-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
Uds3rJ8wW4Kzg7fiEzND0cc8XsnZdWpEaT7O3pJ4oMWfr2WCOcm+4DK2bPuIJN5O
N0Re0QduA0T9wS4RdE0/Gg==
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q
For the quarterly period ended: September 30, 2010 OR For the transition period from to
Commission File Number: 001-32026
COHEN & COMPANY INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of Incorporation or organization) (IRS Employer Identification Number) Cira Centre 2929 Arch Street, 17th Floor Registrants telephone number, including area code: (215) 701-9555 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
x Yes ¨ No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). ¨ Yes ¨ No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (check one) Indicate by check mark whether the Registrant is a shell company (as defined by Rule 12b-2 of the Exchange
Act). ¨ Yes x No As of October 29, 2010 there were 10,478,084 shares of common stock ($0.001 par value per share) of Cohen & Company Inc.
outstanding.
FORM 10-Q INDEX TO QUARTERLY REPORT ON FORM 10-Q September 30, 2010 Consolidated Balance SheetsSeptember 30, 2010 and December 31, 2009 Consolidated Statements of OperationsThree and Nine Months Ended September 30, 2010 and 2009
Consolidated Statements of Cash FlowsNine Months Ended September 30, 2010 and
2009 Managements Discussion and Analysis of Financial Condition and Results of
Operations
Forward Looking
Statements This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking
statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as anticipate, believe, estimate, intend,
could, should, would, may, seek, plan, might, will, expect, anticipate, predict, project,
forecast, potential, continue negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations
about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of
operations or plans expressed or implied by such forward-looking statements. While we cannot predict all of the risks and
uncertainties, they include, but are not limited to, those described in Item 1ARisk Factors included in the Companys Annual Report on Form 10-K for the year ended December 31, 2009. Accordingly, such information should
not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking
statements. These forward-looking statements are found at various places throughout this Quarterly Report on Form 10-Q and include information concerning possible or assumed future results of our operations, including statements about the following
subjects: benefits, results, cost reductions and synergies resulting from the Companys December 2009 business combination; integration of operations; business strategies; growth opportunities; competitive position; market outlook; expected financial position; expected results of operations; future cash flows; financing plans; plans and objectives of management; tax treatment of the December 2009 business combination; any other statements regarding future growth, future cash needs, future operations, business plans and future financial results, and any other
statements that are not historical facts. These forward-looking statements represent our intentions, plans,
expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or
implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have
described. You should consider the areas of risk and uncertainty described above and discussed under Item 1ARisk Factors included in the Companys Annual Report on Form 10-K for the year ended December 31, 2009, as well
as the fact that the earn-out payments that may be earned in connection with the sale of management rights and responsibilities relating to the Alesco X-XVII securitizations may differ materially from the Companys projections due to
prepayments and defaults experienced by the assets in the securitizations and/or reductions in collateral management fees earned from the contract rights, and that we may not realize the anticipated synergies, cost savings and growth opportunities
of acquiring JVB Financial Holdings, L.L.C. and we may not be able to complete such acquisition. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of the Quarterly Report on Form 10-Q.
All subsequent written and oral forward-looking statements concerning other matters addressed in this Quarterly Report on Form 10-Q and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary
statements contained or referred to in this Quarterly Report on Form 10-Q. Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a
change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.
Certain Terms Used
in this Quarterly Report on Form 10-Q In this Quarterly Report on Form 10-Q, unless otherwise noted or as the context
otherwise requires: the Company, Cohen & Company, we, us, and our refers to the combined company Cohen & Company Inc. and its
subsidiaries; Cohen Brothers, refers to either (i) the pre-merger Cohen Brothers, LLC (which did business as Cohen & Company) and its subsidiaries or (ii) post-merger, the main operating subsidiary of the
Company; AFN refers to the pre-merger Alesco Financial Inc. and its subsidiaries; Merger Agreement refers to the Agreement and Plan of Merger among AFN, Alesco Financial Holdings, LLC, a wholly owned subsidiary
of AFN that we refer to as the Merger Sub, and Cohen Brothers, dated as of February 20, 2009 and amended on June 1, 2009, August 20, 2009 and September 30, 2009; Merger refers to the
December 16, 2009 closing of the merger of Merger Sub with and into Cohen Brothers pursuant to the terms of the Merger Agreement, which resulted in Cohen Brothers becoming a majority owned subsidiary of the Company. In accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP, the Merger
was accounted for as a reverse acquisition, Cohen Brothers was deemed to be the accounting acquirer and all of AFNs assets and liabilities were required to be revalued at fair value as of the acquisition date, therefore, the financials
reported herein are the historical financials of Cohen Brothers. As used throughout this filing, the terms, the Company, we, us, and our refer to the operations of Cohen Brothers and its
consolidated subsidiaries from January 1, 2009 through to December 16, 2009 and the combined operations of the merged company and its consolidated subsidiaries from December 17, 2009 forward. AFN refers to the historical operations of
Alesco Financial Inc. through to December 16, 2009, the date of the Merger, or the Merger Date.
CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) Assets Cash and cash equivalents Restricted cash Receivables from: Brokers, dealers, and clearing agencies Related parties Other receivables Investments-trading Other investments, at fair value Receivables under resale agreements Goodwill Other assets Total assets Liabilities Payables to: Brokers, dealers, and clearing agencies Related parties Accounts payable and other liabilities Accrued compensation Trading securities sold, not yet purchased Securities sold under agreement to repurchase Deferred income taxes Debt (includes $0 and $3,807 of notes payable to related parties, respectively) Total liabilities Commitments and contingencies (See Note 18) Stockholders Equity Preferred Stock, $0.001 par value per share, 50,000,000 shares authorized: Series A Voting Convertible Preferred Stock, $0.001 par value per share, 1 share authorized, 1 share issued and
outstanding Series B Voting Non-Convertible Preferred Stock, $0.001 par value per share, 4,983,557 shares authorized, no shares issued and
outstanding Series C Junior Participating Preferred Stock, $0.001 par value per share, 10,000 shares authorized, no shares issued and
outstanding Common Stock, $0.001 par value per share, 100,000,000 shares authorized, 10,478,682 and 10,343,347 shares issued, respectively;
10,428,284 and 10,292,947 shares outstanding, respectively, including 110,349 and 36,109 unvested restricted share awards, respectively Additional paid-in capital Retained earnings (accumulated deficit) Accumulated other comprehensive loss Treasury stock at cost (50,400 shares of Common Stock) Total controlling interest Noncontrolling interest Total stockholders equity Total liabilities and stockholders equity See accompanying notes to unaudited consolidated financial statements. 1
CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands, except
share or unit and per share or per unit information) (Unaudited) Revenues Net trading Asset management New issue and advisory Principal transactions and other income Total revenues Operating expenses Compensation and benefits Business development, occupancy, equipment Professional services, subscriptions, and other operating Depreciation and amortization Impairment of goodwill Total operating expenses Operating income / (loss) Non operating income / (expense) Interest expense Gain on repurchase of debt Gain on sale of management contracts Income / (loss) from equity method affiliates Income / (loss) before income tax expense Income tax (benefit) / expense Net income / (loss) Less: Net income/ (loss) attributable to the noncontrolling interest Net income / (loss) attributable to Cohen & Company Inc. Income / (loss) per common share/membership unit-basic: Income / (loss) per common share/membership unit Weighted average shares/membership units outstanding-basic Income / (loss) per common share/membership unit-diluted: Income / (loss) per common share/membership unit Weighted average shares/membership units outstanding-diluted Dividends declared per common share See accompanying notes
to unaudited consolidated financial statements. 2
Consolidated Statement of Changes in Stockholders Equity (Dollars
in Thousands) (Unaudited) Balance at December 31, 2008 Deconsolidation of subsidiary Equity-based compensation Distributions Net loss Merger and Reorganization Foreign currency items Balance at December 31, 2009 Equity-based compensation and vesting of shares Shares withheld for employee taxes Dividends/Distributions Net income Foreign currency items Balance at September 30, 2010 See accompanying notes to unaudited consolidated financial statements. 3
Consolidated Statements of Cash Flows (Dollars in Thousands)
(Unaudited) Operating activities Net income / (loss) Adjustments to reconcile net income / (loss) to net cash provided by (used in) operating activities: Gain on repurchase of debt Gain on sale of management contracts Equity-based compensation Realized loss / (gain) on other investments Change in unrealized (gain) / loss on other investments Depreciation and amortization Impairment of goodwill (Income)/loss from equity method affiliates Change in operating assets and liabilities, net: (Increase) decrease in other receivables (Increase) decrease in investments-trading, net (Increase) decrease in other assets, net (Increase) decrease in receivables under resale agreement Change in receivables from / payables to related parties, net (Increase) decrease in restricted cash Increase (decrease) in accrued compensation Increase (decrease) in accounts payable and other liabilities Increase (decrease) in trading securities sold, not yet purchased, net Change in receivables from / payables to brokers, dealers, and clearing agencies, net Increase (decrease) in securities sold under agreement to repurchase Increase (decrease) in deferred income taxes Net cash provided by (used in) operating activities Investing activities Purchase of investments-other investments, at fair value Proceeds from sale of management contracts Sales of other investments, at fair value Investment in equity method affiliates Return from equity method affiliates Return of principal, other investments, at fair value Cash used in other acquisition Purchase of furniture, equipment, and leasehold improvements Net cash provided by (used in) investing activities Financing activities Issuance of debt Repayment and repurchase of debt Payments for deferred issuance and financing cost Cash used to net share settle equity awards Distributions to noncontrolling interest Dividends/Distributions Net cash (used in) provided by financing activities Effect of exchange rate on cash Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period See accompanying notes to unaudited consolidated financial statements. 4
Notes to Consolidated Financial Statements (Dollars in Thousands, except
share or unit and per share or per unit information) (Unaudited) 1. ORGANIZATION AND NATURE OF OPERATIONS The Formation Transaction Cohen Brothers, LLC (d/b/a Cohen & Company) (Cohen Brothers) was formed on October 7, 2004 by Cohen Bros. Financial, LLC (CBF). Cohen Brothers is the majority owned
operating subsidiary of Cohen & Company Inc. (see description of the Company below). Cohen Brothers was formed to acquire the net assets of CBFs subsidiaries (the Formation Transaction): Cohen Bros. & Company,
Inc.; Cohen Frères SAS; Dekania Investors, LLC; Emporia Capital Management, LLC; and the majority interest in Cohen Bros. & Tororian Investment Management, Inc. The Formation Transaction was accomplished through a series of
transactions occurring between March 4, 2005 and May 31, 2005. The Company On December 16, 2009, Cohen Brothers completed its merger (the Merger) with a subsidiary of Alesco Financial Inc.
(AFN) (now Cohen & Company Inc.), in accordance with the terms of the Agreement and Plan of Merger among AFN, Alesco Financial Holdings, LLC (Merger Sub), a wholly owned subsidiary of AFN, and Cohen Brothers, dated
as of February 20, 2009 and amended on June 1, 2009, August 20, 2009 and September 30, 2009 (the Merger Agreement), pursuant to which the Merger Sub merged with and into Cohen Brothers, with Cohen Brothers as the
surviving entity and majority owned subsidiary of Cohen & Company Inc. Prior to the Merger, AFN was a holding
company that held its consolidated assets and conducted its operations primarily through its majority-owned subsidiaries. Pursuant to the Merger Agreement, AFN contributed to Merger Sub substantially all of its assets and certain of its liabilities
not already owned, directly or indirectly, by Merger Sub and retained obligations under its outstanding convertible senior debt and junior subordinated notes. Pursuant to the Merger Agreement, each holder of a Cohen Brothers Class A membership
unit, together with one Cohen Brothers Class B membership unit, with respect to such membership units, received either: (1) 0.57372 shares of common stock, $0.001 par value per share (Common Stock), of the Company, or
(2) retained 0.57372 new membership units in Cohen Brothers. In connection with the Merger, the Company received
10,343,347 of new membership units in Cohen Brothers. Cohen Brothers had a total of 15,626,903 units outstanding as of the date of the Merger giving the Company an effective ownership of 66.2% of Cohen Brothers. Of the 5,283,556 Cohen Brothers membership units not held by the Company, Daniel G. Cohen, through CBF, a single member LLC, holds
4,983,557 Cohen Brothers membership units. Each of Mr. Cohens Cohen Brothers membership units is redeemable at Mr. Cohens option, at any time on or after January 1, 2013, for (i) cash in amount equal to the average of
the per share closing prices of the Companys Common Stock for the ten consecutive trading days immediately preceding the date the Company receives Mr. Cohens redemption notice, or (ii) at the Companys option, one share of
the Companys Common Stock, subject, in each case, to appropriate adjustment upon the occurrence of the issuance of additional shares of the Companys Common Stock as a dividend or other distribution on the Companys outstanding
Common Stock, or a further subdivision or combination of the outstanding shares of the Companys Common Stock. Other members of Cohen Brothers hold a total of 299,999 units. These units have the same redemption rights as described for
Mr. Cohen except that the members holding these units may elect to redeem their shares at any time. In exchange for all
of his Cohen Brothers Class C membership units, Mr. Cohen, through CBF, received one share of the Companys Series A Voting Convertible Preferred Stock (Series A Preferred Stock), which has no economic rights but gave
Mr. Cohen the right to nominate and elect a number equal to at least one-third (but less than a majority) of the total number of directors on the Companys board of directors. On October 18, 2010, Mr. Cohen converted the one
share of Series A Preferred Stock into 4,983,557 shares of the Companys Series B Voting Non-Convertible Preferred Stock (Series B Preferred Stock) each of which has no economic rights but entitle Mr. Cohen to one vote on all
matters presented to the Companys stockholders. See note 23 Subsequent Event. In accordance with accounting
principles generally accepted in the United States of America (U.S. GAAP), the transaction was accounted for as a reverse acquisition, and Cohen Brothers was deemed to be the accounting acquirer and all of AFNs assets and
liabilities were required to be revalued at fair value as of the acquisition date. As used in these consolidated financial statements, the term the Company refers to the operations of Cohen Brothers and its consolidated subsidiaries from
January 1, 2009 through to 5
December 16, 2009 and the combined operations of the merged company and its consolidated subsidiaries subsequent to December 17, 2009. AFN refers to the historical
operations of Alesco Financial Inc. through the December 16, 2009 Merger Date. AFN, a Maryland corporation, resulted
from a reverse merger between Alesco Financial Trust, a private Maryland real estate investment trust (REIT), and a subsidiary of Sunset Financial Resources (Sunset), a publicly-traded Maryland REIT, which merger was
completed on October 6, 2006, and was traded on the New York Stock Exchange under the ticker symbol AFN. AFN was a specialty finance company that invested in multiple target asset classes, subject to maintaining its qualification as
a REIT under the Internal Revenue Code and its exemption from regulation under the Investment Company Act of 1940, as amended. Effective January 1, 2010, the Company ceased to qualify as a REIT. On December 17, 2009, the Company began trading on the NYSE
Amex under the ticker symbol COHN. The Company, through its subsidiaries, is an investment firm specializing in credit- related fixed income investments. As of September 30, 2010, the Company had $10.6 billion in assets under
management (AUM). The Companys business is organized into three business segments: Capital Markets: The Companys Capital Markets segment consists of credit-related fixed income securities sales and trading
as well as new issue placements in corporate and securitized products and advisory revenue. The Companys fixed income sales and trading group provides trade execution to corporate and institutional investors. The Company specializes in the
following products: high grade corporate bonds, high yield corporate bonds and loans, asset backed securities (ABS), mortgage backed securities (MBS), collateralized loan obligations (CLOs), collateralized bond
obligations, commercial mortgage backed securities (CMBS), residential mortgage backed securities (RMBS), Small Business Administration (SBA) loans, U.S. government bonds, U.S. government agency securities, hybrid
capital of financial institutions including trust preferred securities (TruPS), whole loans, and other structured financial instruments. During the first half of 2010, the Company added a team to originate and trade brokered deposits or
CDs for small banks as well as established an agency brokerage business offering execution and brokerage services for cash equity and derivative products. Asset Management: The Company serves the needs of client investors by managing assets within investment funds, managed accounts, permanent capital vehicles, and collateralized debt obligations
(collectively referred to as Investment Vehicles). A collateralized debt obligation (CDO) is a form of secured borrowing. The borrowing is secured by different types of fixed income assets such as corporate or mortgage loans
or bonds. The borrowing is in the form of a securitization which means that the lenders are actually investing in notes backed by the assets. The lender will have recourse only to the assets securing the loan. The Companys Asset Management
segment includes its fee based asset management operations which include ongoing base and incentive management fees. Principal Investing: The Companys Principal Investing segment is comprised primarily of its seed capital investments in
Investment Vehicles it manages. The Company generates its revenue by segment primarily through the following activities:
Capital Markets: trading activities of the Company which include execution and brokerage services, riskless trading activities as well as gains and losses (unrealized
and realized) and income and expense earned on securities classified as trading; new issue and advisory revenue comprised primarily of (i) origination fees for corporate debt issues originated by the Company; (ii) revenue
from advisory services; and (iii) new issue securitization revenue associated with arranging new securitizations; Asset Management: asset management fees for the Companys on-going services as asset manager charged and earned by managing Investment Vehicles, which may include
fees both senior and subordinated to the securities in the Investment Vehicle; incentive management fees earned based on the performance of the various Investment Vehicles; Principal Investing: gains and losses (unrealized and realized) and income and expense earned on securities (primarily seed capital investments in original issuance of
Investment Vehicles the Company manages) classified as other investments, at fair value; and 6
income or loss from equity method affiliates. 2. BASIS OF PRESENTATION The financial statements of the Company included
herein were prepared in conformity with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP
for complete financial statements. The information furnished includes all adjustments and accruals of a normal recurring nature, which, in the opinion of management, are necessary for a fair presentation of results for the interim periods. All
intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three and nine months ended September 30, 2010 and 2009 are not necessarily indicative of the results for the entire year or any
subsequent interim period. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31,
2009. Capitalized terms used herein without definition have the meanings ascribed to them in the Annual Report on Form 10-K for the year
ended December 31, 2009. Certain prior period amounts have been reclassified to conform to the current period
presentation. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Adoption of New Accounting Standards Accounting for Transfers of Financial
Assets In December 2009, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update
(ASU) No. 2009-16, Transfers and Servicing (Topic 860) Accounting for Transfers of Financial Assets (ASU 2009-16), which formally codifies the new guidance on the accounting for transfers of financial
assets issued in June 2009. The new guidance seeks to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the
effects of a transfer on its financial position, financial performance, and cash flows; and a transferors continuing involvement, if any, in transferred financial assets. Specifically, the new guidance eliminates the concept of a qualifying
special purpose entity, creates more stringent conditions for reporting a transfer of a portion of a financial asset as a sale, clarifies other sale-accounting criteria, and changes the initial measurement of a transferors interest in
transferred financial assets. The new guidance is effective for fiscal years and interim periods beginning after November 15, 2009. The Companys adoption of the new guidance on accounting for transfers of financial assets as of
January 1, 2010 did not have an effect on the Companys consolidated financial statements. Variable Interest Entities
In December 2009, the FASB issued ASU No. 2009-17, Consolidations (Topic 810) Improvements in Financial
Reporting by Enterprises Involved with Variable Interest Entities (ASU 2009-17), which formally codifies the revised guidance on the accounting for variable interest entities (VIE or VIEs) issued in June 2009.
The revised guidance deals with determining whether an entity is a VIE and requires an enterprise to perform an analysis to determine whether the enterprises variable interest or interests give it a controlling financial interest in a VIE.
Under the revised guidance, an enterprise has a controlling financial interest when it has (a) the power to direct the activities of a VIE that most significantly impact the entitys economic performance and (b) the obligation to
absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. The revised guidance also requires an enterprise to assess whether it has an implicit responsibility to ensure that a VIE
operates as designed when determining whether it has power to direct the activities of the VIE that most significantly impact the entitys economic performance. The revised guidance also requires ongoing assessments of whether an enterprise is
the primary beneficiary of a VIE, requires enhanced disclosures and eliminates the scope exclusion for qualifying special-purpose entities. The revised guidance is effective for fiscal years and interim periods beginning after November 15,
2009. However, in February 2010, the FASB issued ASU No. 2010-10, Consolidation (Topic 810): Amendment for Certain Investment Funds (ASU 2010-10) which delayed the effective date of the revised guidance for an interest in an
entity (1) that has all the attributes of an investment company or (2) for which it is industry practice to apply measurement principles for financial reporting purposes that are consistent with those followed by investment companies. The
deferral does not apply in situations in which a reporting entity has the explicit or implicit obligation to fund losses of an entity that could potentially be significant to the entity. The deferral also does not apply to interests in
securitization entities, asset-backed financing entities, or entities formerly considered qualifying special purpose entities. The amendments also clarify that for entities that do not qualify for the deferral, related parties should be considered
when evaluating the specified criteria for determining whether a decision maker or service provider fee represents a variable interest. In addition, the requirements for evaluating whether a decision makers or service providers fee is a
variable interest are modified to clarify the FASBs intention that a quantitative calculation should not be the sole basis for this evaluation. The amendments included in ASU 2010-10 do not defer the
7
disclosure requirements included in ASU 2009-17. The Companys adoption of the revised guidance, as modified by the deferral, on variable interest entities as of January 1, 2010 did not
have a material impact on the Companys consolidated financial statements for VIEs that it was involved with as of January 1, 2010 based on the Companys analysis as of that date. However, this is an ongoing assessment and it may
impact the Companys consolidated financial statements in the future. See note 13 for additional disclosures provided about VIEs. Disclosures about Fair Value Measurements In January 2010, the FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements (ASU 2010-06). ASU
2010-06 requires some new disclosures and clarifies some existing disclosure requirements about fair value measurement as set forth in FASB Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures
(FASB ASC 820). ASU 2010-06 amends FASB ASC 820 to require a reporting entity: (1) to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for
the transfers; and (2) in the reconciliation for fair value measurements using significant unobservable inputs, to present separately information about purchases, sales, issuances, and settlements. In addition, ASU 2010-06 clarifies the
requirements of the following existing disclosures: (1) for purposes of reporting fair value measurements for each class of assets and liabilities, a reporting entity needs to use judgment in determining the appropriate classes of assets and
liabilities, and (2) a reporting entity should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. ASU 2010-06 is effective for interim and annual
reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal
years beginning after December 15, 2010, and for interim periods within those fiscal years. Early application is permitted. Since the provisions in ASU No. 2010-06 require only additional disclosures concerning fair value measurements, the
Companys adoption of the provisions that were effective for interim periods beginning after December 15, 2009 during the first quarter of 2010 did not affect the Companys financial position, results of operations, or cash flows. The
Company has included the required disclosures in this Quarterly Report on Form 10-Q. Derivatives and Hedging: Scope Exception Related to
Credit Derivatives In March 2010, the FASB issued ASU No. 2010-11, Derivatives and Hedging (Topic 815): Scope
Exception Related to Credit Derivatives (ASU 2010-11). ASU 2010-11 clarifies the type of credit derivative that is exempt from embedded derivative bifurcation requirements. According to this guidance, the only form of embedded credit
derivative that qualifies for the exemption is one that is related to the subordination of one financial instrument to another. Entities that have contracts containing an embedded credit derivative feature in a form other than such subordination may
need to separately account for the embedded credit derivative feature. ASU 2010-11 is effective for fiscal quarters beginning after June 15, 2010, with early adoption permitted. The Companys adoption of the new accounting guidance on
July 1, 2010 did not have any impact on the Companys financial position, results of operations, or cash flows. B. Fair Value
of Financial Instruments The following methods and assumptions were used by the Company in estimating the fair value
of its financial instruments. These determinations were based on available market information and appropriate valuation methodologies. Considerable judgment is required to interpret market data to develop the estimates and, therefore, these
estimates may not necessarily be indicative of the amount the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
Refer to note 8 for a discussion of the fair value hierarchy. Cash and cash equivalents: Both restricted and
unrestricted cash are carried at historical cost which is assumed to approximate fair value. Investments-trading:
These amounts are carried at fair value. The fair value is based on either quoted market prices of an active exchange, independent broker market quotations, or valuation models when quotations are not available. Other investments, at fair value: These amounts are carried at fair value. The fair value is based on quoted market prices of an
active exchange, independent broker market quotations, or valuation models when quotations are not available. In the case of investments in alternative investment funds, fair value is generally based on the reported net asset value of the underlying
fund. Receivables under resale agreements: Receivables under resale agreements are carried at their contracted resale
price, have short-term maturities (one year or less), and are repriced frequently or bear market interest rates and, accordingly, these contracts are at amounts that approximate fair value. 8
Trading securities
sold, not yet purchased: These amounts are carried at fair value. The fair value is based on quoted market prices of an active exchange, independent market quotations, or valuation models when quotations are not available. Securities sold under agreement to repurchase: The liability for securities sold under agreement to repurchase are carried at
their contracted repurchase price, and are very short-term in nature, and are repriced frequently with amounts normally due in one month or less and, accordingly, these contracts are at amounts that approximate fair value. Debt: These amounts are carried at outstanding principal less unamortized discount. However, a substantial portion of the debt was
assumed in the Merger and recorded at fair value as of that date. As of September 30, 2010, the fair value of the Companys debt is estimated to be $45.6 million. As of December 31, 2009, the carrying value of debt approximated fair value.
Derivatives: These amounts are carried at fair value. The fair value is based on quoted market prices on an exchange
that is deemed to be active. 4. ACQUISITIONS JVB Financial Holdings, LLC On September 14, 2010, the Company and
its subsidiary, Cohen Brothers, entered into a Purchase and Contribution Agreement (the Purchase Agreement) with JVB Financial Holdings, L.L.C., a Florida limited liability company (JVB), the sellers listed in the Purchase
Agreement (the Sellers) and certain employees of JVB (the Management Employees) pursuant to which the Sellers will sell all of the equity in JVB to Cohen Brothers and JVB will become a wholly owned subsidiary of Cohen
Brothers. Under the terms of the Purchase Agreement, Cohen Brothers will acquire JVB for a purchase price of: (i) a cash
payment equal to JVBs tangible net worth at the closing date plus $8.1 million; (ii) 313,051 shares of Company common stock; and (iii) 559,020 restricted membership units in Cohen Brothers (the Restricted Units). As of
September 30, 2010, JVBs tangible net worth is estimated to be approximately $9.6 million. Approximately $2.9
million of the cash consideration and all of the Restricted Units will be delivered to JVB members who are also JVB employees and will be subject to forfeiture based on the continued employment of the JVB employees during the three-year period
following the closing of the transaction. The Restricted Units will vest in three equal installments on each of the first three anniversaries of the closing date, subject to the terms and conditions contained in each employees employment
agreement. Once vested, the Restricted Units may be redeemed for cash or, at the Companys option, shares of the common stock of the Company. Upon the closing of the transaction, an escrow of $484 will be established for the payment of any
adjustments to the purchase price based on the tangible net worth of JVB as of the closing of the transaction, and $384 will be held back for payment to the Sellers only if a certain revenue target is achieved at the end of the first year of
operation following the closing of the transaction. As soon as practicable following the closing of the transaction, but in
any event not later than December 31, 2010, one director nominee chosen by the members of JVB will be added to the Companys board of directors. The Company has agreed to continue to nominate such director for reelection to the
Companys board of directors at each annual meeting date of the Companys stockholders through December 31, 2012. Each of the Company, Cohen Brothers and JVB have made representations and warranties in the Purchase Agreement and have agreed to various restrictions, covenants and agreements. The Purchase Agreement
contains standard termination and indemnity provisions. The transaction, which is expected to close during the fourth quarter of 2010, is subject to a number of closing conditions, including the receipt of Financial Industry Regulatory Authority
(FINRA) approval and other conditions set forth in the Purchase Agreement. Upon the closing of the transaction,
an additional 315,319 shares of restricted Company common stock will be awarded to certain JVB employees. These awards generally will be subject to three year cliff vesting if certain performance targets are met and the employees remain employed for
the full three-year period. In connection with these awards, at the closing of the transaction, Daniel G. Cohen, the Companys Chairman and Chief Executive Officer, Christopher Ricciardi, the Companys President, and one other employee of
Cohen Brothers who is not an executive officer of the Company have agreed to enter into voting agreements pursuant to which each will agree to vote any shares in the Company owned by such individual on the record date of the annual meeting in favor
of the Companys 2010 Long-Term Incentive Plan at the Annual Meeting. The above transaction will be accounted under the acquisition
method in accordance with U.S. GAAP. Accordingly, the transaction 9
will be accounted for as an acquisition by Cohen Brothers of JVB. Fairfax, LLC
Effective in September 2010, the Company acquired Fairfax I.S., LLC (Fairfax). Fairfax is a FINRA regulated US broker dealer.
The Company changed its name to Cohen Capital Markets, LLC (CCM) and will continue to operate it as a wholly owned broker dealer subsidiary. The purchase price was $297. The Company allocated the purchase price as follows: Restricted cash: Other assets: Accounts payable: Purchase price Included in other assets, the Company assigned $166 to the value of the broker-dealer license. This will be treated as an
indefinitely lived intangible asset and will be reviewed for impairment annually. 5. SALE OF MANAGEMENT CONTRACTS On July 29, 2010, Cohen & Company Financial Management, LLC (CCFM), a subsidiary of Cohen & Company, entered into a
Master Transaction Agreement whereby it sold to ATP Management, LLC (ATP) the collateral management rights and responsibilities arising after the sale relating to the Alesco X through XVII securitizations, which represented $3.8 billion
of assets under management on such date. The Company received $4.8 million, net of expenses and purchase price adjustments, at the close of the transaction. In connection with the Master Transaction Agreement, CCFM has entered into a three-year Services Agreement under which it will provide certain services to ATP. ATP will pay CCFM up to $13.6 million under
the Services Agreement. ATP agreed to escrow the amounts payable under this arrangement. Any amounts earned under this arrangement will be recorded as a component of asset management revenue in the consolidated statement of operations. The $4.8 million received up front was recorded as deferred revenue in the consolidated balance sheet and will be recognized as a component of asset
management revenue in the consolidated statement of operations, on a straight line basis, over the remaining period of the Services Agreement. 6. RESTRICTED CASH AND RECEIVABLES FROM AND PAYABLES TO BROKERS, DEALERS, AND CLEARING AGENCIES Amounts receivable from and payable to brokers, dealers and clearing agencies consists of the following at September 30, 2010 and
December 31, 2009, respectively. RECEIVABLES FROM BROKERS, DEALERS, AND CLEARING AGENCIES (Dollars in Thousands) Unsettled regular way trades, net Receivables from brokers, dealers, and clearing agencies PAYABLES TO BROKERS, DEALERS, AND CLEARING AGENCIES (Dollars in Thousands) 10
Unsettled regular way trades, net Margin payable Payables to brokers, dealers, and clearing agencies Securities transactions are recorded on a trade date, as if they had settled. The related amounts receivable and payable for
unsettled securities transactions are recorded net in receivables from or payables to brokers, dealers, and clearing agencies on the Companys consolidated balance sheets. All of the unsettled regular way trades as of September 30, 2010
were settled subsequent to September 30, 2010 at their recorded values. The Company incurred interest on margin payable of $621 and $0 for the nine months ended September 30, 2010 and 2009, respectively, and $509 and $0 for the three
months ended September 30, 2010 and 2009, respectively. The Company held restricted cash of $3,314 and $255 as of September 30,
2010 and December 31, 2009, respectively. Of the $3,314 of restricted cash at September 30, 2010, the Company had $409 of restricted cash related to certain short sales it had entered into, $744 of restricted cash on deposit related to
outstanding foreign currency forward contracts and EuroDollar futures contracts, and $2,161 of restricted cash on deposit with clearing brokers and counterparties of repurchase agreement transactions and agency trades during the current period.
7. FINANCIAL INSTRUMENTS InvestmentsTrading The following table provides a detail of the investments classified as investments-trading as of the periods indicated: INVESTMENTSTRADING (Dollars in Thousands) Security Type U.S. government agency mortgage-backed securities and collateralized mortgage obligations Residential mortgage-backed securities Commercial mortgage-backed securities U.S. Treasury securities Interests in securitizations (1) Small Business Administration (SBA) loans Corporate bonds Certificates of deposit Equity securities Eurodollar futures Other Investments-trading 11
Security Type U.S. government agency mortgage-backed securities and collateralized mortgage obligations Residential mortgage-backed securities Interests in securitizations (1) TruPS SBA loans Investments-trading Trading Securities Sold, Not Yet Purchased The following table
shows the cost and carrying value of all trading securities sold, not yet purchased as of the periods indicated: TRADING
SECURITIES SOLD, NOT YET PURCHASED (Dollars in Thousands) Security Type U.S. government agency mortgage-backed securities U.S. Treasury securities Corporate bonds Certificates of deposit Total Security Type U.S. government agency mortgage-backed securities U.S. Treasury security Total The Company tries to manage its exposure to changes in interest rates for the interest rate sensitive securities it holds by
entering into offsetting short positions for similar fixed rate securities. The Company recognized $6,421 and $(1,754) of trading gains
(losses) for the nine months ended September 30, 2010 and 2009, respectively, that relate to investments trading still held at September 30, 2010 and 2009, respectively. 12
Other Investments, at fair value
The following table provides detail of the investments included within other investments, at fair value as of the
periods indicated. OTHER INVESTMENTS, AT FAIR VALUE (Dollars in Thousands) Security Type Interests in securitizations (1) Equity Securities: EuroDekania Star Asia Brigadier (2) MFCA Deep Value (3) Duart Fund (4) Other securities Total equity securities Residential loans Foreign currency forward contracts Other investments, at fair value Security Type Interests in securitizations (1) Equity Securities: EuroDekania Star Asia RAIT Brigadier (2) MFCA Deep Value Other securities Total equity securities Residential loans Other investments, at fair value 13
The Company has granted its bank debt lenders a security interest in substantially all securities that are currently included in other
investments, at fair value. 8. FAIR VALUE DISCLOSURES Fair Value Option The Company has elected to account for certain of
its other financial assets at fair value under the fair value option provisions of FASB ASC 825, Financial Instruments (FASB ASC 825). The primary reasons for electing the fair value option when it first became available in 2008,
was to reduce the burden of monitoring the differences between the cost and the fair value of the Companys investments, previously classified as available for sale securities, including the assessment as to whether the declines are temporary
in nature and to further remove an element of management judgment. Such financial assets accounted for at fair value include:
in general, any security that would otherwise qualify for available for sale treatment; in general, for all investments in equity method affiliates where the affiliate has all of the attributes in FASB ASC 946-10-15-2 (commonly referred to
as investment companies); in general, investments in residential loans. The changes in fair value (realized and unrealized gains and losses) of these instruments for which the Company has elected the fair value option are recorded in principal transactions and other income in
the consolidated statements of operations. All of the investments for which the Company has elected the fair value option are included as a component of other investments, at fair value in the consolidated balance sheet. The Company recognized
$20,717 and $7,158 of gains related to changes in fair value of investments for which it had elected the fair value option during the nine months ended September 30, 2010 and 2009, respectively. The Company recognized $3,892 and $5,299 of gains
related to changes in fair value of investments for which it had elected the fair value option during the three months ended September 30, 2010 and 2009, respectively. Fair Value Measurements In accordance with FASB ASC 820, the
Company has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for
identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the hierarchy under FASB ASC 820 are described below: In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value
measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Companys assessment of the significance of a particular input to the fair value
measurement in its entirety requires judgment, and considers factors specific to the asset or liability. 14
Both observable and
unobservable inputs may be used to determine the fair value of positions that the Company has classified within the Level 3 category. As a result, the unrealized gains and losses for assets and liabilities within the Level 3 category presented in
the tables below may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs. A review of the fair value hierarchy classifications is conducted on a quarterly basis. Changes in the type of inputs may result in a
reclassification for certain financial assets or liabilities. There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the three and nine months ended September 30, 2010. Reclassifications impacting Level 3 of the
fair value hierarchy are reported as transfers in/out of the Level 3 category as of the beginning of the quarter in which reclassifications occur. The following table presents information about the Companys assets and liabilities measured at fair value on a recurring basis as of September 30, 2010 and December 31, 2009, and indicates
the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value. 15
FAIR VALUE
MEASUREMENTS ON A RECURRING BASIS (Dollars in Thousands) Assets: Investments-trading: U.S. government agency mortgage-backed securities and collateralized mortgage obligations Residential mortgage-backed securities Commercial mortgage-backed securities U.S. Treasury securities Interests in securitizations (1) SBA loans Corporate bonds Certificates of deposit Equity securities Eurodollar futures Total investments-trading Other investments, at fair value: Equity Securities: Other Investment Vehicles EuroDekania (2) Star Asia (3) MFCA (4) Investment Funds Brigadier (5) Deep Value (6) Duart Fund (6) Other Total equity securities Interests in securitizations (1) Residential loans Foreign currency forward contracts Total other investments, at fair value Liabilities: Trading securities sold, not yet purchased, at fair value: U.S. government agency mortgage-backed securities U.S. Treasury securities Corporate bonds Certificates of deposit Total trading securities sold, not yet purchased 16
FAIR VALUE
MEASUREMENTS ON A RECURRING BASIS (Dollars in Thousands) Assets: Investments-trading: U.S. government agency mortgage-backed securities and collateralized mortgage obligations Residential mortgage-backed securities Interests in securitizations (1) TruPS SBA loans Total investments-trading Other investments, at fair value: Equity Securities: Other Investment Vehicles RAIT (2) EuroDekania (3) Star Asia (4) MFCA (5) Investment Funds Brigadier (6) Deep Value (7) Other Total equity securities Interests in securitizations (1) Residential loans Total other investments, at fair value Liabilities: Trading securities sold, not yet purchased, at fair value: U.S. government agency mortgage-backed securities U.S. Treasury security Total trading securities sold, not yet purchased The
following provides a brief description of the types of financial instruments the Company holds, the methodology for estimating fair value, and the level within the hierarchy of the estimate. U.S. Government Agency Mortgage-Backed Securities and Collateralized Mortgage Obligations: These are securities which are
generally traded over-the-counter. The Company generally values these securities using third party quotations such as unadjusted broker-dealer quoted prices or market price quotations from external data providers. These valuations are based on a
market approach. This is considered a Level 2 valuation in the hierarchy. In instances where the securities are either new issuances or experience illiquidity, such as collateralized mortgage obligations, more specifically agency inverse
interest-only securities, the Company may use its own internal valuation models, which are based on an income approach. Fair values based on internal valuation models 17
prepared by the Companys management are generally classified within Level 3 of the valuation hierarchy. Residential Mortgage-Backed Securities and Commercial Mortgage-Backed Securities: These are securities for which the Company obtains third party quotations. These valuations are based on a market
approach. These quotes generally represent indicative levels at which a party may be willing to enter into a transaction. The Company generally classifies the fair value of these securities within Level 2 of the valuation hierarchy. U.S. Treasury Securities: U.S. Treasury securities include U.S. Treasury bonds and the fair values of the U.S. Treasury securities
are based on quoted prices in active markets. Valuation adjustments are not applied. The Company classifies the fair value of these securities within Level 1 of the valuation hierarchy. Interests in Securitizations: Where the Company is able to obtain independent market quotations from at least two broker-dealers
and where a price within the range of at least two broker-dealers is used, interests in securitizations will generally be classified as Level 2 of the valuation hierarchy. These valuations are based on a market approach. The independent market
quotations from broker-dealers are generally nonbinding. The Company seeks quotations from broker-dealers that historically have actively traded, monitored, issued, and been knowledgeable about interests in securitizations. The Company generally
believes that to the extent (1) it receives two quotations in a similar range from broker-dealers knowledgeable about interests in securitizations, and (2) the Company believes the broker-dealers gather and utilize observable market
information such as new issue activity in the primary market, trading activity in the secondary market, credit spreads versus historical levels, bid-ask spreads, and price consensus among market participants and sources, then classification as Level
2 of the valuation hierarchy is appropriate. In the absence of two broker-dealer market quotations, a single broker-dealer market quotation may be used without corroboration of the quote in which case the Company generally classifies the fair value
within Level 3 of the valuation hierarchy. If quotations are unavailable, valuation models prepared by the Companys management are used, which are based on an income approach. These models include estimates and the valuations derived from them
could differ materially from amounts realizable in an open market exchange. Fair values based on internal valuation models prepared by the Companys management are generally classified within Level 3 of the valuation hierarchy. TruPS: The fair value of investments in TruPS is estimated using valuation models prepared by the Companys management, and
is classified as Level 3 of the valuation hierarchy. These valuation models are based on the income approach. These investment securities generally do not trade in an active market and, therefore, observable price quotations are not available. Fair
value is determined based on discounted cash flow models using current interest rates, estimates of the term of the particular contract, specific issuer information, including estimates of comparable market credit spreads and other market data.
SBA Loans: The Company obtains third party quotations for its investments in SBA loans. The quotations are generally
based on quotes of comparable instruments and the Company generally classifies these investments within Level 2 of the valuation hierarchy. These valuations are based on a market approach. Corporate Bonds: The Company uses recently executed transactions or third party quotations to arrive at the fair value of its
investments in corporate bonds. These valuations are based on a market approach. The Company generally classifies the fair value of these bonds within Level 2 of the valuation hierarchy. Equity Securities: The fair value of equity securities that represent investments in publicly traded companies (common or
preferred shares, options, warrants, and other equity investments) are determined using the closing price of the security as of the reporting date. This is considered a Level 1 value in the hierarchy. Other equity securities represent investments in
investment funds and other non-publicly traded entities. All of these other entities have the attributes of investment companies as described in FASB ASC 946-15-2. Prior to the third quarter of 2009, the Companys estimate of the fair value of
its investment in these entities was based on valuation models prepared by Companys management, which were based on a market approach, and were generally classified within Level 3 of the valuation hierarchy. During the third quarter of 2009,
the Company began to estimate the fair value of these entities using the reported net asset value per share as of the reporting date in accordance with the practical expedient provisions related to investments in certain entities that
calculate net asset value per share (or its equivalent) included in FASB ASC 820 for all entities except Star Asia. The Company generally classifies these estimates within either Level 2 if its investment in the entity is currently redeemable or
Level 3 if its investment is not currently redeemable. In the case of Star Asia, the Company utilizes a series of valuation models to determine fair value, which use both the market and income based approaches. Residential Loans: Valuation models prepared by the Companys management are used. These valuation models are based on the
market approach. These models include estimates and the valuations derived from them could differ materially from amounts realizable in an open market exchange. Fair values based on internal valuation models prepared by the Companys management
are generally classified within Level 3 of the valuation hierarchy. Certificates of Deposit: The fair value of
certificates of deposit is estimated using third-party quotations. Certificates of deposit are generally categorized in Level 2 of the fair value hierarchy. 18
Derivatives:
Foreign Currency Forward Contracts The Company invests in foreign currency denominated investments that expose it to fluctuations in foreign currency rates and, therefore, the Company may, from time to time, hedge such exposure by using
foreign currency forward contracts. These foreign currency forward contracts are exchange-traded derivatives which transact on an exchange that is deemed to be active. The fair value of the foreign currency forward contracts is based on current
quoted market prices. These are considered a Level 1 value in the hierarchy. As of September 30, 2010, the Company had 145 outstanding foreign currency forward contracts with a notional amount of 12.5 million Japanese Yen per contract. The
Company had no forward currency forward contracts as of December 31, 2009. EuroDollar Futures The Company invests in floating rate investments that expose it to fluctuations in interest and, therefore, the Company may, from time to
time, hedge such exposure using EuroDollar futures. These futures are exchange-traded derivatives which transact on an exchange that is deemed to be active. The fair value of the EuroDollar futures contracts is based on current quoted market prices.
