Florida | 6199 | 77-0666377 | ||
(State or other jurisdiction
of
Incorporation or organization) |
(Primary Standard Industrial
Classification Code Number) |
(I.R.S. Employer
Identification No.) |
Michael B. Kirwan
John J. Wolfel, Jr. Foley & Lardner LLP One Independent Drive, Suite 1300 Jacksonville, Florida 32202 (904) 359-2000 |
J. Brett Pritchard
Locke Lord Bissell & Liddell LLP 111 South Wacker Drive Chicago, Illinois 60606 (312) 443-0700 |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ | Smaller reporting company o |
Proposed Maximum
|
Amount of
|
|||||||||
Title of Each Class of
|
Aggregate
|
Registration
|
||||||||
Securities to be Registered | Offering Price(1)(2) | Fee(3) | ||||||||
Common Stock, par value $0.01 per share
|
$ | 287,500,000 | $ | 20,498.75 | ||||||
(1) | Includes amount attributable to shares of common stock issuable upon the exercise of the underwriters over-allotment option. | |
(2) | 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. | |
(3) | The registration fee was previously paid on August 11, 2010. |
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.
|
Per Share | Total | |||||||
Price to public
|
$ | $ | ||||||
Discounts and commissions to underwriters*
|
$ | $ | ||||||
Net proceeds (before expenses) to us
|
$ | $ |
* | See Underwriting on page 138 of this prospectus for a description of the underwriters compensation. |
FBR Capital Markets |
JMP Securities |
Wunderlich Securities |
Page | ||||||||
ii | ||||||||
1 | ||||||||
13 | ||||||||
32 | ||||||||
33 | ||||||||
34 | ||||||||
35 | ||||||||
37 | ||||||||
39 | ||||||||
41 | ||||||||
46 | ||||||||
79 | ||||||||
99 | ||||||||
105 | ||||||||
120 | ||||||||
121 | ||||||||
127 | ||||||||
131 | ||||||||
136 | ||||||||
138 | ||||||||
143 | ||||||||
143 | ||||||||
143 | ||||||||
F-1 | ||||||||
EX-1.1 | ||||||||
EX-2.1 | ||||||||
EX-4.2 | ||||||||
EX-5.1 | ||||||||
EX-23.2 |
i
| 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. | |
| carrying value of the loan refer to the loan principal balance, accrued interest and accreted origination fees excluding any impairment valuation adjustment. | |
| 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. | |
| 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. | |
| net carrying value of the loan refer to the loan principal balance, accrued interest and accreted origination fees, net of any impairment valuation adjustment. | |
| principal balance of the loan refer to the principal amount loaned by us in a premium finance transaction without including origination fees or interest. | |
| 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. | |
| 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. |
| an initial public offering price that is the midpoint of the price range on the cover of this prospectus; | |
| no exercise of the underwriters over-allotment option; |
| 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 1,573,000 shares of our common stock; |
| the issuance of 27,000 shares of common stock to two employees pursuant to the terms of each of their respective phantom stock agreements; and |
| the conversion, immediately prior to the closing of this offering, of a $30.0 million debenture into 2,000,000 shares of our common stock as described under Corporate Conversion. |
ii
1
Table of Contents
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.
2
Table of Contents
Nine Months
Ended
Year Ended December 31,
September 30,
2007
2008
2009
2009
2010
10
276
396
275
385
$
701
$
18,295
$
28,877
$
20,460
$
33,713
11.0
%
12.0
%
16.3
%
16.1
%
19.3
%
226
439
96
291
10.8
%
11.5
%
11.1
%
9.1
%
$
205.6
$
19.2
$
11.3
$
12.7
$
9.3
3
Table of Contents
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
4
Table of Contents
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 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.
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.
5
Table of Contents
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
Table of Contents
9
10
Shares of common stock offered by us
16,666,667 shares.
2,500,000 shares.
20,266,667 shares.
We estimate that our net proceeds from this offering will be
approximately $228.3 million, 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 $263.2 million. We intend to use
approximately $175.0 million of the net proceeds to support
our premium finance transactions, up to $30.0 million of
the net proceeds to support our structured settlement activities
and any remaining proceeds for general corporate purposes. See
Use of Proceeds.
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.
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.
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 1,573,000 shares
of our common stock;
reflects the conversion, immediately prior to the closing of
this offering, of a $30.0 million debenture into
2,000,000 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 27,000 shares of common stock to
two of our employees pursuant to the terms of each of their
respective phantom stock agreements;
excludes up to 2,500,000 shares of common stock that may be
issued pursuant to the underwriters over-allotment option;
excludes 4,053,333 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
500,000 shares of common stock issuable upon the exercise
of warrants that will be issued to our existing stockholders in
connection with the closing of the underwriters
over-allotment option as described in Description of
Capital Stock Warrants; and
excludes 1,200,000 additional shares of common stock available
for future issuance under our 2010 Omnibus Incentive Plan (the
Omnibus Plan).
7
Table of Contents
Pro Forma Consolidated and Combined Financial and Operating
Data
8
Table of Contents
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)
$
24,515
$
48,004
$
26,114
$
20,216
$
9,099
$
26,114
$
9,099
4,888
11,914
21,483
15,843
15,795
21,483
15,795
526
9,399
29,853
21,865
16,728
29,853
16,728
443
2,684
499
4,848
2,684
4,848
16,410
14,886
6,968
16,410
6,968
1,954
1,954
4,805
4,805
2
47
71
53
195
71
195
29,931
69,807
96,615
73,362
60,392
96,615
60,392
1,343
12,752
33,755
24,710
24,244
30,479
(1)
21,787
(1)
2,332
10,768
9,830
6,705
3,514
9,830
3,514
(225
)
2,738
12,058
11,279
4,320
12,058
4,320
126
7,569
18,339
13,101
22,601
18,339
22,601
24,335
41,566
31,269
22,997
22,118
31,269
22,118
(2)
(2)
27,911
75,393
105,251
78,792
76,797
101,975
74,340
$
2,020
$
(5,586
)
$
(8,636
)
$
(5,430
)
$
(16,405
)
$
(5,360
)
$
(13,948
)
$
(1.49
)
$
(3.87
)
3,600,000
3,600,000
(1)
Reflects a reduction of interest expense of $3.3 million
for the year ended December 31, 2009 and $2.5 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.
Table of Contents
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)
$
15,891
$
3,685
$
8,685
(1)
$
238,919
(3)
643
643
643
670
877
877
877
2,165
736
736
736
26,323
11,455
11,455
9,532
21,034
17,175
17,175
17,175
189,111
121,564
121,564
121,564
152
10,554
10,554
10,554
4,306
8,846
8,846
8,846
542
1,270
1,270
1,270
3,526
4,163
4,163
4,163
$
263,720
$
180,968
$
185,968
$
414,279
$
3,170
$
4,210
$
4,210
$
4,210
7,094
7,094
7,094
60,645
60,645
60,645
12,627
16,172
12,811
(2)
12,811
231,064
82,393
62,539
(2)
62,539
$
246,861
$
170,514
$
147,299
$
147,299
4,035
4,035
(1)
5,000
5,000
(1)
7,000
(1)
700
(1)
7,300
(1)
(5,000
)
(1)
19,924
19,924
(1)
36
(1)(2)
203
(3)
67,138
(1)(2)
295,282
(3)
(12,100
)
(28,505
)
(28,505
)
(28,505
)
16,859
10,454
38,669
266,980
$
263,720
$
180,968
$
185,968
414,279
(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. Does not reflect the sale of 110,000 Series F
preferred units effective December 31, 2010, which were
issued in exchange for a promissory note, and therefore have no
effect on stockholders equity.
(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
16,666,667 shares of common stock at an initial public
offering price of $15.00 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.
