
instruments shall be held by or on behalf of the Collateral Agent pursuant hereto and shall be
delivered in suitable form for transfer by delivery or shall be accompanied by duly executed
instruments of transfer or assignment or undated stock powers executed in blank, all in form and
substance reasonably satisfactory to the Collateral Agent. If any Pledged Collateral consists of
uncertificated securities, unless the immediately following sentence is applicable thereto, the
Pledgor shall cause the Collateral Agent (or its designated custodian or nominee) to become the
registered holder thereof, or cause each issuer of such securities to agree that it will comply
with instructions originated by the Collateral Agent with respect to such securities without
further consent by the Pledgor. If any Pledged Collateral consists of security entitlements, the
Pledgor shall transfer such security entitlements to the Collateral Agent (or its custodian,
nominee or other designee), or cause the applicable securities intermediary to agree that it will
comply with entitlement orders by the Collateral Agent without further consent by the Pledgor.
(ii) Within five (5) days of the receipt by the Pledgor of any Additional Collateral, a Pledge
Amendment, duly executed by the Pledgor, in substantially the form of Annex I hereto (a
Pledge
Amendment
) shall be delivered to the Collateral Agent, in respect of the Additional Collateral
which must be pledged pursuant to this Agreement and the Financing Agreement. The Pledge Amendment
shall from and after delivery thereof constitute part of Schedule I hereto. The Pledgor hereby
authorizes the Collateral Agent to attach each Pledge Amendment to this Agreement and agrees that
all certificates or instruments listed on any Pledge Amendment delivered to the Collateral Agent
shall for all purposes hereunder constitute Pledged Collateral and such Pledgor shall be deemed
upon delivery thereof to have made the
3
representations and warranties set forth in Section 5 hereof with respect to such Additional
Collateral.
(b) If the Pledgor shall receive, by virtue of the Pledgors being or having been an owner of
any Pledged Collateral, any (i) stock certificate (including, without limitation, any certificate
representing a stock dividend or distribution in connection with any increase or reduction of
capital, reclassification, merger, consolidation, sale of assets, combination of shares, stock
split, spin-off or split-off) or other instrument, (ii) option or right, whether as an addition to,
substitution for, or in exchange for, any Pledged Collateral, or otherwise, (iii) dividends payable
in cash (except such dividends permitted to be retained by any such Pledgor pursuant to Section 7
hereof) or in securities or other property or (iv) dividends or other distributions in connection
with a partial or total liquidation or dissolution or in connection with a reduction of capital,
capital surplus or paid-in surplus, the Pledgor shall receive such stock certificate, instrument,
option, right, payment or distribution constituting certificated Pledged Collateral in trust for
the benefit of the Collateral Agent, shall segregate it from such Pledgors other property and
shall deliver it forthwith to the Collateral Agent, in the exact form received, with any necessary
endorsement and/or appropriate stock powers duly executed in blank, to be held by the Collateral
Agent as Pledged Collateral and as further collateral security for the Obligations.
SECTION 5.
Representations and Warranties
. The Pledgor represents and warrants as
follows:
(a) The Pledgor is a limited liability company duly organized, validly existing and in good
standing under the laws of the state of its organization as set forth on the first page hereof, and
has all the requisite limited liability company power and authority to execute, deliver and perform
this Agreement.
(b) The execution, delivery and performance by the Pledgor of this Agreement (i) have been
duly authorized by all necessary limited liability company power and authority, (ii) do not and
will not contravene its certificate of formation, operating agreement, any Requirements of Law or
any contractual restriction binding on or affecting it or any of its properties, (ii) do not and
will not result in or require the creation of any Lien upon or with respect to any of its
properties other than pursuant to this Agreement, and (iii) do not and will not results in any
default, noncompliance, suspension, revocation, impairment, forfeiture or nonrenewal of any
material permit, license, authorization or approval applicable to any of its properties.
(c) Schedule II hereto sets forth (i) the exact legal name of the Pledgor and all other names
used by the Pledgor at any time during the five years preceding the Effective Date, and (ii) the
Pledgors chief executive office and principal place of business and each place of business of the
Pledgor during the five years preceding the Effective Date.
(d) The Pledged Shares have been duly authorized and validly issued and are fully paid and
nonassessable and the holders thereof are not entitled to any preemptive, first refusal or other
similar rights (other than pursuant to a stock transfer agreement entered into
4
with the prior written consent of the Collateral Agent). All other shares of stock
constituting Pledged Collateral will be duly authorized and validly issued, fully paid and
nonassessable.
(e) The Pledgor is and will be at all times the legal and beneficial owner of the Pledged
Collateral free and clear of all Liens except for the Lien created by this Agreement.
(f) The exercise by the Collateral Agent of any of its rights and remedies hereunder will not
contravene any law or any contractual restriction binding on or affecting the Pledgor or any of the
properties of the Pledgor and will not result in or require the creation of any Lien upon or with
respect to any of the properties of the Pledgor other than pursuant to this Agreement or the other
Loan Documents.
(g) No authorization or approval or other action by, and no notice to or filing with, any
Governmental Authority is required to be obtained or made by the Pledgor for (i) the due execution,
delivery and performance by the Pledgor of this Agreement, (ii) the grant by the Pledgor, or the
perfection, of the Lien created hereby in the Pledged Collateral, except for the filing in the
office described in Schedule III hereto of a UCC financing statement naming the Pledgor as debtor,
the Collateral Agent as secured party and describing the Pledged Collateral, to perfect the
Collateral Agents security interests in items of the Pledged Collateral in which such security
interests are not susceptible to perfection by possession of certificates or instruments, which
financing statement has been duly filed or (iii) the exercise by the Collateral Agent of any of its
rights and remedies hereunder, except as may be required in connection with any sale of any Pledged
Collateral by laws affecting the offering and sale of securities generally.
(h) This Agreement is a legal, valid and binding obligation of the Pledgor, enforceable
against the Pledgor in accordance with its terms.
(i) This Agreement creates a valid Lien in favor of the Collateral Agent, for the benefit of
the Agents and the Lenders, in the Pledged Collateral as security for the Obligations. The
Collateral Agents having possession of the certificates representing the Pledged Shares and all
other certificates, instruments and cash constituting Pledged Collateral from time to time results
in the perfection of such Lien. Such Lien is, or in the case of Pledged Collateral in which the
Pledgor obtains rights after the date hereof, will be, a perfected, first priority Lien. All
action necessary or desirable to perfect and protect such Lien has been duly taken, except for the
Collateral Agents having possession of certificates, instruments and cash constituting Pledged
Collateral after the date hereof.
(j) The partnership interests or membership interests of each Pledged Issuer are (i)
securities for purposes of Article 8 of the UCC, (iii) investment company securities within the
meaning of Section 8-103 of the UCC and (iii) evidenced by a certificate.
(k) The pledge of the Pledged Collateral pursuant to this Agreement does not violate
Regulation T, U or X of the Board of Governors of the Federal Reserve System.
5
SECTION 6.
Covenants as to the Pledged Collateral
. So long as any of the Obligations
shall remain outstanding or prior to the termination of all Commitments, the Pledgor will, unless
the Collateral Agent shall otherwise consent in writing:
(a) keep adequate records concerning the Pledged Collateral and permit the Collateral Agent or
any agents, designees or representatives thereof at any time or from time to time to examine and
make copies of and abstracts from such records consistent with the terms of the Financing
Agreement;
(b) at the Pledgors expense, promptly deliver to the Collateral Agent a copy of each notice
or other communication received by it in respect of the Pledged Collateral;
(c) at the Pledgors expense, defend the Collateral Agents right, title and security interest
in and to the Pledged Collateral against the claims of any Person;
(d) at the Pledgors expense, at any time and from time to time, promptly execute and deliver
all further instruments and documents and take all further action that may be necessary or
desirable or that the Collateral Agent may reasonably request in order to (i) perfect and protect,
or maintain the perfection of, the security interest and Lien created hereby, (ii) enable the
Collateral Agent to exercise and enforce its rights and remedies hereunder in respect of the
Pledged Collateral or (iii) otherwise effect the purposes of this Agreement, including, without
limitation, delivering to the Collateral Agent irrevocable proxies in respect of the Pledged
Collateral;
(e) not sell, assign (by operation of law or otherwise), exchange or otherwise dispose of any
Pledged Collateral or any interest therein except as expressly permitted by Section 7.02(c) of the
Financing Agreement;
(f) not create or suffer to exist any Lien upon or with respect to any Pledged Collateral
except for the Lien created hereby;
(g) not make or consent to any amendment or other modification or waiver with respect to any
Pledged Collateral or enter into any agreement or permit to exist any restriction with respect to
any Pledged Collateral other than pursuant to the Loan Documents;
(h) not vote in favor of the issuance of (i) any additional shares of any class of Equity
Interests of each Pledged Issuer, (ii) any securities convertible voluntarily by the holder thereof
or automatically upon the occurrence or non occurrence of any event or condition into, or
exchangeable for, any such shares of Equity Interests or (iii) any warrants, options, contracts or
other commitments entitling any Person to purchase or otherwise acquire any such shares of Equity
Interests, except in the case of clauses (i), (ii) and (iii), to the extent any such issuance is
expressly permitted by the Financing Agreement;
(i) not take or fail to take any action which would in any manner impair the value of or the
enforceability of the Collateral Agents security interest in and Lien on any Pledged Collateral;
and
6
(j) cause each interest in each Pledged Issuer controlled by the Pledgor and pledged hereunder
to be (i) represented by a certificate, (ii) deemed a security within the meaning of Article 8 of
the UCC and (iii) governed by Article 8 of the UCC.
SECTION 7.
Voting Rights, Dividends, Etc. in Respect of the Pledged Collateral
.
(a) So long as no Event of Default shall have occurred and be continuing:
(i) the Pledgor may exercise any and all voting and other consensual rights pertaining to any
Pledged Collateral for any purpose not inconsistent with the terms of this Agreement, the Financing
Agreement or the other Loan Documents;
provided
,
however
, that (A) the Pledgor will
not exercise or will refrain from exercising any such right, as the case may be, if the Collateral
Agent gives the Pledgor notice that, in the Collateral Agents judgment, such action (or inaction)
is reasonably likely to have a material adverse effect to the Pledgors financial condition and (B)
the Pledgor will give the Collateral Agent at least five (5) Business Days notice of the manner in
which it intends to exercise, or the reasons for refraining from exercising, any such right which
is reasonably likely to have a material adverse effect to the Pledgors financial condition;
(ii) the Pledgor may receive and retain any and all dividends, interest or other distributions
or payments in respect of the Pledged Collateral to the extent permitted by the Financing
Agreement;
provided
,
however
, that any and all (A) dividends and interest paid or
payable other than in cash in respect of, and instruments and other property received, receivable
or otherwise distributed in respect of or in exchange for, any Pledged Collateral, (B) dividends
and other distributions paid or payable in cash in respect of any Pledged Collateral in connection
with a partial or total liquidation or dissolution or in connection with a reduction of capital,
capital surplus or paid-in surplus, and (C) cash paid, payable or otherwise distributed in
redemption of, or in exchange for, any Pledged Collateral, together with any dividend, interest or
other distribution or payment which at the time of such payment was not permitted by the Financing
Agreement, shall be, and shall forthwith be delivered to the Collateral Agent, if such Collateral
constitutes certificated Pledged Collateral, to hold as, Pledged Collateral and shall, if received
by the Pledgor, be received in trust for the benefit of the Collateral Agent, shall be segregated
from the other property or funds of the Pledgor, and shall be forthwith delivered to the Collateral
Agent in the exact form received with any necessary endorsement and/or appropriate stock powers
duly executed in blank, to be held by the Collateral Agent as Pledged Collateral and as further
collateral security for the Obligations; and
(iii) the Collateral Agent will execute and deliver (or cause to be executed and delivered) to
the Pledgor all such proxies and other instruments as the Pledgor may reasonably request for the
purpose of enabling the Pledgor to exercise the voting and other rights which it is entitled to
exercise pursuant to Section 7(a)(i) hereof and to receive the dividends, interest and/or other
distributions which it is authorized to receive and retain pursuant to Section 7(a)(ii) hereof.
7
(b) Upon the occurrence and during the continuance of an Event of Default:
(i) all rights of the Pledgor to exercise the voting and other rights which it would otherwise
be entitled to exercise pursuant to Section 7(a)(i) hereof, and to receive the dividends,
distributions, interest and other payments which it would otherwise be authorized to receive and
retain pursuant to Section 7(a)(ii) hereof, shall cease, and all such rights shall thereupon become
vested in the Collateral Agent which shall thereupon have the sole right to exercise such voting
and other consensual rights and to receive and hold as Pledged Collateral such dividends and
interest payments;
(ii) without limiting the generality of the foregoing, the Collateral Agent may, at its option
exercise any and all rights of conversion, exchange, subscription or any other rights, privileges
or options pertaining to any of the Pledged Collateral as if it were the absolute owner thereof,
including, without limitation, the right to exchange, in its discretion, any and all of the Pledged
Collateral upon the merger, consolidation, reorganization, recapitalization or other adjustment of
each Pledged Issuer, or upon the exercise by each Pledged Issuer of any right, privilege or option
pertaining to any Pledged Collateral, and, in connection therewith, to deposit and deliver any and
all of the Pledged Collateral with any committee, depository, transfer agent, registrar or other
designated agent upon such terms and conditions as it may determine; and
(iii) all dividends, distributions, interest and other payments which are received by the
Pledgor contrary to the provisions of Section 7(b)(i) hereof shall be received in trust for the
benefit of the Collateral Agent shall be segregated from other funds of the Pledgor, and shall be
forthwith paid over to the Collateral Agent as Pledged Collateral in the exact form received with
any necessary endorsement and/or appropriate stock powers duly executed in blank, to be held by the
Collateral Agent as Pledged Collateral and as further collateral security for the Obligations.
SECTION 8.
Additional Provisions Concerning the Pledged Collateral
.
(a) To the maximum extent permitted by applicable law, and for the purpose of taking any
action which the Agent may deem necessary or advisable to accomplish the purposes of this
Agreement, the Pledgor (i) authorizes the Collateral Agent to execute any such agreements,
instruments or other documents in the Pledgors name and to file such agreements, instruments or
other documents in the Pledgors name and to file such agreements, instruments, or other documents
in any appropriate filing office (ii) authorizes the Collateral Agent to file any financing
statements required hereunder or under any other Loan Document, and any continuation statements or
amendment with respect thereto, in any appropriate filing office without the signature of the
Pledgor and (iii) ratifies the filing of any financing statement, and any continuation statement or
amendment with respect thereto, filed without the signature of the Pledgor prior to the date
hereof. A photocopy or other reproduction of this Agreement or any financing statement covering
the Pledged Collateral or any part thereof shall be sufficient as a financing statement where
permitted by law.
8
(b) The Pledgor hereby irrevocably appoints the Collateral Agent as the Pledgors
attorney-in-fact and proxy, with full authority in the place and stead of the Pledgor and in the
name of the Pledgor or otherwise, from time to time in the Collateral Agents discretion, to take
any action and to execute any instrument which the Collateral Agent may deem necessary or advisable
to accomplish the purposes of this Agreement (subject to the rights of the Pledgor under Section
7(a) hereof), including, without limitation, to receive, endorse and collect all instruments made
payable to the Pledgor representing any dividend, interest, distribution or other payment in
respect of any Pledged Collateral and to give full discharge for the same. This power is coupled
with an interest and is irrevocable until all of the Obligations are indefeasibly paid in full
after all Commitments have been terminated.
(c) If the Pledgor fails to perform any agreement or obligation contained herein, the
Collateral Agent itself may perform, or cause performance of, such agreement or obligation, and the
expenses of the Collateral Agent incurred in connection therewith shall be payable by the Pledgor
pursuant to Section 10 hereof and shall be secured by the Pledged Collateral.
(d) Other than the exercise of reasonable care to assure the safe custody of the Pledged
Collateral while held hereunder, the Collateral Agent shall have no duty or liability to preserve
rights pertaining thereto and shall be relieved of all responsibility for the Pledged Collateral
upon surrendering it or tendering surrender of it to the Pledgor. The Collateral Agent shall be
deemed to have exercised reasonable care in the custody and preservation of the Pledged Collateral
in its possession if the Pledged Collateral is accorded treatment substantially equal to that which
the Collateral Agent accords its own property, it being understood that the Collateral Agent shall
not have responsibility for (i) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relating to any Pledged Collateral, whether or not
the Collateral Agent has or is deemed to have knowledge of such matters, or (ii) taking any
necessary steps to preserve rights against any parties with respect to any Pledged Collateral.
(e) The powers conferred on the Collateral Agent hereunder are solely to protect its interest
in the Pledged Collateral and shall not impose any duty upon the Collateral Agent to exercise any
such powers. Except for the safe custody of any Pledged Collateral in its possession and the
accounting for monies actually received by it hereunder, the Collateral Agent shall have no duty as
to any Pledged Collateral or as to the taking of any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Pledged Collateral.
(f) The Collateral Agent may at any time in its discretion (i) without notice to the Pledgor,
transfer or register in the name of the Collateral Agent or any of its nominees any or all of the
Pledged Collateral, subject only to the revocable rights of such Pledgor under Section 7(a) hereof,
and (ii) exchange certificates or instruments constituting Pledged Collateral for certificates or
instruments of smaller or larger denominations.
9
SECTION 9.
Remedies Upon Default
. If any Event of Default shall have occurred and be
continuing:
(a) The Collateral Agent may exercise in respect of the Pledged Collateral, in addition to any
other rights and remedies provided for herein or otherwise available to it, all of the rights and
remedies of a secured party upon default under the Code then in effect in the State of New York;
and without limiting the generality of the foregoing and without notice except as specified below,
sell the Pledged Collateral or any part thereof in one or more parcels at public or private sale,
at any exchange or brokers board or elsewhere, at such price or prices and on such other terms as
the Collateral Agent may deem commercially reasonable. The Pledgor agrees that, to the extent
notice of sale shall be required by law, at least five (5) days notice to the Pledgor of the time
and place of any public sale of Pledged Collateral owned by the Pledgor or the time after which any
private sale is to be made shall constitute reasonable notification. The Collateral Agent shall
not be obligated to make any sale of Pledged Collateral regardless of whether or not notice of sale
has been given. The Collateral Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned.
(b) In the event that the Collateral Agent determines to exercise its right to sell all or any
part of the Pledged Collateral pursuant to Section 9(a) hereof, the Pledgor will, upon request by
the Collateral Agent: (i) execute and deliver, and vote in favor of causing the issuer of the
Pledged Collateral and the directors and officers thereof to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts and things, as may be
necessary or, in the opinion of the Collateral Agent, advisable to register the Pledged Collateral
under the provisions of the Securities Act of 1933, as amended (the
Securities Act
), and
to cause the registration statement relating thereto to become effective and to remain effective
for such period as prospectuses are required by law to be furnished, and to make all amendments and
supplements thereto and to the related prospectus which, in the opinion of the Collateral Agent,
are necessary or advisable, all in conformity with the requirements of the Securities Act and the
rules and regulations of the Securities and Exchange Commission applicable thereto, (ii) vote in
favor of causing the issuer of the Pledged Collateral to qualify the Pledged Collateral under the
state securities or Blue Sky laws of each jurisdiction, and to obtain all necessary governmental
approvals for the sale of the Pledged Collateral, as requested by the Collateral Agent, (iii) vote
in favor of causing each Pledged Issuer to make available to its securityholders, as soon as
practicable, an earnings statement which will satisfy the provisions of Section 11(a) of the
Securities Act, and (iv) do or cause to be done all such other acts and things within its power as
may be necessary to make such sale of the Pledged Collateral valid and binding and in compliance
with any applicable law.
(c) Notwithstanding the provisions of Section 9(b) hereof, the Pledgor recognizes that the
Collateral Agent may deem it impracticable to effect a public sale of all or any part of the
Pledged Shares or any other securities constituting Pledged Collateral and that the Collateral
Agent may, therefore, determine to make one or more private sales of any such securities to a
restricted group of purchasers who will be obligated to agree, among other things, to acquire such
securities for their own account, for investment and not with a view to the distribution or resale
thereof. The Pledgor acknowledges that any such private sale may be at
10
prices and on terms less favorable to the seller than the prices and other terms which might
have been obtained at a public sale and, notwithstanding the foregoing, agrees that such private
sales shall be deemed to have been made in a commercially reasonable manner and that the Collateral
Agent shall have no obligation to delay the sale of any such securities for the period of time
necessary to permit the issuer of such securities to register such securities for public sale under
the Securities Act. The Pledgor further acknowledges and agrees that any offer to sell such
securities which has been (i) publicly advertised on a bona fide basis in a newspaper or other
publication of general circulation in the financial community of New York, New York (to the extent
that such an offer may be so advertised without prior registration under the Securities Act) or
(ii) made privately in the manner described above to not less than fifteen
bona
fide
offerees shall be deemed to involve a public disposition for the purposes of Section
9-610(c) of the Code (or any successor or similar, applicable statutory provision) as then in
effect in the State of New York, notwithstanding that such sale may not constitute a public
offering under the Securities Act, and that the Collateral Agent may, in such event, bid for the
purchase of such securities.
(d) Any cash held by the Collateral Agent as Pledged Collateral and all cash proceeds received
by the Collateral Agent in respect of any sale of, collection from, or other realization upon, all
or any part of the Pledged Collateral may, in the discretion of the Collateral Agent, be held by
the Collateral Agent as collateral for, and/or then or at any time thereafter applied (after
payment of any amounts payable to the Collateral Agent pursuant to Section 10 hereof) in whole or
in part by the Collateral Agent against, all or any part of the Obligations in such order as the
Collateral Agent shall elect consistent with the provisions of the Financing Agreement. Any
surplus of such cash or cash proceeds held by the Collateral Agent and remaining after indefeasible
payment in full of all of the Obligations after all Commitments have been terminated shall be paid
over to the Pledgor or to such Person as may be lawfully entitled to receive such surplus.
(e) In the event that the proceeds of any such sale, collection or realization are
insufficient to pay all amounts to which the Agents and the Lenders are legally entitled, the
Pledgor shall be liable for the deficiency, together with interest thereon at the highest rate
specified in the Financing Agreement for interest on overdue principal thereof or such other rate
as shall be fixed by applicable law, together with the costs of collection and the fees, costs and
expenses and other client charges of any attorneys employed by the Collateral Agent to collect such
deficiency.
SECTION 10.
Indemnity and Expenses
.
(a) The Pledgor agrees to defend, protect, indemnify and hold harmless each Agent and each
Lender (and all of their respective officers, directors, employees, attorneys, consultants and
agents) from and against any and all claims, damages, losses, liabilities obligations, penalties,
fees, costs and expenses (including, without limitation, legal fees, costs and expenses of counsel)
to the extent that they arise out of or otherwise result from the enforcement of this Agreement,
except, as to any such indemnified Person, claims, losses or liabilities resulting solely and
directly from such Persons gross negligence or willful misconduct as determined by a final
judgment of a court of competent jurisdiction.
11
(b) The Pledgor agrees to pay to the Collateral Agent upon demand the amount of any and all
costs and expenses, including the fees, costs, expenses and disbursements of the Collateral Agents
counsel and of any experts and agents, which the Collateral Agent may incur in connection with (i)
the amendment, waiver or other modification or termination of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other realization upon, any
Pledged Collateral, (iii) the exercise or enforcement of any of the rights of the Collateral Agent
hereunder, or (iv) the failure by the Pledgor to perform or observe any of the provisions hereof.
SECTION 11.
Notices, Etc.
All notices and other communications provided for hereunder
shall be in writing and shall be mailed (by certified mail, postage prepaid and return receipt
requested), telecopied or delivered, if to the Pledgor, to the Pledgor as specified next to such
Pledgors signature below; if to the Borrower, at its address specified in Section 12.01 of the
Financing Agreement; or if to the Collateral Agent, to it at its address specified in Section 12.01
of the Financing Agreement; or as to any such Person at such other address as shall be designated
by such Person in a written notice to such other Person complying as to delivery with the terms of
this Section 11. All such notices and other communications shall be effective (i) if mailed
(certified mail, postage prepaid and return receipt requested), when received or three (3) days
after deposited in the mails, whichever occurs first, (ii) if telecopied, when transmitted and
confirmation received, or (iii) if delivered by hand, Federal Express or other reputable overnight
courier, upon delivery.
SECTION 12.
Security Interest Absolute
. All rights of the Agents and the Lenders, all
Liens and all obligations of the Pledgor hereunder shall be absolute and unconditional irrespective
of: (i) any lack of validity or enforceability of the Financing Agreement or any other agreement
or instrument relating thereto, (ii) any change in the time, manner or place of payment of, or in
any other term in respect of, all or any of the Obligations, or any other amendment or waiver of or
consent to any departure from the Financing Agreement or any other Loan Document, (iii) any
exchange or release of, or non-perfection of any Lien on any Collateral, or any release or
amendment or waiver of or consent to departure from any Guaranty, for all or any of the
Obligations, or (iv) any other circumstance which might otherwise constitute a defense available
to, or a discharge of, the Pledgor in respect of the Obligations. All authorizations and agencies
contained herein with respect to any of the Pledged Collateral are irrevocable and powers coupled
with an interest.
SECTION 13.
Miscellaneous
.
(a) No amendment of any provision of this Agreement shall be effective unless it is in writing
and signed by the Collateral Agent, and no waiver of any provision of this Agreement, and no
consent to any departure the Pledgor therefrom, shall be effective unless it is in writing and
signed by the Collateral Agent, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
(b) No failure on the part of any Agent or any Lender to exercise, and no delay in exercising,
any right hereunder or under any Loan Document shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or
12
further exercise thereof or the exercise of any other right. The rights and remedies of the
Agents and the Lenders provided herein and in the other Loan Documents are cumulative and are in
addition to, and not exclusive of, any rights or remedies provided by law. The rights of the
Agents and the Lenders under the applicable Loan Document against any party thereto are not
conditional or contingent on any attempt by the Agents or the Lenders to exercise any of their
rights under any other document against such party or against any other Person, including but not
limited to, the Pledgor.
(c) Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining portions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
(d) This Agreement shall create a continuing security interest in and Lien on the Pledged
Collateral and shall (i) remain in full force and effect until the indefeasible payment in full or
release of the Obligations after the termination of all of the Commitments and (ii) be binding on
each Pledgor and, by its acceptance hereof, the Collateral Agent, and its respective successors and
assigns, and shall inure, together with all rights and remedies of the Agents and the Lenders
hereunder, to the benefit of each of the Agents and the Lenders and their respective successors,
transferees and assigns. Without limiting the generality of clause (ii) of the immediately
preceding sentence, without notice to the Pledgor, the Agents and the Lenders may assign or
otherwise transfer their respective rights and obligations under this Agreement and any other Loan
Document to any other Person, and such other Person shall thereupon become vested with all of the
benefits in respect thereof granted to the Agents and the Lenders herein or otherwise. Upon any
such assignment or transfer, all references in this Agreement to any such Agent or Lender shall
mean the assignee of such Agent or Lender. None of the rights or obligations of the Pledgor
hereunder may be assigned or otherwise transferred without the prior written consent of the
Collateral Agent, and any such assignment or transfer shall be null and void.
(e) Upon the satisfaction in full of the Obligations after the termination of all of the
Commitments (i) this Agreement and the security interest and Lien created hereby shall terminate
and all rights to the Pledged Collateral shall revert to the Pledgor, and (ii) the Collateral Agent
will, upon the Pledgors request and at the Pledgors expense, (A) return to the Pledgor such of
the Pledged Collateral as shall not have been sold or otherwise disposed of or applied pursuant to
the terms hereof, and (B) execute and deliver to the Pledgor, without recourse, representation or
warranty, such documents as the Pledgor shall reasonably request to evidence such termination.
(f) This Agreement may be executed in any number of counterparts and by the different parties
hereto on separate counterparts, each of which shall be deemed an original, but all such
counterparts shall constitute one and the same agreement. Delivery of an executed counterpart of
this Agreement by telefacsimile or electronic mail shall be equally as effective as delivery of an
original executed counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile or electronic mail also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed counterpart shall not
affect the validity, enforceability, and binding effect of this Agreement.
13
(g) This Agreement shall be governed by and construed in accordance with the law of the State
of New York, except as required by mandatory provisions of law and except to the extent that the
validity and perfection or the perfection and the effect of perfection or non-perfection of the
security interest and Lien created hereby, or remedies hereunder, in respect of any particular
Pledged Collateral are governed by the law of a jurisdiction other than the State of New York.
(h)
ANY LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY DOCUMENT
RELATED THERETO MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK OR
THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS THEREOF,
AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE PLEDGOR HEREBY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.
THE PLEDGOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF
FORUM
NON
CONVENIENS
, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION, SUIT OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND CONSENTS TO
THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT.
(i) THE PLEDGOR AND (BY ITS ACCEPTANCE OF THE BENEFITS OF THIS AGREEMENT) THE COLLATERAL AGENT
WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN STATEMENT OR OTHER ACTION OF THE PARTIES HERETO.
[signature page follows]
14
IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be executed and delivered on the
date first above written.
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PLEDGOR:
IMPERIAL PREMIUM FINANCE, LLC
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By:
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Imperial Holdings, LLC, its managing member
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By:
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Name:
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Jonathan Neuman
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Title:
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President
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Address:
701 Park of Commerce Blvd., Suite 301
Boca Raton, Florida 33487
Telecopy No.: (561) 995-4203
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15
SCHEDULE I
TO
GUARANTOR SECURITY AGREEMENT
Pledged Shares
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Pledgor
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Name of Issuer
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Number of Shares
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Class
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Certificate Number
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Imperial Premium
Finance, LLC
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Imperial Life
Financing II, LLC
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100
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1
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SCHEDULE II
TO
GUARANTOR SECURITY AGREEMENT
Part A
Current Names and Addresses of Pledgor
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Exact Name
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Address
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City
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State
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Zip Code
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Imperial Premium
Finance, LLC
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701 Park of
Commerce Blvd.,
Suite 301
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Boca Raton
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FL
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33487
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Part B
Names and Addresses of Pledgor Used During Last Five Years
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Exact Name
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Address
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City
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State
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Zip Code
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Imperial Premium
Finance, LLC
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701 Park of
Commerce Blvd.,
Suite 301
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Boca Raton
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FL
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33487
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SCHEDULE III
TO
GUARANTOR SECURITY AGREEMENT
Filing Offices
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Name
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Filing Office
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Imperial Premium Finance, LLC
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ANNEX I
TO
GUARANTOR SECURITY AGREEMENT
PLEDGE AMENDMENT
This Pledge Amendment, dated ____________, is delivered pursuant to Section 4 of the Pledge
and Security Agreement referred to below. The undersigned hereby agrees that this Pledge Amendment
may be attached to the Guarantor Security Agreement, dated as of February ______, 2009, as it may
heretofore have been or hereafter may be amended or otherwise modified or supplemented from time to
time (the
Pledge and Security Agreement
) and that the shares listed on this Pledge
Amendment shall be hereby pledged and assigned to the Collateral Agent and become part of the
Pledged Collateral referred to in such Pledge and Security Agreement and shall secure all of the
Obligations referred to in such Pledge and Security Agreement.
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Pledged Shares
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Number
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Certificate
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Pledgor
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Name of Issuer
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of Shares
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Class
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Number(s)
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[PLEDGOR]
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By:
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Name:
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Title:
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EXHIBIT F
ASSIGNMENT OF BENEFICIAL INTERESTS
This Assignment of Beneficial Interests is made as of
, 20___, by
[
]
(
Beneficiary
) for good and valuable consideration, in favor of
Imperial Premium Finance, LLC
, a Florida limited liability
company (
Lender
) pursuant to a certain
Pledge Agreement between Beneficiary and Lender, dated
[
, 20___] (
Pledge Agreement
).
All capitalized terms used but not defined herein are defined in the Pledge Agreement.
Beneficiary hereby assigns, transfers and sets over to Lender, its successors and assigns all
of Beneficiarys right, title and interest in and under the Trust Agreement (and the trust created
thereby (the Trust)) dated [
, 20___] of which [
] is the settlor or grantor and
of which Beneficiary is a beneficiary, including without limitation, ownership of the beneficial
ownership interests in or under the Trust Agreement and the Trust, any and all rights to
distributions of assets, corpus, income and principal and any rights to amend or terminate the
Trust and Trust Agreement.
AUTHORIZATION AND DIRECTION TO PROVIDE DEATH CERTIFICATE
I hereby authorize and direct my personal representative, family members, funeral service
providers, physician or any other person with responsibility for my affairs at the time of and
after my death to provide to (i) the
[Trust-Name]
(the
Trust
) , (ii) [Name of Trustee],
as trustee of the Trust (the Trustee) and any other person or entity that demonstrates an
ownership or security interest in a life insurance policy under which I am designated as the
insured (each, a
Policyowner
), one or more original death certificates and any other
documents necessary for the Trust or a Policyowner to process a claim for benefits under, or a
surrender of, any life insurance policy under which I am designated as the insured.
If any of the above referenced individuals fails or refuses to provide original death
certificates or any other documents necessary to process a claim for benefits under, or a surrender
of, any insurance policy under which I am designated as the insured, then this authorization may be
used by the Trust, the Trustee any Policyowner and any of their respective agents, designees,
successors or assigns to obtain (i) one or more originals of my death certificates directly from
the appropriate governmental agency and/or funeral service provider, notwithstanding that such
certificate may contain confidential information otherwise protected from dissemination under any
state or federal law or (ii) an order from a court of competent jurisdiction requiring (a) specific
performance of my directions herein or (b) that the appropriate governmental agency deliver to the
Trust, the Trustee or other Policyowner one or more originals of my death certificates.
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[INSURED]
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Signature
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Date of Birth
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Social Security Number
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STATE OF
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ss.:
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COUNTY OF
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Sworn to
(or affirmed) and subscribed before me this ___ day of
by
,
who is personally known to me or who produced
as identification.
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(Print, Type, or Stamp Commissioned Name of Notary Public)
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My Commission Expires:
BENEFICIARY PLEDGE AGREEMENT
THIS BENEFICIARY PLEDGE AGREEMENT
(this Pledge Agreement) [DATE], is made and executed
between [BENEFICIARY-NAME] (Beneficiary), a beneficiary of the [TRUST] (the Trust) and IMPERIAL
PREMIUM FINANCE, LLC, a Florida limited liability company (Lender).
RECITALS
A. Pursuant to the Loan Application and Agreement (the Loan Agreement) dated as of the date
hereof between Lender and [TRUSTEE], the Trustee of the Trust, Lender has loaned or will loan to
Trust an amount under the Loan Agreement to be used by the Trust to pay premiums on a Life
Insurance Policy;
B. The Trust is the sole owner and beneficiary of the Life Insurance Policy, which the Trust
holds pursuant to the terms of the Trust Agreement;
C. The Beneficiary will derive significant benefits from the loan to the Trust under the Loan
Agreement by reason of his or her interest in the Trust;
D. In order to induce the Lender to make the advance contemplated by the Loan Agreement and
extend credit to the Trust as provided in the Loan Agreement, the Beneficiary has agreed to grant a
security interest in the Beneficiarys beneficial interest in the Trust to the Lender in accordance
with the terms and conditions of this Pledge Agreement.
NOW, THEREFORE,
intending to be legally bound and in consideration of the matters described in
the foregoing Recitals, which Recitals are incorporated herein and made a part hereof, and for
other good and valuable consideration the receipt and sufficiency of which are acknowledged,
Beneficiary and Lender hereby covenant and agree as follows:
1.
GRANT OF SECURITY INTEREST.
Beneficiary hereby grants, gives, conveys and pledges to Lender
a first priority security interest in all of Beneficiarys right, title and interest whether now
owned or hereafter acquired and wherever located, in and to the Collateral to secure the
Obligations and agrees that Lender shall have the rights stated in this Pledge Agreement with
respect to the Collateral, in addition to all other rights that Lender may have by law.
2.
COLLATERAL DESCRIPTION.
The word Collateral means all of the Beneficiarys right, title
and interest in and to the beneficial interests in the Trust, the Trust Agreement and the assets
held by the Trust under the Trust Agreement and any Financing Documents, including without
limitation the Trusts entire beneficial interest in and to the Life Insurance Policy and the death
benefits payable thereunder, and all proceeds of all of the foregoing.
3.
BENEFICIARYS REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL.
With respect
to the Collateral, Beneficiary represents and warrants to Lender that:
a.
Ownership.
On and after the Initial Premium Funding Date, the Beneficiary has, and will do
nothing to impair, full, complete and absolute ownership of the Collateral and all rights
thereunder free and clear of any Encumbrances, options, purchase rights or commitments of any kind
except as otherwise contemplated by the Financing Documents. Under the terms of the Trust, the
Beneficiary has, and shall do nothing to impair, the sole and absolute right, subject to the terms
of the Financing Documents, to pledge or assign such beneficial interests as collateral and receive
all proceeds and other amounts now or in the future due and payable in respect to the Collateral.
On and after the Initial Premium Funding Date, Beneficiary has not taken and shall not take, any
actions to provide any Person other than the Beneficiary any interest in or claim to the Collateral
other than as expressly provided in the Financing Documents.
b.
Right to Grant Security Interest.
Beneficiary has the full right, power and authority to
enter into this Pledge Agreement and to grant a security interest, assignment and pledge of the
Collateral to Lender as provided herein, and this Pledge Agreement and the security interest
created by Beneficiary hereunder does not violate or breach, or result in the creation of an
Encumbrance under, the Trust Agreement or any other document, instrument, mortgage or agreement to
which Beneficiary is a party or to which its assets are bound.
c.
Trust Agreement.
A true and correct copy of the Trust Agreement, including all amendments,
supplements and other modifications thereto, has been previously delivered by Trust to Lender. The
Trust Agreement is a legal, valid and binding agreement, enforceable by Beneficiary in accordance
with its terms.
d.
Consents.
No consent, approval, authorization or other order or other action by, and no
notice to or filing with, the trustee of the Trust or any other person is required (i) for the
grant of the security interest by Beneficiary in the Collateral pursuant to this Pledge Agreement
or for the execution, delivery or performance of this Pledge Agreement by Beneficiary, or (ii) for
the exercise by Lender of any of its rights provided for in this Pledge Agreement or the remedies
in respect of the Collateral pursuant to this Pledge Agreement.
e.
Due Authorization, Execution and Delivery; Valid and Binding Obligation.
This Pledge
Agreement has been duly authorized, executed and delivered by Beneficiary and constitutes a legal,
valid and binding obligation of Beneficiary enforceable by Lender against Beneficiary in accordance
with its terms.
f.
No Prior Assignment.
Beneficiary has not previously granted a security interest in any of
the Collateral to any other creditor or other person.
g.
No Further Transfer.
Beneficiary shall not sell, assign, encumber, or otherwise dispose of
any of Beneficiarys rights in the Collateral except as expressly provided in this Pledge
Agreement.
h.
No Defaults.
There are no defaults relating to the Collateral, and there are no offsets or
counterclaims to the same. Beneficiary will strictly and promptly do everything required of
Beneficiary under the terms, conditions, promises, and agreements contained in or relating to the
Collateral.
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i.
Proceeds.
Any and all replacement or renewal certificates, instruments, or other benefits
or proceeds related to the Collateral that are received by Beneficiary shall be held by Beneficiary
in trust for Lender and immediately shall be delivered by Beneficiary to Lender to be held as part
of the Collateral.
j.
Location.
Beneficiarys primary office and principal place of business or residence if an
individual and the place where Beneficiary keeps Beneficiarys records concerning the Collateral
are located at the address set forth in Section 9(i) below. If Beneficiary changes Beneficiarys
name or address, or the name or address of any person granting a security interest under this
Pledge Agreement changes, Beneficiary will promptly notify the Lender of such change, but in no
event later than thirty (30) days following such change.
k.
Further Acts.
Beneficiary will, at its sole expense, promptly execute, acknowledge and
deliver all such instruments and take all such actions as Lender from time to time may request in
order to ensure to Lender the benefits of its lien in and to the Collateral intended to be created
by this Pledge Agreement, including the filing of any necessary financing statements or
continuation statements, which may be filed by Lender with or (to the extent permitted by law)
without the signature of Beneficiary, and will cooperate with Lender, at Beneficiarys expense, in
obtaining all necessary approvals and making all necessary filings under federal, state, local or
foreign law in connection with such lien or any sale or transfer of the Collateral.
4.
PERFECTION AND PROTECTION OF SECURITY.
The Beneficiary makes the following
representations, warranties and covenants to the Lender from the Execution Date until the
Obligations are paid in full:
a. (i) The pledgors right, title and interest in any Collateral is and shall be free from any
Encumbrance except for the security interest and lien created hereby and pursuant to the other
Financing Documents; and
(ii) The Pledgor shall not sell or otherwise dispose of, or pledge, mortgage or create, or
suffer to exist a lien on, the Collateral in favor of any person other than the Lender (except as
permitted in the Loan Agreement).
b. The Beneficiary authorizes the Lender to file financing statements relating to the
Collateral under the Uniform Commercial Code (UCC) containing the information set forth on
Schedule B hereto in the jurisdictions indicated in this Pledge Agreement or as otherwise
determined by the Lender. Subject to the filing of continuation statements in respect of such
financing statements required from time to time under the UCC, (i) the security interest in the
Collateral, to the extent the same can be perfected by filing of financing statements under the
UCC, constitutes and will constitute a perfected first priority security interest therein, subject
to no other Encumbrance which is perfected by filing of financing statements, and (ii) subject
further to the Lenders obtaining and maintaining possession or control over Collateral as to which
a security interest can be perfected by possession or control under the UCC, the security interest
in the Collateral, to the extent the same can be perfected under the UCC, constitutes and will
constitute a perfected first priority security
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interest therein, subject to no other Encumbrance; provided that continuation of such security
interest in the proceeds of the Collateral is limited by the provisions of Sections 9-203, 9-315
and 9-322 of the UCC.
c. There is no financing statement naming the Beneficiary or any of its predecessors in
interest as debtor now on file or registered in any public office evidencing any Encumbrance on the
Collateral, or intended so to be and the Beneficiary (including any of its predecessors in
interest) has not filed or authorized the filing of, any financing statement relating to any of its
right, title or interest in or to any of the Collateral, except financing statements filed or to be
filed in respect of and covering the security interest and lien of the Lender granted and provided
for in this Pledge Agreement and the other Financing Documents.
d. The Beneficiary shall cause the Trust to annotate its books and records to reflect the
pledge of the beneficial interests in the Trust effected by this Pledge Agreement.
e. The Beneficiary shall ensure at all times that the Lender has control for purposes of
Section 8-106 of the UCC of all uncertificated instruments included within the Collateral. The
Beneficiary has caused the Trust to execute and deliver to the Lender on the date of this Pledge
Agreement a consent in the form attached hereto as Schedule C in order to comply with the
requirements of Section 8-106(c)(2) of the UCC to the extent beneficial interests in the Trust
constitute uncertificated securities for purposes of Article 8 of the UCC.
5.
LENDERS RIGHTS AND OBLIGATIONS WITH RESPECT TO THE COLLATERAL.
a. While this Pledge Agreement is in effect, Lender shall retain all of Beneficiarys rights,
title and interest in the Collateral, together with any and all evidence of the Collateral, and
this Pledge Agreement will remain in effect until (a) there no longer is any Obligations owing to
Lender; and (b) all other obligations secured by this Pledge Agreement have been fulfilled. In
furtherance of the foregoing, the Beneficiary shall execute an Assignment of Beneficial Interests
in the form attached hereto as Schedule D contemporaneously with the execution of this Pledge
Agreement.
b. Notwithstanding Section 4(a) above, so long as no Event of Default shall have occurred and
be continuing, the Beneficiary shall be entitled:
(i) to exercise, as it shall think fit, but in a manner not inconsistent with the terms hereof
and the terms of the other Financing Documents, any voting power with respect to the Collateral,
and for that purpose the Lender shall (if any securities pledged under this Agreement (each, a
Pledged Security) shall be registered in the name of the Lender or its nominee) execute or cause
to be executed from time to time, at the expense of the Beneficiary, such proxies or other
instruments in favor of the Beneficiary or its nominee, in such form and for such purposes as shall
be reasonably required by the Beneficiary and shall be specified in a written request therefor, to
enable it to exercise such voting power with respect to such Pledged Security; and
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(ii) except as otherwise provided in Sections 4(c) and 4(d) hereof, to receive and retain for
its own account any and all payments, proceeds, dividends, distributions, monies, compensation,
property, assets, instruments or rights to the extent such are permitted pursuant to the terms of
the Loan Agreement, other than (x) stock or liquidating dividends or (y) extraordinary dividends
and dividends or other amounts payable under or in connection with any recapitalization,
restructuring, or other non ordinary course event (the dividends and amounts in this clause (y)
being Extraordinary Payments), paid, issued or distributed from time to time in respect of the
Collateral.
c.
Extraordinary Payments and Distributions.
(i) In case, upon the dissolution or liquidation (in whole or in part) of any issuer of any
Collateral, any sum shall be paid or payable as a liquidating dividend or otherwise upon or with
respect to any Pledged Security or, in the event any other Extraordinary Payment is paid or
payable, then and in any such event, such sum or Extraordinary Payment shall be paid by the
Beneficiary over to the Lender promptly, and in any event within ten (10) days after receipt
thereof, to be held by the Lender as additional collateral hereunder.
(ii) In case any stock dividend shall be declared with respect to any Pledged Security, or any
shares of stock or fractions thereof shall be issued pursuant to any stock split involving any
Pledged Security, or any distribution of capital shall be made on any of the Collateral, or any
shares, obligations or other property shall be distributed upon or with respect to the Collateral,
in each case pursuant to a recapitalization or reclassification of the capital of the issuer
thereof, or pursuant to the dissolution, liquidation (in whole or in part), bankruptcy or
reorganization of such issuer, or to the merger or consolidation of such issuer with or into
another corporation, the shares, obligations, capital or other property so distributed shall be
delivered by the Beneficiary to the Lender promptly, and in any event within ten (10) days after
receipt thereof, to be held by the Lender as additional collateral hereunder subject to the terms
of this Pledge Agreement, and all of the same shall constitute Collateral for all purposes hereof.
d.
Voting Rights and Ordinary Payments After an Event of Default.
Upon the occurrence and
during the continuance of any Event of Default, all rights of the Beneficiary to exercise or
refrain from exercising the voting and other consensual rights that it would otherwise be entitled
to exercise pursuant to Section 4(b)(i) hereof and to receive the payments, proceeds, dividends,
distributions, monies, compensation, property, assets, instruments or rights that the Beneficiary
would otherwise be authorized to receive and retain pursuant to Section 4(b)(ii) hereof shall
cease, and thereupon the Lender shall be entitled to exercise all voting power with respect to any
Pledged Security and to receive and retain, as additional collateral hereunder, any and all
payments, proceeds, dividends, distributions, monies, compensation, property, assets, instruments
or rights at any time declared or paid upon any of the Collateral during such an Event of Default
and otherwise to act with respect to the Collateral as outright owner thereof.
e.
All Payments in Trust.
All payments, proceeds, dividends, distributions, monies,
compensation, property, assets, instruments or rights that are received by the Beneficiary contrary
to the provisions of Section 4 hereof shall be received and held in trust
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for the benefit of the Lender, shall be segregated by the Beneficiary from other funds of the
Beneficiary and shall be forthwith paid over to the Lender as Collateral in the same form as so
received (with any necessary endorsement).
6.
LENDERS EXPENDITURES.
If any action or proceeding is commenced that would materially
affect Lenders interest in the Collateral or if Beneficiary fails to comply with any provision of
this Pledge Agreement or any Financing Documents, including but not limited to Beneficiarys
failure to discharge or pay when due any amounts Beneficiary is required to discharge or pay under
this Pledge Agreement or any Financing Documents, Lender on Beneficiarys behalf may (but shall not
be obligated to) take any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any
time levied or placed on the Collateral and paying all costs for insuring, maintaining and
preserving the Collateral. All such expenditures incurred or paid by Lender for such purposes will
then bear interest at the Interest Rate from the date incurred or paid by Lender to the date of
repayment by Trust. All such expenses will become a part of the Obligations and, at Lenders
option, will (A) be payable on demand; (B) be added to the Total Amount Due and be apportioned
among and be payable with any installment payments to become due during either (1) the term of any
applicable insurance Life Insurance Policy; or (2) the remaining term of the Loan Agreement; or (C)
be treated as a balloon payment which will be due and payable at the Maturity Date. The liens
created under this Pledge Agreement also will secure payment of these amounts. Such right shall
be in addition to all other rights and remedies to which Lender may be entitled upon an Event of
Default.
7.
LIMITATIONS ON OBLIGATIONS OF LENDER.
Lender shall use ordinary reasonable care in the
physical preservation and custody of the Collateral to the extent in the possession of the Lender
but shall have no other obligation to protect the Collateral or its value. In particular, but
without limitation, Lender shall have no responsibility (A) for the collection or protection of any
income on the Collateral (other than any death benefits paid or payable under the Life Insurance
Policy and any interest or payments in the nature of interest which may be paid or become due in
respect thereto); (B) for the preservation of rights against issuers of the Collateral or against
third persons (other than the Insurer); (C) for ascertaining any maturities, conversions,
exchanges, offers, tenders, or similar matters relating to the Collateral other than the Life
Insurance Policy; nor (D) for informing the Beneficiary about any of the above, whether or not
Lender has or is deemed to have knowledge of such matters.
8.
RIGHTS AND REMEDIES ON DEFAULT.
Upon the occurrence of an Event of Default, or at any
time thereafter, Lender may exercise any one or more of the following rights and remedies in
respect of the Collateral, in addition to any rights or remedies that may be available at law, in
equity, or otherwise:
a. Upon the occurrence and during the continuance of any Event of Default, the Lender may
exercise, in addition to other rights and remedies provided for herein or otherwise available to
it, all rights of voting, exercise and conversion with respect to the Collateral and all of the
rights and remedies of a collateral agent on default under the UCC at that time (whether or not
applicable to the affected Collateral) and may also, without obligation to resort to other
security, at any time and from time to time sell, resell, assign and deliver, in its sole
discretion, all or any of the Collateral, in one or more parcels at the same or different times,
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and all right, title and interest, claim and demand therein and right of redemption thereof,
on any securities exchange on which any Collateral may be listed, or at public or private sale, for
cash, upon credit or for future delivery, and in connection therewith the Lender may grant options.
b. If any of the Collateral is sold upon credit or for future delivery, the Lender shall not
be liable for the failure of the purchaser to purchase or pay for the same and, in the event of any
such failure, the Lender may resell such Collateral. In no event shall the Beneficiary be credited
with any part of the proceeds of sale of any Collateral until cash payment therefor has actually
been received by the Lender.
c. The Lender may purchase any Collateral at any public sale and, if any Collateral is of a
type customarily sold in a recognized market or is of the type that is the subject of widely
distributed standard price quotations, the Lender may purchase such Collateral at private sale, and
in each case may make payment therefor by any means, including, without limitation, by release or
discharge of Obligations in lieu of cash payment.
d. The Beneficiary recognizes that the Lender may be unable to effect a public sale of all or
part of the Collateral consisting of securities by reason of certain prohibitions contained in the
Securities Act of 1933, as amended (the Securities Act), or in applicable Blue Sky or other state
securities laws, as now or hereafter in effect, but may be compelled to resort to one or more
private sales to a restricted group of purchasers who will be obliged to agree, among other things,
to acquire such securities for their own account, for investment and not with a view to the
distribution or resale thereof. The Beneficiary agrees that any such Collateral sold at any such
private sale may be sold at a price and upon other terms less favorable to the seller than if sold
at public sale and that each such private sale shall be deemed to have been made in a commercially
reasonable manner. The Lender shall have no obligation to delay the sale of any such securities
for the period of time necessary to permit the issuer of such securities, even if such issuer would
agree, to register such securities for public sale under the Securities Act. The Beneficiary
agrees that private sales made under the foregoing circumstances shall be deemed to have been made
in a commercially reasonable manner.
e. No demand, advertisement or notice, all of which are hereby expressly waived, shall be
required in connection with any sale or other disposition of any part of the Collateral that
threatens to decline speedily in value or that is of a type customarily sold on a recognized
market; otherwise the Lender shall give the Beneficiary at least ten (10) days prior notice of the
time and place of any public sale and of the time after which any private sale or other disposition
is to be made, which notice the Beneficiary agrees is commercially reasonable.
f. The Lender shall not be obligated to make any sale of Collateral if it shall determine not
to do so, regardless of the fact that notice of sale may have been given. The Lender may, without
notice or publication, adjourn any public or private sale or cause the same to be adjourned from
time to time by announcement at the time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the same was so adjourned.