These are considered a Level 1 value in the hierarchy. As of September 30, 2010, the Company had 87 outstanding EuroDollar futures contracts with a notional amount of $1 million per contract and a duration of three months. The Company had no
EuroDollar futures contracts as of December 31, 2009. Trading Securities Sold, Not Yet Purchased: The securities
are valued using quoted active market prices of the securities sold and are generally categorized within Level 1 or 2 of the valuation hierarchy depending on the type of investment sold. For a discussion of the valuation methodology used for U.S.
government agency mortgage-backed securities, refer to U.S. Government Agency Mortgage-Backed Securities and Collateralized Mortgage Obligations. For a discussion of the valuation methodology used for U.S. treasury securities, refer to
U.S. Treasury Securities. For a discussion of the valuation methodology for corporate bonds, refer to Corporate Bonds. The following table presents additional information about assets and liabilities measured at fair value on a recurring basis and for which the Company has utilized Level 3 inputs to determine fair value
for the nine and three months ended September 30, 2010 and 2009. 19
LEVEL 3 INPUTS
Nine Months Ended September 30, 2010 (Dollars in Thousands) Assets: Investments-trading: U.S. government agency mortgage-backed securities and collateralized mortgage obligations Interests in securitizations (3) TruPS Total investments- trading Other investments, at fair value: Equity Securities: Other Investment Vehicles EuroDekania (4) Star Asia (5) MFCA (6) Investment Funds Brigadier (7) Deep Value (8) Other Total equity securities Interests in securitizations (3) Residential loans Total other investments, at fair value 20
LEVEL 3 INPUTS
Nine Months Ended September 30, 2009 (Dollars in Thousands) Assets: Investments-trading: Interests in securitizations (3) Total investments- trading Other investments, at fair value: Equity Securities: Other Investment Vehicles Investment Funds Total equity securities Interests in securitizations Total other investments, at fair value 21
LEVEL 3 INPUTS
Three Months Ended September 30, 2010 (Dollars in Thousands) Assets: Investments-trading: U.S. government agency mortgage-backed securities and collateralized mortgage obligations Interests in securitizations (3) Total investments- trading Other investments, at fair value: Equity Securities: Other Investment Vehicles EuroDekania (4) Star Asia (5) MFCA (6) Investment Funds Brigadier (7) Deep Value (8) Other Total equity securities Interests in securitizations (3) Residential loans Total other investments, at fair value 22
LEVEL 3 INPUTS
Three Months Ended September 30, 2009 (Dollars in Thousands) Assets: Investments-trading: Interests in securitizations (3) Total investments- trading Other investments, at fair value: Equity Securities: Other Investment Vehicles Investment Funds Total equity securities Interests in securitizations Total other investments, at fair value The circumstances that would result in transferring certain financial instruments from Level 2 to Level 3 in the fair value hierarchy would typically include what the Company believes to be a decrease in
the availability, utility, and reliability of observable market information such as new issue activity in the primary market, trading activity in the secondary market, credit spreads versus historical levels, bid-ask spreads, and price consensus
among market participants and sources. During 2009, the liquidity and transparency surrounding structured credit products,
such as interests in securitizations, continued to diminish. The absence of new issue activity in the primary market led to a continually decreasing level of transparency, as seasoned secondary issuances could not be analyzed on a comparative basis
relative to new issuances. In addition, diminished trading activity in the secondary market also led the Company to believe that broker-dealer quotations may not be based on observable and reliable market information. The Company has maintained this
assessment during 2010 and has not transferred any assets out of Level 3. Investments-trading: During the nine months
ended September 30, 2010, the transfers in to Level 3 reflect the transfer from Level 2 of our investments in certain U.S. government agency collateralized mortgage obligations, specifically agency inverse interest only securities, due to the
fact that these securities are not very liquid, pricing discovery is challenging and there is decreased observability of inputs. During the three months ended September 30, 2010, there were no transfers in or out of Level 3. During the nine
months ended September 30, 2009, transfers into Level 3 reflect the transfers from Level 2 of interests in securitizations comprised of bank trust preferred securities, due to decreased observability of inputs. During the three months ended
September 30, 2009, there were no transfers in or out of Level 3. 23
Other investments,
at fair value: During the nine months ended September 30, 2010, the transfers in to Level 3 reflect the transfer from Level 2 of our investment fund, Brigadier, due to the fact that the investment is not currently redeemable. In the first
half of 2010, the Brigadier fund determined it would liquidate. Effective the second quarter of 2010, the Brigadier fund ceased permitting redemptions until final liquidation. Therefore, no investor requested redemptions are allowed. Brigadier
expects the liquidation to be completed during the fourth quarter of 2010. The fund distributed 90% of its NAV to its unit holders during the second quarter of 2010, and the remaining 10% will be distributed upon the completion of the final audit
and settlement of expenses of the fund. During the three months ended September 30, 2010, there were no transfers in or out of Level 3. During the nine months ended September 30, 2009, the transfers into Level 3 reflect the transfers from
Level 2 of interests in securitizations comprised of bank trust preferred securities, due to decreased observability of inputs. During the nine and three months ended September 30, 2009, the transfers out of Level 3 to Level 2 represent a
certain investment fund for which the Company estimated its fair value based on the reported net asset value per share as of the reporting date in accordance with the practical expedient provisions of FASB ASC 820 which were adopted by
the Company during the third quarter of 2009. The following table presents additional information about investments in
certain entities that calculate net asset value per share (regardless of whether the practical expedient provisions of FASB ASC 820 have been applied) which are measured at fair value on a recurring basis at September 30, 2010 and
December 31, 2009. FAIR VALUE MEASUREMENTS OF INVESTMENTS IN CERTAIN ENTITIES THAT CALCULATE NET ASSET VALUE PER SHARE (OR ITS EQUIVALENT) Other Investment Vehicles: EuroDekania (a) Star Asia (b) MFCA (c) Investment Funds: Brigadier (d) Deep Value (e) Duart Fund (f) Total Other Investment Vehicles: EuroDekania (a) Star Asia (b) MFCA (c) Investment Funds: Brigadier (d) Deep Value (e) Total 24
N/A Not applicable. FAIR VALUE MEASUREMENTS ON A NON-RECURRING BASIS (Dollars in Thousands)
Assets: Goodwill (Strategos) The Company determined the fair value of its goodwill related to the Strategos acquisition using a discounted cash flow
model, which is based on an income approach. This value was determined in accordance with its annual impairment test. An impairment charge of $5,607 was recorded. See footnote 10. 9. COLLATERALIZED SECURITIES TRANSACTIONS Securities purchased under
agreements to resell (reverse repurchase agreements or receivables under resale agreements) or sales of securities under agreements to repurchase (repurchase agreements), principally U.S. government and federal
agency obligations, are treated as collateralized financing transactions and are recorded at their contracted resale or repurchase amounts plus accrued interest. Resulting interest income and expense are included in net trading in the consolidated
statements of operations. In the case of reverse repurchase agreements, the Company generally takes possession of securities
as collateral. Likewise, in the case of repurchase agreements, the Company is required to provide the counterparty with securities. 25
In certain cases a
repurchase agreement and a reverse repurchase agreement may be entered into with the same counterparty. If certain requirements are met, the offsetting provisions included in FASB ASC 210, Balance Sheet (FASB ASC 210), allow (but
do not require) the reporting entity to net the asset and liability on the balance sheet. It is the Companys policy to present the assets and liabilities on a gross basis even if the conditions described in offsetting provisions included in
FASB ASC 210 are met. The Company classifies reverse repurchase agreements as a separate line item within the assets section of the Companys consolidated balance sheets. The Company classifies repurchase agreements as a separate line item
within the liabilities section of the Companys consolidated balance sheets. In the event the counterparty does not meet
its contractual obligation to return securities used as collateral, or does not deposit additional securities or cash for margin when required, the Company may be exposed to the risk of reacquiring the securities or selling the securities at
unfavorable market prices in order to satisfy its obligations to its customers or counterparties. The Companys policy to control this risk is monitoring the market value of securities pledged or used as collateral on a daily basis and
requiring adjustments in the event of excess market exposure. In the normal course of doing business, the Company obtains
reverse repurchase agreements that permit it to re-pledge or resell the securities to others. The Company enters into reverse
repurchase agreements to acquire securities to cover short positions or as an investment. The Company enters into repurchase agreements to finance the Companys securities positions held in inventory. At September 30, 2010 and
December 31, 2009, the fair value of securities received as collateral under reverse repurchase agreements was $8,334 and $19,875, respectively. At September 30, 2010 and December 31, 2009, the fair value of securities pledged as
collateral under repurchase agreements was $8,239 and $0, respectively. 10. GOODWILL Goodwill The following table presents
goodwill as of the relevant dates: Strategos Impairment of goodwill AFN Total The Company periodically reviews goodwill for impairment. The Company performs its annual impairment test of goodwill in the
third quarter of each year (Strategos) and the fourth quarter of each year (AFN). For its annual impairment test of Strategos, the Company
first estimates the current fair value of the Strategos reporting unit. This fair value is compared to the book value of the goodwill and, if the fair value is less, then the goodwill is deemed impaired. The Company determines the fair value of the
Strategos reporting unit using a discounted cash flow analysis. During the third quarter of 2010, the Company determined that an impairment charge should be recorded related to the goodwill allocated to Strategos. During the nine and three months
ended September 30, 2010, the Company recognized an impairment charge of $5,607. The charge is included in the consolidated statements of operations as impairment of goodwill and is reflected as a component of operating expenses. 11. OTHER ASSETS AND ACCOUNTS PAYABLE AND OTHER LIABILITIES Other assets include deferred financing costs, deferred solicitations costs, prepaid expenses, security deposits, miscellaneous other assets, cost method investments, furniture, equipment and leasehold
improvements, net, intangible assets, and investments in private partnerships and limited liability companies that are valued using the equity method of accounting. Other assets at September 30, 2010 and December 31, 2009 included: 26
Deferred financing costs Deferred solicitation costs Prepaid expenses Security deposits Miscellaneous other assets Cost method investment Furniture, equipment and leasehold improvements, net Intangible assets Equity method affiliates Other assets Accounts payable and other liabilities include accounts payable, rent payable, payroll tax liabilities,
severance payable, accrued interest payable, accrued income taxes, guarantee liabilities related to GSME Acquisition Partners I and Alesco XIV (see note 18), deferred income (see note 5) and other general accrued expenses. Accounts payable and other liabilities at September 30, 2010 and December 31, 2009 included: Accounts payable Rent payable Accrued interest payable Income and payroll taxes payable Severance payable Guarantee liability Deferred income Other general accrued expenses Accounts payable and other liabilities 12. INVESTMENTS IN EQUITY METHOD AFFILIATES The Company has several investments that are accounted for under the equity method. Equity method accounting requires that the Company record its investment on the consolidated balance sheets and
recognize its share of the affiliates net income as earnings each year. Investment in equity method affiliates is included as a component of other assets on the Companys consolidated balance sheets. The Company has certain equity method affiliates for which it has elected the fair value option. The Company elected the fair value
option for its investments in the onshore feeder fund of Brigadier and MFCA effective January 1, 2008. See notes 7 and 8. In March 2010, the Company participated in a rights offering of Star Asia and made an additional investment in Star Asia
and increased its ownership percentage. Prior to this increase, Star Asia had been treated as an available for sale security for which the fair value option had been elected. Effective with this ownership increase, Star Asia is considered an equity
method affiliate. However, the Company continued its fair value election regarding Star Asia. See notes 8 and 21. The Company
acquired an interest in a newly formed entity Star Asia SPV for $4,058 in March 2010. The Company subsequently made an additional investment in Star Asia SPV during the second quarter of 2010 for $328. Star Asia SPV is treated as an equity method
investment. See note 21. As of December 31, 2009, the Company had three equity method investees (excluding equity method
affiliates for which the Company has adopted the fair value option): (i) Star Asia Manager; (ii) Deep Value GP; and (iii) Deep Value GP II. As of September 30, 2010, the Company has five equity method investees (excluding equity
method affiliates for which it has adopted the fair value option): (i) Star Asia Manager; (ii) Deep Value GP; (iii) Deep Value GP II; (iv) Star Asia SPV; and (v) Duart Capital Management LLC (Duart Capital). See
note 21 for a discussion of Duart Capital. The following table summarizes the activity and the earnings of the Companys equity method affiliates. 27
INVESTMENT IN EQUITY
METHOD AFFILIATES (Dollars in Thousands) Balance at January 1, 2010 Investments / advances Distributions/repayments In-kind distribution Earnings / (loss) realized Balance at September 30, 2010 In September 2010, Strategos substantially completed the liquidation of the first Strategos Deep Value Fund.
In conjunction with this liquidation and distribution of funds to investors, the Deep Value GP recognized an incentive fee earned in the amount of $11,929. The Company owns 50% of the Deep Value GP. Therefore, the Companys share of this
incentive fee was $5,965 and was included as a component of income from equity method affiliates. This incentive fee is included in the earnings / (loss) realized line item of $5,990 in the table above. The following table summarizes the combined financial information for all equity method investees, including equity method investees for
which the fair value option was elected. SUMMARY DATA OF EQUITY METHOD INVESTEES (unaudited) (Dollars in Thousands) Total Assets Liabilities Equity attributable to the controlling interest Non-controlling interest Liabilities & Equity Net income / (loss) attributable to controlling interest See note 21 for information regarding transactions with the Companys equity method investees.
13. VARIABLE INTEREST ENTITIES FASB ASC 810, Consolidation (FASB ASC 810) contains the guidance surrounding the definition of variable interest entities (VIEs), the definition of variable interests, and
the consolidation rules surrounding VIEs. In general, VIEs are entities in which equity investors lack the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support. The Company has variable interests in VIEs through its management contracts and investments in various securitization entities including CLOs and CDOs. 28
Once it is determined
that the Company holds a variable interest in a VIE, FASB ASC 810 requires that the Company perform a qualitative analysis to determine (i) which entity has the power to direct the matters that most significantly impact the VIEs financial
performance; and (ii) if the Company has the obligation to absorb the losses of the VIE that could potentially be significant to the VIE or the right to receive the benefits of the VIE that could potentially be significant to the VIE. The
entity that has both of these characteristics is deemed to be the primary beneficiary and required to consolidate the VIE. This assessment must be done on an ongoing basis. The Company classifies the VIEs it is involved with into two groups: (i) VIEs managed by the Company; and (ii) VIEs managed by third parties. In the case of the VIEs that the Company has been
involved with, the Company has generally concluded that the entity that manages the VIE has the power to direct the matters that most significantly impact the VIEs financial performance. This is not a blanket conclusion as it is possible for an
entity other than the manager to have the power to direct such matters. However, for all the VIEs the Company is involved with as of September 30, 2010, the Company has drawn this conclusion. In the case where the Company has an interest in a VIE managed by a third party, the Company has concluded that it is not the primary
beneficiary because the Company does not have the power to direct its activities. In the case of an interest in a VIE managed by the Company, the Company will perform an additional qualitative analysis to determine if its interest (including any
investment as well as any management fees that qualify as variable interests) could absorb losses or receive benefits that could potentially be significant to the VIE. This analysis considers the most optimistic and pessimistic scenarios of
potential economic results that could reasonably be experienced by the VIE. Then, the Company compares the benefits it would receive (in the optimistic scenario) or the losses it would absorb (in the pessimistic scenario) as compared to all benefits
and losses absorbed by the VIE in total. If the benefits or losses absorbed by the Company were significant as compared to total benefits and losses absorbed by all variable interest holders, then the Company would conclude it is the primary
beneficiary. As of September 30, 2010, the Company has variable interests in various securitizations but it has
determined that it is not the primary beneficiary and, therefore, is not consolidating the securitization VIEs. The maximum potential financial statement loss the Company would incur if the securitization vehicles were to default on all of their
obligations would be (i) the loss of value of the interests in securitizations that the Company holds in its inventory at the time, and (ii) any management fee receivables in the case of managed VIEs. The Company has not provided financial
or other support to these VIEs during the nine or three months ended September 30, 2010 and 2009 and has no liabilities, contingent liabilities, or guarantees (implicit or explicit) related to these VIEs at September 30, 2010 and
December 31, 2009. The following table presents the carrying amounts of the assets in the Companys consolidated
balance sheets that relate to the Companys variable interest in identified VIEs and the Companys maximum exposure to loss associated with these identified nonconsolidated VIEs in which it holds variable interests at September 30,
2010 and December 31, 2009. NON-CONSOLIDATED VARIABLE INTEREST ENTITIES (Dollars in Thousands) Managed VIEs Third party managed VIEs Total Managed VIEs Third party managed VIEs Total 29
14. DEBT The Company had the following debt outstanding as of September 30, 2010 and December 31, 2009, respectively: DETAIL OF DEBT (Dollars in Thousands) Description 2010 Credit Facility 2009 Credit Facility Contingent convertible senior notes Junior subordinated notes Subordinated notes payable Total 2010 Credit Facility On
July 29, 2010, Dekania Investors, LLC, a subsidiary of the Company, entered into a new secured credit facility with TD Bank, N.A. (the 2010 Credit Facility). The new credit facility expires in September 2012, and replaces Cohen
Brothers previous $30,000 revolving credit facility that was due to expire on May 31, 2011 (the 2009 Credit Facility). Proceeds of the 2010 Credit Facility will be used to finance working capital requirements and for general
corporate purposes. The 2010 Credit Facility is comprised of $ 9,300 of term loan capacity and a maximum of $1,300 for the
issuances of letters of credit. On July 29, 2010, Dekania Investors, LLC drew $9,300. Scheduled payments of principal and interest are required over the term of the credit facility. With respect to the draw of $9,300, Dekania Investors, LLC is required, commencing on September 30, 2010, to make seven consecutive
quarterly principal payments in the amount of $1,162. All unpaid principal and interest with respect to the outstanding draw of $9,300 will be due and payable on September 30, 2012. As of October 1, 2010, the Company had $8,138 of
outstanding borrowings and there was no availability to borrow under the 2010 Credit Facility. Amounts outstanding pursuant
to the 2010 Credit Facility bear interest, at Dekania Investors LLCs option, at either: (1) the adjusted LIBOR rate (as defined in the 2010 Credit Facility) plus 4.5% (the LIBOR Rate) provided that the adjusted LIBOR is at
least 1.5%, or (2) a base rate (as defined in the 2010 Credit Facility), plus 2.75%. The current minimum annual interest rate of the 2010 Credit Facility is 6.0%. Dekania Investors, LLC will pay a fee on the face amount of each letter of credit issued equal to (1) 4.5%, (2) a fronting fee of 0.25% on the face amount of the letter of credit issued, and
(3) the customary issuance fees. TD Bank charged an upfront fee for the 2010 Credit Facility of $250, and Cohen Brothers was required to pay TD Bank $450 as an exit fee for the previous credit facility. As a result of the 2010 Credit Facility and the related security and pledge agreements, the Company and its affiliates continue to grant
TD Bank a security interest in certain of their assets, including substantially all of their remaining asset management contracts and their rights in the three-year Services Agreement discussed in note 5, but not its investments that are currently
classified as investments-trading. The 2010 Credit Facility includes standard events of default, representations, warranties,
restrictions and covenants, including 30
financial covenants that Dekania Investors, LLC is required to maintain, such as (1) a minimum net worth; (2) a minimum consolidated cash flow to debt service coverage ratio; (3) a
minimum consolidated cash flow to debt service and distribution coverage ratio and (4) a maximum funded debt to consolidated cash flow ratio. As of September 30, 2010, Dekania Investors, LLC was in compliance with the financial covenants in the 2010 Credit Facility. Contingent Convertible Senior Notes In March 2010, the Company repurchased
$5,144 notional amount of contingent convertible senior notes from an unrelated third party for $4,115. The Company recognized a gain from repurchase of debt of $886 which is included as a separate component of non-operating income/(expense) in the
Companys consolidated statements of operations. Subordinated Notes On July 29, 2010, Cohen & Company Securities, LLC (CCS), one of the Companys U.S. broker-dealer
subsidiaries commenced its offer to purchase all of the outstanding unsecured subordinated promissory notes issued by Cohen Brothers due June 20, 2013 (the Subordinated Notes) for an amount equal to 80% of the outstanding principal
balance (including accrued paid in kind interest up to, but excluding, the payment date) plus 100% of accrued and unpaid cash interest up to, but excluding, the payment date. As of July 29, 2010, the notes had a principal balance of $9,508 and
interest is paid in cash at an annual rate equal to nine percent (9%) per annum and in kind, at an annual rate equal to three percent (3%) per annum. On August 27, 2010, CCS completed its cash offer to purchase all of the outstanding
Subordinated Notes that were tendered. A total of $8,081 principal amount of the Subordinated Notes (representing 85% of the outstanding Subordinated Notes) were tendered prior to the expiration of the offer to repurchase on August 26, 2010.
CCS accepted for purchase all of the Subordinated Notes tendered pursuant to the offer to repurchase for a total purchase price of $6,762, including accrued interest. The Company recognized a gain from repurchase of debt of $1,632 for the nine and
three months ended September 30, 2010. See Note 21 for a description of notes held and redeemed by related parties. Deferred
Financing. In July 2010, the Company wrote off $675 of unamortized deferred financing to interest expense relating to the
2009 Credit Facility upon the execution of the 2010 Credit Facility. The Company incurred $339 of deferred financing costs during the third quarter of 2010 associated with the 2010 Credit Facility. Deferred financing costs are recorded in other
assets in the consolidated balance sheets. See note 11. The Company will expense these deferred financing costs to interest expense over the remaining life of the 2010 Credit Facility. The Company recognized interest expense from deferred financing
costs of $1,070 and $856 for the nine months ended September 30, 2010 and 2009, respectively, and $702 and $180 for the three months ended September 30, 2010 and 2009, respectively. The expected interest expense from deferred financing
costs to be recognized in 2010 is $1,109 (including the $1,070 already recognized as of September 30, 2010); in 2011 is $156; and in 2012 is $117. No expense will be recorded beyond 2012 as the deferred financing costs will be fully amortized
in 2012. 15. INCOME TAXES For tax purposes, AFN contributed its assets and certain of its liabilities to Cohen Brothers in exchange for an interest in Cohen Brothers on December 16, 2009. AFN was organized and had been
operated as a REIT for United States federal income tax purposes. Accordingly, AFN generally was not subject to U.S. federal income tax to the extent of its distributions to stockholders and as long as certain asset, income, distribution and share
ownership tests were met. As a result of the consummation of the Merger, Cohen & Company ceased to qualify as a REIT effective as of January 1, 2010 and is instead treated as a C corporation for United States federal income tax
purposes. Although for tax purposes AFN is deemed to have acquired a majority interest in Cohen Brothers on the effective
date of the Merger, for GAAP purposes, Cohen Brothers is deemed to have acquired AFN. Therefore, the consolidated financial statements of the Company treat the Company as a pass-through entity (not subject to federal income tax) for all periods
prior to the effective date of the Merger. Subsequent to the Merger (December 17, 2009 December 31, 2009), the Company was effectively taxed as a REIT. The Company ceased to be a REIT as of January 1, 2010, and is subject to U.S.
federal, state and local taxation, taxed at prevailing rates beginning in 2010. The Company has recorded deferred income
taxes as of September 30, 2010 in accordance with FASB ASC No. 740, Income Taxes. Deferred tax assets and liabilities are determined based on the difference between the book basis and tax basis of assets and liabilities using tax
rates in effect for the year in which the differences are expected to reverse. The recognition of deferred tax assets is reduced by a valuation allowance if it is not more likely than not that the tax benefits will be realized. 31
As of
December 31, 2009, the Company had a federal net operating loss (NOL) of approximately $48 million which will be available to offset future taxable income, subject to limitations described below. If not used, this NOL will begin to
expire in 2029. The Company also had net capital losses (NCLs) in excess of capital gains of approximately $69 million as of December 31, 2009, which can be carried forward to offset future capital gains, subject to the limitations
described below. If not used, this carryforward will begin to expire in 2012. No assurance can be provided that the Company will have future taxable income or future capital gains to benefit from its NOL and NCL carryovers. The Company has determined that its NOL and NCL carryovers are not currently limited by Section 382 of the Internal Revenue Code of
1986, as amended (the Code). However, largely because of the material shift in ownership related to the Merger, the Company may experience an ownership change as defined in that section (Ownership Change) in the future.
If an Ownership Change were to occur in the future, the Companys ability to use its NOLs, NCLs and certain recognized
built-in losses to reduce its taxable income in a future year would generally be limited to an annual amount (the Section 382 Limitation) equal to the fair value of the Company immediately prior to the Ownership Change multiplied by the
long term tax-exempt interest rate. In the event of an Ownership Change, NOLs and NCLs that exceed the Section 382 Limitation in any year will continue to be allowed as carryforwards for the remainder of the carryforward period, and
such NOLs and NCLs can be used to offset taxable income for years within the carryforward period subject to the Section 382 Limitation in each year. However, if the carryforward period for any NOL or NCL were to expire before that loss is fully
utilized, the unused portion of that loss would expire unused. On December 21, 2009, the Companys Board of
Directors adopted a Section 382 Rights Agreement (the Rights Agreement) in an effort to help protect against a possible limitation on the Companys ability to utilize its net operating loss and net capital loss carryforwards
(the deferred tax assets) to reduce potential future federal income tax obligations. The Rights Agreement provides for a distribution of one preferred stock purchase right (a Right, and collectively, the Rights)
for each share of the Companys Common Stock, par value $0.001 per share, outstanding to stockholders of record at the close of business on December 21, 2009. Each Right entitles the registered holder to purchase from the Company a unit
consisting of one ten-thousandth of a share of Series C Junior Participating Preferred Stock, par value $0.001 per share (Series C Preferred Stock), at a purchase price of $100.00 per unit, subject to adjustment. Initially, the Rights will not be exercisable and will be attached to and automatically trade with the Companys Common Stock. The
Rights will separate from the Companys Common Stock and a distribution date will occur, with certain exceptions, upon the earlier of (i) ten days following a public announcement that a person or a group of affiliated or
associated persons has acquired beneficial ownership of 4.95% or more of the Companys outstanding Common Stock, which person or group would then qualify as an acquiring person, or (ii) ten business days following the
commencement of a tender offer or exchange offer that would result in a person or group becoming an acquiring person. If at the time of the adoption of the Rights Agreement, any person or group of affiliated or associated persons was the beneficial
owner of 4.95% or more of the outstanding shares of the Companys Common Stock, such person shall not become an acquiring person unless and until such person acquires any additional shares of the Companys Common Stock. In addition to
other exceptions, a person will not become an acquiring person if such person acquired the shares of the Companys Common Stock pursuant to the exercise of options or warrants to purchase Common Stock outstanding and beneficially owned by such
person as of the date such person became the beneficial owner of 4.95% or more of the then outstanding shares of the Companys Common Stock or as a result of an adjustment to the number of shares of the Companys Common Stock for which
such options or warrants are exercisable, or as a result of a stock split or stock dividend. The Rights have no voting
privileges and will expire on the earliest of (i) the close of business on December 31, 2012, (ii) the time at which the Rights are redeemed pursuant to the Rights Agreement, (iii) the time at which the Rights are exchanged
pursuant to the Rights Agreement, (iv) the repeal of Section 382 of the Internal Revenue Code or any successor statue if the Companys Board of Directors determines that the Rights Agreement is no longer necessary or desirable for the
preservation of certain tax benefits, (v) the beginning of the taxable year of the Company to which the Companys Board of Directors determines that certain tax benefits may not be carried forward, or (vi) the first anniversary of
adoption of the Rights Agreement if shareholder approval of the Rights Agreement has not been received by or on such date. The Rights Agreement contains a provision such that if a person or group acquires beneficial ownership of 4.95% or more of the
Companys Common Stock and is determined by the Companys Board of Directors to be an acquiring person, each Right (other than the Rights held by the acquiring person) will entitle the holder to purchase Common Stock having a value of two
times the exercise price of the Right. No rights were exercisable at September 30, 2010. There was no impact to the
Companys financial results as a result of the adoption of the Rights Agreement in December 2009. The terms and conditions of the Rights are set forth in the Section 382 Rights Agreement attached as Exhibit 4.1 to Cohen & Company
Inc.s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 28, 2009. 32
Notwithstanding the
facts that (i) the Company has determined that the use of its remaining NOL and NCL carryforwards are not currently limited by Section 382 of the Code; and (ii) the Company has implemented the rights plan described above to reduce the
chance of a future ownership change, the Company recorded a valuation allowance for substantially all of its NOLs and NCLs when calculating its net deferred tax liability as of September 30, 2010. The valuation allowance was recorded because
the Company determined it is not more likely than not that it will realize these benefits. In determining its federal income
tax provision for 2010, the Company has assumed that it will retain the valuation allowance applied against its deferred tax asset related to the NOL and NCL carryforwards through and including December 31, 2010. To the extent of its usage of
NOL and NCL deferred tax assets during 2010, the Company will record an offsetting adjustment to reduce the valuation allowance. Therefore, the Companys 2010 income tax provision is comprised mainly of state, local and foreign taxes owed to
jurisdictions where the NOL and NCL carryforwards are not able to be utilized or are limited. The Companys
determination that it is not more likely than not that it will realize future tax benefits from the NOL and NCLs may change in the future. In the future, the Company may conclude that it is more likely than not that it will realize the benefit of
all or a portion of the NOL and NCL carryforwards. If it makes this determination in the future, the Company would reduce the valuation allowance and record a tax benefit as a component of the statement of operations in the period it made this
determination. From that point forward, the Company would begin to record net deferred tax expense for federal income taxes as a component of its provision for income tax expense as it utilizes the NOLs and NCLs. The Company recorded a tax benefit during the third quarter of 2010 of $622. This benefit realized by the Company was not the result of
changing its assessment of the likelihood of realizing its existing NOL or NCL carryforward and the corresponding adjustment to the valuation allowance. Rather, during the third quarter, the Company reduced its estimated current income tax rate for
2010 based on revised estimates of current state and local taxable income. 16. NET CAPITAL REQUIREMENTS The U.S. broker-dealer subsidiaries of the Company are subject to the net capital provision of Rule 15c3-1 under the Securities Exchange
Act of 1934, which requires the maintenance of minimum net capital, as defined therein. As applied to the Companys U.S. broker-dealer subsidiaries, CCS and CCM, the rule required net capital of $601 and $275, respectively, as of
September 30, 2010. As of September 30, 2010, CCSs adjusted net capital was $3,912 which exceeded the minimum requirements by $3,311, and CCMs adjusted net capital was $25,971 which exceeded the minimum requirements by $25,696.
EuroDekania Management Limited, a subsidiary of the Company regulated by the Financial Services Authority in the United
Kingdom, is subject to the net liquid capital provision of the Financial Services and Markets Act 2000, GENPRU 2.140R to 2.1.57R, relating to financial prudence with regards to the European Investment Services Directive and the European Capital
Adequacy Directive, which requires the maintenance of minimum liquid capital, as defined therein. As of September 30, 2010, the total minimum required net liquid capital was $2,396, and net liquid capital in EuroDekania Management Limited was
$9,780, which exceeded the minimum requirements by $7,384 in compliance with the net liquid capital provisions. 17. EARNINGS (LOSS) PER
COMMON SHARE/MEMBERSHIP UNIT The following table presents a reconciliation of basic and diluted loss per common
share/membership unit for the periods indicated. Membership units that may be issued in connection with the vesting of a restricted unit issued pursuant to the Amended and Restated Cohen Brothers, LLC 2009 Equity Award Plan (the 2009 Equity
Award Plan) have been excluded from the diluted weighted average shares outstanding calculations because of the obligations of Mr. Daniel G. Cohen, our chairman and chief executive officer, under the Equity Plan Funding Agreement to
transfer to (1) Cohen Brothers the number of Cohen Brothers membership units or shares of the Companys Common Stock equal to the number of Cohen Brothers membership units to be issued by Cohen Brothers to the participants in the 2009
Equity Award Plan in connection with vesting of a Cohen Brothers restricted unit, or (2) the Company the number of shares of the Companys Common Stock equal to the number of recapitalized Cohen Brothers membership units to be issued by
Cohen Brothers to the participants in the 2009 Equity Award Plan in connection with the vesting of a Cohen Brothers restricted unit. See note 16 to the Companys consolidated financial statements included in the Companys Annual Report on
Form 10-K for the year ended December 31, 2009. 33
EARNINGS (LOSS) PER
COMMON SHARE/MEMBERSHIP UNIT (Dollars in Thousands, except share or unit and per share or per unit information)
Net income (loss) attributable to Cohen & Company Inc. Add: Income attributable to the non-controlling interest attributable to Cohen Brothers membership units exchangeable into
Cohen & Company Inc. shares (1) Add (deduct): Adjustment for income tax benefit (expense) (2) Net income (loss) on a fully converted basis Weighted average common shares/membership units outstanding Basic Cohen Brothers membership units exchangeable into Cohen & Company Inc. shares (1) Weighted average common shares/membership units outstanding Diluted Net income (loss) per common share/membership unit-Basic Net income (loss) per common share/membership unit-Diluted 18. COMMITMENTS AND CONTINGENCIES Legal Proceedings The Company is a party to various routine legal proceedings arising out of the ordinary course of the Companys business. Management
believes that none of these actions, individually or in the aggregate, will have a material adverse effect on the Companys financial condition or results of operations. The Companys U.S. broker-dealer subsidiary, CCS, is a party to litigation commenced in 2009 in the United States District Court for the Northern District of Illinois (the Illinois Court)
under the caption Frederick J. Grede, not individually, but as Liquidation Trustee and Representative of the Estate of Sentinel Management Group, Inc. v. Delores E. Rodriguez, Barry C. Mohr, Jr., Jacques de Saint Phalle, Keefe,
Bruyette & Woods, Inc., and Cohen & Company Securities, LLC. The plaintiff in this case is the Liquidation Trustee for the Estate of Sentinel Management Group, Inc. (Sentinel), which filed a bankruptcy petition in
August 2007. The Liquidation Trustee alleges that CCS sold Sentinel securities, mainly collateralized debt obligations, that the Liquidation Trustee contends were unsuitable for Sentinel and that CCS violated Section 10(b) of the Exchange Act
and Rule 10b-5. The Liquidation Trustee also seeks relief under the Illinois Blue Sky Law, the Illinois Consumer Fraud Act, the United States Bankruptcy Code, and under common law theories of negligence and unjust enrichment. The relief sought by
the Liquidation Trustee under these various 34
legal theories includes damages, rescission, disgorgement, and recovery of allegedly voidable transactions under the Bankruptcy Code, as well as costs and attorneys fees. The Company is
vigorously defending the claims. By order dated July 8, 2009, the Illinois Court dismissed the Liquidation Trustees Illinois Consumer Fraud Act claim. Discovery is ongoing with respect to the remaining claims. No contingent liability was
recorded in the Companys consolidated financial statements related to this litigation. CCS is also party to litigation
commenced on May 21, 2009 in the Illinois Court under the caption Frederick J. Grede, not individually, but as Liquidation Trustee of the Sentinel Liquidation Trust, Assignee of certain claims v. Keefe, Bruyette & Woods, Inc.,
Cohen & Company Securities, LLC, Delores E. Rodriguez, Barry C. Mohr, Jr., and Jacques de Saint Phalle. The plaintiff in this case is the Liquidation Trustee of the Sentinel Liquidation Trust, which emerged from the bankruptcy of
Sentinel, filed in August 2007. The Liquidation Trustee, purportedly as the assignee of claims of Sentinels customers, alleges that, by recommending that Sentinel purchase securities, mainly collateralized debt obligations, that the trustee
deems to have been unsuitable for Sentinels customer accounts, CCS aided and abetted breaches of fiduciary duties purportedly owed by Sentinel and its head trader to Sentinels customers, in violation of Illinois common law. The complaint
also alleges claims under common law theories of negligence and unjust enrichment. The Company will vigorously defend all claims. CCS filed a motion to dismiss the Liquidation Trustees complaint on July 21, 2009. On August 19, 2009,
without having ruled on CCSs motion to dismiss, the Illinois Court stayed this action pending the Liquidation Trustees appeal of the dismissal on July 28, 2009, of a substantially similar case brought against The Bank of New York
Mellon Corp (BNYM). The dismissal in the BNYM case has been reversed and remanded to the Illinois Court, but no action has been taken by the Illinois Court in the litigation against CCS. No contingent liability was recorded in the
Companys consolidated financial statements related to this litigation. In a related development, CCS received a
subpoena on May 14, 2009 from the staff of the Securities and Exchange Commission (SEC) captioned In the Matter of Sentinel Management Group, Inc. CCS and the Company has cooperated with the investigation. Cohen Brothers and its registered investment advisor subsidiary, Cohen & Company Financial Management, LLC (f/k/a Cohen Bros.
Financial Management, LLC) are also named in a lawsuit filed on August 6, 2009 in the Supreme Court of the State of New York, County of Kings, captioned Riverside National Bank of Florida v. Taberna Capital Management, LLC, Trapeza Capital
Management, LLC, Cohen & Company Financial Management, LLC f/k/a Cohen Bros. Financial Management LLC, FTN Financial Capital Markets, Keefe, Bruyette & Woods, Inc., Merrill Lynch, Pierce, Fenner & Smith, Inc., Bank of
America Corporation, as successor in interest to Merrill Lynch & Co., JP Morgan Chase, Inc, JP Morgan Securities, Citigroup Global Markets., Credit Suisse (USA) LLC, ABN AMRO, Cohen & Company, Morgan Keegan & Co., Inc.,
SunTrust Robinson Humphrey, Inc., The McGraw-Hill Companies, Inc., Moodys Investors Services, Inc. and Fitch Ratings, Ltd. The plaintiff, Riverside National Bank of Florida (Riverside), alleges that offering memoranda issued in
connection with certain interests in securitizations it purchased failed to disclose alleged ratings agencies conflicts of interest. Riverside alleges, among other things, common law fraud, negligent misrepresentation and breaches of certain
alleged duties. On September 28, 2009, after a demand was made by the Company and its co-defendants to change venue, plaintiff filed a stipulation with the Supreme Court of the State of New York, County of Kings, consenting to changing the
place of trial from County of Kings to County of New York. The Company is vigorously defending the claims. On December 11, 2009, the defendants filed motions to dismiss the complaint on several grounds. On April 16, 2010, Riverside was
closed by the Office of the Comptroller of the Currency. Subsequently, the Federal Deposit Insurance Corporation (the FDIC) was named receiver of the bank. By letter dated April 19, 2010, Riverside requested a 30 day extension for
the oral argument on the defendants motions to dismiss which was originally scheduled for May 12, 2010. On May 4, 2010, the FDIC filed a motion to substitute as plaintiff and for an order staying the litigation for 90 days which was
subsequently granted. On June 3, 2010, the defendants removed the action to the United States District Court for the Southern District of New York where the case is captioned Federal Deposit Insurance Corporation v. The McGraw-Hill
Companies, Inc. et al., 10 Civ. 04421 (DAB). On June 25, 2010, Judge Deborah Batts signed an order providing that defendants are to re-file their motions to dismiss by August 24, 2010. On August 20, 2010, Judge Batts signed an
order adjourning the proceedings for an additional 90 days at the request of the FDIC. The effect of such orders is that the defendants motion to dismiss must be filed by February 23, 2011, after which the FDIC will have 60 days to
respond and defendants will have 30 days for their replies. Cohen & Company Financial Management, LLC
(CCFM) was named in a lawsuit filed on July 29, 2010 in the United States District Court for the District of Oregon, captioned Cascade Bancorp v. Cohen & Company Financial Management, LLC. On September 2, 2010,
a Notice of Dismissal without prejudice was filed with respect to the lawsuit by Cascade Bancorp in the United States District Court for the District of Oregon. Regulatory Matters On June 18, 2009, Cohen Brothers was one of
a number of market participants to receive a subpoena from the SEC seeking documents and information in an investigation titled In the Matter of Certain CDO Structuring Sales and Marketing Practices. The Company has and intends to continue to
cooperate with the investigation. 35
In 2009, CCS was
subject to a routine FINRA examination. As a result of that exam, the FINRA staff requested additional information and the testimony of certain employees concerning the mark-ups CCS charged in four transactions during the exam period. CCS and the
Company cooperated with FINRA. CCS has reached an agreement in principle with the FINRA staff to settle allegations that it charged impermissible mark-ups to qualified institutional customers in one transaction in 2007, and two transactions in 2008.
Without admitting or denying the allegations, CCS consented to a Letter of Acceptance, Waiver and Consent that, among other things, (i) alleged violations of NASD Rules 2110, 2440 and 3010; (ii) censured CCS; (iii) ordered CCS to pay
restitution of $899 plus interest; (iv) ordered CCS to pay a $50 fine; and (v) directed CCS to review its supervisory systems and procedures. The agreement is awaiting final approval by FINRA. As a result, the Company recorded a net
expense of $707 during the third quarter of 2010. The net expense of $707 was comprised of two entries: (i) the Company recorded additional expense of $1,117 as a component of professional services, subscriptions, and other operating expenses,
representing the restitution of $899, the fine of $50, and $168 of estimated interest charges; and (ii) the Company recorded a reduction in compensation and benefits expense of $410, representing the intended recapture by the Company of incentive
compensation previously paid employees related to the three transactions. Non-Profit Preferred Funding I (NPPF
I) Arrangement with Merrill Lynch Portfolio Management, Inc. On December 27, 2007, Merrill Lynch Portfolio
Management, Inc. (the NPPF I Trustor) and the trustee of the NPPF I CDO entered into a loan agreement whereby the NPPF I Trustor made an initial $3,000 advance to the NPPF I CDO so that additional funds would be available for the most
junior CDO certificate holders in future distributions of CDO waterfall payments. At each waterfall payment date, the advance will be repaid in full and the NPPF I Trustor will re-advance a scheduled amount to the CDO trust. The scheduled amounts
will decrease by $300 on each distribution date through September 15, 2012. The advance will not bear interest. The Company is not a party to this agreement and is not obligated to provide reimbursement for any outstanding advances to NPPF I
Trustor. As of September 30, 2010, the outstanding advance between NPPF I Trustor and Merrill Lynch Portfolio Management, Inc. was $1,200. As an accommodation to NPPF I Trustor, the Company agreed to pay 6% simple interest on the advance via a side letter agreement entered into on December 27, 2007, between the Company and NPPF I
Trustor. The Company is only obligated to pay interest on outstanding advances. The side letter will terminate on the earlier of the payment in full of all advances and December 2014. The Company accounts for the interest on the outstanding advances
as a reduction to revenue since these interest payments are deemed a direct reduction of the Companys on-going revenue that otherwise would have been earned for the duration of the trust. The reduction in revenue earned by the Company for the
nine months ended September 30, 2010 and 2009 was $70 and $97, respectively, and for the three months ended September 30, 2010 and 2009 was $21 and $30, respectively. The potential additional liability the Company would have, assuming the
$1,200 advance (as of September 30, 2010) to the NPPF I Trust remained outstanding through December 2014, would be approximately $306. The Company sold the NPPF I management contract during the first quarter of 2009. However, the Company retained this obligation. Letter of Credit on behalf of GSME Acquisition Partners I In
November 2009, the Company acted as the lead underwriter for the initial offering of a new special purpose acquisition corporation, GSME Acquisition Partners I (GSME), which will focus on acquiring a company located in China. A special
purpose acquisition corporation (SPAC) is a blank check company that raises money from stockholders into a shell corporation and then seeks to utilize that money to finance a business combination. Generally, the money is funded into a
trust and certain provisions are put in place to ensure the trust can liquidate and return the money to stockholders if the business combination is not completed by a certain date. The sponsors of the SPAC generally receive equity interests which
are subordinated in some form in the event the trust has to liquidate. GSME has twelve months to identify a business combination and obtain approval from stockholders and an additional six months for the business combination to close. In connection
with this transaction, the Company issued a letter of credit for the benefit of the trust in the amount of $1,242 that will be drawn upon under certain circumstances, such as the non-approval of a business combination by stockholders or if no
business combination is presented for a vote within the specified time frame. The Companys maximum exposure to GSME pursuant to the letter of credit is $1,242. The Companys obligation to fund amounts to GSME is accounted for as a
guarantee pursuant to the guarantee provisions included in FASB ASC 460, Guarantees. As of September 30, 2010 and December 31, 2009, the Company had a $98 liability included in accounts payable and other liabilities for its
obligation to stand ready to perform. If it becomes probable and estimable that the Company will be required to fund the guarantee, an additional or incremental liability will be accrued for under the guidance of FASB ASC 450,
Contingencies. On October 12, 2010, GSME announced that it had entered into an agreement to acquire an entity. GSME announced that it will hold its extraordinary general meeting of shareholders on November 17, 2010 to consider and vote
upon its proposed acquisition. If the acquisition is approved by shareholders, the Companys letter of credit should be released and the Company would reverse its guarantee liability of $98 with an offsetting credit new issue revenue in the
consolidated statement of operations. If the acquisition is not approved, it is possible that all, or a portion, of the Companys letter of credit will be drawn to fund the liquidation of GSME. If this were to happen, any draw on the letter of
credit in excess of $98 will result in additional expense that will be recorded by the Company. The 36
maximum amount of additional expense is $1,144. Alesco XIV Guarantee
AFN invested in a CDO (Alesco XIV) in which Assured Guaranty (Assured) was providing credit support to the
senior interests in securitizations. Alesco XIV made a loan (the Guaranteed Loan) to a particular borrower and AFN entered into an arrangement with Assured whereby AFN agreed to make payments to Assured upon the occurrence of both
(i) a loss on the Guaranteed Loan; and (ii) a loss suffered by Assured on its overall credit support arrangement to Alesco XIV security holders. This arrangement is accounted for as a guarantee by the Company. At the Merger date, the
Company recorded a liability of $1,084 related to this arrangement which is included in accounts payable and other liabilities in the Companys consolidated balance sheet. This amount does not represent the expected loss; rather it represents
the Companys estimate of the fair value of its guarantee (i.e. the amount it would have to pay a third party to assume this obligation). This arrangement is being accounted for as a guarantee. The value will be adjusted under certain limited
circumstances such as: (i) when the guarantee is extinguished; or (ii) if payment of amounts under the guarantee become probable and estimable. The maximum potential loss to the Company on this arrangement is approximately $8,750. Under
certain circumstances, Assured can require the Company to post liquid collateral. Delayed Draw Notes In March 2010, the Company purchased $5,000 delayed draw notes in a subprime auto loan securitization. As of September 30, 2010,
$3,474 has been drawn and funded by the Company. Subsequent to September 30, 2010, the Company sold the delayed draw notes to an unrelated third party and therefore has no further funding obligation. The notes were sold for $3,143 resulting in
a loss of $32 as compared to the September 30, 2010 carrying value. 19. SEGMENT AND GEOGRAPHIC INFORMATION Segment Information The Company operates within three business segments: Capital Markets, Asset Management, and Principal Investing. See note 1. The Companys business segment information for the nine and three months ended September 30, 2010 and 2009 is prepared using
the following methodologies and generally represents the information that is relied upon by management in its decision making processes: (a) Revenues and expenses directly associated with each business segment are included in determining net income by segment; and (b) Indirect expenses (such as general and administrative expenses including executive and overhead costs) not directly associated with specific business segments are not allocated to the segments
statements of operations. Accordingly, the Company presents segment information consistent with internal management reporting. See note (1) in the table below for more detail on unallocated items. Beginning with this quarterly report, the Company reclassified certain personnel and operating expenses from its asset management segment
to its principal investing segment. All prior periods presented have been reclassified to conform with the current period presentation. The following tables present the financial information for the Companys segments for the periods indicated.
37
As of and for the nine months ended September 30, 2010 Net trading Asset management New issue and advisory Principal transactions and other income Total revenues Total operating expenses Operating income / (loss) Income from equity method affiliates Other non operating income / (expense) Income / (loss) before income taxes Income tax expense Net income / (loss) Less: Net income attributable to the noncontrolling interest Net income / (loss) attributable to Cohen & Company Inc. Depreciation and amortization (included in total operating expense) Total assets(2) (3) Investment in equity method affiliates (included in total assets) As of and for the nine months ended September 30, 2009 Net trading Asset management New issue and advisory Principal transactions and other income Total revenues Total operating expenses Operating income / (loss) Loss from equity method affiliates Other non operating income / (expense) Income / (loss) before income taxes Income tax expense Net income / (loss) Less: Net loss attributable to the noncontrolling interest Net income / (loss) attributable to Cohen & Company Inc. Depreciation and amortization (included in total operating expense) Total assets(2) (3) Investment in equity method affiliates (included in total assets) 38
As of and for the three months ended September 30, 2010 Net trading Asset management New issue and advisory Principal transactions and other income Total revenues Total operating expenses Operating income / (loss) Income from equity method affiliates Other non operating income / (expense) Income / (loss) before income taxes Income tax expense / (benefit) Net income / (loss) Less: Net income attributable to the noncontrolling interest Net income / (loss) attributable to Cohen & Company Inc. Depreciation and amortization (included in total operating expense) As of and for the three months ended September 30, 2009 Net trading Asset management New issue and advisory Principal transactions and other income Total revenues Total operating expenses Operating income / (loss) Income from equity method affiliates Other non operating income / (expense) Income / (loss) before income taxes Income tax expense / (benefit) Net income / (loss) Less: Net loss attributable to the noncontrolling interest Net income / (loss) attributable to Cohen & Company Inc. Depreciation and amortization (included in total operating expense) 39
As of September 30, 2010: Goodwill Intangible assets (included in other assets) Goodwill Intangible assets (included in other assets) Asset management total operating
expenses include an impairment charge of $5,607 for the nine and three months ended September 30, 2010, and $0 for the nine and three months ended September 30, 2009 related to the impairment of goodwill allocated to the Strategos
reporting unit. Geographic Information The Company conducts its business activities through offices in the following locations: (1) United States and (2) United Kingdom and other. Total revenues by geographic area are summarized as
follows: GEOGRAPHIC INFORMATION (Dollars in Thousands) Total Revenues: United States United Kingdom & Other Total Long-lived assets attributable to an individual country, other than the United States, are not material.