Table of Contents
Three Months Ended
Nine Months Ended
Year Ended December 31,
September 30,
September 30,
2007
2008
2009
2009
2010
2009
2010
196
499
194
23
15
145
86
$
44,501
$
97,559
$
51,573
$
7,385
$
2,788
$
39,030
$
18,245
$
794,517
$
2,283,223
$
942,312
$
130,600
$
62,500
$
708,910
$
417,275
$
15,082
$
21,744
$
13,742
$
2,623
$
2,495
$
11,165
$
7,234
75.5
74.9
74.9
74.1
75.0
74.7
74.0
12.9
13.2
13.2
13.2
14.1
13.4
14.1
$
14.0
$
14.9
$
16.0
$
18.8
$
13.1
$
16.3
$
13.9
$
4,053.7
$
4,575.6
$
4,857.3
$
5,678.3
$
4,166.7
$
4,889.0
$
4,852.0
$
227.0
$
195.5
$
265.8
$
321.1
$
185.8
$
269.2
$
212.1
10.5
%
10.8
%
11.4
%
11.5
%
11.5
%
11.5
%
11.5
%
$
125.1
$
96.2
$
134.6
$
153.4
$
92.1
$
139.4
$
105.8
55.1
%
49.2
%
50.6
%
47.8
%
49.6
%
51.8
%
49.9
%
$
45.8
$
77.9
$
118.9
$
138.4
$
76.5
$
114.7
$
88.5
20.2
%
39.9
%
44.7
%
43.1
%
41.1
%
42.6
%
41.7
%
$
43,650
$
148,744
$
189,111
$
187,330
$
121,564
$
187,330
$
121,564
265
702
692
706
426
706
426
$
1,065,870
$
2,895,780
$
3,091,099
$
3,296,937
$
2,120,587
$
3,296,937
$
2,120,587
494
631
613
403
613
403
$
$
118,864
$
177,137
$
169,455
$
116,115
$
169,455
$
116,115
76.3
75.3
75.4
75.5
74.3
75.5
74.3
12.4
13.9
14.5
14.2
15.1
14.2
15.1
$
7.7
$
9.1
$
8.5
$
8.3
$
6.7
$
8.3
$
6.7
$
181.9
$
211.9
$
273.3
$
265.3
$
285.4
$
265.3
$
285.4
10.2
%
10.4
%
10.9
%
10.7
%
11.3
%
11.2
%
11.3
%
27
20
31
20
31
$
$
$
4,306
$
1,711
$
8,846
$
1,711
$
8,846
$
$
$
2.8
$
2.2
$
5.2
$
2.2
$
5.2
11
Table of Contents
Three Months Ended
Nine Months Ended
Year Ended December 31,
September 30,
September 30,
2007
2008
2009
2009
2010
2009
2010
10
276
396
102
138
275
385
23
52
10
48
32
96
11.0
%
12.0
%
16.3
%
17.1
%
20.1
%
16.1
%
19.3
%
$
701
$
18,295
$
28,877
$
8,094
$
13,458
$
20,460
$
33,713
$
369
$
8,010
$
10,947
$
2,908
$
2,959
$
7,894
$
9,099
$
2,056
$
5,295
$
4,460
$
1,087
$
1,168
$
3,479
$
3,561
$
666
$
4,475
$
5,015
$
1,298
$
1,957
$
3,257
$
5,294
$
70.1
$
66.3
$
72.9
$
79.4
$
97.5
$
74.4
$
87.6
$
36.9
$
29.0
$
27.6
$
28.5
$
21.4
$
28.7
$
23.6
80.3
113.8
109.7
113.4
147.3
109.2
134.3
$
205.6
$
19.2
$
11.3
$
10.7
$
8.5
$
12.7
$
9.2
$
66.6
$
16.2
$
12.7
$
12.7
$
14.2
$
11.8
$
13.8
226
439
72
96
291
$
$
443
$
2,684
$
24
$
1,585
$
499
$
4,848
10.8
%
11.5
%
9.6
%
11.1
%
9.1
%
12
Table of Contents
13
14
| 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. |
15
16
17
18
| 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; |
19
| 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; | |
| any loss caused by our fraudulent, illegal, criminal, malicious or grossly negligent acts; | |
| 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; | |
| 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; | |
| our failure to timely submit a properly completed proof of loss certificate to the lender protection insurance policy insurer; | |
| our failure to timely notify the lender protection insurance policy insurer of: |
| the occurrence of certain prohibited acts, as described in the lender protection insurance policy, or | |
| material non-compliance of the related loan with applicable laws, in each case after obtaining actual knowledge of such events; |
| our making of a claim under the lender protection insurance policy knowing the same to be fraudulent; or | |
| 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. |
20
| training and educating our employees regarding our obligations relating to confidential information; | |
| actively monitoring our record retention plans and any changes in state or federal privacy and compliance requirements; |
21
| maintaining secure storage facilities for tangible records; and | |
| limiting access to electronic information. |
22
23
24
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25
Table of Contents
our results of operations;
changes in expectations as to our future results of operations,
including financial estimates and projections by securities
analysts and investors;
changes in laws and regulations applicable to structured
settlements or premium finance transactions;
increased competition for premium finance lending or the
acquisition of structured settlements;
our ability to secure credit facilities on favorable terms or at
all;
results of operations that vary from those expected by
securities analysts and investors;
future sales of our common stock;
fluctuations in interest rates, inflationary pressures and other
changes in the investment environment that affect returns on
invested assets; and
volatile and unpredictable developments, including man-made,
weather-related and other natural catastrophes or terrorist
attacks.
26
Table of Contents
pay a price per share that substantially exceeds the pro forma
net tangible book value of our assets after subtracting
liabilities; and
contribute 80.0% of the total amount invested to date to fund us
based on an assumed initial offering price to the public of
$15.00 per share, which is the midpoint of the price range on
the cover of this prospectus, and will own 82.2% of the shares
of common stock outstanding after completion of this offering.
27
Table of Contents
28
Table of Contents
29
Table of Contents
30
Table of Contents
31
Table of Contents
our results of operations;
our ability to continue to grow our businesses;
our ability to obtain financing on favorable terms or at all;
changes in laws and regulations applicable to premium finance
transactions or structured settlements;
changes in mortality rates and the accuracy of our assumptions
about life expectancies;
increased competition for premium finance lending or for the
acquisition of structured settlements;
adverse developments in capital markets;
loss of the services of any of our executive officers;
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
changes in general economic conditions, including inflation,
changes in interest rates and other factors.
32
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33
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34
Table of Contents
$8.0 million of the debenture was attributed to the
repurchase of 112,500 shares of common units. These common
units were originally issued on December 15, 2006 for
$5.0 million in cash. The value attributed to the common
units reflects an agreement between us and our shareholders and
equates to a return on investment of approximately 15% per annum
for the period they have been outstanding (approximately
4 years).
$19.0 million of the debenture was attributed to
(i) the repayment of $18.3 million ($16.1 million
of principal and $2.2 million of accrued interest) due as
of November 1, 2010 on the promissory note in favor of
Skarbonka and (ii) an agreement between us and our
shareholders to contribute an additional $700,000 in value to
imputed interest on the debenture until the expected repayment
date.
$3.0 million of value was attributed to the repurchase of
25,000 shares of Series B preferred units. The
Series B preferred units were originally issued on
December 31, 2009 for $2.5 million. As of
November 1, 2010 (issuance of debenture), these units had
an unpaid preferred return of $333,000.
35
Table of Contents
36
Table of Contents
38
on an actual basis;
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
1,573,000 shares of our common stock; (ii) the
issuance of 27,000 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
2,000,000 shares of our common stock based on an assumed
initial public offering price of $15.00 per share, which is the
midpoint of the price range on the cover of this prospectus, as
described under Corporate Conversion; and
on a pro forma as adjusted basis to give effect to the above and
our sale of 16,666,667 shares of common stock at an assumed
initial public offering price of $15.00 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.
As of September 30, 2010
Pro Forma As
Actual
Pro Forma
Adjusted
(In thousands)
$
82,393
$
62,539
$
62,539
$
82,393
$
62,539
$
62,539
4,035
5,000
7,000
700
7,300
(5,000
)
19,924
(28,505
)
$
10,454
$
$
37
Table of Contents
As of September 30, 2010
Pro Forma As
Actual
Pro Forma
Adjusted
(In thousands)
36
203
67,138
295,282
(28,505
)
(28,505
)
38,669
266,980
$
92,847
$
101,208
$
329,519
up to 2,500,000 shares of common stock that may be issued
pursuant to the underwriters over-allotment option;
4,053,333 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 500,000 shares of
common stock issuable upon the exercise of warrants that will be
issued to our existing stockholders in connection with the
closing of the underwriters over-allotment option; and
1,200,000 additional shares available for future issuance under
our Omnibus Plan.
Table of Contents
43
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 1,573,000 shares
of our common stock;
the issuance of 27,000 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 2,000,000 shares of our common stock based on an
assumed initial public offering price of $15.00 per share, which
is the midpoint of the price range on the cover of this
prospectus, as described under Corporate Conversion.
$
15.00
$
10.74
2.43
13.17
$
1.83
39
Table of Contents
Shares Issued
Total Consideration
Average Price
Number
Percent
Amount
Percent
per Share
3,600,000
17.8
%
$
62,602,000
20.0
%
$
17.39
16,666,667
82.2
%
$
250,000,000
80.0
%
$
15.00
20,266,667
100.0
%
$
312,602,000
100.0
%
$
15.42
up to 2,500,000 shares of common stock that may be issued
pursuant to the underwriters over-allotment option;
4,053,333 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 500,000 shares of
common stock issuable upon the exercise of warrants that will be
issued to our existing stockholders in connection with the
closing of the underwriters over-allotment option; and
1,200,000 additional shares available for future issuance under
our Omnibus Plan.