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g. The remedies provided herein in favor of the Lender shall not be deemed exclusive, but
shall be cumulative, and shall be in addition to all other remedies in favor of the Lender existing
at law or in equity.
h. To the extent that applicable law imposes duties on the Lender to exercise remedies in a
commercially reasonable manner, the Beneficiary acknowledges and agrees that it is not commercially
unreasonable for the Lender (i) to advertise dispositions of Collateral through publications or
media of general circulation; (ii) to contact other persons, whether or not in the same business as
the Beneficiary, for expressions of interest in acquiring all or any portion of the Collateral;
(iii) to hire one or more professional auctioneers to assist in the disposition of Collateral; (iv)
to dispose of Collateral by utilizing Internet sites that provide for the auction of assets of the
types included in the Collateral or that have the reasonable capability of doing so, or that match
buyers and sellers of assets; (v) to disclaim disposition warranties, or (vi) to the extent deemed
appropriate by the Lender, to obtain the services of brokers, investment bankers, consultants and
other professionals to assist the Lender in the disposition of any of the Collateral. The
Beneficiary acknowledges that the purpose of this clause (h) is to provide non-exhaustive
indications of what actions or omissions by the Lender would not be commercially unreasonable in
the Lenders exercise of remedies against the Collateral and that other actions or omissions by the
Lender shall not be deemed commercially unreasonable solely on account of not being indicated in
this clause (h). Without limiting the foregoing, nothing contained in this clause (h) shall be
construed to grant any rights to the Beneficiary or to impose any duties on the Lender that would
not have been granted or imposed by this Pledge Agreement or by applicable law in the absence of
this clause (h).
i. The Lenders prior recourse to any Collateral shall not constitute a condition of any
demand, suit or proceeding for payment or collection of the Obligations.
9.
MISCELLANEOUS PROVISIONS.
The following miscellaneous provisions are a part of this
Pledge Agreement:
a.
Amendments.
This Pledge Agreement, together with the Loan Agreement, and all Financing
Documents, constitutes the entire understanding and agreement of the parties as to the matters set
forth in this Pledge Agreement. No alteration of or amendment to this Pledge Agreement shall be
effective unless given in writing and signed by the party or parties sought to be charged or bound
by the alteration or amendment.
b.
Arbitration.
All controversies or disputes arising out of or in connection with this Pledge
Agreement (Disputes) shall be resolved pursuant to this Section 9a.
(i) All Disputes shall in the first instance be discussed amicably between the parties with a
view to resolving such Dispute, commencing upon one party giving other parties written notice of
such Dispute. In the event that such Dispute is not resolved within thirty (30) days after such
notice (or such longer period as the parties may agree in writing with respect to any such
Dispute), any party may submit such Dispute to be finally settled by arbitration administered under
the Commercial Arbitration Rules of the American Arbitration Association (the Rules) by a panel
of three arbitrators sitting in [
]. One
8
arbitrator shall be nominated by the party initiating arbitration at the time of the filing of
its demand for arbitration, the second arbitrator shall be nominated by the opposing party(ies) at
the time of the filing of its answering statement, and the third arbitrator (who shall act as
chairman) shall be jointly nominated by party-nominated arbitrators if they are able to agree. If
the first two party nominated arbitrators are unable to agree upon a third within thirty (30) days
after the nomination of the second, or if either party fails to nominate an arbitrator as set forth
herein, an arbitrator shall be appointed pursuant to the Rules. The award of the arbitrators shall
be final and binding upon the parties, and shall not be subject to any appeal or review. The
parties agree that such award may be recognized and enforced in any court of competent
jurisdiction. The parties agree to submit to the personal jurisdiction of the federal and state
courts sitting in [
], for the sole purpose of enforcing this Pledge Agreement (including,
where appropriate, issuing injunctive relief), the agreement to arbitrate contained herein and any
award resulting from arbitration pursuant to this Section and, to the fullest extent permitted by
law, waive any objection which they may have at any time to the laying of venue of any proceedings
brought in such court and any claim that such proceedings have been brought in an inconvenient
forum.
(ii) The Lender and Beneficiary further agree that no claim may be brought as a class action,
and that the Lender and Beneficiary do not have the right to act, nor shall they attempt to act, as
a class representative or participate as a member of a class of claimants with respect to any claim
related to or arising out of this Pledge Agreement. To the extent that this arbitration provision
is held unenforceable, the Lender and Beneficiary: (i) irrevocably submit to the exclusive
jurisdiction of any federal or state court sitting in [
] in respect of any action or
proceeding arising under or related to in any manner whatsoever this Pledge Agreement or the
transactions contemplated under this Pledge Agreement, (ii) agree that this Pledge Agreement and
the transactions contemplated by the Financing Arrangement shall in all respects be governed by and
construed in accordance with the laws of the State of [
] (without reference to conflicts
of laws provisions) and (iii) HEREBY WAIVE THE RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY ON ANY
CLAIM, COUNTERCLAIM, SETOFF, DEMAND, ACTION OR CAUSE OF ACTION (I) ARISING OUT OF OR IN ANY WAY
RELATED TO THIS AGREEMENT, OR (II) IN ANY WAY IN CONNECTION WITH OR PERTAINING OR RELATED TO OR
INCIDENTAL TO ANY DEALINGS OF THE PARTIES TO THIS AGREEMENT IN CONNECTION WITH THIS PLEDGE
AGREEMENT, REPRESENTATIONS AND WARRANTIES, AND CONSENT OR THE EXERCISE OF ANY PARTYS RIGHTS AND
REMEDIES UNDER THIS AGREEMENT OR OTHERWISE, OR THE CONDUCT OR THE RELATIONSHIP OF THE PARTIES
HERETO, IN ALL OF THE FOREGOING CASES WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE. The Parties hereby agree and acknowledge that this
provision is intended to encompass any dispute between any Party to this Pledge Agreement and any
interested third party.
(iii) In any arbitral proceeding arising under this Pledge Agreement, the parties agree that
they will engage in cooperative discovery, to be supervised by the arbitral tribunal. In its
discretion, the tribunal may order the exchange of documents in the custody or control of parties
to this Pledge Agreement, and may order a limited number of party
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depositions of one (1) days duration each if requested by the opposing party and if the
tribunal finds that such depositions would contribute to the efficient development of evidence.
c.
Attorneys Fees; Expenses.
Beneficiary agrees to pay upon demand all of Lenders costs
and expenses, including Lenders reasonable attorneys fees and Lenders legal expenses, incurred
in connection with the enforcement of this Pledge Agreement. Lender may hire or pay someone else to
help enforce this Pledge Agreement, and Beneficiary shall pay the costs and expenses of such
enforcement. Costs and expenses include Lenders reasonable attorneys fees and legal expenses
whether or not there is a lawsuit, including reasonable attorneys fees and legal expenses for
bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. Beneficiary also shall pay all
court costs and such additional fees as may be directed by the court.
d.
Indemnification.
The Beneficiary hereby releases the Lender and its officers,
shareholders, directors, employees and agents (each, an Indemnified Party) from any claims,
causes of action and demands at any time arising out of or with respect to this Pledge Agreement,
the Obligations, the Collateral and its use and/or any actions taken or omitted to be taken by such
Indemnified Party with respect thereto (except such claims, causes of action and demands arising
from the bad faith, gross negligence or willful misconduct of such Indemnified Party) and the
Beneficiary hereby agrees to hold each Indemnified Party harmless from and with respect to any and
all such claims, causes of action and demands (except such claims, causes of action and demands
arising from the gross negligence or willful misconduct of such Indemnified Party).
e.
Caption Headings.
Caption headings in this Pledge Agreement are for convenience purposes
only and are not to be used to interpret or define the provisions of this Pledge Agreement.
f.
Governing Law
. THIS PLEDGE AGREEMENT WILL BE GOVERNED BY THE LAWS OF THE STATE OF
[
] WITHOUT REGARD TO ITS CONFLICTS OF LAW PROVISIONS. LENDER HAS ACCEPTED THIS PLEDGE
AGREEMENT IN THE STATE OF [
].
g.
Marshalling.
The Lender shall not be required to marshal any present or future collateral
security (including but not limited to this Pledge Agreement and the Collateral) for, or other
assurances of payment of, the Obligations or any of them or to resort to such collateral security
or other assurances of payment in any particular order, and all of its rights hereunder and in
respect of such collateral security and other assurances of payment shall be cumulative and in
addition to all other rights, however existing or arising. To the extent that it lawfully may, the
Beneficiary hereby agrees that it shall not invoke any law relating to the marshalling of
collateral which might cause delay in or impede the enforcement of the Lenders rights under this
Pledge Agreement or under any other instrument creating or evidencing any of the Obligations or
under which any of the Obligations is outstanding or by which any of the Obligations is secured or
payment thereof is otherwise assured, and, to the extent that it lawfully may, the Beneficiary
hereby irrevocably waives the benefits of all such laws.
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h.
No Waiver by Lender.
Lender shall not be deemed to have waived any rights under this
Pledge Agreement unless such waiver is given in writing and signed by Lender. No delay or omission
on the part of Lender in exercising any right shall operate as a waiver of such right or any other
right. A waiver by Lender of a provision of this Pledge Agreement shall not prejudice or constitute
a waiver of Lenders right otherwise to demand strict compliance with that provision or any other
provision of this Pledge Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Beneficiary, shall constitute a waiver of any of Lenders rights or of any of
Beneficiarys obligations as to any future transactions. Whenever the consent of Lender is
required under this Pledge Agreement, the granting of such consent by Lender in any instance shall
not constitute continuing consent to subsequent instances where such consent is required and in all
cases such consent may be granted or withheld in the sole discretion of Lender.
i.
Notices
. All demands, notices and communications hereunder will be in writing and will be
deemed to have been duly given if personally delivered at, mailed by certified mail, return receipt
requested, mailed by a nationally recognized overnight courier or sent via facsimile or email, to
each applicable party at the address specified below or, as to any of such parties, at such other
address or facsimile number as will be designated by such party in a written notice to the other
party. Any party may change its address for notices under this Pledge Agreement by giving written
notice to the other parties, specifying that the purpose of the notice is to change the partys
address. For notice purposes, Beneficiary agrees to keep Lender informed at all times of
Beneficiarys current address. Notice shall be provided as follows:
If to the Beneficiary:
[BENEFICIARY-NAME]
c/o [BENEFICIARY-NAME, ADDRESS]
Telephone:
Facsimile:
If to the Lender:
Imperial Premium Finance, LLC
701 Park of Commerce Blvd, Ste 301
Boca Raton, FL 33487
Facsimile: 1.561.995.4201
j.
Power of Attorney.
Beneficiary hereby appoints Lender as its true and lawful
attorney-in-fact, irrevocably, with full power of substitution to do the following: (1) to demand,
collect, receive, sue and recover all sums of money or other property which may now or hereafter
become due, owing or payable from the Collateral; (2) to execute, sign and endorse any and all
claims, instruments, receipts, checks, drafts or warrants issued in payment for the Collateral; (3)
to settle or compromise any and all claims arising under the Collateral, and in the place and stead
of Beneficiary, to execute and deliver its release and settlement for the claim; (4) to execute and
sign any agreements to confirm that ownership of the Collateral has been changed to a third party
and (5) to file any claim or claims or to take any action or institute or take part in any
proceedings, either in its own name or in the name of Beneficiary, or otherwise, which in the
discretion of Lender may seem to be necessary or advisable. The
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foregoing power of attorney given as security for the Obligations, being coupled with an
interest, shall be irrevocable until the Obligations are indefeasibly paid in full and otherwise
satisfied and discharged.
k.
Severability.
If a court of competent jurisdiction finds any provision of this Pledge
Agreement to be illegal, invalid, or unenforceable as to any circumstance, that finding shall not
make the offending provision illegal, invalid, or unenforceable as to any other circumstance. To
the extent permitted by applicable law, the offending provision shall be considered modified so
that it becomes legal, valid and enforceable; however, if the offending provision cannot be so
modified, it shall be considered deleted from this Pledge Agreement. Unless otherwise required by
law, the validity, invalidity, or unenforceability of any provision of this Pledge Agreement shall
not affect the legality, validity or enforceability of any other provision of this Pledge
Agreement.
l.
Successors and Assigns.
Subject to any limitations stated in this Pledge Agreement on
transfer of Beneficiarys interest, this Pledge Agreement shall be binding upon and inure to the
benefit of the parties, their successors and assigns. If ownership of the Collateral becomes
vested in a person other than Beneficiary, Lender, without notice to Beneficiary, may deal with
Beneficiarys successors with reference to this Pledge Agreement and the Obligations by way of
forbearance or extension without releasing Beneficiary from the obligations of this Pledge
Agreement or liability under the Obligations.
m.
Survival of Representations and Warranties.
All representations, warranties, and
agreements made by Trust in this Pledge Agreement shall survive the execution and delivery of this
Pledge Agreement, shall be continuing in nature, and shall remain in full force and effect until
such time as the Obligations shall be paid in full.
n.
Time is of the Essence.
Time is of the essence in the performance of this Pledge
Agreement.
o.
Waive Jury.
ALL PARTIES TO THIS PLEDGE AGREEMENT HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL
IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY.
10.
DEFINITIONS.
The following capitalized words and terms shall have the following
meanings when used in this Pledge Agreement. Capitalized terms used but not defined herein shall
have the meanings assigned thereto in the Loan Agreement. Unless specifically stated to the
contrary all references to dollar amounts shall mean amounts in lawful money of the United States
of America. Words and terms used in the singular shall include the plural, and the plural shall
include the singular, as the context may require, Words and terms not otherwise defined in this
Pledge Agreement shall have the meanings attributed to such terms in the UCC:
a.
Collateral.
The word Collateral is defined in Section 2 hereof.
b.
Guaranty.
The word Guaranty means any guaranty from Guarantor to Lender, including
without limitation a guaranty of all or part of the Obligations.
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c.
Lender.
The word Lender means Imperial Premium Finance, LLC, its successors and assigns.
d.
Pledge Agreement.
The words Pledge Agreement mean this Pledge Agreement, as amended or
modified from time to time, together with all exhibits and schedules attached hereto from time to
time.
THE [BENEFICIARY-NAME] HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS PLEDGE AGREEMENT AGREES
TO ITS TERMS. THIS PLEDGE AGREEMENT IS DATED [DATE].
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BENEFICIARY
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[BENEFICIARY-NAME]
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SCHEDULE A
LOAN APPLICATION AND AGREEMENT
14
SCHEDULE B
UCC FINANCING STATEMENT DETAILS
Debtor information
:
1.
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Name of Beneficiary
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2.
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Street address of principal residence of Beneficiary; cannot be a post-office box or business
address, unless beneficiary is a business, in which case, the place of business should be
included or, if there is more than one place of business, the chief executive office
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3.
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If Beneficiary is a business, also include (a) the entity form (e.g., corporation, limited
liability company, limited partnership, etc.), (b) its jurisdiction of formation and (c) any
organizational identification number issued by such jurisdiction
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Secured Party information
:
Imperial Premium Finance, LLC
701 Park of Commerce Blvd.
Suite 301
Boca Raton, Florida 33487
Collateral Description
:
All of Debtors right, title and interest in and to the beneficial interest in [
insert name of
Trust
] (the
Trust
), the Trusts trust agreement and the assets held by the Trust under
such trust agreement and any Financing Documents, including without limitation the Trusts entire
beneficial interest in and to the Life Insurance Policy and the death benefits payable thereunder,
and all proceeds of all of the foregoing.
For purposes of the foregoing description of the Collateral, the each of the terms
Financing
Documents
and
Life Insurance Policy
shall have the meanings set forth in the Loan
Application and Agreement dated as of [
insert applicable closing date
] between the Trust (through
its trustee), as borrower, and the Secured Party, as lender.
SCHEDULE C
CONSENT OF ISSUER OF UNCERTIFICATED SECURITIES
The undersigned, [NAME OF BORROWER TRUST] (the Issuer), hereby acknowledges receipt of the
foregoing Pledge Agreement, consents to any transfer of the beneficial interests of the Issuer
pursuant to the exercise of remedies thereunder and irrevocably agrees to comply with any
instructions originated by the Lender without further consent by [NAME OF BENEFICIARY] or any other
Person.
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[BORROWER TRUST]
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By:
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Name:
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Title:
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SCHEDULE D
FORM OF ASSIGNMENT OF BENEFICIAL INTERESTS
17
[DATE]
INSURER: [INSURER]
ASSIGNMENT OF LIFE INSURANCE POLICY AS COLLATERAL
This ASSIGNMENT OF LIFE INSURANCE POLICY AS COLLATERAL (this
Assignment
) is
dated as of [DATE], and is made in favor of [COLLATERAL-AGENT], a
, in
its capacity as collateral agent (the
Collateral Agent
) by
[TRUST-NAME]
, a [JURISDICTION]
life insurance trust (together with its successors and permitted assigns, the
Assignor
).
WHEREAS
, pursuant to a Loan Application and Agreement between [LENDER-NAME], a Florida limited
liability company (including any application and assignees thereof, the Lender) and Assignor
dated [DATE] (the
Loan Agreement
), the Lender has made an initial loan in the amount of
[FIRST-YEAR-PREMIUM] (the
Loan
) to the Assignor as evidenced by a Promissory Note dated
[DATE] (as amended, supplemented or modified from time to time, the
Promissory Note
);
WHEREAS
, the Assignor is the sole owner of the Life Policy (as defined below);
WHEREAS
, as a condition precedent to the Lenders obligations under the Promissory Note and
Loan Agreement to make the Loan to the Assignor, the Lender requires the Assignor to execute and
deliver this Assignment to the Collateral Agent;
NOW
,
THEREFORE
, in consideration of the premises and the mutual covenants hereinafter
contained, and for other good and valuable consideration, the adequacy and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1.
DEFINITIONS
.
Capitalized terms used herein and not otherwise defined have the
respective meanings specified in the Loan Agreement.
2.
COLLATERAL ASSIGNMENT
.
For value received, the Assignor hereby
assigns, transfers, pledges and grants all of the Assignors claims, options, privileges, rights,
title and interest in, to and under the life insurance policy described below to the Collateral
Agent:
Policy No.: [POLICY-NUMBER]
Issued by: [INSURER] (
Insurer
)
Insured: [INSURED] (
Insured
)
and any and all applications, riders, endorsements, supplements, amendments, renewals and all
other documents that modify or otherwise affect the terms and conditions of such policy issued in
connection therewith, and any and all proceeds thereof (said policy,
contracts, other documents and proceeds are hereinafter collectively referred to as the
Life
Policy
), subject to all the terms and conditions of this Assignment. This Assignment
includes, without limitation, assignment of the following rights:
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(a)
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the sole right to collect from the Insurer the net proceeds of the Life
Policy payable upon the death of the Insured or maturity of the Life Policy;
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(b)
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the sole right to surrender, in whole or in part, the Life Policy and receive
the surrender value thereof at any time provided by the terms of such Life Policy and
at such other times as the Insurer may allow, and the sole right to exercise any and
all other rights permitted by the terms of the Life Policy or allowed by the Insurer
and to receive all benefits and advantages derived therefrom;
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(c)
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the sole right to obtain any loans or advances on the Life Policy at any
time, either from the Insurer or from other persons or entities, and to pledge or
assign the Life Policy as security for such loans or advances;
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(d)
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the sole right to further assign the Collateral Agents rights under the Life
Policy to any person and for any purpose;
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(e)
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the sole right to collect and receive all distributions, credited earnings,
any shares of surplus, dividend deposits or additions to and other proceeds of the
Life Policy now or hereafter made or apportioned thereto, and to exercise any and all
rights and options contained in the Life Policy with respect thereto and to determine
the amount of premium or other amount paid with respect to any feature of the Life
Policy permitting such a right or option;
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(f)
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the sole right to request that the Insurer amend the Life Policy;
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(g)
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the sole right to any and all contract rights, arising from or relating to
the Life Policy, and any and all payment rights, and the other rights listed above,
existing with respect thereto;
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(h)
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the sole right to exercise any and all amendment, voting, or nonforfeiture
rights or privileges to the extent created or endowed by the Life Policy and the right
to apply for and maintain waiver of premium or conversion of the Life Policy;
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(i)
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the sole right to return the Life Policy for cancellation or redemption; and
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(j)
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the sole right to do or cause to be done all things necessary, proper or
advisable to maintain the Life Policy in force.
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Notwithstanding the foregoing, the right to elect any optional mode of settlement permitted by the
Life Policy or allowed by the Insurer is reserved and excluded from this Assignment and does not
pass by virtue hereof, but the reservation of this right shall in no
2
way impair the right of the Collateral Agent to surrender the Life Policy completely with all its
incidents or impair any other right of the Collateral Agent hereunder, and any election of a mode
of settlement shall be made subject to this Assignment and to the rights of the Collateral Agent
hereunder.
It is expressly agreed that the following specific rights may not be exercised while this
Assignment is in effect, except with the consent of the Assignor and Collateral Agent:
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(a)
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The right to change the death benefit option;
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(b)
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The right to change the face amount; or
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(c)
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The right to add or delete any riders or other policy benefits, which are
permitted by the terms of the Life Policy.
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It is further agreed that the Collateral Agent will not exercise either the right to surrender the
Life Policy or request a partial withdrawal, or otherwise act under this Assignment, until there
has been a default in any of the Obligations (as defined below), and the Collateral Agent has
mailed, by first class mail to the Assignor to the address set forth in Section 10(f), notice of
intention to exercise such right, and three days have elapsed after the date such notice has been
mailed by the Collateral Agent.
3.
OBLIGATIONS SECURED
. This Assignment is made, and the Life Policy is
to be held, as collateral security for all present and future obligations of the Assignor to the
Lender under the Loan Agreement and Promissory Note (including, without limitation, all rights of
the Lender to receive the outstanding principal amounts, accrued interest and other fees and
charges due thereunder) and all liabilities, obligations, covenants, duties, and indebtedness owing
by the Assignor to the Collateral Agent under this Assignment (all of which obligations of the
Assignor to the Lender/Collateral Agent secured or to become secured hereby are herein called the
Obligations
). For purposes of this Assignment, the term
Obligations
shall also
include, without limitation, interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or allowable in such
proceeding.
4.
BENEFITS PAYMENT DIRECTIVE
. The Assignor hereby authorizes and
directs the Insurer to pay any and all periodic payments and other amounts, including, without
limitation, death benefits, due or that become due and payable under or on account of the Life
Policy either to the Collateral Agent or as the Collateral Agent directs in writing;
provided
,
however
, that nothing in this paragraph entitles the Collateral Agent to
retain more than the amount of the Obligations.
5.
REPRESENTATIONS AND WARRANTIES OF THE ASSIGNOR
. The Assignor hereby
represents and warrants as follows:
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(a)
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it is validly existing as a life insurance trust under the laws of the State
of [JURISDICTION];
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(b)
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the execution, delivery and performance by the Assignor of this Assignment
(i) are within the Assignors power, (ii) have been duly authorized by all necessary
action, and (iii) do not contravene any provision of the Assignors trust agreement
(Trust Documents), any law, rule or regulation applicable to the Assignor or its
assets, or conflict with, violate, create a lien or default under, or require a
consent under, the Life Policy or other document or agreement to which the Assignor is
a party or by which it or its assets are bound;
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(c)
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this Assignment constitutes a legal, valid and binding obligation of the
Assignor enforceable against the Assignor in accordance with the terms hereof (subject
to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors rights and remedies generally);
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(d)
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as of the date hereof:
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(i) it is the sole and recorded owner of, and the sole and duly designated
beneficiary under, the Life Policy;
(ii) the Assignor has an insurable interest in the life of the Insured under
the Life Policy;
(iii) the Life Policy is in full force and effect and constitutes the valid
and binding obligation of the Insurer, enforceable in accordance with its terms;
(iv) the Life Policy has not lapsed and/or been reinstated;
(v) the information set forth in
Section 2
hereof with respect to the
Life Policy is true and correct in all respects;
(vi) the Life Policy has not been sold to any person or entity, there are no
outstanding loans on or encumbering the Life Policy, and the Life Policy is free
and clear of any and all Liens other than the interests granted to the Lender and
Collateral Agent under this Assignment, the Promissory Note, the Loan Agreement and
the other Financing Documents. As used in this Assignment,
Liens
means
any security interest, mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference, priority or
other security agreement, option or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of any financing statement executed
by or on behalf of the debtor named therein under the Uniform Commercial Code or
comparable law of any jurisdiction, and any restriction on the use, voting,
transfer, receipt of income or other exercise of any attributes of ownership);
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(vii) to the Assignors actual knowledge, the Life Policy is not subject to
any right of rescission, set-off, recoupment, counterclaim or defense, whether
arising out of the transactions concerning such Life Policy between the Lender and
the Assignor, the Insured or otherwise, and no such right has been asserted;
(viii) there is no default, breach or violation under the Life Policy, and no
event has occurred that, with notice and/or the expiration of any grace or cure
period, would constitute a default, breach or violation under the Life Policy;
(ix) the Assignor is not subject to any Internal Revenue Service, state or
local governmental authority review, notice of deficiency, tax assessment, audit
notice or equivalent review regarding the tax benefits or tax payable in connection
with the purchase, holding or transfer of the Life Policy;
(x) there are no governmental orders and no proceedings or investigations
pending or, to the actual knowledge of the Assignor, threatened, before any
governmental authority asserting the invalidity of the Life Policy, seeking the
payment under the Life Policy or seeking any governmental order that could
reasonably be expected to adversely affect the validity or enforceability of the
Life Policy, or reduce the death benefit or surrender value thereunder;
(xi) no proceedings in bankruptcy are pending or to the Assignors knowledge
threatened against the Assignor, its trustee or the Insured (and no grounds exist
for such proceedings) and none of the Assignors, its trustees or the Insureds
property is subject to any assignment for the benefit of creditors; and
(xii) the Assignor has delivered or caused to be delivered to the Collateral
Agent true and correct copies of all necessary or appropriate consents executed by
the appropriate persons (including, without limitation, the Insured) authorizing
the Lender and each of its representatives to review the Life Policy, all
applications, riders, endorsements, supplements, amendments and all other documents
that modify or otherwise affect the terms and conditions of the Life Policy, and
all medical, psychological and health and/or life expectancy related records
regarding the Insured.
6.
ACKNOWLEDGEMENTS AND AGREEMENTS
. The Assignor hereby acknowledges and
agrees as follows:
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(a)
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any balance of sums received hereunder from the Insurer remaining after
payment of the then-existing Obligations, matured or unmatured, shall be paid in full
by the Collateral Agent to the persons or entities entitled
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thereto under the terms of the Life Policy as if this Assignment had not been
executed;
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(b)
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the Insurer is hereby authorized and directed to recognize the Collateral
Agents claims to rights hereunder without investigating the reason for any action
taken by the Collateral Agent, or the validity or the amount of the Obligations or the
existence of any default therein, or the giving of any notice hereunder, under
applicable law or otherwise, or the application to be made by the Collateral Agent of
any amounts to be paid to the Collateral Agent; the sole signature of the Collateral
Agent shall be sufficient for the exercise of any rights under the Life Policy
assigned hereby and the sole receipt by the Collateral Agent of any sums shall be a
full discharge and release therefor to the Insurer; wire transfers or checks for all
or any part of the sums payable under the Life Policy and assigned herein shall be
paid to the Collateral Agent or its designee if, when, and in such amounts as may be
requested by the Collateral Agent;
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(c)
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neither the Lender nor the Collateral Agent shall be under any obligation to
pay from their own funds any premium, or the principal of or interest on loans or
advances on the Life Policy, if any, whether or not obtained by the Lender or the
Collateral Agent, or any other charges on the Life Policy, but such amounts so paid by
the Lender or Collateral Agent from their own funds shall become a part of the
Obligations hereby secured, shall be due and payable immediately, and shall accrue
interest at rate set forth in the Promissory Note;
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(d)
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the exercise of any right, option, privilege or power given to the Collateral
Agent under this Assignment shall be at the option of the Collateral Agent, and the
Collateral Agent may exercise any such right, option, privilege or power without
notice to, or consent by, or affecting the liability of, or releasing any interest
hereby assigned by the Assignor;
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(e)
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the Assignor shall do or cause to be done all things necessary to preserve
and keep in full force and effect the Assignors existence; the Assignor shall not
distribute, sell, transfer, lease or otherwise dispose of (in one transaction or in a
series of transactions) all or substantially all of its assets (in each case, whether
now owned or hereafter acquired), or terminate, liquidate or dissolve while the
Obligations remain outstanding;
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(f)
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the Assignor shall deliver to the Collateral Agent copies of any and all
reports, financial statements, notices, illustrations, projections and other
information received from the Insurer in any way related to the Life Policy, and the
Assignor shall cooperate with the Collateral Agent in obtaining any additional
information from the Insurer that the Collateral Agent may reasonably request from
time to time in respect of the Life Policy;
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(g)
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the Assignor shall not surrender, cancel or otherwise terminate the Life
Policy or allow the Life Policy to lapse or terminate and the Assignor shall, at its
sole cost and expense, preserve and keep in full force the Life Policy until the
Obligations have been satisfied in full pursuant to the terms of the Promissory Note;
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(h)
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the Assignor shall not take any action in contravention of the Collateral
Agents security interest in the Life Policy, or grant or permit to exist any Lien on
the Life Policy other than the interests granted to the Lender and Collateral Agent
under this Assignment, the Promissory Note, the Loan Agreement and the other Financing
Documents.
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(i)
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the Assignor shall not, directly or indirectly, by operation of law or
otherwise, merge, consolidate, or otherwise combine with, any person or entity, unless
this Assignment and all obligations hereunder are assumed by such person or entity
pursuant to such merger, consolidation or other combination;
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(j)
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the Assignor shall comply with and enforce all provisions of its Trust
Documents;
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(k)
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Following an Event of Default (as defined in the Loan Agreement), the
Assignor shall accept written instructions from the Collateral Agent regarding the
disposition of the Life Policy and any other collateral or proceeds covered thereby,
including instructions to assign ownership of the Life Policy to the Lender or any
third party engaged to dispose of the collateral, or to dispose of the collateral in a
commercially reasonable fashion or as otherwise directed in writing by the Collateral
Agent; and
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(l)
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the Assignor shall not take any action under the Life Policy without the
written consent of the Lender or Collateral Agent, and agrees to take such actions
with respect to the Life Policy as the Lender or Collateral Agent may reasonably
request in writing.
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7.
TERMINATION
. Upon the final and irrevocable payment and satisfaction
in full of all of the Obligations, this Assignment and the security interests created hereunder
shall automatically terminate.
8.
LIMITED POWER OF ATTORNEY; STANDARD OF CARE.
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(a)
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The Assignor hereby irrevocably constitutes and appoints the Collateral Agent
and any officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place and
stead of such Assignor and in the name of such Assignor or in its own name, from time
to time at the Collateral Agents discretion, for the limited purpose of carrying out
the terms of this Assignment, to take any and all appropriate action and to execute
and deliver any and all documents and instruments that the Collateral Agent
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may deem necessary or desirable to accomplish the purposes of this Assignment and
to effectuate any right assigned to the Collateral Agent under this Assignment
(including, without limitation, the right to transfer or direct the transfer of the
Life Policy or the proceeds thereof to the Collateral Agent upon the sole signature
of the Collateral Agent) or Lender under the Promissory Note, as the case may be;
provided, however, that nothing in this Assignment shall obligate the Collateral
Agent to protect the interests of the Assignor or any other person or entity in or
under the Life Policy.
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(b)
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The Assignor hereby ratifies, to the extent permitted by law, all that any
said attorney shall lawfully do or cause to be done by virtue hereof. The power of
attorney granted pursuant to this Assignment, being coupled with an interest, shall be
irrevocable until the Obligations are indefeasibly paid in full (in the case of
payment obligations) and otherwise satisfied and discharged.
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(c)
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The powers conferred on the Collateral Agent pursuant to this Section 8 are
solely to protect the Collateral Agents interests in the Life Policy and shall not
impose any duty upon the Collateral Agent to exercise any such powers. For the
avoidance of doubt, nothing herein shall obligate the Collateral Agent to take any
action with respect to the Life Policy, including, without limitation, selling,
transferring or disposing of the Life Policy, and the Collateral Agent shall have the
right to do or cause to be done all things necessary, proper or advisable to maintain
the Life Policy in full force in accordance with its terms.
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(d)
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The Collateral Agents sole duty with respect to the Life Policy shall be to
use reasonable care in the custody and preservation of any documents or instruments in
the Collateral Agents possession evidencing such Life Policy in the same manner as
the Collateral Agent deals with similar property for its own account. The Collateral
Agent shall not be responsible to the Assignor except for the Collateral Agents own
gross negligence or willful misconduct.
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(e)
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The Collateral Agent shall not be responsible for filing any financing or
continuation statements or recording any documents or instruments in any public office
at any time or times or otherwise perfecting or maintaining the perfection of any
security interest in the Collateral. The Collateral Agent shall not be liable or
responsible for any loss or diminution in the value of any of the Collateral, by
reason of the act or omission of any carrier, forwarding agency or other agent or
bailee selected by the Collateral Agent in good faith. The Collateral Agent shall not
be responsible for the existence, genuineness or value of any of the Collateral or for
the validity, perfection, priority or enforceability of the liens in any of the
Collateral, whether impaired by operation of law or by reason of any action or
omission to act on its part hereunder, except to the extent
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such action or omission constitutes gross negligence, bad faith or willful
misconduct on the part of the Collateral Agent, for the validity or sufficiency of
the Collateral or any agreement or assignment contained therein or for the payment
of taxes, charges, assessments or liens upon the Collateral or otherwise as to the
maintenance of the Collateral.
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9.
NO WAIVER
. Any forbearance or failure or delay by the Collateral
Agent in exercising any right, power or remedy hereunder shall not be deemed to be a waiver of such
right, power or remedy, and any single or partial exercise of any right, power or remedy shall not
preclude the further exercise thereof. The Collateral Agent may take or release other security,
may release any party primarily or secondarily liable for any of the Obligations, may grant
extensions, renewals or indulgences with respect to the Obligations, or may apply to the
Obligations in such order as the Collateral Agent shall determine the proceeds of the Life Policy
hereby assigned or any amount received on account of the Life Policy by the exercise of any right
permitted under this Assignment, without resorting or regard to other security or any guaranty. No
waiver of any provision hereof shall be effective unless it shall be in writing and signed by the
Collateral Agent.
10.
MISCELLANEOUS
.
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(a)
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Counterparts
. This Assignment may be executed in any number of counterparts,
each of which shall constitute an original and together shall constitute one and the
same instrument.
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(b)
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Assignment
. This Assignment shall be binding upon the Assignor and its
successors and assigns and shall inure to the benefit of the Collateral Agent and its
successors and assigns.
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(c)
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Arbitration
. Any claims, questions or controversies arising under or related
to in any manner whatsoever this Assignment or the transactions contemplated hereunder
including, but not limited to, any challenge by the Assignor, the Insured, or the
Insureds estate or subrogees (each, a Assignor Party) against the Collateral Agent,
Lender or any other party with a participation in the loan evidenced under the
Promissory Note (each, an Interested Party, notwithstanding the fact such parties
are not signatories hereto) (a Dispute) shall be submitted to arbitration conducted
before the American Arbitration Association (the AAA). Any Assignor Party or any
Interested Party is hereby authorized to invoke this arbitration provision, and any
judgment with respect to any award rendered pursuant to this arbitration provision may
be entered in any court of competent jurisdiction. Such arbitration will be conducted
under the rules of the AAA and the laws of the State of [JURISDICTION] and will be
conducted in [TRUST-CITY-STATE]. Each Assignor Party understands that claims
submitted to arbitration are not heard by a jury and are not subject to the rules
governing the courts. Each Assignor Party further agrees that no claim may be brought
as a class action, and that no Assignor Party has the right to act, nor shall they
attempt to act, as a class
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representative or participate as a member of a class of claimants with respect to
any claim related to or arising out of this Assignment. To the extent that this
arbitration provision is held unenforceable, the Assignor Parties: (a) irrevocably
submit to the exclusive jurisdiction of any federal or state court sitting in
[TRUST-CITY-STATE] in respect of any action or proceeding arising under or related
to in any manner whatsoever this Assignment, (b) agree that this Assignment and the
transactions contemplated hereunder shall in all respects be governed by and
construed in accordance with the laws of the State of [JURISDICTION] (without
reference to conflicts of laws provisions); provided, however, that the rights,
protections and immunities of the Collateral Agent shall be governed under the laws
of the State of [JURISDICTION]; and (c) HEREBY WAIVE THE RIGHT SUCH PARTY MAY HAVE
TO A TRIAL BY JURY ON ANY CLAIM, COUNTERCLAIM, SETOFF, DEMAND, ACTION OR CAUSE OF
ACTION (I) ARISING OUT OF OR IN ANY WAY RELATED TO THIS ASSIGNMENT OR (II) IN ANY
WAY IN CONNECTION WITH OR PERTAINING OR RELATED TO OR INCIDENTAL TO ANY DEALINGS OF
THE PARTIES TO THIS ASSIGNMENT IN CONNECTION WITH THIS ASSIGNMENT OR THE EXERCISE
OF ANY PARTYS RIGHTS AND REMEDIES UNDER THIS ASSIGNMENT OR OTHERWISE, OR THE
CONDUCT OR THE RELATIONSHIP OF THE PARTIES HERETO, IN ALL OF THE FOREGOING CASES
WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE. The Assignor Parties hereby agree and acknowledge that this provision
is intended to encompass any Dispute between any Assignor Party and any Interested
Party. The parties hereby expressly agree, and each Interested Party in receipt of
this Assignment acknowledges that the arbitration provision in this Section 10(c)
shall not apply to the trustee of the Assignor in respect of its rights, duties,
protections and immunities under the Trust Documents.
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(d)
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Inconvenient Forum
. The Assignor hereby irrevocably waives, to the fullest
extent that it may legally do so, the defense of an inconvenient forum to the
maintenance of any action or proceeding arising out of or related to this Assignment
or any other Financing Documents. The Assignor further agrees that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
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(e)
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Disclaimers
. THE ASSIGNOR ACKNOWLEDGES AND AGREES THAT THE COLLATERAL AGENT
HAS NOT AND WILL NOT PROVIDE ANY ADVICE OR RECOMMENDATIONS IN CONNECTION WITH THIS
ASSIGNMENT, INCLUDING, WITHOUT LIMITATION, ADVICE OR RECOMMENDATIONS RELATING TO
ESTATE OR FINANCIAL PLANNING, TAXES OR ACCOUNTING OR LEGAL MATTERS. THE ASSIGNOR HAS
HAD THE
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OPPORTUNITY TO BE REPRESENTED BY ITS OWN COMPETENT COUNSEL IN CONNECTION WITH THE
NEGOTIATION AND EXECUTION OF THIS ASSIGNMENT. THE UNDERSIGNED ACKNOWLEDGES THAT
BEFORE SIGNING THIS ASSIGNMENT, THE ASSIGNOR HAS READ THIS ASSIGNMENT IN ITS
ENTIRETY AND RECEIVED A LEGIBLE, COMPLETELY FILLED-IN COPY OF THIS ASSIGNMENT.
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(f)
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Notices
. All demands, notices and communications hereunder will be in writing
and will be deemed to have been duly given if personally delivered at, mailed by
certified mail, return receipt requested, mailed by a nationally recognized overnight
courier or sent via facsimile or email, to each applicable party at the address
specified below or, as to any of such parties, at such other address or facsimile
number as will be designated by such party in a written notice to the other party:
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If to the Assignor:
[TRUST-NAME]
c/o [TRUSTEE-NAME], [TRUST-ADDRESS], [TRUST-CITY-STATE] [TRUST-ZIP]
Telephone:
Facsimile:
If to the Lender:
[LENDER-NAME]
701 Park of Commerce Blvd, Ste 301
Boca Raton, FL 33487
Facsimile: 1.561.995.4201
If to the Collateral Agent:
[COLLATERAL-AGENT]
[COLLATERAL-AGENT-STREET-ADDRESS]
[COLLATERAL-AGENT-CITY-STATE-ZIP]
Attention:
Telephone:
Facsimile:
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(g)
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Severability
. In the event any one or more of the provisions contained in this
Assignment shall for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any other
provision hereof, and this Assignment shall be construed as if such invalid, illegal
or unenforceable provision had never been contained herein.
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(h)
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Trustee Recourse
. It is expressly understood and agreed by the parties
hereto that (i) this Assignment is entered into by
[TRUSTEE-NAME]
,
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not individually or personally, but solely as trustee of the Assignor in the
exercise of the powers and authority conferred and vested in
[TRUSTEE-NAME]
by the
Assignor and (ii) in no event shall
[TRUSTEE-NAME]
, in its individual capacity,
have any liability for the representations, warranties, covenants, agreements or
other obligations of the Assignor hereunder, as to all of which recourse shall be
had solely to the assets of the Assignor.
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[
Signature Page Follows
]
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IN WITNESS WHEREOF
, the undersigned Assignor has executed this Assignment in favor of the
Lender as of the date first written above.
ASSIGNOR:
[TRUST-NAME]
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By:
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., solely as Trustee
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Name: [TRUSTEE-NAME]
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Title: TRUSTEE
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STATE OF
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)
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) :
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COUNTY OF
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)
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Sworn to (or affirmed) and subscribed before me this ___day of
by
[TRUSTEE-NAME]
, who is personally known to me or who produced
as identification.
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(Print, type, or stamp commissioned
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Name of Notary Public)
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My Commission Expires:
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IN WITNESS WHEREOF
, the undersigned Lender has accepted and acknowledged this Assignment as of
the date first written above.
LENDER:
[LENDER-NAME]
IN WITNESS WHEREOF
, the undersigned Collateral Agent has accepted and acknowledged this
Assignment as of the date first written above.
COLLATERAL AGENT:
[COLLATERAL-AGENT]
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By:
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[COLLATERAL AGENT]., solely as Collateral Agent
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Name:
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Title:
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14
Consent and Acknowledgment
The undersigned hereby:
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(a)
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acknowledges its receipt of the attached Assignment of Life Insurance
Policy as Collateral (the Assignment) with respect to the Life Policy (as
defined in such Assignment);
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(b)
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confirms that it has recorded in its books and records, with respect
to the Life Policy, the Assignment of such Life Policy to the Collateral Agent (as
defined in the Assignment) in a manner sufficient to cause the Assignment to the
Collateral Agent to be recognized in its books and records;
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(c)
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confirms that it has not previously received notice of any other
assignment of or security interest in the Life Policy except for [describe any
known prior assignments], securing the Loan Agreement (as defined in the
Assignment) and Promissory Note (as defined in the Assignment); and
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(d)
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agrees to pay all amounts/death benefits due under the Life Policy
directly to the Collateral Agent.
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[(Name of) Life Insurance Company is not a party to the Assignment and assumes no responsibility
for the sufficiency or validity of the Assignment.]
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[Name of ] LIFE INSURANCE COMPANY
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By:
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Signature
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Print Name
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Title:
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Date:
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Assigned Life Policy:
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Policy Owner:
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Policy Number:
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15
Contacts For [INSURED]
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Contact # 1 Name:
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Relationship:
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Mailing Address:
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City, State, Zip:
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Phone Number:
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Contact # 2 Name:
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Relationship:
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Mailing Address:
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City, State, Zip:
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Phone Number:
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Contact # 3 Name:
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Relationship:
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Mailing Address:
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City, State, Zip:
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Phone Number:
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ESCROW AGREEMENT
This Escrow Agreement (the Agreement) is made and entered into by and between, [NAME OF
ILIT] (the Trust), IMPERIAL PREMIUM FINANCE, LLC, a Florida limited liability company (the
Lender), and
(the Escrow Agent) effective as of
,
20___.
RECITALS
A. The Lender and the Trust have entered into a Loan Application and Agreement dated of even
date herewith (the Loan Agreement), pursuant to which the Lender has advanced certain monies to
fund current and future life insurance premiums on the Life Insurance Policy. Capitalized terms
used but not defined herein shall have the meaning assigned thereto in the Loan Agreement.
B. The planned First Year Premium, Second Year Premium and Third Year Premium payments for the
Life Insurance Policy, and the Payment Dates with respect to such premium payments, are defined and
set forth on Schedule A attached hereto.
C. In connection with the Loan Agreement, the Lender and Trust have agreed that to the extent
that monies advanced under the Loan Agreement are to be used to pay Second Year Premiums and Third
Year Premiums on the Life Insurance Policy, such additional advanced amounts shall be deposited
into escrow and held therein until needed to pay subsequent premiums that may become due under the
Life Insurance Policy.
D. The Lender intends to finance the loans to the Trust in part by an affiliate obtaining
loans pursuant to that certain Financing Agreement (the Financing Agreement), dated as of
, 2009, among Imperial Life Financing II, LLC, a Georgia limited liability company, the
lenders from time to time party thereto (together with their successors and assigns, the Financing
Lenders) and CTL Holdings II LLC, as collateral agent and administrative agent for the Financing
Lenders (together with its successors and assigns, the Agent).
NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the
receipt and sufficiency of which are hereby expressly acknowledged, the Trust, Lender and the
Escrow Agent hereby agree as follows:
1.
Escrow Deposits
. Promptly following the execution of the Loan Agreement, the
Lender shall deposit or cause to be deposited with Escrow Agent funds in the aggregate amount of
the Second Year Premium and Third Year Premium, if any, described on Schedule A (the Escrow
Amounts). The Escrow Agent shall hold as part of the Escrow Amounts all dividends, principal,
interest, and any other payment or distribution therein paid to Escrow Agent (collectively, the
Escrow Funds).
2.
Disposition of Escrow Funds
. The Escrow Agent shall make disposition of the Escrow
Funds deposited and held in escrow pursuant to Section 1 hereof as follows:
1
a. The Escrow Agent hereby agrees to act with respect to the Escrow Funds upon the
written instructions of, or with the consent of, the Agent.
b. If the Escrow Agent receives written notice that the Insured has died or that the
Life Insurance Policy has been contested by the Insurer, the Escrow Agent shall retain the
Escrow Funds until further instructed in writing by the Agent;
c. In the absence of contrary written instructions from the Agent, on the Payment Date
or within 15 calendar days prior to the Payment Date for Life Insurance Policy premiums set
forth on Schedule A, the Escrow Agent shall remit the applicable premium amount to the
Insurer at (i) the address set forth on Schedule A by Federal Express or other reputable
overnight courier or (ii) if wiring instructions are set forth on Schedule A, by Federal
Reserve Bank wire; or
d. Following payment of all Life Insurance Policy premiums set forth on Schedule A,
the Escrow Agent shall disburse any remaining Escrow Funds in accordance with the
disbursement instructions provided by the Agent.
3.
Investment of Funds
. Escrow Agent shall acknowledge in writing receipt of the
Escrow Amount upon written request by the Lender or Agent and shall (except when invested as
indicated hereinafter) hold the same in a segregated interest bearing escrow or bank account
(Escrow Account), and the Escrow Agent shall promptly after initial receipt thereof invest the
Escrow Funds by purchasing United States Treasury obligations having maturity dates and amounts
approximating the Second Year Premium and Third Year Premium due dates and amounts so that the
proceeds from the maturity thereof may be used to timely pay the Second Year Premium and Third Year
Premium and maintaining such United States Treasury obligations in a type of account acceptable to
the Agent with a financial institution acceptable to Agent. Any investment earnings on the Escrow
Funds shall become part of the Escrow Funds, and shall be disbursed in accordance with Sections 2
and 15 of this Agreement. The parties acknowledge that the Escrow Agent is not providing
investment supervision, recommendations, or advice. At any time while the Escrow Funds are held in
escrow by Escrow Agent, neither the Lender, the Trust nor the Agent shall have the rights thereto,
other than the right to have the Escrow Funds distributed by Escrow Agent in accordance with this
Agreement. It is expressly agreed and understood by the parties hereto that Escrow Agent shall not
in any way whatsoever be liable for any losses on any investments, including without limitation,
losses from market risks due to premature liquidation or resulting from other actions taken
pursuant to and consistent with this Agreement, except to the extent that such losses are a result
of Escrow Agents fraud, willful misconduct, or gross negligence.
4.
Compensation of Escrow Agent
. Lender shall pay to Escrow Agent for its services as
Escrow Agent hereunder such compensation as may be agreed to from time to time, separately in
writing, by Lender and Escrow Agent. Such compensation shall be fully earned when due and
non-refundable when paid. Lender shall be solely responsible for and shall reimburse Escrow Agent
upon demand for all reasonable expenses, disbursements and advances incurred or made by Escrow
Agent in connection with this Agreement, including the reasonable fees and expenses of counsel and
other professionals to Escrow Agent engaged in connection
2
with the preparation and negotiation of this Agreement. The provisions of this Section 4
shall survive the termination of this Agreement and the resignation or removal of Escrow Agent.
5.
Notices.
Any and all notices and other communications that may be required or
permitted hereunder shall be in writing, sent by first-class mail, overnight courier,
hand-delivery, by facsimile transmission or by other electronic transmission to Lender at 701 Park
of Commerce Boulevard, Suite 301, Boca Raton, Florida 33487, Fax Number: 561-995-4203, Attention:
President, to 701 Park of Commerce Boulevard, Suite 301, Boca Raton, Florida 33487, Fax Number:
561-995-4203, Attention: President, to the Trust at [
] and to Escrow Agent at
[
], Fax Number: [
],
Attention: [
] or to any address
subsequently provided by the parties resulting from a change of address of any party. Copies of
any notice or communication given or sent hereunder by any party hereto shall also be sent to each
other party.
6.
Escrow Agents Liability
. The following provisions shall govern Escrow Agents
rights, powers, obligations, and duties under this Agreement, notwithstanding anything herein to
the contrary.
(a) In performing any of its duties hereunder, Escrow Agent shall not incur any liability
for any damages, losses or expenses whatsoever, except for its gross negligence, bad faith
or willful misconduct; provided, that Escrow Agent shall have no personal liability for any
error or judgment made in good faith by any employee or agent of Escrow Agent unless such
Person was grossly negligent. The Escrow Agent shall not be liable for the default or
misconduct of the Lender, the Trust or the Agent.
(b) Escrow Agent shall not incur any liability with respect to any action taken or omitted
in reasonable reliance upon any instrument, including without limitation, any written
notice, acknowledgment or instruction expressly provided for in this Agreement, not only as
to its due execution and the validity and effectiveness of its provisions, but also as to
the truth and accuracy of any information contained therein, which Escrow Agent shall
reasonably believe to be genuine, to have been signed or presented by a proper person or
persons, and to conform with the provisions of this Agreement.
(c) Without in any way limiting the generality of Section 6(b) above, Escrow Agent shall
not, except for its gross negligence, bad faith or willful misconduct, as determined by a
court of competent jurisdiction, be liable for any loss of, or delay in the delivery of, any
Escrow Funds by any mail, courier or delivery service in accordance with the provisions of
this Agreement.
(d) The duties, responsibilities and obligations of Escrow Agent hereunder shall be limited
to those expressly set forth herein and no duties, responsibilities or obligations shall be
inferred or implied. Escrow Agent shall not be subject to, nor required to comply with, any
other agreement between or among any or all of the parties hereto, including the Loan
Agreement, even though reference thereto may be made herein, or to comply with any direction
or instruction (other than those contained herein or delivered in accordance with this
Agreement) from any party hereto or any entity acting on its behalf.
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Escrow Agent shall not be required to and shall not expend or risk any of its own funds or
otherwise incur any financial liability in the performance of any of its duties hereunder.
(e) This Agreement is for the exclusive benefit of the parties hereto and such parties
respective successors, and shall not be deemed to give, either express or implied, any legal
or equitable right, remedy or claim to any other entity or person whatsoever;
provided
, that the parties hereto agree that the Agent and the Financing Lenders and
their successors and assigns are third party beneficiaries of this Agreement.
(f) If Escrow Agent is served with any judicial or administrative order, judgment, decree,
writ or other form of judicial or administrative process which in any way affects any Escrow
Funds (including but not limited to, orders of attachment or garnishment or other forms of
levies or injunctions or stays related to the transfer of any Escrow Funds), Escrow Agent is
authorized to comply therewith in any manner as it or its legal counsel of its own choosing
deems appropriate; and if Escrow Agent complies with any such judicial or administrative
order, judgment, decree, writ or other form of judicial or administrative process, Escrow
Agent shall not be liable to any of the parties hereto or to any other person or entity even
though such order, judgment, decree, writ or process may be subsequently modified or vacated
or otherwise determined to have been without legal force or effect.
(g) Escrow Agent, at the joint and several expense of Lender and Trust, may consult with
legal counsel and other professionals of its selection as to any matter relating to this
Agreement, and Escrow Agent shall not incur any liability in acting in good faith in
accordance with any advice from such counsel.
(h) Escrow Agent shall not incur any liability for not performing any act or fulfilling any
duty, obligation or responsibility hereunder by reason of any occurrence beyond the
reasonable control of Escrow Agent (including but not limited to, any act or provision of
any present or future law or regulation or governmental authority, any act of God or war,
civil unrest, terrorism, governmental orders, regulations, or the unavailability of the
Federal Reserve Bank wire or telex or other wire or communication facility).
(i) Escrow Agent makes no representation as to the validity, value, genuineness or
collectability of any security or other document or instrument held by or delivered to it.
(j) Escrow Agent shall not be called upon to advise any party as to selling or retaining, or
taking or refraining from taking any action with respect to, any securities or other
property deposited hereunder.
(k) No provision of this Agreement will require Escrow Agent to expend or risk funds or
otherwise incur any financial liability in the performance of any of its rights or powers
hereunder, if Escrow Agent will have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably assured or
provided to it.
(l) Escrow Agent will be under no obligation to appear in, prosecute or defend any action
relating to this Agreement.