20. SUPPLEMENTAL CASH FLOW DISCLOSURE Interest paid by the Company on its debt was $4,629 and $2,446 for the nine months ended September 30, 2010 and 2009, respectively. Prior to the Merger, the Company was a pass-through entity for U.S. federal income taxes. However, it did pay entity-level taxes in
certain local jurisdictions. The Company paid income taxes of $2,328 and $734 for the nine months ended September 30, 2010 and 2009, respectively, and received income tax refunds of $873 and $7 for the nine months ended September 30, 2010
and 2009, respectively. In the nine months ended September 30, 2010, the Company had the following significant non-cash
transactions which are not 40
reflected on the statement of cash flows: On May 1, 2010, $140 of
in-kind interest on the subordinated notes payable to related parties was added to the principal balance of the subordinated notes payable. During the second quarter of 2010, the Company received an in-kind distribution of $55 in the form of 109,890 shares of Star Asia from its equity method affiliate, Star Asia SPV. See note 21. In the nine months ended September 30, 2009, the Company had the following significant non-cash transactions which are not reflected
on the statement of cash flows: During the second quarter of 2009, the Company deconsolidated the Deep Value onshore feeder
fund. As a result, the Company recorded a decrease in non-controlling interest of $11,005, a decrease of $10,967 in other investments, at fair value related to the Deep Value onshore feeder funds investment in its related master fund, and an
increase in accounts payable and other liabilities of $38. On May 1, 2009, $135 of in-kind interest on the subordinated
notes payable to related parties was added to the principal balance of the subordinated notes payable. On June 1, 2009,
the Company entered into an amended and restated credit facility with TD Bank. The Company recorded an increase in other assets and an increase in accounts payable and other liabilities of $450 related to the exit fee the Company was obligated to
pay to TD Bank upon the maturity, payment in full, or acceleration of the 2009 Credit Facility, whichever is to occur first. The exit fee was paid in July 2010 when the Company entered into the 2010 Credit Facility. See note 14. 21. RELATED PARTY TRANSACTIONS The Company has identified the following related party transactions for the nine and three months ended September 30, 2010 and 2009. The transactions are listed by related party and the amounts are
disclosed in tables at the end of this section. A. RAIT RAIT Financial Trust (RAIT) is a publicly traded REIT. It has been identified as a related party because (1) the chairman
and chief executive officer of the Company was a trustee of RAIT until his resignation from that position on February 26, 2010 (and was formerly the chief executive officer of RAIT from December 2006 to February 2009); and (2) the chairman
of RAIT is the mother of the chairman and chief executive officer of the Company. 1. Shared Services Agreement The Company has a shared services agreement with RAIT whereby RAIT reimburses the Company for costs incurred by the Company for
administrative and occupancy costs related to RAIT. The Company received payments under this agreement which are disclosed as shared services in the tables at the end of this section. The payments are recorded as a reduction in the related expense.
2. Rent During 2009, the Company began reimbursing RAIT for certain costs incurred by RAIT for office space that is occupied by the Companys
chairman and chief executive officer in one location. Previously, this cost had been borne by RAIT as the Companys chairman was the chief executive officer of RAIT. However, upon his resignation as RAITs chief executive officer in
February 2009, this cost began to be reimbursed by the Company. The payments were for all periods after February 2009. The payments by the Company are disclosed as shared services in the tables at the end this section. The payments are recorded as
an increase to the related expense. In 2006, the Company entered into a lease, as tenant, in one location for which RAIT
shares space. RAIT pays for its share of the space under a sub-lease arrangement with the Company. The Company received payments under this agreement which are disclosed as shared services payments in the tables at the end of this section. The
payments are recorded as a reduction in rent expense. 3. RAIT Shares During the first quarter of 2010, the Company sold all of the shares it held in RAIT. The Company recognized a net gain of $387 during the
first quarter of 2010 which is included as a component of principal transactions and other income in the Companys consolidated statements of operations. Although the Company recognized a net gain during the nine months ended September 30,
2010, it incurred a life to date loss of $8,563. The following summarizes key information regarding the Companys investment in RAIT as of December 31, 2009: 41
SUMMARY OF KEY ITEMS
RELATED TO RAIT SHARES (Dollars in Thousands, except share data) Shares held at end of year Carrying value at end of year Unrealized loss at end of year These shares were included
in other investments, at fair value on the consolidated balance sheets as of December 31, 2009. The change in fair value was recognized in earnings under the fair value option accounting provisions of FASB ASC 825. See notes 7 and 8. The
Companys shares represented approximately 1% of the outstanding shares of RAIT as of December 31, 2009. 4. Securities sold to
and purchased from RAIT In May 2009, one of the Companys U.S. broker-dealer subsidiaries, CCS, executed a
transaction whereby it purchased $8,500 principal amount of the collateralized debt obligation security, RAIT CRE CDO I, Ltd., from an unrelated third party for $340 and immediately sold the security to RAIT for $361. The Company recognized $21 of
net trading revenue related to this transaction in the consolidated statements of operations. In August 2009, CCS executed a
transaction whereby it purchased $300 principal amount of a commercial mortgage-backed security from an unrelated third party for $186 and immediately sold this security to RAIT for $195. The Company recognized $9 of net trading revenue related to
this transaction in the consolidated statements of operations. In September 2009, CCS executed a transaction whereby it
purchased $5,500 principal amount of RAIT CRE CDO I Class F tranche from an unrelated third party for $221 and sold this security to RAIT for $304. The Company recognized $83 of net trading revenue related to this transaction in the consolidated
statements of operations. In January 2010, CCS executed a transaction whereby it purchased $6,500 principal amount of a
commercial mortgage backed security from an unrelated third party for $4,049 and sold the security to RAIT for $4,179. The Company recognized $130 of net trading revenue related to this transaction in the consolidated statements of operations.
In April 2010, the Companys U.S. broker-dealer subsidiary executed a transaction whereby it purchased $500 principal
amount of a commercial mortgage backed security from an unrelated third party for $231 and sold the security to RAIT for $235. The Company recognized $4 of net trading revenue related to this transaction in the consolidated statements of operations.
B. Transactions between Alesco Financial Inc., or AFN, and Cohen Brothers AFN was a publicly traded REIT prior to the consummation of the Merger of one of its subsidiaries with and into Cohen Brothers on
December 16, 2009. Following the Merger, AFN changed its name to Cohen & Company Inc. Prior to the Merger, AFN and Cohen Brothers had been identified as related parties because: (i) Cohen Brothers chairman and chief
executive officer was also the chairman of AFN prior to the Merger and (ii) Cohen Brothers former chief operating officer, who served in this capacity until December 16, 2009, was chief executive officer and a director of AFN prior
to the consummation of the Merger. The following discussion relates to transactions that occurred during the pre-Merger period and therefore are deemed related party transactions. 1. Cohen & Company Inc. Shares (formerly AFN Shares) Alesco
Financial Trust (AFT) began operations in January 2006 when it completed a private offering of securities, and the Companys subsidiary, Cohen Brothers, purchased 400,000 shares of AFT at the initial private offering price of $10
per share. In 2006, AFT merged with a public company, Sunset Financial Resources, Inc. (Sunset). As part of this merger, each holder of AFT shares received 1.26 shares of Sunset. Following the merger, Sunset changed its name to AFN. Upon
the consummation of the Merger between Cohen Brothers and AFN on December 16, 2009, the Company reclassified its majority owned subsidiarys investment in Cohen & Company Inc. shares to treasury stock on the consolidated balance
sheet. The Companys shares were included in other investments, at fair value on the consolidated balance sheets during
the pre-Merger period. The change in fair value was recognized in earnings under the fair value option accounting provisions of FASB ASC 825 for the nine and three months ended September 30, 2009. See note 8. 2. Management Contract AFN had no employees. A subsidiary of Cohen Brothers externally managed AFN for an annual management and incentive fee
42
through December 16, 2009. Cohen Brothers designated some of its employees to work exclusively as the management of AFN, while other employees responsibilities included both AFN and
other matters. The base management and incentive fee otherwise payable to Cohen Brothers was reduced by AFNs proportionate share of the amount of any asset management fees that were paid to Cohen Brothers in connection with any CDOs AFN
invested in, based on the percentage of the most junior interests in securitizations held by AFN in such CDOs. These management fees are disclosed as a component of management fee revenue in the tables at the end of this section for the relevant
pre-Merger periods. Upon the consummation of the Merger on December 16, 2009, the revenue and expense related to the management contract are eliminated for GAAP purposes. 3. Alesco XVII CDO side letter On March 6, 2008, Cohen Brothers
entered into a side letter agreement with AFN with respect to the Alesco XVII CDO whereby Cohen Brothers had agreed to remit to AFN, who was the owner of 75% of the first tier preferred shares of the Alesco XVII CDO, 75% of the collateral management
fees Cohen Brothers would receive on the CDO. Cohen Brothers recognized the receipt of collateral management fees in asset management fees in the consolidated statements of operations. Prior to the Merger, Cohen Brothers accounted for this fee to
AFN as a reduction to the asset management fees (a concession) since this fee was deemed a direct reduction of Cohen Brothers ongoing asset management fees that otherwise would have been earned for the duration of the CDO. The reduction in
asset management fees for the nine and three months ended September 30, 2009 (which is part of the pre-Merger period from January 1, 2009 through December 16, 2009) was $149 and $47, respectively. Upon the consummation of the Merger
on December 16, 2009, the revenue and expense related to this side letter were eliminated for GAAP purposes, and, therefore there was no reduction in asset management fees for the nine and three months September 30, 2010 related to the
Alesco XVII CDO side letter. 4. Shared Services Prior to the Merger, AFN would reimburse Cohen Brothers for certain general and administrative expenses (e.g., pro rata share of Cohen Brothers rent, telephone, utilities, and other office, internal
and overhead expenses) related to AFN. Cohen Brothers recorded this amount as a reduction in the related expense. These expenses are disclosed as shared services (paid) received in the tables at the end of this section. C. Cohen Bros. Financial, LLC (CBF) CBF has been identified as a related party because (i) CBF holds a noncontrolling interest of the Company; and (ii) CBF is wholly owned by the chairman and Chief Executive Officer of the
Company. Beginning in October 2008, the Company began receiving a monthly advisory fee for consulting services provided by
the Company to CBF. The fee is recognized as a component of asset management revenue in the consolidated statements of operations. This fee is disclosed as management fee revenue in the tables at the end of this section. D. The Bancorp, Inc. The Bancorp, Inc. (TBBK) is identified as a related party because (i) TBBKs chairman is the Companys chairman and chief executive officer; and (ii) the former chief
operating officer of the Company (who served in this capacity until December 16, 2009) is a director of TBBK. TBBK
maintained deposits for the Company in the amount of $96 and $70 as of September 30, 2010 and December 31, 2009, respectively. E. Investment Vehicles and Other The following are identified as related parties. Amounts with respect to the transactions identified below are summarized in a table at the end of this section. 1. Brigadier, formed by the Company in May 2006, is a series of investment funds that primarily earns investment returns by investing in
various fixed income and credit market related investments and securities through its master fund. In the first half of 2010, the Brigadier fund determined it would liquidate. Effective beginning in the second quarter of 2010, the Brigadier fund has
ceased permitting redemptions until final liquidation. It expects the liquidation to be completed during 2010. The fund distributed 90% of its NAV to unit holders during the second quarter of 2010, with the remaining 10% to be distributed upon the
completion of final audits and settlement of expenses of the fund. The Company is the general partner and made an initial investment in the onshore feeder fund. As of September 30, 2010 and December 31, 2009, the Company owned 93% and 85%
of the onshore feeder fund through its general and limited partnership interests. Brigadier has been identified as a related party because in the absence of the fair value option of FASB ASC 825, the Brigadier onshore feeder fund would be treated as
an equity method affiliate of the Company. The Company continues to treat the onshore feeder fund as an equity method investment even though it owns a majority of the interests as it expects 43
the fund to complete its liquidation during 2010. The Company has the
following transactions with Brigadier: 2. Star Asia invests primarily in Asian commercial real estate structured finance products, including CMBS, corporate debt of REITs and
real estate operating companies, B notes, mezzanine loans and other commercial real estate fixed income investments. As of September 30, 2010 and December 31, 2009, the Company directly owned approximately 22% and 11%, respectively, of
Star Asias outstanding shares. Star Asia has been identified as a related party because in the absence of the fair value option of FASB ASC 825, Star Asia would be treated as an equity method affiliate and the chairman and chief executive
officer of the Company is a member of Star Asias board of directors. The Company has the following transactions with
Star Asia: 3.
EuroDekania invests primarily in hybrid capital securities of European banks and insurance companies, CMBS, RMBS and widely syndicated leverage loans. As of September 30, 2010 and December 31, 2009, the Company directly owned approximately
5% and 2%, respectively, of EuroDekanias outstanding shares. EuroDekania has been identified as a related party because the chairman and chief executive officer of the Company is a member of EuroDekanias board of directors.
The Company has the following transactions with EuroDekania: 4. Dekania Corp
(DEKU) was a business combination company which the Company sponsored at its creation in 2007 for the purpose of acquiring one or more unidentified businesses. DEKU completed its public offering in February 2007 and was listed on the
NYSE Amex under the symbol DEK. DEKU had been identified as a related party because (i) DEKU was an equity method affiliate of the Company and (ii) the chairman and chief executive officer of the Company was a member of
DEKUs board of directors. In February 2009, DEKU liquidated. See note 3-F to the Companys consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2009. The Company had the following transactions with DEKU: 44
5. Star Asia Manager serves as external manager
of Star Asia and Star Asia SPV (see E-10. listed below) and the Company owns 50% of Star Asia Manager. Star Asia Manager has been identified as a related party because it is an equity method investee of the Company. The Company recognizes its share
of the income or loss of Star Asia Manager as income or loss from equity method affiliates in the consolidated statements of operations. From time to time, the Company may advance Star Asia Manager funds for normal operating purposes; such advances
are a component of due from related party in the consolidated balance sheets. 6. MFCA primarily invests in securities that
are exempt from U.S. federal income taxes. As of September 30, 2010 and December 31, 2009, the Company owned approximately 3% of MFCAs outstanding shares. MFCA has been identified as a related party because: (i) in the absence
of the fair value option of FASB ASC 825, MFCA would be treated as an equity method affiliate of the Company; (ii) the chairman and chief executive officer of the Company is the former chairman of MFCAs board and still serves as a member
of the board; and (iii) the president of the Company served as vice chairman of MFCAs board until March 18, 2009. In March 2009, the board of directors of MFCA assigned the management contract to an unrelated third party. The Company has the following transactions with MFCA: 7. Cohen Financial Group, Inc. (CFG) had been identified as a related party because it was a member of the Company prior to
45
the Merger. CFG filed a Certificate of Dissolution with the Secretary of State of the State of Delaware on December 16, 2009, and is in process of completing the liquidation process. From
time to time, the Company advanced CFG funds for normal operating purposes; these amounts were treated as due from related party in the consolidated balance sheets. As of September 30, 2010 and December 31, 2009, the Company had
outstanding receivables due from CFG of $24 and $76, respectively. 8. The Deep Value GP serves as the general partner for the
feeder funds of Strategos Deep Value Mortgage Funds (in the case of the first master fund) and as the general partner of the master fund itself (in the case of a second master fund). The Deep Value GP II serves as the general partner for the
offshore feeder fund (in the case of a third master fund). The Deep Value GP and the Deep Value GP II are collectively referred to as the Deep Value GPs. The Deep Value GP and the Deep Value GP II have been identified as related parties
because (i) the Deep Value GPs are equity method affiliates of the Company; and (ii) certain employees of the Company own 50% and 60% of the Deep Value GP and the Deep Value GP II, respectively. The Company recognizes its share of the
income or loss of the general partners since they are accounted for under the equity method. The income or loss is recorded as income or loss from equity method affiliates in the consolidated statements of operations. From time to time, the Company
may advance the Deep Value GPs funds for normal operating purposes; these amounts are treated as due from related party in the consolidated balance sheets. 9. Deep Value is a series of closed-end distressed debt funds. Deep Value raises capital from investors, and earns investment returns by investing in a diversified portfolio of asset backed securities
consisting primarily of residential mortgage-backed securities and other real estate related securities, as well as other U.S. real estate related assets and related securities. As of September 30, 2010, the first Deep Value fund has liquidated
substantially all of its remaining investments and expects to distribute its remaining investments during the fourth quarter of 2010. As of September 30, 2010 and December 31, 2009, the Company owned approximately 31% of the Deep Value
onshore feeder fund and 10% of the Deep Value offshore feeder fund. Deep Value (as a group) has been identified as a related party because (i) in the absence of the fair value option of FASB ASC 825, the onshore and offshore feeders in which
the Company has an investment would be treated as equity method affiliates of the Company and (ii) the Company has an equity method investment through its 50% ownership of the Deep Value GP which is the general partner of the feeder funds.
The Company has the following transactions with Deep Value: 10. Star Asia SPV is a newly formed Delaware limited liability company. The Company directly owned approximately 25% of Star Asia
SPVs outstanding shares as of September 30, 2010. Star Asia SPV has been identified as a related party because it is an equity method investee of the Company. See note 12. 11. Duart Capital is a newly formed Delaware limited liability company. The Company directly owned 20% of Duart Capitals
outstanding equity interests as of September 30, 2010. Duart Capital has been identified as a related party because it is an equity method investee of the Company. Duart Capital also serves as the investment manager of the Duart Fund. See below
and note 12. 12. The Duart Fund is a specialized deep value and special situations opportunity fund formed in September 2010.
The Duart Funds investment objective is to provide superior absolute returns by investing primarily in a portfolio of long and short positions in public and private real estate equity securities, equity-linked securities, or debt securities
(including, but not limited to, convertible debt, debt with warrants, warrants, and credit default swaps related to real estate securities) and partnership or fund interests in the real estate industry globally. The Company directly owned 74% of the
Duart Fund as of September 30, 2010. Capital raising activities are ongoing and the Companys ownership interest percentage is expected to decline. The Duart Fund has been identified as a related party because in the absence of the fair
value option of FASB ASC 825, the onshore feeder fund in which the Company has an investment would be treated as an equity method affiliate of the Company. 46
The Company has the
following transactions with the Duart Fund: The following tables display the routine intercompany transactions recognized in
the statements of operations from the identified related parties during the nine and three months ended September 30, 2010 and 2009, respectively, which are described above. Amounts shown as shared services (paid) / received are included as a
component of operating expense in the Companys consolidated statements of operations: RELATED PARTY TRANSACTIONS
Nine months ended September 30, 2010 (Dollars in Thousands) Brigadier RAIT AFN CBF Star Asia Star Asia Manager Star Asia SPV EuroDekania MFCA DEKU Deep Value Duart Capital Total 47
RELATED PARTY
TRANSACTIONS Three months ended September 30, 2010 (Dollars in Thousands) Brigadier RAIT AFN CBF Star Asia Star Asia Manager Star Asia SPV EuroDekania MFCA DEKU Deep Value Duart Capital Total RELATED PARTY TRANSACTIONS Nine months ended September 30, 2009 (Dollars in Thousands)
Brigadier RAIT AFN CBF Star Asia Star Asia Manager Star Asia SPV EuroDekania MFCA DEKU Deep Value Total 48
RELATED PARTY
TRANSACTIONS Three months ended September 30, 2009 (Dollars in Thousands) Brigadier RAIT AFN CBF Star Asia Star Asia Manager Star Asia SPV EuroDekania MFCA DEKU Deep Value Total The following related party transactions are non-routine and are not included in the tables above.
F. Additional Investment in Star Asia In March 2010, the Company purchased 2,279,820 common shares of Star Asia for $1,334 and 1,139,910 units of Star Asia SPV for $4,058 (a total of $5,392) directly from Star Asia as part of a rights
offering. See notes 7, 8 and 12. During the second quarter of 2010, the Company purchased 551,166 common shares of Star Asia
for $1,837 and 270,658 units of Star Asia SPV for $328 (a total of $2,165) directly from unrelated third party investors of Star Asia. In June 2010, the Company received an in-kind distribution of $55 in the form of 109,890 shares of Star Asia from the Companys equity method affiliate, Star Asia SPV. See notes 12 and 20.
G. Additional Investment in Brigadier In August 2010, the Company purchased $39 of limited partnership interests in the onshore feeder fund of Brigadier from an existing investor of Brigadier. H. Additional Investment in EuroDekania In August 2010, the Company purchased 529,880 shares of EuroDekania for $282 directly from unrelated third party investors of EuroDekania. I. Subordinated Notes Payable As of September 30, 2010 and
December 31, 2009, the Company had $0 and $3,807, respectively, of subordinated notes payable to the Companys employees. On August 27, 2010, CCS repurchased a total of $8,081 principal amount of Subordinated Notes for a total
purchase price of $6,762, including accrued interest. The Company recognized a gain from repurchase of debt of $1,632 for the nine and the three months ended September 30, 2010. See note 14. Of the $3,863 principal amount repurchased from
related parties, $2,636 and $1,164 were repurchased from Messrs. Cohen and Ricciardi, respectively, for a purchase price, including accrued interest of $2,206 and $975 payable to Messrs. Cohen and Ricciardi, respectively. Of the $3,807 of outstanding subordinated notes payable to related parties as of December 31, 2009, $2,598 and $1,147 were payable
to Messrs. Cohen and Ricciardi, respectively. See note 8 to the Companys consolidated financial statements included in the Companys Annual Report on Form 10-K for the year ended December 31, 2009. 49
J. Additional Investment in MFCA
In June 2009, the Company purchased 500,100 common shares of MFCA directly from MFCA for $600 as part of a rights
offering. K. Directors and Employees In addition to the employment agreements described under Item 11 Executive Compensation Employment Agreements; Termination and Change of Control Arrangements of the
Companys Annual Report on Form 10-K for the year ended December 31, 2009, the Company has entered into its standard indemnification agreement with each of its directors and executive officers. L. Other From
time to time, the Companys U.S. broker-dealer subsidiaries provided certain brokerage services to its employees in the ordinary course of doing business. The Company recognized immaterial amounts of revenue from these activities in the nine
and three months ended September 30, 2010 and 2009. 22. DUE FROM / DUE TO RELATED PARTIES The following table summarizes the outstanding due from / to related parties. These amounts may result from normal operating advances or
from timing differences between the transactions disclosed in note 21 and final settlement of those transactions in cash. All amounts are non-interest bearing. DUE FROM/DUE TO RELATED PARTIES (Dollars in Thousands) RAIT Brigadier Deep Value Deep Value GP Deep Value GP II Star Asia Manager Cohen Financial Group, Inc. Cohen Brothers Financial, LLC Employees Total Due from Related Parties Employees Total Due to Related Parties 23. Subsequent Event Conversion of Series A Preferred Stock to Series B Preferred Stock On October 18,
2010, Mr. Cohen elected to convert the one share of Series A Preferred Stock he held into 4,983,557 shares of Series B Preferred Stock. Each share of Series B Preferred Stock does not have any economic rights but entitles Mr. Cohen to one
vote on all matters presented to the Companys stockholders. The Series B Preferred Stock will be automatically redeemed for par value on December 31, 2012. Holders of Series B Preferred Stock are not entitled to receive any dividends,
distributions or distributions upon liquidation, dissolution or winding up of the Company. As of October 29, 2010, there were 4,983,557 shares of Series B Preferred Stock issued and outstanding. 50
The following discussion and analysis of the consolidated financial condition and results of operations of Cohen & Company
Inc. and its majority owned subsidiaries (collectively, we, us, our, or the Company) should be read in conjunction with the unaudited consolidated financial statements and the notes thereto appearing
elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto appearing in the Companys Annual Report on Form 10-K for the year ended December 31, 2009. Managements Discussion and Analysis of Financial Condition and Results of Operations is based on our consolidated
financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and
related disclosures of contingent assets and liabilities. On a regular basis, we evaluate these estimates, including fair value of financial instruments. These estimates are based on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances. Actual results may differ from these estimates. All amounts in this
disclosure are in thousands (except unit and per unit and share and per share data) unless otherwise noted. Overview
We are an investment firm specializing in credit-related fixed income investments. We began operations, through our
predecessors, in 1999 as an investment firm focused on small and mid-cap banks, but have grown over the past ten years into a more diversified fixed income specialty investment firm. We are organized into three business segments: Capital Markets,
Asset Management, and Principal Investing. Capital Markets. Our Capital Markets business segment consists of credit-related fixed income sales and trading, as well as new issue placements in
corporate and securitized products. Our fixed income sales and trading group provides trade execution to corporate and institutional investors. We specialize in the following products: high grade corporate bonds, high yield corporate bonds, ABS,
MBS, CLOs, collateralized bond obligations, CMBS, RMBS, SBA loans, U.S. government bonds, U.S. government agency securities, TruPS, whole loans, and other structured financial instruments. We believe that we are one of the most active participants
in the brokering of TruPS due to our knowledge of the transactions and the relationships we maintain with institutional investors in these securities. During the first half of 2010, we added a team to originate and trade brokered deposits or CDs for
small banks as well as established an agency brokerage business offering execution and brokerage services for cash equity and derivative products. Asset Management. We serve the needs of client investors by managing assets within investment funds, managed accounts, permanent capital vehicles, and
collateralized debt obligations (collectively, investment vehicles). A collateralized debt obligation is a form of secured borrowing. The borrowing is secured by different types of fixed income assets such as corporate or mortgage loans
or bonds or TruPS. The borrowing is in the form of a securitization which means that the lenders are actually investing in notes backed by the assets. The lenders will have recourse only to the assets securing the loans. Our Asset Management
business segment includes our fee-based asset management operations which include on-going base, subordinate and incentive management fees. As of September 30, 2010, we had approximately $10.6 billion in assets under management
(AUM). Principal Investing. Our Principal Investing business segment is comprised primarily of our seed capital investments in investment vehicles we manage.
We generate our revenue by business segment primarily through: Capital Markets: our trading activities which include execution and brokerage services, riskless trading activities as well as gains and losses (unrealized and
realized) and income and expense earned on securities classified as trading; and new issue and advisory revenue comprised of (a) origination fees for corporate debt issues originated by us; (b) revenue from advisory
services; and (c) new issue securitization revenue associated with arranging new securitizations; Asset Management:
51
asset management fees for our on-going services as asset manager charged and earned by managing investment vehicles, which may include fees both senior
and subordinated to the securities issued by the investment vehicle; and incentive management fees earned based on the performance of the various investment vehicles; Principal Investing: gains and losses (unrealized and realized) and income and expense earned on securities, primarily seed capital investments in original issuance of
investment vehicles we manage, classified as other investments, at fair value; and income or loss from equity method affiliates. Material Events or Transactions in the Third Quarter of 2010: The following
material events or transactions occurred during the third quarter of 2010: JVB Financial Holdings, LLC On September 14, 2010, we entered into a Purchase and Contribution Agreement (the Purchase Agreement) with JVB Financial
Holdings, L.L.C., a Florida limited liability company (JVB), the sellers listed in the Purchase Agreement (the Sellers) and certain employees of JVB (the Management Employees) pursuant to which the Sellers will
sell all of the equity in JVB to us and JVB will become a wholly owned subsidiary of Cohen Brothers. Under the terms of the Purchase Agreement, Cohen Brothers will acquire JVB for a purchase price of: (i) a cash payment equal to JVBs
tangible net worth at the closing date plus $8.1 million; (ii) 313,051 shares of Company common stock; and (iii) 559,020 restricted membership units in Cohen Brothers (the Restricted Units). As of September 30, 2010,
JVBs tangible net worth is estimated to be approximately $9.6 million. The purchase price is subject to adjustment based on JVBs closing tangible net worth. A portion of the cash and the Restricted Units will be subject to forfeiture
based on continued employment and/or achievement of performance goals. The transaction, which is expected to close during the fourth quarter of 2010, is subject to customary closing conditions, including regulatory approval. See note 4 to our
consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q. In accordance with U.S. GAAP, the transaction will be accounted for as an acquisition by Cohen Brothers of JVB. Sale of Management Contracts On July 29, 2010, we entered into a Master Transaction Agreement pursuant to which we sold to ATP Management, LLC (ATP) the collateral management rights and responsibilities arising after
the sale relating to the Alesco X through XVII securitizations, which represented $3.8 billion of assets under management on such date. In addition, we agreed to sell to ATP the collateral management rights and responsibilities relating to the
Alesco I through IX securitizations, which represented $3.0 billion of assets under management on such date, upon satisfaction of certain conditions, including obtaining the consent of certain equity holders. The required consents of the equity
holders were not obtained and, accordingly, we continue to own the collateral management rights and responsibilities relating to the Alesco I through IX securitizations. We received $4.8 million net of expenses and purchase price adjustments, at the close of the Alesco X through XVII transaction. In connection with the Master Transaction Agreement, we entered into a
three-year Services Agreement under which we will provide certain services to ATP. ATP will pay us up to $13.6 million under the Services Agreement. See note 5 to our consolidated financial statements included in Item 1 in this Quarterly Report
on Form 10-Q. Repurchase of Subordinated Notes On July 29, 2010, Cohen & Company Securities, LLC (CCS), one of our U.S. broker dealer subsidiaries, commenced its offer to purchase all of the outstanding unsecured subordinated
promissory notes issued by Cohen Brothers due June 20, 2013 (the Subordinated Notes) equal to 80% of the outstanding principal balance (including accrued paid in kind interest up to, but excluding, the payment date) plus 100% of
accrued and unpaid cash interest up to, but excluding, the payment date. As of July 29, 2010, the notes had a principal balance of $9,508 and interest was paid (1) in cash at an annual rate equal to nine percent (9%) per annum, and
(2) in kind at an annual rate equal to three percent (3%) per annum. On August 27, 2010, CCS completed its cash offer to purchase all of the outstanding Subordinated Notes that were tendered. A total of $8,081 principal amount of the
Subordinated Notes (representing 85% of the outstanding Subordinated Notes) were tendered prior to the expiration of the offer to repurchase on August 26, 2010. CCS 52
accepted for purchase all of the Subordinated Notes tendered pursuant to the offer to repurchase for a total purchase price of $6,762, including accrued interest. We recognized a gain from
repurchase of debt of $1,632 for the nine and three months ended September 30, 2010. 2010 Credit Facility On July 29, 2010, Dekania Investors, LLC, one of our subsidiaries, entered into a new secured credit facility with TD Bank, N.A. (the
2010 Credit Facility). The 2010 Credit Facility expires in September 2012 and replaces our previous $30,000 revolving credit facility that was due to expire on May 31, 2011. Proceeds of the 2010 Credit Facility are being used to
finance working capital requirements and for general corporate purposes. The 2010 Credit Facility is comprised of $9,300 of term loan capacity and a maximum of $1,300 for the issuances of letters of credit. On July 29, 2010, Dekania Investors,
LLC drew $9,300. Dekania Investors, LLC is required, commencing on September 30, 2010, to make seven consecutive quarterly principal payments in the amount of $1,162. All unpaid principal and interest with respect to the outstanding draw of
$9,300 will be due and payable on September 30, 2012. Amounts outstanding pursuant to the 2010 Credit Facility bear
interest, at Dekania Investors LLCs option, at either: (1) the adjusted LIBOR rate (as defined in the 2010 Credit Facility), plus 4.5% (the LIBOR Rate); provided, that the adjusted LIBOR is at least 1.5%, or (2) a base
rate (as defined in the 2010 Credit Facility), plus 2.75%. The current minimum annual interest rate of the 2010 Credit Facility is 6.0%. Business Environment Our business is materially affected by economic conditions in the financial markets, political conditions, broad trends in business and finance, changes in volume and price levels of securities
transactions, and changes in interest rates, all of which can affect our profitability. Severe market fluctuations or weak economic conditions could ultimately reduce our trading volume and revenues and adversely affect our profitability.
A portion of our revenues are generated from net trading activity. We engage in proprietary trading for our own account as
well as execute riskless trades with a customer order in hand resulting in limited market risk to us. The inventory of securities held for our own account as well as held to facilitate customer trades and our market making activities are
sensitive to market movements. A portion of our revenues is generated from management fees. Our ability to charge management
fees and the amount of those fees is dependent upon the underlying investment performance and stability of the investment vehicles. If these types of investments do not provide attractive returns to investors, the demand for such instruments will
likely fall, thereby reducing our opportunity to earn new management fees or maintain existing management fees. Consolidated Results of
Operations The following section provides a comparative discussion of our consolidated results of operations for the
specified periods. The period-to-period comparisons of financial results are not necessarily indicative of future results. 53
Nine Months Ended
September 30, 2010 compared to the Nine Months Ended September 30, 2009 The following table sets forth
information regarding our consolidated results of operations for the nine months ended September 30, 2010 and 2009. COHEN & COMPANY INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands)
(Unaudited) Revenues Net trading Asset management New issue and advisory Principal transactions and other income Total revenues Operating expenses Compensation and benefits Business development, occupancy, equipment Professional services, subscriptions, and other operating Depreciation and amortization Impairment of goodwill Total operating expenses Operating income / (loss) Non operating income / (expense) Interest expense Gain on repurchase of debt Gain on sale of management contracts Income/(loss) from equity method affiliates Income / (loss) before income tax expense Income tax expense Net income / (loss) Less: Net income / (loss) attributable to the noncontrolling interest Net income / (loss) attributable to Cohen & Company Inc. N/M = Not Meaningful Revenues Revenues increased by $38,714, or 63%, to $100,648 for the
nine months ended September 30, 2010 from $61,934 for the nine months ended September 30, 2009. As discussed in more detail below, the change was comprised of increases of $24,565 in net trading revenue, $18,005 in principal transactions
and other income and $878 in new issue and advisory revenue, partially offset by a decrease of $4,734 in asset management revenue. Net
Trading Net trading revenue increased $24,565, or 77%, to $56,483 for the nine months ended September 30, 2010 from
$31,918 for the nine months ended September 30, 2009. The increase in net trading revenue for the nine months ended
September 30, 2010 is primarily the result of (i) the continued build-out of the Capital Markets segment and our increase in overall Capital Markets headcount to 97 as of September 30, 2010 as compared to 61 as of September 30,
2009, which included a significant expansion of our European Capital Markets team; and (ii) 54
improved results as we transition to a strategy of using risk capital, including the impact of the increased value in leveraged credit products on our trading investments, realized and
unrealized. Our net trading revenue includes unrealized gains on our trading investments, as of the applicable measurement
date, which may never be realized due to changes in market or other conditions not in our control that may adversely affect the ultimate value realized from our trading investments. Due to volatility and uncertainty in the markets, the net trading
revenue recognized during the nine months ended September 30, 2010 may not be indicative of future results. Furthermore, some of the assets included in the Investmentstrading line of our consolidated balance sheets represent Level 3
valuations within the FASB fair value hierarchy. Level 3 assets are carried at fair value based on estimates using internal valuation models and other estimates. See note 8 to our consolidated financial statements included in Item 1 in this
Quarterly Report on Form 10-Q. The fair value estimates made by the Company may not be indicative of the final sale price at which these assets may be sold. Asset Management Assets Under Management AUM refers to our assets under management and equals the sum of: (1) the gross assets included in collateralized debt obligations
that we have sponsored and manage; plus (2) the gross assets accumulated and temporarily financed in warehouse facilities during the accumulation phase of the securitization process, which gross assets are intended to be included in
collateralized debt obligations; plus (3) the gross assets of a portfolio that we managed for RAIT; plus (4) the NAV of the permanent capital vehicles and investment funds we manage; plus (5) the NAV of other managed accounts.
AUM is also an important driver of our revenue and expense fluctuations. AUM drives our asset management fee revenue. In
addition, much of our workforce receives a significant portion of their compensation through performance bonuses which are related to our revenues. Therefore, AUM will impact compensation expense in addition to revenue. Our calculation of AUM may differ from the calculations of other asset managers and, as a result, this measure may not be comparable to
similar measures presented by other asset managers. Our AUM measure includes, for instance, certain AUM for which we charge either no or nominal fees which are generally related to our assets in the accumulation phase. Our definition of AUM is not
based on any definition of AUM contained in any of our management agreements. 55
ASSETS UNDER
MANAGEMENT (dollars in thousands) Company sponsored collateralized debt obligations Other managed assets (1) Permanent capital vehicles Investment funds Managed accounts (2) Assets under management (end of period) (3) Average assets under management company sponsored collateralized debt obligations Asset management fees decreased by $4,734, or 20%, to $19,050 for the nine
months ended September 30, 2010 from $23,784 for the nine months ended September 30, 2009, as discussed in more detail below. The following table provides a more detailed comparison of the two periods: ASSET MANAGEMENT (dollars in thousands) Collateralized debt obligations and related service agreements Investment funds Other Total Collateralized Debt Obligations Asset management revenue from company-sponsored collateralized debt obligations decreased $5,500 to $14,833 for the nine months ended September 30, 2010 from $20,333 for the nine months ended
September 30, 2009. The following table summarizes the periods presented by asset class: 56
FEES EARNED BY ASSET
CLASS (dollars in thousands) Trust preferred securities and insurance company debt U.S. High grade and mezzanine ABS Middle market loans U.S. Trust preferred securities and insurance company debt Europe Broadly syndicated loans Europe Obligations of tax exempt entities Total Asset management fees for TruPS and insurance company debt of United States companies decreased primarily
because the average AUM in this asset class declined due to greater levels of deferrals and defaults of the underlying assets. The amounts earned from the amortization of the sale proceeds as well as the revenue earned from the services agreement
related to the Alesco X XVII securitizations are included in this line item in the table above. Substantially all of
our TruPS trusts have stopped paying subordinated management fees. However, we will begin accruing the subordinated asset management fees again if payments resume and, in our estimate, continued payment by the trusts is reasonably assured. If
payments resume in the future, but we are unsure of continued payment, we will recognize the subordinated asset management fee as payments are received and will not accrue the fee on a monthly basis. Asset management fees for high grade and mezzanine ABS declined primarily because the average AUM in this asset class declined due to
defaults of the underlying assets and liquidations of certain collateralized debt obligations. Asset management fees for
middle market loans of United States companies decreased to $0 because we sold three CLO management contracts comprising substantially all of our Emporia business line to an unrelated third party in February 2009. Asset management fees for TruPS and insurance company debt of European companies decreased primarily because we stopped accruing for
subordinated fees for certain collateralized debt obligations due to the non-payment of such fees during 2009 and due to the decline in the average AUM in this asset class due to greater levels of deferrals and defaults of the underlying assets as
well as a result of exchange rate fluctuations. Asset management fees for broadly syndicated loans Europe increased
because we began accruing for subordinated asset management fees again when payments resumed in January 2010. We stopped accruing for subordinated fees in this asset class due to the non-payment of such fees related to the period effective
January 1, 2009. Asset management fees for obligations of tax exempt entities decreased during the nine months ended
September 30, 2010 as compared to the same period in 2009 because in March 2009, we entered into a sub-advisory agreement with an unrelated third party, related to the Structured Tax-Exempt Pass-Through (STEP) management contract.
From March 18, 2009 through April 21, 2009, we continued to receive collateral management fees from this securitization and served as its manager. Effective April 22, 2009, the STEP management contract was formally assigned to the
unrelated third party who then became the collateral manager. Per our agreement, the new collateral manager pays us a fee equal to 55% of any management fees the unrelated third party receives from this securitization. As of April 22, 2009 and
thereafter, we recognize this sub advisory fee as other income which is a component of principal transactions and other income in the consolidated statements of operations. 57
Investment Funds
Our asset management revenue from investment funds is comprised of fees from the management of Brigadier and Deep
Value. Brigadier Deep Value Total The decrease in Brigadier revenue was due to a decrease in base and incentive management fee revenue of
$1,054. Brigadier had experienced extensive redemptions during 2009. We are currently in the process of liquidating Brigadier. Effective beginning in the second quarter of 2010, the Brigadier fund ceased permitting redemptions until final
liquidation. Brigadier expects the liquidation to be completed during 2010. The fund distributed 90% of its NAV to unit holders during the second quarter of 2010, with the remaining 10% to be distributed upon the completion of final audits and
settlement of expenses of the fund. We ceased charging management fees effective April 30, 2010. The increase in Deep
Value revenue was primarily because there was an increase in NAV during the first nine months of 2010 as compared to the first nine months of 2009. During the third quarter of 2010, the first Strategos Deep Value Fund substantially completed its
liquidation process and therefore less management fees generated by Deep Value will be earned by us in the future. In addition, during the first quarter of 2009, we consolidated the onshore fund of Deep Value and the related management fees that
were earned were eliminated in consolidation and were effectively recognized as a component of noncontrolling interest in the consolidated statements of operations. We deconsolidated the onshore fund subsequent to the first quarter of 2009.
Other Our other asset management revenue consists of revenue earned from the management of permanent capital vehicles and managed accounts. The
net increase of $1,241 was primarily comprised of an increase in managed accounts fees of $1,361, partially offset by a decrease of $120 from MFCA. The MFCA management contract was assigned to a third party in the first quarter of 2009. Of the
$1,241 increase in managed account fees, $896 came from a single new managed account arrangement. In conjunction with the
assignment of the MFCA management contract, we will receive a participation fee beginning on March 18, 2012 and for the ten-year period thereafter equal to 10% of the revenue earned in excess of $1,000 annually by the unrelated third party for
managing MFCA. The increase in fees from managed accounts is due to the fact that the managed account arrangements were
entered into subsequent to the second quarter of 2009. New Issue and Advisory Revenue New issue and advisory revenue increased by $878, or 72%, to $2,103 for the nine months ended September 30, 2010 as compared to
$1,225 for the same period in 2009. The increase is primarily attributable to an increased number of new issue and advisory engagements that closed during 2010 as compared to 2009. Principal Transactions and Other Income Principal transactions and other
income increased by $18,005, to $23,012 for the nine months ended September 30, 2010, as compared to $5,007 for the nine months ended September 30, 2009. 58
Principal
Transactions & Other Income (dollars in thousands) Change in fair value of other investments, at fair value Foreign currency Dividend, interest, and other income Total The increase in the change in fair value of other investments of $17,957 is comprised of the following:
AFN EuroDekania Star Asia RAIT Brigadier MFCA Deep Value Other Total Effective with the merger on December 16, 2009, our investment in AFN was reclassified as treasury
stock and is not adjusted going forward. RAIT (NYSE: RAS) is a publicly traded company so changes in the value of our investment match changes in the public share price. In addition, we sold our investment in RAIT during the first quarter of 2010.
Our investments in EuroDekania, Star Asia, Brigadier, MFCA, and Deep Value generally increase and decrease in value based on the NAV of the underlying funds. In March 2010, Star Asia undertook a rights offering at a substantial discount to underlying NAV. Each investor in Star Asia was issued rights to participate up to their pro rata ownership percentage. We,
along with two other third party investors of Star Asia, agreed to acquire our pro rata share and any unsubscribed shares (we each agreed to acquire one third of any unsubscribed shares). As a result, we invested $1,334 during the first quarter of
2010 to acquire 2,279,820 shares of Star Asia. 1,166,000 shares represented our pro rata ownership percentage and 1,113,820 represented our share of the unsubscribed amounts. During the second quarter of 2010, we also purchased 551,166 shares
directly from unrelated third parties for $1,837 and received 109,890 shares as an in-kind distribution from Star Asia. All of these purchases, including the tender offer, were made at amounts below Star Asias net asset value. For the nine
months ended September 30, 2010, the change in fair value of our investment in Star Asia was comprised of $8,821 from our investment in the unsubscribed shares in the rights offering at a substantial discount to NAV, $3,757 from our purchases
of shares and receipt of shares from Star Asia SPV during the second quarter at amounts below NAV, and $2,518 from changes in the underlying NAV of Star Asia. In August 2010, we purchased 529,880 shares of EuroDekania for $282 from unrelated third party investors of EuroDekania. $309 of the $444 in increase in value of EuroDekania is a result of this additional
investment. The change in other investments was comprised of an increase of $1,262 related to certain investments acquired as
part of the Merger, a decrease of $1,733 related to increased net realized and unrealized losses on Japanese Yen-based forward contracts put in place to partially hedge fluctuations in the investment value of Star Asia, and an increase of $3,673
related to a single investment in a securitization which was sold during 2010. The remaining $1,474 of the increase relates to improved results from investments held in both periods. We receive payments under certain asset management contracts in Euros or U.K. Pounds Sterling; however, our functional currency is the
United States dollar. The foreign currency fluctuations are due to changes in the exchange rates between Euros, U.K. 59
Pounds Sterling and United States Dollars in the related periods. We have not hedged our foreign currency exposure related to management fees paid in Euros or U.K. Pounds Sterling to date.
Operating Expenses Operating expenses increased $26,186, or 38%, to $95,852 for the nine months ended September 30, 2010 from $69,666 for the nine months ended September 30, 2009. The change was due to increases
of $11,333 in compensation and benefits, $9,050 in professional services, subscriptions, and other operating, $216 in business development, occupancy, equipment, and a $5,607 impairment charge to goodwill, partially offset by a decrease of $20 in
depreciation and amortization. Compensation and Benefits Compensation and benefits increased $11,333, or 21%, to $64,190 for the nine months ended September 30, 2010 from $52,857 for the nine months ended September 30, 2009. COMPENSATION AND BENEFITS (dollars in thousands) Cash compensation and benefits Equity-based compensation Total Cash compensation and benefits in the table above is primarily comprised of salary, incentive compensation
and benefits. The increase in cash compensation and benefits is primarily a result of the increase in incentive compensation which is tied to revenue and operating profitability. The increase was partially offset by a decrease of $410 which was
recorded in the third quarter of 2010 as a result of an agreement in principle reached with the Financial Industry Regulatory Authority (FINRA) staff to pay restitution related to certain allegations stemming from a recent FINRA exam.
The agreement is awaiting final approval by FINRA. The $410 represents the intended recapture by us of incentive compensation previously paid to employees. See note 18 to our consolidated financial statements included in Item 1 in this Quarterly
Report on Form 10-Q. See also Part II Other Information; Item 1 Legal Proceedings in this Quarterly Report on Form 10-Q. In addition, our total headcount increased from 127 at September 30, 2009 to 148 at September 30, 2010.
Compensation and benefits includes equity-based compensation which decreased $820, or 25%, to $2,414 for the nine months
ended September 30, 2010 from $3,234 for the nine months ended September 30, 2009. For the nine months ended
September 30, 2009, compensation and benefits includes equity-based compensation of $1,361 related to the amortization of restricted units consisting of Cohen Brothers long-term incentive profit (LTIP) units awarded to our
executives and $1,873 related to the amortization of Cohen Brothers options awarded to our employees. Upon the closing of the Merger, the vesting of the LTIP units was accelerated in December 2009 and such LTIPs were automatically converted to Cohen
Brothers membership units and then converted into our Common Stock and the options awarded to our employees, to the extent not exercised prior to the Merger, were automatically cancelled. For the nine months ended September 30, 2010,
compensation and benefits includes equity-based compensation of $1,365 related to the amortization of restricted units granted under the Cohen Brothers, LLC 2009 Equity Award Plan, and $1,049 related to restricted shares of our Common Stock.