40
Table of Contents
41
Table of Contents
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)
$
678
$
24,515
$
48,004
$
26,114
$
20,216
$
9,099
$
26,114
$
9,099
316
4,888
11,914
21,483
15,843
15,795
21,483
15,795
526
9,399
29,853
21,865
16,728
29,853
16,728
443
2,684
499
4,848
2,684
4,848
16,410
14,886
6,968
16,410
6,968
1,954
1,954
4,805
4,805
2
47
71
53
195
71
195
994
29,931
69,807
96,615
73,362
60,392
96,615
60,392
1,343
12,752
33,755
24,710
24,244
30,479
(1)
21,787
(1)
2,332
10,768
9,830
6,705
3,514
9,830
3,514
(225
)
2,738
12,058
11,279
4,320
12,058
4,320
126
7,569
18,339
13,101
22,601
18,339
22,601
891
24,335
41,566
31,269
22,997
22,118
31,269
22,118
(2)
(2)
891
27,911
75,393
105,251
78,792
76,797
$
101,975
74,340
$
103
$
2,020
$
(5,586
)
$
(8,636
)
$
(5,430
)
$
(16,405
)
$
(5,360
)
$
(13,948
)
$
(1.49
)
$
(3.87
)
3,600,000
3,600,000
(1)
Reflects a reduction of interest expense of $3.3 million
for the year ended December 31, 2009 and $2.5 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.
42
Table of Contents
Historical
Pro Forma
December 31,
September 30,
September 30,
2006
2007
2008
2009
2009
2010
2010
(Unaudited)
(Unaudited)
(In thousands, except share data)
5,351
$
1,495
$
7,644
$
15,891
$
466
$
3,685
$
8,685
(1)
1,675
2,221
643
643
562
659
670
666
877
877
136
5,718
8,871
2,165
1,816
736
736
672
26,650
26,323
26,963
11,455
11,455
244
2,972
8,604
21,034
18,909
17,175
17,175
3,909
43,650
148,744
189,111
187,330
121,564
121,564
377
1,141
152
6,969
10,554
10,554
320
528
528
4,306
1,711
8,846
8,846
1,714
542
1,270
1,270
756
1,875
1,850
1,337
1,514
919
919
30
835
4,180
887
503
2,017
2,017
37
456
476
982
487
699
699
$
10,463
$
62,001
$
211,040
$
263,720
$
247,334
$
180,968
$
185,968
$
505
$
3,437
$
5,533
$
3,170
$
2,981
$
4,210
$
4,210
7,094
7,094
60,645
60,645
882
5,563
12,627
14,552
16,172
12,811
(2)
35,559
183,462
231,064
214,737
82,393
62,539
(2)
$
505
$
39,878
$
194,558
$
246,861
$
232,270
$
170,514
$
147,299
4,035
4,035
4,035
(1)
5,000
5,000
(1)
7,000
(1)
700
(1)
7,300
(1)
(5,000
)
9,855
20,000
19,945
19,924
19,924
19,924
(1)
36
(1)(2)
67,138
(1)(2)
103
2,123
(3,463
)
(12,100
)
(8,895
)
(28,505
)
(28,505
)
9,958
22,123
16,482
16,859
15,064
10,454
38,669
$
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. Does not reflect the sale of 110,000 Series F
preferred units effective December 31, 2010, which were
issued in exchange for a promissory note, and therefore have no
effect on stockholders equity.
(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.
Table of Contents
Three Months Ended
Nine Months Ended
Year Ended December 31,
September 30,
September 30,
2007
2008
2009
2009
2010
2009
2010
196
499
194
23
15
145
86
$
44,501
$
97,559
$
51,573
$
7,385
$
2,788
$
39,030
$
18,245
$
794,517
$
2,283,223
$
942,312
$
130,600
$
62,500
$
708,910
$
417,275
$
15,082
$
21,744
$
13,742
$
2,623
$
2,495
$
11,165
$
7,234
75.5
74.9
74.9
74.1
75.0
74.7
74.0
12.9
13.2
13.2
13.2
14.1
13.4
14.1
$
14.0
$
14.9
$
16.0
$
18.8
$
13.1
$
16.3
$
13.9
$
4,053.7
$
4,575.6
$
4,857.3
$
5,678.3
$
4,166.7
$
4,889.0
$
4,852.0
$
227.0
$
195.5
$
265.8
$
321.1
$
185.8
$
269.2
$
212.1
10.5
%
10.8
%
11.4
%
11.5
%
11.5
%
11.5
%
11.5
%
$
125.1
$
96.2
$
134.6
$
153.4
$
92.1
$
139.4
$
105.8
55.1
%
49.2
%
50.6
%
47.8
%
49.6
%
51.8
%
49.9
%
$
45.8
$
77.9
$
118.9
$
138.4
$
76.5
$
114.7
$
88.5
20.2
%
39.9
%
44.7
%
43.1
%
41.1
%
42.6
%
41.7
%
$
43,650
$
148,744
$
189,111
$
187,330
$
121,564
$
187,330
$
121,564
265
702
692
706
426
706
426
$
1,065,870
$
2,895,780
$
3,091,099
$
3,296,937
$
2,120,587
$
3,296,937
$
2,120,587
494
631
613
403
613
403
$
$
118,864
$
177,137
$
169,455
$
116,115
$
169,455
$
116,115
76.3
75.3
75.4
75.5
74.3
75.5
74.3
12.4
13.9
14.5
14.2
15.1
14.2
15.1
$
7.7
$
9.1
$
8.5
$
8.3
$
6.7
$
8.3
$
6.7
$
181.9
$
211.9
$
273.3
$
265.3
$
285.4
$
265.3
$
285.4
10.2
%
10.4
%
10.9
%
10.7
%
11.3
%
11.2
%
11.3
%
27
20
31
20
31
$
$
$
4,306
$
1,711
$
8,846
$
1,711
$
8,846
$
$
$
2.8
$
2.2
$
5.2
$
2.2
$
5.2
44
Table of Contents
Three Months Ended
Nine Months Ended
Year Ended December 31,
September 30,
September 30,
2007
2008
2009
2009
2010
2009
2010
10
276
396
102
138
275
385
23
52
10
48
32
96
11.0
%
12.0
%
16.3
%
17.1
%
20.1
%
16.1
%
19.3
%
$
701
$
18,295
$
28,877
$
8,094
$
13,458
$
20,460
$
33,713
$
369
$
8,010
$
10,947
$
2,908
$
2,959
$
7,894
$
9,099
$
2,056
$
5,295
$
4,460
$
1,087
$
1,168
$
3,479
$
3,561
$
666
$
4,475
$
5,015
$
1,298
$
1,957
$
3,257
$
5,294
$
70.1
$
66.3
$
72.9
$
79.4
$
97.5
$
74.4
$
87.6
$
36.9
$
29.0
$
27.6
$
28.5
$
21.4
$
28.7
$
23.6
80.3
113.8
109.7
113.4
147.3
109.2
134.3
$
205.6
$
19.2
$
11.3
$
10.7
$
8.5
$
12.7
$
9.2
$
66.6
$
16.2
$
12.7
$
12.7
$
14.2
$
11.8
$
13.8
226
439
72
96
291
$
$
443
$
2,684
$
24
$
1,585
$
499
$
4,848
10.8
%
11.5
%
9.6
%
11.1
%
9.1
%
45
Table of Contents
46
47
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 |
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. |
48
49
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 | % |
50
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 | % |
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 | % |
51
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 | % |
52
Year Ended
|
Nine Months Ended
|
|||||||
December 31, 2009 | September 30, 2010 | |||||||
Number of loans impaired at maturity
|
32 | 179 | ||||||
Loans not repaid at maturity
|
56 | 320 | ||||||
Claims submitted to lender protection insurer
|
56 | 320 | ||||||
Claims paid by lender protection insurer
|
56 | 320 | ||||||
Amount of claims paid
|
$ | 24,555 | $ | 112,784 | ||||
Net carrying value of loans at payoffs
|
$ | 23,814 | $ | 111,829 | ||||
Gain on LPIC payoffs (all loans)
|
$ | 741 | $ | 955 | ||||
Gain on LPIC payoffs (impaired loans)
|
$ | 304 | $ | (54 | ) | |||
Percent of claims paid by lender protection insurer
|
100 | % | 100 | % |
December 31, | September 30, | |||||||||||||||||||
2007 | 2008 | 2009 | 2009 | 2010 | ||||||||||||||||
Percentage of total number of loans outstanding with lender
protection insurance
|
| 70.4 | % | 91.2 | % | 86.8 | % | 94.6 | % | |||||||||||
Percentage of total loans receivable, net balance covered by
lender protection insurance
|
| 79.9 | % | 93.7 | % | 90.5 | % | 95.5 | % |
53
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 |
54
55
56
| 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. | |
| 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. | |
| 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. | |
| 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 . |
57
58
59
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 | ) | ||||||
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 | ) | |||||||||
60
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 | ) | |||||
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 | ) | ||||||
61
62
63
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, | ||||||||
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 | % |
64
65
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 |
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 |
66
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 | % |
67
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 |
68
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 |
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 | % |
69
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 |
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 |
70
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 | ) | |||||
71
72
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. |
73
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. |
74
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 | % |
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 | ) | |||||||
75
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 |
76
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. |
December 31, | September 30, | |||||||||||||||||||
2007 | 2008 | 2009 | 2009 | 2010 | ||||||||||||||||
Percentage of total number of loans outstanding with lender
protection insurance
|
| 70.4 | % | 91.2 | % | 86.8 | % | 94.6 | % | |||||||||||
Percentage of total loans receivable, net balance covered by
lender protection insurance
|
| 79.9 | % | 93.7 | % | 90.5 | % | 95.5 | % |
77
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 |
78
79
| 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. |
80
| 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; | |
| 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. |
81
| 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, 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. |
| 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 |
82
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. |
Nine Months Ended
|
||||||||||||||||||||
Year Ended December 31, | September 30, | |||||||||||||||||||
2007 | 2008 | 2009 | 2009 | 2010 | ||||||||||||||||
Repaid by the borrower
|
0 | 2 | 12 | 12 | 3 | |||||||||||||||
Repaid from death benefit during term of loan
|
0 | 3 | 2 | 1 | 1 | |||||||||||||||
Repaid from lender protection insurance claim
|
0 | 4 | 56 | 25 | 320 |
83
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. |
84
Step 1: Borrower Independently Obtains a Life Insurance Policy
|
An individual, who desires to obtain
life insurance, forms an irrevocable trust, generally for estate
planning purposes.