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(m) The Escrow Agent shall be under no obligation to institute, conduct or defend any
litigation under this Agreement or otherwise or in relation to this Agreement, even if at
the request, order or direction of the Lender, the Trust and/or the Agent, unless the
Lender, the Trust and/or the Agent, as the case may be, has or have offered to the Escrow
Agent security or indemnity reasonably satisfactory to it against the costs, expenses and
liabilities that may be incurred by the Escrow Agent therein or thereby.
(n) Anything in this Agreement to the contrary notwithstanding, in no event shall the Escrow
Agent be liable for special, indirect or consequential loss or damage of any kind whatsoever
(including but not limited to lost profits), even if the Escrow Agent has been advised of
the likelihood of such loss or damage and regardless of the form of action.
(o) Escrow Agent shall not be required to take any action hereunder if the Escrow Agent
shall have reasonably determined, or shall have been advised by counsel, that such action is
likely to result in liability on the part of the Escrow Agent or is contrary to the terms
hereof or is otherwise contrary to law.
(p) Without limiting the generality of the foregoing, the Escrow Agent shall have no
liability whatsoever for the actions of the Lender, the Trust or the Agent hereunder or
under the Loan Agreement and, except as expressly set forth herein, shall have no duty to
determine the compliance by either thereof with the terms hereof or thereof.
(q) In the exercise of its rights and powers and in the performance of its duties and
obligations under this Agreement, Escrow Agent: (i) may act directly or through its agents,
attorneys, custodians or nominees pursuant to agreements entered into with any of them, and
although Escrow Agent shall be responsible for all obligations of Escrow Agent hereunder,
Escrow Agent shall not be liable for the conduct or misconduct of such agents, attorneys,
custodians or nominees if such agents, attorneys, custodians or nominees shall have been
selected by Escrow Agent in good faith, and (ii) may consult with counsel, accountants and
other skilled professionals to be selected in good faith and employed by it. Escrow Agent
shall not be liable for anything done, suffered or omitted in good faith by it in accordance
with the opinion or advice of any such counsel, accountants or other such persons as long as
no officer or agent of Escrow Agent has any actual knowledge that such opinion or advice is
inappropriate or based on incorrect information.
7.
Escrow Agents Right to Request Further Instructions
. Whenever the Escrow Agent is
unable to decide between alternative courses of action permitted or required by the terms of this
Agreement, or is unsure as to the application, intent, interpretation or meaning of any provision
of this Agreement, the Escrow Agent shall promptly give notice (in such form as shall be
appropriate under the circumstances) to the Lender and Agent requesting instruction as to the
course of action to be adopted, and, to the extent the Escrow Agent acts in good faith in
accordance with any such instruction received, the Escrow Agent shall not be liable on account of
such action to any person or party. In the event that the Escrow Agent receives instructions from
both the Lender and the Agent, the instructions from the Agent shall control. If the Escrow Agent
shall not have received appropriate instructions within ten (10) calendar days of sending such
notice (or within such shorter period of time as reasonably may be specified in such notice
5
or may be necessary under the circumstances) it may, but shall be under no duty to, take or
refrain from taking such action which is consistent, in its view, with this Agreement, and the
Escrow Agent shall have no liability to any party or person for any such action or inaction.
8.
Underlying Disputes Concerning Escrow
. Escrow Agent shall not be liable for
payment of any interest or any court cost in any action that may be brought to recover the funds
held in escrow, except as expressly provided herein. Nothing herein contained shall be deemed to
obligate Escrow Agent to deliver any funds unless Escrow Agent pursuant to this Agreement shall
have first received the same and not otherwise paid out such funds in accordance with written
instruction under this Agreement. In the event of any dispute or other circumstance sufficient in
the sole discretion of Escrow Agent to justify its doing so, Escrow Agent shall be entitled to
tender the Escrow Funds and any earnings thereon, into the registry of custody of any court of
competent jurisdiction, together with such legal pleadings as it may deem appropriate, and
thereupon be discharged from all further duties and liabilities under this Agreement. Any such
legal action may be brought in such court as Escrow Agent may determine to have jurisdiction
thereof.
9.
Indemnification of Escrow Agent.
The Lender and the Trust, jointly and severally,
agree to hold the Escrow Agent, its officers, directors, shareholders and employees (each, an
Indemnified Person) harmless and agree, jointly and severally, to indemnify each Indemnified
Person from and against any loss, liability, expense (including but not limited to reasonable
attorneys fees and expenses), claims or demands arising out of or in connection with the
transactions contemplated hereby, except for the Indemnified Persons gross negligence or willful
misconduct. IT IS THE EXPRESS INTENT OF THE PARTIES THAT, FOR THE PURPOSES OF THIS PARAGRAPH,
CLAIMS, AND THE OBLIGATIONS OF LENDER AND TRUST TO DEFEND, PROTECT, INDEMNIFY, AND HOLD HARMLESS,
WILL INCLUDE, BUT NOT BE LIMITED TO, CLAIMS ARISING OUT OF OR RESULTING FROM ESCROW AGENTS SOLE OR
CONCURRENT (1) NEGLIGENCE, (2) STRICT LIABILITY, OR (3) OTHER FAULT OF ANY NATURE, provided that
there shall be no obligation to defend, indemnify or hold Escrow Agent harmless from any claims
arising out of or resulting from Escrow Agents gross negligence or willful misconduct. The
foregoing indemnity shall survive the resignation or removal of Escrow Agent pursuant hereto and
the termination of this Agreement.
10.
Representations and Warranties of Escrow Agent
. Escrow Agent represents and
warrants to Lender, Trust and Agent, as of the Agreement date, and as of each date it accepts funds
to be held in escrow hereunder, as follows:
(a) Escrow Agent is organized and validly existing under the laws of the United States of
America, with the right to perform all of its obligations hereunder;
(b) The execution, delivery and performance of this Agreement by Escrow Agent have been duly
authorized by all necessary action on the part of Escrow Agent; and
(c) This Agreement is the legal, valid and binding obligation of Escrow Agent enforceable by
Lender and Agent against Escrow Agent in accordance with the terms hereof, except as
enforceability may be limited by bankruptcy, insolvency,
6
reorganization, moratorium and other similar laws affecting creditors rights generally or
by general principles of equity.
11.
Resignation, Removal and Replacement of Escrow Agent
. Escrow Agent may resign or
be removed by Agent and be discharged from performing any future duties hereunder, and a successor
Escrow Agent shall be appointed by the Agent. Escrow Agent shall present Lender, Trust and Agent
with prompt written notice of such resignation, and Agent shall provide to Escrow Agent prompt
written notice of the appointment of each successor Escrow Agent. No resignation or removal of
Escrow Agent shall become effective until the appointment of a successor Escrow Agent hereunder and
the acceptance by such successor of the duties of Escrow Agent hereunder. Notwithstanding the
foregoing, if no replacement Escrow Agent is appointed in accordance with this Section 11 within
thirty (30) days after Escrow Agent gives written notice to Lender, Trust and Agent of its
resignation or Escrow Agent has been notified of its removal, the Escrow Agent may, at the joint
and several expense of the Lender and Trust, petition, any court of competent jurisdiction for the
appointment of its successor.
12.
Income Tax Reporting
. The parties agree that, for tax reporting purposes, all
interest or other income from investment of the Escrow Funds shall, as of the end of each calendar
year and to the extent required by the Internal Revenue Service be reported as having been earned
by the Trust whether or not income was disbursed during a particular year. The Trust shall provide
the Escrow Agent with a certified tax identification numbers by furnishing appropriate forms W-9 or
W-8 and such other forms and documents that the Escrow Agent may request. The parties understand
that if such tax reporting documentation is not provided and certified to the Escrow Agent, the
Escrow Agent may be required by the Internal Revenue Code of 1986, as amended, and the Regulations
promulgated thereunder, to withhold a portion of any interest or other income earned on the
investment of monies or other property held by the Escrow Agent pursuant to this Agreement.
13.
General
.
(a) Time is of the essence in this Agreement.
(b) The section headings of this Agreement are for convenience only and shall not limit or
otherwise affect any of the terms hereof.
(c) Neither this Agreement nor any term, condition, covenant or agreement hereof may be
changed, waived, discharged, or terminated orally but only by an instrument in writing
signed by each party hereto and by the Agent. In no event shall Escrow Agent be required to
join in any amendment hereto which adversely affects its rights, duties, obligations,
privileges, protections, indemnifications or immunities hereunder.
(d) This Agreement, together with all documents referred to herein, constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof.
Notwithstanding anything in this Agreement to the contrary, Escrow Agent shall not be bound
by the terms of any documents to which it is not a party.
(e) This Agreement shall be governed by the laws of the State of New York, without regard to
the principles of conflict and choice of laws thereof. Each of the parties hereto
7
hereby irrevocably agrees that any action, suit or proceedings against by any of the other
parties hereto with respect to this Agreement shall be brought before the exclusive
jurisdiction of the federal and state courts located in the County of New York in the State
of New York, unless all the parties hereto agree in writing to any other jurisdiction. Each
of the parties hereto hereby submit to such exclusive jurisdiction.
(f) If any paragraph or part hereof shall for any reason be held or adjudged to be invalid,
illegal, or unenforceable by any court of competent jurisdiction, such paragraph or part
thereof so adjudicated invalid, illegal, or unenforceable shall be deemed separate,
distinct, and independent, and the remainder of this Agreement shall remain in full force
and effect and shall not be affected by such holding or adjudication.
(g) As used herein, the singular number shall include the plural, the plural the singular,
and the use of the masculine, feminine, or neuter gender shall include all genders, as the
context may require.
(h) This Agreement may be executed in any number of counterparts, each of which shall be an
original, but such counterparts shall constitute but one and the same instrument. Delivery
of an executed counterpart of this Agreement by telefacsimile or other electronic
transmission shall be equally effective as delivery of an original executed counterpart of
this Agreement.
(i) EACH OF THE PARTIES HERETO WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT
OF, OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREUNDER.
(j) The parties acknowledge and agree that each party has participated equally in the
negotiation and preparation of this Agreement and that the rule of law that ambiguities
contained in a contract shall be construed against the drafter thereof shall not be applied
to this Agreement or the interpretation of any term or provision hereof.
14.
Termination of Escrow
. The escrow established pursuant to this Agreement in
relation to the Loan Agreement shall terminate upon the earlier to occur of (a) receipt by Escrow
Agent of written notice signed by Agent expressly terminating the escrow established pursuant to
this Agreement; or (b) payment of all premiums on the Life Insurance Policy scheduled to be paid on
Schedule A.
15.
Escrow Funds Upon Termination
. Upon the termination of the escrow in accordance
with Section 14 hereof, Escrow Agent shall pay all remaining funds in the Escrow Account to the
account of the [ ] located at [ ], account number
with ABA routing number
.
16.
United States Patriot Act Compliance
. As a condition to the provision of any
services hereunder by the Escrow Agent, and notwithstanding anything herein to the contrary, if
requested, the Escrow Agent shall have no duties or obligations whatsoever hereunder unless and
until the Escrow Agent shall have received a completed document in the form attached hereto as
8
Exhibit B from each of Lender and Trust along with all supporting documentation referred to
therein. Escrow Agent shall have the exclusive right in its sole discretion to determine the
adequacy of the information supplied by Lender or the Trust. In the event the Lender and Trust
shall fail to supply all required documentation to the Escrow Agent but nevertheless have delivered
funds or documents to the Escrow Agent, the Escrow Agent shall return all such funds and documents
to the party having delivered the same and this Agreement shall be deemed immediately terminated
for all purposes except for the obligations of the Lender and Trust under Section 9 hereof.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.
SIGNATURE PAGE FOLLOWS.]
9
IN WITNESS WHEREOF, the Trust, Agent Lender and the Escrow Agent have executed this escrow
agreement as of the day and year first above written.
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as Escrow Agent
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By:
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Name:
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Title:
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IMPERIAL PREMIUM FINANCE, LLC
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By:
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Name:
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Title:
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[TRUST]
By:
, solely as trustee
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By:
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Name:
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Title:
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Schedule A
Planned Premiums
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Amount of Planned Premiums
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Payment Date
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First Year Premium:
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Second Year Premium:
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Third Year Premium
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Insurer Address for Transmittal of Planned Premiums:
[insert address]
Wiring Instructions for Insurer:
[insert]
11
Imperial Life & Annuity Services, LLC
701 Park of Commerce Blvd., Suite 301
Boca Raton, FL 33487
FEE AGREEMENT
Date:
, 2009
, hereinafter called the Agent, as full consideration and compensation for all
services of Imperial Life & Annuity Services LLC (ILAS) , agrees to pay to ILAS the following
fees (Fee), in cash, on or about the following dates (Fee Due Date) in connection with the
financing provided for the policy years and policy indicated below.
Initial Fee:
Subsequent Fee:
Fee Due Date:
Insured:
Plan:
Insurance Company:
Policy No.:
Should Agent become aware that any Fee will not be paid on the Fee Due Date set forth above,
Agent shall immediately (and not more than two (2) days after Agent becomes aware of such
non-payment) notify ILAS in writing that said Fee will not be paid on the Fee Due Date, explain
the reason that the Fee will not be paid on such date and provide an updated Fee Due Date.
Notwithstanding, ILAS reserves the right to charge interest on the Fee up to the maximum amount
permitted by law should Agent fail to pay the Fee on the Fee Due Date.
1. This agreement (hereinafter, this Agreement) may not be terminated.
2. The Agent and ILAS shall adhere to and be subject to all applicable State, Federal and local
laws and regulations.
3. No assignment of this Agreement or any rights and benefits accruing to the ILAS hereunder, shall
be valid unless authorized in advance in writing, by an officer of ILAS.
4. ILAS shall have no authority to alter, modify, waive or change any of the terms, rates or
conditions of any Insurance Company or Insurance Companies that Agent represents, or their policies
or contract, nor to perform any act or make any representations concerning the Insurance Company or
Insurance Companies that Agent
represents or their policies or contracts other than as expressly authorized in writing by an
officer of the Agent, or as authorized or permitted herein. ILAS shall have no authority to endorse
checks or other forms of payment payable to the Agent or to the Insurance Company or Insurance
Companies that Agent represents, nor to advertise or publish any matter or thing concerning the
Agent or its policies without written permission of the Agent, or to do or perform any act or thing
other than that which is expressly authorized or permitted herein.
5. This Agreement relates solely to the procurement of premium financing of the above Policy and
shall not create, or be construed as creating, a principal-agent, employer-employee or
master-servant relationship between the Agent and ILAS, nor shall ILAS hold itself out as a
soliciting agent for or on behalf of the Agent.
6. ILAS and Agent acknowledge that money damages may not be an adequate remedy for violations of
this Agreement and that any party may, in its sole discretion, apply to a court of competent
jurisdiction for specific performance or injunctive or such other relief as such court may deem
just and proper to enforce this Agreement or to prevent any violation hereof. In addition, if Agent
fails to pay ILAS any amounts due hereunder, Agent agrees to a Consent to Judgment for any amounts
due and owing ILAS hereunder and consents to ILAS executing Agents name on Agents behalf on any
documents including, but not limited to, the Consent to Judgment, itself, in order to give full
force and effect to said Consent to Judgment. In addition, Agent agrees that ILAS may pursue relief
from a court of competent jurisdiction, including but not limited to obtaining an order or writ of
attachment (or other pre or post judgment relief in favor of ILAS) on commissions being paid to
Agent on all other deals involving Agent, as well as and, to the extent permitted by applicable
law, the Agent waives any objection to the imposition of such relief in appropriate circumstances,
including but not limited to waives any objection against ILAS to seize Agents assets in order to
satisfy said Confession of Judgment. In the event ILAS undertakes any collection or other actions
to collect the amounts due to ILAS hereunder, Agent agrees to pay upon demand all of ILASs costs
and expenses, including ILASs reasonable attorneys fees and ILASs legal expenses, incurred in
connection with the enforcement of this Agreement.
7. In addition this Agreement shall be construed and governed in accordance with the laws of the
State of Florida, without regard to conflict of laws principles. In the event the parties are
unable to mediate their dispute to a satisfactory resolution, the parties agree that the Circuit
Court of the Fifteenth Judicial Circuit in and for Palm Beach County, Florida shall have exclusive
jurisdiction to hear and determine any claims or disputes between the parties arising out of or
related to this Agreement, unless federal jurisdiction is available, in which case the Southern
District of Florida, West Palm Beach Division, shall have exclusive jurisdiction to determine any
claims or disputes arising out of or related to this Agreement. The parties expressly submit and
consent in advance to such jurisdiction in any action or suit commenced in such court, and each
party hereby waives any objection that it may have based upon lack of personal jurisdiction,
improper venue or
forum non conveniens
.
IN THE EVENT OF ANY LITIGATION PROCEEDINGS AND TO THE
EXTENT PERMITTED BY LAW, EACH OF THE PARTIES
HEREBY KNOWINGLY AND WILLINGLY WAIVES AND SURRENDERS SUCH PARTYS RIGHT TO TRIAL BY JURY AND AGREES
THAT SUCH LITIGATION SHALL BE TRIED TO A JUDGE SITTING ALONE AS THE TRIER OF BOTH FACT AND LAW, IN
A BENCH TRIAL, WITHOUT A JURY
.
8. This Agreement replaces any previous Agreement relating to the above Policy. No change in this
Agreement shall bind the Agent unless in writing and signed by an officer of the Agent.
IN WITNESS WHEREOF
, the parties hereto have executed and delivered this Agreement as of the
date and year first written above.
Imperial Life & Annuities Services, LLC
L046727
Current License Number
AGENT INFORMATION:
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Agent Signature
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Company
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Agent Address:
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Company Representative
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STATE OF
COUNTY OF
On the
day of
, in the year
before me, the undersigned, personally ap
peared
,
personally known to me or proved to me on the basis of satisfactory evidence to be the
individual(s) whose name(s) is (are) subscribed to the within instrument, and acknowledged to me
that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their
signature(s) on the instrument, the individual(s), or the person upon behalf of which the
individual(s) acted, executed the instrument.
My Commission expires on
AUTHORIZATION FOR USE AND/OR DISCLOSURE OF HEALTH INFORMATION
I,
, hereby voluntarily authorize the disclosure of information from
my health record including protected health information (PHI) as defined in the HIPAA Privacy
Regulations. I understand that the disclosing health care provider will not condition treatment,
payment, enrollment, or eligibility for benefits on my providing or refusing to provide this
authorization.
I hereby authorize the Disclosing Party:
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Name of Disclosing Party
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Address
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City
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State
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Zip Code
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to disclose to Imperial Premium Finance, LLC, 701 Park of Commerce Blvd, Ste. 301, Boca Raton,
FL 33487, who may provide the information to the companies listed below, or its reinsurers, any
insurance support organizations, and those persons authorized to represent them who may need to
collect information on me in regard to proposed coverage, records and information pertaining to:
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Allianz Life of North America
AIG
American General Life Ins. Co.
American General Life Ins. Co. of NY
American National
AXA
First Colony Life Ins. Co.
General American Life Ins. Co.
Guarantee Trust Life Ins. Co.
Genworth Financial
IBU, Inc.
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Imperial Premium Finance, LLC
ING
Jefferson Pilot Life Ins. Co.
John Hancock Life Ins. Co.
Lexington Insurance Company
Lincoln Benefit Life Ins. Co.
Massachusetts Mutual Life Ins. Co.
Metropolitan Life Ins. Co.
MONY
Nationwide
New York Life Insurance Co.
North American Co. for Life &
Health
National Western
PDC Retrievals
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Presidential Life Ins. Co.
Principal Insurance
Prudential Life Ins. Co.
Security Life of Denver
State Life Ins. Co.
Sun Life Ins. Co.
The Producers Group
TransAmerica Ins. Co.
Transamerica Occidental
United of Omaha Life Ins. Co.
US Financial Life
US Life Ins. Co.
West Coast Life Ins. Co.
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Name of Patient/Member (list other names used)
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Medical Record Number
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Date of Birth
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Social Security Number
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Telephone Number
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DURATION:
This authorization shall become effective immediately and shall remain in effect for one
year from the date of signature unless a different date is specified here
(date).
REVOCATION:
This authorization is also subject to written revocation by the Patient/Member at any
time. The written revocation will be effective upon receipt, except to the extent that the
disclosing party or others have acted in reliance upon this authorization and such revocation can
be made to Imperial Premium Finance, LLC and the Health Records Department of the Disclosing Party
in writing at the addresses stated above.
REDISCLOSURE:
I understand that information disclosed by this authorization, except for Alcohol and
Drug Abuse as defined in 42 CFR Part 2, may be subject to re-disclosure by the recipient and may no
longer be protected by the Health Insurance Portability and Accountability Act Privacy Rule (45 CFR
Part 164) and the Privacy Act of 1974 (5 USC 552a).
SPECIFY RECORDS:
Check the line, initial and/or sign which type of information is to be disclosed:
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Medical Information (Entire Record)
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Psychiatric/Mental Health
þ
EKG
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Progress Notes
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HIV/AIDS Related Treatment
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Alcohol/Drug Abuse Treatment/Referral
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Billing Statements
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Genetic Records
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Other Health Information
(Specify)
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Specify the date of records to be disclosed:
Any and all available
.
The recipient may use the health information authorized on this form for the following purposes:
at the request of an individual including; but not limited to, insurance application and related business.
I understand that I may revoke this authorization in writing submitted at any time to the
Health Records Department of the Disclosing Party except to the extent that action has been taken
in reliance on this authorization. If this authorization was obtained as a condition of obtaining
insurance coverage or a policy of insurance, other law may provide the insurer with the right to
contest a claim under the policy. A copy of this authorization is valid as the original and the
Member/Patient and I have received a signed copy of this authorization.
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Signature of Patient/Member
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Date
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Signature of Personal Representative
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Date
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(State Relationship to Patient/Member)
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HOLD HARMLESS AGREEMENT
[TRUST-NAME]
The undersigned Grantor and each undersigned Beneficiary release and agree to hold harmless
the Insurance Agent [AGENT], the Trustee of the [TRUST-NAME], (the Trust), for any and all
actions, acts or inactions of the Insurance Agent and the Trustee in connection with the issuance
and/or maintenance of any insurance policy(ies) acquired or held by the Trust, the administration
of the Trust or any other matters related thereto, except for dishonesty or intentional fraud, and
understand and agree that in the event the Trust assets are sold or liquidated on account of any
default under any loan agreement or other indebtedness (Policy Loan) there are no guarantees as
to the amount of the net proceeds therefrom except that the Trust shall pay to the Beneficiaries
the amounts, if any, in excess of full satisfaction under any loan agreement or indebtedness in the
event of (a) the Grantors death or (b) the termination of the Trust. NOTWITHSTANDING, THE GRANTOR
AND EACH BENEFICIARY UNDERSTAND THAT THERE ARE NO REPRESENTATIONS OR GUARANTEES OF ANY KIND THAT
THERE WILL BE ANY FUNDS TO DISTRIBUTE TO THE BENEFICIARIES AFTER THE PAYMENT OF ANY INDEBTEDNESS.
The Grantor and each Beneficiary understand that neither the Trustee nor the Insurance Agent
nor any other person is rendering legal or tax advice by virtue of the Trust or acquisition or
financing of the life insurance policy, and that the Grantor and each Beneficiary are urged to
consult their own advisors,
AS THE TRUST IS NOT A COMPLETE ESTATE PLANNING DOCUMENT.
The Grantor and each Beneficiary also represent that the only understanding, obligations and
representations of any person in connection with the Trust and/or the acquisition and/or financing
of the life insurance policy that are of any validity, force or effect are those in writing and
that no oral statement or representation to the contrary is of any force or effect, and there are
no other terms, conditions, or understandings whatsoever of any kind or nature concerning the
purchase, financing, or acquisition of any life insurance policy, the subject matter of the Trust,
and that any other such term, condition, or understanding is of no force or effect.
The Grantor and each Beneficiary also represent that the insurance applied for and owned or to
be owned by the Trust was applied for and/or obtained not for investment but rather for estate
preservation purposes and the ability to leverage the money of Lender will allow the Trust to
purchase the Policy that will have a high death benefit option. This will (a) allow Grantor and
the representative of Grantors estate the ability to protect against significant estate tax
consequences that Grantors estate may face given the current state of the law, (b) will provide
Grantors estate with certain protection in the event estate tax liability should arise, and (c)
permit Grantor to be able to protect the Beneficiaries from certain potential expenses that they
would otherwise sustain without the liquidity that the Policy will offer.
[Signature pages follow.]
IN WITNESS WHEREOF the Grantor and the Beneficiary(ies) have executed this Hold Harmless and
Disclosure Agreement on this ___day of
,
.
STATE OF
COUNTY OF
This day personally appeared before me, the undersigned authority in and for said County and
State, the within named [INSURED]
(Grantor)
who acknowledged signing and delivering the above and
foregoing
Hold Harmless Agreement
on the day and date therein mentioned as a free and
voluntary act and deed and for the purpose therein expressed.
GIVEN under my hand and official seal of office this the ___day of
,
.
Notary Public
My Commission Expires:
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BENEFICIARY
:
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[Beneficiary]
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STATE OF
COUNTY OF
This day personally appeared before me, the undersigned authority in and for said County and
State, the within named
[BENEFICIARY] (Beneficiary)
who acknowledged signing and delivering the
above and foregoing
Hold Harmless Agreement
on the day and date therein mentioned as a free
and voluntary act and deed and for the purpose therein expressed.
GIVEN under my hand and official seal of office this the ___day of
,
.
Notary Public
My Commission Expires:
GUARANTY
THIS GUARANTY is entered into as of [DATE] by the undersigned (the
Guarantor
), in favor
of and for the benefit of [LENDER-NAME], a Florida limited liability company (which for all
purposes of this Guaranty shall include any assignees, whether or not by operation of law, and
successors thereto, the
Lender
).
RECITALS
Pursuant to a loan agreement between the Lender and [TRUST-NAME] (Trust or Borrower) dated
[DATE] (the Loan Agreement), the Lender has made an initial loan in the amount of
[FIRST-YEAR-PREMIUM] (the Loan) to the Trust as evidenced by the Promissory Note dated [DATE] (as
amended, supplemented or modified from time to time, the Note). The proceeds of the Loan were
used to pay or reimburse for the premiums due under life insurance policy number [POLICY-NUMBER]
issued by [INSURER] (the Insurer) on the life of [INSURED] in the face amount of
[NET-DEATH-BENEFIT] (the Policy).
The Guarantor, as grantor of the Borrower, acknowledges and agrees that the Guarantor has received
and will receive direct and indirect benefits from the extension of the Loan made to the Borrower.
Any capitalized terms used herein and not otherwise defined shall have the definitions accorded to
such terms in the Loan Agreement.
1.
Conditions to Liability
. Notwithstanding anything herein to the contrary, this
Guaranty shall result in liability to the Guarantor only in the event that any of the following
shall occur (each of which shall be identified as a
Default
):
(a) Any act (or omission to act) of fraud or willful misconduct on the part of the Guarantor,
or any other action or inaction by the Guarantor, that impairs the Lenders ability to be repaid
under the Note or otherwise under the Loan;
(b) Any act (or omission to act) of the Guarantor that directly or indirectly impairs the
Lenders rights to the Policy as collateral under the terms of the Loan, the Note, any Financing
Document and/or the Collateral Assignment;
(c) Any failure of the Borrower to use the proceeds of the Loan exclusively as set forth in
the Note, the Financing Documents or any other documents related to the Loan;
(d) Any act by the Borrower or the Guarantor to transfer, amend, change ownership of, cancel,
convey, sell or assign the Policy or any interest therein without the express written consent of
the Lender;
(e) Any failure to act by the Borrower or the Guarantor that results, directly or indirectly,
in the transfer of the Policy or any interest therein or any amendment, change of ownership,
cancellation, conveyance, sale or assignment thereof, except with the express written consent of
the Lender;
(f) [Any default in payment of, or failure to pay any, interest, principal or other amounts
which become due under the Note or Loan;] [OPTIONAL]
(g) The breach of any representation, warranty or covenant by the Guarantor contained in the
Collateral Assignment or in any Financing Document;
(h) Any act or action by any Beneficiary or any other person asserting to be a beneficiary
under the Trust Agreement that impairs, delays or interferes with the Lenders rights to have
ownership of the Life Insurance Policy transferred to it or its designee following an Event of
Default and a foreclosure by the Lender on the beneficial ownership interests in the Borrower
pursuant to the Pledge Agreement; and
(i) Any failure of the Borrower, the Guarantor or any beneficiary of the Borrower who directly
or indirectly receives any payment from the Insurer prior to the repayment of the Loan, to pay or
cause to be paid to the Lender all or such portion of such payment necessary to repay the entire
outstanding balance of the Loan and any other outstanding amounts under the Financing Documents,
together with any accrued and unpaid interest thereon and any other charges and expenses payable to
the Lender under the terms of the Note, the Financing Documents and any other documents related to
the Loan.
Upon the occurrence of a Default, the Guarantor hereby irrevocably and unconditionally
guarantees to the Lender, the due and punctual payment when due of all liabilities and all other
amounts outstanding or due to be paid to the Lender under, in connection with or related to, the
Loan and any other agreements entered into with respect thereto (including the Financing
Documents), including but not limited to outstanding principal and accrued and unpaid interest
under the Note, any early termination fees, costs and expenses payable to the Lender (including,
but not limited to, reasonable attorneys fees) in the event of an uncured default under the Loan
or any Financing Document, as well as any and all costs and expenses of the Lender to enforce this
Guaranty (including, but not limited to, reasonable attorneys fees), whether or not (i) due or
owing to, or in favor or for the benefit of, the Lender, or (ii) ARISING OR ACCRUING BEFORE OR
AFTER THE FILING BY OR AGAINST THE GUARANTOR OF A PETITION UNDER THE BANKRUPTCY CODE OR ANY SIMILAR
FILING BY OR AGAINST THE GUARANTOR, AS THE CASE MAY BE, UNDER THE LAWS OF ANY JURISDICTION OR (c)
ALLOWABLE UNDER SECTION 502(b)(2) OF THE BANKRUPTCY CODE (collectively, the
Guaranteed
Obligations
).
Notwithstanding the foregoing, in the event liability under this Guaranty results solely as a
result of a Default as described in Section 1(g), the Guarantors liability shall be limited to
100% of the amount outstanding or due under the Guaranteed Obligations.
2.
Waiver
.
(a) The Guarantor unconditionally and irrevocably waives, to the fullest extent permitted by
applicable law: (i) notice of any of the matters referred to in Section 1 hereof; (ii) all notices
which may be required by statute, rule of law or otherwise to preserve any rights against the
Guarantor hereunder, including, without limitation, notice of the acceptance of this Guaranty, or
the creation, renewal, extension, modification or accrual of the Guaranteed Obligations or notice
of any other matters relating thereto, any presentment, demand, notice of dishonor, protest,
nonpayment of any damages or other amounts payable under any Financing Document; (iii) any
requirement for the enforcement, assertion or exercise of any right, remedy,
power or privilege under or in respect of any Financing Document, including, without
limitation, diligence in collection or protection of or realization upon the Guaranteed Obligations
or any part thereof or any collateral therefor; (iv) any requirement of diligence; (v) any
requirement to mitigate the damages resulting from a default by the Borrower under the Note or any
Financing Document; (vi) the occurrence of every other condition precedent to which the Guarantor
or the Borrower may otherwise be entitled; (vii) the right to require the Lender to proceed against
the Borrower or any other person liable on the Guaranteed Obligations, to proceed against or
exhaust any security held by the Borrower or any other person, or to pursue any other remedy in the
Lenders power whatsoever; (viii) the right to have the property of the Borrower first applied to
the discharge of the Guaranteed Obligations; (ix) any lack of validity or enforceability in the
Note or any other Financing Document, (x) any exchange or release of, or non-perfection of any
collateral securing, all or any of the Guaranteed Obligations; (xi) any release, amendment or
waiver of or consent to departure from any other guaranty or any document relating to any security
for or in respect of the Guaranteed Obligations; (xii) any other circumstances which might
otherwise constitute a defense available to, or discharge of, the Guarantor; or (xiii) any and all
rights it may now or hereafter have under any agreement or at law or in equity (including, without
limitation, any law subrogating the Guarantor to the rights of the Lender) to assert any claim
against or seek contribution, indemnification or any other form of reimbursement from the Borrower
or any other party liable for payment of any or all of the Guaranteed Obligations for any payment
made by the Guarantor under or in connection with this Guaranty or otherwise.
(b) The Lender may, at its election, exercise any right or remedy it may have against the
Borrower without affecting or impairing in any way the liability of the Guarantor hereunder and the
Guarantor waives, to the fullest extent permitted by applicable law, any defense arising out of the
absence, impairment or loss of any right of reimbursement, contribution or subrogation or any other
right or remedy of the Guarantor against the Borrower, whether resulting from such election by the
Lender or otherwise. The Guarantor waives any defense arising by reason of any disability or other
defense of the Borrower or by reason of the cessation for any cause whatsoever of the liability,
either in whole or in part, of the Borrower to the Lender for the Guaranteed Obligations.
(c) The Guarantor assumes the responsibility for being and keeping informed of the financial
condition of the Borrower and of all other circumstances bearing upon the risk of nonpayment of the
Guaranteed Obligations and agrees that the Lender shall not have any duty to advise the Guarantor
of information regarding any condition or circumstance or any change in such condition or
circumstance. The Guarantor acknowledges that the Lender has not made any representations to the
Guarantor concerning the financial condition of the Borrower. The value of the consideration
received and to be received by the Guarantor is reasonably worth at least as much as the liability
and obligation of Guarantor incurred or arising under this Guaranty and all related papers and
arrangements.
3.
Parties
. This Guaranty shall inure to the benefit of the Lender and its
successors, assigns or transferees, and shall be binding upon the Guarantor and his or her
respective heirs, successors and assigns; provided, that the Guarantor may not delegate or assign
any of the Guarantors duties or obligations under this Guaranty without the prior written consent
of the Lender.
4.
Notices
. All notices and other communications provided for herein shall be in
writing and shall be delivered by hand or overnight courier service, mailed by U.S. mail, certified
with return receipt requested, or sent by telecopy (with confirmed receipt or followed by overnight
delivery) to the addresses (or telecopy numbers) set forth on the signature pages hereto. The
Guarantor or the Lender may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and other
communications given in accordance with the provisions of this Guaranty shall be deemed to have
been given on the date of receipt or, if mailed, the fifth (5th) business day following the date so
mailed, if earlier, or the next business day if sent by overnight courier.
5.
Right to Deal with the Borrower
. At any time and from time to time, without
terminating, affecting or impairing the validity of this Guaranty or the obligations of the
Guarantor hereunder, the Lender may deal with the Borrower in the same manner and as fully as if
this Guaranty did not exist and shall be entitled, among other things, to grant the Borrower,
without notice or demand and without affecting the Guarantors liability hereunder, such extension
or extensions of time to perform, renew, compromise, accelerate or otherwise change the time for
payment of or otherwise change the terms of indebtedness or any part thereof contained in or
arising under any Financing Document or any other document evidencing Obligations of the Borrower
to the Lender, or to waive any obligation of the Borrower to perform, any act or acts as the Lender
may deem advisable.
6.
Subrogation
.
Notwithstanding anything to the contrary contained herein, any and
all rights and claims of the Guarantor against the Borrower or any of its property or against any
other person, arising by reason of any payment by the Guarantor to the Lender pursuant to the
provisions, or in respect, of this Guaranty shall be subordinate, junior and subject in right of
payment to the prior and indefeasible payment in full of the Guaranteed Obligations to the Lender,
and until such time, the Guarantor shall have no right of subrogation, contribution or any similar
right and hereby waive any right to enforce any remedy the Lender may now or hereafter have against
the Borrower, any endorser or any other guarantor of all or any part of the Guaranteed Obligations
and any right to participate in, or benefit from, any security given to the Lender to secure the
Guaranteed Obligations. Any promissory note evidencing such liability of the Borrower to the
Guarantor shall be non-negotiable, shall expressly state that it is subordinated pursuant to this
Guaranty and shall be immediately assigned (with recourse) and delivered to the Lender. All liens
and security interests of the Guarantor, whether now or hereafter arising and howsoever existing,
in assets of the Borrower or any assets securing the Guaranteed Obligations shall be and hereby are
subordinated to the rights and interests of the Lender in those assets until the prior and
indefeasible final payment in full of all of the Guaranteed Obligations to the Lender and
termination of all financing arrangements between the Borrower and the Lender. If any amount shall
be paid to the Guarantor contrary to the provisions of this Section 6 at any time when all the
Guaranteed Obligations shall not have been indefeasibly paid in full, such amount shall be held in
trust for the benefit of the Lender and shall forthwith be turned over in kind in the form received
to the Lender (duly endorsed if necessary) to be credited and applied against the Guaranteed
Obligations, whether matured or unmatured, in accordance with the terms of the Financing Documents
and this Guaranty.
7.
Survival of Representations, Warranties, and Agreements
.
All representations,
warranties, covenants and agreements made herein, including representations
and warranties deemed made herein, shall survive any investigation or inspection made by or on
behalf of the Lender and shall continue in full force and effect until all of the obligations of
the Guarantor under this Guaranty shall be fully performed in accordance with the terms hereof, and
until the payment in full of the Guaranteed Obligations.
8.
GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL
.
THIS GUARANTY SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF [JURISDICTION-UC]. THE
GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR
ANY DISTRICT OF [JURISDICTION-UC] AND ANY COURT IN THE STATE OF [JURISDICTION-UC] IN ANY ACTION,
SUIT OR PROCEEDING BROUGHT AGAINST THE GUARANTOR AND RELATED TO OR IN CONNECTION WITH THIS GUARANTY
OR THE TRANSACTIONS CONTEMPLATED HEREBY, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
GUARANTOR HEREBY WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE IN ANY
SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT THE GUARANTOR IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF SUCH COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT
FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER, OR THAT THIS GUARANTY OR ANY
DOCUMENT OR ANY INSTRUMENT REFERRED TO HEREIN OR THE SUBJECT MATTER THEREOF MAY NOT BE LITIGATED IN
OR BY SUCH COURTS. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE GUARANTOR AGREES (I) NOT TO SEEK
AND HEREBY WAIVES THE RIGHT TO ANY REVIEW OF THE JUDGMENT OF ANY SUCH COURT BY ANY COURT OF ANY
OTHER NATION OR JURISDICTION WHICH MAY BE CALLED UPON TO GRANT AN ENFORCEMENT OF SUCH JUDGMENT AND
(II) NOT TO ASSERT ANY COUNTERCLAIM, IN ANY SUCH SUIT, ACTION OR PROCEEDING UNLESS SUCH
COUNTERCLAIM COULD NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE
INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION. THE GUARANTOR AGREES THAT SERVICE OF PROCESS
MAY BE MADE UPON THE GUARANTOR BY CERTIFIED OR REGISTERED MAIL TO THE ADDRESS FOR NOTICES SET FORTH
IN THIS GUARANTY OR ANY METHOD AUTHORIZED BY THE LAWS OF [JURISDICTION-UC]. THE GUARANTOR
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT
OF OR RELATING TO THIS GUARANTY, THE FINANCING DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.
9.
Expenses
. The Guarantor hereby agrees to pay on demand, and to hold the Lender
harmless against liability for, any and all costs and expenses (including, without limitation,
reasonable legal fees, costs and expenses of counsel and fees, costs and expenses incurred in
connection with any bankruptcy proceeding) incurred or expended by the Lender in connection with
the enforcement, amendment, modification or waiver of or preservation of any rights under this
Guaranty, and the collection of amounts payable hereunder, and until so paid, such fees, costs,
disbursements and expenses shall be added to, and constitute, Guaranteed Obligations.
10.
Further Assurances
.
The Guarantor hereby covenants and agrees to execute and
deliver to the Lender such additional agreements, instruments and documents as the Lender may
reasonably request to give effect to the obligations of the Guarantor under this Guaranty.
11.
Miscellaneous
.
If any term of this Guaranty or any application hereof shall be invalid or unenforceable, the
remainder of this Guaranty and any other application of such term shall not be affected thereby.
Any term of this Guaranty may be amended, waived, discharged or terminated only by an
instrument in writing signed by the Guarantor and the Lender. No notice to or demand on the
Guarantor shall be deemed to be a waiver of the obligations of the Guarantor or of the right of the
Lender to take further action without notice or demand as provided in this Guaranty. No course of
dealing between the Guarantor and the Lender shall change, modify or discharge, in whole or in
part, this Guaranty or any obligations of the Guarantor hereunder. No waiver of any term, covenant
or provision of this Guaranty shall be effective unless given in writing by the Lender and if so
given shall only be effective in the specific instance in which given.
The headings in this Guaranty are for purposes of reference only and shall not limit or define
the meaning hereof.
No delay or failure of the Lender in exercising any right, power or privilege hereunder or
under the Financing Documents, shall affect such right, power or privilege nor shall any single or
partial exercise thereof or any abandonment or discontinuance of steps to enforce such a right,
power or privilege preclude any further exercise thereof or of any other right, power or privilege.
The Lenders rights and remedies hereunder are cumulative and not exclusive of any rights or
remedies which it would otherwise have. Any waiver, permit, consent or approval of any kind or
character of the Lender concerning any breach or default by the Guarantor under this Guaranty must
be in writing and specifically described.
All payments made by the Guarantor hereunder to the Lender in respect of the Guaranteed
Obligations shall be made to the Lender in U.S. dollars and immediately available funds at an
account designated by the Lender, or to such other place as the Lender may hereafter specify in
writing.
The execution and delivery of this Guaranty shall not supersede, terminate, modify or
supplement in any manner any other guaranty previously executed and delivered to the Lender by the
Guarantor and no release or termination of this Guaranty shall be construed to terminate or release
any other guaranty unless such other guaranty is specifically referred to in any such termination.
The Guarantors obligations hereunder shall be the personal obligations of such Guarantor.
This Guaranty is a continuing guaranty and shall remain in full force and effect without
regard to any defenses or counterclaims that the Guarantor or the Borrower may assert on the debt
underlying this Guaranty, including, but not limited to, failure of consideration, breach of
warranty, fraud, statute of frauds, bankruptcy, statute of limitations, lender liability, accord
and satisfaction and usury until (A) all of the Guaranteed Obligations shall have been indefeasibly
paid in full and (B) Borrower shall have indefeasibly satisfied all of its Obligations under the
Note and the other Financing Documents and notice thereof has been provided by Lender to the
Guarantor.
[The remainder of this page is intentionally left blank.]
IN WITNESS WHEREOF, the undersigned have executed and delivered this Guaranty as of the day and
year first above written.
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[INSURED] signature
Address:
Phone:
Fax:
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INSURED DISCLOSURE STATEMENT,
REPRESENTATIONS AND WARRANTIES, AND CONSENT
IMPORTANT
:
PLEASE READ THIS DISCLOSURE STATEMENT AND CONSENT AND CONSULT WITH YOUR
ADVISORS BEFORE SIGNING THIS OR ANY OF THE LIFE INSURANCE FINANCING ARRANGEMENT DOCUMENTS
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INSURED:
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[INSURED], [INSURED-ADDRESS], [INSURED-CITY-STATE]
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INSUREDS
SPOUSE:
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[INSURED-SPOUSE], [INSURED-ADDRESS],
[INSURED-CITY-STATE]
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GRANTOR:
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[INSURED], [INSURED-ADDRESS], [INSURED-CITY-STATE]
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LIFE INSURANCE TRUST:
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[TRUST-NAME], a [JURISDICTION] trust
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TRUSTEE OR LIFE
INSURANCE TRUSTEE:
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[
TRUSTEE-NAME], [TRUST-ADDRESS],
[TRUST-CITY-STATE] [TRUST-ZIP]
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[LENDER-NAME]
(the
Lender
) is offering a life insurance premium financing
arrangement (the
Financing Arrangement
) which provides trusts settled by individuals,
such as the Grantor, with financing to purchase and maintain a life insurance policy (the
Policy
) on the life of certain qualifying individuals, such as the Insured. To obtain
financing under the Financing Arrangement, the Insured or Grantor must settle (or have settled) a
life insurance trust (the
Life Insurance Trust
or
Trust
) under
[JURISDICTION]
law and the Insured must consent (or have consented) to the Life Insurance Trusts purchase of the
Policy. The Grantor must have an insurable interest in the life of the Insured and all
beneficiaries of the Life Insurance Trust must be individuals or tax-exempt charities with an
insurable interest in the life of the Insured or an estate planning vehicle, all of the owners or
beneficiaries of which have an insurable interest in the life of the Insured.
In order to participate in the Financing Arrangement, the Trust will be required to execute a Loan
Application and Agreement (the
Loan Agreement
) and a Promissory Note in favor of the
Lender. Pursuant to the Loan Agreement, the Lender will, subject to the terms, provisions and
conditions of the Loan Agreement, make an advance of funds to, or for the benefit of, the Trust for
the purpose of funding premiums under the Policy. The obligations of the Trust under the Loan
Agreement may be secured by a collateral assignment of the Life Insurance Trusts interest in the
Policy under a collateral assignment agreement between the Trust and the Collateral Agent (the
Collateral Assignment Agreement
). The obligations under the Loan Agreement will bear
periodic interest at a
[FIXED-FLOATING]
subject to a minimum interest rate of nine percent
(9%) (in the case of a floating rate) and will be due and payable (i) one (1) Business Day after
payment of any proceeds of the Policy, and (ii) any other date that the principal and interest
shall become due and payable in full under the Loan Agreement, whether at the scheduled maturity
under the Promissory Note, by acceleration, notice of prepayment, or otherwise. The Trust may
pre-pay the Loan (including any accrued interest), in full but not in part, without penalty other
than the payment of the Yield Maintenance Premium in some circumstances, as provided under the Loan
Agreement.
Capitalized terms used but not defined herein shall have the meanings assigned thereto in the Loan
Agreement.
Each of the following are events of default under the Loan Agreement and Financing Documents:
Payment Default.
Trust fails to make any payment within three (3) Business Days after the
same becomes due and payable under the Loan Agreement, the Promissory Note or any other
Financing Document.
Other Defaults.
Trust fails to comply with or to perform any other term, obligation,
covenant or condition contained in the Promissory Note, the Loan Agreement or in any of the
other Financing Documents or to comply with or to perform any term, obligation, covenant or
condition contained in any other agreement between Lender and Trust or a default occurs
under the Promissory Note, Loan Agreement, Security Agreement or any other Financing
Document.
False Statements.
Any warranty, representation or statement made or furnished to Lender by
the Trust, the Insured or on Trusts behalf under the Promissory Note, the Loan Agreement
or any other Financing Document is false or misleading in any material respect, either now
or at the time made or furnished or becomes false or misleading at any time thereafter.
Related Agreements.
The Policy, Promissory Note, Loan Agreement, Security Agreement or any
other Financing Document ceases to be in full force and effect (including failure of any
collateral document to create a valid and perfected security interest or lien) at any time
and for any reason; the Trust becomes a revocable trust, contests the validity or
enforceability of any Financing Document or denies that it has any further liability under
any Financing Document to which it is a party, or cancels or terminates, or attempts to
cancel or terminate, the Policy; or the Insurer contests the Policy based on the Trust
lacking an insurable interest in the life of the Insured.
Indebtedness, Creditor or Forfeiture Proceedings.
Any garnishment of any of Trusts
accounts, attachment, lien, levy, additional encumbrance or additional security interest
being placed upon any of the Collateral, or any commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any other method,
by any creditor of Trust or by any
2
governmental agency against any Collateral, and which is not discharged in full within one
(1) day of the placement thereof. However, this Event of Default shall not apply if there
is a good faith dispute by the Trust as to the validity or reasonableness of the claim
which is the basis of the creditor or forfeiture proceeding and if the Trust gives Lender
written notice of the creditor or forfeiture proceeding and deposits with Lender monies or
a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender,
in its sole discretion, as being an adequate reserve or bond for the dispute.
Insolvency or Default of Trust
. The Trust is: (i) dissolved, liquidated or terminated; (ii)
is unable to pay its debts as they mature; (iii) makes an assignment for the benefit of
creditors; (iv) is bankrupt or insolvent; (v) seeks appointment of, or becomes the subject
of an order appointing, a trustee, conservator, liquidator or receiver as to all or part of
its assets; (vi) commences, approves or consents to, or is the debtor in, any case or
proceeding under any bankruptcy, reorganization or similar law, and in the case of an
involuntary case or proceeding, such case or proceeding is not dismissed thirty (30) days
following its commencement; (vii) is the subject of an order for relief in an involuntary
case under federal bankruptcy law; (viii) the Trust defaults under any loan, extension of
credit, security agreement, purchase or sales agreement, or any other agreement, in favor
of any other creditor or person that may materially affect any of Trusts property or
Trusts ability to repay the Promissory Note or perform Trusts Obligations under the
Promissory Note, the Loan Agreement or any of other Financing Documents; or (ix) Trust
violates any Law.
Insolvency or Default of Insured or Guarantor.
(i) The Insured or any Guarantor makes an
assignment for the benefit of creditors; (ii) The Insured or any Guarantor is adjudicated a
bankrupt or insolvent; (iii) The Insured or any Guarantor seeks appointment of, or becomes
the subject of an order appointing, a trustee, conservator, or receiver as to all or part
of his assets; (iv) The Insured or any Guarantor commences, approves or consents to, or is
the debtor in, any case or proceeding under any bankruptcy or similar law and, in the case
of an involuntary case or proceeding, such case or proceeding is not dismissed thirty (30)
days following its commencement; (v) The Insured or any Guarantor is the subject of an
order for relief in an involuntary case under federal bankruptcy law; (vi) Trust defaults
under any loan, extension of credit, security agreement, purchase or sales agreement, or
any other agreement, in favor of any other creditor or person that may materially affect
any of Trusts property or Trusts ability to repay the Obligations; or (vii) any Guarantor
defaults under the terms of the Personal Guaranty.
Events Affecting Guarantor.
Any of the preceding events occurs with respect to any
Guarantor of any of the indebtedness under the Promissory Note or any Guarantor dies or
becomes incompetent, or revokes or disputes the validity of, or liability under, any
guaranty of the indebtedness evidenced by the Promissory Note; in the event of a death,
Lender, at its option, may, but shall not be required
3
to, permit the Guarantors estate to assume unconditionally the obligations arising under
the guaranty in a manner satisfactory to Lender, and, in doing so, cure any Event of
Default.
Adverse Change.
A material adverse change occurs in Trusts financial condition, or
Lender believes the prospect of payment or performance of the Obligations is materially
impaired.
Cure Provisions.
Other than as set forth in the preceding clauses of this Section, failure
by the Trust or Beneficiary, as applicable, to perform in any material respect any of its
obligations under the Promissory Note, Loan Agreement, Security Agreement or any other
Financing Document to which either is a party if such failure is not remedied on or prior
to the fifteenth (15th) day after written notice of such failure is given to the Trust or
the Beneficiary, respectively, by the Lender.
In connection with, and as a condition precedent to the Trust obtaining a loan from the Lender in
connection with the Financing Arrangement, settlement of the Trust and the undersigned Grantor,
Insured and, if as of the date hereof the Insured is lawfully married, the Insureds
Spouse
1
, do each hereby acknowledge, represent, warrant, covenant and agree, jointly and
severally, to the following:
1.
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The Grantor, the Insured and the Insureds Spouse with their advisors which they deem
appropriate (including, for example, attorneys, tax advisors and accountants), have read and
understand the terms of each Financing Arrangement Document, including, without limitation,
this Insured Disclosure Statement, Representations and Warranties, and Consent (Disclosure
Statement), any credit application, the Trust Agreement for the Life Insurance Trust, the
Loan Agreement, the Promissory Note, the Collateral Assignment, the Authorization for
Disclosure of Protected Health Information and the Authorization and Direction to Provide
Death Certificate (collectively, the
Financing Arrangement Documents
). The Insured
has specifically received appropriate legal and tax advice regarding the form, substance and
drafting of the Trust Agreement for the Life Insurance Trust.
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2.
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The terms of the Financing Arrangement Documents are fair and reasonable to the Life
Insurance Trust, the Insured and the Insureds Spouse.
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3.
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The initial contribution of the Insured, if any, to the Life Insurance Trust constitutes the
Insureds separate property and does not constitute the community property or quasi-community
property of the Insured and the Insureds Spouse. The Insured and the Insureds Spouse hereby
agree to execute any additional
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1
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If the Insured is not married as of the date
hereof, all references to Spouse in this Disclosure Statement and Consent are
hereby rendered null and void.
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4
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documentation legally required to commute such property to the separate property of the
Insured.
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4.
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The Insured is financially sophisticated and, individually or together with the Insureds
Spouse, has a net worth of at least
[NET-WORTH]
. The Insured formed and is the sole grantor
of the Life Insurance Trust.
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5.
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There may be federal, state or local income, gift or estate tax effects of participation in
the Financing Arrangement to the Grantor, the Insured, the Insureds Spouse, the
beneficiary(ies) of the Life Insurance Trust (Beneficiary) and the Life Insurance Trust.