Business Development, Occupancy and Equipment Business development, occupancy, and equipment increased $216, or 6%, to $4,113 for the nine months ended September 30, 2010 from $3,897 for the nine months ended September 30, 2009. Business
development expenses, such as promotion, advertising, travel and entertainment constituted $31 of the increase from the nine months ended September 30, 2009, primarily the result of headcount increases and the scaling of our infrastructure to
support plans for the business. Rent expense and occupancy and equipment constituted $93 and $92, respectively, of the increase from the nine months ended September 30, 2009. Professional Services, Subscriptions, and Other Operating Expenses Professional services, subscriptions, and other operating expenses increased $9,050, or 82%, to $20,043
for the nine months ended September 30, 2010 from $10,993 for the nine months ended September 30, 2009. The increase included an increase of $2,549 in legal and professional fees, an increase of $1,796 in solicitation, clearing and
execution costs, an increase of $154 in recruiting expense, an increase of $844 in insurance premiums, an increase of $1,236 in subscription costs, an increase of $333 in consulting fees, and an increase of $2,138 in other costs. Of the $1,796
increase in solicitation, clearing, and execution costs, $833 related to the write-off of deferred solicitation costs incurred to raise capital for the first Strategos Deep Value Fund. These costs had been paid and were being amortized over the
expected life of the investment fund. The fund substantially completed its liquidation as of September 30, 60
2010. Accordingly, substantially all of the unamortized solicitation costs related to the first Strategos Deep Value fund were expensed in the third quarter of 2010. Of the $2,138 in other costs,
$1,117 of expense was recorded in the third quarter of 2010 as a result of an agreement in principle reached with the FINRA staff to pay restitution related to certain allegations stemming from a recent FINRA exam. The agreement is awaiting final
approval by FINRA. See note 18 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q. See also Part II Other Information; Item 1 Legal Proceedings in this Quarterly Report on Form
10-Q. Depreciation and Amortization Depreciation and amortization decreased $20, or 1%, to $1,899 for the nine months ended September 30, 2010 from $1,919 for the nine months ended September 30, 2009. The entire decline was due to
a decrease in depreciation and amortization expense on furniture, equipment and leasehold improvements due to certain equipment becoming fully depreciated. Impairment of Goodwill During the nine months ended September 30,
2010, we recognized an impairment charge of $5,607. The impairment charge is a result of the annual impairment test which is completed in the third quarter of each year (as it relates to Strategos goodwill). For its annual impairment test of
Strategos, the Company first estimates the current fair value of the Strategos reporting unit. This fair value is compared to the book value of the goodwill and, if the fair value is less, then the goodwill is deemed impaired. The Company determines
the fair value of the Strategos reporting unit using a discounted cash flow analysis. The future cash flows of Strategos were unfavorably impacted by the successful wind down of the first Strategos Deep Value fund. During the third quarter of 2010,
the Company determined that an impairment charge should be recorded related to the goodwill allocated to Strategos. During the three and nine months ended September 30, 2010, the Company recognized an impairment charge of $5,607. The charge is
included in the consolidated statements of operations as impairment of goodwill and is reflected as a component of operating expenses. Non-Operating Income and Expense Interest Expense Interest expense increased $2,409, or 64%, to $6,167 for the nine months ended September 30, 2010 from $3,758 for the nine months
ended September 30, 2009. This increase of $2,409 was primarily comprised of (a) a decrease of $1,572 of interest incurred on our bank debt; (b) an increase of $1,421 of interest incurred on convertible senior notes assumed from AFN;
(c) an increase of $2,616 of interest incurred on junior subordinated notes assumed from AFN; and (d) a decrease of $62 of interest incurred on subordinated notes payable. The nine month period ended September 30, 2009 also includes
non-operating income of $6 related to an interest rate swap we terminated on June 1, 2009 when we entered into the 2009 Credit Facility. The decrease of $1,572 on bank debt was primarily due to the fact that we reduced the amount outstanding
under the line of credit to $0 from February 2010 to July 28, 2010. On July 29, 2010, our subsidiary, Dekania
Investors, LLC entered into a new secured credit facility with TD Bank, N.A. (the 2010 Credit Facility) and made a draw of $9,300. As a consequence, we wrote off $675 of unamortized deferred financing costs to interest expense related to
the former credit facility. For additional information see - Liquidity and Capital Resources Debt Financing and note 14 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q.
Gain on Repurchase of Debt In March 2010, we repurchased $5,144 notional amount of contingent convertible senior notes from an unrelated third party for $4,115. The notes had a carrying value of $5,001 resulting in a gain from
repurchase of debt of $886 which is included as a separate component of non-operating income/(expense) in our consolidated statements of operations. See note 14 to our consolidated financial statements included in Item 1 in this Quarterly
Report on Form 10-Q. In August 2010, one of our broker-dealer subsidiaries, CCS, completed its cash offer to purchase all of
the outstanding subordinated notes payable that were tendered. CCS repurchased $8,081 principal amount of the subordinated notes payable (representing 85% of the outstanding subordinated notes payable) for $6,762, including accrued interest. We
recorded a gain from repurchase of debt of $1,632 which is included as a separate component of non-operating income/(expense) in our consolidated statements of operations. See note 14 to our consolidated financial statements included in Item 1
in this Quarterly Report on Form 10-Q. We did not repurchase any debt in the nine month period ended September 30, 2009.
Gain on Sale of Management Contracts The gain on sale of management contracts decreased $3,645, or 79%, to $971 for the nine months ended September 30, 2010 61
from $4,616 for nine months ended September 30, 2009. On February 27, 2009, we sold three CLO management contracts comprising substantially all of our middle market loans-U.S. (Emporia)
business line to an unrelated third party. We received net proceeds from this sale, after payment of certain expenses, of $7,258. In addition, we were entitled to certain contingent payments based on the amount of subordinated management fees
received by the unrelated third party under the sold CLO management contracts in an amount not to exceed an additional $1,500. We had agreed to pay $3,000 of the net proceeds to AFN in order to compensate AFN for amounts that it would have otherwise
received under a leverage loan warehouse facility in which AFN had an interest. This payment was only required if the Merger was not completed. We recorded a net gain on sale of management contracts of $4,616 for the nine months ended
September 30, 2009, representing the net cash received of $7,484, which also includes the payments received from the unrelated third party during the second and third quarter of 2009, less the $3,000 contingent payment due to AFN. We recognized
the contingent payment as a liability as of September 30, 2009. This contingent payment was not made and the additional $3,000 gain was subsequently recognized in December 2009. We record the contingent payments to be received from the
unrelated third party of the subordinated fee (of up to $1,500) as additional gain as such payments are actually received. We recorded $971 of these contingent payments during the nine months ended September 30, 2010. As of June 30, 2010,
we reached the maximum limit of additional fees we could receive under these contracts. Therefore, we will no longer record any additional gain on these contracts in future periods. Income / (Loss) from Equity Method Affiliates Income from equity method
affiliates increased $9,596 to income of $6,004 for the nine months ended September 30, 2010 from a loss of $3,592 for the nine months ended September 30, 2009. Income or loss from equity method affiliates represents our share of the
related entities earnings. As of September 30, 2009, we had two equity method investees: (1) Star Asia Manager and (2) Deep Value GP. During the first nine months of 2009, we wrote off our equity method investment in DEKU for a
total charge of $4,339, since DEKU was liquidated in February 2009. As of September 30, 2010, we had five equity method investees: (1) Star Asia Manager, (2) Deep Value GP, (3) Deep Value GP II; (4) Star Asia SPV; and
(5) Duart Capital. See notes 12 and 21 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q. In September 2010, Strategos substantially completed the liquidation of the first Strategos Deep Value Fund. In conjunction with this liquidation and distribution of funds to investors, the Deep Value GP
recognized its incentive fee earned in the amount of $11,929. We own 50% of the Deep Value GP. Therefore, our share of this incentive fee was $5,965 and was included as a component of income from equity method affiliates during the nine months ended
September 30, 2010. Income Tax Expense Income tax expense increased by $201 to income tax expense of $501 for the nine months ended September 30, 2010 from income tax expense of $300 for the nine months ended September 30, 2009,
primarily as a result of an increase in our overall taxable income as well as the fact that the Company is treated as a C corporation in 2010. See note 15 to our consolidated financial statements included in Item 1 in this Quarterly Report on
Form 10-Q. Net Income / (Loss) Attributable to the Noncontrolling Interest Net income / (loss) attributable to the noncontrolling interest for the nine months ended September 30, 2009 was comprised of the 45%
of the noncontrolling interest attributable to the onshore feeder fund of Deep Value, which we consolidated as of December 31, 2008, through to the first quarter of 2009 since we owned a majority of the limited partner interests since its first
closing in April 2008 through the end of the first quarter of 2009. During the second quarter of 2009, our ownership percentage in the onshore feeder fund declined to 30%. Accordingly, in the second quarter of 2009, we deconsolidated the onshore
feeder fund. No gain or loss was recognized related to the deconsolidation as the amounts transferred were already based on fair value. For the nine months ended September 30, 2010, the net income / (loss) attributable to noncontrolling
interest was comprised of the 33.8% noncontrolling interest related to member interests in our majority owned subsidiary, Cohen Brothers, other than the interests held by us for the nine months ended September 30, 2010. 62
Three Months Ended
September 30, 2010 compared to the Three Months Ended September 30, 2009 The following table sets forth
information regarding our consolidated results of operations for the three months ended September 30, 2010 and 2009. COHEN & COMPANY INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands)
(Unaudited) Revenues Net trading Asset management New issue and advisory Principal transactions and other income Total revenues Operating expenses Compensation and benefits Business development, occupancy, equipment Professional services, subscriptions, and other operating Depreciation and amortization Impairment of goodwill Total operating expenses Operating income / (loss) Non operating income / (expense) Interest expense Gain on repurchase of debt Gain on sale of management contracts Income/(loss) from equity method affiliates Income / (loss) before income tax expense Income tax (benefit) expense Net income / (loss) Less: Net income / (loss) attributable to the noncontrolling interest Net income / (loss) attributable to Cohen & Company Inc. N/M = Not Meaningful Revenues Revenues decreased by $1,465, or 6%, to $23,104 for the
three months ended September 30, 2010 from $24,569 for the three months ended September 30, 2009. As discussed in more detail below, the change was comprised of an increase of $3,118 in net trading revenue, offset by decreases in $3,298 in
principal transactions and other income, $835 in asset management revenue, and $450 in new issue and advisory revenue. Net Trading
Net trading revenue increased $3,118, or 29%, to $14,025 for the three months ended September 30, 2010 from $10,907
for the three months ended September 30, 2009. 63
The increase in net
trading revenue for the three months ended September 30, 2010 is primarily the result of (i) the continued build-out of the Capital Markets segment and our increase in overall Capital Markets headcount to 97 as of September 30, 2010
as compared to 61 as of September 30, 2009, which included a significant expansion of our European Capital Markets team; and (ii) improved results as we transition to a strategy of using risk capital, including the impact of the increased
value in leveraged credit products on our trading investments, realized and unrealized. Our net trading revenue includes
unrealized gains on our trading investments, as of the applicable measurement date, which may never be realized due to changes in market or other conditions not in our control that may adversely affect the ultimate value realized from our trading
investments. Due to volatility and uncertainty in the markets, the net trading revenue recognized during any three month period may not be indicative of future results. Furthermore, many of the assets included in the Investmentstrading line of
our consolidated balance sheets represent Level 3 valuations within the FASB fair value hierarchy. Level 3 assets are carried at fair value based on estimates using internal valuation models and other estimates. See note 8 to our consolidated
financial statements included in Item 1 in this Quarterly Report on Form 10-Q. The fair value estimates made by the Company may not be indicative of the final sale price at which these assets may be sold. Asset Management Asset
management fees decreased by $835, or 12%, to $6,036 for the three months ended September 30, 2010 from $6,871 for the three months ended September 30, 2009, as discussed in more detail below. The following table provides a more detailed
comparison of the two periods: ASSET MANAGEMENT (dollars in thousands) Collateralized debt obligations and related service agreements Investment funds Permanent capital vehicles and other Total Collateralized Debt Obligations Asset management revenue from company-sponsored collateralized debt obligations decreased $1,182 to $4,746 for the three months ended September 30, 2010 from $5,928 for the three months ended
September 30, 2009. The following table summarizes the periods presented by asset class: COLLATERALIZED DEBT
OBLIGATION ASSET MANAGEMENT FEES EARNED BY ASSET CLASS (dollars in thousands) Trust preferred securities and insurance company debt U.S. High grade and mezzanine ABS Trust preferred securities and insurance company debt Europe Broadly syndicated loans Europe Total Asset management fees for TruPS and insurance company debt of United States companies decreased primarily
because the average AUM in this asset class declined due to greater levels of deferrals and defaults of the underlying assets. The amounts earned from the amortization of the sale proceeds as well as the revenue earned from the services agreement
related to the Alesco X-XVII securitizations are included in this line item in the table above. 64
Substantially all of
our TruPS trusts have stopped paying subordinated management fees. However, we will begin accruing the subordinated asset management fees again if payments resume and, in our estimate, continued payment by the trusts is reasonably assured. If
payments resume in the future, but we are unsure of continued payment, we will recognize the subordinated asset management fee as payments are received and will not accrue the fee on a monthly basis. One of the TruPS trusts referred to above resumed
payment of subordinated assets management fees in March 2010. Asset management fees for high grade and mezzanine ABS declined
primarily because the average AUM in this asset class declined due to defaults of the underlying assets and liquidations of certain collateralized debt obligations. Asset management fees for TruPS and insurance company debt of European companies decreased primarily because we stopped accruing for subordinated fees for certain collateralized debt obligations due to
the non-payment of such fees during 2009 and due to the decline in the average AUM in this asset class due to greater levels of deferrals and defaults of the underlying assets as well as a result of exchange rate fluctuations. Asset management fees for broadly syndicated loans Europe increased because we began accruing for subordinated asset management
fees again when payments resumed in December 2009. We stopped accruing for subordinated fees in this asset class due to the non-payment of such fees during the first quarter of 2009. Investment Funds Our asset management revenue from investment funds
is comprised of fees from the management of Brigadier and Deep Value. Brigadier Deep Value Total The decrease in Brigadier revenue was due to a decrease in base and incentive management fee revenue of
$189. Brigadier experienced extensive redemptions during 2009. The Company is currently in the process of liquidating Brigadier. Effective beginning in the second quarter of 2010, the Brigadier fund has ceased permitting redemptions until final
liquidation. It expects the liquidation to be completed during 2010. The fund distributed 90% of its NAV to unit holders during the second quarter of 2010, with the remaining 10% to be distributed upon the completion of final audits and settlement
of expenses of the fund. We have stopped charging management fees effective April 30, 2010. The increase in Deep Value
revenue was primarily because there was an increase in NAV during the third quarter of 2010 as compared to the third quarter of 2009. During the third quarter of 2010, the first Strategos Deep Value Fund substantially completed its liquidation
process and therefore less management fees generated by Deep Value will be earned by us. Other Our other asset management revenue consists of revenues earned from the management of permanent capital vehicles and managed accounts. The
net increase of $475 was primarily comprised of an increase of managed account fees. Of this increase, $310 came from the addition of a single management account arrangement subsequent to the third quarter of 2009. The increase in fees from managed accounts is due the fact that the managed account arrangements were entered into subsequent to the
second quarter of 2009. New Issue and Advisory Revenue New issue and advisory revenue decreased by $450, or 94%, to $30 for the three months ended September 30, 2010 from $480 for the three months ended September 30, 2009. The decrease is primarily
attributable to less new issue activity in the third quarter 2010 related to advisory engagements as compared to third quarter of 2009. Principal Transactions and Other Income Principal transactions and other income decreased by $3,298, or 52%, to $3,013 for the three months ended September 30, 2010 as compared to $6,311 for the three months ended September 30, 2009.
65
Principal
Transactions & Other Income (dollars in thousands) Change in fair value of other investments, at fair value Foreign currency Dividend, interest, and other income Total The decrease in the change in fair value of other investments of $2,658 is comprised of the following:
AFN EuroDekania Star Asia RAIT Brigadier MFCA Deep Value Other Total Effective with the merger on December 16, 2009, our investment in AFN was reclassified as treasury
stock and is not adjusted going forward. RAIT (NYSE: RAS) is a publicly traded company so changes in the value of our investment match changes in the public share price. We sold our investment in RAIT during the first quarter of 2010. Our
investments in EuroDekania, Brigadier, MFCA, and Deep Value generally increase and decrease in value based on the NAV of the underlying funds. During the second quarter of 2010, we purchased 551,166 shares of Star Asia directly from unrelated third parties for $1,837 and received 109,890 shares as an in-kind distribution from Star Asia SPV. In
August 2010, we purchased 529,880 shares of EuroDekania for $282 from unrelated third party investors of EuroDekania. $309 of the $421 in increase in value of EuroDekania is a result of this investment. In September 2010, the Duart Fund was formed
and we made an initial investment of $4,500. The change in other investments was comprised primarily of a decrease of $1,219
related to an increased net realized and unrealized loss on Japanese Yen-based forward contracts put in place to partially hedge fluctuations in the investment value of Star Asia. We receive payments under certain asset management contracts in Euros or U.K. Pounds Sterling; however, our functional currency is the
United States Dollar. The foreign currency fluctuations are due to changes in the exchange rates between Euros, U.K. Pounds Sterling and United States Dollars in the related periods. Operating Expenses Operating expenses increased $5,103, or 21%, to
$29,262 for the three months ended September 30, 2010 from $24,159 for the three months ended September 30, 2009. The change was due to increases of $4,221 in professional services, subscriptions, and other operating, $252 in business
development, occupancy, equipment, and $5,607 in impairment of goodwill, which was partially offset by decreases of $4,975 in compensation and benefits and $2 in depreciation and amortization. Compensation and Benefits Compensation and benefits decreased $4,975, or 27%, to $13,787 for the three months ended September 30, 2010 from $18,762 for the
three months ended September 30, 2009. 66
COMPENSATION AND
BENEFITS (dollars in thousands) Cash compensation and benefits Equity-based compensation Total Cash compensation and benefits in the table above is primarily comprised of salary, incentive compensation
and benefits. The decrease in cash compensation and benefits is primarily a result of the decrease in incentive compensation that is tied to operating profitability. We recorded a decrease of $410 in the third quarter of 2010 as a result of
an agreement in principle reached with the FINRA staff to pay restitution related to certain allegations stemming from a recent FINRA exam. The agreement is awaiting final approval by FINRA. The $410 represents the intended recapture by us of
incentive compensation previously paid to employees. See note 18 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q. See also Part II Other Information; Item 1 Legal Proceedings in this
Quarterly Report on Form 10-Q. Compensation and benefits includes equity-based compensation which decreased $505, or 46%, to
$593 for the three months ended September 30, 2010 from $1,098 for the three months ended September 30, 2009. For
the three months ended September 30, 2009, compensation and benefits includes equity-based compensation of $413 related to the amortization of restricted units consisting of Cohen Brothers long term incentive profit (LTIP) units
awarded to our executives and $685 related to the amortization of Cohen Brothers options awarded to our employees. Upon the closing of the Merger, the vesting of the LTIP units was accelerated in December 2009 and such LTIPs were automatically
converted to Cohen Brothers membership units and then converted into our Common Stock and the options awarded to our employees, to the extent not exercised prior to the Merger, were automatically cancelled. For the three months ended
September 30, 2010, compensation and benefits includes equity-based compensation of $148 related to the amortization of restricted units granted under the Cohen Brothers, LLC 2009 Equity Award Plan, and $445 related to restricted shares of our
Common Stock. Business Development, Occupancy and Equipment Business development, occupancy, and equipment increased $252, or 22%, to $1,392 for the three months ended September 30, 2010 from $1,140 for the three months ended September 30, 2009. Business
development expenses, such as promotion, advertising, travel and entertainment constituted $209 of the increase from the three month period ended September 30, 2009, as well as an increase in rent expense of $20 and an increase in occupancy and
equipment expenses of $23. Professional services, subscriptions, and other operating Expenses Professional services, subscriptions, and other operating expenses increased $4,221, or 116%, to $7,848 for the three months ended
September 30, 2010 from $3,627 for the three months ended September 30, 2009. The increase included an increase of $612 in legal and professional fees; an increase of $1,798 in solicitation, clearing and execution costs; an increase of
$239 in insurance premiums, an increase of $383 in subscription costs, and a net increase of $1,189 in other costs. Of the $1,798 increase in solicitation, clearing, and execution costs, $833 related to the write-off of deferred solicitation costs
incurred to raise capital for the first Strategos Deep Value Fund. These costs had been paid and were being amortized over the expected life of the investment fund. The fund substantially completed its liquidation as of September 30, 2010.
Accordingly, substantially all of the unamortized solicitation costs related to the first Strategos Deep Value Fund were expensed in the third quarter of 2010. Of the $1,189 in other costs, $1,117 of expense was recorded in the third quarter of 2010
as a result of an agreement in principle reached with the FINRA staff to pay restitution related to certain allegations stemming from a recent FINRA exam. The agreement is awaiting final approval by FINRA. See note 18 to our consolidated financial
statements included in Item 1 in this Quarterly Report on Form 10-Q. See also Part II Other Information; Item 1 Legal Proceedings in this Quarterly Report on Form 10-Q. Depreciation and Amortization Depreciation and amortization decreased $2 to $628 for the three months ended September 30, 2010 from $630 for the three months ended September 30, 2009. The entire decline was due to a decrease
in depreciation and amortization expense on furniture, equipment and leasehold improvements due to certain equipment becoming fully depreciated. Impairment of Goodwill During the three months ended September 30,
2010, we recognized an impairment charge of $5,607 to goodwill. For its annual impairment test of Strategos, the Company first estimates the current fair value of the Strategos reporting unit. This fair value is compared to the book value of the
goodwill and, if the fair value is less, then the goodwill is deemed impaired. The Company 67
determines the fair value of the Strategos reporting unit using a discounted cash flow analysis. The future cash flows of Strategos were unfavorably impacted by the successful wind down of the
first Strategos Deep Value fund. During the third quarter of 2010, the Company determined that an impairment charge should be recorded related to the goodwill allocated to Strategos. During the nine and three months ended September 30, 2010,
the Company recognized an impairment charge of $5,607. The charge is included in the consolidated statements of operations as impairment of goodwill and is reflected as a component of operating expenses. Non-Operating Income and Expense Interest Expense Interest expense increased $1,242 or 113%, to $2,345 for the three months ended September 30, 2010 from $1,103 for the three months
ended September 30, 2009. This increase of $1,242 was primarily comprised of (a) a decrease of $3 of interest incurred on our bank debt; (b) an increase of $447 of interest incurred on convertible senior notes assumed from AFN;
(c) an increase of $881 of interest incurred on junior subordinated notes assumed from AFN; and (d) a decrease of $83 of interest incurred on subordinated notes payable. On July 29, 2010, our subsidiary, Dekania Investors, LLC entered into a new secured credit facility with TD Bank, N.A. (the
2010 Credit Facility) and made a draw of $9,300. As a consequence, we wrote off $675 of unamortized deferred financing costs to interest expense related to the former credit facility. For additional information see - Liquidity and
Capital Resources Debt Financing and note 14 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q. Gain on Repurchase of Debt In August 2010, one of our broker-dealer
subsidiaries, CCS, completed its cash offer to purchase all of the outstanding subordinated notes payable that were tendered. CCS repurchased $8,081 principal amount of the subordinated notes payable (representing 85% of the outstanding subordinated
notes payable) for $6,762, including accrued interest. We recorded a gain from repurchase of debt of $1,632 which is included as a separate component of non-operating income/(expense) in our consolidated statements of operations. See note 14 to our
consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q. We did not repurchase any
debt in the three month period ended September 30, 2009. Gain on Sale of Management Contracts The gain on sale of management contracts decreased $132, or 100%, to $0 for the three months ended September 30, 2010 from $132 for
three months ended September 30, 2009. On February 27, 2009, we sold three CLO management contracts comprising substantially all of our middle market loans-U.S. (Emporia) business line to an unrelated third party. These amounts represent
the payments received from the unrelated third party during the third quarter of 2010 and 2009. We are entitled to certain contingent payments based on the amount of subordinated management fees received by the unrelated third party under the sold
CLO management contracts in an amount not to exceed an additional $1,500. We record the contingent payments to be received from the unrelated third party of the subordinated fee (of up to $1,500) as additional gain as such payments are actually
received. As of June 30, 2010, we reached the maximum limit of additional fees we could receive under these contracts. Therefore, we will no longer record any additional gain on these contracts in future periods. Income / (Loss) from Equity Method Affiliates Income from equity method affiliates increased by $5,846 to $6,112 for the three months ended September 30, 2010 from $266 for the three months ended September 30, 2009. Income or loss from
equity method affiliates represents our share of the related entities earnings. As of September 30, 2009, we had two equity method investees: (1) Star Asia Manager and (2) Deep Value GP. DEKU was liquidated in February 2009 and
we wrote off our equity method investment in DEKU for a total charge of $4,482 during the first quarter of 2009. The write-off was offset by $143 related to a part of a refund we received in August 2009 related to the liquidation of DEKU. As of
September 30, 2010, we had five equity method investees: (1) Star Asia Manager, (2) Deep Value GP, (3) Deep Value GP II; (4) Star Asia SPV; and (5) Duart Capital. See notes 12 and 21 to our consolidated financial
statements included in Item 1 in this Quarterly Report on Form 10-Q. In September 2010, Strategos substantially
completed the liquidation of the first Strategos Deep Value Fund. In conjunction with this liquidation and distribution of funds to investors, the Deep Value GP recognized its incentive fee earned in the amount of $11,929. We own 50% of the Deep
Value GP. Therefore, our share of this incentive fee was $5,965 and was included as a component of income from equity method affiliates during the three months ended September 30, 2010. Income Tax(Benefit) / Expense 68
Income tax expense
decreased by $734 to an income tax benefit of $622 for the three months ended September 30, 2010 from income tax expense of $112 for the three months ended September 30, 2009. The tax benefit realized by us during the third quarter of 2010
was a result of a reduction in our estimated current income tax rate for 2010 based on revised estimates of current state and local taxable income. See note 15 to our consolidated financial statements included in Item 1 in this Quarterly Report
on Form 10-Q. Net Income / (Loss) Attributable to the Noncontrolling Interest For the third quarter of 2010, the net income / (loss) attributable to noncontrolling interest was comprised of the 33.8% noncontrolling
interest related to member interests in our majority owned subsidiary, Cohen Brothers, other than the interests held by us for the three months ended September 30, 2010. There was no net income / (loss) attributable to noncontrolling interest
for the third quarter of 2009 because the onshore feeder fund of Deep Value was deconsolidated subsequent to March 31, 2009 since we no longer owned a majority of the limited partner interests. Liquidity and Capital Resources Liquidity is a measurement of our ability to meet potential cash requirements including ongoing commitments to repay debt borrowings, interest payments on outstanding borrowings, fund investments, and
support other general business purposes. In addition, our United States and United Kingdom broker-dealer subsidiaries are subject to certain regulatory requirements to maintain minimum levels of net capital. Historically, our primary sources of
funds have been our operating activities and general corporate borrowings. Beginning in January 2010, we significantly expanded our government trading operations leading to higher securities owned as well as balances for securities purchased under
agreements to resell. We began facilitating those operations through the use of securities sold under agreements to repurchase (repurchase agreements) and securities purchased under agreements to resell (reverse repurchase
agreements). As a holding company that does not conduct business operations in its own right, substantially all of the
assets of the Company are comprised of our majority ownership interest in Cohen Brothers. Substantially all of Cohen Brothers net assets as well as net income are subject to restrictions on paying distributions to us. Our ability to pay
dividends to our stockholders will be dependent on distributions we receive from Cohen Brothers and subject to the Cohen Brothers LLC Operating Agreement. The amount and timing of distributions by Cohen Brothers will be at the discretion of the
Cohen Brothers board of managers. During the third quarter of 2010, our board of directors initiated a dividend of $0.05 per
quarter. However, our board of directors will have the power to decide to increase, reduce, or eliminate this quarterly payment going forward. The boards decision will depend on a variety of factors, including business, financial and
regulatory considerations as well as any limitations under Maryland law or imposed by any agreements governing indebtedness of the Company. On November 9, 2010, our board of directors declared a cash dividend of $0.05 per share, which will be paid on our common stock on December 1, 2010 to stockholders of record on November 19, 2010. A pro
rata distribution will be made to the other members of Cohen Brothers upon the payment of the dividends to stockholders of the Company. We filed a Registration Statement on Form S-3 on April 29, 2010, which was declared effective by the SEC on May 24, 2010. This registration statement enables us to offer and sell, in the
aggregate, up to $300,000 of debt securities, preferred stock (either separately or represented by depositary shares), common stock (including, if applicable, any associated preferred stock purchase rights, subscription rights, stock purchase
contracts, stock purchase units and warrants, as well as units that include any of these securities). The debt securities, preferred stock, subscription rights, stock purchase contracts, stock purchase units and warrants may be convertible into or
exercisable or exchangeable for common or preferred stock of our Company. We may offer and sell these securities separately or together, in any combination with other securities. The registration statement provides another source of liquidity in
addition to the alternatives already in place. The net proceeds from a sale of our securities may be used for our operations and for other general corporate purposes, including, but not limited to, capital expenditures, repayment or refinancing of
borrowings, working capital, investments and acquisitions. Cash Flows We have four primary uses for capital: (1) To fund the expansion of the Capital Markets segment: Through September 2010, we expanded our Capital Markets segment by expanding our offices, hiring additional sales and trading professionals and
launching new initiatives to expand on our existing capabilities. Following the Merger, we believe that we are better capitalized and able to utilize more leverage in our Capital Markets business and therefore expand our operations to other
credit-related fixed income areas to deepen our product capabilities. We believe the prudent use of capital to facilitate client orders will increase trading volume and profitability. 69
(2) To fund
investments: Our investments take several forms, including investments in securities and seed or sponsor investments in permanent capital vehicles or investment funds. We may need to raise additional debt or equity financing in order to
ensure we have the capital necessary to take advantage of attractive investment opportunities. If we are unable to raise sufficient capital on economically favorable terms, our earnings may be adversely impacted or we may need to forgo attractive
investment opportunities which may impact our long term performance. (3) To fund mergers or acquisitions: We may
opportunistically use capital to acquire other asset managers or individual asset management contracts or financial services firms. To the extent our liquidity sources are insufficient to fund our future activities, we may need to raise additional
funding through an equity or debt offering. No assurances can be given that additional financing will be available in the future, or that, if available, such financing will be on favorable terms. If we are unable to raise sufficient capital on
economically favorable terms, we may need to forgo attractive merger or acquisition opportunities which may impact our long term performance. (4) To fund potential dividends and tax distributions: Cohen Brothers is required to fund distributions to the Company in order to pay any entity level taxes owed by the Company (referred to as tax
distributions). To the extent tax distributions are made to the Company, Cohen Brothers will make a pro rata distribution to the other members of Cohen Brothers (the noncontrolling interest). In addition, the Company announced during the third
quarter of 2010 that it intends to make quarterly dividend payments to shareholders. A pro rata distribution will be made to the other members of Cohen Brothers upon the payment of the dividends to stockholders of the Company. As of September 30, 2010 and December 31, 2009, we maintained cash and cash equivalents of $43,069 and $69,692, respectively.
We generated cash from or used cash for the following activities: SUMMARY CASH FLOW INFORMATION (dollars in thousands) Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Effect of exchange rate on cash Net cash flow Cash and cash equivalents, beginning Cash and cash equivalents, ending See the statement of cash flows in our consolidated financial statements. Nine Months Ended September 30, 2010 As of September 30, 2010, our cash and cash equivalents were $43,069, representing a net decrease of $26,623 from December 31, 2009. The decrease was attributable to the cash used for operating
activities of $30,520, the cash used for financing activities of $12,481, partially offset by the cash provided by investing activities of $16,208 and the effect of the increase in the exchange rate on cash of $170. The cash used for operating activities of $30,520 was comprised of (a) net inflows of $11,738 related to working capital
fluctuations including primarily the increase in accrued compensation, the increase in accounts payable and other liabilities, and the increase in accounts receivable, partially offset by the decrease in net receivables from related parties, the
decrease in other assets, and the decrease in deferred income taxes; (b) $28,021 of net cash outflows from overall net trading activities comprised of our investments-trading, trading securities sold, not yet purchased, receivables under resale
agreements, securities sold under agreement to repurchase, and receivables and payables from brokers, dealers, and clearing agencies and restricted cash on deposit which is related to various trading activities as well as the unrealized gains and
losses on the investments-trading and trading securities sold, but not yet purchased; and (c) a reduction in cash generated from other earnings items of $14,237 (which represents net income or loss
70
adjusted for the following non-cash operating items: gain on repurchase of debt, gain on sale of management contracts, realized and unrealized gains and losses on other investments, income or
loss from equity method affiliates, equity-based compensation, depreciation and amortization, and the impairment of goodwill). The cash provided by investing activities of $16,208 was comprised of (a) cash proceeds from the return of principal of $19,357
which is comprised of $17,330 from our investment in Deep Value and $2,027 from our investments in certain interests in securitizations and residential loans; (b) cash received from the sale of other investments of $8,540, which includes $3,454
from the sale of a single investment in securitizations, $1,056 from the sale of RAIT common stock, $3,721 from the redemption of 90% of our investment in the Brigadier hedge fund and $309 from the sale of other investments; (c) net cash
received from sale of management contracts of $971, (d) cash of $3,273 we received from equity method affiliates; partially offset by (e) the investment of $5,198 in equity method affiliates, including $4,386 in Star Asia SPV and $812 in
Duart Capital; (f) the purchase of other investments, fair value, including (i) the purchase of additional shares of Star Asia in the amount of $1,334 related to Star Asias rights offering, as well as the purchase of shares directly
from unrelated third parties during the second quarter of 2010 in the amount of $1,836; (ii) the purchase of additional shares of EuroDekania in the amount of $282 from unrelated third parties during the third quarter of 2010; (iii) the
purchase of an investment in Brigadier of $39 from an existing unrelated third party investor; (iv) the investment of $4,500 in the Duart Fund during the third quarter of 2010 and (v) the purchase of other investments of $1,765;
(g) the purchase of additional furniture and leasehold improvements of $682 related to the New York office and the EuroDekania Management Limited office in the United Kingdom; and (h) the acquisition of a broker-dealer for $297 during the
third quarter of 2010. The cash used in financing activities of $12,481 was comprised of (a) $9,300 of borrowings
related to the 2010 Credit Facility we entered into in July 2010 (b) the repayment of $9,950 of outstanding borrowings on our prior credit facility; (c) the repurchase of $5,144 notional amount of contingent convertible senior notes for
$4,115; (d) the repurchase of $8,081 principal amount of subordinated notes payable for $6,465; (e) payments for deferred issuance and financing costs of $303; (f) distributions to the noncontrolling interest holders of $264;
(g) dividends to the Companys stockholders of $521; and (h) $163 for the payment of the employees tax obligations to taxing authorities related to the vesting of equity based awards and the surrender of 25,354 shares of the
Companys Common Stock. The total shares withheld were based on the value of the restricted stock award on the applicable vesting date as determined by the Companys closing stock price. These net share settlements reduced and retired the
number of shares that would have otherwise been issued as a result of the vesting and did not represent an expense to the Company. Nine
Months Ended September 30, 2009 As of September 30, 2009, our cash and cash equivalents were $14,639
representing a net decrease of $17,333 from December 31, 2008. The decrease was attributable to the cash used for financing activities of $47,563, partially offset by the cash provided from investing activities of $16,552, the cash provided
from operating activities of $13,270 and the effect of the increase in exchange rate on cash of $408. The cash provided by
operating activities of $13,270 was primarily comprised of (a) cash flows from net trading activities of $7,818 comprised of trading investments, unrealized gains and losses on investments-trading, and receivables and payables from brokers,
dealers and clearing agencies, and (b) net inflows of $16,417 related to working capital fluctuations; partially offset by (c) a reduction in cash generated from other earnings items of $10,965 (which represents net income or loss adjusted
for the following non-cash items: gain on the sale of management contracts, realized and unrealized gains and losses on other investments, income or loss from equity method affiliates, equity-based compensation, and depreciation and amortization).
The cash provided by investing activities for the nine months ended September 30, 2009 primarily related to the
following (a) the redemption of a portion of our investment in one of our investment funds, Brigadier, in the amount of $10,000; (b) cash proceeds of $7,258 we received for the three CLO management contracts we sold to an unrelated third
party during the first quarter of 2009 as well as $358 we received for the subordinated management fees related to these contracts during the second and third quarter of 2009; (c) cash proceeds of $800 we received for our return from our
investment in the equity method affiliate, Star Asia Manager; and (d) cash proceeds from a return of principal of $1,544 primarily related to our investment in a certain securitization; partially offset by (e) the investment of $2,456 we
made in our equity method affiliate, DEKU for which we had provided a letter of credit and paid such amount in conjunction with the DEKU liquidation in 2009; (f) the purchase of additional shares of MFCA in the amount of $600 for $1.20 per
share; and (g) the purchase of additional furniture and leasehold improvements of $352 related to the New York office. We used the proceeds from our redemption in the onshore feeder fund of Brigadier and the sale of the management contracts to
supplement our cash flow from operations in order to provide us the necessary capital to pay down our debt. The cash used in
financing activities for the nine months ended September 30, 2009 was primarily related to (a) the repayment of $42,050 of outstanding borrowings on our bank debt; (b) distributions paid to our members of $4,525 to fund members
tax obligations, and (c) $988 of deferred issuance and financing costs related to the amended and restated credit facility we entered into on June 1, 2009. 71
Regulatory Capital Requirements
Three of our majority owned subsidiaries include licensed securities dealers in the United States and the United
Kingdom. As broker-dealers, our subsidiaries, CCS and CCM, are subject to Uniform Net Capital Rule, Rule 15c3-1 under the Exchange Act, and our international subsidiary, EuroDekania Management Limited, is subject to the regulatory supervision and
requirements of the FSA in the United Kingdom. The amount of net assets that these subsidiaries may distribute is subject to restrictions under these applicable net capital rules. These subsidiaries have historically operated in excess of minimum
net capital requirements. Our minimum capital requirements at September 30, 2010, which amounted to $3,272 were as follows: MINIMUM NET CAPITAL REQUIREMENTS (dollars in thousands) United States United Kingdom Total We operate with more than the minimum regulatory capital requirement in our licensed securities dealers and
at September 30, 2010, total net capital or equivalent as defined by local statutory regulations in our licensed securities dealers amounted to $39,663. In addition, our licensed securities dealers are generally subject to capital withdrawal notification and restrictions. Securities Financing During the nine months ended
September 30, 2010, we entered into repurchase agreements with two third party financial institutions. There is no maximum limit as to the amount of securities that may be transferred pursuant to these agreements, and transactions are approved
on a case-by-case basis. The repurchase agreements do not include substantive provisions other than those covenants and other customary provisions contained in standard master repurchase agreements. The repurchase agreements generally require us to
transfer additional securities to the counterparty in the event the value of the securities then held by the counterparty in the margin account falls below specified levels and contains events of default in cases where we breach our obligations
under the agreement. We receive margin calls from our repurchase agreement counterparties from time to time in the ordinary course of business. To date, we have maintained sufficient liquidity to meet margin calls, and we have never been unable to
satisfy a margin call, although no assurance can be given that we will be able to satisfy requests from our lenders to post additional collateral in the future. See note 9 to our consolidated financial statements included in Item 1 in this
Quarterly Report on Form 10-Q. An event of default under the repurchase agreements would give our counterparty the option to
terminate all repurchase transactions existing with us and make any amount due by us to the counterparty to be payable immediately. Repurchase obligations are full recourse obligations to us. If we were to default under a repurchase obligation, the
counterparty would have recourse to our other assets if the collateral was not sufficient to satisfy the obligation in full. In addition, the Companys clearing brokers provide securities financing arrangements including margin arrangements and securities
borrowing and lending arrangements. These arrangements generally require us to transfer additional securities or cash to the clearing broker in the event the value of the securities then held by the clearing broker in the margin account falls below
specified levels and contains events of default in cases where we breach our obligations under the agreement. An event of
default under the clearing agreement would give our counterparty the option to terminate our clearing arrangement. Any amounts owed to the clearing agent would be immediately due and payable. These obligations are recourse to us. Furthermore, a
termination of our clearing arrangement would result in a significant disruption to our business and would have a significant negative impact on our dealings and relationship with our customers. Debt Financing We have four sources of debt financing other than securities financing arrangements: (1) a new credit facility with TD Bank, N.A.
(the 2010 Credit Facility); (2) convertible senior notes; (3) junior subordinated notes (payable to two special purpose trusts: (a) Alesco Capital Trust I, and (b) Sunset Financial Statutory Trust I); and
(4) unsecured subordinated financing. As of October 1, 2010, $8,138 was drawn, $1,292 was committed for two letters
of credit and there was no availability to borrow additional funds under the 2010 Credit Facility. In March 2010, the Company repurchased $5,144 notional amount of contingent convertible senior notes from an unrelated third party for $4,115 and
recognized a gain from repurchase of debt of $886. In August 2010, the Company repurchased $8,081 principal amount of subordinated notes payable for $6,762, including accrued interest and 72
recognized a gain from repurchase of debt of $1,632. As of
September 30, 2010, we were in compliance with the covenants in our debt financing documents. See note 14 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q for a discussion of the
Companys outstanding debt. The following table summarizes long-term indebtedness and other financing as of
September 30, 2010 and December 31, 2009, respectively: DETAIL OF DEBT FINANCING SOURCES (dollars in thousands) Description 2010 Credit Facility Contingent convertible senior notes Junior subordinated notes Subordinated notes payable Total Description Former revolving credit facility Contingent convertible senior notes Junior subordinated notes Subordinated notes payable Total Off Balance Sheet Arrangements In November 2009, we acted as the lead underwriter for the initial offering of a new special purpose acquisition corporation, GSME Acquisition Partners I (GSME), which will focus on acquiring
a Chinese company. A special purpose acquisition corporation (SPAC) is a blank check company that raises money from stockholders into a shell corporation and then seeks to utilize that money to finance a business combination. Generally,
the money is funded into a trust and certain provisions are put in place to ensure the trust can liquidate and return the money to stockholders if the business combination is not completed. The sponsors of the SPAC generally receive equity interests
which are subordinated in some form in the event the trust has to liquidate. GSME has twelve months to identify a business
combination and obtain approval and an additional six months for the business combination to close. In connection with this transaction, we issued a letter of credit for the benefit of the trust in the amount of
73
$1,242 that will be drawn upon under certain circumstances, such as the non-approval of a business combination or if no business combination is presented for a vote within the specified time
frame. Our maximum exposure to GSME pursuant to the letter of credit is $1,242. Our obligation to fund amounts to GSME is accounted for as a guarantee pursuant to the guarantee provisions included in FASB ASC 460, Guarantees. As of
September 30, 2010 and December 31, 2009, we recorded $98 as a liability included in accounts payable and other liabilities for its obligation to stand ready to perform. If it becomes probable and estimable that we will be
required to fund the guarantee, an additional or incremental liability will be accrued for under the guidance of FASB ASC 450, Contingencies. On October 12, 2010, GSME announced that it had entered into an agreement to acquire an entity.
GSME announced that it will hold its extraordinary general meeting of shareholders on November 17, 2010 to consider and vote upon its proposed acquisition. If the acquisition is approved by shareholders, our letter of credit should be released
and we would reverse our guarantee liability of $98 which will increase our net income. If the acquisition is not approved, it is possible that all, or a portion of our letter of credit will be drawn to fund the liquidation of GSME. If this were to
happen, any draw on the letter of credit in excess of $98 will result in additional expense that will be recorded by us. The maximum amount of additional expense is $1,144. AFN invested in a CDO (Alesco XIV) in which Assured Guaranty (Assured) was providing credit support to the senior interests in the securitization. Alesco XIV made a loan (the Guaranteed
Loan) to a particular borrower and AFN entered into an arrangement with Assured whereby AFN agreed to make payments to Assured upon the occurrence of both (i) a loss on the Guaranteed Loan, and (ii) a loss suffered by Assured on its
overall credit support arrangement to Alesco XIV security holders. This arrangement is accounted for as a guarantee by us. At the Merger Date, we recorded a liability of $1,084 related to this arrangement which is included in accounts payable and
other liabilities in the Companys consolidated balance sheet as of September 30, 2010 and December 31, 2009. This amount does not represent the expected loss; rather it represents the Companys estimate of the fair value of its
guarantee (i.e. the amount it would have to pay a third party to assume this obligation). This arrangement is being accounted for as a guarantee; therefore, the carrying value will not be periodically adjusted going forward. The maximum potential
loss to the Company on this arrangement is $8,750. Under certain circumstances, Assured can require the Company to post liquid collateral. In March 2010, the Company purchased $5,000 delayed draw notes in a subprime auto loan securitization. As of September 30, 2010, $3,474 has been drawn and funded by the Company. Subsequent to
September 30, 2010, the Company sold the delayed draw notes to an unrelated third party and therefore has no further funding obligation. The notes were sold for $3,143 resulting in a loss of $32 as compared to the September 30, 2010
carrying value. Contractual Obligations The following table summarizes our significant contractual obligations as of September 30, 2010 and the future periods in which such obligations are expected to be settled in cash. The bank debt,
junior subordinated notes and subordinated notes payable are assumed to be repaid on their respective maturity dates. Our convertible senior notes are assumed to be repaid on May 15, 2012, which represents the earliest date that the holders of
the senior notes may require us to repurchase the notes for cash. Excluded from the table are obligations that are short-term in nature, including trading liabilities and repurchase agreements: CONTRACTUAL OBLIGATIONS As of September 30, 2010 (dollars in thousands) Operating lease arrangements Maturity of 2010 Credit Facility (1) Interest on 2010 Credit Facility (2) Maturity of convertible senior notes (3) Interest on convertible senior notes (3) Maturities on junior subordinated notes Interest on junior subordinated notes (4) Maturities of subordinated notes payable (5) Interest on subordinated notes payable (6) Total 74
We believe that we will be able to continue to fund our current operations and meet our contractual obligations through a combination of
existing cash resources and other sources of credit. Due to the uncertainties that exist in the economy, we cannot be certain that we will be able to replace existing financing or find sources of additional financing in the future. Critical Accounting Policies and Estimates Our accounting policies are essential to understanding and interpreting the financial results reported in our condensed consolidated financial statements. The significant accounting policies used in the
preparation of our condensed consolidated financial statements are summarized in note 3 to the Companys consolidated financial statements and notes thereto found in our Annual Report on Form 10-K for the year ended December 31, 2009.
Certain of those policies are considered to be particularly important to the presentation of our financial results because they require us to make assumptions and estimates about future events, and apply judgments that affect the reported amounts of
assets, liabilities, revenues, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our consolidated
financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future
events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. During the nine months ended September 30, 2010, there were no material changes to matters discussed under the heading Critical Accounting Policies and Estimates in Part II, Item 7
of the Companys Annual Report on Form 10-K for the year ended December 31, 2009. Recent Accounting Pronouncements
The following is a recent accounting pronouncement that, we believe, may have a continuing impact on our financial
statements going forward. In March 2010, the FASB issued ASU No. 2010-11, Derivatives and Hedging (Topic 815): Scope
Exception Related to Credit Derivatives (ASU 2010-11). ASU 2010-11 clarifies the type of credit derivative that is exempt from embedded derivative bifurcation requirements. According to this guidance, the only form of embedded credit
derivative that qualifies for the exemption is one that is related to the subordination of one financial instrument to another. Entities that have contracts containing an embedded credit derivative feature in a form other than such subordination may
need to separately account for the embedded credit derivative feature. ASU 2010-11 is effective for fiscal quarters beginning after June 15, 2010, with early adoption permitted. The Companys adoption of the new accounting guidance on
July 1, 2010 did not have any impact on the Companys financial position, results of operations, or cash flows. All amounts in this section are in thousands unless otherwise noted. 75
Market Risk Market risk is the risk of economic loss arising from the adverse impact of market changes to the market value of our trading and
investment positions. Market risk is inherent to both derivative and non-derivative financial instruments, and accordingly, the scope of our market risk management procedures extends beyond derivatives to include all market risk sensitive financial
instruments. For purposes of analyzing the components of market risk, we have broken out our investment portfolio into three broad categories: Fixed Income Securities: We hold the following securities: U.S. treasury securities, U.S. government agency MBS, collateralized mortgage obligations, non-government MBS, corporate bonds, preferred
stock, certificates of deposits, SBA loans, residential loans, unconsolidated investments in the middle and senior tiers of securitization entities. This category can be broadly broken down into two subcategories: fixed rate and floating rate.