|
|
An application to obtain a life
insurance policy is submitted to an insurance company by the
individual so that, when issued, the policy will be owned by the
irrevocable trust whose beneficiaries have insurable interests
in the life of the insured (primarily family members of the
insured).
|
||
A life insurance policy is issued to the
irrevocable trust and the life insurance agent/broker involved
in the issuance of the policy receives a commission from the
issuing life insurance agency.
|
||
Step 2: Sales
|
An independent insurance agent/broker
contacts us regarding potentially obtaining a premium finance
loan on behalf of a borrower.
|
|
We work with referring agents/brokers to
obtain necessary information regarding the life insurance
policy, such as life expectancy reports, medical evaluations and
other information relevant to the valuation of the life
insurance policy.
|
||
Our sales team manages the process and
is the point of contact for the referring agent/broker.
|
||
Step 3: Loan Underwriting
|
We analyze the information we obtain
regarding the life insurance policy using our proprietary models
to determine its fair value.
|
|
We review all potential transactions
for adherence to our internal guidelines, such as proof of
payment of prior premiums from the borrowers own funds and
rating of the issuing life insurance company and other items.
|
||
If the loan is to be insured with lender
protection insurance, we consult with our lender protection
insurer to determine the insured value of the loan, which is the
amount we would receive in the event that we filed a lender
protection insurance claim, and to provide the insurer with any
information necessary for their own underwriting process.
|
85
Step 4: Legal/Compliance
|
We conduct an independent review of
each file and verify that compliance, legal and fair value
assessment processes have been completed in order to approve a
loan.
|
|
We complete a compliance checklist of
over 200 items by multiple departments.
|
||
We maintain and distribute documents
necessary for compliance with HIPAA, legal and internal
standards.
|
||
We confirm that the borrower has at
least one independent professional trustee to ensure all future
premiums will be paid. If there is no independent professional
trustee, we require the borrower to amend the trust
documentation to appoint one.
|
||
Step 5: Funding
|
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/broker in regard to the accuracy of the
information provided to us and the issuing life insurance
company.
|
|
Once the loan documentation is properly
executed, we fund all funds directly to the borrower in one
initial wire transfer. Loan proceeds advanced are never in
excess of the premiums previously paid and future premiums that
are scheduled to come due on the policy during the term of the
loan nor do we pay any fees or other compensation to the
borrower.
|
||
Upon funding, we charge the referring
agent/broker an agency fee that is collected on average within
47 days thereafter. The agency fee is charged to the
referring agent/broker and is not part of the premium finance
loan.
|
||
The borrower is not required to make any
payment on the loan until maturity. At the end of the loan term,
the borrower is required to repay the loan in full (including
all interest and origination fees that accrue over the life of
the loan).
|
||
We update our files with completed
documentation.
|
||
Prior to this offering, we relied upon
debt financing to fund our loans. Using debt financing, we
would receive funds under a credit facility prior to our wiring
funds to the borrower. If the loan had lender protection
insurance, we would pay the cost of the lender protection
insurance premium to the lender protection insurer
contemporaneously with the funding of the loan. With the net
proceeds of this offering, we intend to fund new premium finance
loans without relying on debt financing.
|
||
Step 6: Servicing
|
We prepare and monitor internal and
external reporting to accounting, lenders and others.
|
|
We verify premiums are paid and
correctly applied.
|
||
We update files for medical history and
ongoing premium payments.
|
86
Step 7: Loan Maturity
|
We send a notice to the borrower and
trustee 60 days and 30 days prior to the maturity of a
loan to provide advance notice that the premium finance loan is
coming due.
|
|
Upon maturity of a loan, we are either
(i) repaid our principal as well as our origination fees and
interest income or (ii) the loan goes into default due to
nonpayment by the borrower.
|
||
If the loan goes into default, we ask
the borrower to liquidate the policy. To assist a borrower with
its liquidation of a policy, we will introduce the borrower to
potential buyers as well as to life settlement brokers. We
receive no commission or fee for these introductions or any sale
of the policy by the borrower. The liquidation proceeds are
used to pay off our loan, including accrued interest and
origination fees, and the balance is retained by the borrower.
If the liquidation proceeds of a policy are less than the amount
to pay off the loan, the borrower seeks our consent in order to
liquidate the policy. We may either approve the sale of the
policy for less than the amount due on the loan or may decide to
take control of the policy. If the loan is covered by lender
protection insurance, then the lender protection insurer, rather
than us, must consent to the liquidation of the policy if the
liquidation proceeds are going to be less than the loans
insured value.
|
||
If the borrower is unable to liquidate
the policy, we obtain all rights to the policy as lender.
|
||
If the loan has lender protection
insurance, then, 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 the life insurance policy serving
as collateral underlying the loan. Following the payment of the
insurance claim, we have no further economic or beneficial
interest in the policy.
|
||
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 life insurance 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.
|
87
88
| 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; | |
| 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. |
89
90
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 | $ | 9.2 |
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 | % |
| 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. |
91
| 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. |
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 | % |
92
93
| 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. | |
| 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. |
| 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 |
94
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. |
| require that premium finance lenders be licensed by the applicable jurisdiction; | |
| 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. |
95
96
97
98
F-26
45
Chief Executive Officer and Chair of the Board
37
President, Chief Operating Officer and Director
53
Chief Financial Officer and Chief Credit Officer
54
Senior Vice President
51
Director Nominee
48
Director Nominee
66
Director Nominee
65
Director Nominee
52
Director Nominee
99
Table of Contents
100
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101
Table of Contents
the stated reasons why votes were withheld from the director and
whether those reasons can be cured;
the directors length of service, qualifications and
contributions as a director;
New York Stock Exchange listing requirements, and
our corporate governance guidelines.
102
Table of Contents
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;
retaining our independent auditors and conducting an annual
review of the independence of our independent auditors;
pre-approving any non-audit services to be performed by our
independent auditors;
reviewing the annual audited financial statements and quarterly
financial information with management and the independent
auditors;
reviewing with the independent auditors the scope and the
planning of the annual audit;
reviewing the findings and recommendations of the independent
auditors and managements response to the recommendations
of the independent auditors;
overseeing compliance with applicable legal and regulatory
requirements, including ethical business standards;
approving related party transactions;
discussing policies with respect to risk assessment and risk
management;
preparing the audit committee report to be included in our
annual proxy statement;
establishing procedures for the receipt, retention and treatment
of complaints received by us regarding accounting, internal
accounting controls or auditing matters;
establishing procedures for the confidential, anonymous
submission by our employees of concerns regarding questionable
accounting or auditing matters; and
reviewing the committees performance and the adequacy of
the audit committee charter on an annual basis.
evaluating the performance of and determining the compensation
for our executive officers, including our chief executive
officer;
administering and making recommendations to our board with
respect to our equity incentive plans;
overseeing regulatory compliance with respect to compensation
matters;
reviewing and approving employment or severance arrangements
with senior management;
reviewing our director compensation policies and making
recommendations to our board;
taking the required actions with respect to the compensation
discussion and analysis to be included in our annual proxy
statement;
103
Table of Contents
reviewing and approving the compensation committee report to be
included in our annual proxy statement; and
reviewing the committees performance and the adequacy of
the compensation committee charter on an annual basis.
developing and recommending corporate governance principles and
procedures applicable to our board and employees;
recommending committee composition and assignments;
overseeing periodic self-evaluations by the board, its
committees, individual directors and management with respect to
their respective performance;
identifying individuals qualified to become directors;
recommending director nominees;
assisting in succession planning;
recommending whether incumbent directors should be nominated for
re-election to our board; and
reviewing the committees performance and the adequacy of
the corporate governance and nominating committee charter on an
annual basis.
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Table of Contents
Antony Mitchell, our chief executive officer;
Jonathan Neuman, our president and chief operating officer;
Richard OConnell, our chief financial officer;
Deborah Benaim, our senior vice president;
Robert Grobstein, our former chief financial and accounting
officer; and
Anne Dufour Zuckerman, our former general counsel.