Participation in the Financing Arrangement, and termination of participation, could increase
the taxable income, taxable gifts or taxable estate of a participant including the Grantor and
Beneficiary. The Grantor, the Insured and the Insureds Spouse recognize that if the Policy
is not held to maturity and is instead surrendered to the issuer or sold on the secondary
market, any amounts received in excess of the tax basis or possibly the fair market value, if
lower, of the Policy will be taxable income to one or more of the participants. It is unclear
under existing tax law whether this income will be treated as ordinary income or capital gain
income. Some tax practitioners have suggested that if the surrender or sale proceeds exceed a
policys cash surrender value, the excess should be taxed as capital gains; and if the cash
surrender value exceeds the basis of the policy, a conservative approach is to treat that
excess as ordinary income. In addition, it is unclear under federal income tax law how to
compute the tax basis in the Policy. Specifically, the Internal Revenue Service has taken the
position that an owners basis in a policy equals premiums paid minus any nontaxable dividends
and minus the value of the life insurance protection the owner has enjoyed. While existing
case law does not appear to support this position, there can be no assurances on the outcome
of this issue if disputed. The Grantor, the Insured and the Insureds Spouse recognize that
interest incurred on indebtedness the proceeds of which are used to pay premiums on the Policy
cannot be deducted for tax purposes and it is unclear whether any non-deductible interest can
be added to the tax basis in the Policy. In the event that the Lender forecloses upon the
Policy following a default under the Financing Arrangement, the excess of the amount owed over
the tax basis in, or possibly the fair market value, if lower, of, the Policy may be ordinary
taxable income, unless an exception to recognition applies. In all cases, any income realized
upon a sale, surrender, foreclosure upon or other transfer of the Policy may be taxable to the
Grantor even through any proceeds may be receivable by the Trustee and be required to be used
to satisfy any outstanding indebtedness and then be distributed to the Beneficiary. This will
result in the Grantor recognizing income without any cash proceeds (so-called phantom income)
from which to pay any related tax. The Grantor may also recognize phantom income annually
based on the value of any insurance provided. The Grantor, the Insured, the Beneficiary and
the Insureds Spouse have not relied upon any advice from the Lender, any life agent or other
producer, any insurance company that has issued the Policy or any other person associated with
the Financing Arrangement regarding any such tax effects.
|
5
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The Grantor, the Insured, the Beneficiary and the Insureds Spouse have consulted with
their own legal, tax and accounting advisors to determine the tax effects of the Financing
Arrangement on such party.
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6.
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Insurance companies may only allow any person to purchase, in the aggregate, a limited amount
of life insurance on the life of the Insured, and the Trusts purchase, and the maintenance in
force, of the Policy may use all or a part of this limited insurance capacity. Therefore, in
the future, the Insured, the Insureds Spouse, the Trust or any other family members of the
Insured may be unable to purchase life insurance on the life of the Insured in the amounts
desired as a consequence of the purchase, and the maintenance in force, of the Policy. In the
event that the Lender forecloses upon the Policy following an Event of Default under the Loan
Agreement and Financing Documents and resells or further assigns the Policy in order to
recover on its loan, the Policy may be maintained in force and this could in the future limit
or eliminate the ability of the Insured, the Insureds Spouse, the Trust or any other family
members of the Insured to purchase future insurance on the Insureds life because there is a
limit to how much coverage insurers will issue on one life.
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7.
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Unless otherwise set forth in Schedule A hereto, the only beneficiaries of the Insurance
Trust are the Insured, the Insureds Spouse and/or children or other issue of the Insured or
an entity or trust [(a)] the beneficiaries of which are either the Insureds Spouse or a child
or other issue of the Insured [and/or (b) an entity which is qualified as tax-exempt under
Section 501(c)(3) of the Internal Revenue Code of 1986, as amended,] and the Grantor is either
the Insured, the Insureds Spouse or a child of the Insured.
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8.
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Neither the Insured nor the Insureds Spouse have been paid, directly or indirectly, any
inducement (money, property or otherwise) in connection with the Financing Arrangement or to
obtain the Policy.
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9.
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None of the Grantor, the Insured, the Insureds Spouse or, to the knowledge of the foregoing
persons, any beneficiary of the Trust has any present intention to surrender, sell or settle,
directly or indirectly, the Policy or any interest therein.
|
10.
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Unless otherwise set forth in Schedule A hereto, no person or entity other than the Life
Insurance Trust, the Life Insurance Trustee, the beneficiaries of the Life Insurance Trust,
and the Lender has any direct or indirect interest in the Policy.
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11.
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The Policy application has been completed accurately and there are no material omissions or
misstatements in the application.
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12.
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The Lender, or any subsequent owner of the Loan Agreement, may sell, or sell participations
in, the Loan Agreement without the consent of, or prior notice to, the Grantor, the Insured,
the Insureds Spouse or the Life Insurance Trust and the Insured and the Insureds Spouse
agree to take all actions (but at no cost or
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6
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|
expense to the Insured or the Insureds Spouse) requested by the Lender in connection with
any such sale or participation.
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13.
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The Insured agrees to provide certain medical and health information (collectively,
Private Health Information
) as may be reasonably requested, from time to time, by
the Life Insurance Trust, the Lender, life expectancy underwriters and any of their respective
representatives, agents, designees, third party servicers and purchasers of the Policy
following the occurrence of an event of default under the Loan Agreement, successors or
assignees (collectively, the
Authorized Recipients
). To facilitate this provision
of Private Health Information, the Insured agrees to execute such documents as are necessary
to release such information to the relevant parties needing to review such information so as
to allow the Life Insurance Trust to obtain a loan from the Lender in connection with the
Financing Arrangement or to sell the Policy in connection with a foreclosure or otherwise.
The Private Health Information may be used by the Authorized Recipients for the purposes of
(i) valuing the Policy as collateral for the loan and (ii) assisting in any disposition of the
Policy. The Private Health Information may be maintained and/or processed in any jurisdiction
or country. The disclosure of Private Health Information to any of the Authorized Recipients
may involve transfers to countries outside the United States which may not have laws
comparable to those in the United States to protect personal data.
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14.
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The Insured understands that the Trusts obligations under the Loan Agreement are secured or
supported by, among other things, the Policy, and that the Lender can properly evaluate the
value of the Policy as collateral for the Loan Agreement only by considering the Private
Health Information. Absent such information, the Lender would likely deny the Insureds
application because the cash surrender value of the Policy would be inadequate to support the
loan requested. Therefore, in order for the Lender to evaluate the collateral value of the
Policy, the Insured directs and authorizes the Lender to obtain and consider the Private
Health Information.
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15.
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The Insured represents that all Private Health Information that has been provided by or on
behalf of the Insured to the Lender and its designees or third party servicers, the issuer of
the Policy and any life expectancy underwriters, at the time so provided, was true and
complete in all material respects to the best of the Insureds knowledge.
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16.
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The Insured agrees to inform the Trustee, or any designees or agents thereof, within thirty
(30) days of any and all changes in contact information of the Insured and the Insureds
Spouse, including home address or telephone number. The Insured and the Insureds Spouse
acknowledge that the Trustee, on behalf of the Trust, the Lender and its designees or third
party servicers and any subsequent owner of the Policy, or any of their respective
representatives, servicers, agents or designees may, from time to time and at their own
discretion, contact the Insured and the Insureds Spouse for confirmation and update of such
information.
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7
17.
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The Policy is being purchased as part of the Insureds estate planning and for retirement
purposes.
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18.
|
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To the knowledge of the Insured, the Life Insurance Trust has not entered into any contracts
or agreements, other than the Policy and the relevant Financing Arrangement Documents.
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19.
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If the Insurer of the Policy cancels the Policy prior to the repayment of the obligations of
the Trust to Lender under the Financing Arrangement Documents, the obligations of the Insured
and the Life Insurance Trust and the rights of Lender with respect to the Financing
Arrangement Documents and with respect to the Policy shall continue in full force, unaffected
by such cancellation.
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20.
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Each of the Insured and the Insureds Spouse is required to take all actions relating to the
Financing Arrangement that may be necessary or desirable from time to time in the Life
Insurance Trust or Lenders discretion (but at no cost or expense to the Insured or the
Insureds Spouse), including, but not limited to, executing all such documents as may be
required by the Life Insurance Trust, any life agent or other producer or any insurance
company that has issued the Policy and/or beneficiary designation if the Lender enforces its
security interest, if any, in the Policy, the Life Insurance Trust accounts and all other
assets of the Life Insurance Trust following the occurrence of any event of default under the
Loan Agreement or the Financing Arrangement Documents.
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21.
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Any claims, questions or controversies arising under or related to in any manner whatsoever
this Disclosure Statement or the transactions contemplated under the Financing Arrangement
including, but not limited to, any challenge by the Grantor, the Insured, the Insureds Spouse
or the Insureds estate, beneficiaries or subrogees (each, a
Insured Party
) against
the Lender, its designees and/or third party servicers, the Life Insurance Trust, any broker,
any insurance company or any other party interested in or related in any way to the Financing
Arrangement (each, an
Interested Third Party
, notwithstanding the fact such parties
are not signatories hereto) (a
Dispute
) shall be submitted to arbitration conducted
before the American Arbitration Association (the
AAA
). Any Insured Party or any
interested third party is hereby authorized to invoke this arbitration provision, and any
judgment with respect to any award rendered pursuant to this arbitration provision may be
entered in any court of competent jurisdiction. Such arbitration will be conducted under the
rules of the AAA and the laws of the State of [JURISDICTION] and will be conducted in
[TRUST-CITY-STATE]. Each Insured Party understands that claims submitted to arbitration are
not heard by a jury and are not subject to the rules governing the courts. Each Insured Party
further agrees that no claim may be brought as a class action, and that no Insured Party has
the right to act, nor shall they attempt to act, as a class representative or participate as a
member of a class of claimants with respect to any claim related to or arising out of the
Financing Arrangement. To the extent that this arbitration
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8
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provision is held unenforceable, the Insured Parties: (i) irrevocably submit to the
exclusive jurisdiction of any federal or state court sitting in [TRUST-CITY-STATE] in
respect of any action or proceeding arising under or related to in any manner whatsoever
this Disclosure Statement or the transactions contemplated under the Financing Arrangement,
(ii) agree that this Disclosure Statement and the transactions contemplated by the
Financing Arrangement shall in all respects be governed by and construed in accordance with
the laws of the State of [JURISDICTION] (without reference to conflicts of laws provisions)
and (iii) HEREBY WAIVE THE RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY ON ANY CLAIM,
COUNTERCLAIM, SETOFF, DEMAND, ACTION OR CAUSE OF ACTION (I) ARISING OUT OF OR IN ANY WAY
RELATED TO THIS DISCLOSURE STATEMENT OR (II) IN ANY WAY IN CONNECTION WITH OR PERTAINING OR
RELATED TO OR INCIDENTAL TO ANY DEALINGS OF THE PARTIES TO THIS DISCLOSURE STATEMENT IN
CONNECTION WITH THIS DISCLOSURE STATEMENT OR THE EXERCISE OF ANY PARTYS RIGHTS AND
REMEDIES UNDER THIS DISCLOSURE STATEMENT OR OTHERWISE, OR THE CONDUCT OR THE RELATIONSHIP
OF THE PARTIES HERETO, IN ALL OF THE FOREGOING CASES WHETHER NOW EXISTING OR HEREAFTER
ARISING AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. The sole exception to this
requirement for arbitration involves suits brought on behalf of the Lender seeking a
temporary restraining order, preliminary injunction, and/or permanent injunction
(injunctive relief) based upon (i) any failure of the Trust to use the proceeds of
advanced exclusively as set forth in the Loan Agreement, the Promissory Note, the Financing
Documents or any other documents related to the Loan Agreement; (ii) any act by the Trust
or any Guarantor to transfer, amend, change ownership, cancel, convey, sell or assign the
Policy without the express written consent of the Lender; or (iii) any failure to act by
the Trust or any Guarantor that results, directly or indirectly, in the transfer of the
Policy or any amendment, change of ownership, cancellation, conveyance, sale or assignment
thereof, in the event there is immediate and irreparable injury, loss, or damage (which
immediate and irreparable injury, loss, or damage may be presumed by law and/or by
agreement of the parties). The parties hereby expressly agree, and each Interested Third
Party in receipt of this Disclosure Statement acknowledges, that the arbitrartion
provisions in this section shall not apply to the Trustee in respect of its rights, duties,
protections and immunities.
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22.
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The Grantor, the Insured and the Insureds Spouse acknowledge and understand that various
charities, educational institutions and federal, state or local governmental entities or
agencies may take into account the Life Insurance Trusts purchase, and the maintenance in
force, of the Policy in determining the eligibility of the Insured, the Insureds Spouse or
any other family members of the Insured to receive aid under one or more charitable,
educational and federal, state or local governmental programs, including without limitation,
Medicaid.
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9
23.
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The Grantor, the Insured and the Insureds Spouse acknowledge and understand that, due to
cost of insurance increases or other factors relating to the Policy, it is possible that the
amount of funds advanced under the Loan Agreement may not be sufficient to keep the Policy in
force during the term of the Loan Agreement.
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24.
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The Grantor, the Insured and the Insureds Spouse are each signing this Disclosure Statement
freely and voluntarily and are each of sound mind and not subject to any constraint or undue
influence, and neither has ever been the subject of any mental health or mental competency
proceeding or any other proceeding or hearing with respect to which such partys competency or
capacity to contract is or was an issue.
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25.
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Each of the Grantor, the Insured and the Insureds Spouse has a complete understanding of
this Disclosure Statement and has been given the opportunity to ask questions regarding the
nature and operation of the Financing Arrangement.
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26.
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As of the Execution Date and the Initial Premium Funding Date, the Insured is an individual
residing in the state designated in the Financing Documents.
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27.
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This document and the other Financing Documents to which the Insured is a party have been
duly executed and delivered by the Insured, and (assuming due authorization, execution and
delivery by the other parties thereto) the Financing Documents constitute legal, valid and
binding obligations of the Insured, enforceable against the Insured in accordance with their
terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar
laws affecting creditors rights generally and to equitable principles of general application,
regardless of whether such principles are considered in a proceeding in equity or at law).
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28.
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The execution, delivery and performance by the Insured of the Financing Documents to which it
is a party do not and will not (i) to the knowledge of the Insured, conflict with or cause a
violation by the Insured of (A) any Law or Governmental Order of the Insureds state of
residence applicable to the Insured or to any of the Insureds assets, properties or business
or (B) to the knowledge of the Insured, any other Law or Governmental Order applicable to the
Insured or to any of the Insureds assets, properties or business or (ii) conflict with,
result in any breach of, constitute a default (or event which with the giving of notice or
lapse of time, or both, would become a default) under, require any consent under, or give to
others any rights of termination, amendment or acceleration pursuant to any Contract to which
the Insured is a party.
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29.
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No authorization, approval, consent, franchise, license, covenant, order, ruling, permit,
certification, exemption, notice, declaration or similar right, undertaking or other action
of, to or by, or any filing, qualification or registration with, any Governmental Authority is
required to be obtained by the Insured that has not been obtained or is not in full force and
effect, and no registration, declaration, or filing with any Governmental Authority is
required to be given or made by the
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10
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|
Insured to or with, any Governmental Authority that has not been given or made or the
applicable waiting period for which has not expired or terminated, each in connection with
the execution and delivery of this Disclosure Statement and the other Financing Documents
and the consummation of the transactions contemplated hereby and thereby.
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30.
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No Default or Event of Default with respect to the Insured has occurred and is continuing.
The Insured is not in violation of any Law or Governmental Order applicable to it or any of
its properties or assets. No judicial, administrative or arbitral proceeding is pending or,
to the best knowledge of the Insured, threatened against the Insured, which would have an
adverse effect on the Insureds ability to perform under the Financing Documents.
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31.
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To the best of the Insureds knowledge on the Execution Date, and the Initial Premium Funding
Date, the Insured does not have a catastrophic or life-threatening illness or condition. The
Insured expressly waives any and all rights, claims, interests, powers and privileges that the
Insured possesses with respect to the Policy.
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32.
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The Insured has read, understands, and has signed each document in the Closing Package that
is required to be executed by the Insured. The Insured has retained his or her own legal
counsel, and has obtained his or her own tax, accounting and financial advice, with respect to
this Disclosure Statement and the other Financing Documents and any obligations that the
Insured will incur or undertake hereunder or thereunder, including any risks associated
herewith or therewith, and is relying solely upon his or her own legal, tax, accounting,
financial and other advisers in his or her decision to enter into this Disclosure Statement
and any related transactions. The Insured has considered other alternatives for financing the
Policy, and has satisfied himself or herself that entering into this Disclosure Statement and
the other Financing Documents and consummating the transactions contemplated thereby is in his
or her best interest. The Insured acknowledges that he or she has had this Disclosure
Statement and the other Financing Documents for an amount of time sufficient to thoroughly
analyze, discuss and receive advice from any professionals or anyone else of his or her
choosing.
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33.
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Each of the Insured and Insureds Spouse has read and understands the Privacy Statement by
the Lender set out below (the Privacy Statement) and consents to the collection and use of
their Private Health Information and Personal Information (as defined below) for the purposes
set out in the Privacy Statement and as otherwise described in the Privacy Statement or
elsewhere in this Disclosure Statement, and as set forth in Schedule B to the Loan Agreement.
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Privacy Statement by [LENDER-NAME].
This section, the Privacy Statement, is provided by
[LENDER-NAME]
(the
Lender
), and applies only in connection with the financing
arrangement set forth herein (the
Financing Arrangement
). In this Privacy
Statement, Insured means the person who is the Insured of the Policy held by the Life
Insurance Trust under the Financing
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11
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Arrangement. The Lender may collect medical and health information (collectively,
Private Health Information
) from the Insured. The Lender may collect other
personally identifiable information (
Personal Information
) about the Insured from
the following sources: (i) Personal Information the Lender receives from the Insured or
Insureds spouse on applications or other forms; (ii) Personal Information about
transactions with the Lender or other parties; and (iii) Personal Information the Lender
receives from third parties, such as consumer reporting agencies.
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The Lender will process the Private Health Information and Personal Information for the
purposes of: (i) valuing the Policy as collateral for the loan; (ii) assisting in any
disposition of the Policy following the occurrence of an event of default under the Loan
Agreement; and (iii) as otherwise required to administer, effect or enforce any of the
transactions contemplated hereunder.
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The Lender may disclose the Private Health Information or other Personal Information to the
Life Insurance Trust, life expectancy underwriters, any potential purchasers of the Policy
following a default under the Loan Agreement and any of their respective representatives,
agents, designees, third party servicers, successors or assignees (the
Recipients
), and may also disclose Private Health Information, and other Personal
Information to government agencies, fraud prevention agencies, or as required by a court.
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The Lender does not disclose any information about its customers or former customers to
anyone, except as described herein or as otherwise permitted or required by law. The Lender
restricts access to Personal Information to those employees or agents who need to know that
information to provide products or services to you.
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The Lender maintains physical, electronic and procedural safeguards that comply with
requirements under the U.S. federal standards to protect Private Health Information and
Personal Information.
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34.
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The Insured agrees and consents to the Trust and Lenders use and disclosure of non-public
medical, financial and personal information about the Trust and the Insured as necessary, in
the opinion of the Lender, to provide funding or insurance for the Lenders obligations under
the Loan Agreement or the other Financing Documents or to effect, administer or enforce the
transactions contemplated by the Loan Agreement, the other Financing Documents and any other
agreements entered into in connection therewith, including, without limitation, the sale or
exercise of rights under the Policy; provided that the Trust and Lender shall keep such
information confidential and limit access to such information to those Persons who, in the
Lenders reasonable discretion, require access to such information to provide funding or
insurance for the Lenders obligations under the Loan Agreement or the other Financing
Documents or to effect, administer or enforce the transactions contemplated by this Disclosure
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12
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Statement, the Loan Agreement, the other Financing Documents and any other agreements
entered into in connection therewith, including, without limitation, the sale or the
exercise of rights under the Policy.
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35.
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The Insured agrees that he or she shall be liable for damages for any misrepresentation made
by him or her in this Disclosure Statement or the other Financing Documents, and for any
default by him or her in the performance of any of his or her obligations under this
Disclosure Statement or the other Financing Documents, but otherwise shall have no liability
under the Financing Documents, except to the extent provided in the personal guaranty, if any,
entered into by Insured to provide additional credit support for the Obligations.
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36.
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For so long as any Obligations remain outstanding, the Insured hereby covenants and agrees as
follows:
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(a) The Insured shall take such further action and/or execute and deliver all further
assurances, documents and/or instruments as may be reasonably requested by the Lender in
order to (i) effect, administer or enforce the transactions contemplated by this Disclosure
Statement and the other Financing Documents or to sell the Policy in connection with a
foreclosure or otherwise, (ii) permit the realization of the benefits of any collateral
assignment or pledge of the Policy to the Lender and its assigns and (iii) authorize the
provision and/or delivery of medical, financial, personal and other information and
documentation about the Insured to the Lender, any affiliate of the Lender, any of their
assigns, or any Insurer from any physician, hospital, medical provider, provider of a life
expectancy estimate, insurance company or other Person. In addition, the Insured shall
cause any Beneficiary of the Life Insurance Trust to take any further action and/or execute
and deliver all further assurances, documents and/or instruments as may be reasonably
requested by the Lender in order to (i) effect, administer or enforce the transactions
contemplated by this Disclosure Statement and the other Financing Documents or to sell the
Policy in connection with a foreclosure or otherwise, and (ii) permit the realization of
the benefits of any collateral assignment or pledge of the Policy to the Lender and its
assigns.
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(b) The Insured agrees to notify the Lender in writing of any change of his or her
address, telephone number or other contact information provided by the Insured to the
Lender. The Insured understands that the Lender or the Lenders designee may be verifying
quarterly his or her current address, contact information and other relevant information by
sending the Insured correspondence with a prepaid return response. The Insured covenants
and agrees that he or she shall accurately complete and manually execute each such response
and return the same to the Lender and/or its designees in a timely manner. The Insured
further acknowledges that the Lender or its designee may use other methods to obtain such
information, and the Insured agrees to cooperate, and to request that other Persons
cooperate, in providing such information.
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13
(c) The Insured shall, immediately upon his or her discovery thereof, notify the
Lender in writing of any breaches of the representations and warranties of the Insured in
this document and the other Financing Documents.
37.
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The undersigned hereby acknowledge and agree that (i) [NAME OF TRUSTEE] is acting as a
limited service provider in connection with the Financing Arrangement and is acting solely in
accordance with the terms of the documents governing its services, (ii) [NAME OF TRUSTEE], in
its individual and representative capacities, has not provided any legal or tax advice to the
undersigned in connection with the Financing Arrangement, and (iii) [NAME OF TRUSTEE] has not
reviewed any Financing Arrangement Document on behalf of the undersigned or any other Person
and shall not be responsible for or in respect of and makes no representation as to the
validity, accuracy or sufficiency of any provision of this Disclosure Statement or any other
Financing Arrangement Document.
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38.
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[OPTIONAL] ACCREDITED INVESTOR STATUS: The Insured hereby represents and warrants that the
Insured is an accredited investor within the meaning of Rule 501 of Regulation D promulgated
under the Securities Act of 1933 by virtue of meeting one or more of the following
qualifications (
please check the space to the left of EACH category which is
applicable
):
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[ ]
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(1)
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The Insureds net worth, or joint net worth with the
undersigneds spouse, exceeds $1 million on the date hereof;
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[ ]
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(2)
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The Insured had an individual income in excess of $200,000 in
each of the two most recent years, or joint income with the
Insureds spouse in excess of $300,000 in each of those
years,
and
the Insured has a reasonable expectation of
reaching the same income level in the current year; or
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[ ]
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(3)
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The Insured is a trust with total assets in excess of $5
million, which trust was not formed for the specific purpose
of acquiring the securities offered,
and
whose purchase is
directed by a sophisticated person with such knowledge and
experience in financial and business matters as to be capable
of evaluating the merits and risks of an investment in the
Company.
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Notwithstanding anything to the contrary in this Disclosure Statement, the Grantor, the Insured and
the Insureds Spouse (and any representative or agent of the Grantor, the Insured or Insureds
Spouse) may disclose to any and all persons, without limitation of any kind, the tax treatment and
tax structure of the transactions described in this Disclosure Statement and Consent and all
materials of any kind (including opinions or other tax analyses) that are provided to the Grantor,
the Insured and the Insureds Spouse relating to such tax treatment and tax structure. This
authorization of tax disclosure is retroactively effective to the commencement of discussions with
the Grantor, the Insured and the Insureds Spouse regarding the transactions contemplated herein.
14
*
* * *
IRS Circular 230 Disclosure: [LENDER-NAME] and its affiliates do not provide tax advice. Any
discussion of United States federal tax issues set forth herein is written in connection with the
promotion and marketing of the Financing Arrangement. Such discussion is not intended or written to
be legal or tax advice to any person and is not intended or written to be used, and cannot be used,
by any person for the purpose of avoiding any United States federal tax penalties that may be
imposed on such person. The Grantor, the Insured and the Insureds Spouse should seek advice based
on their particular circumstances from an independent tax advisor.
AGREED TO AND ACKNOWLEDGED BY THE UNDERSIGNED.
INSURED
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X
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(Signature of Insured)
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[INSURED]
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(Printed name of Insured)
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STATE OF
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)
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) :
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COUNTY OF
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)
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Sworn to (or affirmed) and subscribed before me this ___day of
by
[INSURED]
, who
is personally known to me or who produced
as identification.
(Print, type, or stamp commissioned
Name of Notary Public)
My Commission Expires:
15
AGREED TO AND ACKNOWLEDGED BY THE UNDERSIGNED.
INSUREDS SPOUSE (Unmarried Insureds Please Leave Blank)
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X
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(Signature of Insureds Spouse)
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[INSURED-SPOUSE]
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(Printed name of Insureds Spouse)
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STATE OF
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) :
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COUNTY OF
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Sworn to (or affirmed) and subscribed before me this ___day of
by
, who is personally known to me or who produced
as
identification.
(Print, type, or stamp commissioned
Name of Notary Public)
My Commission Expires:
AGREED TO AND ACKNOWLEDGED BY THE UNDERSIGNED.
GRANTOR
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X
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(Signature of Grantor)
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[INSURED]
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(Printed name of Grantor)
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STATE OF
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COUNTY OF
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Sworn to (or affirmed) and subscribed before me this ___day of
by
[INSURED
],
who is personally known to me or who produced
as identification.
16
(Print, type, or stamp commissioned
Name of Notary Public)
My Commission Expires:
17
Schedule A
Trust Beneficiary(s)/Grantor and relationship to Insured:
Persons with a direct or indirect interest in the Policy:
18
AUTHORIZATION FORM
FOR USE AND DISCLOSURE OF HEALTH INFORMATION
To: Any health plan, physician, health care professional, hospital, clinic, laboratory, pharmacy,
medical facility, or other health care provider that has provided payment, treatment or services to
me or on my behalf.
Patients Name:
[INSURED
]
Address:
[INSURED-ADDRESS], [INSURED-CITY-STATE]
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Date of Birth:
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Social Security No.:
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I, [
INSURED
], hereby authorize you to release and disclose (in writing and/or verbally) to
[LENDER-NAME],
its affiliates, including Imperial Finance & Trading, LLC, Imperial Life & Annuity
Services or any of their representatives (collectively Imperial), 701 Park of Commerce, Suite
301, Boca Raton, FL 33487, 1.561.995.4200, all reports, records, office notes, personal notes,
outpatient notes, treatment notes, intake notes, progress notes, any other notes of any kind,
discharge summaries, data compilations, treatment plans, test protocols, test results (including
but not limited to raw scores, computer print-outs, and documents showing sequence of tests),
billing records, documents showing diagnosis and treatment, and all other documents and all other
information of any kind in your possession (from whatever source) concerning or in any way
referencing me or my physical health, alcohol and drug/substance abuse and/or mental health
(including all psychological and psychiatric records and all records relating to HIV/AIDS, HIV/AIDS
testing, and /or HIV/AIDS infection status) and treatment.
For the purpose of evaluating my health (and assisting others in evaluating my health) in
connection with the issuance, maintenance in force and/or disposition of one or more life insurance
policies (individually a Policy and collectively, the Policies)) on my life by or through
Imperial and any financing of the premiums due on the Policy or Policies through one or more
premium finance loans provided by Imperial.
This Authorization is effective until
[three][four][five]
years after the date of signature below.
I understand that I have the right to revoke this Authorization by submitting a written request
that clearly specifies my intent to revoke this Authorization to the health care provider or health
plan to which this Authorization is addressed. I understand that my written revocation will not
affect the ability of the health care provider or health plan to continue to use or disclose my
health information to the extent that it has already acted in reliance on this Authorization.
I understand that my ability to receive treatment from the health care provider, to enroll in or
receive benefits from the health plan, or to have payments made on my behalf is not conditioned on
my signing this Authorization.
I understand that, once disclosed, my health information may not be protected by privacy laws and
may be subject to redisclosure by the recipient person or organization.
A photocopy or facsimile copy of this Authorization shall be valid as the original.
Signature:
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Signature:
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Print Name:
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[INSURED]
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Address:
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[INSURED-ADDRESS]
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[INSURED-CITY-STATE]
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Date:
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If you are completing this form on behalf of another person, please explain your legal authority to
sign this Authorization on behalf of such person (parent, guardian, power of attorney, etc.) and
attach copies of any supporting documentation:
Witness:
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Signature:
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Print Name:
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Date:
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2
ASSIGNMENT OF BENEFICIAL INTERESTS
This Assignment of Beneficial Interests is made as of
, 20
, by
Imperial Premium
Finance, LLC
, a Florida limited liability company
(
Lender
) for good and valuable consideration,
in favor of [
Lexington Insurance Company, Inc
., a Delaware corporation] (
Insurer
).
Lender hereby assigns, transfers and sets over to Insurer, its successors and assigns all of
Lenders right, title and interest in and under the Trust Agreement (and the trust created thereby
(the Trust)) dated [
, 20
] of which [
] is the settlor or grantor and of which
[] [was][were] the initial beneficiar[y][ies] and of which Lender is the current beneficiary
(following foreclosure upon the initial beneficiar[y][ies] interests), including without
limitation, ownership of the beneficial ownership interests in or under the Trust Agreement and the
Trust, any and all rights to distributions of assets, corpus, income and principal and any rights
to amend or terminate the Trust and Trust Agreement.
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IMPERIAL PREMIUM FINANCE, LLC
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By:
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Name:
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Title:
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LIMITED POWER OF ATTORNEY
Know all by these presents, that the undersigned hereby irrevocably constitutes and
appoints [COLLATERAL-AGENT], and any officer or agent thereof, with full power of substitution, the
undersigneds true and lawful attorney-in-fact with full irrevocable power and authority in the
place and stead of the undersigned and in the name of the undersigned or in its own name, from time
to time, for the limited purpose of carrying out the terms of the Collateral Assignment, Loan
Agreement or any other documents contemplated by the Loan Agreement (capitalized terms used but not
defined herein shall have the meanings assigned thereto in the Loan Application and Agreement
between the undersigned and the [LENDER-NAME] dated as of [DATE] (the Loan Agreement)) to take
any action that the Collateral Agent is required to take and to execute and deliver any and all
documents and instruments necessary or desirable to accomplish the purposes of the Collateral
Assignment and to effectuate any right assigned to the Collateral Agent under the Collateral
Assignment (including, without limitation, the right to transfer or direct the transfer of
ownership of the Life Insurance Policy or the proceeds thereof to the Collateral Agent or a third
party designed by the Collateral Agent upon the sole signature of the Collateral Agent following an
Event of Default) or Lender under the Promissory Note, as the case may be.
The undersigned hereby ratifies, to the extent permitted by law, all that any said attorney
shall lawfully do or cause to be done by virtue hereof. This power of attorney given as security
for indebtedness by the undersigned to [LENDER-NAME], being coupled with an interest, shall be
irrevocable until all Obligations under the Loan Agreement are indefeasibly paid in full (in the
case of payment obligations) and otherwise satisfied and discharged.
The undersigned expressly authorizes any said attorney-in-fact to sign any document on the
undersigneds behalf, either by signing the undersigneds name or by signing the name of the
attorney-in-fact, without the need to disclose the fact that said attorney-in-fact is acting as
attorney-in-fact, and in either event such signature shall have the same effect as if the
undersigned personally had signed the document. The undersigned specifically authorizes my
attorney-in-fact so to sign the undersigneds name for or in the presence of a notary public as the
undersigneds notarized signature. The undersigned further authorizes and requires all
institutions and persons, including banks and insurance companies, to accept the signature of said
attorney-in-fact with the same effect as the undersigneds signature would have.
The powers conferred on the Collateral Agent pursuant to this Limited Power of Attorney are
solely to protect the Collateral Agents and [LENDER-NAME]s interests in the Life Insurance Policy
and shall not impose any duty upon the Collateral Agent to exercise any such powers. For the
avoidance of doubt, nothing herein shall obligate the Collateral Agent to take any action with
respect to the Life Insurance Policy, including, without limitation, selling, transferring or
disposing of the Life Insurance Policy, and the Collateral Agent shall have the right to do or
cause to be done all things necessary, proper or advisable to maintain the Life Insurance Policy in
full force in accordance with its terms.
It is expressly understood and agreed by any recipient hereof that in no event shall [NAME OF
TRUSTEE], as trustee of the [Insert Trust Name] (the Trust), in its individual capacity have any
liability for the representations, warranties, covenants, agreements or other
obligations of the Trust hereunder or under any schedule, exhibit, appendix or other document in
connection with this Limited Power of Attorney, as to all of which recourse shall be had solely to
the assets of the Trust, and under no circumstances shall [NAME OF TRUSTEE] as trustee of the Trust
be personally liable for the payment of any indebtedness or expenses of the Trust or be liable for
the breach or failure of any obligation, representation, warranty or covenant made or undertaken by
the Trust under this Limited Power of Attorney or under any schedule, exhibit, appendix or other
document in connection with this Limited Power of Attorney.
IN WITNESS WHEREOF,
the undersigned has caused this Limited Power of Attorney to be signed,
and this Limited Power of Attorney shall be effective as of the
day of
, 2009.
Signed, sealed and delivered
In the presence of
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Witnesses:
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[TRUST-NAME]
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By:[NAME OF TRUSTEE], solely as Trustee
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Name:
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[Type or Print Name]
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Title:
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STATE OF
COUNTY OF
The foregoing instrument was acknowledged before me this
day of
, 2007, by
[TRUSTEE-NAME], the trustee of the [TRUST-NAME]. He is personally known to me or produced
as identification.
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Typed or Printed Name
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Notary Public, State of
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Commission Number
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My commission expires:
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2
LOAN APPLICATION & AGREEMENT
THIS APPLICATION & AGREEMENT
, dated as of [DATE] (this Agreement), among
[LENDER-NAME]
1
, a Florida limited liability company, with a principal address at 701
Park of Commerce Blvd., Ste. 301, Boca Raton, FL 33487 (the Lender) and [TRUST-NAME], a
[JURISDICTION] trust, with a principal address at [TRUST-ADDRESS], [TRUST-CITY-STATE] [TRUST-ZIP]
(Trust or Borrower).
RECITALS
WHEREAS
, the Trust intends to acquire, or has acquired, the Life Insurance Policy and desires
to obtain, pursuant to the terms hereof, financing of Premium payments for up to [TWENTY-SIX]
months;
WHEREAS
, the Lender has agreed to lend, on the terms and conditions and subject to the
limitations set forth herein, funds in the amounts designated in this Agreement to pay Premiums on
the Life Insurance Policy owned, or to be owned, by the Trust under the Trust Agreement, together
with related Trustee Expenses; and
[WHEREAS
, the Insured is providing additional credit support for the Obligations by delivering
the Personal Guaranty.][Optional]
NOW, THEREFORE
, in consideration of these premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
ARTICLE 1
PAYMENT TERMS
1.1.
Loan Payment Amount and Provisions
The following is a summary of the terms of the Advances to be provided under this Agreement.
This Section 1.1 is only a summary and to the extent of any conflict with the balance of this
Agreement, the terms and provisions set forth elsewhere shall prevail.
Loan Date: [DATE]
Advance: [FIRST-YEAR-PREMIUM]
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1
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Insert name of Premium Finance Company (i.e.,
Imperial Premium Finance, LLC or Imperial Specialty Finance, LLC) if loan is in
state which requires a premium finance license; insert name of Licensed
Insurance Agency (i.e., Imperial Life & Annuity Services, LLC) in state where
(a) loan can be made by licensed agency on policies which it writes and (b)
Imperial does not have premium finance license.
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1
Maximum Loan Amount: [PRINCIPAL]
Interest Rate: [FIXED-FLOATING-LONG-FORM]
Principal Amount: Variable based on amount advanced hereunder.
Insured/Borrower Contribution:
2
Maturity Date: [MATURITY-DATE].
Loan Number: [LOAN-NUMBER]
Borrower Name and Address: [TRUST-NAME], [TRUST-ADDRESS], [TRUST-CITY-STATE] [TRUST-ZIP]
Lender Name and Address: [LENDER-NAME], 701 Park of Commerce Blvd., Ste. 301, Boca Raton, FL 33487
Life Insurance Policy: (a) Insurer: [INSURER], (b) Policy Number: [POLICY-NUMBER], and (c) Face
Amount: [NET-DEATH-BENEFIT] (the Life Insurance Policy).
Insurance Agent, Broker and/or Agency for Policy: [AGENT], [AGENT-ADDRESS].
Origination Fees: [ORIGINATION-FEE]
Service Charges: $0
Prepayment: Subject to Section 2.4, the Obligations hereunder may be prepaid in full, but not in
part, provided that a Yield Maintenance Premium payment will be required in connection with a
voluntary prepayment.
[OPTIONAL] [LENDER PROTECTION INSURANCE CHARGE: AMOUNT-EQUAL-TO-15% x 26 MONTHS PREMIUMS, PLUS
INTEREST].
INSURANCE PREMIUM FINANCE AGREEMENT NOTICE: Do not sign this Agreement before you have read it or
if it contains any blank spaces. You are entitled to a completely filled in copy of this
Agreement. [INSERT STATE SPECIFIC NOTICES NOT APPEARING ELSEWHERE HEREIN].
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The dollar amount that the Borrower has paid
towards the Life Insurance Policy Premiums out of his/her own funds (and which
is not financed).
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2
1.2.
Premium and Trustee Expense Advances.
(a) Subject to the terms and conditions hereof, the Lender shall cause to be made and loaned
to the Trust, and the Trust shall borrow, the Advance that the Lender may elect to make for the
purpose of funding certain Premiums and Trustee Expenses during the Term of this Agreement.
The Advance shall be made on the Initial Premium Funding Date. The Advance hereunder may be
(a) delivered to the Trust or (b) paid directly to the Insurer at the Insurers Mailing Address for
Payments with respect to the Life Insurance Policy.
(b) Any Advance for Trustee Expenses may be made at the election of the Lender on the Initial
Premium Funding Date. If the Lender elects not to make an Advance for Trustee Expenses, such
Trustee Expenses shall be the responsibility of the Trust. The date of any Advance for Trustee
Expenses may be changed by the Lender. Any Advance for Trustee Expenses may be applied by the
Lender directly to such expenses.
(c) Any Advance made hereunder by the Lender shall be evidenced by, and repaid with interest
in accordance with, the Promissory Note payable to the order of the Lender.
1.3.
Total Amount Due.
(a) Interest due under the Promissory Note shall accrue at the Interest Rate on the aggregate
principal amount of the Advance outstanding hereunder on each day from the date of the Advance to
the date that the Advance plus accrued interest is paid in full. [
At the end of each month,
accrued interest shall be added to the principal amount due under the Promissory Note, and interest
shall accrue thereafter on such increased principal amount.][DELETE IN GEORGIA AND OTHER STATES NOT
PERMITTING COMPOUNDING OF INTEREST.]
Such outstanding principal amount plus any accrued and unpaid
interest as of any date shall be referred to as the Total Amount Due.
(b) On the Maturity Date, the Trust shall pay to the Lender the Total Amount Due under the
Promissory Note plus the Origination Fee
[plus the Lender Protection Insurance Charge].
(c) Anything contained herein or within the Promissory Note to the contrary notwithstanding,
if said rate or rates of interest or manner of payment exceeds the maximum allowable under
applicable law, then the Trust shall be liable only for the payment of such maximum as allowed by
law, and any payment received from the Trust in excess of such legal maximum, whenever received,
shall be applied to reduce the principal balance of the amount due hereunder to the extent of such
excess or, at the option of the Trust, shall be returned to the Trust.
(d) The Lender may perform its obligations to compute and determine any amounts under this
Agreement directly or through an agent. The Lender shall not be liable to the Trustee in
connection with the performance of any such obligations in the absence of willful misconduct or
gross negligence.
3
1.4.
Partial and Surplus Payments.
If at any time the Lender receives a smaller payment than the Total Amount Due or any other
Obligations due under this Agreement, the Promissory Note or the other Financing Documents, it may
apply the amount actually received in or towards discharge of the Obligations in the order
indicated by the Promissory Note. If the amount realized by the Lender under Article 6 of this
Agreement is more than the amount of the Obligations, the Lender shall pay the excess to the Trust.
1.5.
Dispute Resolution.
(a) All controversies or disputes arising out of or in connection with this Agreement
(Disputes) shall be resolved pursuant to this Section 1.5.
(b) All Disputes shall in the first instance be discussed amicably between the parties with a
view to resolving such Dispute, commencing upon one party giving other parties written notice of
such Dispute. In the event that such Dispute is not resolved within thirty (30) days after such
notice (or such longer period as the parties may agree in writing with respect to any such
Dispute), any party may submit such Dispute to be finally settled by arbitration administered under
the Commercial Arbitration Rules of the American Arbitration Association (the Rules) by a panel
of three arbitrators sitting in [TRUST-CITY-STATE]. One arbitrator shall be nominated by the party
initiating arbitration at the time of the filing of its demand for arbitration, the second
arbitrator shall be nominated by the opposing party(ies) at the time of the filing of its answering
statement, and the third arbitrator (who shall act as chairman) shall be jointly nominated by
party-nominated arbitrators if they are able to agree. If the first two party nominated
arbitrators are unable to agree upon a third within thirty (30) days after the nomination of the
second, or if either party fails to nominate an arbitrator as set forth herein, an arbitrator shall
be appointed pursuant to the Rules. The award of the arbitrators shall be final and binding upon
the parties, and shall not be subject to any appeal or review. The parties agree that such award
may be recognized and enforced in any court of competent jurisdiction. The parties agree to submit
to the personal jurisdiction of the federal and state courts sitting in [TRUST-CITY-STATE], for the
sole purpose of enforcing this Agreement (including, where appropriate, issuing injunctive relief),
the agreement to arbitrate contained herein and any award resulting from arbitration pursuant to
this Section and, to the fullest extent permitted by law, waive any objection which they may have
at any time to the laying of venue of any proceedings brought in such court and any claim that such
proceedings have been brought in an inconvenient forum.
(c) The Trust further agrees that no claim may be brought as a class action, and that the
Insured and Trustee, on behalf of the Trust, do not have the right to act, nor shall they attempt
to act, as a class representative or participate as a member of a class of claimants with respect
to any claim related to or arising out of this Agreement. To the extent that this arbitration
provision is held unenforceable, the Trust: (i) irrevocably submits to the exclusive jurisdiction
of any federal or state court sitting in [TRUST-CITY-STATE] in respect of any action or proceeding
arising under or related to in any manner whatsoever this Agreement or the transactions
contemplated under this Agreement, (ii) agrees that this Agreement and the transactions
contemplated by the Financing Documents shall in all respects be governed by and construed in
accordance with the laws of the State of [JURISDICTION] (without reference to
4
conflicts of laws provisions) and (iii) HEREBY WAIVES THE RIGHT SUCH PARTY MAY HAVE TO A TRIAL
BY JURY ON ANY CLAIM, COUNTERCLAIM, SETOFF, DEMAND, ACTION OR CAUSE OF ACTION (I) ARISING OUT OF OR
IN ANY WAY RELATED TO THIS AGREEMENT, OR (II) IN ANY WAY IN CONNECTION WITH OR PERTAINING OR
RELATED TO OR INCIDENTAL TO ANY DEALINGS OF THE PARTIES TO THIS AGREEMENT IN CONNECTION WITH THIS
DISCLOSURE STATEMENT, REPRESENTATIONS AND WARRANTIES, AND CONSENT OR THE EXERCISE OF ANY PARTYS
RIGHTS AND REMEDIES UNDER THIS AGREEMENT OR OTHERWISE, OR THE CONDUCT OR THE RELATIONSHIP OF THE
PARTIES HERETO, IN ALL OF THE FOREGOING CASES WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE. The Parties hereby agree and acknowledge that this
provision is intended to encompass any dispute between any Party to this Agreement and any
interested third party.
(d) In any arbitral proceeding arising under this Agreement, the parties agree that they will
engage in cooperative discovery, to be supervised by the arbitral tribunal. In its discretion, the
tribunal may order the exchange of documents in the custody or control of parties to this
Agreement, and may order a limited number of party depositions of one (1) days duration each if
requested by the opposing party and if the tribunal finds that such depositions would contribute to
the efficient development of evidence.
(e) The sole exception to this Section 1.5 involves suits brought on behalf of the Lender
seeking a temporary restraining order, preliminary injunction, and/or permanent injunction
(injunctive relief) based upon (i) any failure of the Borrower to use the proceeds advanced
hereunder exclusively as set forth in this Agreement, the Promissory Note, the Financing Documents
or any other documents related to this Agreement; (ii) any act by the Borrower or any Guarantor to
transfer, amend, change ownership, cancel, convey, sell or assign the Life Insurance Policy without
the express written consent of the Lender; or (iii) any failure to act by the Borrower or any
Guarantor that results, directly or indirectly, in the transfer of the Life Insurance Policy or any
amendment, change of ownership, cancellation, conveyance, sale or assignment thereof, in the event
there is immediate and irreparable injury, loss, or damage (which immediate and irreparable injury,
loss, or damage may be presumed by law and/or by agreement of the Parties).
(f) The parties hereby expressly agree, and each interested third party in receipt of this
Agreement acknowledges, that the arbitration provisions in this Section 1.5 shall not apply to the
Trustee in respect of its rights, duties, protections and immunities under the Trust Agreement.
ARTICLE 2
GENERAL PAYMENT PROVISIONS
2.1.
Payments.
(a) All payments by the Trust of any Obligations shall be made in Dollars in immediately
available funds, without defense, setoff or counterclaim, free of any restriction or condition, and
delivered to the Lender not later than 12:00 p.m. (EST) on the date due by wiring
5
such funds to the Lender at such account as the Lender may from time to time designate in
writing to the Trust or by payment of bank or certified check to the Lenders address as it may
from time to time provide in writing to the Trust.
(b) Whenever any payment to be made hereunder shall be stated to be due on a day that is not a
Business Day, such payment shall be made on the next succeeding Business Day and such extension of
time shall be included in the computation of the payment of interest hereunder.
2.2.
Default Interest; Payments Set Aside.
(a) Any Obligations payable by the Trust under the Promissory Note or any Financing Document
not paid when due (whether upon the Maturity Date or otherwise), and any Obligations payable at any
time if a Default or an Event of Default shall have occurred and be continuing (without reference
to any cure period), shall (to the fullest extent permitted by law) bear interest from the date
when due, or the date upon which such Default or Event of Default shall have occurred, until paid
in full at a rate per annum equal to the Interest Rate in effect at the time of such due date or
Default or Event of Default plus 2% per annum (the Default Rate).
(b) To the extent that the Trust makes a payment to the Lender, or the Lender enforces any
security interest or lien, and such payment or proceeds of such enforcement or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to
be repaid to a trustee, receiver or any other party under any bankruptcy or insolvency law, any
other state or federal law, common law or any equitable principles, then, to the extent of such
recovery, the obligation or part thereof originally intended to be satisfied, and all Encumbrances,
rights and remedies therefor or related thereto, shall, to the fullest extent permitted by law, be
revived and continued in full force and effect as if such payment had not been made or such
enforcement had not occurred.
2.3.
Determinations and Delegation by Lender.
(a) Any determination by the Lender or a Person retained by the Lender of the principal amount
including capitalized interest shall be binding absent manifest error.
(b) The Lender may retain a servicer, a special servicer, a calculation agent, an actuary or
other Person to make any determinations, prepare any calculations, reports and notices, and provide
any other services in connection with the Lenders performance of its obligations, or the exercise
of its rights, under this Agreement and the other Financing Documents.
2.4.
Prepayment
.
No privilege is reserved by Borrower to prepay any principal due hereunder and under the Promissory
Note prior to the Maturity Date, except that the Borrower may after giving five (5) days prior
written notice to Lender, prepay in full, but not in part, all principal and interest to and
including the date on which payment is made, along with all sums, amounts, advances, or charges due
under this Agreement, the Promissory Note or the other Financing Documents, upon the payment of the
Yield Maintenance Premium. Notwithstanding the foregoing, no Yield Maintenance Premium payment
shall be required in the event that a full prepayment of the
6
Obligations hereunder is made promptly following a death of the Insured under the Life Insurance
Policy.
ARTICLE 3
CONDITIONS PRECEDENT
3.1.
Conditions Precedent to the Initial Premium Funding Date.
The Lender in its sole discretion may make the Advance. In addition to any other conditions
imposed by the Lender, the Lender shall not make the Advance unless the following conditions have
been satisfied or waived:
(a) The Lender shall have received this Agreement and the other documents described in the
Closing Package, each duly executed and dated the Initial Premium Funding Date (or such earlier
date as shall be satisfactory to the Lender), and in form and substance satisfactory to the Lender;
(b) The Lender shall be satisfied that the life insurance illustration corresponds with the
policy form number, personal data, underwriting classification and cash surrender value set forth
in the Life Insurance Policy to be provided on the Initial Premium Funding Date; and
(c) The representations and warranties of the Trust contained herein and in the other
Financing Documents shall be true and correct on and as of the Initial Premium Funding Date to the
same extent as though made on and as of such date (except to the extent such representations and
warranties relate to a specified date); all obligations of the Trust in this Agreement and the
other Financing Documents required to be performed on or prior to the Initial Premium Funding Date
shall have been performed; and no event shall have occurred and be continuing or would result from
the making of such Advance or the consummation of the other transactions contemplated hereby that
would constitute an Event of Default or a Default under this Agreement or the other Financing
Documents.
3.2.
Termination.
From the Execution Date to the Initial Premium Funding Date, this Agreement may be terminated
at any time at the Lenders sole discretion with written notice to the Trust.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Trust represents and warrants to the Lender, as of the Execution Date, the Initial Premium
Funding Date and on the dates otherwise specified below, as follows:
(a)
Organization
. The Trust Agreement is valid and enforceable and is in full force
and effect under the laws of the State of [JURISDICTION] (subject to applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting creditors rights generally and
7
to equitable principles of general application, regardless of whether such principles are
considered in a proceeding in equity or at law). The Trust has requisite capacity and all
requisite power and authority and all requisite authorizations, consents and approvals, in each
case, to hold the trust estate, to purchase and own the Life Insurance Policy, to enter into the
Financing Documents to which the Trust is a party and to carry out the transactions contemplated
thereby.
(b)
Execution
. This Agreement and the other Financing Documents to which the Trust is
a party have been duly executed and delivered by the Trustee. Assuming due authorization, execution
and delivery by the other parties thereto, this Agreement and such other Financing Documents
constitute legal, valid and binding obligations of the Trust, enforceable against the Trust in
accordance with their terms (subject to applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors rights generally and to equitable principles of
general application, regardless of whether such principles are considered in a proceeding in equity
or at law).
(c)
No Conflict
. The execution and performance by the Trust of this Agreement and the
other Financing Documents to which it is a party do not (i) violate, conflict with or result in the
breach of any provision of its constitutive documents or the Trust Agreement, (ii) conflict with or
cause a violation of any Law or Governmental Order applicable to it or to any of the Trusts
assets, properties or business or (iii) conflict with, result in any breach of, constitute a
default (or event which with the giving of notice or lapse of time, or both, would become a
default) under, require any consent under, or give to others any rights of termination, amendment
or acceleration pursuant to any Contract to which the Trust is a party.
(d)
Consents
. No authorization, approval, consent, franchise, license, covenant,
order, ruling, permit, certification, exemption, notice, declaration or similar right, undertaking
or other action of, to or by, or any filing, qualification or registration with, any Governmental
Authority is required to be obtained by the Trust that has not been obtained or is not in full
force and effect, and no registration, declaration, or filing with any Governmental Authority is
required to be given or made by the Trust to or with, any Governmental Authority that has not been
given or made or the applicable waiting period for which has not expired or terminated, each in
connection with the execution and delivery of this Agreement and the other Financing Documents and
the consummation of the transactions contemplated hereby and thereby.
(e)
No Default; Compliance and Litigation
. No Default or Event of Default under this
Agreement or any other Financing Document has occurred and is continuing. The Trust is not in
violation of any Law or Governmental Order applicable to it or any of its properties or assets. No
judicial, administrative or arbitral proceeding is pending or, to the best knowledge of the Trust,
threatened against the Trust, which would have an adverse effect on the Trusts ability to perform
under the Financing Documents.