Floating rate securities are not in themselves particularly sensitive to interest rate risk. Because they generally accrue
income at a variable rate, the movement in interest rates typically does not impact their fair value. Fluctuations in their current income due to variations in interest rates are generally not material to us. Floating rate fixed income securities
are subject to other market risks such as: default risk of the underlying issuer, changes in issuers credit spreads, investor demand and supply of securities within a particular asset class or industry class of the ultimate obligor. The
sensitivity to any individual market risk cannot be quantified. The fair value of fixed rate securities is sensitive to
changes in interest rates. However, fixed rate securities that have low credit ratings or represent junior interests in securitization are not particularly interest rate sensitive. In general, when we acquire interest rate sensitive securities, we
enter into an offsetting short for a similar fixed rate security. Alternatively, we may enter into other interest rate hedging arrangements such as interest rate swaps or Eurodollar futures. We measure our net interest rate sensitivity by
determining how the fair value of our net interest rate sensitive assets would change as a result of a 100 bps adverse shift across the entire yield curve. Based on this analysis, as of September 30, 2010, we would incur a loss of $373 if the
yield curve rises 100 basis points (bps) across all maturities and a gain of $587 if the yield curve falls 100 bps across all maturities. Equity Securities: We hold equity interests in the form of investments in investment funds, permanent capital vehicles and equity instruments of publicly traded companies. These investments are
subject to equity price risk. Equity price risk results from changes in the level or volatility of underlying equity prices, which affect the value of equity securities or instruments that in turn derive their value from a particular stock. We
attempt to reduce the risk of loss inherent in our inventory of equity securities by closely monitoring those security positions. However, since we generally make investments in our investment funds and permanent capital vehicles in order to
facilitate third party capital raising (and hence increase our AUM and asset management fees), we may be unwilling to sell these positions as compared to investments in unaffiliated third parties. We have one permanent capital vehicle investment
which is denominated in Euros and another permanent capital vehicle for which our investment is denominated in United States dollars, but for which the underlying net assets are primarily based in Japanese Yen. The fair values of these investments
are subject to change as the spot foreign exchange rate between these currencies and the United States Dollar (our functional currency) fluctuates. We may enter into foreign exchange rate derivatives to hedge all or a portion of this risk. We
measure our net equity price sensitivity and foreign currency sensitivity by determining how the net fair value of our equity price sensitive and foreign exchange sensitive assets would change as a result of a 10% adverse change in equity prices or
foreign exchange rates. Based on this analysis, as of September 30, 2010 our equity price sensitivity was $4,743 and our foreign exchange currency sensitivity was $1,180. Other Securities: These investments are primarily made up of residual interests in securitization entities. The fair value of these investments will fluctuate over time based on a number of factors
including, but not limited to: liquidity of the investment type, the credit performance of the individual assets and issuers within the securitization entity, the asset class of the securitization entity and the relative supply and demand of
investments within that asset class, credit spreads in general, the transparency of valuation of the assets and liabilities of the securitization entity, and investors view of the accuracy of ratings prepared by the independent rating agencies. The
sensitivity to any individual market risk cannot be quantified. Debt: In addition to the risks noted above, we incur
interest rate risk related to our debt obligations. We have debt that accrues interest at either variable rates or fixed rates. As of September 30, 2010, a 100 bps change in three month LIBOR would result in a change in our annual cash paid for
interest in the amount of $200. Because a portion of our debt accrues interest at a fixed rate, a 100 bps adverse change in the yield to maturity would result in an increase in the fair value of the debt in the amount of $1,194. How we manage these risks We will seek to manage our market risk by utilizing our underwriting and credit analysis processes that are performed in advance of
acquiring any investment. In addition, we continually monitor our investments trading and our trading securities sold, not yet purchased on a daily basis and our other investments on a monthly basis. We perform an in-depth monthly analysis on
all our investments and our risk committee meets on a monthly basis to review specific issues within our portfolio and to make recommendations for dealing with these issues. 76
Evaluation
of Disclosure Controls and Procedures We have established and maintain disclosure controls and procedures that are
designed to ensure that material information relating to the Company (and its consolidated subsidiaries) required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the
SECs rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, who certify our financial reports and to other members of senior management and
the board of directors. Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as
defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) as of September 30, 2010. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective at
September 30, 2010. Changes in Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting during the quarter ended September 30, 2010 that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. As is described in Item 9A Controls and Procedures of the Companys Annual Report on Form 10-K for the year
ended December 31, 2009, the Company is currently in the process of integrating controls of Cohen Brothers with the controls of AFN. The Company expects to have this integration complete by the end of 2010. All
amounts in this section are in thousands unless otherwise noted. Incorporated by reference to the headings titled
Legal Proceedings in Note 18 to the consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q. Regarding regulatory matters, as previously disclosed, CCS was subject to a routine FINRA examination in 2009. As a result of that exam, the FINRA staff requested additional information and the testimony
of certain employees concerning the mark-ups CCS charged in four transactions during the exam period. Following its examination, the FINRA staff alleged that CCS charged impermissible mark-ups to qualified institutional buyers (QIBs) (as defined in
Rule 144A of the Securities Act), referred to herein as institutional customers, in three of such transactions. With respect to the first transaction, on August 16, 2007, CCS purchased a CDO having a par value of $10,000 for $8,250, or 82.5% of
par, from a dealer. On August 17, 2007, CCS sold those securities to an institutional customer for $9,100, or 91% of par. With respect to the second transaction, on January 3, 2008, CCS purchased a CDO having a par value of $4,500 for
$315, or 7% of par, from an institutional customer. On January 4, 2008, CCS sold those securities to another institutional customer for $585, or 13% of par. With respect to the third transaction, on June 6, 2008, CCS purchased a CDO having
a par value of $8,000 for $400, or 5% of par, from a dealer. Later that day, CCS sold those securities to an institutional customer for $600, or 7.5% of par. FINRA maintains that the mark-ups were impermissible because, among other factors, each of
the securities in question was investment grade under applicable FINRA guidance. CCS has reached an agreement in principle
with the FINRA staff to settle such allegations. Without admitting or denying the allegations, CCS has consented to a Letter of Acceptance, Waiver and Consent (the AWC) that, among other things, (i) alleged violations of NASD Rules
2110, 2440 and 3010; (ii) censured CCS; (iii) ordered CCS to pay restitution of $899 plus interest; (iv) ordered CCS to pay a $50 fine; and (v) directed CCS to review its supervisory systems and procedures. The AWC is currently
awaiting final approval by FINRA. As a result of the AWC, the Company recorded a net expense of $707 during the third quarter
of 2010. The net expense of $707 was comprised of two entries: (i) the Company recorded additional expense of $1,117 as a component of professional services, subscriptions, and other operating expenses, representing the restitution of $899, the fine
of $50, and $168 of estimated interest charges; and (ii) the Company recorded a reduction in compensation and benefits expense of $410, representing the intended recapture by the Company of incentive compensation previously paid employees related to
the three transactions. In
addition to the information set forth in this Quarterly Report on Form 10-Q, you should also carefully review and consider the risk factors contained in our other reports and periodic filings with the SEC, including without limitation the risk
factors contained under the caption Item 1A Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2009, which could materially and adversely affect our business, financial condition and results of
operations. The risk factors discussed in that Form 10-K. 77
do not identify all risks that we face because our business operations could also be affected by additional factors that are not presently known to us or that we currently consider to be
immaterial to our operations. Other than as set forth below, there have been no material changes in the significant factors that may affect our business and operations as described in Item 1A Risk Factors of the Annual Report on
10-K for the year ended December 31, 2009. Our ability to comply with the financial covenants in our debt
agreements will depend primarily on our ability to generate substantial operating cash flows. Our failure to satisfy the financial covenants could result in a default and acceleration of repayment of the indebtedness under our debt agreements.
As of September 30, 2010, we had $21.0 million aggregate principal amount of contingent convertible notes
outstanding, $1.4 million of subordinated notes payable, and $49.6 million aggregate principal amount of junior subordinated notes outstanding. On July 29, 2010, we entered into a new credit facility with TD Bank, N.A. (TD Bank),
which we refer to herein as the 2010 Credit Facility. The 2010 Credit Facility expires in September 2012, and replaced our previous $30 million revolving credit facility with TD Bank that was due to expire on May 31, 2011. The 2010 Credit Facility is comprised of $9.3 million of term loan capacity and a maximum of $1.3 million for the issuances of letters of
credit. On July 30, 2010, the term loan was drawn in the amount of $9.3 million and $1.29 million was committed for two letters of credit. As of October 1, 2010, the Company had $8.1 million of outstanding borrowings and there was no
availability to borrow under the 2010 Credit Facility. Our ability to comply with the financial covenants under the
agreements that govern our indebtedness will depend primarily on our success in generating substantial operating cash flows. We are subject to compliance with a minimum net worth covenant, a minimum consolidated cash flow to debt service coverage
ratio, a minimum consolidated cash flow to debt service and distribution coverage ratio and a maximum funded debt to consolidated cash flow ratio, among other covenants. Industry conditions and financial, business and other factors will affect our ability to generate the cash flows we need to meet those financial tests. If the maturity of our indebtedness were
accelerated, we may not have sufficient funds to pay such indebtedness. In such event, our lenders under the 2010 Credit Facility would be entitled to proceed against the collateral securing the indebtedness, which will include a significant portion
of our assets. There can be no guarantee that we will be able to maintain compliance with such covenants. If we are unable to
maintain compliance with such covenants the lenders would be able to take certain actions which could include increasing the interest rate on the facility by 2%, ceasing to make advances and issuing letters of credit, converting all outstanding
London Interbank Offered Rate (LIBOR) based loans to base rate loans (as defined in the 2010 Credit Facility), or terminating the facility and demanding immediate repayment, or taking action against the collateral. If the lenders were to
terminate the facility, demand immediate repayment or proceed against the collateral, such action could have a material adverse affect on our liquidity. On August 3, 2010, our Board of Directors declared a cash dividend of $0.05 per share. Any future distributions to our stockholders will depend upon certain factors affecting our operating
results, some of which are beyond our control. Our ability to make and sustain cash distributions is based on many
factors, including the return on our investments, operating expense levels and certain restrictions imposed by Maryland law. Some of these factors are beyond our control and a change in any such factor could affect our ability to make distributions.
We may not be able to make distributions. Furthermore, we are dependent on distributions from Cohen Brothers to be able to make distributions. See the risk factor titled We are a holding company whose primary asset is membership units in Cohen
and we are dependent on distributions from Cohen to pay taxes and other obligations in Item 1A Risk Factors of our Annual Report on 10-K for the year ended December 31, 2009. The following table presents shares of restricted stock granted under the Alesco Financial Inc. 2006 Long-Term Incentive Plan that we withheld upon vesting to satisfy our tax withholding obligations
during the three months ended September 30, 2010. As set forth in the table below, during the third quarter of 2010, we withheld a total of 610 shares in the indicated months. These were the only repurchases of equity securities made by us
during this period. In August 2007, our board of directors authorized us to repurchase up to $50 million of our common stock from time to time in open market purchases or privately negotiated transactions (the Repurchase Plan), and,
currently, have the ability to repurchase up to $47,303,874 of our common stock pursuant the Repurchase Plan. 78
Period July 1, 2010 to July 31, 2010 August 1, 2010 to August 31, 2010 September 1, 2010 to September 30, 2010 Total Effective January 1, 2010, the Company ceased to qualify as a REIT and, therefore, is not
required to make any dividends or other distributions to its stockholders. However, the Companys board of directors will have the power to determine its policy regarding the payment of dividends, which may depend on a variety of factors,
including business, financial and regulatory considerations as well as any limitations under Maryland law or imposed by any agreements governing indebtedness of the Company. In addition, the Companys ability to pay dividends will be dependent on distributions it receives from Cohen Brothers. The amount and timing of distributions by Cohen Brothers will be at the
discretion of the Cohen Brothers board of managers and may be impacted by restrictions imposed by the 2010 Credit Facility entered into on July 29, 2010 and subject to the provisions of the Cohen Brothers operating agreement. Exhibit No. Description Data required by FASB Accounting Standards Codification 260, Earnings per Share, is provided in note 17 to our
79
consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q. 80
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
/s/ DANIEL G. COHEN /s/ CHRISTOPHER RICCIARDI /s/ JOSEPH W. POOLER, JR. Executive Vice President, Chief Financial Officer and Treasurer 81 Exhibit 10.1 Confidential Treatment Requested. Confidential portions of this document have been redacted and
have been separately filed with the Commission. MASTER TRANSACTION AGREEMENT AMONG COHEN & COMPANY FINANCIAL MANAGEMENT, LLC, COHEN & COMPANY INC. AND ATP MANAGEMENT LLC DATED AS OF JULY 29, 2010
TABLE OF CONTENTS
Defined Terms. Sale, Assignment and Assumption. Payment of Purchase Price. Representations and Warranties of the Seller and Cohen. Representations and Warranties of ATP. Covenants. Closing. Conditions to the Obligations of ATP. Conditions to the Obligations of the Seller and Cohen. Termination. Indemnification. Miscellaneous. SCHEDULES i
EXHIBITS ii
MASTER TRANSACTION
AGREEMENT This MASTER TRANSACTION AGREEMENT, dated as of July 29, 2010 (such agreement as amended, modified, waived,
supplemented or restated from time to time, the Agreement), by and among COHEN & COMPANY FINANCIAL MANAGEMENT, LLC, a Delaware limited liability company (Cohen Financial or the
Seller), COHEN & COMPANY INC., a Maryland corporation (Cohen), and ATP MANAGEMENT LLC, a Delaware limited liability company (ATP). RECITALS: Each Issuer (as defined below) is the issuer of collateralized debt obligations pursuant to an Indenture (as defined below). The Seller has entered into a CDO Agreement with each of the Issuers pursuant to which the Seller has agreed to provide the services specified therein with respect to obligations issued by the respective
Issuers pursuant to the applicable Indenture. The Seller desires to sell, assign, transfer and convey (and Cohen desires that
Seller sell, assign, transfer and convey) to ATP, and ATP desires to accept and assume, the Sellers (i) rights and obligations in and under the CDO Agreements and (ii) rights, title and interests in and to the Related Assets (as
defined below), in accordance with the terms and subject to the conditions in this Agreement. NOW, THEREFORE, in
consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows: Section 1. Defined Terms. As used in this Agreement, the following terms shall have the following meanings: Affiliate means, with respect to a Person, any other Person that, directly or indirectly through one or more
intermediaries, controls, is controlled by or is under common control with such Person. For purposes hereof, the term control means possession, directly or indirectly, of the power to direct or cause the direction of the management or
policies of a Person, whether through ownership of equity interests, by contract or otherwise. Applicable
Notes shall mean those specific Notes listed on Schedule 3(d) hereto issued by the Regulated Banks. Assigned Assets shall have the meaning ascribed to such term in Section 3(a). Assigned CDO Agreements means with respect to any Closing, the CDO Agreements being assigned to ATP by the Seller at
such Closing. 1
Assigned
Related Assets means with respect to any Closing, the Related Assets being assigned to ATP by the Seller at such Closing. Assignments shall have the meaning ascribed to such term in Section 7(b)(i). Assignment and Assumption Agreement shall have the meaning ascribed to such term in Section 7(b)(i). Assumed Liabilities shall have the meaning ascribed to such term in Section 2(a). ATP Indemnified Persons shall have the meaning ascribed to such term in Section 11(a)(i). ATP Material Adverse Effect means a material adverse effect on (i) the assets, liabilities, results of operations and financial condition of ATP or (ii) the ability of ATP to
perform its material obligations hereunder, but excluding any effect resulting from or relating to (a) general national, international or regional economic, financial, political or business conditions, (b) conditions (including changes in
economic, financial market, regulatory or political conditions and any change in any Law or any change in the manner in which any Law is or may be enforced) affecting generally the industry in which ATP conducts its business (provided that such
changes do not affect ATP in a disproportionate manner as compared to other collateral managers), (c) any public announcement of the Transactions contemplated by this Agreement or (d) the execution or performance of this Agreement, or any
actions taken, delayed or omitted to be taken by ATP pursuant to this Agreement or at the written request of the Seller, Cohen or their respective representatives. Bankruptcy Code means Title XI of the United States Code as now or hereafter in effect or any successor statute. Base Purchase Price shall have the meaning ascribed to such term in Section 3(a). Business Day means any day other than (i) a Saturday or Sunday or (ii) a day on which banking institutions
located in New York, New York are permitted or required by applicable Law or regulation to remain closed. Buyer
Consents and Filings shall have the meaning ascribed to such term in Section 5(d). CDO
Agreements means the agreements listed on Schedule 1.1 to this Agreement under the heading Collateral Management Agreements. Clients means the Issuers to whom the Seller provides Investment Management Services. Closing shall have the meaning ascribed to such term in Section 7(a). 2
Closing
Date shall have the meaning ascribed to such term in Section 7(a). Cohen Brothers means
Cohen Brothers LLC, a Delaware limited liability company. Cohen Indemnification Limit means (i) for
the period from the date hereof until (and including) the three (3) month anniversary of the initial Closing Date, (a) the aggregate Base Purchase Price for the Assigned CDO Agreements plus the amount of the Service Fees minus (a) the
excess, if any, of (1) the Collateral Management Fees (other than Retained Management Fees) collected by ATP under the Assigned CDO Agreements during such three (3) month period over (2) $375,000 and (ii) for each three
(3) month period commencing after the period described in clause (i) (each such period, a Cohen Indemnification Period) until the Cohen Indemnification Limit is reduced to $0, the greater of (a) (1) the Cohen
Indemnification Limit for the prior Cohen Indemnification Period minus (2) the excess, if any, of (x) the Collateral Management Fees (other than any Retained Management Fees) received by ATP during the prior Cohen Indemnification Period
over (y) $375,000 and (b) subject to the limitation set forth in this clause (ii), the aggregate of the indemnification claims made pursuant to Section 11(a)(i) of this Agreement prior to 5:00 p.m. New York City Time on the
date that is the last day of the prior Cohen Indemnification Period. Cohen Services Agreement has the
meaning ascribed to such term in Section 8(h). Collateral Administration Agreements means the
agreements listed on Schedule 1.1 to this Agreement under the heading Collateral Administration Agreements. Collateral Manager means with respect to each CDO Agreement the Collateral Manager as defined in such CDO Agreement. Collateral Management Fees means all fees payable to the Seller pursuant to the CDO Agreements without regard to when
such fees are accrued. Contract shall mean any written agreement, contract, obligation, commitment or
undertaking. Data Room means the electronic data room established by the Seller for the purpose of making
information, agreements, documents and other due diligence regarding the Assigned CDO Agreements and Assigned Related Assets available to ATP, as it existed on the date that is two (2) Business Days prior to the date hereof. Defaulted Security shall have the meaning ascribed to such term in the related Indenture. Earnout Payment shall have the meaning ascribed to such term in Section 3(b). Earnout Quarter shall have the meaning ascribed to such term in Section 3(c). 3
Encumbrance means any mortgage, lien, pledge, security interest, or other similar encumbrance of any kind. End Date shall have the meaning ascribed to such term in Section 10(a)(iv). Escrow Account shall mean the account established pursuant to the Escrow Agreement to hold the Escrow Deposit.
Escrow Agent shall mean TD Bank, N.A. or any successor appointed in accordance with the Escrow Agreement.
Escrow Agreement means the Escrow Agreement dated as of the initial Closing Date by and among the Escrow
Agent and the Parties in substantially the form attached hereto as Exhibit D. Escrow Deposit means
an amount deposited at each Closing by ATP in escrow with the Escrow Agent to be held pursuant to the terms and conditions of the Escrow Agreement and to secure the funds necessary for the satisfaction of certain of the payment obligations under the
Cohen Services Agreement. The portion of the Escrow Deposit to be deposited at each Closing shall be as set forth in Schedule 8(i) to this Agreement. Estimated Earnout Payment shall have the meaning ascribed to such term in Section 3(c). Excess Base Case Revenues shall have the meaning ascribed to such term in Section 3(b). Excess Base Case Revenue Thresholds shall have the meaning ascribed to such term in Section 3(b). Fifth Measurement Period shall have the meaning ascribed to such term in Section 3(b). Final Earnout Amount shall have the meaning ascribed to such term in Section 3(d). First Measurement Period shall have the meaning ascribed to such term in Section 3(b). Fourth Measurement Period shall have the meaning ascribed to such term in Section 3(b). Governmental Authority means any federal, state, local, municipal or other governmental, regulatory or administrative department, commission, board, bureau, agency, quasi-governmental
authority, entity or instrumentality, or any court or arbitrator, in each case, having jurisdiction over the applicable matter. 4
Hedge
Agreements shall have the meaning ascribed to such term in Section 4(g). Holdback Amount
shall have the meaning ascribed to such term in Section 3(c). Indemnified Person shall have the
meaning ascribed to such term in Section 11(b)(i). Indemnifying Person shall have the meaning
ascribed to such term in Section 11(b)(ii). Indenture means any of the indentures and other
equivalent documents listed on Schedule 1.2 to this Agreement. Intellectual Property means all
processes, systems, products, services, software, compositions of matter and compounds, including any improvements or modifications (whether or not patentable or protectable) thereof that is owned, licensed or used by any Seller, including, without
limitation, the following: (i) patents and patent applications, including design patents or applications, patent or invention disclosures, together with all reissues, continuations, continuation-in-part, revisions, divisionals, extensions,
reexaminations of the same and any patent or patent application claiming priority thereto; (ii) all registered and unregistered trademarks, service marks, trade dress, logos, trade names and brand names, and any combination of such names,
including all goodwill associated therewith and all applications, registrations and renewals in connection therewith; (iii) all copyrightable works (including derivative works thereof), all copyrights and all applications, registrations and
renewals in connection therewith; (iv) all trade secrets and confidential business information (including ideas, research and development, know-how, show-how, compositions, designs, drawings, specifications, customer and supplier lists, pricing
and cost information and business and market plans and proposals (whether or not reduced to writing)); (v) all computer software, including all machine and source code (including hard copy and soft copy as well as all data and related
documentation); and (vi) all websites and related content (including, without limitation, underlying software, URLs and domain names). Investment Advisers Act means the Investment Advisers Act of 1940, as amended, and the rules and regulations promulgated thereunder. Investment Management Services means the services provided by the Seller pursuant to the CDO Agreements. IP Licenses shall have the meaning ascribed to such terms in Section 4(r). Issuer and with correlative meaning Issuers means, respectively, the Persons listed on
Schedule 1.3 to this Agreement, individually, or all of them collectively. Judgment means any
judgment, order, injunction or decree. Key Employees shall have the meaning ascribed to such terms in
Section 6(l). 5
Knowledge of
the Seller means the actual knowledge of James McEntee, Christopher Ricciardi, Rachael Fink or Joseph Pooler after reasonable inquiry of the persons responsible for the performance of the Collateral Manager under the CDO Agreements as
listed on Schedule 6(l). Law means any federal, state, foreign or local law, statute,
ordinance, rule, regulation or code. Loss means any actual out-of-pocket loss, liability, claim, damage,
cost or expense (including costs of investigation and reasonable legal fees and expenses), taxes, penalties and obligations, in each case, whether arising from a third party claim or a direct claim between the Parties. Material Contracts shall have the meaning ascribed to such term in Section 4(f). Measurement Period shall have the meaning ascribed to such term in Section 3(b). Net Tax Benefit means the tax benefit of any Loss reduced by the tax detriment associated with the receipt of any
amount for which indemnification is provided under this Agreement. Notes shall have the meaning ascribed
to such term in the Indentures. Notice of Claim shall have the meaning ascribed to such term in
Section 11(b)(i). Objection Notice shall have the meaning ascribed to such term in
Section 11(b)(i). Overpayment shall have the meaning ascribed to such term in Section 3(d).
Party and with correlative meaning Parties means, respectively, Cohen, Cohen Financial
or ATP, individually, or all of them collectively. Person means any individual, limited liability company,
joint venture, corporation, partnership, association, trust, division or operating group of any of the foregoing or any other entity or organization. Prepayment Aggregate shall have the meaning ascribed to such term in Section 3(d). Prepayment Credit shall mean Five Hundred Thousand Dollars ($500,000), adjusted at the end of each Earnout Quarter (commencing with the Earnout Quarter ended February 23, 2010)
until such date as the Prepayment Credit equals $0, as follows: (i) increased by adding the product of (A) the current outstanding Prepayment Credit and (B) 0.0375; and (ii) 6
reduced by the aggregate Prepayment Penalty for Regulated Banks making a prepayment during such Earnout Quarter. In no event shall the Prepayment Credit be less than $0. Prepayment Penalty shall be the amount as determined with reference to Schedule 3(e) hereto, which sets forth
the amount of the Prepayment Penalty by Earnout Quarter. The applicable Prepayment Penalty shall be the amount set forth in the column for the date of prepayment by the Regulated Bank. Prepayment Penalty Amount shall mean as of the end of the Seventh Measurement Period, the aggregate of all Prepayment
Penalties for which there has not been a corresponding reduction in the Prepayment Credit, less the balance of the Prepayment Credit (if any) as of the end of the Seventh Measurement Period. In no event shall the Pre Payment Penalty Amount be
less than $0. Proceeding shall have the meaning ascribed to such term in Section 4(e). Quarterly Excess shall have the meaning ascribed to such term in Section 3(c). Rating Agencies means the rating agencies listed on Schedule 1.4 to this Agreement. Records means, with respect to the Seller and Cohen, all the books of account, ledgers, general, financial and
accounting records, files (including, without limitation, asset management files), data, invoices, distribution lists, billing records, manuals, information, and correspondence (in all cases, in any form or medium), of either the Seller or Cohen and
in its control that are used, held for use or intended to be used in connection with the Sellers performance of the Investment Management Services, together with all other records and other items required to be delivered to ATP in accordance
with Section 6(f). Regulated Banks shall mean those banks identified on Schedule 3(d) hereto;
provided that in no event shall the term Regulated Banks include any banks not identified on Schedule 3(d) that have also issued Notes who are subsequently acquired by or merged with the Regulated Banks listed on Schedule 3(d) hereto.
Related Assets means the Records, Collateral Administration Agreements and the assets listed on
Schedule 1.5 to this Agreement, collectively. Reports shall have the meaning ascribed to such
term in Section 4(g). Response Period shall have the meaning ascribed to such term in
Section 11(b)(i). Required Holders means, with respect to each CDO Agreement, the percentage and
class of the securities and, if applicable, the monoline insurer, required to consent to the Assignment and Assumption Agreement providing for, among other things, the assignment of such CDO Agreement, as listed on Schedule 1.6 to this
Agreement. 7
Retained
Management Fees means, with respect to each CDO Agreement, all Collateral Management Fees paid prior to February 23, 2010, plus one- half of the Collateral Management Fees accrued but not yet paid prior to February 23, 2010 (as
reduced by the amounts payable pursuant to the Sandler Sub-Advisory Agreements) in respect of Investment Management Services provided by the Seller to the Clients pursuant to such CDO Agreement. Schedule 1.7 hereto sets forth the Collateral
Management Fees (by CDO Agreement) paid after February 23, 2010 (as reduced by the amounts payable pursuant to the Sandler Sub-Advisory Agreements) and the payment date for such fees, the portion of the fees accrued prior to February 23,
2010, the portion of the fees accrued after February 23, 2010, the amount of the fee that shall constitute the Retained Management Fees and the current amount of the Collateral Management Fees that are due to be paid to ATP in connection with
the Closings pursuant to Section 3(a); provided, however, that the fees set forth on Schedule 1.7 to be paid to ATP shall be increased to the extent that additional Collateral Management Fees are earned and accrued after
the date hereof and prior to the applicable Closing. Retained Liabilities shall have the meaning ascribed
to such term in Section 2(b). Sandler Sub-Advisory Agreement means the agreements listed on
Schedule 1.1 to this Agreement under the heading Sub-Advisory Agreement. Schedules
shall mean the disclosure schedules attached hereto provided by the Parties. Second Measurement Period
shall have the meaning set forth in Section 3(b). Seller Consents and Filings shall have the
meaning ascribed to such term in Section 4(d). Seller Indemnified Persons shall have the meaning
ascribed to such term in Section 11(a)(ii). Seller/Cohen Material Adverse Effect means a material
adverse effect on the ability of the Seller or Cohen to perform its material obligations hereunder, but excluding any effect resulting from or relating to (i) general national, international or regional economic, financial, political or
business conditions, (ii) conditions (including changes in economic, financial market, regulatory or political conditions and any change in any Law or any change in the manner in which any Law is or may be enforced) affecting generally the
industry in which the Seller or Cohen or the related Issuer make or hold its investments or conduct their business (provided that such changes do not affect the Seller or Cohen in a disproportionate manner as compared to other collateral managers),
(iii) any public announcement of the Transactions contemplated by this Agreement or (iv) the execution or performance of this Agreement, or any actions taken, delayed or omitted to be taken by the Seller or Cohen pursuant to this Agreement
or at the written request of ATP or its representatives. Sellers Share shall have the meaning
ascribed to such term in Section 3(c). 8
Service
Fees means the aggregate of the dollar amounts under the column heading Maximum Services Fee on Schedule 8(i), which correspond to the Assigned CDO Agreements; provided that if the Services Agreement has terminated, the
term Service Fees shall mean the actual amount paid to Seller under the Services Agreement. Seventh
Measurement Period shall have the meaning ascribed to such term in Section 3(b). Similar
Transaction means any transaction or proposed transaction with a Third Party involving the direct or indirect sale or transfer of any of the Collateral Management Fees, CDO Agreements or the Related Assets. Sixth Measurement Period shall have the meaning ascribed to such term in Section 3(b). Subordinated Securities means, with respect to each Issuer, the securities issued by the Issuers that are subordinated
to the Notes listed on Schedule 1.8 to this Agreement. Tax Indemnification Limit means
(i) for the period from the date hereof until (and including) three (3) month anniversary of the initial Closing Date, (a) the aggregate Base Purchase Price for the Assigned CDO Agreements plus the amount of the Service Fees minus
(b) the excess, if any, of (1) the Collateral Management Fees (other than Retained Management Fees) collected by ATP under the Assigned CDO Agreements during such three (3) month period over (2) $375,000 and (ii) for each
three (3) month period commencing after the period described in clause (i) (each such period, a Tax Indemnification Period) until the Tax Indemnification Limit is reduced to $0, the greater of (a) (1) the Tax
Indemnification Limit for the prior Tax Indemnification Period minus (2) the excess, if any, of (x) the Collateral Management Fees (other than any Retained Management Fees) received by ATP during the prior Tax Indemnification Period over
(y) $375,000 and (b) subject to the limitation set forth in this clause (ii), the aggregate of the indemnification claims made pursuant to (a) Section 11(a)(i)(ii) in connection with a breach of Section 6(b) of this
Agreement or (b) Section 11(a)(i)(iv) of this Agreement prior to 5:00 p.m. New York City Time on the date that is the last day of the prior Tax Indemnification Period. Third Accountant shall have the meaning ascribed to such term in Section 3(g). Third Measurement Period shall have the meaning ascribed to such term in Section 3(b). Third Party means any Person other than Seller, Cohen, ATP, the Issuers or their Affiliates. Third Party Claim means any claim, demand, commencement of any action, suit or proceeding, or other assertion of
liability by any Person arising from the claim, demand, commencement of any action, suit or proceeding, or other assertion of liability of another person. Third Party Notice shall have the meaning ascribed to such term in Section 11(b)(ii). 9
Transaction shall have the meaning ascribed to such term in Section 2(a). Transaction Documents, with respect to a Closing, has the meaning ascribed to such term in the related Indenture.
Trustee means, with respect to any Indenture, the financial institution then acting as trustee thereunder.
Voting Agreement shall have the meaning ascribed to such term in Section 8(i). Section 2. Sale, Assignment and Assumption. (a) Upon the terms and subject to the conditions of this Agreement, at each Closing, the Seller shall sell, assign and transfer to ATP free and clear of all Encumbrances, and ATP shall accept from the
Seller all of the Sellers (i) rights and obligations in and under the Assigned CDO Agreements, including, but not limited to, the right to receive all related Collateral Management Fees (other than any related Retained Management Fees)
and (ii) rights, title and interests in and to the Assigned Related Assets and ATP shall assume the obligations of the Seller under such Assigned CDO Agreements to the extent, and only to the extent, such liabilities, obligations and
commitments relate to the period from and after such Closing (collectively, the Assumed Liabilities). Each assignment and assumption of the Assumed Liabilities pursuant to this Agreement, is referred to in this Agreement as a
Transaction. (b) Notwithstanding anything in this Agreement to the contrary, including Section 2(a),
neither ATP nor any of its Affiliates, nor any of their directors, officers, employees, agents or representatives assumes any liability, obligation or commitment of the Seller arising out of, or accruing under, the Assigned CDO Agreements with
respect to any period prior to the applicable Closing, which shall include but not be limited to (i) any liabilities relating to the offering and issuance of the securities described in the Indentures, (ii) any information about, or
relating to, the Seller or any other information contained in the final offering circular or any other information provided to investors prior to the Closing Date, (iii) any act or omission to act by the Seller prior to the Closing Date,
(iv) any breach of a representation or warranty made by the Seller within any of the CDO Agreements or Collateral Administration Agreements, (v) any failure of the Seller to comply with any provision of the CDO Agreements or Collateral
Administration Agreements or (vi) any liabilities relating to, or arising out of, the Proceedings identified on Schedule 4(e) (collectively, the Retained Liabilities). Each of the Seller and Cohen hereby agrees that
the Retained Liabilities remain obligations of the Seller. Section 3. Payment of Purchase Price. (a) The aggregate base purchase price for the assignment by the Seller to ATP of all the CDO Agreements and Related Assets (collectively,
the Assigned Assets) in accordance with the terms and subject to the conditions in this Agreement shall be $9,500,000 (the Base Purchase Price). The Base Purchase Price shall be allocated among the Assigned
Assets as set forth on Schedule 3(a). At each Closing, an amount equal to the portion of the Base Purchase Price attributable to the Assigned Assets being transferred at such Closing shall be paid by ATP to the Seller by wire transfer of
immediately available funds in US Dollars to the account designated on Schedule 3(c). Simultaneously with each Closing, the Seller shall pay to 10
ATP any related Collateral Management Fees (other than any related Retained Management Fees) received prior to such Closing, if any. At the initial Closing, ATP shall pay to Seller the Estimated
Earnout Payment for the Earnout Quarter ending May 23, 2010. (b) In addition to the Base Purchase Price, as
consideration for the assignment by the Seller of the Assigned Assets, the Seller shall have the opportunity to receive additional consideration equal to fifty percent (50%) of the Excess Base Case Revenues (as defined below) received during
each of the periods commencing on February 23, 2010 and ending on February 23, 2011 (the First Measurement Period), commencing on February 24, 2011 and ending on February 23, 2012 (the Second
Measurement Period), commencing on February 24, 2012 and ending on February 23, 2013 (the Third Measurement Period), commencing on February 24, 2013 and ending on February 23, 2014 (the
Fourth Measurement Period), commencing on February 24, 2014 and ending on February 23, 2015 (the Fifth Measurement Period), commencing on February 24, 2015 and ending on February 23, 2016
(the Sixth Measurement Period), commencing on February 24, 2016 and ending on and February 23, 2017 (the Seventh Measurement Period and each, a Measurement Period). For purposes of
this Agreement, Excess Base Case Revenues shall mean the aggregate of all revenues from the Assigned Assets, earned and actually received by ATP, less amounts payable pursuant to the Sandler Sub-Advisory Agreements, that exceed
the following thresholds (the Excess Base Case Revenue Thresholds): (i) $7,816,646 during the First Measurement Period, (ii) $6,095,257 during the Second Measurement Period, (iii) $5,563,272 during the Third
Measurement Period, (iv) $5,381,459 during the Fourth Measurement Period, (v) $5,206,200 during the Fifth Measurement Period, (vi) $5,050,266 during the Sixth Measurement Period, and (vii) $4,892,388 during the Seventh
Measurement Period. Schedule 3(b) sets forth an allocation of the Excess Base Case Revenue Thresholds among the CDO Agreements. The Excess Base Case Revenue Thresholds set forth in (i) through (vii) above shall be adjusted downward
for CDO Agreements that are not sold, assigned and transferred pursuant to this Agreement as of the applicable Measurement Period, and the adjustment shall be equal to the dollar amount allocated to such CDO Agreements on Schedule 3(b). The
Retained Management Fees shall be included in the calculation of Excess Base Case Revenues. Each amount calculated pursuant to this Section 3(b) shall hereinafter be referred to as an Earnout Payment. The Earnout Payment
shall be allocated among the Assigned Assets on a pro rata basis based upon the allocation of the Base Purchase Price as set forth on Schedule 3(a). The Earnout Payment, if any, will be paid by ATP to Seller in accordance with
Section 3(c), (d), (e), (f) and (g). (c) Seller shall be entitled to a non-refundable estimated payment of the
Earnout Payments in accordance with this Section 3(c). For each three month period during each Measurement Period, including the three months ending May 23, the three months ending August 23, the three months ending November 23
and the three months ending February 23 (each three month period, an Earnout Quarter), ATP shall determine the amount, if any, of the aggregate of all revenues from the Assigned Assets, earned and actually received by ATP,
less amounts payable pursuant to the Sandler Sub-Advisory Agreements that exceed the quarterly thresholds listed on Schedule 3(c) hereto, which thresholds shall be adjusted downward for CDO Agreements that are not sold, assigned and
transferred pursuant to this Agreement as of the applicable Earnout Quarter, and the adjustments shall be equal to the dollar amounts allocated to such CDO Agreements as listed on Schedule 3(c) (the Quarterly Excess). No
later than fifteen (15) days following the end of each Earnout Quarter, ATP shall calculate 50% of the Quarterly 11
Excess (the Sellers Share) and report the amount of the Sellers Share to the Seller in writing. Following the delivery of such written notice, the Seller may review
the calculations. Subject to Section 3(e) and the immediately following sentence, ATP shall pay to Seller (by wire transfer of immediately available funds to the account designated on Schedule 3(c)), as an estimate of the Earnout
Payments, 75% of such Sellers Share (the Estimated Earnout Payment and the remaining 25% of such Sellers share (the Holdback Amount) shall be retained by ATP. If during any Earnout Quarter, the
aggregate revenues from the Assigned Assets (calculated as set forth in the second sentence of this subsection) do not exceed the applicable quarterly threshold listed on Schedule 3(c), then the Seller shall not be entitled to an Estimated
Earnout Payment for such Earnout Quarter. In no event shall the Seller be required to return any portion of the Estimated Earnout Payments. The calculation of each Earnout Payment shall be reported to Seller by delivery of a written notice within
fifteen (15) days after each Measurement Period. Following the delivery of such notice, the Seller may review the calculations. (d) No later than fifteen (15) days following the end of the Seventh Measurement Period, ATP shall calculate: (i) the aggregate Earnout Payment for all Measurement Periods (the Final
Earnout Amount) and (ii) the sum of all Estimated Earnout Payments plus the aggregate of the Holdback Amount retained by ATP (the Prepayment Aggregate). If the Final Earnout Amount is equal to or greater than
the Prepayment Aggregate, then the Seller shall be entitled to the aggregate of the Holdback Amount retained by ATP, subject to adjustment as described in Section 3(h) hereof. If the Prepayment Aggregate is greater than the Final Earnout
Amount, then the amount by which the Prepayment Aggregate exceeds the Final Earnout Amount (the Overpayment) shall reduce the Holdback Amount payable to the Seller pursuant to Section 3(h) hereof. (e) If at any time after February 23, 2013, and prior to February 23, 2017, a Regulated Bank prepays the amounts due under the
Applicable Notes, then the Prepayment Credit shall be adjusted as described in Section 1 hereof. No later than fifteen (15) days following the end of an Earnout Quarter, ATP shall deliver the Seller written notice (together with all copies
of relevant work papers, schedules or other documents and records utilized by ATP in its calculation of the Prepayment Credit and the Prepayment Penalty, including details regarding the prepayment) of the Prepayment Credit and the Prepayment Penalty
(if any) as of such Earnout Quarter end. (f) To facilitate Sellers review of ATPs calculations in accordance with
Sections 3(c), (d) and (e), at the written request of the Seller, ATP shall make available (as soon as reasonably practicable following any request therefor) copies of relevant work papers, schedules and other documents and records utilized by
ATP in connection with its calculation; provided, however, that Seller and its affiliates shall maintain the confidentiality of such information and shall not disclose such information to a Third Party (other than Sellers
accountants, attorneys and advisors) without ATPs prior written consent. (g) If there should be any disagreement
between the Seller and ATP as to the proper calculation of any Estimated Earnout Payment, Earnout Payment, the Prepayment Penalty or the Prepayment Penalty Amount, ATPs independent accountants and Sellers independent accountants shall
undertake to reach agreement as to the Earnout Payment or the Prepayment Penalty, as the case may be, in dispute and shall notify ATP and the Seller in writing as to such 12
agreement. Any agreement by such accountants shall be conclusive and binding upon the Parties. If within ten (10) days after the matter is referred to them, such accountants are unable to
agree as to the calculation, such accountants shall jointly and promptly select a third independent certified public accounting firm (the Third Accountant). The Third Accountant shall, within fifteen (15) days after the
matter is referred to it, notify ATP and Seller in writing as to its determination of the Earnout Payment, the Prepayment Penalty, or Prepayment Penalty Amount, as the case may be. Any such determination by the Third Accountant shall be conclusive
and binding on the Parties. The fees and expenses of the Third Accountant and all costs associated with the Third Accountant shall be paid equally by the Seller and Cohen on the one hand and ATP on the other hand. ATP and Seller shall be responsible
for their own attorneys fees, accountants fees and other expenses incurred in connection with the dispute. (h)
Subject to this Section 3(h), ATP shall pay the Holdback Amount (i) less the Overpayment (if any), and (ii) less the Prepayment Penalty Amount (if any), by wire transfer within ninety (90) days following the end of the Seventh
Measurement Period, which amount shall include any undisputed portion of the Holdback Amount. If there is a dispute as to the proper computation of an Earnout Payment or the Prepayment Penalty Amount and such dispute is resolved pursuant to
Section 3(g) in favor of Seller, ATP shall pay by wire transfer of immediately available funds, the amount of such deficiency within three (3) Business Days following the final determination of such dispute. In the event an Estimated
Earnout Payment or the Holdback Amount, or any portion thereof, is not paid as and when due, interest shall accrue on the unpaid amount at a rate of 1% per month. In no event shall Seller or Cohen be responsible to pay ATP any amounts by which
the Overpayment or the Prepayment Penalty Amount exceed the Holdback Amount. Section 4. Representations and
Warranties of the Seller and Cohen. Seller and Cohen hereby jointly and severally represent and warrant to ATP as of the date hereof and as of each Closing Date as follows: (a) Seller is duly formed, validly existing and in good standing under the Laws of the State of Delaware, and Cohen is duly incorporated,
validly existing and in good standing under the Laws of the State of Maryland and each of Seller and Cohen has all requisite limited liability company or corporate (as the case may be) power and authority to own and operate its properties and
assets, to carry on its business as it is now being conducted. (b) Each of Seller and Cohen has full limited liability
company or corporate (as the case may be) power and authority to execute this Agreement and the applicable Assignments, the Cohen Services Agreement, to consummate the applicable Transaction and the other transactions contemplated hereby and
thereby. The execution and delivery by each of the Seller and Cohen of this Agreement and the consummation by each of the Seller and Cohen of the applicable Transaction and the other transactions contemplated hereby and thereby have been duly
authorized by all necessary limited liability company or corporate (as the case may be) action. As of each Closing, the execution and delivery by the Seller of the applicable Assignments and the consummation by the Seller of the transactions
contemplated thereby will have been duly authorized by all necessary limited liability company action. Each of the Seller and Cohen has duly executed and delivered this Agreement, and at or prior to each Closing, the Seller will have duly executed
and delivered each applicable Assignment. Assuming the due 13
authorization, execution and delivery of (i) this Agreement by ATP, and (ii) each Assignment at the applicable Closing by each party thereto other than the Seller, this Agreement hereby
does, and each Assignment and the Cohen Services Agreement, as of the applicable Closing will, constitute a valid and binding obligation of Seller and Cohen, enforceable against the Seller and Cohen in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar laws affecting creditors rights generally or by general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or law). (c) The execution, delivery and performance of this Agreement by the Seller and Cohen, the
execution, delivery and performance of each Assignment by the Seller, the execution, delivery and performance of the Cohen Services Agreement and the consummation by the Seller and Cohen of the transactions contemplated hereby and thereby do not and
will not (i) violate, or be in conflict with, or constitute a default (or an event which, with notice or the lapse of time or both, would constitute a default) under any provision of the respective organizational or incorporation (as the case
may be) documents of the Seller or Cohen, (ii) except as set forth in Schedule 4(c), violate, or be in conflict with, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default)
under, or require any consent, approval, confirmation or similar action under, or result in the termination of, or result in a right or cause to remove under, or accelerate the performance required by, or excuse performance by any Person of any of
its obligations under, or cause the acceleration of the maturity of any debt or obligation pursuant to, (A) any CDO Agreement or (B) any other material agreement to which any of them are a party, or (iii) contravene or conflict with
or constitute a violation of any provision of any Law or Judgment binding upon or applicable to the Seller or Cohen. (d) The
execution and delivery of this Agreement by the Seller and Cohen, the execution and delivery of the applicable Assignments by the Seller, the execution and delivery of the Cohen Services Agreement, and the consummation of the transactions
contemplated hereby and thereby by the Seller and Cohen, do not require any consent, approval, confirmation or similar action of, or any notice to or other filing with, any Governmental Authority or Person or under any CDO Agreement or other
agreement to which the Seller or Cohen is a party, except for the consents, approvals, confirmations or similar actions of, notices to, or other filings set forth in Schedule 4(d) (the Seller Consents and Filings).