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Change in
Pension Value
and Non-
Non-Equity
Qualified
Incentive
Deferred
Name and Principal
Stock
Option
Plan
Compensation
All Other
Year
Salary
Bonus
Awards
Awards
Compensation
Earnings
Compensation(1)
Total
2010
$
$
$
$
$
$
$
929,808
(1)
$
929,808
2009
$
$
$
$
$
$
$
926,000
(1)
$
926,000
2010
$
754,907
$
250,000
$
$
$
$
$
$
1,004,907
2009
$
725,341
$
$
$
$
$
$
$
725,341
2010
$
270,000
$
$
$
$
$
$
$
270,000
2010
$
324,750
$
$
$
$
$
$
$
324,750
2009
$
312,184
$
200,000
$
$
$
$
$
$
512,184
2010
$
305,308
$
$
$
$
$
$
$
305,308
2009
$
347,757
$
$
$
$
$
$
$
347,757
2010
$
89,663
$
$
$
$
$
$
$
89,663
2009
$
249,001
$
$
$
$
$
$
$
249,001
(1)
In 2009 and 2010, 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 and $79,800,
respectively, of the $926,000 and $929,800, respectively, paid
to Warburg was for expense reimbursements.
(2)
On January 4, 2010, we hired Richard S. OConnell to
serve as our chief credit officer. Mr. OConnell began
transitioning into the chief financial officer role in February
2010 and became our chief financial officer in April 2010.
(3)
Ms. Zuckerman served as our general counsel until her
departure from Imperial on November 8, 2010.
(4)
Mr. Grobstein served as our chief financial officer until
his departure from Imperial on May 4, 2010.
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Option
Stock
Cash Severance
Awards(1)
Awards(1)
Total(2)
($)
($)
($)
($)
(except in the case of death or disability):
$
3,150,000
(3)
$
3,150,000
$
3,150,000
(3)
$
3,150,000
$
112,500
(4)
$
112,500
$
206,667
(5)
$
206,667
$
3,150,000
(3)
$
3,150,000
$
3,150,000
(3)
$
3,150,000
(1)
Each of the named executive officers are receiving equity
compensation awards upon the closing of this initial public
offering in the amounts and on the terms described elsewhere in
this prospectus under Omnibus Plan Imperial
Holdings 2010 Omnibus Incentive Plan. We expect that these
award agreements will provide for vesting upon a termination
without cause, a change in control and, with respect to
Messrs. Mitchell and Neuman, upon a termination by the
executive for good reason. 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. As a result, we have not quantified the amounts payable
to the named executive officers in the table above.
(2)
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.
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Table of Contents
(3)
If Messrs. Mitchell or Neuman become entitled to severance
payments during the first three years each of their respective
employment agreements are in effect, then the severance payments
are equal to six times the base salary.
(4)
If Ms. Benaim is terminated from employment, we will
continue to pay her base salary for a period of eighteen weeks.
(5)
If Mr. OConnell is terminated from employment, 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.
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Table of Contents
Chief Executive Officer
120,000 stock options(1)
President and Chief
Operating Officer
120,000 stock options(1)
Chief Financial Officer
32,500 stock options(1)
Senior Vice President
27,500 stock options(1)
Director Nominee
627 shares of restricted stock(2)
Director Nominee
627 shares of restricted stock(2)
Director Nominee
693 shares of restricted stock(2)
Director Nominee
933 shares of restricted stock(2)
Director Nominee
627 shares of restricted stock(2)
289,069 stock options(1)
(1)
These options will have an exercise price equal to the initial
public offering price of our common stock in this offering and
will be subject to pro rata vesting over a three-year period.
(2)
Vest 100% on the first anniversary of the date of grant.
receiving options
and/or
stock
appreciations rights for more than 120,000 shares of common
stock during any fiscal year;
112
Table of Contents
receiving awards of restricted stock
and/or
restricted stock units relating to more than 120,000 shares
of common stock during any fiscal year;
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;
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;
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
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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any person is or becomes the beneficial owner of securities
representing 50% or more of the combined voting power of our
outstanding voting securities;
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
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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Table of Contents
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;
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
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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Shares of Common Stock
Shares of Common Stock
Shares of
Beneficially Owned
Beneficially Owned
Common Stock
Following Offering
Following Offering
Beneficially Owned
Assuming No Exercise of
Assuming Exercise of
Prior to Offering
Underwriters Option
Underwriters Option in Full
Amount
Percent
Amount
Percent
Amount
Percent
Sp. z o.o.(1)
2,000,000
55.6
%
2,000,000
9.9
%
2,000,000
8.8
%
466,666
13.0
%
466,666
2.3
%
466,666
2.0
%
553,167
15.4
%
553,167
2.7
%
553,167
2.4
%
553,167
15.4
%
553,167
2.7
%
553,167
2.4
%
3,573,000
99.3
%
3,573,000
17.6
%
3,573,000
15.7
%
(1)
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.
(2)
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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transactions that must be disclosed in proxy statements under
SEC rules; and
transactions that could potentially cause a non-employee
director to cease to qualify as independent under New York Stock
Exchange listing requirements.
whether the transaction is on terms no less favorable to us than
terms generally available from an unrelated third party;
the extent of the related partys interest in the
transaction;
whether the transaction would interfere with the performance of
the officers or directors duties to us;
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
such other factors that the audit committee deems appropriate
under the circumstances.
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Controlled by Joseph Lewis, beneficial owner of more than 5% of
our common stock.
Controlled by Joseph Lewis and David Haring, beneficial owner of
more than 5% of our common stock.
Controlled by Joseph Lewis and David Haring.
Antony Mitchell, our chief executive officer, chair of the board
and a beneficial owner of more than 5% of our common stock, is
the manager of CTL Holdings, LLC.
Controlled by Antony Mitchell.
Controlled by Jonathan Neuman, our president and chief operating
officer, as well as, a director and beneficial owner of more
than 5% of our common stock.
Controlled by Antony Mitchell.
Controlled by Antony Mitchell and David Haring.
Controlled by Antony Mitchell and Jonathan Neuman.
Controlled by David Haring.
Controlled by Joseph Lewis. Christopher Mangum, president and
sole director of Premium Funding, Inc., a former member of our
board of managers, is sole director, president and secretary of
Jasmund, Ltd.
Controlled by David Haring.
Controlled by Joseph Lewis and David Haring.
Controlled by Christopher Mangum and Joseph Lewis.
Controlled by Jonathan Neuman.
Antony Mitchell is a general partner of Stone Brook Partners.
Controlled by Antony Mitchell.
Controlled by Carl Neuman, the father of Jonathan Neuman.
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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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.
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.
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.
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 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
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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.
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.
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.
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.
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
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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.
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.
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.
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.
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 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.
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.
Effective December 31, 2010, Imex Settlement Corporation
purchased from us 110,000 Series F Preferred Units for an
$11,000,000 promissory note. The Series F 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 F 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 Series F Preferred Units and
the $11,000,000 promissory note will be extinguished as a result
of the corporate conversion.
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.
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.
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 partly
owned 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 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 or 2010. 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.
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.
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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one-fifth or more, but less than one-third, of all voting power
of the corporation;
one-third or more, but less than a majority, of all voting power
of the corporation; or
a majority or more of all voting power of the corporation.
is approved by the corporations board of directors before
the acquisition; or
is effected pursuant to a statutory merger or share exchange to
which the corporation is a party.
mergers and consolidations to which the corporation and the
interested shareholder are parties;
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;
issuances by the corporation of 5% or more of the aggregate fair
market value of its outstanding shares to the interested
shareholder;
the adoption of any plan for the liquidation or dissolution of
the corporation proposed by or pursuant to an arrangement with
the interested shareholder;
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
the receipt by the interested shareholder of certain loans or
other financial assistance from the corporation.
the transaction has been approved by a majority of the
corporations disinterested directors;
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
specified fair price and procedural requirements are satisfied.
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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;
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,
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;
one percent of the number of shares of common stock then
outstanding (approximately 202,667 shares immediately after
the offering); and
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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Number of
Shares
16,666,667
No
Full
Exercise
Exercise
$
$
$
$
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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.
Stabilizing transactions permit bids to purchase the underlying
security as long as the stabilizing bids do not exceed a
specific maximum price.
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.
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.
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
139
Table of Contents
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,
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;
140
Table of Contents
(a)
to legal entities which are authorized or regulated to operate
in the financial markets or, if not so authorized or regulated,
whose corporate purpose is solely to invest in securities;
(b)
to any legal entity which has two or more of (1) an average
of at least 250 employees during the last financial year;
(2) a total balance sheet of more than 43,000,000 and
(3) an annual net turnover of more than 50,000,000,
as shown in its last annual or consolidated accounts;
(A)
it is a qualified investor within the meaning of the
law in that Relevant Member State implementing
Article 2(1)(e) of the Prospectus Directive; and
(B)
in the case of any shares acquired by it as a financial
intermediary, as that term is used in Article 3(2) of the
Prospectus Directive, (i) the shares acquired by it in the
offering have not been acquired on behalf of, nor have they been
acquired with a view to their offer or resale to, persons in any
Relevant Member State other than qualified investors
(as defined in the Prospectus Directive), or in circumstances in
which the prior consent of the representatives has been given to
the offer or resale; or (ii) where shares have been
acquired by it on behalf of persons in any Relevant Member State
other than qualified investors, the offer of those shares to it
is not treated under the Prospectus Directive as having been
made to such persons.