(f)
Payment of Taxes
. The Trust has filed all tax returns and reports of the Trust
required to be filed, and all taxes shown on such tax returns to be due and payable, and all
assessments, fees and other governmental charges upon the Trust and upon its properties, assets,
income, businesses and franchises which are due and payable, have been paid when due and payable.
8
(g)
Investment Company Act
. The Trust is not subject to regulation under the
Investment Company Act of 1940, as amended and is not a registered investment company or company
controlled by a registered investment company or a principal underwriter of a registered
investment company as such quoted terms are defined in the Investment Company Act of 1940, as
amended.
(h)
Purpose of Loan
. The Trust has entered into this Agreement for estate and
retirement planning purposes and the Trust has no present intention to transfer the Life Insurance
Policy or any interest therein, other than any collateral assignment or pledge made in connection
with this Agreement.
(i)
Independent Decision
. The Trust has read and understood, and the Trust has signed
or caused to be signed by the appropriate Persons (other than Lender), each document in the Closing
Package. The Trust has been encouraged by Lender to consult with and has had ample opportunity to
receive advice from attorneys, accountants and tax or other financial advisors of its choosing.
The Trust has considered other options for financing the Life Insurance Policy, and is satisfied
that entering into this Agreement and the other Financing Documents and consummating the
transactions contemplated by this Agreement and the other Financing Documents are in the best
interests of the Trust. The Trust acknowledges that it has had this Agreement and the other
Financing Documents for an amount of time sufficient to thoroughly analyze, discuss and receive
advice from any professionals or anyone else of the Trusts choosing.
(j)
Trustee
. At least one trustee of the Borrower is an attorney, certified public
accountant or bank or trust company which is authorized to serve as trustee for the Borrower in the
state where the Borrower has its situs and has its principal place of administration.
The representations and warranties made by the Trust hereunder shall at all times be true until the
termination of this Agreement in accordance with the terms hereof.
ARTICLE 5
COVENANTS
For so long as any Obligations remain outstanding, the Trust hereby covenants and agrees as
follows:
(a) To take such further action and/or execute and deliver all further assurances, documents
and/or instruments as may be reasonably requested by the Lender in order to (i) effect, administer
or enforce the transactions contemplated by this Agreement and the other Financing Documents to
which the Trust is a party, (ii) permit the realization of the benefits of any collateral
assignment or pledge of the Life Insurance Policy to the Lender and its assigns, (iii) execute any
documents reasonably requested by the Lender to submit to the Insurer for payment of the Death
Benefit, and (iv) authorize the provision and/or delivery of medical, financial, personal and other
information and documentation about the Insured to the Lender, any affiliate of the Lender, any of
their assigns, or any Insurer from any physician, hospital, medical
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provider, provider of a life expectancy estimate, insurance company or other Person with
respect to the Insured.
(b) To notify the Lender in writing of any change of the address, telephone number or other
contact information of the Trust\. The Trust acknowledges that the Lender or its designee may be
verifying quarterly the current addresses, contact information and other relevant information of
the Trust. The Trust covenants and agrees that it shall accurately complete and manually execute
its response and return the same to the Lender and/or its designees in a timely manner. The Trust
further acknowledges that the Lender or its designee may use other methods to obtain such
information, and the Trust agrees to cooperate, and to request that other Persons cooperate, in
providing such information.
(c) If the Trust receives proceeds derived or to be derived from the Life Insurance Policy
[or
from the sale of the beneficial interests in the Trust]
, to (i) hold such proceeds in trust for the
benefit of the Lender and its assigns (to the extent of amounts owed hereunder), (ii) notify the
Lender of such receipt within three (3) Business Days, (iii) transfer, convey and pay over such
proceeds (to the extent of amounts owed hereunder) to the Lender within three (3) Business Days of
its receipt of payment instructions from the Lender and (iv) take any and all actions reasonably
requested by the Lender, at the expense of the Lender, in order to change the payment instructions
with respect to such Life Insurance Policy
[or such beneficial interest]
such that proceeds
therefrom are payable directly to the Lender or any person designated in writing by the Lender.
(d) The Trust shall preserve its existence as a trust established under the laws of the State
of [JURISDICTION], and shall not change its form of organization, amend the Trust Agreement or
permit an Encumbrance to the Life Insurance Policy or any Collateral (except as contemplated by
this Agreement) without the consent of the Lender. The Trust shall maintain an office located in
the State of [JURISDICTION].
(e) The Trust shall pay all Taxes imposed upon the Trust or any of its properties or assets
before any penalty or fine accrues thereon, and shall notify the Lender of any such Taxes as soon
as the Trust has actual knowledge thereof.
(f) The Trust shall notify the Lender in writing of (i) the Insureds death, and (ii) any
breaches of the representations and warranties of the Trust or the Insured in this Agreement or the
other Financing Documents within one (1) business day of its actual knowledge thereof.
(g) The Trust shall not engage in any business or activity other than (i) the acquisition,
maintenance and protection of the Life Insurance Policy and (ii) the entering into this Agreement,
the Promissory Note and the other Financing Documents contemplated hereby;
(h) The Trust shall not incur any indebtedness not committed or provided by this Agreement or
assume or guaranty directly or indirectly any indebtedness of any other entity, other than
Trustees fees (and any related costs of counsel and out of pocket expenses and other Trustee
Expenses), except with the express written consent of the Lender, which consent shall be granted or
withheld in the sole discretion of the Lender;
(i) The Trustee shall not dissolve or liquidate the Trust, in whole or in part; and
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(j) Following an Event of Default, the Trust shall accept written instructions from the
Collateral Agent under the Collateral Assignment regarding the disposition of the Life Insurance
Policy and any other Collateral or proceeds covered thereby, including instructions to assign
ownership of the Life Insurance Policy to the Lender or any third party engaged to dispose of the
Collateral, or to dispose of the Collateral in a commercially reasonable fashion or as otherwise
directed by the Collateral Agent.
(k) In the event that the Trust elects to sell, assign or settle, or to consider selling,
assigning or settling, the Life Insurance Policy when any amounts are outstanding hereunder, the
Trust agrees to solicit bona fide offers (each, an Offer) from multiple potential buyers (each, a
Bidder), at least one of which shall be either (a) a duly licensed life settlement provider
identified to the Trust by the Lender or (b) a Bidder identified by a duly licensed life settlement
broker or life agent identified to the Trust by the Lender, provided that any person identified or
referred to the Trust by the Lender under clauses (a) or (b) shall not be affiliated with, or
related, to the Lender in any manner. This covenant is designed solely to protect the owners or
beneficiaries of the Trust and to ensure that if a sale, assignment or settlement is pursued that
at least one bona fide offer is obtained. For avoidance of doubt, the Trust shall not be obligated
whatsoever to consummate a sale, assignment or settlement of a Life Insurance Policy with any
person identified or referred to the Trust by the Lender.
ARTICLE 6
EVENTS OF DEFAULT AND REMEDIES
6.1.
Events of Default.
The occurrence and continuance of any of the following events shall constitute an Event of
Default:
(a)
Payment Default.
Trust fails to make any payment within three (3) Business Days after the
same becomes due and payable under this Agreement, the Promissory Note or any other Financing
Document.
(b)
Other Defaults.
Trust fails to comply with or to perform any other term, obligation,
covenant or condition contained in the Promissory Note, this Agreement or in any of the other
Financing Documents or to comply with or to perform any term, obligation, covenant or condition
contained in any other agreement between Lender and Trust.
(c)
False Statements.
Any warranty, representation or statement made or furnished to Lender
by Trust, the Insured, or on Trusts behalf under the Promissory Note, this Agreement or any other
Financing Document is false or misleading in any material respect, either now or at the time made
or furnished or becomes false or misleading at any time thereafter.
(d)
Related Agreements.
The Life Insurance Policy, Promissory Note, this Agreement,
Beneficiary Pledge Agreement or any other Financing Document ceases to be in full force and effect
(including failure of any collateral document to create a valid and perfected security interest or
lien) at any time and for any reason; the Trust becomes a revocable trust,
11
contests the validity or enforceability of any Financing Document or denies that it has any
further liability under any Financing Document to which it is a party, or cancels or terminates, or
attempts to cancel or terminate, the Life Insurance Policy; or the Insurer contests the Life
Insurance Policy based on the Trust lacking an insurable interest in the life of the Insured.
(e)
Indebtedness, Creditor or Forfeiture Proceedings.
Any garnishment of any of Trusts
accounts, attachment, lien, levy, additional encumbrance or additional security interest being
placed upon any of the Collateral, or any commencement of foreclosure or forfeiture proceedings,
whether by judicial proceeding, self-help, repossession or any other method, by any creditor of
Trust or by any governmental agency against any Collateral, and which is not discharged in full
within one (1) day of the placement thereof. However, this Event of Default shall not apply if
there is a good faith dispute by Trust as to the validity or reasonableness of the claim which is
the basis of the creditor or forfeiture proceeding and if Trust gives Lender written notice of the
creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor
or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an
adequate reserve or bond for the dispute.
(f)
Insolvency or Default of Trust
. The Trust is: (i) dissolved, liquidated or terminated;
(ii) is unable to pay its debts as they mature; (iii) makes an assignment for the benefit of
creditors; (iv) is bankrupt or insolvent; (v) seeks appointment of, or becomes the subject of an
order appointing, a trustee, conservator, liquidator or receiver as to all or part of its assets;
(vi) commences, approves or consents to, or is the debtor in, any case or proceeding under any
bankruptcy, reorganization or similar law, and in the case of an involuntary case or proceeding,
such case or proceeding is not dismissed thirty (30) days following its commencement; (vii) is the
subject of an order for relief in an involuntary case under federal bankruptcy law; (viii) the
Trust defaults under any loan, extension of credit, Beneficiary Pledge Agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person that may materially
affect any of Trusts property or Trusts ability to repay the Promissory Note or perform Trusts
Obligations under the Promissory Note, this Agreement or any of other Financing Documents; or (ix)
Trust violates any Law.
(g)
Insolvency or Default of Insured or Guarantor.
(i) The Insured or any Guarantor
makes an assignment for the benefit of creditors; (ii) The Insured or any Guarantor is
adjudicated a bankrupt or insolvent; (iii) The Insured or any Guarantor seeks appointment
of, or becomes the subject of an order appointing, a trustee, conservator, or receiver as to all or
part of his or her assets; (iv) The Insured or any Guarantor commences, approves or
consents to, or is the debtor in, any case or proceeding under any bankruptcy or similar law and,
in the case of an involuntary case or proceeding, such case or proceeding is not dismissed thirty
(30) days following its commencement; (v) The Insured or any Guarantor is the subject of
an order for relief in an involuntary case under federal bankruptcy law; (vi) Trust defaults under
any loan, extension of credit, Beneficiary Pledge Agreement, purchase or sales agreement, or any
other agreement, in favor of any other creditor or person that may materially affect any of Trusts
property or Trusts ability to repay the Obligations; or (vii) any Guarantor defaults under the
terms of the Personal Guaranty.
(h)
Events Affecting Guarantor.
Any of the preceding events occurs with respect to any
Guarantor of any of the indebtedness under the Promissory Note or any Guarantor dies or
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becomes incompetent, or revokes or disputes the validity of, or liability under, any guaranty
of the indebtedness evidenced by the Promissory Note; in the event of a death, Lender, at its
option, may, but shall not be required to, permit the Guarantors estate to assume unconditionally
the obligations arising under the guaranty in a manner satisfactory to Lender, and, in doing so,
cure any Event of Default.
(i)
Adverse Change.
A material adverse change occurs in Trusts financial condition, or
Lender believes the prospect of payment or performance of the Obligations is materially impaired.
(j)
Cure Provisions.
Other than as set forth in the preceding clauses of this Section,
failure by the Trust or Insured, as applicable, to perform in any material respect any of its
obligations under the Promissory Note, this Agreement, Beneficiary Pledge Agreement or any other
Financing Document to which either is a party if such failure is not remedied on or prior to the
fifteenth (15th) day after written notice of such failure is given to the Trust or the Insured,
respectively, by the Lender.
6.2.
Remedies.
(a) Automatically upon the occurrence of any Event of Default described in Section 6.1, and in
the case of any other Event of Default, upon notice from the Lender to the Trust, the Total Amount
Due, together with all other Obligations, shall immediately become due and payable, without
presentment, demand, protest or other requirements of any kind, all of which are expressly waived
by the Trust.
(b) Upon the occurrence and during the continuance of an Event of Default, in addition to the
remedies set forth in Section 6.2(a) above, the Lender and its assigns shall have the right to:
(i) exercise all rights and remedies provided for herein or in any other Financing
Document (including surrendering the Life Insurance Policy) or otherwise available to it at
law or in equity, and all rights and remedies of a secured party on default under the
Uniform Commercial Code; and
(ii) execute any instrument and do all other things necessary and proper to protect,
preserve and realize upon any Collateral and the other rights contemplated hereunder and
under the other Financing Documents.
(c) Upon the occurrence and during the continuance of an Event of Default, the Trust agrees to
accept written instructions from the Collateral Agent regarding the disposition of the Life
Insurance Policy and any other Collateral or proceeds thereof, including instructions to assign
ownership of the Life Insurance Policy to the Lender or any third party engaged to dispose of the
Collateral, or to dispose of the Collateral in a commercially reasonable fashion or as otherwise
directed in writing by the Collateral Agent.
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ARTICLE 7
OTHER PROVISIONS
7.1.
Notices.
All notices, requests, claims, demands and other communications required or permitted to be
given hereunder shall be in writing, shall be given to the Lender and the Trust (with a copy to the
Insured), shall be delivered by hand or telecopied or sent by reputable overnight courier service,
and shall be deemed given when so delivered by hand or telecopied (with proof of transmission) or
emailed or one (1) Business Day after being sent by reputable overnight domestic courier service,
and five (5) Business Days after being sent by reputable overnight international courier service.
All such notices, requests, claims, demands and other communications shall be addressed as set
forth below, or pursuant to such other instructions as may be designated in writing to the other
party in accordance with this Section.
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If to the Trust:
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[TRUST-NAME]
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c/o [TRUSTEE-NAME], trustee
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[TRUST-ADDRESS]
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[TRUST-CITY-STATE]
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Phone:
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Fax:
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Email:
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With a copy to Insured:
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[INSURED]
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[INSURED-ADDRESS]
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[INSURED-CITY-STATE]
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Phone:
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Fax:
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Email:
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If to the Lender:
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[LENDER-NAME]
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701 Park of Commerce Blvd.
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Suite 301
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Boca Raton, FL 33487
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Phone: 561-995-4200
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Fax: 561-995-4201
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Email:
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7.2.
Expenses.
(a) Except as otherwise specified in this Agreement, all costs and expenses, including,
without limitation, fees and disbursements of counsel, financial advisors and accountants, incurred
in connection with this Agreement and the transactions contemplated hereby, shall be paid by the
party incurring such costs and expenses unless, at any time after the
14
Initial Premium Funding Date, the Lender elects in its sole discretion to pay the costs and
expenses of any other party hereto.
(b) The Trust agrees, after the occurrence of a Default or an Event of Default, to pay all
costs and expenses incurred by the Lender in enforcing any Obligations of, or in collecting any
payments due from, the Trust hereunder or under the other Financing Documents, including reasonable
fees and expenses of the Lenders attorneys (which shall include the allocated costs of internal
counsel), financial advisors and accountants within five (5) Business Days after receiving an
invoice from the Lender.
(c) This Section shall survive the payments of all other amounts due hereunder.
7.3.
Completeness
.
Notwithstanding anything else herein to the contrary, if the Life
Insurance Policy is not issued at the time this Agreement is executed, the Borrower authorizes the
Lender to fill in the name of the insurance company, policy number and face amount of the policy
after the Life Insurance Policy directly or indirectly funded hereby is issued.
7.4.
Confidentiality.
(a) The Lender is committed to maintaining the confidentiality, integrity and security of
personal information about its current, former and prospective customers. The Trust does not have
to contact the Lender to benefit from the Lenders privacy protections; they apply automatically.
By entering into this Agreement, the Trust consents to the collection and use of information as set
forth below and in Schedule B.
(b) The Lender agrees (i) not to use or disclose non-public medical, financial and personal
information about the Trust and the Insured except as necessary, in the opinion of the Lender, to
secure funding or insurance for its obligations under this Agreement or the other Financing
Documents or to effect, administer or enforce the transactions contemplated by this Agreement, the
other Financing Documents and any other agreements entered into in connection therewith, including,
without limitation, the sale or exercise of rights under the Life Insurance Policy; and (ii) to
keep such information confidential and limit access to such information to those Persons who, in
the Lenders reasonable discretion, require access to such information to effect, administer or
enforce the transactions contemplated by this Agreement, the other Financing Documents and any
other agreements entered into in connection therewith, including, without limitation, the sale or
the exercise of rights under the Life Insurance Policy.
(c) Nothing in this Section shall prohibit disclosure of information that is required or
permitted by any Law or regulation, including, but not limited to, the Gramm-Leach-Bliley Act of
1999, or in response to legal process or to the extent that it may otherwise have become publicly
available without the fault of the person proposing to disclose. In addition, notwithstanding
anything herein to the contrary, in accordance with Section 1.6011-4(b)(3) of the United States
Treasury Regulations, the parties (and each employee, representative, or other agent of any party)
may disclose to any and all Persons, without limitation of any kind, the tax treatment and tax
structure of the transactions contemplated by this Agreement and all materials of any kind
(including opinions or other tax analyses) that are provided to the parties relating to such tax
treatment and tax structure.
15
7.5.
Entire Agreement; Effectiveness; Counterparts; Headings; Severability.
(a) This Agreement, together with the other Financing Documents, embodies the entire agreement
and understanding between the Trust and the Lender with respect to the financing hereunder and
supersedes all prior, contemporaneous or subsequent oral agreements of the Trust and the Lender.
(b) This Agreement may be executed in any number of counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument. Delivery of an executed counterpart of a signature
page to this Agreement by facsimile shall be effective as delivery of an original executed
counterpart of this Agreement.
(c) Section headings herein are included herein for convenience of reference only and shall
not constitute a part hereof for any other purpose or be given any substantive effect.
(d) In case any provision in or obligation hereunder shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not
in any way be affected or impaired thereby.
7.6.
Amendments and Waivers.
No amendment, waiver, modification or supplement of any provision of this Agreement shall be
effective unless the same shall be in writing and signed by the Lender and the Trust, provided that
no amendment, waiver, modification or supplement of any provision of this Agreement that affects
the rights or obligations of the Insured shall be effective until approved in writing by the
Insured, and each amendment, waiver, modification, supplement or consent shall be effective only in
the specific instance and for the specific purpose for which given. Any forbearance or failure to
exercise, and any delay in exercising, any right, power or remedy hereunder shall not impair any
such right, power or remedy or be construed to be a waiver thereof, nor shall it preclude the
further exercise of any such right, power or remedy. The rights, powers and remedies given to the
Lender hereby are cumulative and shall be in addition to and independent of all rights, powers and
remedies existing by virtue of any statute or rule of law or in any of the other Financing
Documents.
7.7.
Assignments; Third Party Beneficiaries.
(a) Except as otherwise expressly provided herein to the contrary, this Agreement shall be
binding upon and inure solely to the benefit of the parties hereto and their respective successors
and permitted assigns, and nothing herein is intended to or shall confer upon any other Person any
legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement. The rights or obligations hereunder or any interest therein of the Trust may not be
assigned or delegated without the prior written consent of the Lender.
(b) The Lender shall have the right at any time to sell, assign or transfer all or any
portion of its rights and obligations under this Agreement and the other Financing Documents,
including, without limitation, all or a portion of the financing hereunder or any other of the
16
Obligations to (i) any Affiliates of the Lender, including Imperial PFC Financing, LLC, an
Illinois limited liability company (Imperial PFC Financing) or (ii) to any Wholesale Lender.
Further, the Lender shall have the right at any time, with notice to, and the written consent of
the Borrower, which consent shall not be unreasonably withheld, delayed or conditioned, to sell,
assign or transfer all or any portion of its rights and obligations under this Agreement and the
other Financing Documents, including, without limitation, all or a portion of the financing
hereunder or any other of the Obligations to any other third party. The Lender shall also have the
right at any time, without notice to or consent of any other party, to sell one or more
participations to any Person in all or any part of the financing hereunder or in any of the other
Obligations on terms and conditions satisfactory thereto.
(c) The Lender may, without notice to or consent of any other party, pledge, collaterally
assign or grant a security interest in the right, title and interest of the Lender in and to this
Agreement and the other Financing Documents and its interest in the Collateral. In such case, the
Lender shall remain liable for all of its obligations under this Agreement and the other Financing
Documents, and the secured party shall not be liable for any obligation of the Lender whether under
this Agreement or the other Financing Documents or otherwise.
7.8.
Limited Liability of Trustees.
(a) It is expressly understood and agreed by the parties hereto that in no event shall [Name
of Trustee], as trustee of the Trust, in its individual capacity have any liability for the
representations, warranties, covenants, agreements or other obligations of the Trust hereunder or
under any schedule, exhibit, appendix or other document in connection with this Agreement, as to
all of which recourse shall be had solely to the assets of the Trust, and under no circumstances
shall [Name of Trustee] as trustee of the Trust be personally liable for the payment of any
indebtedness or expenses of Trust or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by Trust under this Agreement or under any
schedule, exhibit, appendix or other document in connection with this Agreement.
(b) In no event shall any officers, directors, employees, agents, accountants, attorneys or
service providers of Lender be liable in their personal capacities to any Person for the
representations and obligations of the Lender under any Financing Document.
7.9.
Survival of Representations, Warranties and Agreements.
All representations, warranties and agreements made in this Agreement shall survive the
execution and delivery hereof, and shall continue in full force and effect, until no Obligation
remains outstanding.
7.10.
Governing Law.
THIS AGREEMENT AND ALL MATTERS RELATING THERETO SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LOCAL LAW OF THE STATE OF [JURISDICTION-UC] (WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES THAT COULD OR WOULD CAUSE THE APPLICATION OF ANY OTHER LAWS), ALL RIGHTS AND
REMEDIES BEING GOVERNED BY SAID LAW.
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ARTICLE 8
DEFINITIONS AND RULES OF INTERPRETATION
8.1.
Definitions.
As used in this Agreement, the following terms shall have the respective meanings set forth in
this Section.
Advance means the initial amount advanced as set forth in this Agreement, equal to the sum
of Premium plus any amounts advanced for the payment of Trustee Expenses.
Advance for Trustee Expenses means amounts advanced for the payment of Trustee Expenses,
subject to such adjustments as the Lender may elect.
Beneficiary means the beneficiary of the Trust.
Bidder has the meaning set forth in Section 5(k).
Borrower has the meaning set forth in the introductory paragraph.
Business Day means (i) any day excluding Saturday, Sunday and any day which is a legal
holiday under the laws of the States of [JURISDICTION] or New York, or is a day on which banking
institutions located in such states are authorized or required by law or other governmental action
to close.
Closing Package means, collectively, the agreements, instruments, certificates, reports and
documents set forth in Schedule A to this Agreement, to the extent they are required to be
delivered and/or completed on or prior to the Initial Premium Funding Date.
Collateral means the Trusts entire beneficial interest in and to the Life Insurance Policy
and any related documents and security and the death benefits payable under the Life Insurance
Policy and all proceeds thereof.
Collateral Agent means such person or entity designated as the collateral agent in the
Collateral Assignment.
Collateral Assignment means the agreement under which the Borrower assigns the Life
Insurance Policy as collateral to secure the Obligations due or to become due hereunder.
Contract means any contract, agreement, lease, sublease, license, note, bond, mortgage or
indenture, permit, franchise, insurance policy or other instrument, whether written or oral.
Death Benefit means the amount paid by any Insurer upon the death of the Insured under the
terms of the Life Insurance Policy, including any interest paid by the Insurer attributable to the
period beginning on the Death Date.
18
Death Date means the date on which the Insured dies.
Default means (i) a condition or event that, after notice or lapse of time or both, would
constitute an Event of Default under this Agreement or (ii) any default under any Financing
Document.
Default Rate means the rate of interest set forth in Section 2.2(a).
Disputes has the meaning set forth in Section 1.5(a).
Dollar and the sign $ mean the lawful money of the United States of America.
Encumbrance means any mortgage, pledge, hypothecation, assignment, security interest,
charge, lien (statutory or other), or encumbrance of any kind (including any agreement to give any
of the foregoing, any conditional sale or other title retention agreement, any lease in the nature
thereof) and any option, trust or other preferential arrangement having the practical effect of any
of the foregoing.
Event of Default means each of the events set forth in Section 6.1.
Execution Date means the date on which this Agreement is fully executed by the Lender and
the Trust.
Financing Documents means this Agreement, any pledge or collateral assignment of the Life
Insurance Policy, the Disclosure Statement Representations and Warranties and Consent, the Personal
Guaranty, the Closing Package and all other documents, instruments or agreements executed and
delivered by the Trust for the benefit of the Lender in connection herewith, as the same may be
amended or modified with the consent of the Lender.
Governmental Authority means any foreign, or U.S. federal, state, regional, local, municipal
or other government, or any department, commission, board, bureau, agency, public authority or
instrumentality thereof or any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government or any court or arbitrator.
Governmental Order means any order, writ, judgment, injunction, decree, stipulation,
determination or administrative ruling or award entered by or with any Governmental Authority.
Guarantor means any person who delivers a Personal Guaranty to guaranty a portion or all of
the Obligations due by the Borrower hereunder.
Imperial PFC Financing has the meaning set forth in Section 7.7(b).
Initial Premium Funding Date means the date on which the Lender makes the Advance in its
sole discretion pursuant to Section 3.1.
Insured means [INSURED].
Insurer means the issuer of the Life Insurance Policy as identified in this Agreement.
19
Insurers Mailing Address for Payments is as follows: [INSURER], [INSURER-ADDRESS].
Interest Period means each period commencing on the first day of each calendar month during
the term of this Agreement (or, in the case of the first Interest Period, the date the Advance is
made) and ending on the last day of each calendar month during the term of this Agreement (or in
the case of the final Interest Period, the Maturity Date or such earlier date the Obligations
hereunder become due or are pre-paid by the Trust).
Interest Rate means a per annum rate of interest set as follows:
[FIXED-FLOATING-LONG-FORM]
.
Interest Determination Date means, with respect to any Interest Reset Date for an Interest
Period, the second London Banking Day prior to such Interest Reset Date.
Interest Reset Date means, with respect to each Interest Period, the first (1st) day of such
Interest Period.
LIBOR means, with respect to any Interest Period, the London Interbank Offered Rate (one
month) on the Interest Determination Date which is publicly announced in the Money Rates section
of The Wall Street Journal, Eastern Edition, or such other similar publication, as is reasonably
determined by the Lender.
Law means any federal, national, supranational, state, provincial or local statute, law,
ordinance, regulation, rule, code, order, requirement or rule of law (including, without
limitation, common law).
Lender means [LENDER-NAME], a Florida limited liability company authorized to do business in
the State of [JURISDICTION].
[
OPTIONAL
] [Lender Protection Insurance Charge means an amount payable by the Borrower to
the Lender to reimburse the Lender for an insurance charge paid, directly or indirectly, by the
Lender to a third party insurer to protect the Lender or other interested person against losses
resulting from the failure of the Borrower to repay the Obligations hereunder in full and/or a
failure of the Lender to realize sufficient funds following an Event of Default from a foreclosure
upon all collateral for this Loan, including without limitation, the Life Insurance Policy and
collection efforts under any personal guaranties obtained in connection herewith.]
Life Insurance Policy means the life insurance policy or policies identified in this
Agreement, including all amendments, modifications and supplements thereto and all restatements and
replacements thereof.
Loan Date has the meaning given to such term in Section 1.1 of this Agreement.
Loan Term shall mean the [TWENTY-SIX] month period commencing on and including the Loan
Date.
20
London Banking Day means a day on which dealings in deposits in United States dollars are
transacted on the London Interbank Market.
Maturity Date means the earliest of: (i) one (1) Business Day after payment of any proceeds
of the Life Insurance Policy, and (ii) any other date that principal and interest on the Total
Amount Due shall become due and payable in full hereunder, whether by acceleration, notice of
prepayment, or otherwise.
Net Death Benefit with respect to the financing hereunder means an amount equal to the Death
Benefit payable by the Insurer under the Life Insurance Policy less the Total Amount Due and any
other Obligations.
Obligations means all payment and performance obligations of every nature of the Trust from
time to time owed to the Lender under any Financing Document, including without limitation, the
Total Amount Due in connection with the financing hereunder, principal, interest (including
interest which, but for the filing of a petition in bankruptcy or the commencement of any
insolvency, reorganization, or like proceeding with respect to the Trust would have accrued on any
Obligation, whether or not a claim is allowed against the Trust for such interest in such
proceeding), the Origination Fee, the Yield Maintenance Premium, [
the Lender Protection Insurance
Charge
], fees, costs, expenses (including the reasonable fees, charges and disbursements of counsel
to the Lender), indemnification or otherwise.
Offer has the meaning set forth in Section 5(k).
Origination Fee means an amount equal to [ORIGINATION-FEE].
Person means and includes natural persons, corporations, limited partnerships, general
partnerships, limited liability companies, limited liability partnerships, joint stock companies,
joint ventures, unincorporated associations, companies, trusts, banks, trust companies, business
trusts or other entity, or a government or political subdivision or agency thereof.
Personal Guaranty means a guaranty executed by the Insured in favor of the Lender in such
form as shall be agreed to by the Lender.
Premium(s) means the premium(s) for the Life Insurance Policy, subject to adjustment with
the Lenders approval, payable on the Initial Premium Funding Date.
Promissory Note shall mean the promissory note from the Borrower to the Lender, executed
contemporaneously with this Agreement, evidencing amounts owed and/or to be owed under this
Agreement, as such note may be amended, modified or extended.
Rules has the meaning set forth in Section 1.5(b).
Beneficiary Pledge Agreement means each and every Beneficiary Pledge Agreement executed by
any beneficiary of the Trust pursuant to which beneficial interests in the Trust are pledged to
secure the obligations due by the Borrower to the Lender.
21
Tax means any present or future tax, levy, impost, duty, assessment, charge, fee, deduction
or withholding of any nature and whatever called, by whomsoever, on whomsoever and wherever
imposed, levied, collected, withheld or assessed, and including interest, additions to tax and
penalties.
Term shall mean the period commencing on the date of this Agreement first set forth above
and ending on the Maturity Date.
Total Amount Due has the meaning given to such term in clause (b) of Section 1.3 of this
Agreement.
Trust has the meaning set forth in the introductory paragraph.
Trust Agreement means the Trust Agreement entered into between the Grantor named therein and
the Trustee, dated [TRUST-DATE].
Trustee means [TRUSTEE-NAME].
Trustee Expenses means any fees and expenses of the Trustee which the Lender may elect to
advance.
Wholesale Lender means any person or entity that provides or has provided financing to the
Lender or its Affiliates to, directly or indirectly, fund the making, continuing or carrying of
retail life insurance premium finance loans, including the financing under this Agreement. The
term Wholesale Lender shall include any Affiliates of a Wholesale Lender as well as agents acting
on behalf of one or more Wholesale Lender and named as such in agreements relating to such
financings.
Yield Maintenance Premium shall mean the premium calculated as provided in subparagraphs (a)
through (c) of this definition below:
(a) Determine the Reinvestment Yield. The Reinvestment Yield will be equal to the
yield on the U.S. Treasury Issue (Primary Issue)* selected by Lender, published one week
prior to the date of prepayment, and converted to an equivalent monthly compounded nominal
yield. In the event there is no market activity involving the Primary Issue at the time of
prepayment, Lender shall choose a comparable Treasury Bond, Note or Bill (Secondary Issue)
which Lender reasonably deems to be similar to the Primary Issues characteristics (i.e.,
rate, remaining time to maturity, yield).
(b) Calculate the Present Value of the Loan. The Present Value of the Loan is the
present value of the payments to be made in accordance with this Agreement and the
Promissory Note (all installment payments and any remaining payment due on the Maturity Date
discounted at the Reinvestment Yield for the number of months remaining from the date of
prepayment to the Maturity Date).
(c) Subtract the amount of the prepaid proceeds (excluding the payment of this Yield
Maintenance Premium) from the Present Value of the Loan as of the date of prepayment. Any
resulting positive differential shall be the yield maintenance premium.
22
* If at this time there is not a U.S. Treasury Issue for this prepayment period. At
the time of prepayment, Lender shall select in its sole and absolute discretion a U.S.
Treasury Issue with similar remaining time to the end of the applicable prepayment period.
The Yield Maintenance Premium shall not be less than zero. Further, notwithstanding
anything else herein to the contrary, in no event shall the Yield Maintenance Premium be in
an amount which would cause the Borrower to pay more upon prepayment of the loan hereunder
than the Borrower would have paid in full satisfaction of the loan hereunder at maturity on
the scheduled Maturity Date and to the extent necessary, the Yield Maintenance Premium shall
be reduced in the least amount needed to comply with this limit.
8.2.
Interpretation.
(a) A reference to any document or agreement shall include such document or agreement as
amended, modified or supplemented from time to time in accordance with its terms or the terms of
this Agreement.
(b) The singular includes the plural and the plural includes the singular.
(c) A reference to any law includes any amendment or modification to such law.
(d) A reference to any Person includes its permitted successors and permitted assigns.
(e) The words include, includes and including are not limiting.
(f) All terms not specifically defined herein, which terms are defined in the Uniform
Commercial Code as in effect in the State of [JURISDICTION], have the meanings assigned to them
therein.
(g) The words herein, hereof, hereunder and words of like import shall refer to this
Agreement as a whole and not to any particular section or subdivision of such Agreement.
(h) This Agreement is the result of negotiation between, and has been reviewed by counsel to,
the Lender and the Trust. Accordingly, this Agreement is not intended to be construed against the
Lender merely on account of the Lenders involvement in the preparation of such document.
IN WITNESS WHEREOF, the parties have executed this Agreement with the effect from the date
specified above.
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[LENDER-NAME]
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By:
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Name:
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Title:
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Place of Execution:
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[TRUST-NAME]
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By:
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[TRUSTEE-NAME]
, not
in its individual capacity, but solely as Trustee under the
Trust Agreement
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By:
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Name:
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Title:
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Place of Execution:
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24
SCHEDULE A
CLOSING PACKAGE
1.
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Irrevocable and Durable Limited Power of Attorney signed by the Insured permitting the Lender
to review and receive copies of all records protected by the federal Health Insurance
Portability and Accountability Act of 1996.
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2.
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Authorization for Disclosure of Protected Health Information from the Insured.
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3.
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Authorization and Direction to Provide Death Certificate Form from Insured.
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4.
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Copy of the Trust Agreement as in effect on the Initial Premium Funding Date, together with
any other documents affecting the Trust requested by the Lender.
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5.
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A copy of the drivers license of the Insured or other proof of the Insureds age and sex
reasonably satisfactory to the Lender, and confirmation of the Insureds social security
number and address.
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6.
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The original, executed Life Insurance Policy, or a complete copy thereof.
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7.
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The original of the application for the Life Insurance Policy, or a complete copy thereof.
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8.
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Life insurance illustration signed by the Trust reasonably satisfactory to the Lender.
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9.
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Risk and Disclosure Statement executed by the Insured.
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10.
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Risk and Disclosure Statement executed by the Trust.
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11.
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Acknowledgment for the Life Insurance Policy from the Insurer that the Trust is the sole
recorded owner of and duly designated beneficiary under such Life Insurance Policy.
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12.
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Notice from the life insurance agent/broker confirming that medical records provided to the
Lender are true and accurate and that no form of rebating has occurred.
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13.
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Fully Executed Personal Guaranty of the Insured in such form as shall be approved by the
Lender.
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14.
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Beneficiary Pledge Agreement.
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15.
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Promissory Note.
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16.
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A Collateral Assignment of the Life Insurance Policy.
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17.
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Such other documents, instruments, or opinions as the Lender may reasonably request.
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SCHEDULE B
GRAMM-LEACH-BLILEY PRIVACY NOTICE
The Lender knows that you, as the Borrower or Trust, are concerned with how personal
information is treated. This notice is designed to help describe what personal information is
collected and how such information is used with respect to current and former customers. Terms
used, but not defined herein, shall have the meanings given to them in the Agreement to which this
schedule is annexed.
Categories of nonpublic personal information collected by the Lender:
Nonpublic personal information may be collected from the following sources:
(i) information we received from the Trust or the Insured, including information received on
applications or other forms, such as name, address, social security number, assets and income;
(ii) information about transactions with us, our affiliates, or others, including other
parties to this transaction; such as account balances, payment history, assets purchased and sold;
and
(iii) information we received from a consumer reporting agency, such as your credit history
and creditworthiness.
Disclosure of nonpublic personal information:
(i) The Lender does not disclose any nonpublic personal information about the Trust or the
Insured to anyone, except as permitted or required by law. The Lender may disclose the information
described above to firms that perform services on our behalf in connection with maintaining or
servicing an account of the Trust or the Insured, or in connection with processing products or
services at the request of the Trust or the Insured.
(ii) In addition, the Lender reserves the right to disclose nonpublic personal information to
any person or entity, including without limitation any governmental agency, regulatory authority or
self-regulatory organization having jurisdiction over the Lender or an affiliate of the Lender, if
(i) the Lender determines in our discretion that such disclosure is necessary or advisable pursuant
to or in connection with any United States federal, state or local, or non-U. S., law, rule,
regulation, executive order or policy, including without limitation any anti-money laundering law
or the USA PATRIOT Act of 2001, and (ii) such disclosure is not otherwise prohibited by law, rule,
regulation, executive order or policy.
26
Confidentiality and security
THE LENDER RESTRICTS ACCESS TO NONPUBLIC PERSONAL INFORMATION ABOUT THE TRUST AND THE INSURED TO
THOSE EMPLOYEES AND AGENTS WHO NEED TO KNOW THAT INFORMATION TO PROVIDE PRODUCTS OR SERVICES TO THE
TRUST OR THE INSURED, AND AS ALLOWED BY APPLICABLE LAW OR REGULATION, AND DOES NOT PERMIT IT TO BE
SHARED OR USED FOR ANY OTHER PURPOSE. THE LENDER MAINTAINS PHYSICAL, ELECTRONIC, AND PROCEDURAL
SAFEGUARDS TO GUARD THE NONPUBLIC PERSONAL INFORMATION OF THE TRUST AND THE INSURED.
27
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Notifier City, State, Zip
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Dear
:
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A company called Imperial Premium Finance, LLC has allowed me to buy an insurance policy with me as
the insured by lending to me money to pay the premium on the Policy.
As a condition to the loan and as a part of the on-going obligations thereunder, I am asking you to
notify Imperial Premium Finance, LLC of my passing. Please contact Imperial Premium Finance, LLC,
Attention: General Counsel at 701 Park of Commerce Boulevard, Ste. 301, Boca Raton, Florida 33487,
telephone number (888) 364-6775 immediately upon my death.
Thank you in advance for assisting me in this process.
Sincerely,
Insurance Company: [INSURER]
Policy #: [POLICY-NUMBER]
LIMITED SPECIFIC POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that [
INSURED
] hereinafter called Principal does hereby make,
constitute, and appoint IMPERIAL PREMIUM FINANCE, LLC, a Florida limited liability company
hereinafter called Agent, my true and lawful attorney-in-fact, for me and in my name and on my
behalf, giving and granting onto the Agent full power and authority to act as to limited matters
stated below pertaining to the loan and trust documents herein described and no others.
Name of Lender: IMPERIAL PREMIUM FINANCE, LLC
Name of Life Insurance Trust: [TRUST-NAME]
Name of Trustee: [TRUSTEE-NAME]
Name of Borrower: [TRUST-NAME]
Name of Grantor: [INSURED]
PURPOSE: In the event of a clerical or typographical error is discovered on any document involving
the loan of monies by Agent to the Life Insurance Trust to fund the payment of life insurance
premiums, my Agent is hereby authorized to correct any clerical or typographical error and to
initial, sign and deliver, any instrument which my Agent determines to be necessary to effectuate a
correction. Specifically my Agent may make a correction limited to the matters stated below. The
undersigned declared that any and all corrections made by my Agent shall be as valid as if they had
been initialed, signed and delivered by me personally. The undersigned ratifies whatsoever my said
Agent shall lawfully do or cause to be done in the correction of typographical errors as limited
below.
SPECIFIC DUTIES:
My Agent is authorized to correct clerical and typographical errors as to my name, address, or
information concerning my loan documents that are subject to the loan transaction between the Life
Insurance Trust, the Insured and the Lender, if such correction is deemed verified and necessary to
process loan documents and/or the life insurance trust. My agent may make the corrections, initial
the instruments and process as it sees fit.
My Agent shall notify in writing [Name of Trustee], as Trustee of the Life Insurance Trust, of any
actions taken by the Agent pursuant to this Limited Specific Power of Attorney.
It is expressly understood and agreed by any recipient hereof that in no event shall [Name of
Trustee], as trustee of the [Insert Trust Name] (the Trust), in its individual capacity have any
liability for the representations, warranties, covenants, agreements or other obligations of the
Trust hereunder or under any schedule, exhibit, appendix or other document in connection with this
Limited Specific Power of Attorney, as to all of which recourse shall be had solely to the assets
of the Trust, and under no circumstances shall [Name of Trustee] as trustee of the Trust be
personally liable for the payment of any indebtedness or expenses of the Trust or be liable for the
breach or failure of any obligation, representation, warranty or covenant made or undertaken by the
Trust under this Limited Specific Power of Attorney or under any schedule, exhibit, appendix or
other document in connection with this Limited Specific Power of Attorney.
IN WITNESS WHEREOF, the Principal has hereunto set his/her hand and seal, on the day and year first
above written.
[
Signatures Follow on Next Pages
]
First Witness:
Second Witness:
STATE OF
COUNTY OF
This day personally appeared before me, the undersigned authority in and for said County and
State, the within named who acknowledged signing and delivering the above and foregoing on the day
and date therein mentioned as a free and voluntary act and deed and for the purposes therein
expressed.
GIVEN
under my hand and official seal of office this the day of
,
2007.
My Commission Expires:
PROMISSORY NOTE
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Maximum Principal
[PRINCIPAL]
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Loan Date
[DATE]
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Maturity
[MATURITY-DATE]
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Loan No.
[LOAN-NUMBER]
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Fixed/Variable Rate
[FIXED-FLOATING]
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Account
******
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References in the shaded area are for Lenders use only and do not limit the applicability of this document to any particular loan or item.
Any items above containing ***** or left blank have been omitted due to text length limitations
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Borrower:
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[TRUST-NAME]
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Lender:
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[LENDER-NAME], LLC
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[TRUST-ADDRESS]
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701 Park of Commerce Blvd.
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[TRUST-CITY-STATE] [TRUST-ZIP]
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Suite 301
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Boca Raton, FL 33487
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Maximum Principal Amount: [PRINCIPAL], Initial Loan Amount Advanced: [FIRST-YEAR-PREMIUM],
Initial Rate: [INTEREST-RATE], Date of Note: [DATE]
PROMISE TO PAY. [TRUST-NAME]
(Borrower) promises to pay to the order of [LENDER-NAME] (Lender)
in lawful money of the United States of America, all principal, together with accrued interest and
all other charges, owed under the terms of this Promissory Note as hereinafter set forth and the
Loan Agreement (as defined below). The maximum principal that may be advanced to Borrower shall
be
[PRINCIPAL]
, or such lesser amount as determined in accordance with that certain Loan
Application and Agreement (the Loan Agreement) of even date herewith between Borrower and Lender
and Lender shall have no obligation to make any advance in excess of that amount. Any advance
shall be made under, and in accordance with, the Loan Agreement. In the event the unpaid balance
of this Promissory Note ever is greater than the maximum principal advance, Borrower agrees to
repay immediately the excess upon Lenders written demand. Capitalized terms used but not defined
herein shall have the meanings assigned thereto in the Loan Agreement.
PAYMENT.
The principal amount of this Promissory Note, together with all accrued but unpaid
interest and all other charges, shall be due and payable in full in one lump sum on
[MATURITY-DATE], or if earlier, either: (a) one (1) Business Day after payment of any proceeds of
the Life Insurance Policy to or for the benefit of the Borrower; or (b) if the Life Insurance
Policy is rescinded for any reason, one (1) Business Day after the return of any Life Insurance
Policy premium. All payments shall be applied in the following order: (i) to any collection costs
Lender may have incurred in procuring Borrowers performance on this Promissory Note; (ii) to any
fees due under the Loan Agreement; (iii) to the outstanding interest which has accrued on the
balance of the Promissory Note; and (iv) to the outstanding principal balance of the Promissory
Note. All interest under the Promissory Note shall be calculated on the basis of a 360-day year
for the actual number of days elapsed in an interest period (actual/360 method). Determination of
a rate of interest by the Lender shall, in the absence of manifest error, be conclusive and binding
upon the Borrower. Borrower will pay Lender at Lenders address shown above or at such other place
as Lender may designate in writing. All payments shall be made in lawful money of the United States
to Lender at the address set forth above or at such other place as the Lender under this Promissory
Note may designate in writing (Payment Address).
INTEREST RATE.
The Interest Rate on this Promissory Note shall be set (or initially set) at
[INTEREST-RATE] per annum [
and shall compound on a monthly basis][delete in [GEORGIA and other
states not permitting compounding of interest] and substitute
on a simple interest basis
]. The
interest rate on this Promissory Note shall be a
[FIXED-FLOATING]
. If a fixed rate, it shall be
fixed at the Interest Rate set forth in the preceding sentence; if a floating or variable rate, it
shall be reset periodically as follows. If the interest rate on this Promissory Note is set as
variable/floating and not fixed, the Interest Rate shall
initially be as set forth in the first sentence of this paragraph and shall be adjusted thereafter
on the first day of each month during the term of this Promissory Note. Each date on which the
interest rate could vary or change is called a Change Date. Beginning with the first Change
Date, the Interest Rate will be based on an Index plus the Spread. The Index is the [INDEX] on
the
1
Change Date which is publicly announced in the Money Rates section of The Wall Street
Journal, Eastern Edition, or such other similar publication, as is reasonably determined by the
Lender. If the Index is no longer available, the Lender will choose a new index which is based
upon comparable information. If the Change Date is not a Business Day, the rate as announced on
the next Business Day shall be used.
On each Change Date, the Lender will calculate the new interest rate by adding [SPREAD] basis
points (the Spread) to the Index. Subject to the limits set forth herein, this amount will be
the new interest rate until the next Change Date. The interest rate the Borrower is required to
pay under this Promissory Note will not be greater than 16% or less than 9%. Any new interest rate
will become effective on each Change Date.
[At the end of each month, accrued interest as calculated above shall be added to the principal
amount due under the Promissory Note, and interest shall accrue thereafter on such increased
principal amount.][DELETE IN GA and other states not permitting the compounding of interest]
NOTICE: Under no circumstances will the effective rate of interest on this Promissory Note be more
than the maximum rate allowed by applicable law.
PREPAYMENT.
Borrower agrees that all loan fees, including the Origination Fee and the Yield
Maintenance Premium, and other prepaid finance charges are earned fully as of the date of this
Promissory Note and will not be subject to refund upon early payment (whether voluntary or as a
result of default), except: (i) in the case of death of the Insured prior to maturity, the Yield
Maintenance Premium will be waived, or (ii) as otherwise required by law. Borrower agrees not to
send Lender payments marked paid in full, without recourse, or similar language. If Borrower
sends such a payment, Lender may accept it without losing any of Lenders rights under this
Promissory Note, and Borrower will remain obligated to pay any further amount owed to Lender. All
written communications concerning disputed amounts, including any check or other payment instrument
that indicates that the payment constitutes payment in full of the amount owed or that is
tendered with other conditions or limitations or as full satisfaction of a disputed amount must be
mailed or delivered to the Payment Address. No privilege is reserved by Borrower to prepay any
principal due hereunder and under the Loan Agreement prior to the Maturity Date, except that the
Borrower may after giving five (5) days prior written notice to Lender, prepay in full, but not in
part, all principal and interest to and including the date on which payment is made, along with all
sums, amounts, advances, or charges due under the Loan Agreement, this Promissory Note or the other
Financing Documents, upon the payment of the Yield Maintenance Premium.
LATE CHARGE.
Borrower shall pay to Lender a late charge in an amount equal to three percent (3%)
of any amounts that are not paid within five (5) days after the due date thereof to cover the extra
expense involved in handling delinquent payments. Lenders collection of a late charge hereunder
shall not be deemed a waiver by Lender of any of its rights under this Promissory Note, or any
other document between Borrower and Lender.
SECURITY.
This Promissory Note is entitled to the benefit of, among other things, that certain
Assignment Of Life Insurance Policy As Collateral (Collateral Assignment) made by Borrower in
favor of [________], as collateral agent for the Lender (the Collateral Agent), pursuant
to which the Collateral Agent is granted a first priority security interest in the Life Policy (as
such term is defined in the Collateral Assignment). This Promissory Note shall be subject to the
terms and conditions set forth in such Collateral Assignment, the Loan Agreement, and the other
Financing Documents.
INTEREST AFTER DEFAULT.
Upon default, all amounts due under this Promissory Note shall bear
interest from the date of acceleration or maturity at the interest rate set forth in this
Promissory Note (as it may be adjusted from time to time) plus 2% per annum.
DEFAULT.
Each of the following shall constitute an event of default (Event of Default) under
this Promissory Note:
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Payment Default.
Borrower fails to make any payment within three (3) Business Days after
the same becomes due and payable under this Promissory Note, the Loan Agreement, or any
other Financing Document.
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Other Defaults.
Borrower fails to comply with or to perform any other term, obligation,
covenant or condition contained in this Promissory Note, the Loan Agreement or in any of
the other Financing Documents or to comply with or to perform any term, obligation,
covenant or condition contained in any other agreement between Lender and Borrower.
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False Statements.
Any warranty, representation or statement made or furnished to Lender by
Borrower, the Insured or on Borrowers behalf under this Promissory Note, the Loan
Agreement or any other Financing Document is false or misleading in any material respect,
either now or at the time made or furnished or becomes false or misleading at any time
thereafter.
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Related Agreements.
The Life Insurance Policy, Promissory Note, Loan Agreement, Security
Agreement or any other Financing Document ceases to be in full force and effect (including
failure of any collateral document to create a valid and perfected security interest or
lien) at any time and for any reason; the Borrower becomes a revocable trust, contests the
validity or enforceability of any Financing Document or denies that it has any further
liability under any Financing Document to which it is a party, or cancels or terminates, or
attempts to cancel or terminate, the Life Insurance Policy; or the Insurer contests the
Life Insurance Policy based on the Borrower lacking an insurable interest in the life of
the Insured.
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Indebtedness, Creditor or Forfeiture Proceedings.
Any garnishment of any of Borrowers
accounts, attachment, lien, levy, additional encumbrance or additional security interest
being placed upon any of the Collateral, or any commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any other method,
by any creditor of Borrower or by any governmental agency against any Collateral, and which
is not discharged in full within one (1) day of the placement thereof. However, this Event
of Default shall not apply if there is a good faith dispute by Borrower as to the validity
or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding
and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and
deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in
an amount determined by Lender, in its sole discretion, as being an adequate reserve or
bond for the dispute.
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Insolvency or Default of Borrower
. The Borrower is: (i) dissolved, liquidated or
terminated; (ii) is unable to pay its debts as they mature; (iii) makes an assignment for
the benefit of creditors; (iv) is bankrupt or insolvent; (v) seeks appointment of, or
becomes the subject of an order appointing, a trustee, conservator, liquidator or receiver
as to all or part of its assets; (vi) commences, approves or consents to, or is the debtor
in, any case or proceeding under any bankruptcy, reorganization or similar law, and in the
case of an involuntary case or proceeding, such case or proceeding is not dismissed thirty
(30) days following its commencement; (vii) is the subject of an order for relief in an
involuntary case under federal bankruptcy law; (viii) the Borrower defaults under any loan,
extension of credit, security agreement, purchase or sales agreement, or any other
agreement, in favor of any other creditor or person that may materially affect any of
Borrowers property or Borrowers ability to repay this Promissory Note or perform
Borrowers Obligations under this Promissory Note, the Loan Agreement or any of other
Financing Documents; or (ix) Borrower violates any Law.
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Insolvency or Default of Insured or Guarantor.
(i) The Insured or any Guarantor makes an
assignment for the benefit of creditors; (ii) The Insured or any Guarantor is adjudicated a
bankrupt or insolvent; (iii) The Insured or any Guarantor seeks appointment of, or is the
subject of an order appointing, a trustee, conservator, or receiver as to all or part of
his assets (iv) The Insured or any
Guarantor commences, approves or consents to, or is the debtor in, any case or proceeding
under any bankruptcy or similar law and, in the case of an involuntary case or proceeding,
such case or proceeding is not dismissed thirty (30) days following its commencement; (v)
The Insured or any Guarantor is the subject of an order for relief in an involuntary case
under federal bankruptcy law; (vi) Borrower defaults under any loan, extension of credit,
security agreement, purchase or sales agreement, or any other agreement, in favor of any
other creditor or person that may materially affect any of Borrowers property or
Borrowers ability to repay the Obligations; or (vi) any Guarantor defaults under the terms
of the Personal Guaranty.
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Events Affecting Guarantor.