(e) Except as set forth on Schedule 4(e), (i) no action, suit, proceeding or investigation (a
Proceeding) before any Governmental Authority, court or arbitrator is pending, or, to the Knowledge of the Seller, threatened in writing, against the Seller or Cohen that if determined adversely would, individually or in the
aggregate, reasonably be expected to have a Seller/Cohen Material Adverse Effect and (ii) as of the date of this Agreement, no Proceeding before any Governmental Authority, court or arbiter (A) is pending or, to the Knowledge of the
Seller, threatened in writing, against the Seller and (B) to the Knowledge of the Seller, is pending or threatened, in writing, against any Issuer (and the Seller has not received notice of any such Proceeding against any Issuer). (f) Attached hereto as Schedule 4(f) is a list of (i) each CDO Agreement and each material agreement to which any Issuer
is a party and, to the Knowledge of the Seller, each 14
other agreement to which any Issuer is a party and (ii) each material agreement to which the Seller is a party relating to the Issuers, including without limitation, (A) CDO Agreements,
(B) Collateral Administration Agreements, (C) Indentures and (D) Sandler Sub-Advisory Agreements (collectively, the Material Contracts). A true, correct and complete current copy of all Material Contracts, together
with all amendments, supplements, waivers and modifications thereto through the date hereof, have been provided to ATP in the Data Room. Each of the representations and warranties of the Seller under the Section 16(b)(i) through (v) and
(viii) of the CDO Agreements was true and correct as of the date that it was made and as of the date hereof with the same force and effect as though expressly made on and as of the date hereof. (g) The Seller has provided to ATP in the Data Room, with respect to each Indenture, a true and complete copy of each report (including
Trustees reports) delivered pursuant to such Indenture prior to the date hereof (the Reports). To the Knowledge of the Seller, no Report includes any misstatement of a material fact, other than such misstatements that are or
have been corrected in a subsequent report or written communication to the holders of the Subordinate Securities or noteholders, as the case may be, of the Issuers. Except as set forth on Schedule 4(g), to the Knowledge of the Seller, as of
the date of this Agreement, there are no Defaulted Securities that are not listed as such in the last Report. With respect to the ISDA Master Agreements listed on Schedule 4(f) (the Hedge Agreements), except as set forth on
Schedule 4(g), the Seller has not received a written notice from a hedge counter party or a Trustee of an event of default or other termination event under the Hedge Agreements and the Seller has not received written notice from any hedge
counter party purporting to terminate such Hedge Agreements. To the Knowledge of the Seller, no circumstances exist, following notice or the expiration of any grace or cure period, that would constitute an event of default or other termination event
under any Hedge Agreement to which the Seller is a party. (h) Each of the Material Contracts to which the Seller is a party
is a legal, valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms, except as may be limited by general principles of equity (regardless of whether considered in a proceeding at law or in equity) and
by applicable bankruptcy, insolvency, moratorium and other similar laws of general application relating to or affecting creditors rights generally. The Seller has not received, prior to the date hereof, any written notice from any Person
challenging the validity or enforceability of any applicable Material Contract or the obligation to pay the Collateral Management Fees under any CDO Agreement. Except as set forth on Schedule 4(h), the Seller has not granted any waiver
under any Material Contract, and with respect to the CDO Agreements, released any Issuer, in whole or in part, from any of its obligations under the applicable CDO Agreement. Except as set forth in Schedule 4(h), to the Knowledge of the
Seller, (i) no event has occurred or circumstances exist that could, with the passage of time or compliance with any applicable notice requirements or both, constitute a default of, result in a violation or breach of, or give any right to
accelerate, modify, cancel or terminate any Material Contract, (ii) no Event of Default (as defined in the respective CDO Agreements) has occurred and is continuing under the CDO Agreements, (iii) no event or condition exists that would
constitute cause to remove the Collateral Manager under the applicable CDO Agreements, and (iv) no holder of the Clients outstanding securities is soliciting votes or requests for direction, or has threatened in writing, to
remove the Collateral Manager under the applicable CDO Agreements whether for cause or without cause. The Seller has not made any prior assignment of its rights or obligations thereunder. 15
(i) To the Knowledge
of the Seller, except as otherwise disclosed in this Agreement or the Schedules, there are no Retained Liabilities of the Seller other than liabilities and obligations accruing in the ordinary course of business under the Assigned CDO Agreements and
not resulting from a breach of any of the Assigned CDO Agreements. (j) The Seller is the Collateral Manager under
each CDO Agreement to which it is a party. (k) Except as set forth on Schedule 4(k), the Seller has not (i) given
any Issuer any written notice of termination of any CDO Agreement, (ii) prior to the date hereof, received from any Person, Governmental Authority or any holder of Notes, or Subordinated Securities, any written notice of termination of any CDO
Agreement or removal of the Seller as Collateral Manager thereunder or expressing (A) the intent to terminate such CDO Agreement or remove the Seller as Collateral Manager thereunder or (B) the existence of an event or condition that would
constitute cause to remove the Collateral Manager, in each case pursuant to the terms of such CDO Agreement, or (iii) within the 365-day period immediately preceding the date hereof, received from any Person or any holder of Notes,
or Subordinated Securities, any written notice of (A) an intention to cause, either individually or collectively with others, an optional redemption of any securities issued by any collateralized debt obligation or (B) any notice of any
default or Event of Default under any CDO Agreement. (l) Except as set forth on Schedule 4(l), prior to the date
hereof, no Collateral Management Fees have been waived, reduced, postponed, assigned or the subject of any claim asserted by any Person against the Seller pursuant to any right of set-off, counterclaim or deduction (whether pursuant to the express
terms of the applicable CDO Agreement or otherwise). (m) The Seller is a duly registered investment advisor under the
Investment Advisers Act. (n) Except as set forth in Schedule 4(n), none of the Seller, Cohen, their respective
Affiliates nor any of their respective officers, directors or employees, has dealt with any person, firm or corporation who is or may be entitled to a brokers commission, finders fee, investment bankers fee or similar payment from
ATP (or any of its Affiliates) for arranging the transactions contemplated hereby or introducing the parties to each other. Cohen and the Seller are solely responsible for any brokers commissions, finders fees, investment bankers
fees or similar payments set forth on Schedule 4(n) and shall indemnify ATP for any such payments. (o) Each of the
Seller and Cohen (i) is neither insolvent (as such term is defined in Section 101(32) of the Bankruptcy Code) nor will it be rendered insolvent (as so defined) by virtue of incurring its obligations in connection with the Transactions and
this Agreement, (ii) has neither been, nor is or will be, engaged in business or other transactions for which the property remaining in its hands after the incurrence of its obligations in connection with the Transactions and this Agreement
constitutes unreasonably small capital, (iii) neither intends to incur, nor believes that it has incurred, debts beyond its ability to pay such debts as they become due, and/or (iv) has not incurred its obligations in connection with the
Transactions and this Agreement with any intent to hinder, delay or defraud other creditors. 16
(p) Except as set
forth on Schedule 4(p), to the Knowledge of the Seller, as of the date of this Agreement, there are no fees or expenses accrued or otherwise payable by any Issuer to the Seller (or any Affiliate thereof) or any other Person. (q) The Seller is, and has been at all times during the past five (5) years in compliance in all material respects with all Laws
applicable to its business or operations or the use of the Assigned Assets. The Seller has not received, at any time since January 1, 2006, any written notice of or been formally charged with any violation of Laws. (r) The Seller owns or has the valid right to use pursuant to licenses, sublicenses, agreements or permissions, all Intellectual Property
necessary for the performance of the Sellers obligations under the CDO Agreements and the operations of the Issuers (the IP Licenses). All such IP Licenses are in full force and effect and are legal, valid, binding and
enforceable in accordance with their respective terms with respect to the Seller, and to the Knowledge of Seller, each other party to such IP Licenses. No IP License will be terminable as a result of the consummation of the transactions contemplated
by this Agreement and each Issuer will have the continued right to use the Intellectual Property licensed to it pursuant to the IP Licenses. To the Knowledge of Seller, with respect to any Intellectual Property licensed to the Issuers pursuant to
the IP Licenses, the Seller has good and exclusive legal and beneficial title to, or has valid licenses to, each item of Intellectual Property licenses under the IP Licenses and the right, power and authority to enter into such IP Licenses.
Section 5. Representations and Warranties of ATP. ATP hereby represents and warrants to each of the Seller and
Cohen as follows: (a) ATP is duly formed, validly existing and in good standing under the Laws of the State of Delaware and
has all requisite power and authority to own and operate its properties and assets, to carry on its business as it is now being conducted. (b) ATP has full limited liability company power and authority to execute this Agreement, the Assignments and the Cohen Services Agreement and to consummate the Transaction and the other transactions
contemplated hereby and thereby. The execution and delivery by ATP of this Agreement and the consummation by ATP of the Transaction and the other transactions contemplated hereby have been duly authorized by all necessary limited liability company
action. As of each Closing, the execution and delivery by ATP of the Assignments and the Cohen Services Agreement and the consummation by ATP of the transactions contemplated thereby will have been duly authorized by all necessary limited liability
company action. ATP has duly executed and delivered this Agreement and, as of each Closing, ATP will have duly executed and delivered each applicable Assignment and the Cohen Services Agreement. Assuming the due authorization, execution and delivery
of this Agreement by the other Parties, this Agreement constitutes a valid and binding obligation of ATP, enforceable against ATP in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or similar laws affecting creditors rights generally or by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or law). 17
(c) The execution,
delivery and performance of this Agreement by ATP, the execution, delivery and performance of each Assignment by ATP, the execution, delivery and performance of the Cohen Services Agreement by ATP and the consummation by ATP of the transactions
contemplated hereby and thereby do not and will not (i) violate, or be in conflict with, or constitute a default (or an event which, with notice or the lapse of time or both, would constitute a default) under any provision of the organizational
documents of ATP, (ii) violate, or be in conflict with, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or require any consent under, or result in the termination of, or
accelerate the performance required by, or excuse performance by any Person of any of its obligations under, or cause the acceleration of the maturity of any debt or obligation pursuant to (A) any agreement to which it is a party which could
reasonably be expected to have an ATP Material Adverse Effect, or (B) contravene or conflict with or constitute a violation of any provision of any Law or Judgment binding upon or applicable to ATP. (d) The execution and delivery of this Agreement, each Assignment and the Cohen Services Agreement by ATP and the consummation of the
transactions contemplated hereby and thereby by ATP do not require any consent or approval of, or any notice to or other filing with, any Governmental Authority (the Buyer Consents and Filings). (e) ATP either (i) is not, and is not required to become, a registered investment adviser under the Investment Advisers Act, or
(ii) is a registered investment adviser under the Investment Advisers Act. (f) Neither ATP, nor any of its Affiliates
nor any of their respective officers, directors or employees, has dealt with any person, firm or corporation who is or may be entitled to a brokers commission, finders fee, investment bankers fee or similar payment from Seller or
Cohen (or any of their respective Affiliates) for arranging the transactions contemplated hereby or introducing the parties to each other. Section 6. Covenants. (a) From the date of this Agreement through
each Closing, the Seller shall (i) perform its obligations under the CDO Agreements to which it is a party in accordance with the terms thereof, (ii) carry out its business in the usual, regular and ordinary course of business in
substantially the same manner as previously performed, (iii) maintain its existence and good standing in its jurisdiction of organization and in each jurisdictions in which the ownership or leasing of its property or the conduct of its business
requires such qualification, (iv) take commercially reasonable actions as may be necessary to maintain all required licenses or other regulatory approvals necessary for the conduct of its business or operations and the performance of its
obligations under any of the Material Contracts. (b) From the date of this Agreement through each Closing Date, the Seller
will not engage in any activities that would cause any Issuer (i) to have income that is effectively connected with the conduct of a trade or business within the United States for U.S. federal income tax purposes or (ii) to be subject to
United States federal income tax under Section 882(a) of the Code or the branch profits tax under Section 884 of the Code, or (iii) to be required to report any item of income on any tax return that is treated as effectively connected
with the 18
conduct of a trade or business of such Issuer in the United States for U.S. federal income tax purposes. (c) On the terms and subject to the conditions of this Agreement, the Seller and Cohen, on the one hand, and ATP, on the other hand, shall use their respective commercially reasonable efforts to take, or
cause to be taken, all appropriate action, and do, or cause to be done, and to assist and cooperate with the other Parties in doing all things necessary, proper or advisable under applicable Law or otherwise to consummate and make effective the
Transactions as promptly as practicable, including (i) executing and delivering any additional instruments necessary, proper or advisable to consummate the Transactions, and to carry out fully the purposes of this Agreement, (ii) making
all necessary filings with Governmental Authorities, and thereafter making any other required submissions, with respect to the transactions contemplated hereby required under any applicable Law, (iii) obtaining written confirmation from the
Rating Agencies that no withdrawal, reduction or suspension with respect to any then current rating, if any, by the Rating Agencies (including any private or confidential rating) of any class of notes issued under the applicable Indenture will occur
as a result of the assignment of such CDO Agreement to ATP, and (iv) using commercially reasonable efforts to obtain all consents of any Governmental Authority or Third Party, including, without limitation, consent of the Required Holders, the
Issuers and TD Bank, N.A. necessary for the consummation of the Transaction; provided, however, that none of the Seller, Cohen, ATP or any of their respective Affiliates shall be required to engage in any litigation, bring any claims
or offer or grant any financial concessions or accommodations to (or accept any restrictions imposed by) any Governmental Authority or Third Party. The Seller and Cohen, on the one hand, and ATP, on the other hand, shall cooperate with each other in
connection with the making of any filings or obtaining any consents in accordance with this Section 6(c), including providing copies of any such filings to the non-filing party and its advisors prior to filing and discussing all reasonable
additions, deletions or changes suggested in connection therewith. All fees payable to any Governmental Authority in connection with the filings pursuant to this Section 6(c) shall be paid by the Seller. The Seller and Cohen, on the one hand,
and ATP, on the other hand, shall furnish to each other all information required for any application or other filing to be made pursuant to the rules and regulations of any applicable Law in connection with the Transactions. (d) Intentionally Omitted. (e) Prior to the termination of this Agreement pursuant to Section 10 or the occurrence of a Closing with respect to all of the CDO Agreements, the Seller and Cohen will not, and will cause their
Affiliates, and the officers, directors, employees, agents, advisers and other representatives of any of the foregoing not to directly or indirectly solicit the submission of proposals or offers from a Third Party relating to a Similar Transaction,
enter into a Similar Transaction, or participate in negotiations about a Similar Transaction. (f) Each of the Parties agrees
that from and after the initial Closing, the Parties shall (i) cooperate with each other in providing information reasonably required by the other Party in connection with Third Party Claims against any Party (including, without limitation, any
litigation), the preparation and audit of financial statements, insurance audits and governmental investigations; provided, that the out-of-pocket costs of providing such information shall be borne by the Party requesting such information,
and (ii) execute and deliver 19
or cause to be executed and delivered (shall execute and deliver or cause to be executed and delivered) to each other such additional instruments or other documents, and cooperate and do such
other acts and things, all as the other Party may reasonably request for the purpose of carrying out the intent of this Agreement and the transactions contemplated by this Agreement and the other Transaction Documents. On or prior to each Closing,
the Seller and Cohen shall deliver to ATP (i) all related closing documents, CD-ROMs, original Transaction Documents (and all amendments, supplements, waivers and modifications thereof) used by the Seller or Cohen in connection with the
performance by the Seller of its obligations under the related CDO Agreements and (ii) all related monthly reports, notices and other records (including computer records) in its possession. (g) None of the Seller, Cohen, ATP or any of their respective Affiliates shall issue or cause the publication of any press release or
other public announcement or disclosure with respect to this Agreement or the transactions contemplated hereby without prior consent of the Seller, Cohen and ATP, and each of the Seller, Cohen and ATP shall keep (and shall cause their respective
Affiliates to keep) this Agreement and the transactions contemplated hereby confidential, in each case, except as may be (i) required by Law, subpoena, judicial order or the rules (or practices) of any applicable securities exchange or
regulator or (ii) consistent with customary practices of such Person or its Affiliates relating to the disclosure of investments by such Person or any Affiliate thereof to its investors. Each of (i) the Seller and Cohen on the one hand and
(ii) ATP on the other hand hereby agrees that it shall give the other party prior written notice of any contemplated public announcement or other disclosure which shall reference this Agreement or the transactions contemplated hereby. Such
other party shall be given a reasonable opportunity to comment on such contemplated public announcement or disclosure (before such public announcement or other disclosure is made) and the reasonable comments of such other party (if made on a timely
basis) shall be incorporated in such public announcement or other disclosure. (h) In the event that the Seller shall receive
any payment of Collateral Management Fees after any Closing Date from any Issuer under any Assigned CDO Agreement relating to such Closing Date that does not consist entirely of Retained Management Fees, the Seller shall promptly, and in any event
no later than three (3) Business Days, following the receipt of such payment, give ATP written notice of such receipt and remit to ATP the portion of such payment that does not constitute Retained Management Fees. (i) The Seller shall hold any amounts received by the Seller to which ATP is entitled under Section 6(h) in trust and agree that
Seller shall have no right, title or interest whatsoever in such amounts. Any remittance required by Section 6(h) shall be made in the currency received in immediately available funds, without withholding, set-off, deduction or counterclaim of
any type, by wire transfer to the account set forth on Schedule 6(i), as ATP may amend from time to time upon written notice to the Seller. (j) In the event that ATP shall receive any payment of Collateral Management Fees after any Closing Date from any Issuer under any Assigned CDO Agreement relating to such Closing Date that consists of
Retained Management Fees, ATP shall promptly, and in any event no later than three (3) Business Days, following the receipt of such payment, remit to the Seller the portion of such payment that constitutes Retained Management Fees. 20
(k) ATP shall hold any
amounts received by ATP to which the Seller is entitled under Section 6(j) in trust and agrees that ATP shall have no right, title or interest whatsoever in such amounts. Any remittance required by Section 6(j) shall be made in the
currency received in immediately available funds, without withholding, set off, deduction or counterclaim of any type, by wire transfer to such account set forth on Schedule 3(c), as the Seller may amend from time to time upon written
notice to ATP. (l) The Seller hereby represents that Schedule 6(l) sets forth a list of employees of the Seller
or Cohen, and employees of Affiliates of the Seller or Cohen that currently perform the obligations of the Seller under the CDO Agreements. So long as the Cohen Services Agreement remains in effect, ATP covenants and agrees on its behalf and on the
behalf of its Affiliates that it shall not, without the prior written consent of Seller, solicit for employment the employees listed with an * on Schedule 6(l) (the Key Employees) or induce any Key Employee to
terminate his or her employment with Seller or its Affiliates. Each of the Seller, Cohen and ATP agree that ATP shall have the right to conduct due diligence with respect to the business, accounting and operations of the Issuers. (m) The Seller or Cohen shall provide ATP with a copy of any written notice, promptly upon receipt thereof, of any default, Event of
Default (as defined in the applicable CDO Agreement), cause for removal of the Collateral Manager, proposed amendment or waiver of or under any CDO Agreement, or solicitation documents sent by holders of the Clients outstanding securities to
remove the Collateral Manager, whether for cause or without cause. (n) Prior to the termination of
this Agreement pursuant to Section 10 or the final Closing Date, the Seller shall not amend or waive any of its rights under any CDO Agreement without the prior written consent of ATP. (o) Prior to the termination of this Agreement pursuant to Section 10 or the final Closing Date, the Seller or Cohen shall provide
ATP with a copy, promptly upon receipt thereof, of any monthly report, prepayment date report, or notice from any Rating Agency relating to, or arising out of, their rights, duties and obligations as Collateral Managers. (p) Prior to the termination of this Agreement pursuant to Section 10 or the final Closing Date, the Seller shall not cause any
Issuer to (i) enter into any hedge agreement or incur any debt, issue any liability or agree to or suffer to exist any lien upon such Issuers assets unless (A) such liability is incurred in the ordinary course of business and
(B) the Seller has given ATP prior notice of the incurrence of such liability or (ii) agree to any amendment, restructuring, waiver or workout with respect to any of the Issuers assets unless (A) such amendment, restructuring,
waiver or workout is entered into in the ordinary course of business following consultation with ATP and (B) the Seller has given ATP prior notice of such amendment, restructuring, waiver or workout. The Seller hereby represents that
Schedule 6(p) sets forth a list of the Issuer asset amendments, restructurings, waivers and workouts being worked on by the Seller as of the date of this Agreement. (q) The Seller and ATP shall promptly pay all costs and expenses incurred by it in connection with the Transactions. The Seller shall pay
all of its costs and expenses, including the fees and expenses arising out of or relating to the confirmations by the Rating 21
Agencies and the notices to (and consents of) the noteholders, equityholders or other Persons; provided, however, that neither Cohen nor the Seller shall be required to offer or grant any
financial concessions or accommodations in connection with the notices to (and consents of) the noteholders, equityholders or other Persons. (r) From the date of this Agreement through each Closing, the Seller shall take no action that materially adversely affects the ability of any Party to (i) obtain the consent of the Required Holders
or Rating Agencies to the transactions contemplated in this Agreement or (ii) perform its covenants and agreements under this Agreement. (s) The Seller and Cohen agree that for so long as ATP shall remain the Collateral Manager under the CDO Agreements, neither the Seller nor Cohen shall revoke the existing IP Licenses granting the Issuers
the right to use the Alesco trade names. (t) From and after the Closing, ATP covenants and agrees that it shall
not interfere or object to the payment by the Issuers, or the Trustees, of the fees and expenses set forth on Schedule 4(p), including any valid fees (of the same nature and payable to the parties identified on Schedule 4(p) under
the heading Future Approved Fees and Expenses) that accrue in accordance with the terms of the applicable Indenture after the Closing. Section 7. Closing. (a) The entry into the Assignments and the
transfer of any Assigned CDO Agreement and Assigned Related Asset (each a Closing) shall take place on or before the third Business Day following the satisfaction (or, to the extent permitted by Law, waiver by the Party entitled
to the benefit thereof) of the conditions set forth in Section 8 and Section 9 with respect to such Assigned CDO Agreement or Assigned Related Asset, or at such other time and date as shall be agreed between the Seller and ATP. For
purposes of this Agreement, Closing Date means, with respect to each Assigned CDO Agreement and Assigned Related Asset, the date on which the Closing occurred with respect to such Assigned CDO Agreement and Assigned Related Asset.
(b) At each Closing: (i) The Seller shall deliver to ATP an Assignment and Assumption Agreement in the form attached hereto as Exhibit A (the Assignment and Assumption Agreement) and such other
bills of sale, assignments and other instruments of transfer relating to the Assigned CDO Agreements and the Related Assets being assigned by the Seller as of such Closing and as shall be reasonably requested by ATP, if any (collectively, the
Assignments), duly executed by the Seller, in form and substance reasonably satisfactory to ATP; and (ii) ATP shall deliver to the Seller, (1) an Assignment and Assumption Agreement and such other instruments as shall be reasonably requested by the Seller, if any, to evidence the assumption by ATP
of the Assumed Liabilities being assumed as of such Closing, if any, duly executed by ATP, in form and substance reasonably satisfactory to the Seller, and (2) counterpart signature pages to the Assigned CDO Agreements, all duly executed by
ATP. 22
Section 8.
Conditions to the Obligations of ATP. The obligations of ATP to accept and assume the obligations of the Seller under any Assigned CDO Agreement and the Related Assets are subject to the satisfaction (or written waiver by ATP) at or prior to
the applicable Closing of the following conditions: (a) (i) The representations and warranties of the Seller and
Cohen made in this Agreement shall be true and correct as of the date hereof and as of the applicable Closing Date as though made on such Closing Date, except to the extent such representations and warranties expressly relate to an earlier date (in
which case such representations and warranties shall be true and correct on and as of such earlier date) and (ii) no event or condition shall have occurred since the date of this Agreement that would have made any representation of the Seller
or Cohen pursuant to Section 4(e), (g), (h)(ii), (h)(iv) or (p) fail to be true and correct if such representation were made as of the Closing Date (instead of, as set forth therein, as of the date of this Agreement). (b) The Seller and Cohen shall have performed or complied with all obligations and covenants required by this Agreement to be performed
or complied with by the Seller and Cohen by the time of such Closing. (c) Between the date of this Agreement and the Closing
Date, no fact, circumstance, development or event shall have occurred that, individually or in the aggregate, has had or would reasonably be expected to have a Seller/Cohen Material Adverse Effect. (d) With respect to the Assigned CDO Agreements, the Required Holders and TD Bank, N.A. shall have executed and delivered written
instruments consenting to the related Assignment and Assumption Agreement providing for, among other things, the assignment of the Assigned CDO Agreements to ATP and directing the Issuer (or the Trustee, as the case may be) to consent to the
assignment of the Assigned CDO Agreements to ATP; such executed written consents shall be in full force and effect and in substantially the form attached as Exhibit B; and copies of such written consents shall have been provided to ATP.
(e) With respect to the Assigned CDO Agreements, the applicable Issuer shall have executed and delivered a written instrument
consenting to the related Assignment and Assumption Agreement providing for, among other things, the assignment of the Assigned CDO Agreements to ATP; such written consent shall be in full force and effect and in substantially the form attached as
Exhibit C; and a copy of such written consent shall have been provided to ATP. (f) With respect to the Assigned
CDO Agreements, the Rating Agencies shall have confirmed in writing (including, without limitation, by press release, to the extent consistent with a Ratings Agencys procedures) to the applicable Issuer, the applicable Trustee and the Seller
that no withdrawal, reduction or suspension with respect to any then current rating, if any, by the Rating Agencies (including any private or confidential rating) of any class of notes issued under the applicable Indenture will occur as a result of
the related Assignment and Assumption Agreement providing for, among other things, the assignment of the Assigned CDO Agreements to ATP. With respect to the Closing relating to the CDO Agreements listed on Schedule 1.1 as items one
(1) through three (3) only, Sandler ONeill & Partners, L.P. shall have executed and delivered a written instrument consenting to the assignment of the Sandler Sub-Advisory
23
Agreements to ATP. Such written consent shall be in full force and effect and a copy of such written consent shall have been provided to ATP. (g) There shall not be pending or threatened by any Governmental Authority any Proceeding (or by any other person any Proceeding that has
a reasonable likelihood of success) challenging, seeking to restrain or prohibit, or make illegal the Transaction. No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Law, or Judgment (whether temporary,
preliminary or permanent) in any case which is in effect and which prevents or prohibits consummation of the Transaction. (h)
The Seller and ATP shall have entered into a services agreement with respect to the CDO Agreements being assigned as of such Closing in substantially the form attached hereto as Exhibit F (the Cohen Services Agreement).
(i) With respect to the initial Closing only, (i) the Assigned Assets to be assigned by the Seller to ATP at such
Closing include the CDO Agreements listed on Schedule 1.1 as items 10 through 17, (ii) Cohen Brothers and ATP shall have entered into a voting agreement in substantially the form attached hereto as Exhibit E (the Voting
Agreement), (iii) the Escrow Deposit of $11,726,811 shall be deposited by ATP with the Escrow Agent and the Seller and ATP shall have entered into the Escrow Agreement, and (iv) the initial service fee of $1,891,421 payment for
the CDO Agreements assigned at the Initial Closing, as set forth in Schedule 8(i), shall be paid by ATP to Cohen simultaneously with the initial Closing pursuant to the Cohen Services Agreement. At any subsequent Closing, (A) the initial
service fee payment for the CDO Agreement assigned at such subsequent Closing, as set forth in Schedule 8(i), shall be paid by ATP to Cohen simultaneously with the subsequent Closing, and (B) the applicable Escrow Deposit shall be
deposited by ATP with the Escrow Agent. (j) With respect to the initial Closing only, pursuant to Section 6(l), ATP has
concluded its due diligence relating to the business, accounting and operations of the Issuers and the results of such due diligence have been satisfactory in the sole discretion of ATP. (k) No waiver or amendment of any CDO Agreement shall have occurred prior to the Closing without the prior written consent of ATP.
(l) All amendments to the CDO Agreements shall have been duly executed and delivered by the Seller. (m) ATP shall have received (i) a certificate signed by an authorized officer of the Seller and Cohen as to the satisfaction of the
conditions contained in paragraphs (a) through (e) of this Section 8 and (ii) an opinion of Cozen OConnor, in form and substance reasonably satisfactory to ATP and its counsel, (A) covering the due authorization,
execution and delivery of this Agreement and the Assignments by the Seller and Cohen, (B) covering the enforceability of this Agreement, the Assignments, the Cohen Services Agreement and the Voting Agreement, against the Seller, Cohen and Cohen
Brothers and (C) stating, subject to customary assumptions, that the execution, delivery and performance of the Assignments providing for, among other things, the assignment of the CDO Agreements as set forth in the Assignments is authorized or
permitted by the CDO Agreements. 24
Section 9.
Conditions to the Obligations of the Seller and Cohen. The obligations of the Seller to assign and transfer its obligations under any Assigned CDO Agreement and its right, title and interest in and to the Related Assets are subject to the
satisfaction (or written waiver by the Seller) at or prior to the applicable Closing of the following conditions: (a) The
representations and warranties of ATP made in this Agreement shall be true and correct in all material respects as of the applicable Closing Date as though made on such Closing Date, except to the extent such representations and warranties expressly
relate to an earlier date (in which case such representations and warranties shall be true and correct on and as of such earlier date). (b) ATP shall have performed or complied with all obligations and covenants required by this Agreement to be performed or complied with by ATP by the time of the Closing. (c) Between the date of this Agreement and the Closing Date, no fact, circumstance, development or event shall have occurred that,
individually or in the aggregate, has had or would reasonably be expected to have an ATP Material Adverse Effect. (d) With
respect to the Assigned CDO Agreements, the Required Holders and TD Bank, N.A. shall have executed and delivered written instruments consenting to the related Assignment and Assumption Agreement providing for, among other things, the assignment of
the Assigned CDO Agreements to ATP and directing the Issuer to consent to the assignment of the Assigned CDO Agreements to ATP. With respect to of the Closing relating to the CDO Agreements listed on Schedule 1.1 as items one (1) through
three (3) only, Sandler ONeill & Partners, L.P. shall have executed and delivered a written instrument consenting to the assignment of the Sandler Sub-Advisory Agreements to ATP. Such written consents shall be in full force and
effect and in substantially the form attached as Exhibit B; and copies of such executed written consents shall have been provided to ATP. (e) With respect to the Assigned CDO Agreements, the applicable Issuer shall have executed and delivered a written instrument consenting to the related Assignment and Assumption Agreement providing for,
among other things, the assignment of the Assigned CDO Agreements to ATP; such written consent shall be in full force and effect and in substantially the form attached as Exhibit C; and a copy of such written consent shall have been
provided to ATP. (f) With respect to the Assigned CDO Agreements, the Rating Agencies shall have confirmed in writing
(including, without limitation, by press release, to the extent consistent with a Ratings Agencys procedures) to the applicable Issuer, the applicable Trustee and the Seller that no withdrawal, reduction or suspension with respect to any then
current rating, if any, by the Rating Agencies (including any private or confidential rating) of any class of notes issued under the applicable Indenture will occur as a result of the related Assignment and Assumption Agreement providing for, among
other things, the assignment of the Assigned CDO Agreements to ATP. (g) There shall not be pending or threatened by any
Governmental Authority any Proceeding (or by any other person any Proceeding that has a reasonable likelihood of 25
success) challenging, seeking to restrain or prohibit, or make illegal the Transaction. No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Law or Judgment
(whether temporary, preliminary or permanent), in any case which is in effect and which prevents or prohibits consummation of the Transaction. (h) Each of the applicable Issuers and Trustees shall have received from ATP a duly executed counterpart signature page to the Assigned CDO Agreements being assigned as of such Closing. (i) The Seller and ATP shall have entered into the Cohen Services Agreement. (j) Cohen Brothers and ATP shall have entered into the Voting Agreement. (k) The Seller shall have received an opinion or opinions of Hunton & Williams LLP, counsel to ATP, in form and substance
reasonably satisfactory to the Seller and their counsel, covering the due authorization, execution and delivery of this Agreement and the Assignments by ATP and the enforceability of this Agreement and the Assignments against ATP. (l) The Seller shall have received a certificate signed by an authorized officer of ATP as to the satisfaction of the conditions
contained in paragraphs (a) and (b) of this Section 9. Section 10. Termination. (a) Notwithstanding anything to the contrary in this Agreement, this Agreement may be terminated and the Assignment and the other
transactions contemplated by this Agreement abandoned at any time prior to the initial Closing and, after the initial Closing this Agreement insofar as it applies to any transactions contemplated at any subsequent Closings may be abandoned:
(i) by mutual written consent of the Seller, Cohen and ATP; (ii) by ATP in writing if (i) the Seller or Cohen shall have breached or failed to perform any of their respective
representations, warranties, covenants or other agreements contained in this Agreement, which breach or failure to perform (A) would give rise to the failure of a condition set forth in Section 8, and (B) cannot be or has not been
cured on or prior to the applicable End Date; provided, however, that ATP is not then in breach of any of its covenants or agreements contained in this Agreement, (ii) if, as of any date, an event or condition shall have occurred
which would have made any representation of the Seller or Cohen pursuant to Section 4(e), (g), (h)(ii) or (h)(iv) to fail to be true and correct if such representation were made as of such date (instead of, as set forth therein, as of the date
of this Agreement) or (iii) ATP has notified the Seller and Cohen pursuant to Section 6(l) that the results of its due diligence with respect to the business, accounting and operations of the Issuers have not been satisfactory in the sole
discretion of ATP; 26
(iii)
by the Seller and Cohen in writing if ATP shall have breached or failed to perform any of its representations, warranties, covenants or other agreements contained in this Agreement, which breach or failure to perform (i) would give rise to the
failure of a condition set forth in Section 9, and (ii) cannot be or has not been cured on or prior to the applicable End Date; provided, however, that neither the Seller nor Cohen is then in breach of any of its covenants or
agreements contained in this Agreement; or (iv) by the Seller and Cohen or ATP, (A) if the initial
Closing does not occur on or prior to July 30, 2010 (or, such later date as may be agreed to in writing by ATP acting in good faith not later than August 15, 2010, or such later date as may be agreed to in writing by the Seller and ATP),
or (B) if, subsequent to the initial Closing, a Closing or Closings relating to an aggregate of 50% of the Assigned Assets (measured according to the purchase price allocation set forth on Schedule 3(a)) does not occur by August 31,
2010 (or, such later date as may be agreed to in writing by ATP acting in good faith not later than August 31, 2010, or such later date as may be agreed to in writing by the Seller and ATP), or (C) October 1, 2010, or such later date
as may be agreed to in writing by the Seller and ATP (each such date, as applicable, an End Date); provided, however, that no Party shall be entitled to terminate this Agreement pursuant to this clause (iv) if
the failure to consummate the applicable Closing is a result of such Partys material breach of this Agreement. (b) In
the event of termination by the Seller and Cohen or ATP pursuant to this Section 10 at any time (i) prior to the initial Closing under this Agreement, written notice thereof shall forthwith be given to the other and the transactions
contemplated by this Agreement shall be terminated, without further action by any Party or (ii) subsequent to the initial Closing under this Agreement, written notice thereof shall forthwith be given to the other and the transactions
contemplated by this Agreement that are contemplated to occur after the date of such termination and that do not relate to transactions in connection with a Closing that has occurred, shall be terminated, without further action by any Party.
(c) If this Agreement is terminated and the transactions contemplated hereby are abandoned as described in this
Section 10 at any time (i) prior to the initial Closing under this Agreement, this Agreement shall become null and void and of no further force and effect without further liability of any Party, except for the provisions of Sections 6(d),
(g) and (o), 11 and 12 or (ii) after the initial Closing under this Agreement, this Agreement shall (A) remain in full force and effect with respect to the transactions consummated in connection with each Closing that has occurred
prior to such termination and (B) become null and void and of no further force and effect without further liability of any Party, except for the provisions of Sections 6(d), (g) and (q), 11 and 12 with respect to all other transactions
contemplated hereby. Nothing in this Section 10 shall be deemed to release any Party from any liability for any breach by such Party of any of its covenants or agreements under this Agreement. 27
Section 11.
Indemnification. (a) Indemnification. (i) The Seller and Cohen jointly and severally agree to indemnify, defend and hold harmless ATP and its Affiliates and all
of their respective officers, managers, directors, members, partners, employees, agents, successors and assigns (the ATP Indemnified Persons) from and against any Losses actually incurred by such ATP Indemnified Persons arising
out of or resulting from (i) any breach by the Seller or Cohen of any representation or warranty of the Seller contained in this Agreement or any other Contract executed by the Parties in connection with any related Transaction, (ii) any
breach by the Seller or Cohen of any covenant contained in this Agreement or any other Contract executed by the Parties in connection with the related Transactions, (iii) any related Retained Liabilities or (iv) the Issuer (A) having
income that is effectively connected with the conduct of a trade or business within the United States for U.S. federal income tax purposes, (B) being subject to United States federal income tax under Section 882(a) of the Internal Revenue
Code of 1986, as amended (the Code), or a branch tax under Section 884 of the Code or (C) reporting any item of income on any tax return that would be treated as effectively connected with the conduct of a trade or
business of the Issuer in the United States for U.S. federal income tax purposes. (ii) ATP agrees to
indemnify, defend and hold harmless the Seller, Cohen and their respective Affiliates and all of their respective officers, managers, directors, shareholders, members, partners, trustees, employees, agents, successors and assigns (the
Seller Indemnified Persons) from and against any Losses actually incurred by the Seller Indemnified Persons arising out of or resulting from (i) any breach by ATP of any representation or warranty of ATP contained in this
Agreement, (ii) any breach by ATP of any covenant contained in this Agreement or any other Contract executed by the Parties in connection with the related Transactions or (iii) any related Assumed Liabilities. (iii) For the purposes of determining the amount of any Losses related to any claim for indemnification pursuant to
Section 11(a)(i) or Section 11(a)(ii) and any limitations on indemnification pursuant to Section 11(c), such Losses shall be considered without regard to any material, Material Adverse Effect, or similar
qualifications set forth herein. (b) Procedures for Indemnification. (i) If any ATP Indemnified Person or Seller Indemnified Person (each an Indemnified Person) shall claim
indemnification hereunder for any claim (other than a Third Party Claim) for which indemnification is provided in Section 11(a), the Indemnified Person shall promptly, and in any event within one hundred twenty (120) days, after such
Indemnified Person first becomes aware of facts that give rise to the basis for such claim, give written notice (a Notice of Claim) to the Seller and Cohen or ATP, as applicable, setting forth the basis for such claim and the
nature and estimated amount of the claim (which estimated amount shall include, without limitation, an 28
estimate of the Losses that may be incurred in connection with defending any such claim), all in reasonable detail. The failure to give a Notice of Claim to the Indemnifying Person shall not
relieve the Indemnifying Person of any liability hereunder unless the Indemnifying Person was actually prejudiced by such failure and then only to the extent of such prejudice. If the Seller and Cohen or ATP, as applicable, disputes any claim set
forth in the Notice of Claim, it shall deliver to such Indemnified Person that has given the Notice of Claim a written notice indicating its dispute of such Notice of Claim in reasonable detail (an Objection Notice) within thirty
(30) days after the date the Notice of Claim is given (the Response Period). (ii) If
an Indemnified Person shall make a Third Party Claim for which indemnification is provided in Section 11(a), the Indemnified Person shall promptly, and in any event within ninety (90) days, after such Indemnified Person first becomes aware
of facts which give rise to the basis for such claim, give written notice (a Third Party Notice) to the Seller and Cohen or ATP, as applicable (each, an Indemnifying Person), of the basis for such claim, setting
forth the nature of the claim or demand in reasonable detail, and the estimated amount of the claim (which estimated amount shall include, without limitation, an estimate of the Losses that may be incurred in connection with defending any such
claim). The failure to give a Third Party Notice to the Indemnifying Person shall not relieve the Indemnifying Person of any liability hereunder unless the Indemnifying Person was actually prejudiced by such failure and then only to the extent of
such prejudice. The Indemnifying Person shall be entitled to participate therein and, to the extent that it wishes (but subject to the consent of the Indemnified Person), to assume the defense thereof with counsel reasonably satisfactory to such
Indemnified Person so long as the Indemnifying Person notifies the Indemnified Person in writing within sixty (60) days after the Indemnified Person has given a Third Party Notice to the Indemnifying Person that the Indemnifying Person will
indemnify the Indemnified Person from and against the entirety of any Losses the Indemnified Person may suffer resulting from, arising out of, relating to, in the nature of, or caused by the claim, and the Indemnifying Person assumes the defense of
the Proceeding. If the Indemnifying Person (with the consent of the Indemnified Person) assumes the defense of such claim, the Indemnifying Person shall not be liable to such Indemnified Person under such section for any fees of other counsel or any
other expenses, incurred by such Indemnified Person in connection with the defense thereof; provided, however, that in the event that the interests of the Indemnified Person and the Indemnifying Person are, or may reasonably become, in
conflict with or adverse to one another with respect to such Third Party Claim, the Indemnified Person may retain its own counsel at the Indemnifying Persons expense with respect to such Third Party Claim. If an Indemnifying Person assumes the
defense of such an action, (i) no compromise or settlement thereof may be effected by the Indemnifying Person without the Indemnified Persons consent (which shall not be unreasonably withheld, conditioned or delayed) unless (A) there
is no finding or admission of any violation of law or any violation of the rights of any Person and no effect on any other claims that may be made against the Indemnified Person and (B) the sole relief provided is monetary damages that are paid
in full by the Indemnifying Person and (ii) the Indemnifying Person shall have no liability with respect to any compromise or settlement thereof effected without its consent (which shall not be unreasonably withheld, conditioned or delayed). If
notice is given to an Indemnifying Person of the 29
commencement of any action and it does not, within sixty (60) days after the Indemnified Persons notice is given, give notice to the Indemnified Person of its election to assume the
defense thereof (or the Indemnifying Person does not consent to the election by the Indemnifying Person to assume the defense thereof), the Indemnified Person shall, at the expense of the Indemnifying Person, undertake the defense of (with counsel
selected by the Indemnified Person and reasonably acceptable to the Indemnifying Person) such claim, liability or expense, and shall have the right to compromise or settle such claim, liability or expense with the consent of the Indemnifying Person.
(c) Limitations on Indemnification. (i) No ATP Indemnified Person shall be entitled to indemnification pursuant to Section 11(a)(i), unless and until the aggregate Losses incurred by all ATP Indemnified Persons in respect of all claims
under Section 11(a) collectively exceed $50,000 whereupon ATP Indemnified Persons shall be entitled to indemnification hereunder (subject to the other provisions of this Section 11) from the Seller or Cohen for all such Losses incurred by
ATP Indemnified Persons in excess of such $50,000 deductible. Notwithstanding the foregoing, the limitations set forth in this Section 11(c)(i) shall not apply to claims for indemnification pursuant to Section 11(a)(i) that relate to the
representations and warranties contained in Section 4(n) or pursuant to Section 11(a)(i)(ii). (ii)
No Seller Indemnified Person shall be entitled to indemnification pursuant to Section 11(a)(ii), unless and until the aggregate Losses incurred by all Seller Indemnified Persons in respect of all claims under Section 11(a) collectively
exceed $50,000 whereupon Seller Indemnified Persons shall be entitled to indemnification hereunder (subject to the other provisions of this Section 11) from ATP for all such Losses incurred by Seller Indemnified Persons in excess of such
$50,000 deductible. Notwithstanding the foregoing, the limitations set forth in this Section 11(c)(ii) shall not apply to claims for indemnification pursuant to Section 11(a)(i) that relate to the representations and warranties contained
in Section 5(f) or pursuant to Section 11(a)(ii)(ii). (iii) No Party shall be
entitled to indemnification pursuant to Section 11(a)(i)(i) or Section 11(a)(ii)(i), as the case may be, unless the party seeking indemnification notifies the other party of a claim specifying the factual basis of the claim in reasonable
detail on or before the fifth (5th) anniversary of
the initial Closing hereunder, in which case, the survival period shall continue until such claim is fully resolved. (iv) Except as set forth in (vi) and (vii) below, the maximum aggregate liability of the Seller to ATP and ATP Indemnified Persons for indemnification under Section 11(a)(i)(i) of this
Agreement shall not exceed the sum of (A) the aggregate Base Purchase Price paid for the Assigned CDO Agreements, (B) the amount of the Service Fees and (C) the aggregate of Losses that constitute out-of-pocket costs of such ATP
Indemnified Persons. 30
(v)
Except as set forth in (vi) and (vii) below, the maximum aggregate liability of Cohen to ATP and ATP Indemnified Persons for indemnification under Section 11(a)(i) of this Agreement shall not exceed the then applicable Cohen
Indemnification Limit. (vi) The maximum aggregate liability of the Seller and Cohen to ATP and ATP Indemnified
Persons for indemnification under (A) Section 11(a)(i)(ii) in connection with a breach of Section 6(b) of this Agreement or (B) Section 11(a)(i)(iv) of this Agreement shall not exceed the then applicable Tax Indemnification Limit.
(vii) Each of the Seller, Cohen and ATP hereby agrees that the liability of the Seller and Cohen to ATP and
ATP Indemnified Persons if this Agreement is terminated by ATP and the transactions contemplated hereby are abandoned as described in Section 10(a)(ii)(i) as a result of breach or failure by the Seller or Cohen of any of their respective
representations or warranties prior to the initial Closing under this Agreement, be deemed to be equal to ATPs out-of-pocket expenses. (viii) ATP and ATP Indemnified Persons shall not be entitled to indemnification in connection with a claim under Section 11(a)(i)(iv) of this Agreement, if such Loss arises out of or relates to a
change, following a Closing Date, by ATP or in the business of managing the Assigned CDO Agreements or a change, following a Closing Date, by ATP in the United States federal income tax reporting positions heretofore taken by or on behalf of the
Issuer or Issuers, in question, but only to the extent such change in operations or reporting is not required or permitted under the Assigned CDO Agreements. (d) The amount of any Losses for which indemnification is provided for under this Agreement shall be (i) reduced by any amounts actually realized as a result of any indemnification, contribution or
other payment by any Third Party, (ii) reduced by any insurance proceeds or other amounts actually recovered or received from third parties with respect to such Losses; provided that the amount of any insurance proceeds received by an
Indemnified Person shall be equal to the difference between (A) the actual after-tax amount of such proceeds less any deductible paid by the applicable Indemnified Person and (B) the net present value (as determined by the applicable
Indemnified Person in good faith) of the aggregate incremental premium costs which are incurred by an Indemnified Person as a consequence of the Loss or event which gives rise to the payment of insurance proceeds and (iii) reduced by any Net
Tax Benefit actually realized in the year of the Loss from the incurrence or payment of any such Losses. For purposes of this Section 11, a Net Tax Benefit is actually realized in the year of the Loss only if it results in a reduction of the
amount of Taxes actually paid by the Indemnified Person in the taxable year in which the Loss occurs. (e) If an Indemnified
Person recovers any amount with respect to any Loss that was previously satisfied by the Indemnifying Person such Indemnified Person shall promptly pay such amount to such Indemnifying Person. (f) An action for Losses under this Section 11 constitutes the sole and exclusive monetary remedy with respect to this Agreement.
31
(g) Notwithstanding
anything to the contrary set forth in this Agreement, none of the Seller, Cohen and ATP shall have any obligation to indemnify any other party or their respective Indemnified Persons from and against special, indirect consequential, or punitive
damages, lost profits or loss of or diminution in value. Section 12. Miscellaneous. (a) This Agreement may be executed in one or more counterparts (including by facsimile or portable document format (PDF)), all of which
shall be considered an original copy of one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the Parties and delivered to the other Parties. (b) This Agreement, along with the schedules hereto, contains the entire agreement and understanding between the Parties with respect to
the subject matter hereof and supersede all prior agreements and understandings relating to such subject matter. (c) All
notices or other communications required or permitted to be given hereunder shall be in writing and shall be delivered by hand or sent by facsimile or sent, postage prepaid, by registered, certified or express mail or overnight courier service and
shall be deemed given when so delivered by hand or facsimile, or if mailed, three days after mailing (one (1) Business Day in the case of express mail or overnight courier service), as follows: (i) if to ATP: 32
(ii)
if to Seller or Cohen: 33
(d) Each Party
irrevocably and unconditionally submits to the exclusive jurisdiction of (a) the Supreme Court of the State of New York, New York County, and (b) the United States District Court for the Southern District of New York, for the purposes of
any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each of the Seller and ATP agrees to commence any such action, suit or proceeding either in the United States District Court for the Southern
District of New York or if such suit, action or other proceeding may not be brought in such court for jurisdictional reasons, in the Supreme Court of the State of New York, New York County. Each of the Seller, Cohen and ATP further agrees that
service of any process, summons, notice or document by U.S. registered mail to such Partys respective address set forth above shall be effective service of process for any action, suit or proceeding in New York with respect to any matters to
which it has submitted to jurisdiction in this Section 12. Each of the Seller, Cohen and ATP irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby in (i) the Supreme Court of the State of New York, New York County, or (ii) the United States District Court for the Southern District of New York, and hereby and thereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. (e) Each of the Parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms
and provisions of this Agreement exclusively in a state or federal court located in New York, New York. (f) No waiver of any
of the provisions of this Agreement shall be deemed, or shall constitute, a waiver of any other provision of this Agreement, whether or not similar, nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.