141
Table of Contents
142
Table of Contents
143
F-2
F-3
F-4
F-5
F-6
F-7
F-29
F-30
F-31
F-32
F-33
F-1
Table of Contents
F-2
Table of Contents
F-3
Table of Contents
2007
2008
2009
$
24,514,935
$
48,003,586
$
26,113,814
4,887,404
11,914,251
21,482,837
525,964
9,398,679
29,852,722
442,771
2,684,328
16,409,799
2,300
47,400
71,348
29,930,603
69,806,687
96,614,848
1,336,901
7,475,714
23,928,017
6,168
5,276,600
9,826,781
2,331,637
10,767,928
9,830,318
(224,551
)
2,737,620
12,058,007
125,909
7,568,541
18,339,220
21,925,317
36,964,956
30,242,699
2,409,148
4,601,454
1,026,209
27,910,529
75,392,813
105,251,251
$
2,020,074
$
(5,586,126
)
$
(8,636,403
)
$
(1.49
)
3,600,000
F-4
Table of Contents
Retained
Member Units
Member Units
Member Units
Earnings
Common
Preferred A
Preferred B
(Accumulated)
Units
Amounts
Units
Amounts
Units
Amounts
Deficit
Total
221,729
$
9,854,640
$
$
$
103,003
$
9,957,643
228,271
10,145,360
10,145,360
2,020,074
2,020,074
450,000
20,000,000
2,123,077
22,123,077
(54,512
)
(54,512
)
(5,586,126
)
(5,586,126
)
450,000
19,945,488
(3,463,049
)
16,482,439
(21,779
)
(21,779
)
90,796
4,035,000
4,035,000
50,000
5,000,000
5,000,000
(8,636,403
)
(8,636,403
)
450,000
$
19,923,709
90,796
$
4,035,000
50,000
$
5,000,000
$
(12,099,452
)
$
16,859,257
F-5
Table of Contents
2007
2008
2009
$
2,020,074
$
(5,586,126
)
$
(8,636,403
)
405,049
794,306
888,446
287,676
1,046,178
1,289,353
2,331,637
10,767,928
9,830,318
(224,551
)
2,737,620
12,058,007
(525,964
)
(9,398,679
)
(29,852,722
)
(442,771
)
(2,684,328
)
(16,409,799
)
(4,887,323
)
(11,914,251
)
(21,482,837
)
125,909
7,568,541
18,339,220
(561,698
)
(97,456
)
(10,681
)
(419,248
)
(19,717
)
(5,869,311
)
(4,199,501
)
5,416,509
(368,705
)
(704,720
)
4,658,300
(930,953
)
(2,201,314
)
2,003,955
2,931,710
2,360,622
(536,823
)
881,927
7,132,789
12,498,302
(4,803,771
)
(2,156,551
)
(12,631,183
)
(1,524,721
)
(769,328
)
(375,452
)
(1,714,216
)
1,714,216
(904,237
)
1,357,607
3,543,032
36,108,662
(37,528,305
)
(107,301,524
)
(64,143,742
)
(39,409,635
)
(102,813,604
)
(29,314,769
)
7,145,360
349,000
5,000,000
(54,512
)
(21,779
)
(1,674,570
)
(546,165
)
1,536,111
(672,205
)
(22,608,882
)
(17,168,828
)
(15,289,740
)
(22,665,616
)
(794,773
)
(2,826,418
)
35,559,122
131,823,862
73,402,645
18,239,793
12,937,108
40,357,707
111,118,583
50,193,223
(3,855,699
)
6,148,428
8,247,271
5,350,799
1,495,100
7,643,528
$
1,495,100
$
7,643,528
$
15,890,799
$
$
$
4,035,000
$
$
10,926,246
$
14,600,305
3,000,000
$
458,830
$
7,994,775
$
20,311,173
F-6
Table of Contents
NOTE 1
ORGANIZATION
AND DESCRIPTION OF BUSINESS ACTIVITIES
NOTE 2
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
F-7
Table of Contents
F-8
Table of Contents
F-9
Table of Contents
F-10
Table of Contents
F-11
Table of Contents
F-12
Table of Contents
Year Ended
December 31, 2009
$
(5,360,551
)
1,573,000
27,000
2,000,000
3,600,000
$
(1.49
)
NOTE 3
LIQUIDITY
F-13
Table of Contents
NOTE 4
DEFERRED
COSTS
NOTE 5
DEPOSITS
F-14
Table of Contents
NOTE 6
FIXED
ASSETS
2008
2009
$
1,644,636
$
1,885,904
957,717
1,025,841
465,836
531,896
3,068,189
3,443,641
1,217,851
2,106,297
$
1,850,338
$
1,337,344
NOTE 7
LOANS
RECEIVABLE
2008
2009
$
147,937,524
$
167,691,534
11,021,018
33,044,935
(1,353,041
)
(26,403
)
(8,861,910
)
(11,598,764
)
$
148,743,591
$
189,111,302
2008
2009
44,792,648
147,937,524
97,558,515
51,572,637
724,876
12,975,647
15,875,702
(5,163,552
)
(12,997,742
)
(2,950,610
)
(29,607,625
)
(5,088,962
)
147,937,524
167,691,534
F-15
Table of Contents
2008
2009
30,096,732
54,647,002
798,466
6,439,733
30,895,198
61,096,031
Loans
Interest
Receivable
Receivable
Total
$
8,861,910
$
1,441,552
$
10,303,462
8,616,097
1,214,221
9,830,318
(5,879,243
)
(867,229
)
(6,746,472
)
$
11,598,764
$
1,788,544
$
13,387,308
Loans
Interest
Receivable
Receivable
Total
$
2,250,580
$
81,057
$
2,331,637
8,927,947
1,839,981
10,767,928
(2,316,617
)
(479,486
)
(2,796,103
)
$
8,861,910
$
1,441,552
$
10,303,462
F-16
Table of Contents
F-17
Table of Contents
NOTE 8
ORIGINATION
FEES
2008
2009
$
46,124,533
$
57,641,266
(36,257,855
)
(25,211,898
)
1,154,340
615,567
$
11,021,018
$
33,044,935
NOTE 9
AGENCY
FEES RECEIVABLE
Year Ended
December 31,
2008
2009
$
287,676
$
768,806
536,490
1,290,241
(55,360
)
(1,939,161
)
$
768,806
$
119,886
NOTE 10
STRUCTURED
SETTLEMENTS
F-18
Table of Contents
NOTE 11
INVESTMENT
IN LIFE SETTLEMENTS (LIFE INSURANCE POLICIES)
Remaining
Number of
Life Expectancy
Life Settlement
Fair
Face
Contracts
Value
Value
$
$
27
4,306,280
72,875,000
27
$
4,306,280
$
72,875,000
$
1,523,016
1,667,116
1,689,947
1,800,647
1,954,147
23,899,310
$
32,534,183
NOTE 12
INVESTMENT
IN LIFE SETTLEMENT FUND
F-19
Table of Contents
NOTE 13
FAIR
VALUE MEASUREMENTS
Total
Level 1
Level 2
Level 3
Fair Value
$
$
$
4,306,280
$
4,306,280
$
4,306,280
$
4,306,280
$
F-20
Table of Contents
NOTE 14
NOTES PAYABLE
Total Notes
Payable
$
9,178,805
49,743,657
96,173,950
26,594,974
11,806,000
9,627,123
27,939,972
$
231,064,481
F-21
Table of Contents
F-22
Table of Contents
F-23
Table of Contents
Other
Related
Acorn
CTL
Ableco
White Oak
Cedar Lane
Other
Party
Total
$
9,178,805
$
24,936,541
$
$
6,036,372
$
$
$
$
40,151,718
21,481,589
96,173,950
20,558,602
9,627,123
27,939,972
175,781,236
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
F-24
Table of Contents
Year Ended
December 31
December 31
December 31
2007
2008
2009
$
24,514,935
$
48,003,586
$
26,113,814
525,964
9,398,679
29,852,722
4,879,416
11,339,822
20,271,581
16,409,799
398
29,920,315
68,742,087
92,648,314
776,621
9,913,856
28,466,092
2,331,637
10,767,928
9,830,318
(224,551
)
2,737,620
12,058,007
125,909
7,568,541
18,339,220
15,081,517
21,744,468
13,741,737
18,091,133
52,732,413
82,435,374
$
11,829,182
$
16,009,674
$
10,212,940
F-25
Table of Contents
Year Ended
December 31
December 31
December 31
2007
2008
2009
$
$
442,771
$
2,684,328
7,988
574,429
1,211,256
2,300
47,400
70,950
10,288
1,064,600
3,966,534
2,722,377
9,770,400
9,474,887
$
(2,712,089
)
$
(8,705,800
)
$
(5,508,353
)
$
9,117,093
$
7,303,874
$
4,704,587
6,530,571
10,051,542
8,052,284
566,448
2,838,458
5,288,706
7,097,019
12,890,000
13,340,990
$
2,020,074
$
(5,586,126
)
$
(8,636,403
)
December 31
December 31
2008
2009
$
205,428,688
$
245,574,288
2,299,720
9,201,017
207,728,408
254,775,305
3,312,016
8,944,783
$
211,040,424
$
263,720,088
NOTE 16
RELATED
PARTY TRANSACTIONS
Table of Contents
NOTE 17
COMMITMENTS
AND CONTINGENCIES
$
550,220
557,087
115,438
$
1,222,745