Any of the preceding events occurs with respect to any
Guarantor of any of the indebtedness under this Promissory Note or any Guarantor dies or
becomes incompetent, or revokes or
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disputes the validity of, or liability under, any
guaranty of the indebtedness evidenced by this Promissory Note; in the event of a death of
a Guarantor, Lender, at its option, may, but shall not be required to, permit the
Guarantors estate to assume unconditionally the obligations arising under the Personal
Guaranty in a manner satisfactory to Lender, and, in doing so, cure any Event of Default.
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Adverse Change.
A material adverse change occurs in Borrowers financial condition, or
Lender believes the prospect of payment or performance of the Obligations is materially
impaired.
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Cure Provisions.
Other than as set forth in the preceding clauses of this Section, failure
by the Borrower or Insured, as applicable, to perform in any material respect any of its
obligations under this Promissory Note, Loan Agreement, Security Agreement or any other
Financing Document to which either is a party if such failure is not remedied on or prior
to the fifteenth (15th) day after written notice of such failure is given to the Borrower
or the Insured, respectively, by the Lender.
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LENDERS RIGHTS.
It is stipulated and agreed in the event one or more installments are not paid
when the same falls due, or in default of any covenant herein, then the entire balance of the
indebtedness shall at once or at any time thereafter, at the option of the payee of this Promissory
Note, become due, payable and collectible. Demand, protest, and notice of demand, protest, and
non-payment are hereby waived by the undersigned.
ATTORNEYS FEES: EXPENSES.
Lender may hire or pay someone else to help collect this Promissory
Note if Borrower does not pay. Borrower will pay Lender the amount of these costs and expenses,
which includes, subject to any limits under applicable law, Lenders reasonable attorneys fees and
Lenders legal expenses whether or not there is a lawsuit including reasonable attorneys fees and
legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay
or injunction), and appeals. If not prohibited by applicable law, Borrower also will pay any court
costs, in addition to all other sums provided by law.
JURY WAIVER.
LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION,
PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR BORROWER AGAINST THE OTHER.
GOVERNING LAW
. THIS PROMISSORY NOTE WILL BE GOVERNED BY THE LAWS OF THE STATE OF
[JURISDICTION-UC] WITHOUT REGARD TO ITS CONFLICTS OF LAW PROVISIONS. THIS PROMISSORY NOTE HAS BEEN
ACCEPTED BY LENDER IN THE STATE OF [JURISDICTION-UC]. BORROWER AGREES TO BE SUBJECT TO THE
EXCLUSIVE JURISDICTION OF [TRUST-CITY-STATE-UC] CONCERNING ANY DISPUTES ARISING OUT OF OR RELATING
TO THIS PROMISSORY NOTE AND HEREBY SUBMITS TO SUCH JURISDICTION.
REQUESTS FOR SPECIAL SERVICES.
In general, there are no borrower-paid fees associated with the
routine servicing of a loan. Borrower, however, may occasionally find it necessary to request
services for which there is a charge. The services that fall outside of routine servicing include,
without limitation,
providing the following documents upon request: duplicate year-and statements, copies of loan
documents or periodic statements, payment histories, and replacement coupon books. Borrower agrees
to pay the fees imposed by Lender in connection with providing the requested services, as in effect
from time to time. Borrower also agrees to pay facsimile or other fees imposed by Lender if these
services are requested on an expedited basis. All such fees shall be fully earned and
non-refundable and shall be paid upon Lenders demand (provided, that Lender, in its discretion,
may add the fees to the principal indebtedness due, and accrue interest thereon, and the same shall
be due, if not sooner demanded by Lender upon the maturity of the indebtedness without further
demand). The fees shall not be deemed to be interest or charges for the use of money.
SUCCESSOR INTERESTS.
The terms of this Promissory Note shall be binding upon Borrower, and upon
Borrowers heirs, personal representative, successors and assigns, and shall inure to the benefit
of Lender and its successors and assigns.
GENERAL PROVISIONS.
If any part of this Promissory Note cannot be enforced, this fact will not
affect the rest of this Promissory Note. Borrower does not agree or intend to pay, and Lender does
not agree or intend to
4
contract for, charge, collect, take, reserve or receive (collectively
referred to herein as charge or collect), any amount in the nature of interest or in the nature of
a fee for this loan, which would in any way or event (including demand prepayment, or acceleration)
cause Lender to charge or collect more for this loan than the maximum Lender would be permitted to
charge or collect by federal law or the law of the State of [JURISDICTION] (as applicable). Any
such excess interest or unauthorized fee shall, instead of anything stated to the contrary, be
applied first to reduce the principal balance of the amounts due hereunder to the extent of such
excess or, at the option of the Borrower, shall be returned to the Borrower. Lender may delay or
forgo enforcing any of its rights or remedies under this Promissory Note without losing them.
Borrower and any other person who signs, guarantees or endorses this Promissory Note, to the extent
allowed by law, waive presentment, demand for payment, and notice of dishonor. This Promissory
Note is the Promissory Note referred to in, and is entitled to the benefits of, the Loan Agreement
and the other Financing Documents.
PRIOR TO SIGNING THIS PROMISSORY NOTE BORROWER HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS
PROMISSORY NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF
THE PROMISSORY NOTE.
It is expressly understood and agreed by any recipient hereof that in no event shall [Name of
Trustee], as trustee of the Borrower, in its individual capacity have any liability for the
representations, warranties, covenants, agreements or other obligations of the Borrower hereunder
or under any schedule, exhibit, appendix or other document in connection with this Promissory Note,
as to all of which recourse shall be had solely to the assets of the Borrower, and under no
circumstances shall [Name of Trustee] as trustee of the Borrower be personally liable for the
payment of any indebtedness or expenses of the Borrower or be liable for the breach or failure of
any obligation, representation, warranty or covenant made or undertaken by the Borrower under this
Promissory Note or under any schedule, exhibit, appendix or other document in connection with this
Promissory Note.
BORROWER:
[TRUST-NAME]
BY: [Name of Trustee], solely as Trustee
On
___, 2008, before me, the undersigned, personally appeared
,
personally known to me or proved to me on the basis of satisfactory evidence to be the individual
whose name is subscribed to the within instrument, and he or she acknowledged to me that he or
she is a
of [Name of Trustee], which executed the foregoing instrument as
Trustee of the [Life Insurance Trust Name]; and that he or she was authorized by general signing
authority resolutions adopted by [Name of Trustee] to execute documents such as this instrument.
5
OUT OF STATE CLOSING AFFIDAVIT
STATE OF
COUNTY OF
BEFORE ME, the undersigned, a Notary Public in and for the State aforesaid, personally
appeared
[TRUSTEE-NAME]
, the Trustee of the
[TRUST-NAME]
(collectively, the Borrower), who, being
by me first duly sworn, stated:
1. On the date hereof, the Borrower executed a promissory note (the Note) of even date
herewith in the principal amount of
[FIRST-YEAR-PREMIUM]
in favor of
[LENDER-NAME], LLC
, a Florida
limited liability company (collectively, the Lender) in
County,
.
2. The Borrower personally delivered the Note to Lender, and Lender accepted the Note on the
date hereof in
County,
.
DATED this
day of
, 2007.
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Signature of Borrower:
[TRUST-NAME]
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Name:
[TRUSTEE-NAME]
Title: Trustee
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Signature of Lender
(or Authorized Agent):
[LENDER-NAME], LLC
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Name:
Title: Authorized Agent
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Sworn to and subscribed before me
this
day of
, 2007.
Notary Public
Print Name:
State and County Aforesaid
My Commission Expires:
6
REPRESENTATIONS, WARRANTIES AND COVENANTS OF AGENT
The undersigned (the
Agent(s)
), hereby makes the following representations,
warranties and covenants in favor of IMPERIAL PREMIUM FINANCE, LLC AND IMPERIAL FINANCE & TRADING,
LLC, each a Florida limited liability company and [Name of Trustee], as trustee (collectively, the
Reliance Parties
), knowing that the Reliance Parties have and shall rely thereon in
making certain financial accommodations relating to the financing of that certain life insurance
policy or policies (the
Policy
) identified by the insureds name and policy number on
Exhibit A hereto, which Exhibit shall be amended from time to time by executing a new Exhibit
A, which shall be attached to and incorporated into the prior Exhibit A, and to which each and
every one of the representations, warranties and covenants herein shall apply. The Agent shall not
be responsible for the inaccuracies and/or omissions on the part of the insured, with the exception
of those of which the Agent had or should have had knowledge.
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a)
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To the best of my knowledge, insured
1
is the grantor under that certain
irrevocable life insurance trust (the
Trust
) that has been formed to own the
Policy.
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b)
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Other than any pledge or (collateral) assignment interest of the Policy granted to the
Reliance Parties to secure the financing provided to the Trust, no person or entity other
than the Trust and the beneficiaries of the Trust have an interest in the Policy, except
as provided on
Schedule I
. I have not paid, loaned or otherwise advanced to the
Trust, the insured, the insureds spouse or the Policys issuing insurance company (the
Carrier
) any funds for the purpose of paying premium payments on the Policy. To
the best of my knowledge, except as provided on
Schedule I
, no person other than
the insured, the insureds spouse or the Reliance Parties has paid, loaned or otherwise
advanced to the Trust or the Carrier any funds for the purpose of paying any portion of
any premium payment due with respect to the Policy.
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c)
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To the best of my knowledge, I have completed the Policy application and all related
documents accurately and completely and there are no material omissions in the application
or related documents.
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d)
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I currently hold all licenses required to be the writing Agent on the referenced
Policy, and all such licenses are current and in full force and effect.
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e)
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Any information provided to the Carrier in connection with applying for and/or
obtaining the Policy is complete and current including, but not limited to, providing the
Carrier with copies of the irrevocable life insurance trust and the loan documents and any
subsequent changes thereto, if requested by the Carrier. Furthermore, the Agent has
accurately and thoroughly provided any and all other information requested by the Carrier.
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1
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If grantor is a person other than insured, state
name of such person and their relationship to the insured.
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f)
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The Reliance Parties may call [___], an employee of the Carrier (the
Insurance Company
), at [(___) ___ ___] to confirm that the Policy was issued
on a form approved by the [JURISDICTION] Department of Insurance and that the Policy has
been collaterally assigned as contemplated under the financing arrangement.
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g)
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The Agent has not paid or offered, directly or indirectly, any inducement, nor is the
Agent aware of any inducement paid or offered, to the Insured or any other party
affiliated with the Insured.
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h)
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To the best of the Agents knowledge, the entire application for the Policy is
accurate and contains no omissions or errors, and all questions posed by the Carrier in
connection with the application for the Policy have been answered truthfully and without
omission, including, but not limited to insureds net worth and other financial
representations.
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i)
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I am aware of the written and unwritten guidance and corresponding questionnaires
provided by the Carrier in connection with the application for the Policy where premiums
are financed, and have provided full and correct copies of same to the Reliance Parties.
The application and financing arrangement for the Policy are compliant with the Carriers
instructions and all related questionnaires have likewise been provided to the Carrier and
to the best of my knowledge, same has been fully and accurately completed.
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j)
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The Agent shall promptly, within two (2) business days, upon receipt of any notice in
connection with the Policy, deliver such notice to the Reliance Parties via fax and United
States Postal Service and shall use its best efforts to make the Reliance Parties aware of
any correspondence or other action by the Carrier which could cause the coverage to lapse,
to be rescinded, or impacted in any other material way whatsoever.
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k)
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The Agent agrees that a breach of this agreement shall result in damages that are not
quantifiable and agrees to liquidated damages in the amount of [
2XLOANAMOUNT
], in the
event of a breach by the Agent. The liquidated damages shall not be construed as a
penalty or forfeiture.
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l)
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Agent shall execute and deliver to the Reliance Parties that certain Authorization
to Conduct Credit and Criminal Background Checks, annexed hereto as Exhibit B.
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These representations, warranties and covenants shall survive until the tenth (10
th
)
anniversary of this agreement.
This agreement shall be governed by the laws of the State of Florida.
Any and all controversies, claims, disputes, rights, interests, suits or causes of action arising
out of or relating to this agreement and the negotiations relating thereto, or the breach thereof,
shall be brought in any court of competent jurisdiction located in Palm
2
Beach County, Florida and the parties consent to such exclusive jurisdiction and exclusive venue in
said county.
3
Wherefore, the Agent executes this agreement this ___day of _______, 2007, in favor of the
Reliance Parties.
ACKNOWLEDGED BY:
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IMPERIAL PREMIUM FINANCE, LLC
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By:
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Name:
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Jonathan Neuman
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Title:
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President
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IMPERIAL FINANCE & TRADING, LLC
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By:
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Name:
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Jonathan Neuman
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Title:
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President
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4
Schedule I
EXHIBIT A
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Insured:
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[INSURED]
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Policy Number:
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[POLICY-NUMBER]
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Insurer:
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[INSURER]
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To the best of the Agents knowledge, the Insured is obtaining this Policy for estate planning
and/or preservation purposes. Any other purpose should be stated below:
5
EXHIBIT B
Authorization to Conduct Credit and Criminal Background Checks
I, [AGENT], residing at [AGENT-ADDRESS]
,
hereby authorize The Reliance Parties or any of
their agents or designees, to conduct any and all criminal background reports, searches or checks
and any and all credit history reports, searches or checks which it in its sole discretion and
judgment deems necessary or advisable.
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Dated:
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Agent Signature
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Social Security #
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STATE OF
COUNTY OR CITY OF
On the
day of
, in the year ___before me, the undersigned,
personally appeared
[AGENT]
, personally known to me or proved to me on the basis of satisfactory
evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument, and
acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by
his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which
the individual(s) acted, executed the instrument.
My Commission expires on
.
6
BROKERS RIGHTS OF AGENT
Policy # [POLICY-NUMBER]
(the Policy)
Insurance Company: [INSURER]
Policy Owne
r:
[TRUST-NAME]
(the Policy Owner)
Insured: [INSURED]
Agent: [AGENT]
(the Agent)
(collectively, the Agent if multiple Agents)
WHEREAS
, the Policy as identified by the insured name and policy number on Exhibit A hereto,
which Exhibit shall be amended from time to time by executing a new Exhibit A hereto, which shall
be attached to and incorporated into the prior Exhibit A, to which this Brokers Rights of Agent
shall apply, is being purchased or financed with the assistance of the Agent with financing or
other financial accommodations (the Loan) being provided or arranged by Imperial Premium Finance,
LLC (Imperial);
WHEREAS
, Imperial has agreed to lend, on the terms and conditions and subject to the limitations
set forth in the Loan Application and Agreement, dated as of [DATE] between Imperial and the Policy
Owner (the Loan Agreement), funds in the amounts designated in the Loan Agreement to pay premiums
on the Policy;
WHEREAS
, the Agent has agreed to limit any compensation that the Agent may be entitled to in
connection with a future sale of the Policy, if any.
NOW THEREFORE
, in consideration of the premises set forth herein and other consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
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a)
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Agent understands and acknowledges that in certain circumstances the Policy
may be sold, and in such event, the Agent and/or his affiliates shall not, under any
circumstances, be entitled to receive compensation in excess of the
lesser
of
(i) two percent (2%) of the net death benefit of the Policy, and (ii) the proceeds of
such sale to be received by the Policy Owner after deducting from the gross proceeds
(a) the Policy amount required to fully satisfy the Loan, and (b) the Agents
compensation. Agent further understands that Agent shall not be entitled to any
compensation in connection with a sale except to the extent Agent has all applicable
licenses and appointments required to receive such compensation under applicable law,
Agent participates and renders
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services in connection with such sale, the Policy Owner agrees to the payment of
such compensation and the payment of such compensation is permitted under
applicable law.
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b)
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Upon the request of Policy Owner, Agent shall cooperate fully with Policy
Owner and Imperial to facilitate the sale, if any, of the Policy and shall in no event
take any action which could be construed as acting as the broker for the sale of such
Policy or in any way interfering with, or obstructing the sale of such Policy;
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c)
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Cooperation shall include, but not be limited to, assisting a prospective
purchaser of the Policy with (i) obtaining: (a) illustrations, (b) verifications of
coverage, and (c) duplicate policies, (ii) having any documents reviewed or executed
by the insured, and (iii) obtaining any other information reasonably requested by a
prospective purchaser or by Imperial, as the case may be, and shall also include using
Agents best efforts to obtain any executed documents or information provided or the
possible future sale of the Policy,
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d)
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Agent agrees that a breach of this agreement shall result in damages that are
not quantifiable and agrees to liquidated damages in the amount of [
2XLOANAMOUNT
], in
the event of a breach by the Agent. The liquidated damages shall not be construed as
a penalty or forfeiture.
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This Brokers Rights of Agent shall be governed by the laws of the State of Florida.
Any and all controversies, claims, disputes, rights, interests, suits, or causes of action arising
out of or relating to this Brokers Rights of Agent and the negotiations relating thereto, or the
breach thereof, shall be brought in any court of competent jurisdiction located in Palm Beach
County, Florida and the parties consent to such exclusive jurisdiction and exclusive venue in said
county.
Wherefore, the Agent executes this Brokers Rights of Agent this
day of
, 200___.
ACKNOWLEDGED BY:
Imperial Premium Finance, LLC
2
EXHIBIT A
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Insured:
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[INSURED]
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Policy Number:
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[POLICY-NUMBER]
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Insurer:
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[INSURER]
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3
Mandatory Trust Agreement Provisions
Ability to Surrender Assets to Satisfy Policy Loan
Notwithstanding any provision contained herein to the contrary:
1. In the event that a Policy Loan is outstanding, is scheduled to mature within 60 days
(based upon the maturity date specified in the Loan Application and Agreement and the Promissory
Note executed by the Trust) and there are insufficient funds in the Trust to fully satisfy the
obligations under the Policy Loan, the Trustee shall deliver written notice to the
Grantor
1
and the beneficiaries of the Trust at the addresses set forth in the Trust
Agreement (provided, however, that if beneficiaries are listed by class, the Trustee shall only be
required to deliver such notice to the members of such class of beneficiaries identified in a
written statement received by the Trustee from the grantor) stating (a) that the Policy Loan is
maturing and the amount due (or projected to be due) on the maturity date thereof, as specified to
the Trustee in a written notice delivered to the Trustee by the Lender, (b) the amount of funds
insufficient in the Trust, or otherwise unavailable, to fully satisfy the obligations under the
Policy Loan and (c) that unless the grantor and/or beneficiaries contribute funds to the Trust on
or before three (3) Business Days prior to the maturity date sufficient to permit the Trust to pay
the Policy Loan in full, that the Trustee is hereby directed to and shall have no discretion not to
unconditionally and irrevocably transfer and assign the Policy to the lender under the Policy Loan
(the Lender
2
) or to a designee of the Lender if such designee is specified by the
Lender in a written notice delivered prior to such transfer and assignment to the Trustee (the
Designee). If on or before three (3) Business Days prior to the maturity date the grantor and/or
beneficiaries contribute any funds to the Trust, the Trustee shall, within three (3) Business Days
after the receipt of any funds identified as being contributed by the grantor and/or a beneficiary,
pay such funds to the Lender. In the event that the insured and/or beneficiaries fail to
contribute funds to the Trust on or prior to such three (3) Business Day period in an amount
sufficient to permit the Trust to pay all obligations scheduled to be due with respect to the
Policy Loan on such maturity date (as specified to the Trustee in a written notice delivered to the
Trustee by the Lender or the Designee), the Trustee is hereby directed to and shall have no
discretion not to as soon as is commercially reasonably practicable thereafter unconditionally and
irrevocably transfer and assign the Policy and any cash or other assets of the Trust to the Lender
or the Designee. For purposes hereof, the term Policy Loan shall refer to the borrowing effected
by the Trust under the loan documents referenced in Section [ ] of this Trust Agreement.
2. Following the maturity of the Policy Loan (whether at stated maturity, by acceleration
following an event of default or otherwise), if (a) the grantor and/or beneficiaries have not
contributed funds to the Trust on or before three (3) Business Days prior to the maturity date in
an amount sufficient to permit the Trustee to pay the amount due on the Policy Loan in full at the
maturity date, as specified to the Trustee in a written notice delivered to the Trustee by the
Lender, and (b) the Trust does not otherwise have sufficient funds to satisfy the Policy Loan in
full, immediately following receipt by the Trustee of a notice of default from the Lender and a
written demand for the assignment or transfer of the Policy to the Lender or the Designee, the
Trustee is hereby directed to and shall have no discretion not to as soon as is commercially
reasonably practicable thereafter unconditionally and irrevocably transfer and assign the Policy
and any cash or other assets of the Trust to the Lender or the Designee.
3. Any such transfer and assignment of the Policy shall be effected by the Trustee executing
and delivering on behalf of the Trust to the Lender or the Designee as aforesaid (i) a change of
owner
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1
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Substitute Settlor for Grantor if state trust
law uses Settlor in lieu of Grantor.
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2
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For avoidance of doubt, the term Lender shall
include any person that acquires the Policy Loan, either via purchase and
assignment or via a participation interest in the loan.
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form changing the owner of the Policy to the Lender or the Designee, (ii) a change in
beneficiary form changing the beneficiary of the Policy to the Lender or the Designee and (iii)
such other documents or instruments as shall be reasonably requested by the Lender for the purpose
of effecting such changes in owner and beneficiary and the transfer and assignment of all right,
title and interest in and to the Policy, each of such forms, documents or instruments to be in the
form provided by Lender to the Trustee. Any funds in the Trust to be transferred shall be
transferred by wire transfer of immediately available funds to the account specified in writing by
the Lender to the Trustee.
4. At any time following the receipt of a written notice from the Lender stating that an event
of default has occurred under the Policy Loan and requesting a delivery to the Lender or the
Designee of the original Policy and all amendments and endorsements thereto and any other documents
related to such Policy, the Trustee is hereby directed to and shall have no discretion not to
unconditionally and irrevocably deliver the original Policy and such other documents to the Lender
or the Designee. If requested in writing at any time by the Lender after the execution and
delivery of the change in owner and change in beneficiary forms referred to in paragraph 3 of this
Article, the Trustee shall execute all documents presented to it for execution by Lender to cause
the relevant insurance carrier to issue a verification of coverage form indicating that ownership
of the Policy and the beneficiary under the Policy have been changed to the Lender or the Designee.
5. After the transfer of the Policy and Trust assets as provided in Paragraphs (1), (2), (3)
and (4) of this Article, the Trustee shall thereafter arrange for any filings to be made or actions
to be taken by the Trustee or the Trust that are required prior to the termination of the Trust,
including without limitation, the making of any tax or other filings required by law. Upon the
completion of such filing and the taking of such actions, the Trust shall, subject to obtaining the
consent of the Lender and any Designee, terminate and the Trustee thereafter shall have no further
duties, obligations or liabilities whatsoever to the grantor or beneficiaries hereunder or in
connection with or relating to such transfer and assignment. The Trustee shall engage, at the
expense of the Trust, a
firm of independent public accountants (the Accountants) to prepare any and all tax returns
of the Trust that may be required. The Trustee shall have no liability with respect to the
negligence or misconduct of the Accountants and shall only be obligated to (a) execute tax returns
presented to it by the Accountants and file the same with the appropriate tax authorities and (b)
pay the tax shown to be due on such tax returns, to the to the extent of available funds in the
Trust. The Grantor agrees to contribute sufficient funds to the Trust to provide for the payment
of the Accountants tax return preparation fees and to pay any tax shown to be due on such tax
returns, to the extent that the Trust has insufficient funds therefore.
6. The grantor acknowledges that in the event that the Trustee is required to transfer and
assign all of the Trusts assets to the Lender under the circumstances described above in
Paragraphs (1), (2), (3) and (4) of this Article, the beneficiaries shall receive no benefits under
the Trust or any Policy owned by the Trustees.
Spendthrift Clause
Notwithstanding any provision contained herein to the contrary:
1. Except as may be required in conjunction with any Policy Loan or as otherwise provided
herein, the interest of any beneficiary in any trust created hereunder shall not be transferred,
assigned or conveyed and shall not be subject to the claims of any creditors of such beneficiary
and any attempted transfer, assignment or conveyance shall be void and of no effect, and the
Trustee shall continue distributing trust property directly to or for the benefit of such
beneficiary as provided for hereunder notwithstanding any transfer, assignment or conveyance, and
notwithstanding any action by creditors.
2
2. Notwithstanding the foregoing, the interest of any beneficiary in any trust created
hereunder may be pledged to the Lender pursuant to the Policy Loan. In addition, notwithstanding
the foregoing, immediately upon the receipt by the Trustee of a notice of default from the Lender
stating that the interest of a beneficiary in the Trust has been pledged to the Lender pursuant to
the Policy Loan and that an event of default has occurred under the Policy Loan, and that pursuant
to an assignment of beneficial interest previously delivered pursuant to a security agreement, the
interest of the beneficiary in the Trust has been unconditionally and irrevocably assigned and
transferred to the Lender or the Designee, the Trustee shall immediately thereafter reflect on the
books and records of the Trust the assignment and transfer of such beneficial interest to, and the
ownership of such beneficial interest by, the Lender or the Designee.
3. From and after the recordation of such transfer of the beneficial interests in the Trust to
the Lender or the Designee, the Trustee is directed unconditionally and irrevocably not to take any
action with regard to the Trust or the Policy without the prior written consent of the Lender and
any such Designee.
4. In the event the interest of any beneficiary in the Trust created hereunder is transferred,
assigned and re-titled in the name of the Lender or the Designee, as
required by paragraph 2 of this clause, the Lender or Designee shall have the power and right
to direct that the Trust be terminated, after which all of the principal thereof, together with
accumulated income (including any Policy), shall be immediately thereafter unconditionally and
irrevocably paid and distributed to, or re-titled in the name of, the Lender or the Designee by the
Trustee.
Authorization for Life Insurance Premium Financing Transaction
The Trustee, on behalf of the Trust, is hereby directed to, and shall cause the Trust to enter into
the following Policy Loan documents:
1.
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Loan Application and Agreement.
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2.
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Risk and Disclosure Statement.
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3.
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Promissory Note.
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4.
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A Collateral Assignment of the Life Insurance Policy.
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5.
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Such other documents or instruments as the Lender may reasonably request in writing and as
presented to it for execution.
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Subject to [section/article where main protective provisions in the Trust Agreement will be
placed], the Trustee shall, at the written direction of the Lender, cause the Trust to take such
actions as the Lender shall specify in connection with the matters set forth in Article 5(a) of the
Loan Application and Agreement and shall pursuant to such written directions cause the Trust to
comply with the remaining covenants set forth in Article 5 of the Loan Application and Agreement.
Subject to [section/article where main protective provisions in the Trust Agreement will be
placed], for so long as the Policy Loan remains outstanding, the Trustee shall cause the Trust to:
(a) upon written direction from the Lender, take such further action and/or execute and
deliver all further assurances, documents and/or instruments as may be reasonably requested in
writing by the Lender in order to (i) effect, administer or enforce the transactions contemplated
by the Policy Loan
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documents, and (ii) permit the realization of the benefits of any collateral
assignment or pledge of the Policy to the Lender and its assigns.
(b) within one (1) Business Day of its discovery thereof, notify the Lender in writing of any
breaches of the representations and warranties of the Trust under any Policy Loan document.
Insurance On The Life Of The Grantor
1. During the lifetime of the Grantor, the Trustee may receive, as owner and/or beneficiary, any
policy or policies of insurance on the life of the Grantor or the joint lives of the Grantor and
any other person (a Policy), and may apply for, purchase or enter into any agreement for the
purchase of any Policy.
2. The Trustee, on behalf of the Trust, is vested with all right, title and interest in and to
the life insurance policies which may compose part of the Trust estate and is authorized and
empowered to exercise as absolute owner all of the rights, powers, interests, privileges, and
benefits of every kind which may accrue on account of any Policy or interest therein.
3. The Grantor shall have no incidents of ownership, interest or rights of any kind in or to any
of the said Policies which may be included within the Trust estate, or any other property of the
Trust. The Grantor hereby relinquishes all rights and powers in any Policy included within the
Trust estate which are not assignable, and will, at the request of the Trustee, execute all other
instruments reasonably required to effectuate this relinquishment.
4. The Grantor hereby authorizes and directs any insurance company issuing any Policy now or
hereafter included within the Trust estate to recognize the Trustee as the absolute owner of such
Policy, fully entitled to all options, rights, privileges and interests under such Policy.
5. In the event that the Trustee receives written notice that a Policy is being contested or
rescinded by a life insurance carrier, the Trustee shall, within three (3) business days of its
receipt thereof, forward such communications and all documents relating to such contest or
rescission action to the Grantor and Lender. If directed in writing by the Lender, the Trustee
shall at the expense of the Trust and Lender cause the Trust to defend any actions by a life
insurance carrier to rescind or contest any Policy.
6. Without limiting the generality of any other provision of this Trust Agreement, it is
expressly understood and agreed by the parties hereto (i) that in no event shall [Name of Trustee],
in its individual capacity have any liability for any representations or warranties in any Policy
application or any document submitted to an insurance company in connection with any Policy, and
(ii) [Name of Trustee], in its individual and representative capacities shall have no duty or
obligation, and the parties hereto have no expectation that it shall, and it shall not undertake,
to inquire into or independently verify the accuracy or completeness in any manner of the
representations or warranties made in any Policy application or any document submitted to an
insurance company in connection with any Policy.
7. The Grantor hereby agrees and, as evidenced by its acceptance of any benefits hereunder, any
Beneficiary agrees that the Trustee in any capacity has not provided and will not provide in the
future, any advice, counsel or opinion regarding the tax, financial, investment or insurance
implications and consequences of the formation, funding and ongoing administration of the Trust,
including, but not limited to, income, gift, and estate
tax issues, insurable interest issues, and the initial and ongoing selection and monitoring of
annuity product and financing arrangements.
4
TRUST DISCLOSURE STATEMENT,
REPRESENTATIONS AND WARRANTIES, AND CONSENT
IMPORTANT
: PLEASE READ THIS DISCLOSURE STATEMENT AND CONSENT AND CONSULT WITH YOUR
ADVISORS BEFORE SIGNING THIS OR ANY OF THE LIFE INSURANCE FINANCING ARRANGEMENT DOCUMENTS
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INSURED:
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[INSURED], [INSURED-ADDRESS], [INSURED-CITY-STATE]
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INSUREDS SPOUSE:
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[INSURED-SPOUSE], [INSURED-ADDRESS], [INSURED-CITY-STATE]
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GRANTOR:
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[INSURED], [INSURED-ADDRESS], [INSURED-CITY-STATE]
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LIFE INSURANCE TRUST:
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[TRUST-NAME], a [JURISDICTION] Trust
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TRUSTEE OR LIFE INSURANCE TRUSTEE:
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[TRUSTEE-NAME], [TRUST-ADDRESS], [TRUST-CITY-STATE] [TRUST-ZIP]
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[LENDER-NAME]
(the
Lender
) is offering a life insurance premium financing
arrangement (the
Financing Arrangement
) which provides trusts settled by individuals,
such as the Grantor, with financing to purchase and maintain a life insurance policy (the
Policy
) on the life of certain qualifying individuals, such as the Insured. To obtain
financing under the Financing Arrangement, the Insured or Grantor must settle (or have settled) a
life insurance trust (the
Life Insurance Trust
) under [JURISDICTION] law and the Insured
must consent (or have consented) to the Life Insurance Trusts application for the Policy. The
Grantor must have an insurable interest in the life of the Insured and all beneficiaries of the
Life Insurance Trust must be individuals or tax-exempt charities with an insurable interest in the
life of the Insured or an estate planning vehicle, all of the owners or beneficiaries of which have
an insurable interest in the life of the Insured.
In order to participate in the Financing Arrangement, the Life Insurance Trust was required to
execute a Loan Application and Agreement (the
Loan Agreement
) and a Promissory Note in
favor of the Lender. Pursuant to the Loan Agreement, the Lender will, subject to the terms,
provisions and conditions of the Loan Agreement, make an advance of funds to, or for the benefit
of, the Life Insurance Trust for the purpose of funding premiums under the Policy. The obligations
of the Life Insurance Trust under the Loan Agreement are secured by a collateral assignment of the
Life Insurance Trusts interest in the Policy under a collateral assignment agreement between the
Life Insurance Trust and the Collateral Agent (the
Collateral Assignment Agreement
).
The obligations under the Loan Agreement bear a periodic interest at a
[FIXED-FLOATING]
subject to
a minimum interest rate of nine percent (9%) (in the case of a floating rate) and will be due and
payable upon any date that the principal and interest shall become due and payable in full under
the Loan Agreement, whether at the scheduled maturity under the Promissory Note, by acceleration,
notice of prepayment, or otherwise. The Life Insurance Trust may pre-pay the Loan (including any
accrued interest), in full but not in part, without penalty other than the payment of the Yield
Maintenance Premium in some circumstances, as provided under the Loan Agreement.
Capitalized terms used but not defined herein shall have the meanings assigned thereto in the Loan
Agreement.
Each of the following are events of default under the Loan Agreement and Financing Documents:
Payment Default.
Life Insurance Trust fails to make any payment within three (3) Business
Days after the same becomes due and payable under the Loan Agreement, the Promissory Note
or any other Financing Document.
Other Defaults.
Life Insurance Trust fails to comply with or to perform any other term,
obligation, covenant or condition contained in the Promissory Note, the Loan Agreement or
in any of the other Financing Documents or to comply with or to perform any term,
obligation, covenant or condition contained in any other agreement between Lender and Life
Insurance Trust or a default occurs under the Promissory Note, Loan Agreement, Security
Agreement or any other Financing Document.
False Statements.
Any warranty, representation or statement made or furnished to Lender by
the Life Insurance Trust, the Insured or on Life Insurance Trusts behalf under the
Promissory Note, the Loan Agreement or any other Financing Document is false or misleading
in any material respect, either now or at the time made or furnished or becomes false or
misleading at any time thereafter.
Related Agreements.
The Policy, Promissory Note, Loan Agreement, Security Agreement or any
other Financing Document ceases to be in full force and effect (including failure of any
collateral document to create a valid and perfected
2
security interest or lien) at any time and for any reason; the Life Insurance Trust becomes
a revocable trust, contests the validity or enforceability of any Financing Document or
denies that it has any further liability under any Financing Document to which it is a
party, or cancels or terminates, or attempts to cancel or terminate, the Policy; or the
Insurer contests the Policy based on the Life Insurance Trust lacking an insurable interest
in the life of the Insured.
Indebtedness, Creditor or Forfeiture Proceedings.
Any garnishment of any of Life Insurance
Trusts accounts, attachment, lien, levy, additional encumbrance or additional security
interest being placed upon any of the Collateral, or any commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Life Insurance Trust or by any governmental agency against
any Collateral, and which is not discharged in full within one (1) day of the placement
thereof. However, this Event of Default shall not apply if there is a good faith dispute by
the Life Insurance Trust as to the validity or reasonableness of the claim which is the
basis of the creditor or forfeiture proceeding and if Life Insurance Trust gives Lender
written notice of the creditor or forfeiture proceeding and deposits with Lender monies or
a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender,
in its sole discretion, as being an adequate reserve or bond for the dispute.
Insolvency or Default of
Life Insurance Trust. The Life Insurance Trust is: (i) dissolved,
liquidated or terminated; (ii) is unable to pay its debts as they mature; (iii) makes an
assignment for the benefit of creditors; (iv) is bankrupt or insolvent; (v) seeks
appointment of, or becomes the subject of an order appointing, a trustee, conservator,
liquidator or receiver as to all or part of its assets; (vi) commences, approves or
consents to, or is the debtor in, any case or proceeding under any bankruptcy,
reorganization or similar law, and in the case of an involuntary case or proceeding, such
case or proceeding is not dismissed thirty (30) days following its commencement; (vii) is
the subject of an order for relief in an involuntary case under federal bankruptcy law;
(viii) the Life Insurance Trust defaults under any loan, extension of credit, security
agreement, purchase or sales agreement, or any other agreement, in favor of any other
creditor or person that may materially affect any of Life Insurance Trusts property or
Life Insurance Trusts ability to repay the Promissory Note or perform Life Insurance
Trusts Obligations under the Promissory Note, the Loan Agreement or any of other Financing
Documents; or (ix) Life Insurance Trust violates any Law.
Insolvency or Default of Insured or Guarantor.
The Insured or any Guarantor: (i) makes an
assignment for the benefit of creditors; (ii) is adjudicated a bankrupt or insolvent; (iii)
seeks appointment of, or becomes the subject of an order appointing, a trustee,
conservator, or receiver as to all or part of his assets; (iv) commences, approves or
consents to, or is the debtor in, any case or proceeding under any bankruptcy or similar
law and, in the case of an involuntary case or proceeding, such case or proceeding is not
dismissed thirty (30) days following its
3
commencement; (v) is the subject of an order for relief in an involuntary case under
federal bankruptcy law; (vi) Life Insurance` Trust defaults under any loan, extension of
credit, security agreement, purchase or sales agreement, or any other agreement, in favor
of any other creditor or person that may materially affect any of Trusts property or
Trusts ability to repay the Obligations; or (vii) any Guarantor defaults under the terms
of the Guaranty.
Events Affecting Guarantor.
Any of the preceding events occurs with respect to any
Guarantor of any of the indebtedness under the Promissory Note or any Guarantor dies or
becomes incompetent, or revokes or disputes the validity of, or liability under, any
guaranty of the indebtedness evidenced by the Promissory Note; in the event of a death,
Lender, at its option, may, but shall not be required to, permit the Guarantors estate to
assume unconditionally the obligations arising under the guaranty in a manner satisfactory
to Lender, and, in doing so, cure any Event of Default.
Adverse Change.
A material adverse change occurs in Life Insurance Trusts financial
condition, or Lender believes the prospect of payment or performance of the Obligations is
materially impaired.
Cure Provisions.
Other than as set forth in the preceding clauses of this Section, failure
by the Life Insurance Trust or Beneficiary, as applicable, to perform in any material
respect any of its obligations under the Promissory Note, Loan Agreement, Security
Agreement or any other Financing Document to which either is a party if such failure is not
remedied on or prior to the fifteenth (15th) day after written notice of such failure is
given to the Life Insurance Trust or the Beneficiary, respectively, by the Lender.
In connection with, and as a condition precedent to the Life Insurance Trust obtaining a loan from
the Lender in connection with the Financing Arrangement, the undersigned on behalf of the Life
Insurance Trust hereby acknowledges, represents, warrants, covenants and agrees to the following:
1.
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The Trustee has not taken any action to dissolve the Life Insurance Trust, and to the actual
knowledge of the Trustee, no voluntary, involuntary or judicial actions have been taken to
dissolve the Life Insurance Trust.
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2.
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In the event the Trustee receives written notice that the Policy is Contested (as defined
below) at any time that any amount remains owing under the Loan Agreement, the Trustee shall,
within three (3) business days of its receipt thereof, forward such communications and all
documents relating to such Contest to the Lender. The Life Insurance Trust agrees to
cooperate fully in a defense against any Contest.
Contested
means, with respect to
a Policy, the denial of a claim for benefits under, or the assertion of a right by the issuer
of such Policy to cancel
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or rescind the Policy pursuant to the suicide or contestability provisions thereof or
otherwise.
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3.
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The copy of the trust agreement of the Life Insurance Trust (the
Trust Agreement
)
attached hereto as Exhibit A is true, complete and accurate, and has not been amended,
revoked or otherwise changed since the date adopted.
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4.
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The execution, performance and delivery of the Financing Arrangement Documents are in
accordance with, and do not violate, the Trust Agreement. Amounts received by the Trustee
under the Life Insurance Trust may be used or applied only in accordance with the Trust
Agreement.
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5.
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There may be federal, state or local income, gift or estate tax effects of participation in
the Financing Arrangement to the Life Insurance Trust. Participation in the Financing
Arrangement, and termination of participation, could increase the taxable income, taxable
gifts or taxable estate of a participant. The Life Insurance Trust has not relied upon any
advice from the Lender, any life agent or other producer, any insurance company that has
issued the Policy or any other person associated with the Financing Arrangement regarding any
such tax effects.
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6.
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The Life Insurance Trust and the Trustee have not been paid, directly or indirectly, any
inducement (money, property or otherwise) in connection with the Financing Arrangement or to
obtain the Policy other than reasonable and customary fees for services as Trustee.
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7.
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None of the Life Insurance Trust, to the actual knowledge of the Trust, the Grantor, the
Insured, the Insureds Spouse or any beneficiary of the Life Insurance Trust has any present
intention to surrender, sell or settle, directly or indirectly, the Policy or any interest
therein.
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8.
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To the knowledge of the Life Insurance Trust, the Policy application has been completed
accurately and to the knowledge of the Life Insurance Trust there are no material omissions or
misstatements in the application.
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9.
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The Lender, or any subsequent owner of the Loan Agreement, may sell, or sell participations
in, the Loan Agreement without the consent of, or prior notice to, the Grantor, the Insured,
the Insureds Spouse or the Life Insurance Trust and the Life Insurance Trust agrees to take
all actions (but at no cost or expense to the Life Insurance Trust) requested by the Lender in
connection with any such sale or participation.
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10.
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The Life Insurance Trust (i) has not entered into any contracts or agreements, other than the
Policy and the Financing Arrangement Documents and (ii) after the date hereof, will not,
without the prior written consent of Lender (such consent not to be unreasonably withheld)
enter into any contract or agreement which
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could be expected to have a material adverse effect on the Life Insurance Trusts ability
to perform its obligations under any Financing Arrangement Document or which could
adversely effect Lenders rights under any Financing Arrangement Documents (as determined
by Lender).
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11.
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Any claims, questions or controversies arising under or related to in any manner whatsoever
this Disclosure Statement or the transactions contemplated under the Financing Arrangement
including, but not limited to, any challenge by the Life Insurance Trust against the Lender,
its designees and/or third party servicers, any broker, any insurance company or any other
party interested in or related in any way to the Financing Arrangement (each, an
Interested Third Party
, notwithstanding the fact such parties are not signatories
hereto) (a
Dispute
) shall be submitted to arbitration conducted before the American
Arbitration Association (the
AAA
). The Life Insurance Trust is hereby authorized to
invoke this arbitration provision, and any judgment with respect to any award rendered
pursuant to this arbitration provision may be entered in any court of competent jurisdiction.
Such arbitration will be conducted under the rules of the AAA and the laws of the State of
[JURISDICTION] and will be conducted in [TRUST-CITY-STATE]. The Life Insurance Trust
understands that claims submitted to arbitration are not heard by a jury and are not subject
to the rules governing the courts. The Life Insurance Trust further agrees that no claim may
be brought as a class action, and that the Life Insurance Trust has no right to act, nor shall
attempt to act, as a class representative or participate as a member of a class of claimants
with respect to any claim related to or arising out of the Financing Arrangement. To the
extent that this arbitration provision is held unenforceable, the Life Insurance Trust: (i)
irrevocably submits to the exclusive jurisdiction of any federal or state court sitting in
[TRUST-CITY-STATE] in respect of any action or proceeding arising under or related to in any
manner whatsoever this Disclosure Statement or the transactions contemplated under the
Financing Arrangement, (ii) agrees that this Disclosure Statement and the transactions
contemplated by the Financing Arrangement shall in all respects be governed by and construed
in accordance with the laws of the State of [JURISDICTION] (without reference to conflicts of
laws provisions) and (iii) HEREBY WAIVES THE RIGHT TO A TRIAL BY JURY ON ANY CLAIM,
COUNTERCLAIM, SETOFF, DEMAND, ACTION OR CAUSE OF ACTION (I) ARISING OUT OF OR IN ANY WAY
RELATED TO THIS DISCLOSURE STATEMENT, OR (II) IN ANY WAY IN CONNECTION WITH OR PERTAINING OR
RELATED TO OR INCIDENTAL TO ANY DEALINGS TO THIS DISCLOSURE STATEMENT IN CONNECTION WITH THIS
DISCLOSURE STATEMENT OR THE EXERCISE OF ANY OF ITS RIGHTS AND REMEDIES UNDER THIS DISCLOSURE
STATEMENT OR OTHERWISE, OR THE CONDUCT OR THE RELATIONSHIP OF THE PARTIES HERETO, IN ALL OF
THE FOREGOING CASES WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE. The sole exception to this requirement for arbitration involves
suits brought on behalf of the Lender seeking a temporary
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restraining order, preliminary injunction, and/or permanent injunction (injunctive
relief) based upon (i) any failure of the Life Insurance Trust to use the proceeds of
advanced exclusively as set forth in the Loan Agreement, the Promissory Note, the Financing
Documents or any other documents related to the Loan Agreement; (ii) any act by the Life
Insurance Trust or any Guarantor to transfer, amend, change ownership, cancel, convey, sell
or assign the Policy without the express written consent of the Lender; or (iii) any
failure to act by the Life Insurance Trust or any Guarantor that results, directly or
indirectly, in the transfer of the Policy or any amendment, change of ownership,
cancellation, conveyance, sale or assignment thereof, in the event there is immediate and
irreparable injury, loss, or damage (which immediate and irreparable injury, loss, or
damage may be presumed by law and/or by agreement of the parties). The parties hereby
expressly agree and each Interested Third Party in receipt of this Disclosure Statement
acknowledges, that the arbitration provisions of this section shall not apply to the
Trustee in respect of its rights, duties, protections and immunities under the Trust
Agreement.
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12.
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The Lender and any purchaser of the Policy in the event of a disposition of the Policy
following the occurrence of an event of default under the Loan Agreement or Financing
Arrangement Documents shall be entitled to rely on the acknowledgments, representations,
warranties and agreements of the Life Insurance Trust herein and in any other Financing
Arrangement Documents.
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13.
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This document and the other Financing Arrangement Documents to which the Life Insurance Trust
is a party have been duly executed and delivered by the Life Insurance Trust, and (assuming
due authorization, execution and delivery by the other parties thereto) the Financing
Arrangement Documents constitute legal, valid and binding obligations of the Life Insurance
Trust, enforceable against the Life Insurance Trust in accordance with their terms (subject to
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting
creditors rights generally and to equitable principles of general application, regardless of
whether such principles are considered in a proceeding in equity or at law).
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14.
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No authorization, approval, consent, franchise, license, covenant, order, ruling, permit,
certification, exemption, notice, declaration or similar right, undertaking or other action
of, to or by, or any filing, qualification or registration with, any Governmental Authority is
required to be obtained by the Life Insurance Trust that has not been obtained or is not in
full force and effect, and no registration, declaration, or filing with any Governmental
Authority is required to be given or made by the Life Insurance Trust to or with, any
Governmental Authority that has not been given or made or the applicable waiting period for
which has not expired or terminated, each in connection with the execution and delivery of
this and the other Financing Arrangement Documents and the consummation of the transactions
contemplated hereby and thereby.
Governmental Authority
means any foreign, or U.S.
federal, state, regional, local, municipal or other government, or any department, commission,
board, bureau, agency, public authority or
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instrumentality thereof or any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government or any court or
arbitrator.
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15.
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No Default or Event of Default with respect to the Life Insurance Trust has occurred and is
continuing. The Life Insurance Trust is not in violation of any Law or Governmental Order
applicable to it or any of its properties or assets. No judicial, administrative or arbitral
proceeding is pending or, to the best knowledge of the Life Insurance Trust, threatened
against the Life Insurance Trust, which would have an adverse effect on the Life Insurance
Trusts ability to perform under the Financing Arrangement Documents.
Law
means any
federal, national, supranational, state, provincial or local statute, law, ordinance,
regulation, rule, code, order, requirement or rule of law (including, without limitation,
common law).
Governmental Order
means any order, writ, judgment, injunction, decree,
stipulation, determination or administrative ruling or award entered by or with any
Governmental Authority.
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16.
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Following an Event of Default, the Trustee shall accept instructions from the Collateral
Agent regarding the disposition of the Policy and any other Collateral or proceeds covered
thereby, including instructions to assign ownership of the Policy to the Lender or any third
party engaged to dispose of the Collateral, or to dispose of the Collateral in a commercial
reasonable fashion or as otherwise directed by the Collateral Agent.
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17.
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For so long as any Indebtedness remains outstanding, the Life Insurance Trust hereby
covenants and agrees as follows:
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(a) The Life Insurance Trust shall take such further action and/or execute and deliver
all further assurances, documents and/or instruments as may be reasonably requested by the
Lender in order to (i) effect, administer or enforce the transactions contemplated by this
Disclosure Statement and the other Financing Arrangement Documents, and (ii) permit the
realization of the benefits of any collateral assignment or pledge of the Policy to the
Lender and its assigns.
(b) The Life Insurance Trust shall, immediately upon its discovery thereof, notify the
Lender in writing of any breaches of the representations and warranties of the Life
Insurance Trust in this document and the other Financing Arrangement Documents.
Notwithstanding anything to the contrary in this Disclosure Statement, this Disclosure Statement
and the representations and warranties contained herein shall at all times be subject to the
Trustee rights, protections and immunities set forth in the Trust Agreement of the Life Insurance
Trust.
Notwithstanding anything to the contrary in this Disclosure Statement, the Life Insurance Trust may
disclose to any and all persons, without limitation of any kind,
8
the tax treatment and tax structure of the transactions described in this Disclosure Statement and
all materials of any kind (including opinions or other tax analyses) that are provided to the Life
Insurance Trust relating to such tax treatment and tax structure. This authorization of tax
disclosure is retroactively effective to the commencement of discussions with the Grantor, the
Insured and the Insureds Spouse regarding the transactions contemplated herein.
It is expressly understood and agreed by any recipient hereof that (i) in no event shall [Name of
Trustee], as Trustee of the Life Insurance Trust, in its individual capacity have any liability for
the representations, warranties, covenants, agreements or other obligations of the Life Insurance
Trust hereunder or under any schedule, exhibit, appendix or other document in connection with
this Disclosure Statement, as to all of which recourse shall be had solely to the assets of
the Life Insurance Trust, (ii) under no circumstances shall [Name of Trustee] as Trustee of
the Life Insurance Trust be personally liable for the payment of any indebtedness or expenses
of the Life Insurance Trust or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by Life Insurance Trust under
this Disclosure Statement or under any schedule, exhibit, appendix or other document in connection
with this Disclosure Statement, and (iii) the Trustee of the Life Insurance Trust has not reviewed
any Financing Arrangement Document on behalf of the Life Insurance Trust or any other Person and
shall not be responsible for or in respect of and makes no representation as to the validity or
sufficiency of any provision of this Disclosure Statement or any other Financing Arrangement
Document.
* *
*
*
IRS Circular 230 Disclosure: [LENDER-NAME] and its affiliates do not provide tax advice. Any
discussion of United States federal tax issues set forth herein is written in connection with the
promotion and marketing of the Financing Arrangement. Such discussion is not intended or written to
be legal or tax advice to any person and is not intended or written to be used, and cannot be used,
by any person for the purpose of avoiding any United States federal tax penalties that may be
imposed on such person. The Grantor, the Insured and the Insureds Spouse should seek advice based
on their particular circumstances from an independent tax advisor.
AGREED TO AND ACKNOWLEDGED BY THE UNDERSIGNED.
9
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[TRUST-NAME]
By [Name of Trustee], solely as Trustee
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By:
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Name:
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Title:
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10
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STATE OF
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)
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) :
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COUNTY OF
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)
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Sworn to (or affirmed) and subscribed before me this ___day of
, 200___by
[TRUSTEE-NAME]
, who is personally known to me or who produced
as identification.
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(Print,
type, or stamp commissioned
Name of Notary Public)
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My Commission Expires:
11
EXHIBIT A
[Trust Agreement]
12
EXHIBIT G
FORM OF BORROWING BASE CERTIFICATE
Date:
, ___
This Borrowing Base Certificate (this
Certificate
) is given by Imperial Life
Financing II, LLC, a Georgia limited liability company (the
Borrower
) pursuant to the
Financing Agreement, dated as of March 13, 2009 (as amended, restated, supplemented or otherwise
modified from time to time, including any replacement agreement therefor, the
Financing
Agreement
), by and among the Borrower, the lenders from time to time party thereto (each a
Lender
and collectively, the
Lenders
), CTL Holdings II, LLC, a Georgia limited
liability company (
CTL
), as collateral agent for the Lenders (in such capacity, the
Collateral Agent
), and CTL, as administrative agent for the Lenders (in such capacity,
the
Administrative Agent
and together with the Collateral Agent, each an
Agent
and collectively, the
Agents
). Capitalized terms defined in the Financing Agreement and
not otherwise defined herein are used herein as defined in the Financing Agreement.
The individual executing this Certificate on behalf of the Borrower is an Authorized Officer
and, as such, is duly authorized to execute and deliver this Certificate on behalf of the Borrower.
By executing this Certificate such Authorized Officer hereby certifies to the Agents and the
Lenders that:
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(a)
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Attached hereto as
Exhibit A
is a schedule of the
Borrowing Base as of the date set forth above and the calculations made with
respect thereto; and
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(b)
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Based on such schedule:
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(i)
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the Borrowing Base as of the date set forth
above is $
; and
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(ii)
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[no prepayment of the principal amount of the
Loans is required pursuant to Section 2.05(c)(ii) of the Financing
Agreement] [$
of the principal amount of the Loans is required
to be prepaid pursuant to Section 2.05(c)(ii) of the Financing
Agreement].