(g) This Agreement shall be governed by and construed in accordance with the laws of the State of New York. (h) Each Party hereby waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect to
any litigation directly or indirectly arising out of, under or in connection with this Agreement or any transaction contemplated hereby. Each Party (i) certifies that no representative, agent or attorney of any other Party has represented,
expressly or otherwise, that such other Party would not, in the event of litigation, seek to enforce that foregoing waiver and (ii) acknowledges that it and the other Parties have been induced to enter into this Agreement by, among other
things, the mutual waivers and certifications in this Section 12. (i) Except as otherwise provided herein, all fees and
expenses incurred in connection herewith and the transactions contemplated hereby shall be paid by the Party incurring such expenses, whether or not the transactions contemplated hereby are consummated. 34
(j) No amendment,
supplement or modification of this Agreement shall be effective unless in writing signed by all of the Parties. (k) Neither
this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by the Seller and Cohen on the one hand, or ATP, on the other hand (whether by operation of Law or otherwise) without the prior written consent of the other
Parties; provided, however, that, notwithstanding the foregoing, ATP may assign any or all of its rights, interests or obligations under this Agreement to any Affiliate thereof without the consent of the Seller or Cohen. This Agreement
(and all obligations hereunder) is binding upon, inure to the benefit of and be enforceable by the Parties and their respective successors and assigns, and nothing in this Agreement, express or implied, other than the rights of the Buyer Indemnified
Persons and the Seller Indemnified Persons pursuant to Section 11, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. [Signature Page Follows.] 35
IN WITNESS WHEREOF,
the Parties have duly executed and delivered this Agreement as of the date first above written. /s/ Joseph W. Pooler, Jr. /s/ Joseph W. Pooler, Jr. /s/ Marc K. Furstein
Schedule 1.1
CDO Agreements Collateral Management Agreements 1
Sandler Sub-Advisory Agreements Collateral Administration Agreements
Collateral Administration Agreement, dated as of December 19, 2003, by and among Alesco Preferred Funding II, Ltd., Cohen Bros. Financial Management,
LLC (now known as Cohen & Company Financial Management, LLC) and The Bank of New York 2
Mellon Trust Company, National Association (successor to JPMorgan Chase Bank, National Association). 3
4
Schedule 1.2
Indentures 5
6
Schedule 1.3
Issuers 7
8
Schedule 1.4
Rating Agencies Fitch Moodys Standard & Poors
Schedule 1.5
Related Assets Source code and software necessary for ATP to establish and maintain an investor reporting website for CDO Agreements which are Assigned to ATP at a Closing. A database for each CDO Agreement which is Assigned to ATP at a Closing containing historical financial information and underlying asset information.
Schedule 1.6
Required Holders CDO Agreement Required Holders
Schedule 1.7
Collateral Management Fees Paid After 2/23/2010 Alesco 1 Alesco 1 Alesco 2 Alesco 3 Alesco 3 Alesco 4 Alesco 5 Alesco 5 Alesco 6 Alesco 6 Alesco 7 Alesco 7 Alesco 8 Alesco 8 Alesco 9 Alesco 9 Subtotal Alesco 10 Alesco 10 Alesco 11 Alesco 11 Alesco 12 Alesco 12 Alesco 13 Alesco 13 Alesco 14
Alesco 14 Alesco 15 Alesco 15 Alesco 16 Alesco 16 Alesco 17 Alesco 17 Subtotal Total
Schedule 1.8
Subordinated Shares Alesco 1 Alesco 2 Alesco 3 Alesco 4 Alesco 5 Alesco 6 Alesco 7 Alesco 8 Alesco 9 Subtotal Alesco 10 Alesco 11 Alesco 12 Alesco 13 Alesco 14 Alesco 15 Alesco 16 Alesco 17 Subtotal Total
Schedule 3(a)
Allocation of Purchase Price Alesco 1 Alesco 2 Alesco 3 Alesco 4 Alesco 5 Alesco 6 Alesco 7 Alesco 8 Alesco 9 Subtotal Alesco 10 Alesco 11 Alesco 12 Alesco 13 Alesco 14 Alesco 15 Alesco 16 Alesco 17 Subtotal Total
Schedule 3(b)
Allocation of Excess Base Case Revenue Alesco 1 Alesco 2 Alesco 3 Alesco 4 Alesco 5 Alesco 6 Alesco 7 Alesco 8 Alesco 9 Subtotal Alesco 10 Alesco 11 Alesco 12 Alesco 13 Alesco 14 Alesco 15 Alesco 16 Alesco 17 Subtotal Total
*** Confidential material redacted and filed separately with the Commission.
Schedule 3(c) Quarterly Thresholds; Seller Wiring Instructions *** Quarterly Thresholds: [Charts begin on following page.]
Schedule 3(c) Quarterly Thresholds Alesco 1 Alesco 2 Alesco 3 Alesco 4 Alesco 5 Alesco 6 Alesco 7 Alesco 8 Alesco 9 Subtotal Alesco 10 Alesco 11 Alesco 12 Alesco 13 Alesco 14 Alesco 15 Alesco 16 Alesco 17 Subtotal Total
Schedule 3(c) Quarterly Thresholds Alesco 1 Alesco 2 Alesco 3 Alesco 4 Alesco 5 Alesco 6 Alesco 7 Alesco 8 Alesco 9 Subtotal Alesco 10 Alesco 11 Alesco 12 Alesco 13 Alesco 14 Alesco 15 Alesco 16 Alesco 17 Subtotal Total
Schedule 3(c) Quarterly Thresholds Alesco 1 Alesco 2 Alesco 3 Alesco 4 Alesco 5 Alesco 6 Alesco 7 Alesco 8 Alesco 9 Subtotal Alesco 10 Alesco 11 Alesco 12 Alesco 13 Alesco 14 Alesco 15 Alesco 16 Alesco 17 Subtotal Total
Schedule 3(c) Quarterly Thresholds Alesco 1 Alesco 2 Alesco 3 Alesco 4 Alesco 5 Alesco 6 Alesco 7 Alesco 8 Alesco 9 Subtotal Alesco 10 Alesco 11 Alesco 12 Alesco 13 Alesco 14 Alesco 15 Alesco 16 Alesco 17 Subtotal Total
Schedule 4(c)
No Conflicts The following consents are required: TD Bank, N.A. Required Consents Alesco I: Collateral Management Agreement Financial
Sub-Advisory Agreement Issuer Majority-in-Interest
of Preferred Shareholders R.A.C.: Fitch Moodys Standard &
Poors Sandler ONeill & Partners, L.P. Alesco II: Collateral Management Agreement Financial
Sub-Advisory Agreement Issuer Majority-in-Interest
of Preferred Shareholders R.A.C.: Fitch Moodys Standard &
Poors Sandler ONeill & Partners, L.P.
CDO Agreement Alesco III: Collateral Management Agreement Financial
Sub-Advisory Agreement Issuer Majority-in-Interest
of Preferred Shareholders R.A.C.: Fitch Moodys Standard &
Poors Sandler ONeill & Partners, L.P. Alesco IV: Collateral Management Agreement Issuer Majority-in-Interest
of Preferred Shareholders R.A.C.: Fitch Moodys Standard &
Poors Alesco V: Collateral Management Agreement Issuer Majority-in-Interest
of Preferred Shareholders R.A.C.: Fitch Moodys Standard &
Poors 2
Required Consents Alesco VI: Collateral Management Agreement Issuer Majority-in-Interest
of Preferred Shareholders R.A.C.: Fitch Moodys Standard &
Poors Alesco VII: Collateral Management Agreement Issuer Majority-in-Interest
of the Holders of the Income Notes R.A.C.: Fitch Moodys Standard &
Poors Assured Guaranty Corp. Alesco VIII: Collateral Management Agreement Issuer Majority-in-Interest
of Preferred Shareholders R.A.C.: Fitch Moodys Standard &
Poors 3
Alesco IX: Collateral Management Agreement Issuer Majority-in-Interest
of Preferred Shareholders R.A.C.: Fitch Moodys Standard &
Poors. Alesco X: Collateral Management Agreement Issuer Majority-in-Interest
of Preferred Shareholders R.A.C.: Fitch Moodys Standard &
Poors Alesco XI: Collateral Management Agreement Issuer Majority-in-Interest
of Preferred Shareholders R.A.C.: Fitch Moodys Standard &
Poors 4
Alesco XII: Collateral Management Agreement Issuer Majority-in-Interest of Preferred Shareholders R.A.C.: Fitch Moodys Standard
& Poors Alesco XIII: Collateral Management Agreement Issuer Majority-in-Interest of Preferred Shareholders R.A.C.: Fitch Moodys Standard
& Poors Alesco XIV: Collateral Management Agreement Issuer Majority-in-Interest of First Tier Preferred Shareholders R.A.C.: Fitch Moodys Standard
& Poors 5
Alesco XV: Collateral Management Agreement Issuer Majority-in-Interest of First Tier Preferred Shareholders R.A.C.: Fitch Moodys Standard
& Poors Alesco XVI: Collateral Management Agreement Issuer Majority-in-Interest of First Tier Preferred Shareholders R.A.C.: Fitch Moodys Standard
& Poors Alesco XVII: Collateral Management Agreement Issuer Majority-in-Interest of First Tier Preferred Shareholders R.A.C.: Fitch Moodys Standard
& Poors. 6
Schedule 4(d)
Consents and Approvals The following consents are required: TD Bank, N.A. Alesco I: Collateral Management Agreement Financial
Sub-Advisory Agreement Issuer, Majority-in-Interest of Preferred Shareholders,
Fitch, Moodys, Standard & Poors. Sandler ONeill & Partners, L.P. Alesco II: Collateral Management Agreement Financial
Sub-Advisory Agreement Issuer, Majority-in-Interest of Preferred Shareholders,
Fitch, Moodys, Standard & Poors. Sandler ONeill & Partners, L.P. Alesco III: Collateral Management Agreement Financial
Sub-Advisory Agreement Issuer, Majority-in-Interest of Preferred Shareholders,
Fitch, Moodys, Standard & Poors. Sandler ONeill & Partners, L.P. Alesco IV: Collateral Management Agreement Issuer, Majority-in-Interest of Preferred Shareholders, Fitch, Moodys, Standard
& Poors Alesco V: Collateral Management Agreement Issuer, Majority-in-Interest of Preferred Shareholders, Fitch, Moodys, Standard
& Poors. Alesco VI: Collateral Management Agreement Issuer, Majority-in-Interest of Preferred Shareholders, Fitch, Moodys, Standard
& Poors. Alesco VII: Collateral Management Agreement Issuer, Majority-in-Interest of the Holders of the Income Notes, Assured Guaranty Corp.,
Fitch, Moodys, Standard & Poors
Table of Contents
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Maryland
16-1685692
Philadelphia, Pennsylvania
19104
(Address of principal executive offices)
(Zip Code)
Large accelerated filer
¨
Accelerated filer
¨
Non-accelerated filer
¨ (Do not check if a smaller reporting company)
Smaller reporting company
x
Table of Contents
Page
Item 1.
1
1
2
3
4
5
Item 2.
51
Item 3.
75
Item 4.
77
Item 1.
77
Item 1A.
77
Item 2.
78
Item 6.
79
Signatures
81
Table of Contents
Table of Contents
Table of Contents
ITEM 1.
FINANCIAL STATEMENTS.
September 30, 2010
(unaudited)
December 31, 2009
$
43,069
$
69,692
3,314
255
4,423
1,032
1,255
4,809
4,268
168,376
135,428
47,846
43,647
9,606
20,357
3,944
9,551
22,069
14,989
$
308,488
$
299,442
$
35,595
$
13,491
38
15,859
13,039
16,978
7,689
86,504
114,712
7,669
10,569
10,899
48,431
61,961
221,643
221,791
10
10
59,611
58,121
4,285
(170
)
(1,185
)
(1,292
)
(328
)
(328
)
62,393
56,341
24,452
21,310
86,845
77,651
$
308,488
$
299,442
Table of Contents
Three months ended
September 30,
Nine months ended
September 30,
2010
2009
2010
2009
$
14,025
$
10,907
$
56,483
$
31,918
6,036
6,871
19,050
23,784
30
480
2,103
1,225
3,013
6,311
23,012
5,007
23,104
24,569
100,648
61,934
13,787
18,762
64,190
52,857
1,392
1,140
4,113
3,897
7,848
3,627
20,043
10,993
628
630
1,899
1,919
5,607
5,607
29,262
24,159
95,852
69,666
(6,158
)
410
4,796
(7,732
)
(2,345
)
(1,103
)
(6,167
)
(3,758
)
1,632
2,518
132
971
4,616
6,112
266
6,004
(3,592
)
(759
)
(295
)
8,122
(10,466
)
(622
)
112
501
300
(137
)
(407
)
7,621
(10,766
)
(138
)
2,645
(11
)
$
1
$
(407
)
$
4,976
$
(10,755
)
$
$
(0.04
)
$
0.48
$
(1.12
)
10,428,481
9,611,707
10,391,679
9,611,707
$
$
(0.04
)
$
0.48
$
(1.12
)
15,712,037
9,611,707
15,675,235
9,611,707
$
0.05
$
$
0.05
$
Table of Contents
Cohen & Company Inc.
Preferred
Stock
Shares
Preferred
Stock $
Amount
Common
Stock
Shares
Common
Stock $
Amount
Additional
Paid-In
Capital
Retained
Earnings/
(Accumulated
Deficit)
Cohen Brothers,
LLC Members
Equity
Accumulated
Other
Comprehensive
Income / (Loss)
Treasury
Stock (1)
Noncontrolling
Interest
Total
Comprehensive
Income
/
(Loss)
$
$
$
$
$
51,622
$
(1,725
)
$
$
11,016
$
60,913
$
(11,005
)
(11,005
)
207
6,243
106
6,556
(4,746
)
(4,746
)
(170
)
(11,535
)
(98
)
(11,803
)
(11,803
)
1
10,307,238
10
57,914
(41,584
)
(328
)
21,291
37,303
433
433
433
1
$
10,307,238
$
10
$
58,121
$
(170
)
$
$
(1,292
)
$
(328
)
$
21,310
$
77,651
$
(11,370
)
86,449
1,598
816
2,414
(25,354
)
(108
)
(55
)
(163
)
(521
)
(264
)
(785
)
4,976
2,645
7,621
7,621
107
107
107
1
$
10,368,333
$
10
$
59,611
$
4,285
$
$
(1,185
)
$
(328
)
$
24,452
$
86,845
$
7,728
(1)
50,400 shares of the Companys Common Stock.
Table of Contents
Nine Months Ended September 30,
2010
2009
$
7,621
$
(10,766
)
(2,518
)
(971
)
(4,616
)
2,414
3,234
6,942
(9,959
)
(29,227
)
5,631
1,899
1,919
5,607
(6,004
)
3,592
(572
)
4,373
(32,948
)
1,477
105
6,699
10,751
235
6,697
(2,966
)
9,299
(1,074
)
3,001
(278
)
(28,208
)
17,681
6,341
7,669
(330
)
(30,520
)
13,270
(9,756
)
(600
)
971
7,616
8,540
10,000
(5,198
)
(2,456
)
3,273
800
19,357
1,544
(297
)
(682
)
(352
)
16,208
16,552
9,300
(20,530
)
(42,050
)
(303
)
(988
)
(163
)
(264
)
(521
)
(4,525
)
(12,481
)
(47,563
)
170
408
(26,623
)
(17,333
)
69,692
31,972
$
43,069
$
14,639
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
$
100
220
(23
)
$
297
September 30,
2010
December 31, 2009
$
4,423
$
$
4,423
$
Table of Contents
September 30,
2010
December 31, 2009
$
$
7,415
35,595
6,076
$
35,595
$
13,491
September 30, 2010
Cost
Carrying Value
Unrealized
Gain / (Loss)
$
103,217
$
103,664
$
447
889
893
4
1,887
1,886
(1
)
1,231
1,209
(22
)
10,540
12,370
1,830
8,281
8,239
(42
)
22,707
22,843
136
10,766
10,838
72
6,312
6,450
138
(16
)
(16
)
80
(80
)
$
165,910
$
168,376
$
2,466
Table of Contents
December 31, 2009
Cost
Carrying Value
Unrealized
Gain / (Loss)
$
106,575
$
106,575
$
964
964
27,710
9,110
(18,600
)
3,380
3,380
15,248
15,399
151
$
153,877
$
135,428
$
(18,449
)
(1)
Primarily comprised of collateralized debt obligations and collateralized loan obligations.
September 30, 2010
Cost
Carrying Value
Unrealized
(Gain) / Loss
$
60,607
$
61,045
$
438
11,949
12,329
380
12,765
13,033
268
98
97
(1
)
$
85,419
$
86,504
$
1,085
December 31, 2009
Cost
Carrying Value
Unrealized
(Gain) / Loss
$
93,536
$
94,837
$
1,301
20,000
19,875
(125
)
$
113,536
$
114,712
$
1,176
Table of Contents
September 30, 2010
Cost
Carrying Value
Unrealized
Gain / (Loss)
$
4,560
$
245
$
(4,315
)
7,259
1,177
(6,082
)
20,728
32,379
11,651
39
452
413
5,561
2,471
(3,090
)
6,388
6,388
4,500
4,500
98
59
(39
)
38,185
47,426
9,241
207
267
60
(92
)
(92
)
$
42,952
$
47,846
$
4,894
December 31, 2009
Cost
Carrying Value
Unrealized
Gain / (Loss)
$
13,379
$
2,380
$
(10,999
)
6,977
451
(6,526
)
17,503
14,058
(3,445
)
9,619
669
(8,950
)
4,075
4,075
5,561
2,380
(3,181
)
14,506
19,236
4,730
175
138
(37
)
54,341
41,007
(13,334
)
260
260
$
67,980
$
43,647
$
(24,333
)
(1)
Primarily comprised of collateralized debt obligations.
(2)
The Company originally invested $30,000 in the Brigadier onshore feeder fund. As of December 31, 2008, the Company had redeemed its entire initial investment. The
remaining investment represented accumulated unrealized appreciation on this investment. The investment in the Brigadier onshore feeder fund was, at all times during 2009 and the nine months ended September 30, 2010, carried at its estimated
fair value. However, for the purposes of the table above and determining the cost basis, the Company treated the redemptions during 2008 and 2009 and the nine months ended September 30, 2010 as first representing a return of investment and
second representing a redemption of net appreciation. During the second quarter of 2010, the Company purchased $39 of limited partnership interest units in Brigadier from one of Brigadiers investors.
(3)
The Company originally invested $14,506 in Deep Value. As of September 30, 2010, the Company had redeemed its entire initial investment. The remaining investment
represented accumulated unrealized appreciation on this investment. The investment in Deep Value was, at all times during 2009 and the nine months ended September 30, 2010, carried at its estimated fair value. However, for the purposes of the
table above and determining the cost basis, the Company treated the redemptions during the nine months ended September 30, 2010 as first representing a return of investment and second representing a redemption of net appreciation.
Table of Contents
(4)
Duart Fund or Duart Global Deep Value Securities Fund LP. See note 8.
Level 1
Financial assets and liabilities whose values are based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets
or liabilities.
Level 2
Financial assets and liabilities whose values are based on one or more of the following:
1.
Quoted prices for similar assets or liabilities in active markets;
2.
Quoted prices for identical or similar assets or liabilities in non-active markets;
3.
Pricing models whose inputs are observable for substantially the full term of the asset or liability; or
4.
Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of
the asset or liability.
Level 3
Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both significant to the fair value measurement and
unobservable. These inputs reflect managements own assumptions about the assumptions a market participant would use in pricing the asset or liability.
Table of Contents
Table of Contents
September 30,
2010
Fair Value
Quoted Prices in
Active Markets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
$
103,664
$
$
38,259
$
65,405
893
893
1,886
1,886
1,209
1,209
12,370
12,370
8,239
8,239
22,843
22,843
10,838
10,838
6,450
6,450
(16
)
(16
)
$
168,376
$
7,643
$
82,958
$
77,775
1,177
1,177
32,379
32,379
2,471
2,471
36,027
36,027
452
452
6,388
6,388
4,500
4,500
11,340
4,500
6,840
59
59
11,399
4,500
6,899
245
245
267
267
(92
)
(92
)
$
47,846
$
(92
)
$
4,500
$
43,438
$
61,045
$
$
61,045
$
12,329
12,329
13,033
13,033
97
97
$
86,504
$
12,329
$
74,175
$
(1)
Primarily comprised of collateralized debt obligations and collateralized loan obligations.
(2)
Hybrid Securities Fund European
(3)
Real Estate Fund Asian
(4)
Tax Exempt Fund
(5)
Multi-Strategy Credit Funds
(6)
Real Estate Funds
Table of Contents
December 31,
2009
Fair Value
Quoted Prices in
Active Markets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
$
106,575
$
$
106,575
$
964
964
9,110
9,110
3,380
3,380
15,399
15,399
$
135,428
$
$
122,938
$
12,490
$
669
$
669
$
$
451
451
14,058
14,058
2,380
2,380
17,558
669
16,889
4,075
4,075
19,236
19,236
23,311
4,075
19,236
138
40
98
41,007
709
4,075
36,223
2,380
2,380
260
260
$
43,647
$
709
$
4,075
$
38,863
$
94,837
$
$
94,837
$
19,875
19,875
$
114,712
$
19,875
$
94,837
$
(1)
Primarily comprised of collateralized debt obligations and collateralized loan obligations.
(2)
Real estate industry
(3)
Hybrid Securities Fund European
(4)
Real Estate Fund Asian
(5)
Tax Exempt Fund
(6)
Multi-Strategy Credit Funds
(7)
Real Estate Funds
Table of Contents
Table of Contents
Table of Contents
January 1,
2010
Net realized/unrealized gains
(losses) included in income
Transfers
in and/or
(out), net
of Level 3
Purchases
and
(Sales), net
(1)
September 30,
2010
Unrealized
gains/(losses)
still held at the
end of the
period(2)
Net
trading
Principal
transactions
and other
income
$
$
(532
)
$
$
7,281
$
58,656
$
65,405
$
(395
)
9,110
10,413
(7,153
)
12,370
4,703
3,380
5,322
(8,702
)
$
12,490
$
15,203
$
$
7,281
$
42,801
$
77,775
$
4,308
$
451
$
$
444
$
$
282
$
1,177
$
444
14,058
15,096
3,225
32,379
15,096
2,380
91
2,471
91
16,889
15,631
3,507
36,027
15,631
(81
)
4,216
(3,683
)
452
(3,802
)
19,236
4,482
(17,330
)
6,388
1,658
19,236
4,401
4,216
(21,013
)
6,840
(2,144
)
98
(39
)
59
(39
)
36,223
19,993
4,216
(17,506
)
42,926
13,448
2,380
3,441
(5,576
)
245
75
260
60
(53
)
267
60
$
38,863
$
$
23,494
$
4,216
$
(23,135
)
$
43,438
$
13,583
(1)
Includes return of principal/capital of interests in securitizations and investment funds.
(2)
Represents the amount of total gains or losses for the period, included in earnings, relating to assets classified as Level 3 that are still held at the end of the
period.
(3)
Primarily comprised of collateralized debt obligations and collateralized loan obligations.
(4)
Hybrid Securities Funds European
(5)
Real Estate Funds Asian
(6)
Tax Exempt Funds
(7)
Multi-Strategy Credit Funds
(8)
Real Estate Funds
Table of Contents
January 1,
2009
Net realized/unrealized
gains (losses) included
in income
Transfers
in and/or
out, net
of Level 3
Purchases
and
(Sales),
net (1)
September 30,
2009
Unrealized
gains
(losses) still
held at end of
the
period(2)
Net
trading
Principal
transactions
and other
income
$
3,000
$
(1,672
)
$
$
5,752
$
(192
)
$
6,888
$
(1,754
)
$
3,000
$
(1,672
)
$
$
5,752
$
(192
)
$
6,888
$
(1,754
)
$
12,749
$
$
1,707
$
$
600
$
15,056
$
1,707
38,473
4,851
(4,104
)
(21,024
)
18,196
4,734
51,222
6,558
(4,104
)
(20,424
)
33,252
6,441
4,843
(2,943
)
2,141
(1,487
)
2,554
(2,878
)
$
56,065
$
$
3,615
$
(1,963
)
$
(21,911
)
$
35,806
$
3,563
(1)
Includes return of principal/capital of interests in securitizations (primarily comprised of collateralized debt obligations) and investment funds. In addition, for the
2009 period, purchases and (sales), net for the investment funds include a decrease of $10,967 related to Deep Values investment in its related master fund. The Company deconsolidated Deep Value as of April 1, 2009.
(2)
Represents the amount of total gains or losses for the period, included in earnings, relating to assets classified as Level 3 that are still held at the end of the
period.
(3)
Comprised of collateralized debt obligations.
Table of Contents
June 30,
2010
Net realized/unrealized gains
(losses) included in income
Transfers
in and/or
(out), net
of Level 3
Purchases
and
(Sales), net
(1)
September 30,
2010
Unrealized
gains/(losses)
still held at the
end of the
period(2)
Net
trading
Principal
transactions
and other
income
$
7,057
$
(464
)
$
$
$
58,812
$
65,405
$
(341
)
15,844
3,283
(6,757
)
12,370
(3,097
)
$
22,901
$
2,819
$
$
$
52,055
$
77,775
$
(3,438
)
$
474
$
$
421
$
$
282
$
1,177
$
421
31,031
1,348
32,379
1,348
2,450
21
2,471
21
33,955
1,790
282
36,027
1,790
414
(1
)
39
452
(1
)
17,338
2,105
(13,055
)
6,388
(719
)
17,752
2,104
(13,016
)
6,840
(720
)
59
59
51,766
3,894
(12,734
)
42,926
1,070
369
175
(299
)
245
(124
)
263
16
(12
)
267
16
$
52,398
$
$
4,085
$
$
(13,045
)
$
43,438
$
962
(1)
Includes return of principal/capital of interests in securitizations and investment funds.
(2)
Represents the amount of total gains or losses for the period, included in earnings, relating to assets classified as Level 3 that are still held at the end of the
period.
(3)
Primarily comprised of collateralized debt obligations and collateralized loan obligations.
(4)
Hybrid Securities Funds European
(5)
Real Estate Funds Asian
(6)
Tax Exempt Funds
(7)
Multi-Strategy Credit Funds
(8)
Real Estate Funds
Table of Contents
June 30,
2009
Net realized/unrealized
gains (losses) included
in income
Transfers
in and/or
out, net
of Level 3
Purchases
and (Sales),
net (1)
September 30,
2009
Unrealized
gains
(losses) still
held at end of
the
period(2)
Net
trading
Principal
transactions
and other
income
$
7,288
$
(315
)
$
$
$
(85
)
$
6,888
$
(400
)
$
7,288
$
(315
)
$
$
$
(85
)
$
6,888
$
(400
)
$
13,557
$
$
1,499
$
$
$
15,056
$
1,499
19,657
2,643
(4,104
)
18,196
2,643
33,214
4,142
(4,104
)
33,252
4,142
3,512
211
(1,169
)
2,554
211
$
36,726
$
$
4,353
$
(4,104
)
$
(1,169
)
$
35,806
$
4,353
(1)
Includes return of principal /capital of interests in securitizations (primarily comprised of collateralized debt obligations) and investment funds.
(2)
Represents the amount of total gains or losses for the period, included in earnings, relating to assets classified as Level 3 that are still held at the end of the
period.
(3)
Comprised of collateralized debt obligations.
Table of Contents
Fair Value at
September 30, 2010
(dollars in
thousands)
Unfunded
Commitments
Redemption
Frequency
(if Currently
Eligible)
Redemption
Notice Period
$
1,177
N/A
N/A
32,379
N/A
N/A
2,471
N/A
N/A
36,027
$
452
$
N/A
N/A
6,388
N/A
N/A
4,500
Quarterly
90 days
11,340
$
47,367
$
Fair Value at
December 31, 2009
(dollars in
thousands)
Unfunded
Commitments
Redemption
Frequency
(if Currently
Eligible)
Redemption
Notice Period
$
451
N/A
N/A
14,058
N/A
N/A
2,380
N/A
N/A
16,889
4,075
$
Monthly
90 days
19,236
N/A
N/A
23,311
$
40,200
$
Table of Contents
(a)
EuroDekania Limiteds (EuroDekania) investment strategy is to make investments in hybrid capital securities that have attributes of debt and equity,
primarily in the form of subordinated debt issued by insurance companies, banks and bank holding companies based primarily in Western Europe (EuroTruPS); widely syndicated leveraged loans by European corporate loans; CMBS, including
subordinated interests in first mortgage real estate loans; and RMBS and other ABS backed by consumer and commercial receivables. The majority of the assets are denominated in Euros and U.K. Pounds Sterling. The fair value of the investment in this
category has been estimated using the net asset value per share of the investment in accordance with the practical expedient provisions of FASB ASC 820.
(b)
Star Asias investment strategy is to make investments in Asian real estate structured finance investments, including CMBS, corporate debt of REITs and real estate
operating companies, whole loans, mezzanine loans and other commercial real estate fixed income investments. The fair value of the investment in this category has been estimated using a series of internal valuation models that use both the market
and income approach. If the Company had used Star Asias unadjusted reported NAV to determine its fair value, the carrying value of its investment in Star Asia would have been $38,093 as of September 30, 2010 and $17,088 as of
December 31, 2009.
(c)
MFCAs investment strategy is to make direct and indirect investments in certain securities whose interest payments are exempt from US federal income taxes
consisting of long-term obligations issued by or on behalf of non-profit institutions and state authorities in the healthcare, education, cultural, philanthropic, research, service/advocacy, infrastructure and housing sectors. The fair value of the
investment in this category has been estimated using the net asset value per share of the investment in accordance with the practical expedient provisions of FASB ASC 820. The Company does not manage MFCA. Therefore, the Company uses the
latest reported NAV from the third party manager. From time to time, this may be one quarter in arrears. MFCA has announced that it intends to list equity securities on a public exchange. To date, no public listing has been completed. If such a
listing is completed in the future on a nationally recognized exchange, the Company will cease to apply the provisions of FASB ASC 820 and will determine the fair value of its interest in MFCA based on the public trading price rather than the
underlying NAV of MFCA.
(d)
Brigadiers investment strategy was to make investments in various sectors of the fixed income markets. Prior to commencement of the liquidation process, the fund
operated under four basic investment strategies: long-short, relative value, primary origination and market arbitrage. The investment manager may have periodically reallocated its assets among different strategies based on the desired risk
management characteristics of the fund. After a one-year lock-up period, the fund allowed monthly redemptions upon 90 days notice. In the first half of 2010, the Brigadier fund determined it would liquidate. Effective beginning in the second quarter
of 2010, the Brigadier fund ceased permitting redemptions until final liquidation. Brigadier expects the liquidation to be completed during 2010. The fund distributed 90% of its NAV to unit holders during the second quarter of 2010, with the
remaining 10% to be distributed upon the completion of final audits and settlement of expenses of the fund. Currently, no investor requested redemptions are allowed. The fair value of the investment in this category has been estimated using the net
asset value per share of the investment in accordance with the practical expedient provisions of FASB ASC 820.
(e)
Deep Values investment strategy is to make investments in securities secured by, or related to, residential and commercial real estate including RMBS, equity and
debt investments in CDOs that are collateralized mainly by RMBS, senior and subordinated mortgage notes, preference shares and whole loans secured by or related to residential real estate and other related securities and derivatives referencing the
foregoing. The fund may also invest in CMBS and other securities and debt secured by or relating to commercial real estate. This is a closed-end fund that does not allow redemptions. The expected term of the fund is three years, with two optional
one-year extensions. As of September 30, 2010, Deep Value has liquidated substantially all of its remaining investments and expects to distribute its remaining investments during the fourth quarter of 2010. The fair value of the investment in
this category has been estimated using the net asset value per share of the investments in accordance with the practical expedient provisions of FASB ASC 820.
(f)
The Duart Fund is a specialized deep value and special situations investment opportunity fund. The Duart Funds investment strategy is to make investments
primarily in a portfolio of long and short positions in public and private real estate equity securities, equity-linked securities, or debt securities (including, but not limited to, convertible debt, debt with warrants, warrants, and credit default
swaps that relate to real estate securities) and partnership or fund interests in the real estate industry globally. The Duart Fund allows quarterly redemptions upon 90 days notice. The fair value of the investment in this category has been
estimated using the net asset value per share of the investment in accordance with the practical expedient provisions of FASB ASC 820.
September 30,
2010
Fair Value
Quoted Prices in
Active Markets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
$
3,121
$
$
$
3,121
Table of Contents
September 30,
2010
December 31,
2009
$
8,728
$
8,728
(5,607
)
3,121
8,728
823
823
$
3,944
$
9,551
Table of Contents
September 30,
2010
December 31,
2009
$
313
$
1,044
784
2,590
6,500
2,747
1,605
1,879
1,524
2,202
250
250
2,536
3,226
206
574
8,351
477
$
22,069
$
14,989
September 30,
2010
December 31,
2009
$
3,094
$
1,930
853
877
1,172
1,055
965
1,522
26
971
1,182
1,182
5,006
1,472
3,561
4,030
$
15,859
$
13,039
Table of Contents
Investment in
Star
Asia
Manager
Deep
Value
GP
Deep
Value II
GP
Star Asia
SPV
Duart
Capital
Total
$
343
$
97
$
37
$
$
$
477
4,386
812
5,198
(550
)
(2,723
)
(3,273
)
(55
)
(55
)
601
5,990
(2
)
227
(812
)
6,004
$
394
$
6,087
$
35
$
1,835
$
$
8,351
September 30,
2010
December 31,
2009
$
507,042
$
255,511
$
155,217
$
2,308
350,637
253,203
1,188
$
507,042
$
255,511
Three months ended September 30,
Nine months ended September 30,
2010
2009
2010
2009
$
39,079
$
39,140
$
64,898
$
79,629
Table of Contents
September 30, 2010
Carrying Amount
Other Receivables
Investments-Trading
Other Investments, at
Fair Value
Maximum Exposure to
loss in non-consolidated
VIEs
$
1,936
$
827
$
$
2,763
15
11,543
245
11,803
$
1,951
$
12,370
$
245
$
14,566
December 31, 2009
Carrying Amount
Other Receivables
Investments-Trading
Other Investments, at
Fair Value
Maximum Exposure to
loss in non-consolidated
VIEs
$
3,140
$
3,364
$
188
$
6,692
278
5,746
2,192
8,216
$
3,418
$
9,110
$
2,380
$
14,908
Table of Contents
Current
Outstanding
Par
September 30,
2010
December 31,
2009
Interest
Rate
Terms
Weighted
Average
Interest Rate
@ 09/30/2010
Weighted
Average
Contractual
Maturity
$
9,300
$
9,300
$
6.00
%
6.00
%
September 2012
9,950
N/A
N/A
July 2009
21,006
20,511
25,374
7.63
%
7.63
%
May 2027(1)
49,614
17,194
17,269
7.39
%
7.39
%
August 2036
1,426
1,426
9,368
12.00
%
12.00
%
June 2013
$
48,431
$
61,961
(1)
The Company may redeem all or part of the notes for cash on or after May 20, 2012, at a redemption price equal to 100% of the principal amount of the notes, plus
accrued and unpaid interest and additional interest, if any, to, but excluding, the redemption date. The holders of the notes may require the Company to repurchase all or a portion of their notes for cash on May 15, 2012, May 15, 2017
and May 15, 2022 for a repurchase price equal to 100% of the principal amount of the notes, plus accrued and unpaid interest and additional interest, if any, to, but excluding, the repurchase date.
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Three months ended September 30,
Nine months ended September 30,
2010
2009
2010
2009
$
1
$
(407
)
$
4,976
$
(10,755
)
(138
)
2,645
139
(104
)
$
2
$
(407
)
$
7,517
$
(10,755
)
10,428,481
9,611,707
10,391,679
9,611,707
5,283,556
5,283,556
15,712,037
9,611,707
15,675,235
9,611,707
$
$
(0.04
)
$
0.48
$
(1.12
)
$
$
(0.04
)
$
0.48
$
(1.12
)
(1)
The Cohen Brothers membership units not held by Cohen & Company Inc. (that is, those held by the non-controlling interest for the nine and three months ended
September 30, 2010) may be redeemed and exchanged into shares of the Company on a one-to-one basis. These units are not included in the computation of basic earnings per share. These units enter into the computation of diluted net income (loss)
per common share when the effect is dilutive using the if-converted method.
(2)
If the Cohen Brothers membership units had been converted at the beginning of the period, the Company would have incurred a higher income tax expense or realized a
higher income tax benefit, as applicable.
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Capital
Markets
Asset
Management
Principal
Investing
Segment
Total
Unallocated(1)
Total
Summary statement of operations
$
56,483
$
$
$
56,483
$
$
56,483
19,050
19,050
19,050
2,103
2,103
2,103
(24
)
375
22,661
23,012
23,012
58,562
19,425
22,661
100,648
100,648
43,809
17,148
2,246
63,203
32,649
95,852
14,753
2,277
20,415
37,445
(32,649
)
4,796
5,964
40
6,004
6,004
970
970
(3,648
)
(2,678
)
14,753
9,211
20,455
44,419
(36,297
)
8,122
501
501
14,753
9,211
20,455
44,419
(36,798
)
7,621
2,645
2,645
$
14,753
$
9,211
$
20,455
$
44,419
$
(39,443
)
$
4,976
Other statement of operations data:
$
$
576
$
$
576
$
1,323
$
1,899
Balance sheet data:
$
191,685
$
18,276
$
50,984
$
260,945
$
47,543
$
308,488
$
$
5,964
$
2,387
$
8,351
$
$
8,351
Capital
Markets
Asset
Management
Principal
Investing
Segment
Total
Unallocated(1)
Total
Summary statement of operations
$
31,918
$
$
$
31,918
$
$
31,918
23,784
23,784
23,784
1,225
1,225
1,225
13
396
4,598
5,007
5,007
33,156
24,180
4,598
61,934
61,934
33,286
16,194
569
50,049
19,617
69,666
(130
)
7,986
4,029
11,885
(19,617
)
(7,732
)
(3,592
)
(3,592
)
(3,592
)
4,616
4,616
(3,758
)
858
(130
)
12,602
437
12,909
(23,375
)
(10,466
)
300
300
(130
)
12,602
437
12,909
(23,675
)
(10,766
)
(11
)
(11
)
(11
)
$
(130
)
$
12,602
$
448
$
12,920
$
(23,675
)
$
(10,755
)
Other statement of operations data:
$
$
587
$
$
587
$
1,332
$
1,919
Balance sheet data:
$
15,425
$
17,207
$
42,640
$
75,272
$
24,275
$
99,547
$
$
$
420
$
420
$
$
420
Table of Contents
Capital
Markets
Asset
Management
Principal
Investing
Segment
Total
Unallocated(1)
Total
Summary statement of operations
$
14,025
$
$
$
14,025
$
$
14,025
6,036
6,036
6,036
30
30
30
36
3
2,974
3,013
3,013
14,091
6,039
2,974
23,104
23,104
13,689
8,980
2,002
24,671
4,591
29,262
402
(2,941
)
972
(1,567
)
(4,591
)
(6,158
)
5,964
148
6,112
6,112
(1
)
(1
)
(712
)
(713
)
402
3,022
1,120
4,544
(5,303
)
(759
)
(622
)
(622
)
402
3,022
1,120
4,544
(4,681
)
(137
)
(138
)
(138
)
$
402
$
3,022
$
1,120
$
4,544
$
(4,543
)
$
1
Other statement of operations data:
$
$
191
$
$
191
$
437
$
628
Capital
Markets
Asset
Management
Principal
Investing
Segment
Total
Unallocated(1)
Total
Summary statement of operations
$
10,907
$
$
$
10,907
$
$
10,907
6,871
6,871
6,871
480
480
480
5
225
6,081
6,311
6,311
11,392
7,096
6,081
24,569
24,569
13,249
4,463
192
17,904
6,255
24,159
(1,857
)
2,633
5,889
6,665
(6,255
)
410
266
266
266
132
132
(1,103
)
(971
)
(1,857
)
2,765
6,155
7,063
(7,358
)
(295
)
112
112
(1,857
)
2,765
6,155
7,063
(7,470
)
(407
)
$
(1,857
)
$
2,765
$
6,155
$
7,063
$
(7,470
)
$
(407
)
Other statement of operations data:
$
$
196
$
$
196
$
434
$
630
Table of Contents
(1)
Unallocated includes certain expenses incurred by overhead and support departments (such as the executive, finance, legal, information technology, human resources,
risk, compliance, and other similar overhead and support departments). Some of the items not allocated include: (1) operating expenses related to support departments; (2) interest expense on debt; (3) change in fair value of interest
rate swap; and (4) income taxes. Management does not consider these items necessary for an understanding of the operating results of these segments and such amounts are excluded in segment reporting to the Chief Operating Decision Maker.
(2)
Unallocated assets primarily include (1) amounts due from related parties; (2) furniture and equipment, net; and (3) other assets that are not considered
necessary for an understanding of segment assets and such amounts are excluded in segment reporting to the Chief Operating Decision Maker.
(3)
Goodwill and intangible assets as of September 30, 2010 and 2009 are allocated to the following segments:
Capital
Markets
Asset
Management
Principal
Investing
Segment
Total
Unallocated
Total
$
412
$
3,532
$
$
3,944
$
3,944
$
206
206
$
206
As of September 30, 2009:
Capital
Markets
Asset
Management
Principal
Investing
Segment
Total
Unallocated
Total
$
$
8,728
$
$
8,728
$
8,728
$
40
$
711
$
$
751
$
751
Three months ended
September
30,
Nine months ended
September
30,
2010
2009
2010
2009
$
20,853
$
22,677
$
88,361
$
57,180
2,251
1,892
12,287
4,754
$
23,104
$
24,569
$
100,648
$
61,934
Table of Contents
Table of Contents
December 31,
2009
510,434
$
669
$
(8,950
)
Table of Contents
Table of Contents
A.
The Company earned management and incentive fees on its management contract. Effective April 30, 2010 and in conjunction with the liquidation of Brigadier, the
Company stopped charging management fees. These fees were recorded as a component of asset management revenue in the consolidated statements of operations.
B.
Under the fair value option of FASB ASC 825, the Company recognizes unrealized and realized gains and losses on its investment in the Brigadier onshore feeder fund. The
unrealized gains and losses and realized gains and losses, if any are recorded as a component of principal transactions in the consolidated statements of operations.
A.
The Company recognizes dividend income on its investment in Star Asia. Dividend income is recorded as a component of principal transactions and other income in the
consolidated statements of operations.
B.
The Company recognizes unrealized and realized gains and losses on its investment in Star Asia. The unrealized gains and losses and realized gains and losses, if any,
are recorded as a component of principal transactions in the consolidated statements of operations.
A.
The Company earns management and incentive fees on its management contract. These fees are recorded as a component of asset management revenue in the consolidated
statements of operations.
B.
The Company recognizes dividend income on its investment in EuroDekania. Dividend income is recorded as a component of principal transactions and other income in the
consolidated statements of operations.
C.
The Company recognizes unrealized and realized gains and losses on its investment in EuroDekania. The unrealized gains and losses and realized gains and losses are
recorded as a component of principal transactions in the consolidated statements of operations.
A.
The Company recognized its share of the income or loss of DEKU. This was recorded as income or loss from equity method affiliates in the consolidated statements of
operations.
B.
The Company had a shared services agreement with DEKU whereby the Company provided DEKU with use of its office space, utilities, administrative, technology, and
secretarial services for approximately $8 per month.
Table of Contents
C.
From time to time, the Company advanced DEKU funds for normal operating purposes; this was treated as a due from related party in the consolidated balance sheets.
D.
In November 2008, the Company entered into an agreement whereby it loaned DEKU funds to cover DEKUs costs and to provide DEKU with working capital to enable it to
fund expenses, including the expenses associated with the pursuit of a business combination and expenses with respect to its dissolution and liquidation. The loan bore no interest. The Company treated the advances as due from related party in the
consolidated balance sheets.
E.
The Company had provided a letter of credit for the benefit of DEKU and paid $2,599 to the Dekania trust in conjunction with the DEKU liquidation. This was initially
treated as an additional investment in DEKU, and subsequently written off (see F. immediately below).
F.
The Company wrote off its equity method investment in DEKU for a total charge of $4,482 to the consolidated statement of operations in February 2009 (see G. immediately
below).
G.
In connection with the DEKU liquidation, DEKU had filed a final federal tax return and received an income tax refund of $1,152. DEKU paid this amount to the Company as
repayment for amounts outstanding related to expenses paid on behalf of DEKU by the Company. The Company had a receivable from DEKU of $962 (representing the amount due immediately prior to the receipt of the refund) which was extinguished upon the
receipt of the refund. The remaining balance of the refund, net of liquidation related expenses, was offset against the loss from equity method affiliates that was previously recognized. The total loss from equity method affiliates related to DEKU
was $4,339 for the nine months ended September 30, 2009.
A.
The Company earned management and incentive fees on the MFCA management contract prior to its assignment to an unrelated third party in March 2009, which were recorded
as a component of asset management revenue in the consolidated statements of operations.
B.
The Company recognizes dividend income on its investment in MFCA, as a component of principal transactions and other income in the consolidated statements of
operations.
D.
Under the fair value option of FASB ASC 825, the Company recognizes unrealized and realized gains and losses on its investment in MFCA. The unrealized gains and losses
and realized gains and losses are recorded as a component of principal transactions in the consolidated statements of operations.
E.
From time to time, the Company advanced MFCA funds for normal operating purposes; these amounts were treated as due from related party in the consolidated balance
sheets.
F.
MFCA reimburses the Company for certain general administrative expenses (e.g. pro rata of the Companys rent, telephone, utilities, and other office, internal and
overhead expenses) related to MFCA. The Company records this amount as a reduction in the related expense. These expenses are disclosed as shared services (paid) received in the tables at the end of this section.
Table of Contents
A.
The Company earns management and incentive fees on its management contract, which are recorded as a component of asset management revenue in the consolidated statements
of operations.
B.
Under the fair value option of FASB ASC 825, the Company recognizes unrealized and realized gains and losses on its investments in the feeder funds. The unrealized
gains and losses and realized gains and losses are recorded as a component of principal transactions in the consolidated statement of operations.
C.
From time to time, the Company may advance funds to Deep Value for normal operating purposes; these amounts are treated as due from related party in the consolidated
balance sheets.
D.
The tables listed below do not include any transactions with the Deep Value onshore feeder fund during the period the Company consolidated the onshore feeder fund as of
December 31, 2008 and through the first quarter of 2009. See note 3-F to the Companys consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2009.
Table of Contents
A.
Under the fair value option of FASB ASC 825, the Company recognizes unrealized and realized gains and losses on its investments in the feeder fund. The unrealized gains
and losses and realized gains and losses are recorded as a component of principal transactions in the consolidated statement of operations.
B.
From time to time, the Company may advance funds to the Duart Fund for normal operating purposes; these amounts are treated as due from related party in the
consolidated balance sheets.