NOTE 18
PREFERRED
EQUITY
NOTE 19
EMPLOYEE
BENEFIT PLAN
F-27
Table of Contents
NOTE 20
SUBSEQUENT
EVENTS
F-28
Table of Contents
F-29
Table of Contents
For the Nine Months Ended
September 30
2009
2010
$
20,215,518
$
9,099,047
15,842,555
15,794,962
21,865,432
16,728,185
499,410
4,847,649
14,885,912
6,967,828
4,805,387
1,954,112
53,250
194,646
73,362,077
60,391,816
18,342,353
18,341,797
6,367,949
5,901,939
6,705,249
3,514,191
11,278,543
4,320,219
13,100,595
22,600,831
22,224,687
21,401,216
772,713
716,939
78,792,089
76,797,132
$
(5,430,012
)
$
(16,405,316
)
(3.87
)
3,600,000
F-30
Table of Contents
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
90,796
$
4,035,000
$
90,796
$
4,035,000
50,000
5,000,000
50,000
5,000,000
70,000
7,000,000
70,000
7,000,000
7,000
700,000
7,000
700,000
73,000
7,300,000
(5,000,000
)
73,000
2,300,000
450,000
19,923,709
450,000
19,923,709
(12,099,452
)
(16,405,316
)
(28,504,768
)
590,796
$
16,859,257
150,000
$
15,000,000
$
(5,000,000
)
$
(16,405,316
)
740,796
$
10,453,941
F-31
Table of Contents
September 30,
September 30,
2009
2010
$
(5,430,012
)
$
(16,405,316
)
668,612
560,814
980,813
105,047
6,705,249
3,514,191
11,278,543
4,320,219
(21,865,432
)
(16,728,185
)
(499,410
)
(4,847,649
)
(1,954,112
)
(4,805,387
)
(14,885,912
)
(6,967,828
)
(15,842,555
)
(15,794,962
)
12,634,586
22,600,831
(200,000
)
(10,705
)
283,460
684,624
6,074,016
1,323,571
(4,548,613
)
(3,633,749
)
5,589,261
(3,803,686
)
(1,007,030
)
(2,558,299
)
8,132,148
8,988,607
3,544,565
(12,036,627
)
(31,763,058
)
(332,198
)
(142,360
)
(727,333
)
22,579,535
119,065,842
(51,104,212
)
(23,546,748
)
2,070,494
(28,856,875
)
96,719,895
10,000,000
(21,807
)
1,536,111
(642,698
)
(16,141,397
)
(5,416,447
)
(41,342,500
)
(65,119,158
)
(22,516,946
)
(60,518,397
)
100,721,701
35,249,406
11,480,543
9,284,505
33,715,705
(77,162,789
)
(7,177,797
)
(12,205,952
)
7,643,528
15,890,799
$
465,731
$
3,684,847
$
12,959,547
$
19,324,030
$
11,132,246
$
$
$
5,000,000
$
4,035,000
$
$
$
63,967,983
F-32
Table of Contents
NOTE 1
ORGANIZATION
AND DESCRIPTION OF BUSINESS ACTIVITIES
NOTE 2
BASIS OF
PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
F-33
Table of Contents
F-34
Table of Contents
Nine Months Ended September 30,
2009
2010
$
768,806
$
119,886
957,340
66,027
(19,742
)
$
1,706,404
$
185,913
F-35
Table of Contents
Nine Months Ended
September 30, 2010
$
(13,948,427
)
1,573,000
27,000
2,000,000
3,600,000
$
(3.87
)
NOTE 3
LOANS
RECEIVABLE
2010
$
167,691,523
18,244,655
5,302,093
(6,593,350
)
(80,847,708
)
$
103,797,213
F-36
Table of Contents
Loans
Interest
Receivable
Receivable
Total
$
11,598,765
$
1,788,544
$
13,387,308
3,408,162
106,029
3,514,191
(8,360,092
)
(443,709
)
(8,803,801
)
1,341,732
1,341,732
$
7,988,567
$
1,450,864
$
9,439,430
NOTE 4
LENDER
PROTECTION INSURANCE CLAIMS RECEIVED IN ADVANCE
F-37
Table of Contents
NOTE 5
STRUCTURED
SETTLEMENTS
December 31,
September 30,
2009
2010
$
151,543
$
1,080,362
9,473,286
$
151,543
$
10,553,648
F-38
Table of Contents
NOTE 6
INVESTMENT
IN LIFE SETTLEMENT FUND
NOTE 7
FAIR
VALUE MEASUREMENTS
Total
Level 1
Level 2
Level 3
Fair Value
$
$
$
8,846,149
$
8,846,149
$
$
$
9,473,286
$
9,473,286
F-39
Table of Contents
Total
Level 1
Level 2
Level 3
Fair Value
$
$
$
4,306,280
$
4,306,280
$
$
$
$
$
4,306,280
2,976,230
3,736,435
(102,302
)
(2,070,494
)
$
8,846,149
$
3,377,025
$
7,981,050
1,505,373
(13,137
)
$
9,473,286
$
1,505,373
F-40
Table of Contents
Remaining
Number of
Life Expectancy
Life Settlement
Contracts
Fair Value
Face Value
$
0
$
0
$
0
$
0
$
0
$
0
1
$
738,888
$
2,000,000
1
$
540,359
$
2,200,000
29
$
7,566,902
$
132,432,000
31
$
8,846,149
$
136,632,000
Premiums to be Paid
$
2,467,561
$
3,378,195
$
3,438,684
$
3,358,507
$
3,515,607
$
51,307,396
$
67,465,949
Note 8
Note
Payable Acorn Capital Group
F-41
Table of Contents
NOTE 9
RELATED
PARTY TRANSACTIONS
NOTE 10
PREFERRED
EQUITY
F-42
Table of Contents
NOTE 11
SEGMENT
INFORMATION
F-43
Table of Contents
Nine Months Ended September 30,
2009
2010
$
20,215,518
$
9,099,047
21,865,432
16,728,185
15,426,584
15,482,339
14,885,912
6,967,828
3,300,014
2,065,679
72,393,446
53,643,092
20,868,766
21,349,549
6,705,249
3,514,191
11,278,543
4,320,219
13,100,595
22,600,831
11,164,673
7,312,839
63,117,826
59,097,629
$
9,275,620
$
(5,454,537
)
$
499,410
$
4,847,649
415,971
312,623
1,505,373
53,250
83,079
968,631
6,748,724
6,735,674
8,855,095
$
(5,767,043
)
$
(2,106,371
)
3,508,577
(7,560,908
)
5,097,053
5,950,221
3,841,536
2,894,187
8,938,589
8,844,408
$
(5,430,012
)
$
(16,405,316
)
F-44
Table of Contents
December 31
September 30
2009
2010
$
245,574,288
$
164,517,923
9,201,017
11,444,883
254,775,305
175,962,806
8,944,783
5,005,289
$
263,720,088
$
180,968,095
NOTE 12
SUBSEQUENT
EVENTS
F-45
Table of Contents
F-46
Table of Contents
FBR
Capital
Markets
JMP
Securities
Wunderlich
Securities
Table of Contents
Item 13.
Other
Expenses of Issuance and Distribution.
$
20,499
29,250
141,264
1,400,000
600,000
879,622
3,000
210,000
5,000
600,000
300,000
$
4,188,635
Item 14.
Indemnification
of Directors and Officers.
Item 15.
Recent
Sales of Unregistered Securities.
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.
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
II-1
Table of Contents
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.
Effective June 30, 2010, we sold 7,000 Series D
Preferred Units to Imex Settlement Corporation for a price of
$700,000.
II-2
Table of Contents
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.
Effective December 31, 2010, we sold 110,000 Series F
Preferred Units to Imex Settlement Corporation for an
$11,000,000 promissory note.
Item 16.
Exhibits
and Financial Statement Schedules.
Item 17.
Undertakings.
II-3
Table of Contents
By
Title:
Chief Executive Officer
Chief Executive Officer
(Principal Executive Officer)
January 12, 2011
Chief Financial Officer and
Chief Credit Officer
(Principal Financial Officer)
January 12, 2011
Director of Finance and Accounting (Principal Accounting Officer)
January 12, 2011
President and Chief Operating Officer
January 12, 2011
II-4
Table of Contents
By:
Sole Director
By:
By:
II-5
Table of Contents
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;
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;
may apply standards of materiality in a way that is different
from what may be viewed as material to you or other investors;
and
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.