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Additionally, the undersigned hereby certifies, represents and warrants to the Agents and the
Lenders that (i) as of the date hereof, each representation and warranty contained in or made
pursuant to any Loan Document is true and correct in all material respects (except to the extent
such representation or warranty expressly relates to an earlier date, in which case, such
representation or warranty was true and correct as of such earlier date), (ii) each of the
covenants and agreements contained in any Loan Document have been performed (to the extent required
to be performed on or before the date hereof), (iii) no Default or Event of Default has occurred
and is continuing on the date hereof, and (iv) all of the calculations set forth on
Exhibit
A
have been made in accordance with the requirements of the Financing Agreement.
[Signature page follows]
-2-
IN WITNESS WHEREOF, the Borrower has caused this Certificate to be executed by one of its
Authorized Officers this
day of
, 200___.
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IMPERIAL LIFE FINANCING II, LLC
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By:
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Imperial Premium Finance, LLC, its sole member
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By:
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Imperial Holdings, LLC, its managing member
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By:
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Name:
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Jonathan Neuman
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Title:
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President
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EXHIBIT A
Effective Date of Calculation: ________________
A.
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Borrowing Base Calculation
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1.
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Covered Loan Amount Limit
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(a)
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Eligible Insurance Premium Loans financed
under the Financing Agreement
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$
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(b)
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Aggregate Origination Fees with respect
to such Insurance Premium Loans (but not to
exceed that portion of the Origination Fee
payable by the Premium Finance Borrower
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$
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(c)
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Aggregate of the Collateral Value Policy
and Contingent Collateral Value Policy
premiums reimbursement amounts payable,
directly or indirectly, by the Premium
Finance Borrowers to the Originator or the
Borrower in respect of such Insurance Premium
Loans, to the extent financed under the
Financing Agreement (but not to exceed that
portion of the premium cost passed through to
the Premium Finance Borrower)
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$
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(d)
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Amount of interest that is reasonably
expected to be due on the scheduled maturity
dates of the Eligible Insurance Premium Loans
financed under the Financing Agreement
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$
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(e)
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The sum of 1(a), 1(b), 1(c) and 1(d)
determined by discounting each to present
value by using an interest rate equal to
22.025% and such amounts shall be present
valued back to the effective date of this
calculation
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$
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2.
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Borrowing Base Limit
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(a)
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Aggregate of the Covered Loan Amount of
all Eligible Insurance Premium Loans owned
(actually, beneficially or through a
participation) by the Borrower and pledged as
Collateral for the Loans under the Financing
Agreement and the Loan Documents and in which
the Collateral Agent has for the benefit of
the Agents and the Lenders a perfected first
priority lien
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$
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(b)
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Aggregate Interest Amount of each
Insurance Premium Loan at the maturity date
of each such Insurance Premium Loan
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$
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(c)
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The sum of 2(a) and 2(b) determined by
discounting each to present value by using an
interest rate equal to 22.025% and such
amounts shall be present valued back to the
effective date of this calculation
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$
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3.
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Borrowing Base (the lesser of 1 and 2)
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$
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EXHIBIT H
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ATTORNEYS AT LAW
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ONE INDEPENDENT DRIVE, SUITE 1300
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JACKSONVILLE, FL 32202-5017
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P. O. BOX 240
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JACKSONVILLE, FL 32201-0240
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904.359.2000 TEL
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904.359.8700 FAX
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foley.com
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CLIENT/MATTER NUMBER
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084091-0102
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March 13, 2009
To the Agents and each of the Lenders party
to the Financing Agreement referred to below
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Re:
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Imperial Life Financing II, LLC, a Georgia limited liability
company (the
Borrower
)
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Ladies and Gentlemen:
We have acted as special counsel for the Borrower, Imperial Premium Finance, LLC, a Florida
limited liability company (
Imperial
) and Jonathan Neuman and Antony Mitchell (each an
Individual Guarantor
and collectively, the
Individual Guarantors
and together
with the Borrower and Imperial, each a
Credit Party
, and collectively, the
Credit
Parties
) in connection with the making by the Lenders (as defined herein) of the term loans
(the
Term Loans
) to the Borrower pursuant to the Financing Agreement, dated as of March
13, 2009 (the
Financing Agreement
), by and among the Borrower, the lenders from time to
time party thereto (each a
Lender
and collectively, the
Lenders
) and CTL
Holdings II LLC, a Georgia limited liability company (
CTL
), as collateral agent for the
Lenders (in such capacity, the
Collateral Agent
), and CTL, as administrative agent for
the Lenders (in such capacity, the
Administrative Agent
and together with the Collateral
Agent, each an
Agent
and collectively, the
Agents
). This opinion is being
delivered to you pursuant to Section 5.01(d) of the Financing Agreement. All capitalized terms
used and not defined herein have the same meanings herein as set forth in the Financing Agreement.
With your permission, all assumptions and statements of reliance herein have been made without
any independent investigation or verification on our part, except to the extent, if any, otherwise
expressly stated, and we express no opinion with respect to the subject matter or accuracy of the
assumptions or items upon which we have relied.
In connection with the opinions expressed herein, we have examined such documents, records and
matters of law as we have deemed necessary for purposes of this opinion. We have examined, among
other documents, the following documents which are, unless otherwise indicated, dated as of the
date hereof:
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(a)
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the Financing Agreement;
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BOSTON
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JACKSONVILLE
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NEW YORK
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SAN FRANCISCO
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TOKYO
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BRUSSELS
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LOS ANGELES
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ORLANDO
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SHANGHAI
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WASHINGTON, D.C.
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CENTURY CITY
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MADISON
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SACRAMENTO
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SILICON VALLEY
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CHICAGO
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MIAMI
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SAN DIEGO
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TALLAHASSEE
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DETROIT
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MILWAUKEE
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SAN DIEGO/DEL MAR
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TAMPA
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The Agents and each of the Lenders party to the
Financing Agreement
March 13, 2009
Page 2
|
(b)
|
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the Security Agreement;
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(c)
|
|
the Guarantor Security Agreement executed by Imperial (the
Imperial
Security Agreement
);
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(d)
|
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the Individual Guaranty executed by Jonathan Neuman;
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(e)
|
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the Individual Guaranty executed by Antony Mitchell;
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(f)
|
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the Collateral Agency Agreement;
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(g)
|
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the Fee Letter;
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(h)
|
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the UCC Filing Authorization Letter;
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|
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(i)
|
|
the SunTrust Bank Restricted (Blocked) Account Agreement in favor of Collateral
Agent executed by SunTrust Bank, Borrower and Collateral Agent (the Restricted Account
Agreement);
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(j)
|
|
a copy of a UCC-1 FINANCING STATEMENT filed with the Florida Secured
Transaction Registry naming Imperial as debtor and the Collateral Agent as the secured
party (the
Imperial Financing Statement
) a copy of which is attached hereto
as Exhibit A;
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(k)
|
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the Master Participation Agreement;
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(l)
|
|
the form of Insurance Premium Loan Assignment Agreement;
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(m)
|
|
the Initial Servicing Agreement; and
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(n)
|
|
the Collateral Value Policy and the Contingent Lender Protection Insurance Policy.
|
The documents referred to in items (a) through (h) above, inclusive, and items (k) through (l)
above, inclusive, are referred to herein collectively as the Opinion Documents. The documents
referred to in items (a) through (m) above, inclusive, are referred to herein collectively as the
Documents.
In addition to the Documents and the Collateral Value Policy and the Contingent Lender
Protection Insurance Policy, we have also examined and relied upon the original or certified copies
of the documents relating to the creation and organization of the Credit Parties, described herein
below, and such other certificates and documents with respect to the Credit Parties and the
Term Loans as we have deemed necessary or appropriate for the purposes of this opinion:
The Agents and each of the Lenders party to the
Financing Agreement
March 13, 2009
Page 3
1. A copy of the Articles of Organization of Borrower, filed with the Secretary of State of
Georgia on February 5, 2009, and certified as of a recent date;
2. A copy of the Articles of Organization of Imperial, filed with the Secretary of State of
Florida on December 14, 2006, and certified as of a recent date;
3. A certificate issued by the Office of the Secretary of State of Florida, dated as of a
recent date, indicating that Imperial is duly formed, in good standing and validly existing as of
such date;
4. A copy of Limited Liability Company Agreement of Borrower; and
5. A copy of Limited Liability Company Agreement of Imperial.
As to questions of fact material to this opinion, we have relied upon statements and
certificates of the Credit Parties and public officials. We have made no independent investigation
of the warranties and representations made by the Credit Parties in the Documents or of any related
matters.
Based on the foregoing, and subject to the limitations, qualifications and assumptions set
forth herein, we are of the opinion that:
1. Imperial is a duly formed and validly existing limited liability company under the laws of
the State of Florida, with the limited liability company power under the Florida Limited Liability
Company Act and its Limited Liability Company Agreement to execute and deliver the Documents to
which it is a party and to perform Imperials obligations thereunder.
2. Based solely on the good standing certificate issued by the Utah Department of Commerce,
Imperial is duly qualified and in good standing as a foreign corporation qualified to do business
in Utah.
3. The execution, delivery and performance of the Documents and the Collateral Value Policy
and the Contingent Lender Protection Insurance Policy have been duly authorized by all necessary
limited liability company action on the part of Imperial under the Limited Liability Company
Agreement of Imperial and have been duly executed and delivered by the Credit Parties party
thereto.
4. The execution and delivery by the Credit Parties of the Documents to which they are a party
and the performance of their respective obligations thereunder (a) do not violate such Credit
Partys certificate of formation or its limited liability company agreement; (b) do not violate,
breach or result in a default under any Transaction Document listed on Exhibit B hereof to which
such Credit Party is bound, (c) to our knowledge, do not result in the creation or imposition of a
lien, charge or encumbrance upon such Credit Party or any of the property or assets of such Credit
Party (other than pursuant to the Loan Documents), (d) do not violate the Florida Limited Liability
The Agents and each of the Lenders party to the
Financing Agreement
March 13, 2009
Page 4
Company Act, any New York statute or regulation (excluding however any insurance or premium
finance laws) or any federal statute or regulation (including Regulations T, U, or X of the Board)
that we have, in the exercise of customary professional diligence, recognized as directly
applicable to such Credit Party or to transactions of the type contemplated by the Documents; (e)
to our knowledge, do not violate any judgment, writ, injunction, decree, order or ruling that is
specifically directed to such Credit Party or its properties; and (f) will not, to our knowledge,
result in any suspension, revocation, impairment, forfeiture or nonrenewal of any material permit
or license applicable to its operations or any of its properties.
5. The execution and delivery by the Borrower of the Collateral Value Policy and the
Contingent Lender Protection Insurance Policy and the performance of its obligations thereunder (a)
do not violate the Borrowers certificate of formation or its limited liability company agreement;
(b) do not violate, breach or result in a default under any Transaction Document listed on Exhibit
B hereof to which the Borrower is bound, (c) to our knowledge, do not result in the creation or
imposition of a lien, charge or encumbrance upon the Borrower or any of the property or assets of
the Borrower (other than pursuant to the Loan Documents), (d) to our knowledge, do not violate the
Florida Limited Liability Company Act, any New York statute or regulation (excluding however any
insurance or premium finance laws) or any federal statute or regulation (including Regulations T,
U, or X of the Board) that we have, in the exercise of customary professional diligence, recognized
as directly applicable to the Borrower or to transactions of the type contemplated by the
Collateral Value Policy and the Contingent Lender Protection Insurance Policy; (e) to our
knowledge, do not violate any judgment, writ, injunction, decree, order or ruling that is
specifically directed to the Borrower or its properties; and (f) will not, to our knowledge, result
in any suspension, revocation, impairment, forfeiture or nonrenewal of any material permit or
license applicable to its operations or any of its properties.
6. No consent, authorization or approval by, and no notice to or filing with, any Federal,
Florida or New York governmental authority is required (a) in connection with the due execution,
delivery and performance by any Credit Party of any Document to which such Person is a party, or
(b) for the grant by any Credit Party pursuant to any Loan Document, or the perfection, of any lien
or security interest purported to be created thereby in any Collateral, other than (i) the filing
of the Imperial Financing Statement, which has been filed, and (ii) those which have already been
obtained.
7. Each Opinion Document constitutes the legal, valid and binding obligation of the Credit
Party which is a party thereto, enforceable against such Credit Party in accordance with its terms,
except as they may be qualified below.
8. To the extent a security interest may be created under Article 9 of the Uniform Commercial
Code as currently in effect in the State of New York (the New York UCC), the Security Agreement
creates a valid security interest in favor of the Collateral Agent for the benefit of the Agents
and the Lenders in the Collateral purported to be covered thereby. To the extent a security
interest may be created under Article 9 of the New York UCC, the Imperial Security
The Agents and each of the Lenders party to the
Financing Agreement
March 13, 2009
Page 5
Agreement creates a valid security interest in favor of the Collateral Agent for the benefit
of the Agents and the Lenders in the Collateral purported to be covered thereby.
9. The Imperial Financing Statement is in appropriate form for filing with the Florida Secured
Transaction Registry (the Imperial Filing Office). The description of the Collateral set forth
in the Imperial Financing Statement is sufficient to perfect a security interest in the items and
types of Collateral in which a security interest may be perfected by the filing of a financing
statement under Article 9 of the Uniform Commercial Code as currently in effect in the State of
Florida (the Florida UCC).
10. With respect to that portion of the collateral described in the Imperial Security
Agreement in which a security interest may be perfected by the filing of a financing statement with
the Imperial Filing Office, the filing and recording of the Imperial Financing Statement results in
the perfection of a security interest in Imperials interest in such collateral under Article 9 of
the Florida UCC.
11. Other than nominal recording or filing fees, no fees, taxes or other charges are due or
payable in the State of Florida in connection with the execution, delivery, filing or recordation
of Imperial Financing Statement.
12. Assuming (i) that the Collateral Agent has taken and is retaining possession in the State
of New York of (a) the stock certificates evidencing the Pledged Shares, together with properly
completed stock powers endorsing the Pledged Shares and executed by the pledgors owning such stock
in blank, and (b) the promissory notes representing the Pledged Debt (as defined in the Security
Agreement) and such promissory notes have been properly endorsed, and (ii) the Collateral Agent has
taken such Pledged Shares and Pledged Debt in good faith without notice having been acquired by the
Collateral Agent or any Lender of any adverse claim within the meaning of the New York UCC, there
has been created under the Security Agreement and Imperial Security Agreement, and there has been
granted to the Collateral Agent, a valid and perfected security interest in the Pledged Shares and
Pledged Debt prior to all other security interests. The opinions in this paragraph 12 with respect
to Pledged Debt is limited solely to Pledged Debt in the form of promissory notes meeting all of
the requirements set forth in paragraph (xviii) below.
13. We have no actual knowledge of any pending or threatened action, suit or proceeding
affecting any Credit Party before any court, arbitrator, or Governmental Authority which may
materially and adversely affect (i) the financial condition, business, performance, properties,
operations or prospects of any Credit Party, (ii) the ability of any Credit Party to perform the
obligations of such Person under any Document to which it is a party, (iii) the legality, validity
or enforceability of any Document, (iv) the rights and remedies of any Agent or any Lender under
any
Opinion Document, or (v) the creation, perfection or priority of the Lien of the Collateral
Agent on any of the Collateral securing the Obligations.
The Agents and each of the Lenders party to the
Financing Agreement
March 13, 2009
Page 6
14. None of the Credit Parties is an investment company registered or required to be
registered under the Investment Company Act of 1940, as amended, or controlled by such a company.
15. Assuming that the Opinion Documents are governed by the law of the State of Florida for
the purpose of the opinion set forth in this paragraph, and assuming further that all interest,
including all charges, fees and penalties in the nature of interest, charged or paid in respect of
the Term Loan will not exceed, in the aggregate, 25% per annum simple interest on the actual
principal outstanding from time to time, the Loan Documents do not violate any usury laws of the
State of Florida.
The opinions set forth above are subject to the following qualifications:
In rendering the foregoing opinions, we have assumed the following to be true:
(i) That the signatures on all documents and certificates examined by us are genuine,
and that where any such signature purports to have been made in a corporate, governmental,
fiduciary, or other capacity, the person who affixed such signature to such document or
certificate had authority to do so;
(ii) The authenticity of all documents submitted to us as originals and the conformity
to original documents of all documents submitted to us as copies;
(iii) Regarding documents (including but not limited to the Documents and the
Collateral Value Policy and the Contingent Lender Protection Insurance Policy) executed by
parties other than the Credit Parties, that such other parties have the corporate or other
entity power to enter into and perform all obligations under such documents, the due
authorization by all requisite corporate or other entity action of the execution, delivery
and performance of the documents by such other parties, and the validity, enforceability and
binding effect of those documents as and to and on such other parties; and that the
execution and delivery of such documents by such other parties was unconditional, except for
conditions to closing expressly set forth within such documents;
(iv) All applicable Documents have been or will be duly filed, indexed, and recorded
among the appropriate official records, with all fees, charges and taxes having been paid.
(v) The parties to the Documents and their successors and assigns will (i) act in good
faith and in a commercially reasonable manner in the exercise of any rights or enforcement
of any remedies under the Documents; (ii) not engage in any conduct in the exercise of such
rights or enforcement of such remedies that would constitute other than fair dealing; and
(iii) comply with all requirements of applicable procedural and substantive law in
exercising any rights or enforcing any remedies under the Documents.
The Agents and each of the Lenders party to the
Financing Agreement
March 13, 2009
Page 7
(vi) Borrower has the title or other interest in each item of personal property
described in the Security Agreement in which a security interest is purported to be granted
under the Security Agreement free and clear of any claims, liens, restrictions, security
interests, or other interests or rights of any person, other than Lender and other than as
set forth in the Documents.
(vii) Imperial has the title or other interest in each item of personal property
described in the Imperial Security Agreement in which a security interest is purported to be
granted under the Imperial Security Agreement free and clear of any claims, liens,
restrictions, security interests, or other interests or rights of any person, other than
Lender and other than as set forth in the Documents.
(viii) The Documents accurately describe and contain the complete and mutual
understanding of the parties, and there are no oral or written statements or agreements that
modify, amend, or vary, or purport to modify, amend, or vary, any of the terms of the
Documents.
(ix) No interest, charges, fees, or other benefits or compensation in the nature of
interest will be paid or charged in connection with the Term Loans, other than those that
Borrower has specifically agreed in writing in the Documents to pay to Lenders.
(x) Each of the parties has complied with the requirement and implied covenant of good
faith and fair dealing.
(xi) There has not been any mutual mistake of fact or misunderstanding, fraud,
concealment, misrepresentation, duress or undue influence, or criminal activity with respect
to the transactions contemplated by the Documents.
(xii) Lenders have complied with all applicable laws.
(xiii) The Documents will be enforced in circumstances and in a manner which are
commercially reasonable.
(xiv) The execution of the Documents by each of the parties, in the form in which the
Documents have been executed by each of the parties, is sufficient to bind such parties and
be legal, valid, binding, and enforceable against each of the parties under the laws of any
jurisdiction other than the State of New York that may be determined to govern any
aspect of the interpretation, construction, or enforcement of the Loan Documents or any
right or obligation thereunder.
(xv) Each Credit Party has, or has the power to transfer, rights in its interest in the
Collateral, and value (as described in Section 679.2031 of the Florida UCC or Section 9-203
of the New York UCC) has been given.
The Agents and each of the Lenders party to the
Financing Agreement
March 13, 2009
Page 8
(xvi) Each party to the Documents is receiving adequate consideration with respect to
the execution and delivery of the Documents to which it is a party.
(xvii) The Credit Parties have complied, and each Document complies, with any
applicable statutory licensing provisions and regulations relating to premium finance
companies and premium finance loans.
(xviii) The promissory notes representing the Pledged Debt are negotiable instruments
and such promissory notes will be taken by the Collateral Agent for the benefit of the
Lenders (a) for value, (b) in good faith, (c) without notice that the instrument is overdue
or has been dishonored or of any defense against or claim to it on the part of any person.
In addition to the assumptions set forth above, the opinions set forth above are also subject
to the following qualifications:
i. The enforceability of the Documents and the availability of certain remedies
thereunder, including but not limited to, specific performance and injunctive relief, may be
subject to or limited by (a) bankruptcy, insolvency, reorganization, arrangement,
moratorium, fraudulent conveyance or transfer, equitable subordination, or other similar
laws relating to or affecting the rights of creditors generally; (b) general equitable
principles and the exercise of judicial discretion in the application thereof, regardless of
whether such enforceability is considered in a proceeding at law or in equity; and (c) in
that certain of the remedial provisions may be limited by applicable law, provided that such
limitations of the remedial provisions do not make the remedies provided for therein
inadequate for the practical realization of the benefits of the security intended to be
afforded thereby.
ii. Anything in this opinion to the contrary notwithstanding, we express no opinion
whatsoever concerning (a) any agreement, document, or instrument, other than the Documents
and the Collateral Value Policy and the Contingent Lender Protection Insurance Policy
(Other Documents), regardless of whether such agreement, document, or instrument is
related to, referenced in or a condition of or requirement to the Documents; (b) any term,
condition, or provision of or reference in the Documents that is governed in whole or in
part by any of the Other Documents; and (c) the performance of any obligation or the
compliance with any term of the Documents after the date of this opinion.
iii. The enforceability of the Documents is further subject to the qualification that
certain waivers (including, without limitation, waivers of jury trial, waivers of stay,
waivers of counterclaims, notice, and rights of redemption, unknown future rights, or
defenses to obligations), procedures, remedies, grants, claims, actions, consents to
jurisdiction and other provisions of the Documents may be unenforceable under, or limited
by, in whole or in part, the law of the State of New York or by Federal law. However, such
The Agents and each of the Lenders party to the
Financing Agreement
March 13, 2009
Page 9
limitations do not, in our opinion, substantially prevent the practical realization of
the benefits intended by the Documents.
iv. Any provision of the Documents granting so-called self-help or extrajudicial
remedies may not be enforceable.
v. Any provision of the Documents regarding delegation of authority by Lenders to a
trustee, or any waiver by Borrower of its rights against a trustee, may not be enforceable.
vi. The award and amount of attorneys fees are subject to the discretion of the court
before which any proceeding involving the Documents may be brought.
vii. Provisions in the Documents which provide that the filing of a petition under 11
U.S.C. Sections 101, et seq. (the Bankruptcy Code), shall constitute a default or event of
default or that such a filing under the Bankruptcy Code shall result in conversion of the
Term Loans to a recourse liability, may not be enforceable.
viii. The opinions expressed above concern only the effect of laws (excluding the
principles of conflicts of laws) as currently in effect. We assume no obligation to
supplement this opinion if any applicable laws change after the date of this opinion, or if
we become aware of any facts that might change the opinions expressed above after the date
of this opinion.
ix. We express no opinion as to (i) pension and employee benefit laws and regulations,
(ii) antitrust and unfair competition laws and regulations, or (iii) environmental laws.
x. We limit our opinion on the security interest granted with respect to commercial
tort claims to those commercial tort claims identified with specificity in the Security
Agreement, if any.
Statements in this letter qualified by our knowledge are based upon the current, actual
knowledge of Robert S. Bernstein, the attorney in our firm who has rendered services to the Credit
Parties in connection with the Term Loans. Such statements are not intended to, and do not,
suggest any review of records, public filings or other inquiry, search or investigation whatsoever.
We are licensed to practice law in the State of Florida and no part of this opinion shall be
construed to opine on any laws other than those of the State of Florida, the State of New York
(with
respect to the opinions set forth in paragraphs 4, 5, 6, 7, 8 and 12), and the laws of the
United States of America. We express no opinion as to the compliance or noncompliance, or the
effect of the compliance or noncompliance, of any addressee or any other person or entity with any
state or federal laws or regulations applicable to each of them by reason of their status as or
affiliation with a
The Agents and each of the Lenders party to the
Financing Agreement
March 13, 2009
Page 10
federally insured-depository institution. Our opinions are limited to those expressly set
forth herein, and we express no opinions by implication. Our opinions are specifically qualified
by reference to and are based upon laws, rulings and regulations in effect on the date hereof, and
are subject to modification to the extent such laws, rulings and regulations may be changed in the
future. We make no undertaking to update, reissue, or amend our opinions after the date hereof.
The opinions expressed herein are solely for the benefit of the addressees hereof and their
successors and assigns in connection with the transaction referred to herein and may not be relied
on by such addressees for any other purpose or in any manner or for any purpose by any other person
or entity, except that this opinion letter may be relied upon by any nationally-recognized rating
agency that assigns a rating to any securities issued in connection with the Assumption, but it may
not be quoted in whole or in part or referred to in any offering document relating to any such
securities. Notwithstanding the foregoing, the addressee hereof and their successors and assigns
may disclose the contents of this opinion to satisfy any regulatory requirements applicable thereto
and may disclose the contents of this opinion to their attorneys and auditors.
Very truly yours,
FOLEY & LARDNER LLP
EXHIBIT A
Imperial Financing Statement
EXHIBIT B
Material Transaction Documents
The Initial Servicing Agreement
The form of documents contained in the Loan Document Package attached as Exhibit F to the
Financing Agreement
EXHIBIT I
FORM OF INSURANCE PREMIUM LOAN SALE AND ASSIGNMENT AGREEMENT
This
INSURANCE PREMIUM LOAN SALE AND ASSIGNMENT AGREEMENT
(
Assignment Agreement
) is
entered into as of _____, 20___between Imperial Premium Finance, LLC, a Florida limited
liability company (
Assignor
) and Imperial Life Financing II, LLC, a Georgia limited
liability company (
Assignee
). Reference is made to the agreement described in
Item
2
of
Annex I
annexed hereto (as amended, restated, modified or otherwise supplemented
from time to time, the
Financing Agreement
). Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to them in the Financing Agreement.
1.
Interests
. The Assignor hereby sells, transfers and assigns to the Assignee, and
the Assignee hereby purchases and assumes from the Assignor, all of the Assignors right, title and
interest in and to the Insurance Premium Loan identified on
Annex I
together with the Loan
Documentation Package as of the date hereof with respect to such Insurance Premium Loan originated
in an Applicable Non-Licensed State as specified on
Annex I
.
2.
Representations and Warranties of the Assignor
. The Assignor hereby represents and
warrants to the Assignee as of the Settlement Date (or such other date as expressly provided below)
that:
(a)
Organization and Good Standing
. The Assignor has been duly organized and is
validly existing as a limited liability company in good standing under the laws of the state of its
incorporation or formation, and has power and authority to own its properties and to conduct its
business as such properties shall be currently owned and such business is presently conducted.
(b)
Due Qualification
. The Assignor is duly qualified to do business (or is exempt
from such qualification requirements) and has obtained all necessary licenses and approvals in each
jurisdiction in which failure to so qualify or to obtain such licenses or approvals would have a
material adverse effect on the Assignors ability to perform its obligations as an Assignor under
this Assignment Agreement.
(c)
Due Authorization
. The Assignors execution, delivery and performance of this
Assignment Agreement and the other agreements and instruments executed or to be executed by the
Assignor contemplated by this Assignment Agreement, and the consummation of the transactions
contemplated by this Assignment Agreement, have been duly and validly authorized by all necessary
action on the part of the Assignor.
(d)
Binding Obligation
. This Assignment Agreement constitutes the legal, valid and
binding obligation of the Assignor enforceable against the Assignor in accordance with its terms,
except as enforceability may be limited by insolvency, reorganization, moratorium and other similar
laws affecting creditors rights generally or by general principles of equity whether considered in
a suit at law or in equity.
(e)
No Conflict
. The Assignors execution and delivery of this Assignment Agreement,
its performance of the transactions contemplated hereby and its fulfillment of the terms hereof
applicable to the Assignor do not (i) contravene the Assignors organizational or
1
governing documents, (ii) conflict with or violate any applicable law, (iii) violate any
provision of, or require any filing, registration, consent or approval under, any law presently in
effect having applicability to the Assignor, except for such filings, registrations, consents or
approvals as have already been obtained or made and are in full force and effect, (iv) conflict
with, result in any breach of (A) any of the terms or provisions of, or constitute (with or without
notice or lapse of time or both) a default under any Insurance Premium Loan or (B) any of the terms
or provisions of, or constitute (with or without notice or lapse of time or both) a default under
any indenture, contract, agreement, mortgage, deed of trust or other instrument to which the
Assignor is a party or by which it or its properties or assets are bound.
(f)
No Proceedings
. There are no proceedings, injunctions, writs, restraining orders
or investigations pending or, to the best knowledge of the Assignor, threatened against the
Assignor before any governmental authority (i) asserting the illegality, invalidity or
unenforceability, or seeking any determination or ruling that would affect the legality, validity
or enforceability, of the Loan Documents, this Assignment Agreement or any other Transaction
Document, (ii) seeking to prevent the consummation of any of the transactions contemplated by the
Loan Documents, this Assignment Agreement or any other Transaction Document, (iii) seeking any
determination or ruling that, if adversely determined, could have a material and adverse effect on
the financial condition or operations of the Assignor or the validity or enforceability of, or the
performance by the Assignor of its obligations under, this Assignment Agreement or (iv) seeking to
affect adversely the income tax attributes or other tax attributes of the Assignor under the U.S.
federal or the State of Florida, as applicable, tax systems. There are no proceedings,
injunctions, writs, restraining orders or investigations pending with respect to any Insurance
Premium Loan an interest in which is being sold to the Assignee, or the related Life Insurance
Policy, before any governmental authority asserting the illegality, invalidity or unenforceability,
or seeking any determination or ruling that would affect the legality, validity or enforceability,
of any such Insurance Premium Loan or the related Life Insurance Policy.
(g)
No Consents
. No authorization, consent, license, order or approval of, or
registration or declaration with, any Person, including any governmental authority, is required for
the Assignor in connection with the execution and delivery of this Assignment Agreement by the
Assignor or the performance of its obligations under this Assignment Agreement, except for the
exercise by the Assignee or its assigns of the rights provided for in this Assignment Agreement or
the remedies in respect of any Insurance Premium Loans an interest in which is sold, transferred,
assigned or otherwise conveyed by the Assignor to the Assignee pursuant to this Assignment
Agreement.
(h)
Liens
. Each Insurance Premium Loan which has been sold and transferred hereunder
is owned by the Assignor free and clear of any Lien, and the Assignor has not either created or
consented to the creation of any Lien affecting any Insurance Premium Loan sold and transferred
hereunder or any related Life Insurance Policy other than the Liens contemplated by the Transaction
Documents.
(i)
Valid Transfers
. This Assignment Agreement constitutes a valid sale, transfer and
assignment to the Assignee of an interest in the Assignors entire right, title and interest in and
to the Insurance Premium Loans sold and transferred hereunder, whether now existing or hereafter
created (including all monies due or to become due with respect to such Insurance
2
Premium Loans, all proceeds (including proceeds as defined in the UCC of the jurisdiction
whose law governs the perfection of an interest in such Insurance Premium Loans) of such Insurance
Premium Loans and all cash proceeds of any related security).
(j)
Solvency
. The Assignor is solvent and will not become insolvent after giving
effect to the transactions contemplated by this Assignment Agreement.
(k)
Compliance
. The Assignor has complied with all Requirements of Law with respect
to it, its business and properties and all Insurance Premium Loans and the Life Insurance Policy
related thereto. The Assignor has obtained all applicable permits, certifications and licenses
(including all licenses to originate Insurance Premium Loans) necessary with respect to its
business and properties and all Insurance Premium Loans and the Life Insurance Policy related
thereto.
(l)
No Rescission
. Neither any Insurance Premium Loans sold hereunder nor the related
Life Insurance Policy has been subordinated or rescinded or, except as disclosed in writing to the
Assignee, amended in any manner
(m)
No Event of Bankruptcy
. No Event of Bankruptcy has occurred with respect to the
Assignor. An Event of Bankruptcy means an Event of Default under Sections 9.01(f) or (g) of the
Financing Agreement.
(n)
Fraudulent Conveyance
. The Assignor is not entering into the transactions
contemplated hereby with any intent of hindering, delaying or defrauding creditors.
(o)
Insurance Premium Loans
.
(i) As of the Settlement Date, each Insurance Premium Loan sold by the Assignor hereunder is
an Eligible Insurance Premium Loan and the grant, sale and purchase hereunder of such Insurance
Premium Loans and Collections arising thereunder do not conflict with, result in a breach of any of
the provisions of, or constitute (with or without notice or lapse of time or both) a default under,
any agreements evidencing such Insurance Premium Loan;
(ii) As of the Settlement Date, each Insurance Premium Loan on such date is the valid, binding
and enforceable obligation of each obligor thereunder;
(iii) As of the Settlement Date, each Insurance Premium Loan on such date was originated by
the Assignor in the ordinary course of the Assignors premium finance lending activities and in
accordance with all Requirements of Law;
(iv) As of any Settlement Date, the information set forth in this Assignment Agreement with
respect to each Insurance Premium Loan therein is correct;
(v) With respect to each Insurance Premium Loan sold by the Assignor, the Assignor represents
and warrants that each such Insurance Premium Loans has been originated in accordance with the
applicable criteria set forth in the Transaction Documents;
3
(vi) As of the Settlement Date, no payment default exists with respect to any Insurance
Premium Loan;
(vii) As of the Settlement Date, no event or circumstance under Section V.A or Section V.B of
the Collateral Value Policy or Contingent Collateral Value Policy has occurred;
(viii) As of the Settlement Date, the Assignor (A) has not committed a Prohibited Act (as
defined in the Collateral Value Policy or Contingent Collateral Value Policy) and (B) is not aware
that any Prohibited Act has been committed by any Person with respect to an Insurance Premium Loan
in which an interest is sold by the Assignor hereunder; and
(ix) As of the Settlement Date, no policy loan, cash withdrawal or surrender has occurred with
respect to the Life Insurance Policy related to the Insurance Premium Loan in which an interest is
sold by the Assignor hereunder.
(p)
Legal Names
. As of the Settlement Date, the legal name of the Assignor is as set
forth on the signature pages of this Assignment Agreement.
(q)
Margin Regulations
. The Assignor will not use any of the proceeds of the purchase
price for any purpose which will conflict with or contravene any of Regulations T, U or X
promulgated by the Federal Reserve Board from time to time.
(r)
Reasonably Equivalent Value
. The Assignee has given reasonably equivalent value
to the Assignor in consideration for each purchase under this Assignment Agreement, no such
transfer has been made for or on account of an antecedent debt owed by the Assignor to the
Assignee, and no such transfer is or may be voidable or subject to avoidance under any applicable
bankruptcy, insolvency or other similar law.
(s)
Accuracy of Information
. All certificates, reports, statements, documents and
other information furnished to the Assignee by or on behalf of the Assignor pursuant to any
provision of this Assignment Agreement, or in connection with or pursuant to any amendment or
modification of, or waiver under, this Assignment Agreement are, and shall, at the time the same
are so furnished, be complete and correct in all material respects on the date the same are
furnished.
(t)
Taxes
. The Assignor has filed or has caused to be filed all federal, state and
local tax returns which it is required to file and has paid all Taxes, assessments and other
governmental charges due in respect of its respective returns, except to the extent that any such
Taxes, assessments or other governmental charges are being contested in good faith and as to which
the Assignor has set aside on its books adequate reserves and in respect of which no Liens have
attached to or been filed against the Assignor or any of its properties. There are no agreements
or waivers extending the statutory period of limitations applicable to any federal income tax
return of the Assignor for any period.
(u)
Investment Company Act
. The Assignor is not an investment company within the
meaning of the Investment Company Act of 1940, as amended.
4
(v)
Quality of Title
. No effective financing statement or other similar instrument is
in effect covering any of the Insurance Premium Loans that have been transferred hereunder or any
interest therein that has been filed, authorized, acknowledged or otherwise permitted by the
Assignor or any Affiliate thereof in any recording office except for financing statements that may
be filed (x) in favor of the Collateral Agent in accordance with the Security Agreement, and/or (y)
in favor of the Assignor under the related Loan Document Package.
3.
Representations and Warranties of the Assignee
. The Assignee hereby represents and
warrants to the Assignor as of the Settlement Date that:
(a)
Organization and Good Standing
. The Assignee has been duly organized and is
validly existing as a limited liability company in good standing under the laws of the State of
Illinois, and has power and authority to own its properties and to conduct its business as such
properties shall be currently owned and such business is presently conducted.
(b)
Power and Authority
. The Assignee shall have the power and authority to execute
and deliver this Assignment Agreement and to carry out its terms; the Assignee shall have full
power and authority to purchase the property to be purchased and shall have duly authorized such
purchase; and the execution, delivery and performance of this Assignment Agreement shall have been
duly authorized by the Assignee by all necessary action.
(c)
Binding Obligation
. This Assignment Agreement shall constitute a legal, valid and
binding obligation of the Assignee enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws affecting creditors rights generally or by general principles of equity.
The representations and warranties set forth in Section 2 and Section 3 of this Assignment
Agreement shall survive the sale of the interests by the Assignor to the Assignee pursuant to this
Assignment Agreement. Upon discovery by the Assignor or the Assignee of a breach of any of the
foregoing representations and warranties, the party discovering such breach shall give prompt
written notice to the other.
4.
Remedies
.
(a)
Repurchase of interests for Certain Breaches
. In the event of a breach of any
representations and warranties set forth in Section 2(e), (f), (g), (h), (k), (o) or (v), upon the
earlier to occur of the discovery of such breach by the Assignor or receipt by the Assignor of
written notice of such breach given by or on behalf of the Assignee, the Assignees interest in
each Insurance Premium Loan relating to such breach shall be repurchased by the Assignor from the
Assignee and upon such repurchase shall terminate and be extinguished.
(b)
Reconveyed Insurance Premium Loans
. Upon the repurchase by the Assignor of any
interest under this Assignment Agreement, then, on the date required for such repurchase, the
Assignor shall deposit into the Collection Account in immediately available funds an amount equal
to the outstanding principal balance of the affected Insurance Premium Loans on the date of such
repurchase, together with accrued and unpaid interest thereon through such date at the interest
rate per annum on the Loans under the Financing Agreement. Such deposit shall be considered
payment in full for such interest.
5
In connection with the preceding paragraph, the Assignee shall execute such documents and
instruments of transfer or assignment as shall be prepared by the Assignor, and shall take such
other actions as shall reasonably be requested by the Assignor, to effect the repurchase of the
interests from the Assignee. Upon repurchase of the interests in Insurance Premium Loans from the
Assignee, the Assignee shall automatically and without further action be deemed to transfer,
assign, set over and otherwise convey to or upon the order of the Assignor, without recourse,
representation or warranty, all the right, title and interest of the Assignee in and to the
reconveyed interest and all Collections with respect thereto and all proceeds thereof received
after the date of such repurchase.
5.
Covenants of the Assignor
. The Assignor hereby covenants that:
(a)
No Impairment
. Except in accordance with, or as contemplated by, the Loan
Documents and the Transaction Documents, the Assignor shall take no action, nor omit to take any
action, which would impair the rights of the Assignee in any Insurance Premium Loan in which an
interest has been transferred hereunder.
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(b)
Compliance with Law
. The Assignor will comply in all material respects with all
Requirements of Law with respect to it, its business and properties and the Insurance Premium Loans
and related Life Insurance Policies. The Assignor will maintain all applicable permits,
certifications and licenses (including all licenses to originate Insurance Premium Loans) necessary
with respect to its business and properties and all Insurance Premium Loans and the Life Insurance
Policy related thereto.
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(c)
Preservation of Existence
. The Assignor will preserve and maintain its existence,
rights, franchises and privileges as a limited liability company or corporation, as applicable, and
become and remain licensed in each jurisdiction where the failure to maintain such license would
materially and adversely affect (A) the interests of the Assignee hereunder or (B) the
collectibility of any Insurance Premium Loans in which an interest has been transferred hereunder
or the related Life Insurance Policies; and the Assignor shall not consolidate with or merge into
any other Person or convey or transfer its properties and assets substantially as an entirety to
any Person without the prior written consent of the Assignee.
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(d)
Performance and Compliance with Insurance Premium Loans
. The Assignor will, at
its expense, timely and fully perform and comply with all provisions, covenants and other promises
required to be observed by it hereunder. The Assignor shall comply with and perform its
obligations with respect to any Insurance Premium Loan.
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(e)
Collections and Payments
. Except as otherwise provided in this Assignment
Agreement, the Assignor will cause any Collections received by it to be deposited in the Collection
Account no later than the Business Day following the receipt and identification of proceeds.
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(f)
Arms-Length Relationship; Separate Existence
. The Assignor will maintain an
arms-length relationship with the Assignee. Any transaction between the Assignee on the one hand
and the Assignor or any respective Affiliates thereof, on the other hand, will, in the
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6
reasonable judgment of the Assignor, be fair and equitable to the Assignee. The Assignor shall
not acquire any obligations of the Assignee.
(g)
Responsibility of Assignor
. The Assignor will not agree to be, or hold itself out
to be, responsible for the debts of the Assignee or for the decisions or actions with respect to
the daily business and affairs of the Assignee.
(h)
Reporting Requirements
.
(i) As soon as possible and in any event within ten (10) Business Days after the Assignor
obtains knowledge thereof, the Assignor shall notify the Assignee of any litigation, investigation
or proceeding that could reasonably be expected to impair in any material respect the ability of
the Assignor to perform its obligations under this Assignee Agreement.
(ii) The Assignor shall promptly deliver to the Assignee such other information, documents,
records or reports regarding the Insurance Premium Loans in which an interest has been transferred
hereunder and related Life Insurance Policies as the Assignee may from time to time reasonably
request in order to protect the Assignees interests under or as contemplated by this Assignment
Agreement..
(i)
No Bankruptcy Filing Against Assignee
. The Assignor will not commence, institute
or cause to be commenced or instituted any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any United States federal or state bankruptcy
or similar law, against the Assignee or join in the commencement of any proceeding against the
Assignee under any such law.
(j)
Insurance Premium Loans
. After the Effective Date, the Assignor will not sell or
assign any interests in more than two (2) out of every three (3) Insurance Premium Loans to any
Person other than the Assignee until the Commitments under the Financing Agreement have been
terminated;
provided
, that the Assignor is acting in good faith in connection with such
sales or assignments and has not selected the Insurance Premium Loans to be sold and assigned to
the Assignee based on the perceived quality of credit of any Insurance Premium Loan.
6.
Sale
. It is the intention of the parties that the conveyance of the Insurance
Premium Loans hereunder constitute a sale and not pledges of security for a loan and the parties
will treat such conveyance as a sale for tax and accounting purposes. The parties acknowledge and
agree that the transactions contemplated by this Assignment Agreement shall be, and shall be
treated as a purchase by the Assignor and a sale by the Assignee of the Insurance Premium Loans
hereunder, and not as a lending transaction or the grant of a security interest in the Insurance
Premium Loans hereunder, such that the Insurance Premium Loans hereunder shall not be part of the
bankruptcy estate of the Assignor under Section 541 of the Bankruptcy Code or subject to the
automatic stay under Section 362 of the Bankruptcy Code or any similar law. However, if the
conveyances of such Insurance Premium Loans were not characterized by a court of law as sales of
Insurance Premium Loans or a court of law determined that the consideration for the conveyance of
the Insurance Premium Loans hereunder did not represent fair value, then such conveyances of such
Insurance Premium Loans shall be considered a capital contribution to the Assignee (or, in the case
where the consideration for the conveyances of the
7
Insurance Premium Loans did not represent fair value, capital contributions to the extent of
any shortfall in fair value).
7.
Settlement Date
. Following the execution of this Assignment Agreement by the
Assignor and the Assignee, it will be delivered by the Assignor to the Collateral Agent and the
Insurance Collateral Agent. The effective date of this Assignment Agreement (the
Settlement
Date
) shall be the latest of (a) the date of the execution hereof by the Assignor and the
Assignee, (b) the date this Assignment Agreement has been delivered to the Collateral Agent and the
Insurance Collateral Agent, (c) the settlement date specified on
Annex I
, and (d) the
receipt by Assignor of the Purchase Price specified in
Annex I
.
8.
Rights
. As of the Settlement Date (a) the Assignee shall be a party to the Loan
Documentation Package and, to the extent of the interest assigned pursuant to this Assignment
Agreement, have the rights and obligations of a Lender thereunder, and (b) the Assignor shall, to
the extent of the interest assigned pursuant to this Assignment Agreement, subject to the
provisions of any Servicing Agreement, relinquish its rights and be released from its obligations
under the Loan Documentation Package.
9.
Adjustments
. The Assignor and the Assignee shall make all appropriate adjustments
in payments under the Loan Documentation Package for periods prior to the Settlement Date directly
between themselves on the Settlement Date.
10.
Governing Law
. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
11.
Waiver of Jury Trial
. EACH PARTY HERETO HEREBY WAIVES ANY RIGHT TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BASED UPON OR ARISING OUT OF THIS ASSIGNMENT
AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO, AND AGREES THAT ANY SUCH ACTION, PROCEEDING OR
COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
12.
Counterparts
. This Assignment Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart of this Assignment
Agreement by facsimile or electronic mail shall be equally effective as delivery of an original
executed counterpart.
13.
Indemnification
. Without limiting any other rights that the Assignee may have
hereunder or under any applicable law, the Assignor hereby agrees to indemnify the Assignee and the
Indemnitees from and against any and all amounts awarded against or incurred by any of them, and
arising out of or resulting from this Assignment Agreement or the activities of the Assignor in
connection herewith or in respect of any Insurance Premium Loan in which an interest has been
transferred hereunder or related Life Insurance Policy that are sustained as a result of:
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(i) any representation, warranty or covenant made by the Assignor under this Assignment
Agreement, or any other document, certificate or report delivered by the Assignor hereunder that
was incorrect in any material respect when made or deemed made or that the Assignor failed to
perform;
(ii) the failure by the Assignor to comply with this Assignment Agreement, the Transaction
Documents, the Loan Documents, or any Requirement of Law with respect to any Insurance Premium Loan
or Life Insurance Policy;
(iii) any commingling by the Assignor of Collections with other funds of the Assignor or any
of its Affiliates; or
(iv) any breach by the Assignor of any obligation under any Insurance Premium Loan in which an
interest has been transferred hereunder or related Life Insurance Policy.
The foregoing indemnity excludes (a) losses on Insurance Premium Loans in which an interest
has been transferred hereunder to the extent reimbursement therefor would constitute credit
recourse to the Assignor for nonpayment of any Insurance Premium Loan in which an interest has been
transferred hereunder by the related obligor and (b) any income or franchise taxes or similar taxes
(or any interest or penalties on them).
14.
Amendment
. This Assignment Agreement may be amended from time to time by the
Assignor and the Assignee in writing with the prior written consent of the Agents and the Required
Lenders. Notwithstanding the foregoing, the parties hereby agree that no amendment, modification
or waiver of, or consent with respect to, any provision of this Assignment Agreement that (a) prior
to the occurrence of a Credit Event (as defined in the Collateral Value Insurance Policy) would, in
the reasonable belief of any party hereto, be likely to adversely affect the interests of the
Collateral Value Insurer shall in any event be made or become effective unless the same shall be
consented to by the Collateral Value Insurer in writing or (b) following the occurrence of a Credit
Event, would, in the reasonable belief of any party hereto, be likely to adversely affect the
interests of the Contingent Collateral Value Insurer shall in any event be made or become effective
unless the same shall be consented to by the Contingent Collateral Value Insurer in writing. In
all events, copies of any amendments to this Agreement shall be promptly provided to (x) the
Collateral Value Insurer prior to the occurrence of a Credit Event and (y) the Contingent
Collateral Value Insurer following the occurrence of a Credit Event, by the Assignee following
execution thereof. Each of the parties hereto agrees that the Collateral Value Insurer and the
Contingent Collateral Value Insurer are third party beneficiaries solely with respect to this
Section 14, and shall have no rights with respect to any other provisions of this Assignment
Agreement. Each of the parties hereto agrees that the each of the Agents and the Lenders is a
third party beneficiary with respect to this Assignment Agreement.
[Remainder of page left intentionally blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered
by their respective officers thereunto duly authorized, as of the date first above written.
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ASSIGNOR:
IMPERIAL PREMIUM FINANCE, LLC
By: Imperial Holdings, LLC, its managing member
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By:
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Name:
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Title:
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Date:
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NOTICE ADDRESS FOR ASSIGNOR
701 Park of Commerce Blvd., Suite 301
Boca Raton, Florida 33487
Telephone No.: (561) 995-4202
Telecopy No.: (561) 995-4203
ASSIGNEE:
IMPERIAL LIFE FINANCING II, LLC
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By:
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Imperial Premium Finance, LLC, its sole member
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By:
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Imperial Holdings, LLC, its managing member
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By:
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Name:
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Jonathan Neuman
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Title:
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President
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Date:
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NOTICE ADDRESS FOR ASSIGNEE
191 Peachtree Street, Suite 3300
Atlanta, Georgia 30303
Telephone No.:
Telecopy No.:
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ANNEX FOR INSURANCE PREMIUM LOAN SALE AND ASSIGNMENT AGREEMENT
ANNEX I
1.
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Assignee/Purchaser: Imperial Life Financing II, LLC, a Georgia limited liability company
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2.
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Name and Date of Financing Agreement:
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Financing Agreement, dated as of March ___, 2009, by and among
Imperial Life Financing II, LLC, a Georgia limited liability company
(the
Borrower
), the lenders from time to time party
thereto (each a
Lender
and collectively, the
Lenders
), CTL Holdings II, LLC, a Georgia limited
liability company (
CTL
), as collateral agent for the
Lenders (in such capacity, the
Collateral Agent
), and CTL,
as administrative agent for the Lenders (in such capacity, the
Administrative Agent
and together with the Collateral
Agent, each an
Agent
and collectively, the
Agents
).
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3.
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Date of Assignment Agreement:
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4.
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Premium Finance Borrower:
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5.
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Insurance Premium Loan Number:
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6.
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Loan Documentation:
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7.
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Insurance Premium Loan Agreement Date:
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8.
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Life Insurance Policy Number:
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9.
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Amount of Insurance Premium Loan:
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10.
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Purchase Price:
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11.
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Final Maturity Date of Insurance Premium Loan:
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12.
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Settlement Date:
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11
EXHIBIT J
FORM OF MASTER PARTICIPATION AGREEMENT
This MASTER PARTICIPATION AGREEMENT, dated as of March _____, 2009 (the Agreement), between
Imperial Premium Finance, LLC, a Florida limited liability company (the Originator) and Imperial
Life Financing II, LLC, a Georgia limited liability company (the Participant).
In consideration of the premises and the mutual covenants herein contained, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the
parties hereto, the parties hereby agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.01
Definitions
. Capitalized terms used herein and not otherwise defined in
this Agreement shall have the respective meanings ascribed to such terms in the Financing Agreement
or, if not in the Financing Agreement, in the Glossary of Defined Terms attached hereto as Exhibit
A.
SECTION 1.02
Usage of Terms
.
(a) The words hereof, herein and hereunder and words of similar import when used in this
Agreement, including the Glossary of Defined Terms, shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; article, section, subsection, exhibit and
schedule references contained in this Agreement are references to articles, sections, subsections,
exhibits and schedules in or to this Agreement unless otherwise specified; with respect to all
terms in this Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other genders; references to writing include printing, typing,
lithography and other means of reproducing words in a visible form; references to agreements and
other contractual instruments include all subsequent amendments, amendments and restatements and
supplements thereto or changes therein entered into in accordance with their respective terms and
not prohibited by this Agreement; references to Persons include their permitted successors and
assigns; references to laws include their amendments and supplements, the rules and regulations
thereunder and any successors thereto; and the term including means including without
limitation.
SECTION 1.03
Computation of Time Periods
. Unless otherwise stated in this Agreement,
in the computation of a period of time from a specified date to a later specified date, the word
from means from and including and the words to and until each means to but excluding.
ARTICLE II.
TRANSFERS OF INTERESTS IN INSURANCE PREMIUM LOANS
SECTION 2.01
Transfers of Interests in Insurance Premium Loans
. On the terms and
subject to the conditions of this Agreement, the Originator shall, on the Effective Date and from
time to time thereafter, sell and transfer to the Participant without recourse, and the Participant
shall, on the Effective Date and from time to time thereafter purchase from the Originator (any
such sale, transfer, purchase and acquisition is herein referred to as a Transfer), a
participation interest in each Insurance Premium Loan originated by the Originator in an Applicable
Licensed State.
ARTICLE III.
PARTICIPATIONS
SECTION 3.01
Transfers
. (a) On the terms and conditions set forth herein, during the
Effective Period and on and as of the related Transfer Effective Date, the Originator hereby sells,
transfers and assigns to the Participant, and the Participant hereby purchases and acquires from
the Originator, with respect to each Insurance Premium Loan made by the Originator in an Applicable
Licensed State identified in a Participation Certificate (as defined herein), a participation
evidencing a 100% undivided beneficial ownership interest (each, a Participation) in all of the
Originators right, title and interest in, to and under (i) such Insurance Premium Loan, the
related promissory note and all other documents in the Loan Documentation Package for such
Insurance Premium Loan and all right, title and interest of the Originator in the Collateral
(including any related Life Insurance Policies) and (ii) all Collections thereon received by the
Originator on or after the Transfer Effective Date, including all cash proceeds received with
respect to such Insurance Premium Loans and all related security (including proceeds as defined
in the UCC of the jurisdiction whose law governs the perfection of an interest in such Insurance
Premium Loans). On each Transfer Effective Date, the Participant and the Originator shall execute
a participation certificate in the form of Exhibit B attached hereto (each a
Participation
Certificate
). Each Participation Certificate shall be deemed to incorporate in its entirety,
the terms and conditions of this Agreement and all representations, warranties, agreements and
covenants made hereunder shall be deemed to have been made in respect of the Insurance Premium
Loans the subject of the Participation Certificate as of the applicable Transfer Effective Date.
(b) The parties acknowledge and agree that (i) the conveyance of the Insurance Premium Loans
is being effected hereunder by Participations instead of outright assignments and (ii) accordingly,
the sale, transfer, assignment and conveyance of the Participations in the Insurance Premium Loans
hereunder shall have the consequence that the Originator holds legal title and not an equitable
interest in such Insurance Premium Loans and the Participant holds 100% of the equitable interest
in such Insurance Premium Loans. The Originator acknowledges and agrees that, to the fullest
extent permitted by applicable law, it holds legal title to such Insurance Premium Loans as trustee
for the benefit of the Participant and its successors and assigns. However, notwithstanding any
other provision herein, the Originator
and the Participant agree and acknowledge that the Originator shall remain the lender of
record on all Insurance Premium Loans in which a Participation has been transferred hereunder. The
2
parties acknowledge and agree that the transactions contemplated by this Agreement shall be, and
shall be treated as a purchase by the Participant and a sale by the Originator of Participations in
the Insurance Premium Loans hereunder, and not as a lending transaction or the grant of a security
interest in Participations in the Insurance Premium Loans hereunder, such that the Participations
in the Insurance Premium Loans hereunder shall not be part of the bankruptcy estate of the
Originator under Section 541 of the Bankruptcy Code or subject to the automatic stay under Section
362 of the Bankruptcy Code or any similar law.
(c) Subject to Section 5.03, the Participations sold, transferred, assigned and conveyed
hereunder in such Insurance Premium Loans are final and irrevocable from and after the Transfer
Effective Date, and neither the Participant nor the Originator shall have any right to require that
any such Participation terminate or be repurchased by the Originator from the Participant and be
extinguished.
(d) It is the intention of the parties that the conveyance of the Insurance Premium Loans to
the Participant effected by this Agreement constitute sales of Participations in such Insurance
Premium Loans and not pledges of security for a loan. However, if the conveyances of such
Insurance Premium Loans were not characterized by a court of law as sales of Participations or a
court of law determined that the consideration for the Participations did not represent fair value,
then such conveyances of such Insurance Premium Loans shall be considered a capital contribution to
the Participant (or, in the case where the consideration for the Participations did not represent
fair value, capital contributions to the extent of any shortfall in fair value).
SECTION 3.02
Payment of Purchase Price
. In consideration of the Transfer of each
Participation from the Originator to the Participant as provided in Section 3.01, on each Transfer
Effective Date the Participant agrees to pay the Originator an amount equal to the Purchase Price
for each such Participation purchased by the Participant hereunder.
(a)
Initial Purchase Price Payment
. On the terms and subject to the conditions set
forth in this Agreement, the Participant agrees to pay to the Originator the Purchase Price in cash
for the purchase to be made from the Originator on the Effective Date.
(b)
Subsequent Purchase Price Payments
. On each Transfer Effective Date subsequent to
the Effective Date, on the terms and subject to the conditions set forth in this Agreement, the
Participant shall pay to the Originator the Purchase Price for the Participations being sold by the
Originator on such Transfer Effective Date in cash.
SECTION 3.03
Payments to Participant
. Whenever the Originator receives or collects a
payment in respect of any Insurance Premium Loan subject to a Participation, it will pay over the
same to the Participant in the same funds as received promptly after its receipt thereof and in any
event within one Business Day of its receipt thereof.
3
ARTICLE IV.
CONDITIONS TO EFFECTIVENESS AND PURCHASES
SECTION 4.01
Conditions Precedent to Initial Transfer
. The initial Transfer hereunder
is subject to the condition precedent that the Participant shall have received, on or before the
date hereof, the following, each in form and substance satisfactory to the Participant:
(a) A certified copy of the organizational or governing documents of the Originator.
(b) Evidence reasonably satisfactory to the Participant of (i) due authorization by the
Originator of the transactions contemplated by this Agreement and (ii) due execution of this
Agreement (including the names and true signatures of the officers of the Originator authorized to
execute this Agreement and any other documents contemplated hereunder and appropriate documentation
evidencing the incumbency of such officers).
(c) Written search reports certified by a search service acceptable to the Participant,
listing all effective financing statements that name the Originator as debtor or assignor and that
are filed in the jurisdictions in which filings were made pursuant to clause (d) below and in such
other jurisdictions that the Participant shall reasonably request, together with copies of such
financing statements (none of which shall cover any Collateral or interests therein or proceeds of
any thereof), and tax, ERISA and judgment lien search reports from a Person satisfactory to the
Participant showing no evidence of such lien filed against the Originator.
(d) Copies of proper amendment or termination statements, if any, necessary to release all
security interests and other rights of any Person in the Collateral previously granted by the
Originator.
(e) The Agreement and the other Transaction Documents and all documentation to be delivered in
connection therewith shall have been executed and delivered, and all conditions thereto shall have
been satisfied.
(f) An opinion of Foley & Lardner, LLP, counsel to the Participant and the Originator, in form
and substance satisfactory to the Agents, and as to such other matters as the Collateral Agent may
reasonably request, including, without limitation, non-consolidation, true sale and true
participation opinions.
(g) All legal matters incident to the execution and delivery of this Agreement and to the
purchases by the Participant of a Participation from the Originator shall be satisfactory to
counsel for the Participant.
SECTION 4.02
Conditions Precedent to All Transfers
. The Transfer to take place on the
initial Transfer Effective Date and each Transfer to take place on a subsequent Transfer Effective
Date hereunder shall be subject to the further conditions precedent that:
(a) On or prior to such Transfer Effective Date, the Originator (or the Servicer on its
behalf) shall, at its own expense, have marked its records related to each Insurance Premium Loan
in which a Participation has been transferred hereunder with a notation,
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acceptable to the
Participant, stating that a Participation in such Insurance Premium Loan, the related promissory
note and all other documents in the Loan Documentation Package for such Insurance Premium Loan and
Collections with respect thereto and other proceeds thereof, has been sold in accordance with this
Agreement, and the Originator further agrees not to alter such file designation with respect to any
applicable Insurance Premium Loan in which a Participation has been transferred hereunder during
the term of this Agreement;
(b) On each Transfer Effective Date, the following statements shall be true:
(i) all of the Originators representations and warranties contained in Section 5.01
are correct on and as of such date as though made on and as of such date; and
(ii) no event has occurred and is continuing, or would result from such Transfer, that
constitutes an Event of Termination or would constitute an Event of Termination but for the
requirement that notice be given or that time elapse or both;
(c) On each Transfer Effective Date, the Originator and the Participant shall have executed a
Participation Certificate for each Insurance Premium Loan for which a Participation has been
transferred hereunder;
(d) On each Transfer Effective Date, the Originator shall have complied with all of its
covenants hereunder and shall have fulfilled in all material respects all of its obligations
hereunder;
(e) As of each Transfer Effective Date, no Originator shall be insolvent;
The acceptance by the Originator of the Purchase Price for any Participation shall be deemed
to be a representation and warranty by the Originator as to the matters set forth in this Section.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
SECTION 5.01
Representations and Warranties of the Originator
. The Originator hereby
represents and warrants as to itself to the Participant as of the Effective Date and each Transfer
Effective Date (or such other date as expressly provided below) that:
(a)
Organization and Good Standing
. The Originator has been duly organized and is
validly existing as a limited liability company in good standing under the laws of the state of its
incorporation or formation, and has power and authority to own its properties and to conduct its
business as such properties shall be currently owned and such business is presently conducted.
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(b)
Due Qualification
. The Originator is duly qualified to do business (or is exempt
from such qualification requirements) and has obtained all necessary licenses and approvals in each
jurisdiction in which failure to so qualify or to obtain such licenses or approvals would have a
material adverse effect on the Originators ability to perform its obligations as the Originator
under this Agreement.
(c)
Due Authorization
. The Originators execution, delivery and performance of this
Agreement and the other agreements and instruments executed or to be executed by the Originator
contemplated by this Agreement, and the consummation of the transactions contemplated by this
Agreement, have been duly and validly authorized by all necessary action on the part of the
Originator.
(d)
Binding Obligation
. This Agreement constitutes the legal, valid and binding
obligation of the Originator enforceable against the Originator in accordance with its terms,
except as enforceability may be limited by insolvency, reorganization, moratorium and other similar
laws affecting creditors rights generally or by general principles of equity whether considered in
a suit at law or in equity.
(e)
No Conflict
. The Originators execution and delivery of this Agreement, its
performance of the transactions contemplated hereby and its fulfillment of the terms hereof
applicable to the Originator do not (i) contravene the Originators organizational or governing
documents, (ii) conflict with or violate any applicable law, (iii) violate any provision of, or
require any filing, registration, consent or approval under, any law presently in effect having
applicability to the Originator, except for such filings, registrations, consents or approvals as
have already been obtained or made and are in full force and effect, (iv) conflict with, result in
any breach of (A) any of the terms or provisions of, or constitute (with or without notice or lapse
of time or both) a default under any Insurance Premium Loan or (B) any of the terms or provisions
of, or constitute (with or without notice or lapse of time or both) a default under any indenture,
contract, agreement, mortgage, deed of trust or other instrument to which the Originator is a party
or by which it or its properties or assets are bound.
(f)
No Proceedings
. There are no proceedings, injunctions, writs, restraining orders
or investigations pending or, to the best knowledge of the Originator, threatened against the
Originator before any governmental authority (i) asserting the illegality, invalidity or
unenforceability, or seeking any determination or ruling that would affect the legality, validity
or enforceability, of the Loan Documents, this Agreement or any other Transaction Document, (ii)
seeking to prevent the consummation of any of the transactions contemplated by the Loan Documents,
this Agreement or any other Transaction Document, (iii)
seeking any determination or ruling that, if adversely determined, could have a material and
adverse effect on the financial condition or operations of the Originator or the validity or
enforceability of, or the performance by the Originator of its obligations under, this Agreement or
(iv) seeking to affect adversely the income tax attributes or other tax attributes of the
Originator under the U.S. federal or the State of Florida, as applicable, tax systems. There are
no proceedings, injunctions, writs, restraining orders or investigations pending with respect to
any Insurance Premium Loan a Participation in which is being sold to the Participant, or the
related Life Insurance Policy, before any governmental authority asserting the illegality,
invalidity or unenforceability, or seeking any determination or ruling that would affect the
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legality, validity or enforceability, of any such Insurance Premium Loan or the related Life
Insurance Policy.
(g)
No Consents
. No authorization, consent, license, order or approval of, or
registration or declaration with, any Person, including any governmental authority, is required for
the Originator in connection with the execution and delivery of this Agreement by the Originator or
the performance of its obligations under this Agreement, except for (i) the filing of the financing
statements or other documents required to have been filed on or prior to the Effective Date or
applicable Transfer Effective Date pursuant to Section 4.01, all of which were so filed and are in
full force and effect, (ii) the filing from time to time of any amendments, assignments or
continuation statements which may become applicable pursuant to this Agreement or (iii) the
exercise by the Participant or its assigns of the rights provided for in this Agreement or the
remedies in respect of any Insurance Premium Loans a Participation in which is sold, transferred,
assigned or otherwise conveyed by the Originator to the Participant pursuant to this Agreement.
(h)
Liens
. Each Insurance Premium Loan in which a Participation has been transferred
hereunder is owned by the Originator free and clear of any Lien (subject to the Participations
therein), and the Originator has not either created or consented to the creation of any Lien
affecting any Insurance Premium Loan in which a Participation has been transferred hereunder or any
related Life Insurance Policy other than the Liens contemplated by this Agreement and the other
Transaction Documents.
(i)
Location
. As of the Effective Date, the chief executive office of the Originator,
and the office where the Originator keeps its copy of the Transaction Documents and Records, is
located at the Originators address specified in Section 9.03.
(j)
Valid Transfers
. This Agreement constitutes a valid sale, transfer and assignment
to the Participant of Participations in the Originators entire right, title and interest in and to
the Insurance Premium Loans in which a Participation has been transferred hereunder, whether now
existing or hereafter created (including all monies due or to become due with respect to such
Insurance Premium Loans, all proceeds (including proceeds as defined in the UCC of the
jurisdiction whose law governs the perfection of an interest in such Insurance Premium Loans) of
such Insurance Premium Loans and all cash proceeds of any related security). If an Event of
Bankruptcy were to occur with respect to the Originator, the right to retain the Insurance Premium
Loans (including all monies due or to become due with respect to such Insurance Premium Loans, all
proceeds of such Insurance Premium Loans and all cash proceeds of any related security) would not
be deemed to be property of the Originator. If and to
the extent the sale of the Participations in the Insurance Premium Loans under this Agreement
is not deemed to be or is not recognized as a sale by a court of law, the conveyance of the
interest in the Insurance Premium Loans created on or after the applicable Transfer Effective Date,
shall to the extent set forth in Section 3.01(d) be considered a capital contribution to the
Participant.
(k)
Solvency
. The Originator is solvent and will not become insolvent after giving
effect to the transactions contemplated by this Agreement. The Originator is currently repaying
all of its indebtedness as such indebtedness becomes due; and, after giving
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effect to the
transactions contemplated by this Agreement, the Originator will have adequate capital to conduct
its business as presently conducted and as contemplated by this Agreement.
(l)
Compliance
. The Originator has complied, and will comply on each Transfer
Effective Date, with all Requirements of Law with respect to it, its business and properties and
all Insurance Premium Loans and the Life Insurance Policy related thereto. The Originator has
obtained and will maintain all applicable permits, certifications and licenses (including all
licenses to originate Insurance Premium Loans) necessary with respect to its business and
properties and all Insurance Premium Loans and the Life Insurance Policy related thereto.
(m)
No Rescission
. Neither any Insurance Premium Loans in which a Participation is
sold hereunder nor the related Life Insurance Policy has been subordinated or rescinded or, except
as disclosed in writing to the Participant, amended in any manner.
(n)
No Event of Bankruptcy
. No Event of Bankruptcy has occurred with respect to the
Originator.
(o)
Fraudulent Conveyance
. The Originator is not entering into the transactions
contemplated hereby with any intent of hindering, delaying or defrauding creditors.
(p)
Insurance Premium Loans
.
(i) As of each Transfer Effective Date, each Insurance Premium Loan in which a
Participation is granted or sold by the Originator hereunder is an Eligible Insurance
Premium Loan and the grant, sale and purchase hereunder of a Participation in such Insurance
Premium Loans and Collections arising thereunder do not conflict with, result in a breach of
any of the provisions of, or constitute (with or without notice or lapse of time or both) a
default under, any agreements evidencing such Insurance Premium Loan;
(ii) As of any Transfer Effective Date, each Insurance Premium Loan on such date is the
valid, binding and enforceable obligation of each Obligor thereunder;
(iii) As of any Transfer Effective Date, each Insurance Premium Loan on such date was
originated by the Originator in the ordinary course of the Originators premium finance
lending activities and in accordance with all Requirements of Law;
(iv) As of any Transfer Effective Date, the information set forth in the applicable
Participation Certificate with respect to each Insurance Premium Loan therein was correct;
(v) With respect to each Insurance Premium Loan in which a Participation is granted or
sold by the Originator, the Originator represents and warrants that each such Insurance
Premium Loans has been originated in accordance with the applicable criteria set forth in
the Transaction Documents;
8
(vi) As of any Transfer Effective Date, no payment default exists with respect to any
Insurance Premium Loan;
(vii) As of any Transfer Effective Date, no event or circumstance under Section V.A or
Section V.B of the Collateral Value Policy or Contingent Collateral Value Policy has
occurred;
(viii) As of any Transfer Effective Date, the Originator (A) has not committed a
Prohibited Act (as defined in the Collateral Value Policy or Contingent Collateral Value
Policy) and (B) is not aware that any Prohibited Act has been committed by any Person with
respect to an Insurance Premium Loan in which a Participation is granted or sold by the
Originator; and
(ix) As of any Transfer Effective Date, no policy loan, cash withdrawal or surrender
has occurred with respect to the Life Insurance Policy related to the Insurance Premium Loan
in which a Participation is granted or sold by the Originator.
(q)
Legal Names
. As of the Effective Date, the legal name of the Originator is as set
forth on the signature pages of this Agreement.
(r)
ERISA
. With respect to any Plan maintained or participated in during the past six
years by the Originator or any of its ERISA Affiliates, (i) such Plan complied and complies in all
material respects with all Requirements of Law, (ii) a Reportable Event has not occurred with
respect to any such Plan, (iii) such Plan has not been terminated and (iv) no funding deficiency
has occurred in respect of any such Plan, except, in each case, where the occurrence of any of the
foregoing could not be reasonably expected to result in liability to such Seller or any such ERISA
Affiliate in excess of $50,000 or result in a Lien against the Participations, or any related
Insurance Premium Loans or related Life Insurance Policies (or any portion thereof). With respect
to any such Plan that is intended to qualify for special tax treatment under Sections 401(a) or
403(a) of the Code, such Plan is in compliance with the applicable requirements of the Code for
such qualifications.
(s)
Margin Regulations
. The Originator will not use any of the proceeds of the
Purchase Price for any purpose which will conflict with or contravene any of Regulations T, U or X
promulgated by the Federal Reserve Board from time to time.
(t)
Reasonably Equivalent Value
. The Participant has given reasonably equivalent
value to the Originator in consideration for each purchase of a Participation under this Agreement,
no such transfer has been made for or on account of an antecedent debt owed by the Originator to
the Participant, and no such transfer is or may be voidable or subject to avoidance under any
applicable bankruptcy, insolvency or other similar law.
(u)
Accuracy of Information
. All certificates, reports, statements, documents and
other information furnished to the Participant by or on behalf of the Originator pursuant to any
provision of this Agreement, or in connection with or pursuant to any amendment or modification of,
or waiver under, this Agreement are, and shall, at the time the
9
same are so furnished, be complete
and correct in all material respects on the date the same are furnished.
(v)
Taxes
. The Originator has filed or has caused to be filed all federal, state and
local tax returns which it is required to file and has paid all Taxes, assessments and other
governmental charges due in respect of its respective returns, except to the extent that any such
Taxes, assessments or other governmental charges are being contested in good faith and as to which
the Originator has set aside on its books adequate reserves and in respect of which no Liens have
attached to or been filed against the Originator or any of its properties. There are no agreements
or waivers extending the statutory period of limitations applicable to any federal income tax
return of the Originator for any period.
(w)
Investment Company Act
. The Originator is not an investment company within the
meaning of the Investment Company Act of 1940, as amended.
(x)
Quality of Title
. No effective financing statement or other similar instrument is
in effect covering any of the Insurance Premium Loans in which a Participation has been transferred
hereunder or any interest therein that has been filed, authorized, acknowledged or otherwise
permitted by the Originator or any Affiliate thereof in any recording office except for financing
statements that may be filed (x) in favor of the Collateral Agent in accordance with the Security
Agreement, (y) in favor of the Participant under this Agreement, and/or (z) in favor of the
Originator under the related Loan Document Package.
SECTION 5.02
Representations and Warranties of the Participant
. The Participant
hereby represents and warrants to the Originator as of the Effective Date and each Transfer
Effective Date that:
(a)
Organization and Good Standing
. The Participant has been duly organized and is
validly existing as a limited liability company in good standing under the laws of the State of
Georgia, and has power and authority to own its properties and to conduct its business as such
properties shall be currently owned and such business is presently conducted.
(b)
Power and Authority
. The Participant shall have the power and authority to
execute and deliver this Agreement and to carry out its terms; the Participant shall have full
power and authority to purchase the property to be purchased and shall have duly
authorized such purchase; and the execution, delivery and performance of this Agreement shall
have been duly authorized by the Participant by all necessary action.
(c)
Binding Obligation
. This Agreement shall constitute a legal, valid and binding
obligation of the Participant enforceable in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting creditors rights generally or by general principles of equity.
The representations and warranties set forth in this Section 5.02 and in Section 5.01 shall
survive the sale of the Participations by the Originator to the Participant pursuant to this
Agreement. Upon discovery by the Originator or the Participant of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall give prompt written notice
to the other.
10
SECTION 5.03
Remedies
.
(a)
Repurchase of Participations for Certain Breaches
. In the event of a breach of
any representations and warranties set forth in Sections 5.01(e), (f), (g), (h), (l), (p) or (x),
upon the earlier to occur of the discovery of such breach by the Originator or receipt by the
Originator of written notice of such breach given by or on behalf of the Participant, the
Participants Participation in each Insurance Premium Loan relating to such breach shall be
repurchased by the Originator from the Participant and upon such repurchase shall terminate and be
extinguished.
(b)
Reconveyed Insurance Premium Loans
. Upon the repurchase by the Originator of any
Participation under this Agreement, then, on the date required for such repurchase, the Originator
shall deposit into the Collection Account in immediately available funds an amount equal to the
outstanding principal balance of the affected Insurance Premium Loans on the date of such
repurchase, together with accrued and unpaid interest thereon through such date at the interest
rate per annum on the Loans under the Financing Agreement. Such deposit shall be considered
payment in full for such Participation.
In connection with the preceding paragraph, the Participant shall execute such documents and
instruments of transfer or assignment as shall be prepared by the Originator, and shall take such
other actions as shall reasonably be requested by the Originator, to effect the repurchase of
Participations from the Participant. Upon repurchase of Participations in Insurance Premium Loans
from the Participant, the Participant shall automatically and without further action be deemed to
transfer, assign, set over and otherwise convey to or upon the order of the Originator, without
recourse, representation or warranty, all the right, title and interest of the Participant in and
to the reconveyed Participations and all Collections with respect thereto and all proceeds thereof
received after the date of such repurchase.
SECTION 5.04
Covenants of the Originator
. The Originator hereby covenants that:
(a)
Security Interests
. Except for the Transfers hereunder and the Liens contemplated
by the Loan Documents and the Transaction Documents, the Originator will
not sell, pledge, assign or transfer to any other Person, or grant, create, incur, assume or
suffer to exist any Lien on any Insurance Premium Loan in which a Participation has been
transferred hereunder, whether now existing or hereafter created, or any interest therein, the
Originator will promptly notify the Participant upon its knowledge of the existence of any such
Lien on any such Insurance Premium Loan, and the Originator shall defend the Participation interest
of the Participant in the Insurance Premium Loans transferred hereunder, whether now existing or
hereafter created, against all claims of third parties claiming through or under the Originator.
(b)
No Impairment
. Except in accordance with, or as contemplated by, the Loan
Documents and the Transaction Documents, the Originator shall take no action, nor omit to take any
action, which would impair the rights of the Participant in any Insurance Premium Loan in which a
Participation has been transferred hereunder, nor shall the Originator, except as expressly
provided in the Servicing Agreement, reschedule, revise or defer payments due on any Insurance
Premium Loan in which a Participation has been transferred hereunder.
11
(c)
Compliance with Law
. The Originator will comply in all material respects with all
Requirements of Law with respect to it, its business and properties and the Insurance Premium Loans
and related Life Insurance Policies. The Originator will maintain all applicable permits,
certifications and licenses (including all licenses to originate Insurance Premium Loans) necessary
with respect to its business and properties and all Insurance Premium Loans and the Life Insurance
Policy related thereto.
(d)
Preservation of Existence
. The Originator will preserve and maintain its
existence, rights, franchises and privileges as a limited liability company or corporation, as
applicable, and become and remain licensed in each jurisdiction where the failure to maintain such
license would materially and adversely affect (A) the interests of the Participant hereunder or (B)
the collectibility of any Insurance Premium Loans in which a Participation has been transferred
hereunder or the related Life Insurance Policies; and the Originator shall not consolidate with or
merge into any other Person or convey or transfer its properties and assets substantially as an
entirety to any Person without the prior written consent of the Participant.
(e)
Keeping of Records and Books of Account
. The Originator (or the Servicer on its
behalf) will maintain and implement administrative and operating procedures (including, without
limitation, the ability to recreate the records related to any items comprising a Loan
Documentation Package in the event of the destruction of the originals thereof) and keep and
maintain all such records and other documents, books, records and information reasonably necessary
or advisable for the collection of the Insurance Premium Loans and related Life Insurance Policy
(including, without limitation, records adequate to permit the daily identification of each
Insurance Premium Loan and related Life Insurance Policy and all Collections of and adjustments to
each such Insurance Premium Loan and related Life Insurance Policy).
(f)
Performance and Compliance with Insurance Premium Loans
. The Originator will, at
its expense, timely and fully perform and comply with all provisions, covenants and other promises
required to be observed by it hereunder, The Originator shall comply with and perform its
obligations with respect to any Insurance Premium Loan.
(g)
Collections and Payments
. Except as otherwise provided in this Agreement, the
Originator will cause any Collections received by it to be deposited in the Collection Account no
later than the Business Day following the receipt and identification of proceeds.
(h)
Protection of the Participants Interest in Insurance Premium Loans
.
(i) Except as provided in Article VII, the Originator covenants and agrees that it will
not convey, assign, exchange or otherwise transfer its rights under the Insurance Premium
Loan in which a Participation has been transferred hereunder to any Person prior to the
termination of this Agreement pursuant to Section 7.01.
(ii) The Originator will advise the Participant promptly, in reasonable detail, (A) of
any Lien or claim asserted against any of the Insurance Premium
12
Loans in which a
Participation has been transferred hereunder or related Life Insurance Policy, other than
the Liens created hereby, (B) of the occurrence of any breach by the Originator of any of
its representations, warranties and covenants contained herein, (C) of the occurrence of any
other event that would materially and adversely affect the value of any of the Insurance
Premium Loans in which a Participation has been transferred hereunder, (D) of the occurrence
of any event or circumstance under Section V.A or Section V.B of the Collateral Value Policy
or Contingent Collateral Value Policy, (E) of the occurrence of a Prohibited Act (as defined
in the Collateral Value Policy or Contingent Collateral Value Policy) by the Originator or
knowledge of the commission of a Prohibited Act by any Person with respect to an Insurance
Premium Loan in which a Participation is granted or sold by the Originator, and (F) of the
occurrence of any policy loan, cash withdrawal or surrender with respect to the Life
Insurance Policy related to the Insurance Premium Loan in which a Participation is granted
or sold by the Originator.
(iii) The Originator will not, without providing 45 days prior written notice to the
Participant and without filing such amendments to any previously filed financing statements
as may be required by law to fully preserve and protect the interests of the Participant
hereunder in and to the Insurance Premium Loans Participations in which are conveyed hereby,
(i) change its jurisdiction of organization, (ii) change the location of its chief executive
office in the United States or the location of where records related to the Insurance
Premium Loans are kept or (iii) change its name, identity or business structure in any
manner that would, could or might make any financing statement or continuation statement
filed by the Originator in accordance with this Agreement seriously misleading within the
meaning of Section 9-402(7) of any applicable enactment of the UCC.
(i)
Arms-Length Relationship; Separate Existence
. The Originator will maintain an
arms-length relationship with the Participant. Any transaction between the Participant on the one
hand and the Originator or any respective Affiliates thereof, on the other hand, will, in the
reasonable judgment of the Originator, be fair and equitable to the Participant. The Originator
shall not acquire any obligations of the Participant.
(j)
Responsibility of Originator
. The Originator will not agree to be, or hold itself
out to be, responsible for the debts of the Participant or for the decisions or actions with
respect to the daily business and affairs of the Participant.
(k)
Reporting Requirements
.
(i) As soon as possible and in any event within ten (10) Business Days after the
Originator obtains knowledge thereof, the Originator shall notify the Participant of any
litigation, investigation or proceeding that could reasonably be expected to impair in any
material respect the ability of the Originator to perform its obligations under this
Agreement.
(ii) The Originator shall promptly deliver to the Participant such other information,
documents, records or reports regarding the Insurance Premium Loans in which a Participation
has been transferred hereunder and related Life Insurance
13
Policies as the Participant may
from time to time reasonably request in order to protect the Participants interests under
or as contemplated by this Agreement.
(l)
Extension, Renewal, Waiver or Amendment of Insurance Premium Loans
. Except as
otherwise permitted under this Agreement, Originator will not without the consent of the
Participant (i) renew, extend, amend, waive or otherwise modify the terms of any Insurance Premium
Loan in which a Participation has been transferred hereunder or other item comprising a component
of any Loan Documentation Package or (ii) rescind, cancel, terminate or sell any Insurance Premium
Loan in which a Participation has been transferred hereunder or other item comprising a component
of any Loan Documentation Package except as ordered by a court of competent jurisdiction or other
governmental authority.
(m)
No Actions Against Obligors
. The Originator will not, without the consent of the
Participant, commence or settle any legal action to enforce collection of any Insurance Premium
Loan in which a Participation has been transferred hereunder.
(n)
No Bankruptcy Filing Against Participant
. The Originator will not commence,
institute or cause to be commenced or instituted any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any United States federal or
state bankruptcy or similar law, against the Participant or join in the commencement of any
proceeding against the Participant under any such law.
(o)
ERISA
. The Originator will not maintain any Plans in its own name or otherwise
agree to make contributions to any Plan. The Originator will not allow any Plan maintained by any
of its ERISA Affiliates to incur any accumulated funding deficiency (within the meaning of
Section 302 of ERISA or Section 412 of the Code), whether or not waived. The Originator will not
allow any of its ERISA Affiliates to fail to timely make all contributions required to be made by
it to any Plans.
(p)
Taxes
. The Originator will file or will cause to be filed all federal, state and
local tax returns which it is required to file and will pay promptly when due all Taxes,
assessments and other governmental charges due in respect of its respective returns, except to the
extent that any such Taxes, assessments or other governmental charges are being contested in
good faith and as to which the Originator has set aside on its books adequate reserves and in
respect of which no Liens have attached to or been filed against the Originator or any of its
properties.
(q)
Insurance Premium Loans
. After the Effective Date, the Originator will not sell
or assign any interests in more than two (2) out of every three (3) Insurance Premium Loans to any
Person other than the Participant until the Commitments under the Financing Agreement have been
terminated;
provided
, that the Originator is acting in good faith in connection with such
sales or assignments and has not selected the Insurance Premium Loans to be sold and assigned to
the Participant based on the perceived quality of credit of any Insurance Premium Loan.
14
ARTICLE VI.
CONFIDENTIALITY
SECTION 6.01
General Duty
. Each party hereto agrees that (i) each of the Transaction
Documents and its contents, (ii) each Loan Documentation Package and its contents, (iii) all
medical and personal information concerning the Underlying Lives and Premium Finance Borrowers,
(iv) the identity of and information concerning payments to brokers or other similar parties
involved in the sourcing, negotiation and funding of any Insurance Premium Loan, (v) any
information supplied by either party and marked confidential, restricted or proprietary or that
otherwise reasonably could be expected to be confidential in nature regarding its customers and
prospective customers, account information, products and services, vendors, financial, technical or
marketing information, business or marketing strategies, operating policies and procedures, in
whatever form, in each case to the extent not in the public domain when transmitted by one party to
another, not published or otherwise become part of the public domain (through no fault of the
receiving party) after transmission, not known to the receiving party prior to transmission or
through disclosure by a third party with a lawful right to make such disclosure (and not to the
knowledge of the recipient of such information bound by any duty to the transmitting party to keep
such information confidential) and not independently developed by the receiving party, comprise
Confidential Information.
SECTION 6.02
Reasonable Precautions
. Each party hereto shall safeguard and hold as
confidential all Confidential Information, and shall use such information solely for the purposes
contemplated by the Transaction Documents, in each case other than its own Confidential Information
to the extent appropriately disclosed to others in connection with its business unrelated to the
transactions contemplated by the Transaction Documents. Each party hereto shall take such
precautions as may be lawful and reasonably necessary to restrain its officers, directors,
employees, agents or representatives from disclosure of all Confidential Information to any other
Person other than to its own officers, directors, employees, agents or representatives that have a
need to know such information in order for such party to perform its obligations under the
Transaction Documents, other than its own Confidential Information to the extent appropriately
disclosed to others in connection with its business unrelated to the transactions contemplated by
the Transaction Documents. If any
party reasonably and in good faith determines that it is required by law (or by subpoena,
discovery request, search warrant or similar legal process) to disclose any Confidential
Information to a third party (other than a regulator that regulates the Originator or any of its
Affiliates), such party promptly shall notify the other of such situation or of its receipt of such
legal process and shall reasonably cooperate with such other party in an effort to quash such legal
process or to seek a protective order or other appropriate relief. Upon the termination or
expiration of this Agreement, each party hereto promptly shall return to the other all Confidential
Information of such other party that is within its custody and control. Each party hereto agrees
that legal remedies may be insufficient for a breach of the duties specified in this Section 6.02,
and that each party shall be entitled to injunctive relief to prevent disclosure of and cause the
return of Confidential Information as contemplated herein, in addition to any other legal or
equitable remedies available to such party.
SECTION 6.03
Dissemination of Certain Information
. Each party hereto shall at all
times comply with all laws and regulations applicable to it in the performance of its duties
hereunder and affecting the Insurance Premium Loans and related Collateral (including any Life
15
Insurance Policies) and the negotiation, documentation, funding and servicing thereof, including
laws and regulations regarding the privacy of any Underlying Life or Premium Finance Borrower and
the maintenance of all information obtained by the Originator and/or the Participant in the
performance of their duties in accordance with applicable laws and regulations concerning the
dissemination of such information; provided that any party may disclose such information to
competent judicial or regulatory authorities in response to a written request therefrom for such
information or as otherwise reasonably and in faith determined to be required by law; provided,
however, that (i) no party shall disclose such information to such judicial or regulatory
authorities before the date set forth in such request therefor and (ii) each party shall provide
the other with prompt notice to the extent permitted by law or regulation of such request, in order
to permit such other party, at its own expense, to seek judicial or other relief before such
information is disclosed.
SECTION 6.04
Monitoring
. In recognition of the Originator
s
responsibilities
under the Gramm Leach Bliley Act, Section 501(b) (15 U.S.C. 6801) and the Interagency Guidelines
Establishing Standards for Safeguarding Customer Information (the Guidelines), the Participant
represents and warrants that it maintains an information security program designed to: (i) ensure
the security and confidentiality of customer information, (ii) protect against any anticipated
threats or hazards to the security or integrity of customer information, (iii) protect against
unauthorized access to or use of customer information that could result in substantial harm or
inconvenience to any customer of the Originator and (iv) ensure proper disposal of consumer and
customer information as required by applicable law, in each case only with respect to customer
information actually in the possession and control of the Participant received in connection with
an Insurance Premium Loan. The Participant agrees promptly to notify the Originator of any
security breaches that relate to Confidential Information supplied by the Originator.
ARTICLE VII.
EVENTS OF TERMINATION
SECTION 7.01
Termination
.
If any of the following events (each, an Event of Termination) shall have occurred:
(a) any failure by the Originator to make any payment, transfer or deposit required to be
paid, effected or made by it hereunder on or before the date occurring two (2) Business Days after
the date such payment, transfer or deposit is required to be made hereunder; or
(b) any representation (other than any representation as to an Insurance Premium Loan the
breach of which is cured by repurchase pursuant to Section 5.03), warranty, certification or
written statement made or deemed made by the Originator under or in connection with this Agreement
or in any statement, record, certificate, financial statement or other document delivered pursuant
hereto or in connection herewith shall prove to have been incorrect in any material respect on or
as of the date made or deemed made which continues
16
unremedied for 30 days after the date on which
written notice of such failure, requiring the same to be remedied, shall have been given to the
Originator by the Participant; or
(c) the Originator shall fail to observe or perform in any covenant or agreement applicable to
it contained herein (other than as specified in clause (a) or (b) above) which continues unremedied
for 30 days after the date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Originator by the Participant; or
(d) an Event of Bankruptcy shall occur with respect to the Originator; or
(e) the Participant shall fail for any reason to have a valid sale, transfer and assignment of
the Participations and a beneficial ownership of the Originators right, title and interest in and
to the Insurance Premium Loans in which a Participation has been transferred hereunder, Collections
related thereto, all proceeds of such Insurance Premium Loans and all cash proceeds of any related
security; or
(f) this Agreement shall cease to be in full force and effect except in accordance with its
terms; or
(g) the Originator shall become required to register as an investment company under the
Investment Company Act of 1940, as amended; or
(h) a Servicer Default shall have occurred; or
(i) an Event of Default shall have occurred under the Financing Agreement;
then, if the event set forth in paragraph (d) above shall have occurred, an Event of Termination
shall occur without any notice, demand, protest or other requirement of any kind immediately upon
the occurrence of such event, and the Participant may, by notice to the Originator, declare that an
Event of Termination shall occur as of the date set forth in such notice. Upon the occurrence of
an Event of Termination, the Effective Period shall automatically terminate (any such termination
of the Effective Period, an Early Termination).
Upon the occurrence of an Early Termination, the Participant shall have, in addition to the
rights and remedies set forth above and any other rights and remedies under this Agreement, the
following rights and remedies:
(1) The Participant may require the Originator to assign all of the Originators right, title
and interest in and to the Insurance Premium Loans in which a Participation has been transferred
hereunder, the related promissory note and all other documents in the Loan Documentation Package
for such Insurance Premium Loan and any Collateral therefor (including any related Life Insurance
Policy) to a Person designated by the Participant; and
(2) The Participant shall have all other rights and remedies with respect to the Insurance
Premium Loans in which a Participation has been transferred hereunder and related
17
Life Insurance
Policies provided after default under the UCC of the applicable jurisdiction and under other
applicable laws, which rights and remedies shall be cumulative.
ARTICLE VIII.
INDEMNIFICATION AND LIMITATION ON LIABILITY
SECTION 8.01
Originator Indemnification
.
Without limiting any other rights that the Participant may have hereunder or under any
applicable law, the Originator hereby agrees to indemnify the Participant and the Indemnitees from
and against any and all amounts awarded against or incurred by any of them, and arising out of or
resulting from this Agreement or the activities of the Originator in connection herewith or in
respect of any Insurance Premium Loan in which a Participation has been transferred hereunder or
related Life Insurance Policy that are sustained as a result of:
(a) any representation, warranty or covenant made by the Originator under this Agreement, or
any other document, certificate or report delivered by the Originator hereunder that was incorrect
in any material respect when made or deemed made or that the Originator failed to perform;
(b) the failure by the Originator to comply with this Agreement, the Transaction Documents,
the Loan Documents, or any Requirement of Law with respect to any Insurance Premium Loan or Life
Insurance Policy;
(c) any commingling by the Originator of Collections with other funds of the Originator or any
of its Affiliates;
(d) any breach by the Originator of any obligation under any Insurance Premium Loan in which a
Participation has been transferred hereunder or related Life Insurance Policy; or
(e) the failure to vest and maintain vested in the Participant a first priority perfected
ownership interest in any Participation or Collections or a first priority perfected security
interest in the Insurance Premium Loans in which a Participation has been transferred hereunder and
Collections.
The foregoing indemnity excludes (a) losses on Insurance Premium Loans in which a
Participation has been transferred hereunder to the extent reimbursement therefor would constitute
credit recourse to the Originator for nonpayment of any Insurance Premium Loan in which a
Participation has been transferred hereunder by the related Obligor and (b) any income or franchise
taxes or similar taxes (or any interest or penalties on them).
18
ARTICLE IX.
MISCELLANEOUS PROVISIONS
SECTION 9.01
Amendment
. This Agreement may be amended from time to time by the
Participant and the Originator in writing with the prior written consent of the Agents and the
Required Lenders. Notwithstanding the foregoing, the parties hereby agree that no amendment,
modification or waiver of, or consent with respect to, any provision of this Agreement that (a)
prior to the occurrence of a Credit Event (as defined in the Collateral Value Insurance Policy)
would, in the reasonable belief of any party hereto, be likely to adversely affect the interests of
the Collateral Value Insurer shall in any event be made or become effective unless the same shall
be consented to by the Collateral Value Insurer in writing, or (b) following to the occurrence of a
Credit Event, would, in the reasonable belief of any party hereto, be likely to adversely affect
the interests of the Contingent Collateral Value Insurer shall in any event be made or become
effective unless the same shall be consented to by the Contingent Collateral Value Insurer in
writing. In all events, copies of any amendments to this Agreement shall be promptly provided to
(x) the Collateral Value Insurer prior to the occurrence of a Credit Event and (y) the Contingent
Collateral Value Insurer following the occurrence of a Credit Event, by the Participant following
execution thereof. Each of the parties hereto agrees that the Collateral Value Insurer and the
Contingent Collateral Value Insurer are third party beneficiaries solely with respect to this
Section 9.01, and shall have no rights with respect to any other provisions of this Agreement.
Each of the parties hereto agrees that the each of the Agents and the Lenders is a third party
beneficiary with respect to this Agreement.
SECTION 9.02
Governing Law; Submission to Jurisdiction; Waiver
.
(a) THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICTS OF LAWS PROVISIONS
(OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW), AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
(b) EACH OF THE PARTIES HERETO IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY
FEDERAL OR STATE COURT SITTING IN THE COUNTY AND STATE OF NEW YORK IN RESPECT OF ANY ACTION OR
PROCEEDING ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY TO THIS AGREEMENT
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH PROCEEDINGS IN ANY SUCH COURT AND ANY
CLAIM THAT ANY PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(c) EACH PARTY HERETO HEREBY WAIVES THE RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY ON ANY
CLAIM, COUNTERCLAIM, SETOFF, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING OUT OF OR IN ANY WAY
RELATED TO THIS AGREEMENT OR ANY OTHER TRANSACTION
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DOCUMENTS, OR (B) IN ANY WAY IN CONNECTION WITH
OR PERTAINING OR RELATED TO OR INCIDENTAL TO ANY DEALINGS OF THE PARTIES TO THIS AGREEMENT WITH
RESPECT TO THE TRANSACTION DOCUMENTS OR IN CONNECTION WITH THIS AGREEMENT OR THE EXERCISE OF ANY
PARTYS RIGHTS AND REMEDIES UNDER THIS AGREEMENT OR OTHERWISE, OR THE CONDUCT OR THE RELATIONSHIP
OF THE PARTIES HERETO, IN ALL OF THE FOREGOING CASES WHETHER NOW EXISTING OR HEREAFTER ARISING AND
WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.
SECTION 9.03
Notices
. All demands, notices, reports and communications hereunder
shall be in writing and shall be deemed to have been duly given if personally delivered at,
delivered by electronic mail to, mailed by certified mail, return receipt requested, mailed by a
nationally recognized overnight courier or sent via facsimile, to (a) in the case of the
Participant, to such partys address specified in the Financing Agreement or (b) in the case of the
Originator, to the address specified for the Originator in the signature pages attached hereto; or,
as to any of such Persons, at such other address, facsimile number or electronic mail address as
shall be designated by such Person in a written notice to the other Persons. Notices, demands and
communications hereunder given shall be effective, (1) if personally delivered, when received, (2)
if sent by certified mail, three (3) Business Days after having been deposited in the mail, postage
prepaid, (3) if sent by overnight courier, one (I) Business Day after having been given to such
courier, and (4) if transmitted by facsimile or electronic mail, upon oral confirmation of receipt
by the addressee or upon the senders receipt of an affirmative confirmation of receipt thereof by
the addressee. Notwithstanding the foregoing, notice of breach, service of legal process or other
similar communications shall not be given by electronic mail and will not be deemed duly given
under this Agreement if delivered by such means.
SECTION 9.04
Severability of Provisions
. If any one or more of the covenants,
agreements, provisions or terms of this Agreement shall for any reason whatsoever be held invalid,
then such covenants, agreements, provisions or terms shall be deemed severable from the remaining
covenants, agreements, provisions and terms of this Agreement and shall in no way affect the
validity or enforceability of the other provisions of this Agreement.
SECTION 9.05
Further Assurances
. The Originator and the Participant agree to do and
perform, from time to time, any and all acts and to authorize and execute any and all further
documents and instruments reasonably and in good faith determined to be required by law or
reasonably requested by the other party hereto to more fully to effect the purposes of this
Agreement. The Originator authorizes the Participant to file any financing statements or
continuation statements relating thereto and to the Insurance Premium Loans in which a
Participation has been transferred hereunder and related Life Insurance Policy under the provisions
of the UCC, or any similar law, of any applicable jurisdiction.
SECTION 9.06
No Waiver; Cumulative Remedies
. No failure to exercise and no delay in
exercising, on the part of the Participant or the Originator, of any right, remedy, power or
privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and not exhaustive of any rights, remedies, powers and
privileges provided by law.
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SECTION 9.07
Counterparts
. This Agreement may be executed in two or more counterparts
(and by different parties on separate counterparts), each of which shall be an original, but all of
which together shall constitute one and the same instrument. Delivery of an executed counterpart
of a signature page to this Agreement by telecopier shall be effective as delivery of a manually
executed counterpart of this Agreement.
SECTION 9.08
Merger and Integration
. Except as specifically stated otherwise herein
and in the other Transaction Documents and in the Loan Documents to which the parties hereto are a
party, this Agreement sets forth the entire understanding of the parties hereto relating to the
subject matter hereof, and all prior understandings, written or oral, are superseded by this
Agreement. This Agreement may not be modified, amended, waived or supplemented except as provided
herein. Except for items specifically required to be delivered hereunder, the Participant shall
not have any duty or responsibility to provide the Originator or any of their respective affiliates
any information that comes into the possession of the Participant or any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates.
SECTION 9.09
Headings
. The headings herein are for purposes of reference only and
shall not otherwise affect the meaning or interpretation of any provision hereof.
SECTION 9.10
No Petition
. The Originator, by entering into this Agreement, hereby
covenants and agrees that it will not at any time institute against the Participant, or solicit or
incite any other Person to institute for the purpose of joining in any such institution against the
Participant, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or
other proceedings under any United States federal or state bankruptcy or similar law. This Section
will survive the termination of this Agreement.
SECTION 9.11
Tax Classification
. Nothing contained in this Agreement shall be deemed
or construed by the parties hereto or by any third person to create the relationship of a
partnership or joint venture. The parties hereto agree that they will not take any action contrary
to the foregoing intention and agree to report the transaction for all tax purposes consistent with
the foregoing intention unless and until determined to the contrary by an applicable tax authority.
SECTION 9.12
Electronic Communications
. Unless otherwise provided herein,
communications may be via e-mail; provided that if communication by e-mail is required under this
Agreement, but is not available for any reason, any other suitable means of written communication
providing for same or next day delivery shall be used in lieu thereof, including by facsimile
transmission or personal delivery.
SECTION 9.13
Participations
. THE PARTIES HERETO ARE PARTICIPATING IN INSURANCE
PREMIUM LOANS AND ARE NOT INVESTING IN A BUSINESS ENTERPRISE.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their
respective officers as of the day and year first above written.
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IMPERIAL PREMIUM FINANCE, LLC,
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as the Originator
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By: Imperial Holdings, LLC, its managing member
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By:
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Name:
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Jonathan Neuman
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Title:
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President
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Address:
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701 Park of Commerce Blvd., Suite 301
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Boca Raton, FL 33487
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Telecopy No.: (561) 995-4203
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IMPERIAL LIFE FINANCING II, LLC,
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as Participant
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By: Imperial Premium Finance, LLC, its sole member
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By: Imperial Holdings, LLC, its managing member
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By:
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Name:
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Jonathan Neuman
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Title:
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President
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Address:
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191 Peachtree Street NE, Suite 3300
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Atlanta, GA 30303
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Telecopy No.:
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22
EXHIBIT A
Glossary of Defined Terms
Agents means CTL Holdings II, LLC, as collateral agent and administrative agent under the
Financing Agreement, together with its successors and assigns.
Code means the Internal Revenue Code of 1986, as amended.
Collection Account means that certain bank account, referenced as the Imperial Life
Financing II, LLC Collection Account and pledged pursuant to the Security Agreement, maintained at
the Cash Management Bank, for the purpose of receiving Collections and which is subject to a
blocked account agreement, or with respect to which a security interest has otherwise been created
and perfected.
Early Termination is defined in Section 7.01 of the Master Participation Agreement.
Effective Period means the period beginning on the Effective Date and terminating on the
close of business on the date on which an Early Termination occurs.
ERISA Affiliate means, with respect to any Person, any trade or business (whether or not
incorporated) which is a member of a group of which such Person is a member and which would be
deemed to be a controlled group within the meaning of Sections 414(b), (c), (m) and (o) of the
Code.
Event of Bankruptcy means an Event of Default under Sections 9.01(f) or (g) of the Financing
Agreement.
Event of Termination is defined in Article VII of the Master Participation Agreement.
Financing Agreement means the Financing Agreement, dated on or about the Effective Date, by
and among the Participant, the lenders from time to time party thereto and CTL Holdings II, LLC, as
administrative agent and collateral agent, as the same may be amended, modified, restated,
supplemented, refinanced, extended, refunded or replaced (in whole or in part) from time to time.
Funding Date means for each Insurance Premium Loan the date on which the Participant pays
the Originator the Purchase Price.
Lenders means the lenders from time to time party to the Financing Agreement, together with
their successors and assigns.
Lien means any interest in property securing an obligation owed to, or a claim by, a Person,
whether such interest is based on the common law, statute or contract, and including but not
limited to the security interest lien arising from a mortgage, encumbrance, judgment, pledge,
conditional sale or trust receipt for a lease, consignment or bailment for security purposes, but,
with respect to a Life Insurance Policy, does not include the interest of the
A-1
Life Insurance Carrier therein if such interest arises solely from or with respect to a
related policy loan.
Life Insurance Carrier means the issuer of a Life Insurance Policy.
Master Participation Agreement means the Master Participation Agreement, dated as of the
Effective Date, between the Originator and the Participant.
Originator means Imperial Premium Finance, LLC.
Participant means Imperial Life Financing II, LLC, a Georgia limited liability company, in
its capacity as participant under the Master Participation Agreement, and its successors and
permitted assigns in that capacity.
Participation has the meaning set forth in the Master Participation Agreement.
Purchase Price means, with respect to each 100% participation in an Insurance Premium,
acquired or purported to be acquired by the Participant under the Master Participation Agreement or
any similar sale or purchase agreement, the initial outstanding principal balance of such Insurance
Premium Loan.
Requirements of Law means, with respect to any Person, collectively, the common law and all
federal, state, provincial, local, foreign, multinational or international laws, statutes, codes,
treaties, standards, rules and regulations, guidelines, ordinances, orders, judgments, writs,
injunctions, decrees (including administrative or judicial precedents or authorities) and the
interpretation or administration thereof by, and other determinations, directives, requirements or
requests of, any Governmental Authority, in each case that are applicable to or binding upon such
Person.
Transfer Effective Date means, with respect to any Insurance Premium Loan in which a
Participation has been transferred, the related Funding Date.
A-2
EXHIBIT B
FORM OF PARTICIPATION CERTIFICATE
AGREEMENT, dated as of ________________, 200__, by and between Imperial Premium Finance, LLC,
a Florida limited liability company (in such capacity, the
Seller
) and Imperial Life
Financing II, LLC, a Georgia limited liability company (
Purchaser
).
Reference is made to that certain Master Participation Agreement dated as of March ___, 2009
by and between Seller and Purchaser (the
Master Participation Agreement
). Capitalized
terms used herein and not otherwise defined shall have the meanings ascribed to them in the Master
Participation Agreement.
This Participation Certificate shall be deemed to be a Participation Certificate as described
in the Master Participation Agreement and with respect to the sale by Seller to Purchaser of a
participation interest in certain Insurance Premium Loans described below. As set forth in Section
3.01 of the Master Participation Agreement, the terms and conditions of the Master Participation
Agreement shall be deemed incorporated herein.
The parties hereto hereby agree that the Seller has sold a Participation (subject to the
receipt of funds in the amount of the Participation in accordance with the provisions of the Master
Participation Agreement), and the Participant has purchased from the Seller (and forwarded to the
Seller funds in the amount of the Participation in accordance with the terms of the Master
Participation Agreement), a Participation in the Insurance Premium Loan:
Item 1.
Transfer Effective Date
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Item 2.
Borrower
:
Item 3.
Insurance Premium Loan Number
:
Item 4.
Loan Documentation
:
Item 5.
Insurance Premium Loan Agreement Date
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Item 6.
Life Insurance Policy Number
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Item 7.
Amount of Participation in Outstanding Insurance Premium Loan
:
Item 8.
Insurance Premium Loan
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Item 9.
Purchase Price
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Item 10:
Final Maturity Date of Insurance Premium Loan
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B-1
IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Participation
Certificate this ___ day of__________, 200___.
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SELLER
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IMPERIAL PREMIUM FINANCE, LLC
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By: Imperial Holdings, LLC, its managing member
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By:
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Name: Jonathan Neuman
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Title: President
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PURCHASER
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IMPERIAL LIFE FINANCING II, LLC
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By: Imperial Premium Finance, LLC, its sole member
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By: Imperial Holdings, LLC, its managing member
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By:
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Name: Jonathan Neuman
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Title: President
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B-2