Exhibit
1
.1
Form of Underwriting Agreement
2
.1
Plan of Conversion
***3
.1
Form of Articles of Incorporation of Registrant
***3
.2
Form of Bylaws of Registrant
****4
.1
Form of Common Stock Certificate
4
.2
Form of Warrant to purchase common stock
5
.1
Opinion of Foley & Lardner LLP
****
~
10
.1
Employment Agreement between the Registrant and Antony Mitchell
dated November 8, 2010
***
~
10
.2
Employment Agreement between the Registrant and Jonathan Neuman
dated September 29, 2010
****
~
10
.3
Employment Agreement between the Registrant and Rory
OConnell dated November 4, 2010
****
~
10
.4
Employment Agreement between the Registrant and Deborah Benaim
dated November 8, 2010
10
.5
Reserved
***
~
10
.6
Imperial Holdings 2010 Omnibus Incentive Plan
***
~
10
.7
2010 Omnibus Incentive Plan Form of Stock Option Award Agreement
******+10
.8
Omnibus Claims Settlement Agreement dated as of
September 8, 2010 by and between Imperial PFC Financing,
LLC and Lexington Insurance Company
******10
.9
Pledge and Security Agreement dated September 8, 2010 by
Imperial Premium Finance, LLC
****10
.10
Guarantor Security Agreement dated November 2009 by Imperial
Premium Finance, LLC
****10
.11
Guarantor Security Agreement dated March 13, 2009 by
Imperial Premium Finance, LLC
II-6
Table of Contents
Exhibit
**10
.12
Settlement Agreement dated as of May 19, 2009 among Sovereign
Life Financing, LLC, Imperial Premium Finance, LLC and Acorn
Capital Group, LLC
***10
.12.1
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
****10
.13
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
*****+10
.14
Letter Agreement dated September 14, 2009 among Imperial
Holdings, LLC, Lexington Insurance Company and National Fire
& Marine Insurance Company
****10
.15
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
****10
.16
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
****10
.17
Oral agreement between Imperial Holdings, LLC and Warburg
Investment Corporation
****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 thereto, and CTL Holdings II LLC as
Collateral Agent and Administrative Agent
*****+10
.19
Letter Agreement dated March 13, 2009 among Imperial Holdings,
LLC, Lexington Insurance Company and National Fire & Marine
Insurance Company
***10
.20
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
***10
.21
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
***10
.22
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
***10
.23
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
***10
.24
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
***10
.25
Consent Letter dated September 30, 2010 by and among
Imperial Holdings, LLC and Lexington Insurance Company
***10
.26
Consent Letter dated September 30, 2010 by and among
Imperial Holdings, LLC and Slate Capital LLC
10
.27
Reserved
**10
.28
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.
**10
.29
Promissory Note effective as of August 31, 2009 in the principal
amount of $25,000,000 held by Amalgamated International
Holdings, S.A.
II-7
Table of Contents
Exhibit
**10
.30
Promissory Note effective as of August 31, 2009 in the principal
amount of $10,323,756 held by IMPEX Enterprises, Ltd.
10
.31
Reserved
****10
.32
Consent Letter dated November 9, 2010 by and among Imperial
Holdings, LLC and Lexington Insurance Company
****10
.33
Consent Letter dated November 9, 2010 by and among Imperial
Holdings, LLC and Slate Capital LLC
**10
.34
Marketing Agreement between Imperial Litigation Funding, LLC as
Originator and Plaintiff Funding Holding Inc d/b/a LawCash as
Funder
**10
.35
Agreement dated November 13, 2009 among GWG Life Settlements,
LLC and Imperial Premium Finance, LLC as Selling Advisor
****10
.36
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.
****10
.37
$30.0 million Unsecured Convertible Debenture issued on
November 1, 2010 by Imperial Holdings, LLC to Branch Office
of Skarbonka Sp. z o.o.
***21
.1
Subsidiaries of the Registrant
*23
.1
Consent of Foley & Lardner LLP (included as part of its
opinion to be filed as Exhibit 5.1 hereto)
23
.2
Consent of Grant Thornton LLP
**24
.1
Power of Attorney
***99
.1
Consent of Director Nominees (Messrs. Crow, Higgins, Rosenberg
and Wyrough)
****99
.2
Consent of Director Nominee (Mr. Buzen)
**
Filed as exhibit to registration statement on
Form S-1
on August 12, 2010.
***
Filed as exhibit to amendment No. 1 to registration statement on
Form S-1 on October 1, 2010.
****
Filed as exhibit to amendment No. 2 to registration
statement on
Form S-1
on November 10, 2010.
*****
Filed as exhibit to amendment No. 3 to registration
statement on Form S-1 on November 12, 2010.
******
Filed as exhibit to amendment No. 4 to registration
statement on Form S-1 on November 19, 2010.
~
Compensatory plan or arrangement.
+
Certain portions of the exhibit have been omitted pursuant to a
request for confidential treatment. An unredacted copy of the
exhibit has been filed separately with the United States
Securities and Exchange Commission pursuant to a request for
confidential treatment.
II-8
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Very truly yours, | ||||||
|
||||||
IMPERIAL HOLDINGS, INC, | ||||||
|
||||||
|
By: | |||||
|
|
|||||
|
Title: |
By:
|
||||
Title:
|
|
Number of Initial
Underwriter
Shares to be Purchased
[ ]
[ ]
[ ]
X,XXX,XXX
Very truly yours, | ||||||
|
||||||
|
Name: | |||||
|
Title: | |||||
|
||||||
|
||||||
|
(Address) |
By:
|
||||
Title:
|
|
2
3
Name of Existing Holder | Initial Allocation of Shares Formula for Determining | |
IMEX |
$7,000,000 ÷ Midpoint Price
|
|
IFS |
Allocated Value [$37,000,000 + (0.0075 x Allocated Value)]
|
|
Midpoint Price x 2
|
||
Red Oak |
Allocated Value [$37,000,000 + (0.0075 x Allocated Value)]
|
|
Midpoint Price x 2
|
Name of Existing Holder | Record Holder of Issued Shares Post-Existing Holder Reorganizations | |
IMEX |
Pine Trading, Ltd. (
Pine Trading
)
|
|
IFS |
Mitchell
|
|
Red Oak |
Neuman
|
Pine Trading Allocation x (IPO Price Midpoint Price)
|
= | Number of Adjusted | ||
IPO Price
|
Shares |
4
($30 million
÷ Midpoint Price) x (IPO Price - Midpoint Price)
|
= | Number of Additional | ||
IPO Price
|
Shares |
Name of Phantom Holder | Number of Shares | |
Moulton |
(Allocated Value ÷ Midpoint Price) x .005
|
|
Purdy |
(Allocated Value ÷ Midpoint Price) x .0025
|
5
6
CONVERTING ENTITY
:
IMPERIAL HOLDINGS, LLC Red Oak Finance, LLC, its Member |
||||
By: | /s/ Jonathan Neuman | |||
Name: Jonathan Neuman
Title: Manager |
||||
MANAGERS:
RED OAK FINANCE, LLC , Manager |
||||
By: | /s/ Jonathan Neuman | |||
Jonathan Neuman
President |
||||
IMEX SETTLEMENT CORPORATION
,
Manager |
||||
By: | /s/ Antony Mitchell | |||
Antony Mitchell
President |
||||
IFS HOLDINGS, INC.
,
Manager |
||||
By: | /s/ Antony Mitchell | |||
Antony Mitchell
President |
||||
EXISTING HOLDERS:
RED OAK FINANCE, LLC , Member |
||||
By: | /s/ Jonathan Neuman | |||
Jonathan Neuman
President |
||||
IMEX SETTLEMENT CORPORATION
,
Member |
||||
By: | /s/ Antony Mitchell | |||
Antony Mitchell
President |
||||
IFS HOLDINGS, INC.
,
Member |
||||
By: | /s/ Antony Mitchell | |||
Antony Mitchell
President |
||||
ADDITIONAL PARTIES
:
PINE TRADING, LTD. |
||||
By: | /s/ Edgardo E. Diaz | |||
Name: | Edgardo E. Diaz | |||
Its: | Director | |||
By: | /s/ Maria Vallarino A. | |||
Maria Vallarino A. | ||||
Director | ||||
/s/ James Purdy | ||||
JAMES PURDY | ||||
/s/ Jonathan Moulton | ||||
JONATHAN MOULTON | ||||
No. W-
|
, 2011 |
2
2. | EXERCISE OF WARRANT . |
3
4
5
6
7
8
|
To Holder: | |||
|
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||||
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To Company: | |||
|
||||
|
Imperial Holdings, Inc. | |||
|
701 Park of Commerce Boulevard Suite 301 | |||
|
Boca Raton, Florida 33487 | |||
|
Facsimile: 561-995-4389 | |||
|
Attn: Andrew S. Hillman General Counsel |
9
10
IMPERIAL HOLDINGS, INC. | ||||||
|
||||||
Name:
|
||||||
Its:
|
||||||
|
||||||
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HOLDER | |||||
|
||||||
Name:
|
11
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Signature:
|
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|
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Name (print):
|
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||
|
Title (if applicable):
|
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|
||
|
Company (if
applicable):
|
2
/s/ Grant Thornton LLP | ||||
Fort Lauderdale, Florida | ||||
January 11, 2011 | ||||