Principal transactions and other income
Management
fee revenue
Dividend
income
Gain/(Loss)
Income/(loss)
from equity
method
affiliates
Shared
Services
(Paid) /
Received
$
54
$
$
59
$
$
387
(7
)
194
15,096
601
227
500
444
60
91
14
2,081
4,482
5,988
(812
)
$
2,829
$
60
$
20,559
$
6,004
$
7
Table of Contents
Principal transactions and other income
Management
fee revenue
Dividend
income
Gain/(Loss)
Income/(loss)
from equity
method
affiliates
Shared
Services
(Paid) /
Received
$
$
$
(1
)
$
$
(2
)
63
1,348
196
147
167
421
30
21
5
570
2,105
5,973
(204
)
$
800
$
30
$
3,894
$
6,112
$
3
Principal transactions and other income
Management
fee revenue
Dividend
income
Gain/(Loss)
Income/(loss)
from equity
method
affiliates
Shared
Services
(Paid) /
Received
$
1,108
$
$
255
$
$
174
(9
)
408
215
219
1,495
721
500
171
(840
)
120
1,052
23
(4,339
)
15
1,502
4,734
26
$
3,449
$
171
$
7,278
$
(3,592
)
$
244
Table of Contents
Principal transactions and other income
Management
fee revenue
Dividend
income
Gain/(Loss)
Income/(loss)
from equity
method
affiliates
Shared
Services
(Paid) /
Received
$
189
$
$
137
$
$
802
(34
)
232
73
76
1,036
106
167
87
(44
)
507
3
143
509
2,643
17
$
941
$
87
$
5,313
$
266
$
42
Table of Contents
September 30,
2010
December 31,
2009
$
98
$
85
13
168
577
640
68
44
20
32
17
24
76
244
174
7
$
1,032
$
1,255
$
38
$
$
38
$
Table of Contents
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Table of Contents
Table of Contents
Table of Contents
Nine months ended
September 30,
Favorable/(Unfavorable)
2010
2009
$ Change
% Change
$
56,483
$
31,918
$
24,565
77
%
19,050
23,784
(4,734
)
(20
)%
2,103
1,225
878
72
%
23,012
5,007
18,005
360
%
100,648
61,934
38,714
63
%
64,190
52,857
(11,333
)
(21
)%
4,113
3,897
(216
)
(6
)%
20,043
10,993
(9,050
)
(82
)%
1,899
1,919
20
1
%
5,607
(5,607
)
N/M
95,852
69,666
(26,186
)
(38
)%
4,796
(7,732
)
12,528
162
%
(6,167
)
(3,758
)
(2,409
)
(64
)%
2,518
2,518
N/M
971
4,616
(3,645
)
(79
)%
6,004
(3,592
)
9,596
267
%
8,122
(10,466
)
18,588
178
%
501
300
(201
)
(67
)%
7,621
(10,766
)
18,387
171
%
2,645
(11
)
(2,656
)
N/M
$
4,976
$
(10,755
)
$
15,731
146
%
Table of Contents
Table of Contents
As of September 30,
As of December 31,
2010
2009
2009
2008
2007
$
9,951,576
$
16,033,375
$
15,569,780
$
23,486,862
$
37,881,563
177,447
5,293,739
179,553
258,809
161,984
324,764
556,559
174,279
244,224
243,894
301,675
191,488
281,796
1,551
230,285
$
10,587,204
$
16,537,959
$
16,205,943
$
24,290,748
$
43,923,349
$
13,010,887
$
18,114,833
$
17,524,608
$
30,005,018
$
32,646,629
(1)
Includes assets in the accumulation phase as well as other assets managed for third parties or affiliates.
(2)
Represents client funds managed under separate account arrangements.
(3)
AUM for company sponsored collateralized debt obligations, other managed assets, permanent capital vehicles, investment funds and other managed accounts represents
total AUM at the period indicated.
September 30,
2010
September 30,
2009
Change
$
14,833
$
20,333
$
(5,500
)
2,135
2,610
(475
)
2,082
841
1,241
$
19,050
$
23,784
$
(4,734
)
Table of Contents
September 30,
2010
September 30,
2009
Change
$
9,082
$
9,611
$
(529
)
2,164
3,705
(1,541
)
986
(986
)
2,303
5,072
(2,769
)
1,284
537
747
422
(422
)
$
14,833
$
20,333
$
(5,500
)
Table of Contents
September 30,
2010
September 30,
2009
Change
$
54
$
1,108
$
(1,054
)
2,081
1,502
579
$
2,135
$
2,610
$
(475
)
Table of Contents
September 30,
2010
September 30,
2009
Change
$
22,285
$
4,328
$
17,957
(83
)
(669
)
586
810
1,348
(538
)
$
23,012
$
5,007
$
18,005
September 30,
2010
September 30,
2009
Change
$
$
408
$
(408
)
444
(840
)
1,284
15,096
1,495
13,601
387
174
213
59
255
(196
)
91
1,052
(961
)
4,482
4,734
(252
)
1,726
(2,950
)
4,676
$
22,285
$
4,328
$
17,957
Table of Contents
September 30,
2010
September 30,
2009
Change
$
61,776
$
49,623
$
12,153
2,414
3,234
(820
)
$
64,190
$
52,857
$
11,333
Table of Contents
Table of Contents
Table of Contents
Three months ended
September 30,
Favorable/(Unfavorable)
2010
2009
$ Change
% Change
$
14,025
$
10,907
$
3,118
29
%
6,036
6,871
(835
)
(12
)%
30
480
(450
)
(94
)%
3,013
6,311
(3,298
)
(52
)%
23,104
24,569
(1,465
)
(6
)%
13,787
18,762
4,975
27
%
1,392
1,140
(252
)
(22
)%
7,848
3,627
(4,221
)
(116
)%
628
630
2
5,607
(5,607
)
N/M
29,262
24,159
(5,103
)
(21
)%
(6,158
)
410
(6,568
)
(1,602
)%
(2,345
)
(1,103
)
(1,242
)
(113
)%
1,632
1,632
N/M
132
(132
)
(100
)%
6,112
266
5,846
2,198
%
(759
)
(295
)
(464
)
(157
)%
(622
)
112
734
655
%
(137
)
(407
)
270
66
%
(138
)
138
N/M
$
1
$
(407
)
$
408
100
%
Table of Contents
September 30,
2010
September 30,
2009
Change
$
4,746
$
5,928
$
(1,182
)
570
698
(128
)
720
245
475
$
6,036
$
6,871
$
(835
)
September 30,
2010
September 30,
2009
Change
$
2,962
$
3,055
$
(93
)
618
931
(313
)
746
1,779
(1,033
)
420
163
257
$
4,746
$
5,928
$
(1,182
)
Table of Contents
September 30,
2010
September 30,
2009
Change
$
$
189
$
(189
)
570
509
61
$
570
$
698
$
(128
)
Table of Contents
September 30,
2010
September 30,
2009
Change
$
2,866
$
5,524
$
(2,658
)
97
252
(155
)
50
535
(485
)
$
3,013
$
6,311
$
(3,298
)
September 30,
2010
September 30,
2009
Change
$
$
232
$
(232
)
421
(44
)
465
1,348
1,036
312
802
(802
)
(1
)
137
(138
)
21
507
(486
)
2,105
2,643
(538
)
(1,028
)
211
(1,239
)
$
2,866
$
5,524
$
(2,658
)
Table of Contents
September 30,
2010
September 30,
2009
Change
$
13,194
$
17,664
$
(4,470
)
593
1,098
(505
)
$
13,787
$
18,762
$
(4,975
)
Table of Contents
Table of Contents
Table of Contents
Nine Months Ended
September 30,
2010
2009
$
(30,520
)
$
13,270
16,208
16,552
(12,481
)
(47,563
)
170
408
(26,623
)
(17,333
)
69,692
31,972
$
43,069
$
14,639
Table of Contents
Table of Contents
$
876
2,396
$
3,272
Table of Contents
As of September 30, 2010
Current
Outstanding Par
Carrying Value
Interest
Rate
Terms
Weighted
Average
Interest @
09/30/2010
Weighted
Average
Contractual
Maturity
$
9,300
(1)
$
9,300
(1)
6.0
%
6.0
%
September 2012
21,006
20,511
7.6
%
7.6
%
May 2027 (2)
49,614
17,194
7.4
%
7.4
%
August 2036
1,426
1,426
12.0
%
12.0
%
June 2013
$
48,431
As of December 31, 2009
Current
Outstanding Par
Carrying Value
Interest
Rate
Terms
Weighted
Average
Interest @
12/31/2009
Weighted
Average
Contractual
Maturity
$
9,950
$
9,950
8.5
%
8.5
%
May 2011
26,150
25,374
7.6
%
7.6
%
May 2027 (2)
49,614
17,269
7.4
%
7.4
%
August 2036
9,368
9,368
12.0
%
12.0
%
June 2013
$
61,961
(1)
As of October 1, 2010, we paid our first quarterly installment of $1,162 on the 2010 Credit Facility. As of October 1, 2010, $8,138 was drawn, $1,292 was
committed for two letters of credit and there was no availability to borrow additional funds under the 2010 Credit Facility.
(2)
The Company may redeem all or part of the notes for cash on or after May 20, 2012, at a redemption price equal to 100% of the principal amount of the notes, plus
accrued and unpaid interest and additional interest, if any, to, but excluding, the redemption date. The holders of the notes may require the Company to repurchase all or a portion of their notes for cash on May 15, 2012, May 15, 2017
and May 15, 2022 for a repurchase price equal to 100% of the principal amount of the notes, plus accrued and unpaid interest and additional interest, if any, to, but excluding, the repurchase date.
Table of Contents
Payment Due by Period
Total
Less than
1 year
1-3
Years
3-5
Years
More Than
5 Years
$
7,767
$
1,820
$
2,551
$
2,223
$
1,173
9,300
5,812
3,488
613
446
167
21,006
21,006
3,204
1,602
1,602
49,614
49,614
59,032
3,668
5,827
4,318
45,219
1,559
1,559
400
130
270
$
152,495
$
13,478
$
36,470
$
6,541
$
96,006
Table of Contents
(1)
Commencing on September 30, 2010, quarterly principal payments of $1,162 are due, and all unpaid principal is due and payable on September 30, 2012.
(2)
Interest on the 2010 Credit Facility includes the finance charge on the two letters of credit and interest on all outstanding debt as of September 30, 2010, which
is variable. The interest rate of 6.0% as of September 30, 2010 was used to compute the contractual interest payment in each period noted. Fluctuations in actual interest rates may result in different interest payments than noted above.
(3)
Assumes the convertible senior notes are repurchased May 15, 2012. Interest includes amounts payable during the period the convertible notes were outstanding at an
annual rate of 7.625%.
(4)
The interest on the junior subordinated notes related to the Alesco Capital Trust is based on a fixed interest rate of 9.50% through to July 30, 2012, and an
assumed variable rate of 4.29% based on a 90-day LIBOR rate as of September 30, 2010 plus 4.00% calculated from July 30, 2012 through to maturity. The interest on the junior subordinated notes related to the Sunset Capital Trust is
variable. The interest rate of 4.44% (based on a 90-day LIBOR rate as of September 30, 2010 plus 4.15%) was used to compute the contractual interest payment in each period noted.
(5)
The subordinated notes payable mature on June 20, 2013 and bear interest at an annual rate of 12% (9% is payable in cash and 3% is paid in-kind semiannually on
May 1 and November 1). Maturities include in-kind interest of $154. All accrued in-kind interest is added to the unpaid principal balance of the subordinated notes payable on each May 1 and November 1, and thereafter the
increased principal balance accrues interest at the annual rate of 12%.
(6)
Represents the cash interest payable on the outstanding balance of the subordinated notes payable in each period noted.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Table of Contents
Table of Contents
ITEM 4.
CONTROLS AND PROCEDURES.
Item 1.
Legal Proceedings
Item 1A.
Risk Factors
Table of Contents
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
Table of Contents
Total
Number of
Shares
Purchased
Average
Price
Paid Per
Share
Total Number of
Shares
Purchased
as Part
of
Publicly Announced
Plans or Programs
Maximum
Number of
Shares
that May Yet be
Purchased
Under
the
Plans or Program
610
$
4.99
N/A
N/A
N/A
N/A
N/A
N/A
610
$
4.99
N/A
Item 6.
Exhibits
10.1
Master Transaction Agreement, dated July 29, 2010, by and among Cohen & Company Inc., Cohen & Company Financial Management, LLC and ATP Management
LLC.*
10.2
Services Agreement, dated July 29, 2010, by and between ATP Management LLC and Cohen & Company Financial Management LLC.*
10.3
Loan and Security Agreement, dated July 29, 2010, by and among Dekania Investors, LLC, TD Bank, N.A. and the financial institutions now or thereafter listed on Schedule A
thereto.*
10.4
Purchase and Contribution Agreement, dated September 14, 2010, by and among Cohen & Company Inc., Cohen Brothers, LLC, JVB Financial Holdings, L.L.C., the Sellers Listed on
Annex I thereto and the Management Employees, as defined therein (incorporated by reference to Exhibit 2.1 to the Companys Annual Report on Form 8-K filed with the SEC on September 14, 2010).
11.1
Statement Regarding Computation of Per Share Earnings.**
31.1
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended.**
31.2
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended.**
32.1
Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended.***
32.2
Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended.***
*
Filed herewith.
**
Table of Contents
***
Furnished herewith.
Confidential treatment has been requested for portions of this document. An unredacted version of this exhibit has been filed separately with the Securities and
Exchange Commission.
Table of Contents
COHEN & COMPANY INC.
By:
Daniel G. Cohen
Date: November 9, 2010
Chairman of the Board and Chief Executive Officer
COHEN & COMPANY INC.
By:
Christopher Ricciardi
Date: November 9, 2010
President
COHEN & COMPANY INC.
By:
Joseph W. Pooler, Jr.
Date: November 9, 2010
Page
Section 1.
1
Section 2.
10
Section 3.
10
Section 4.
13
Section 5.
17
Section 6.
18
Section 7.
22
Section 8.
23
Section 9.
25
Section 10.
26
Section 11.
28
Section 12.
32
Schedule 1.1
-
List of CDO Agreements
Schedule 1.2
-
List of Indentures
Schedule 1.3
-
List of Issuers
Schedule 1.4
-
List of Rating Agencies
Schedule 1.5
-
List of Related Assets
Schedule 1.6
-
List of Required Holders
Schedule 1.7
-
List of Accrued and Unpaid Collateral Management Fees
Schedule 1.8
-
List of Subordinated Securities
Schedule 3(a)
-
Allocation of Purchase Price
Schedule 3(b)
-
Allocation of Excess Base Case Revenue
Schedule 3(c)
-
Quarterly Thresholds; Seller Wiring Instructions
Schedule 3(d)
-
Applicable Notes; Regulated Banks
Schedule 3(e)
-
Prepayment Penalty
Schedule 4(c)
-
Exceptions to No Conflicts
Schedule 4(d)
-
Consents and Approvals
Schedule 4(e)
-
Proceedings
Schedule 4(f)
-
Material Contracts
Schedule 4(g)
-
List of Additional Defaulted Securities and Hedge Defaults
Schedule 4(h)
-
Waivers and Releases
Schedule 4(k)
-
Notices
Schedule 4(l)
-
Waiver of Collateral Management Fees
Schedule 4(n)
-
Brokers
Schedule 4(p)
-
List of Fees and Expenses
Schedule 6(i)
-
ATP Wiring Instructions
Schedule 6(l)
-
List of Employees; Key Employees
Schedule 6(p)
-
List of Amendments, Restructurings, Waivers and Workouts
Schedule 8(i)
-
Escrow Deposits and Initial Service Fee Payments
Exhibit A
Form of Assignment and Assumption Agreement
Exhibit B
Form of Required Holders Consent
Exhibit C
Form of Issuers Consent
Exhibit D
Form of Escrow Agreement
Exhibit E
Form of Voting Agreement
Exhibit F
Form of Cohen Services Agreement
ATP Management LLC
c/o Fortress Investment Group LLC
1345 Avenue of the Americas,
46th Floor
New York, New York 10105
Telephone:
(212) 479-1505
Facsimile:
(212) 798-6090
Attention:
Rick Noble
with copies, which shall not constitute notice, to:
Joel A. Holsinger
Fortress Investment Group LLC
400 Galleria Parkway
Suite 1500
Atlanta, GA 30339
Telephone:
(678) 385-5905
Facsimile:
(678) 550-9105
Joshua Pack
Fortress Investment Group
10250 Constellation Blvd., Suite 2350
Los Angeles, CA 90067
Telephone:
(310) 228-3015
Facsimile:
(310) 228-3031
Hunton & Williams LLP
600 Peachtree Street, N.E., Suite 4100
Atlanta, GA 30308
Facsimile:
(404) 602-8669
Attention:
John R. Schneider, Esq.
Hunton & Williams LLP
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219-4074
Facsimile:
(804) 343-4833
Attention:
S. Gregory Cope, Esq.
Cohen & Company Inc.
Circa Centre
2929 Arch Street
17th Floor
Philadelphia PA 19103
Facsimile:
(215) 701-8282
Attention:
Joseph Pooler, Chief Financial Officer
and to:
Cohen & Company Financial Management, LLC
135 East 57th Street, 21st
Floor
New York, NY 10022
Facsimile:
(646) 673-8100
Attention:
Rachael Fink, Esq., General Counsel
with copies, which shall not constitute notice, to:
Cozen OConnor
1900 Market Street
Philadelphia, PA 19103
Facsimile:
(215) 701-2228
Attention:
Anna M. McDonough, Esq.
COHEN & COMPANY INC.
By:
Name: Joseph W. Pooler, Jr.
Title: Chief Financial Officer
COHEN & COMPANY FINANCIAL MANAGEMENT, LLC
By:
Name: Joseph W. Pooler, Jr.
Title: Chief Financial Officer
ATP MANAGEMENT LLC
By:
Name: Marc K. Furstein
Title: Chief Operating Officer
(1)
Collateral Management Agreement, dated as of September 25, 2003, by and between Alesco Preferred Funding I, Ltd. and Cohen Bros. Financial Management, LLC (now
known as Cohen & Company Financial Management, LLC).
(2)
Collateral Management Agreement, dated as of December 19, 2003, by and between Alesco Preferred Funding II, Ltd. and Cohen Bros. Financial Management, LLC (now known as
Cohen & Company Financial Management, LLC).
(3)
Collateral Management Agreement, dated as of March 25, 2004, by and between Alesco Preferred Funding III, Ltd. and Cohen Bros. Financial Management, LLC (now known as
Cohen & Company Financial Management, LLC).
(4)
Collateral Management Agreement, dated as of May 18, 2004, by and between Alesco Preferred Funding IV, Ltd. and Cohen Bros. Financial Management, LLC (now known as
Cohen & Company Financial Management, LLC).
(5)
Collateral Management Agreement, dated as of September 14, 2004, by and between Alesco Preferred Funding V, Ltd. and Cohen Bros. Financial Management, LLC (now known as
Cohen & Company Financial Management, LLC).
(6)
Collateral Management Agreement, dated as of December 21, 2004, by and between Alesco Preferred Funding VI, Ltd. and Cohen Bros. Financial Management, LLC (now known as
Cohen & Company Financial Management, LLC).
(7)
Collateral Management Agreement, dated as of April 19, 2005, by and between Alesco Preferred Funding VII, Ltd. and Cohen Bros. Financial Management, LLC (now known as
Cohen & Company Financial Management, LLC).
(8)
Collateral Management Agreement, dated as of August 4, 2005, by and between Alesco Preferred Funding VIII, Ltd. and Cohen Bros. Financial Management, LLC (now known as
Cohen & Company Financial Management, LLC).
(9)
Collateral Management Agreement, dated as of December 15, 2005, by and between Alesco Preferred Funding IX, Ltd. and Cohen Bros. Financial Management, LLC (now known as
Cohen & Company Financial Management, LLC).
(10)
Collateral Management Agreement, dated as of March 15, 2006, by and between Alesco Preferred Funding X, Ltd. and Cohen Bros. Financial Management, LLC (now known as
Cohen & Company Financial Management, LLC).
(11)
Collateral Management Agreement, dated as of June 29, 2006, by and between Alesco Preferred Funding XI, Ltd. and Cohen Bros. Financial Management, LLC (now known as
Cohen & Company Financial Management, LLC).
(12)
Collateral Management Agreement, dated as of October 12, 2006, by and between Alesco Preferred Funding XII, Ltd. and Cohen Bros. Financial Management, LLC (now
known as Cohen & Company Financial Management, LLC).
(13)
Collateral Management Agreement, dated as of November 30, 2006, by and between Alesco Preferred Funding XIII, Ltd. and Cohen & Company Financial Management, LLC.
(14)
Collateral Management Agreement, dated as of December 21, 2006, by and between Alesco Preferred Funding XIV, Ltd. and Cohen & Company Financial Management, LLC.
(15)
Collateral Management Agreement, dated as of March 29, 2007, by and between Alesco Preferred Funding XV, Ltd. and Cohen & Company Financial Management, LLC.
(16)
Collateral Management Agreement, dated as of June 28, 2007, by and between Alesco Preferred Funding XVI, Ltd. and Cohen & Company Financial Management, LLC.
(17)
Collateral Management Agreement, dated as of October 30, 2007, by and between Alesco Preferred Funding XVII, Ltd. and Cohen & Company Financial Management, LLC.
(1)
Financial Sub-Advisory Agreement, dated as of September 25, 2003, by and between Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial
Management, LLC) and Sandler ONeill & Partners, L.P.
(2)
Financial Sub-Advisory Agreement, dated as of December 19, 2003, by and between Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial
Management, LLC) and Sandler ONeill & Partners, L.P.
(3)
Financial Sub-Advisory Agreement, dated as of March 25, 2004, by and between Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial
Management, LLC) and Sandler ONeill & Partners, L.P.
(1)
Collateral Administration Agreement, dated as of September 25, 2003, by and among Alesco Preferred Funding I, Ltd., Cohen Bros. Financial Management, LLC (now known as
Cohen & Company Financial Management, LLC) and The Bank of New York Mellon Trust Company, National Association (successor to JPMorgan Chase Bank, National Association).
(2)
(3)
Collateral Administration Agreement, dated as of March 25, 2004, by and among Alesco Preferred Funding III, Ltd., Cohen Bros. Financial Management, LLC (now known
as Cohen & Company Financial Management, LLC) and The Bank of New York Mellon Trust Company, National Association (successor to JPMorgan Chase Bank, National Association).
(4)
Collateral Administration Agreement, dated as of May 18, 2004, by and among Alesco Preferred Funding IV, Ltd., Cohen Bros. Financial Management, LLC (now known as
Cohen & Company Financial Management, LLC) and The Bank of New York Mellon Trust Company, National Association (successor to JPMorgan Chase Bank, National Association).
(5)
Collateral Administration Agreement, dated as of September 14, 2004, by and among Alesco Preferred Funding V, Ltd., Cohen Bros. Financial Management, LLC (now known as
Cohen & Company Financial Management, LLC) and The Bank of New York Mellon Trust Company, National Association (successor to JPMorgan Chase Bank, National Association).
(6)
Collateral Administration Agreement, dated as of December 21, 2004, by and among Alesco Preferred Funding VI, Ltd., Cohen Bros. Financial Management, LLC (now known as
Cohen & Company Financial Management, LLC) and The Bank of New York Mellon Trust Company, National Association (successor to JPMorgan Chase Bank, National Association).
(7)
Collateral Administration Agreement, dated as of April 19, 2005, by and among Alesco Preferred Funding VII, Ltd., Cohen Bros. Financial Management, LLC (now known as
Cohen & Company Financial Management, LLC) and The Bank of New York Mellon Trust Company, National Association (successor to JPMorgan Chase Bank, National Association).
(8)
Collateral Administration Agreement, dated as of August 4, 2005, by and among Alesco Preferred Funding VIII, Ltd., Cohen Bros. Financial Management, LLC (now known as
Cohen & Company Financial Management, LLC) and The Bank of New York Mellon Trust Company, National Association (successor to JPMorgan Chase Bank, National Association).
(9)
Collateral Administration Agreement, dated as of December 15, 2005, by and among Alesco Preferred Funding IX, Ltd., Cohen Bros. Financial Management, LLC (now known as
Cohen & Company Financial Management, LLC) and U.S. Bank National Association.
(10)
Collateral Administration Agreement, dated as of March 15, 2006, by and among Alesco Preferred Funding X, Ltd., Cohen Bros. Financial Management, LLC (now known as
Cohen & Company Financial Management, LLC) and U.S. Bank National Association.
(11)
Collateral Administration Agreement, dated as of June 29, 2006, by and among Alesco Preferred Funding XI, Ltd., Cohen Bros. Financial Management, LLC (now known as
Cohen & Company Financial Management, LLC) and U.S. Bank National Association.
(12)
Collateral Administration Agreement, dated as of October 12, 2006, by and among Alesco Preferred Funding XII, Ltd., Cohen Bros. Financial Management, LLC (now
known as Cohen & Company Financial Management, LLC) and U.S. Bank National Association.
(13)
Collateral Administration Agreement, dated as of November 30, 2006, by and among Alesco Preferred Funding XIII, Ltd., Cohen & Company Financial Management, LLC and
Wells Fargo Bank, National Association.
(14)
Collateral Administration Agreement, dated as of December 21, 2006, by and among Alesco Preferred Funding XIV, Ltd., Cohen & Company Financial Management, LLC and
U.S. Bank National Association.
(15)
Collateral Administration Agreement, dated as of March 29, 2007, by and among Alesco Preferred Funding XV, Ltd., Cohen & Company Financial Management, LLC and
LaSalle Bank National Association.
(16)
Collateral Administration Agreement, dated as of June 28, 2007, by and among Alesco Preferred Funding XVI, Ltd., Cohen & Company Financial Management, LLC and U.S.
Bank National Association.
(17)
Collateral Administration Agreement, dated as of October 30, 2007, by and among Alesco Preferred Funding XVII, Ltd., Cohen & Company Financial Management, LLC and
Wells Fargo Bank, National Association.
(1)
Indenture, dated as of September 25, 2003, by and among Alesco Preferred Funding I, Ltd., Alesco Preferred Funding I, Inc. and The Bank of New York Mellon Trust
Company, National Association (successor to JPMorgan Chase Bank, National Association).
(2)
Indenture, dated as of December 19, 2003, by and among Alesco Preferred Funding II, Ltd., Alesco Preferred Funding II, Inc. and The Bank of New York Mellon Trust
Company, National Association (successor to JPMorgan Chase Bank, National Association).
(3)
Indenture, dated as of March 25, 2004, by and among Alesco Preferred Funding III, Ltd., Alesco Preferred Funding III, Inc. and The Bank of New York Mellon Trust
Company, National Association (successor to JPMorgan Chase Bank, National Association).
(4)
Indenture, dated as of May 18, 2004, by and among Alesco Preferred Funding IV, Ltd., Alesco Preferred Funding IV, Inc. and The Bank of New York Mellon Trust Company,
National Association (successor to JPMorgan Chase Bank, National Association).
(5)
Indenture, dated as of September 14, 2004, by and among Alesco Preferred Funding V, Ltd., Alesco Preferred Funding V, Inc. and The Bank of New York Mellon Trust
Company, National Association (successor to JPMorgan Chase Bank, National Association).
(6)
Indenture, dated as of December 21, 2004, by and among Alesco Preferred Funding VI, Ltd., Alesco Preferred Funding VI, Inc. and The Bank of New York Mellon Trust
Company, National Association (successor to JPMorgan Chase Bank, National Association).
(7)
Indenture, dated as of April 19, 2005, by and among Alesco Preferred Funding VII, Ltd., Alesco Preferred Funding VII, Inc. and The Bank of New York Mellon Trust
Company, National Association (successor to JPMorgan Chase Bank, National Association).
(8)
Indenture, dated as of August 4, 2005, by and among Alesco Preferred Funding VIII, Ltd., Alesco Preferred Funding VIII, Inc. and The Bank of New York Mellon Trust
Company, National Association (successor to JPMorgan Chase Bank, National Association).
(9)
Indenture, dated as of December 15, 2005, by and among Alesco Preferred Funding IX, Ltd., Alesco Preferred Funding IX, Inc. and U.S. Bank National Association.
(10)
Indenture, dated as of March 15, 2006, by and among Alesco Preferred Funding X, Ltd., Alesco Preferred Funding X, Inc. and U.S. Bank National Association.
(11)
Indenture, dated as of June 29, 2006, by and among Alesco Preferred Funding XI, Ltd., Alesco Preferred Funding XI, Inc. and U.S. Bank National Association.
(12)
Indenture, dated as of October 12, 2006, by and among Alesco Preferred Funding XII, Ltd., Alesco Preferred Funding XII, Inc. and U.S. Bank National Association.
(13)
Indenture, dated as of November 30, 2006, by and among Alesco Preferred Funding XIII, Ltd., Alesco Preferred Funding XIII, Inc. and Wells Fargo Bank, National
Association.
(14)
Indenture, dated as of December 21, 2006, by and among Alesco Preferred Funding XIV, Ltd., Alesco Preferred Funding XIV, Inc., Alesco Preferred Funding XIV (L2), Ltd.
and U.S. Bank National Association.
(15)
Indenture, dated as of March 29, 2007, by and among Alesco Preferred Funding XV, Ltd., Alesco Preferred Funding XV, LLC, Alesco Preferred Funding XV (L2), Ltd. and
LaSalle Bank National Association.
(16)
Indenture, dated as of June 28, 2007, by and among Alesco Preferred Funding XVI, Ltd., Alesco Preferred Funding XVI, LLC, Alesco Preferred Funding XVI (L2), Ltd. and
U.S. Bank National Association.
(17)
Indenture, dated as of October 30, 2007, by and among Alesco Preferred Funding XVII, Ltd., Alesco Preferred Funding XVII, LLC, Alesco Preferred Funding XVII (L2), Ltd.
and Wells Fargo Bank, National Association.
(1)
Alesco Preferred Funding I, Ltd., an exempted company incorporated under the laws of the Cayman Islands.
(2)
Alesco Preferred Funding II, Ltd., an exempted company incorporated under the laws of the Cayman Islands.
(3)
Alesco Preferred Funding III, Ltd., an exempted company incorporated under the laws of the Cayman Islands.
(4)
Alesco Preferred Funding IV, Ltd., an exempted company incorporated under the laws of the Cayman Islands.
(5)
Alesco Preferred Funding V, Ltd., an exempted company incorporated under the laws of the Cayman Islands.
(6)
Alesco Preferred Funding VI, Ltd., an exempted company incorporated under the laws of the Cayman Islands.
(7)
Alesco Preferred Funding VII, Ltd., an exempted company incorporated under the laws of the Cayman Islands.
(8)
Alesco Preferred Funding VIII, Ltd., an exempted company incorporated under the laws of the Cayman Islands.
(9)
Alesco Preferred Funding IX, Ltd., an exempted company incorporated under the laws of the Cayman Islands.
(10)
Alesco Preferred Funding X, Ltd., an exempted company incorporated under the laws of the Cayman Islands.
(11)
Alesco Preferred Funding XI, Ltd., an exempted company incorporated under the laws of the Cayman Islands.
(12)
Alesco Preferred Funding XII, Ltd., an exempted company incorporated under the laws of the Cayman Islands.
(13)
Alesco Preferred Funding XIII, Ltd., an exempted company incorporated under the laws of the Cayman Islands.
(14)
Alesco Preferred Funding XIV, Ltd., an exempted company incorporated under the laws of the Cayman Islands.
(15)
Alesco Preferred Funding XV, Ltd., an exempted company incorporated under the laws of the Cayman Islands.
(16)
Alesco Preferred Funding XVI, Ltd., an exempted company incorporated under the laws of the Cayman Islands.
(17)
Alesco Preferred Funding XVII, Ltd., an exempted company incorporated under the laws of the Cayman Islands.
Alesco I:
Majority-in-Interest of Preferred Shareholders
Alesco II:
Majority-in-Interest of Preferred Shareholders
Alesco III:
Majority-in-Interest of Preferred Shareholders.
Alesco IV:
Majority-in-Interest of Preferred Shareholders
Alesco V:
Majority-in-Interest of Preferred Shareholders
Alesco VI:
Majority-in-Interest of Preferred Shareholders
Alesco VII:
Majority-in-Interest of Income Notes
Alesco VIII:
Majority-in-Interest of Preferred Shareholders
Alesco IX:
Majority-in-Interest of Preferred Shareholders
Alesco X:
Majority-in-Interest of Preferred Shareholders
Alesco XI:
Majority-in-Interest of Preferred Shareholders
Alesco XII:
Majority-in-Interest of Preferred Shareholders
Alesco XIII:
Majority-in-Interest of Preferred Shareholders
Alesco XIV:
Majority-in-Interest of the First Tier Preferred Shareholders
Alesco XV:
Majority-in-Interest of the First Tier Preferred Shareholders
Alesco XVI:
Majority-in-Interest of the First Tier Preferred Shareholders
Alesco XVII:
Majority-in-Interest of the First Tier Preferred Shareholders
CM
Payments
Received
After 2/23/10
CM Payment
Date
Portion
Accrued
Through
2/23/10
Portion
Accrued
After 2/23/10
Retained
Management
Fee
CM Fees
Due ATP
Management
$
56,589
4/15/10
$
23,893
$
32,696
$
11,947
$
44,643
84,883
7/15/10
84,883
84,883
61,413
4/30/10
15,694
45,719
7,847
53,566
55,507
4/15/10
23,436
32,071
11,718
43,789
83,789
7/15/10
83,789
83,789
97,608
4/30/10
24,944
72,664
12,472
85,136
96,191
3/23/10
64,127
32,064
32,064
64,128
93,697
6/23/10
93,697
93,697
169,322
3/23/10
112,881
56,441
56,441
112,882
166,828
6/23/10
166,828
166,828
183,030
3/23/10
122,020
61,010
61,010
122,020
174,947
6/23/10
174,947
174,947
168,528
3/23/10
112,352
56,176
56,176
112,352
168,562
6/23/10
168,562
168,562
190,654
3/23/10
127,103
63,551
63,552
127,103
179,667
6/23/10
179,667
179,667
2,031,217
626,450
1,404,767
313,225
1,717,992
297,913
3/23/10
198,609
99,304
99,305
198,609
296,563
6/23/10
296,563
296,563
198,145
3/23/10
132,097
66,048
66,049
132,097
191,995
6/23/10
191,995
191,995
193,636
4/15/10
81,757
111,879
40,879
152,758
184,523
7/15/10
184,523
184,523
133,099
3/23/10
88,733
44,366
44,367
88,733
131,162
6/23/10
131,162
131,162
226,470
3/23/10
150,980
75,490
75,490
150,980
CM
Payments
Received
After 2/23/10
CM Payment
Date
Portion
Accrued
Through
2/23/10
Portion
Accrued
After 2/23/10
Retained
Management
Fee
CM Fees
Due ATP
Management
214,020
6/23/10
214,020
214,020
156,237
3/23/10
104,158
52,079
2,079
104,158
150,668
6/23/10
150,668
150,668
143,841
3/23/10
95,894
47,947
47,947
95,894
137,766
6/23/10
137,766
137,766
56,184
3/23/10
37,456
18,728
18,728
37,456
52,387
6/23/10
52,387
52,387
2,764,610
889,684
1,874,926
444,842
2,319,768
$
4,795,827
$
1,516,134
$
3,279,693
$
758,067
$
4,037,760
$
27,400,000
28,300,000
28,800,000
33,500,000
33,000,000
62,300,000
63,500,000
59,300,000
44,400,000
380,500,000
60,400,000
44,000,000
44,060,000
33,600,000
52,000,000
39,500,000
26,000,000
36,750,000
336,310,000
$
716,810,000
Base Purchase
Price
$
218,445
234,016
226,572
414,238
394,807
689,166
338,316
755,407
808,062
4,079,029
1,141,497
754,558
772,747
512,563
851,646
611,058
562,611
214,289
5,420,971
$
9,500,000
First
Measurement
Period
Second
Measurement
Period
Third
Measurement
Period
Fourth
Measurement
Period
Fifth
Measurement
Period
Sixth
Measurement
Period
Seventh
Measurement
Period
$
179,070
$
140,608
$
130,794
$
126,889
$
123,101
$
119,426
$
115,861
194,944
152,928
141,466
135,854
127,696
123,884
120,186
190,105
148,994
137,588
133,481
121,866
118,228
114,699
342,438
265,663
236,994
229,920
223,049
216,391
209,924
331,189
256,671
223,647
216,970
210,493
204,209
198,113
580,577
449,947
401,404
389,420
377,793
366,514
355,571
289,188
224,121
199,669
193,719
187,935
182,325
176,882
590,574
462,796
428,085
415,385
402,992
389,750
376,921
615,522
482,844
451,271
440,549
427,925
415,673
401,067
3,313,606
2,584,572
2,350,917
2,282,187
2,202,851
2,136,400
2,069,223
934,802
734,926
685,416
665,134
645,455
626,362
607,730
636,545
495,092
446,039
432,725
419,808
407,277
395,120
629,921
495,027
458,960
444,413
431,147
418,277
403,165
424,125
332,779
309,682
298,810
288,177
279,569
270,449
728,623
571,030
509,083
479,746
463,550
449,713
435,902
483,367
379,325
354,198
344,018
333,749
323,787
314,122
452,659
355,296
324,861
313,212
303,863
294,793
285,994
212,998
147,209
124,115
121,214
117,599
114,089
110,683
4,503,040
3,510,684
3,212,355
3,099,272
3,003,349
2,913,867
2,823,164
$
7,816,646
$
6,095,257
$
5,563,272
$
5,381,459
$
5,206,200
$
5,050,266
$
4,892,388
First Measurement Period - Quarter Ending
Second Measurement Period - Quarter Ending
5/23/10
8/23/10
11/23/10
2/23/11
1st Period
5/23/11
8/23/11
11/23/11
2/23/12
2nd Period
$
49,086
$
46,147
$
43,212
$
40,625
$
179,070
$
38,041
$
35,764
$
33,489
$
33,314
$
140,608
53,563
50,113
47,153
44,116
194,944
41,511
38,837
36,544
36,036
152,928
52,161
48,940
45,920
43,084
190,105
40,425
37,928
35,588
35,053
148,994
93,975
88,188
82,730
77,546
342,438
72,830
68,346
64,116
60,371
265,663
90,770
85,362
79,909
75,148
331,189
70,347
66,156
61,929
58,239
256,671
158,810
149,952
139,807
132,009
580,577
123,078
116,213
108,350
102,307
449,947
79,423
74,372
69,920
65,473
289,188
61,553
57,638
54,188
50,741
224,121
161,900
152,176
142,529
133,969
590,574
125,472
117,936
110,460
108,927
462,796
168,886
158,460
148,677
139,499
615,522
130,887
122,806
115,225
113,926
482,844
908,573
853,709
799,857
751,467
3,313,606
704,144
661,624
619,889
598,915
2,584,572
256,559
240,586
225,859
211,798
934,802
198,833
186,454
175,041
174,598
734,926
174,654
163,872
153,755
144,263
636,545
135,357
127,001
119,160
113,574
495,092
172,746
162,258
152,075
142,843
629,921
133,878
125,750
117,858
117,541
495,027
116,405
109,153
102,476
96,092
424,125
90,214
84,594
79,419
78,553
332,779
199,677
187,818
175,784
165,344
728,623
154,749
145,559
136,232
134,489
571,030
132,600
124,463
116,733
109,570
483,367
102,765
96,459
90,468
89,633
379,325
124,200
116,532
109,338
102,588
452,659
96,255
90,313
84,737
83,991
355,296
75,168
48,900
45,881
43,049
212,998
40,391
37,897
35,558
33,363
147,209
1,252,008
1,153,584
1,081,901
1,015,547
4,503,040
952,442
894,027
838,473
825,741
3,510,684
$
2,160,581
$
2,007,293
$
1,881,758
$
1,767,014
$
7,816,646
$
1,656,586
$
1,555,652
$
1,458,362
$
1,424,656
$
6,095,257
Third Measurement Period - Quarter Ending
Fourth Measurement Period - Quarter Ending
5/23/12
8/23/12
11/23/12
2/23/13
3rd Period
5/23/13
8/23/13
11/23/13
2/23/14
4th Period
$
33,072
$
32,820
$
32,575
$
32,327
$
130,794
$
32,085
$
31,840
$
31,602
$
31,362
$
126,889
35,775
35,494
35,237
34,960
141,466
34,707
34,434
34,185
32,528
135,854
34,789
34,526
34,266
34,007
137,588
33,750
33,496
33,243
32,992
133,481
59,923
59,472
59,022
58,577
236,994
58,134
57,696
57,260
56,829
229,920
56,541
56,130
55,691
55,286
223,647
54,853
54,454
54,028
53,635
216,970
101,455
100,768
99,929
99,252
401,404
98,426
97,759
96,946
96,289
389,420
50,476
50,110
49,728
49,356
199,669
48,980
48,614
48,243
47,882
193,719
108,226
107,412
106,620
105,827
428,085
105,032
104,229
103,455
102,667
415,385
113,512
113,047
112,586
112,126
451,271
111,341
110,535
109,734
108,939
440,549
593,769
589,779
585,652
581,718
2,350,917
577,309
573,058
568,696
563,123
2,282,187
173,287
171,995
170,704
169,431
685,416
168,159
166,905
165,653
164,417
665,134
112,780
111,929
111,084
110,246
446,039
109,414
108,588
107,768
106,955
432,725
116,702
114,950
114,087
113,221
458,960
112,371
111,518
110,681
109,841
444,413
78,061
79,220
76,063
76,339
309,682
76,603
74,355
73,792
74,060
298,810
133,815
129,564
123,324
122,381
509,083
121,470
120,540
119,643
118,093
479,746
89,335
88,905
88,313
87,645
354,198
86,985
86,327
85,677
85,029
344,018
83,741
80,930
80,393
79,797
324,861
79,195
78,597
78,004
77,416
313,212
31,303
31,043
30,942
30,827
124,115
30,647
30,418
30,189
29,961
121,214
819,024
808,534
794,910
789,886
3,212,355
784,843
777,250
771,408
765,772
3,099,272
$
1,412,793
$
1,398,313
$
1,380,562
$
1,371,604
$
5,563,272
$
1,362,153
$
1,350,307
$
1,340,104
$
1,328,895
$
5,381,459
Fifth Measurement Period - Quarter Ending
Sixth Measurement Period - Quarter Ending
5/23/14
8/23/14
11/23/14
2/23/15
5th Period
5/23/15
8/23/15
11/23/15
2/23/16
6th Period
$
31,127
$
30,890
$
30,659
$
30,425
$
123,101
$
30,198
$
29,968
$
29,744
$
29,517
$
119,426
32,293
32,039
31,807
31,557
127,696
31,329
31,082
30,858
30,615
123,884
30,814
30,581
30,350
30,121
121,866
29,894
29,668
29,444
29,222
118,228
56,399
55,974
55,551
55,125
223,049
54,715
54,303
53,893
53,479
216,391
53,215
52,829
52,415
52,034
210,493
51,627
51,251
50,850
50,481
204,209
95,487
94,841
94,051
93,414
377,793
92,636
92,009
91,243
90,625
366,514
47,517
47,162
46,803
46,453
187,935
46,099
45,754
45,406
45,066
182,325
101,900
101,123
100,367
99,603
402,992
98,858
98,104
96,763
96,025
389,750
108,150
107,367
106,590
105,818
427,925
105,053
104,293
103,538
102,790
415,673
556,903
552,805
548,593
544,550
2,202,851
540,408
536,433
531,739
527,819
2,136,400
163,184
161,967
160,752
159,553
645,455
158,356
157,176
155,997
154,834
626,362
106,148
105,347
104,552
103,762
419,808
102,979
102,202
101,431
100,665
407,277
109,017
108,190
107,378
106,563
431,147
105,763
104,960
104,172
103,382
418,277
73,673
71,510
71,768
71,226
288,177
70,688
70,155
69,625
69,100
279,569
117,214
116,317
115,451
114,568
463,550
113,715
112,845
112,005
111,148
449,713
84,389
83,750
83,120
82,491
333,749
81,870
81,250
80,638
80,029
323,787
76,831
76,251
75,676
75,105
303,863
74,538
73,975
73,417
72,863
294,793
29,735
29,510
29,288
29,066
117,599
28,847
28,629
28,413
28,199
114,089
760,190
752,842
747,983
742,334
3,003,349
736,757
731,193
725,699
720,219
2,913,867
$
1,317,093
$
1,305,647
$
1,296,576
$
1,286,884
$
5,206,200
$
1,277,165
$
1,267,626
$
1,257,438
$
1,248,038
$
5,050,266
Seventh Measurement Period - Quarter Ending
5/23/16
8/23/16
11/23/16
2/23/17
7th Period
$
29,296
$
29,073
$
28,856
$
28,636
$
115,861
30,394
30,154
29,937
29,701
120,186
29,002
28,783
28,565
28,350
114,699
53,075
52,682
52,284
51,883
209,924
50,086
49,721
49,332
48,974
198,113
89,871
89,262
88,519
87,919
355,571
44,723
44,388
44,050
43,721
176,882
95,308
94,580
93,875
93,158
376,921
101,409
100,644
99,884
99,130
401,067
523,162
519,288
515,302
511,471
2,069,223
153,662
152,505
151,351
150,212
607,730
99,905
99,151
98,403
97,660
395,120
102,606
100,945
100,187
99,427
403,165
68,578
68,061
67,158
66,651
270,449
110,321
109,476
108,661
107,444
435,902
79,426
78,825
78,231
77,640
314,122
72,313
71,767
71,226
70,688
285,994
27,986
27,775
27,565
27,357
110,683
714,797
708,506
702,783
697,079
2,823,164
$
1,237,959
$
1,227,794
$
1,218,084
$
1,208,550
$
4,892,388
CDO Agreement
Required Consents
CDO Agreement
CDO Agreement
Required Consents
CDO Agreement
Required Consents
CDO Agreement
Required Consents
CDO Agreement
Required Consents
CDO Agreement | Required Consents | |
Alesco VIII:
Collateral Management Agreement |
Issuer, Majority-in-Interest of Preferred Shareholders, Fitch, Moodys, Standard & Poors. | |
Alesco IX:
Collateral Management Agreement |
Issuer, Majority-in-Interest of Preferred Shareholders, Fitch, Moodys, Standard & Poors. | |
Alesco X:
Collateral Management Agreement |
Issuer, Majority-in-Interest of Preferred Shareholders, Fitch, Moodys, Standard & Poors. | |
Alesco XI:
Collateral Management Agreement |
Issuer, Majority-in-Interest of Preferred Shareholders, Fitch, Moodys, Standard & Poors. | |
Alesco XII:
Collateral Management Agreement |
Issuer, Majority-in-Interest of Preferred Shareholders, Fitch, Moodys, Standard & Poors. | |
Alesco XIII:
Collateral Management Agreement |
Issuer, Majority-in-Interest of Preferred Shareholders, Fitch, Moodys, Standard & Poors. | |
Alesco XIV:
Collateral Management Agreement |
Issuer, Majority-in-Interest of the First Tier Preferred Shareholders, Fitch, Moodys, Standard & Poors. | |
Alesco XV:
Collateral Management Agreement |
Issuer, Majority-in-Interest of the First Tier Preferred Shareholders, Fitch, Moodys, Standard & Poors. | |
Alesco XVI:
Collateral Management Agreement |
Issuer, Majority-in-Interest of the First Tier Preferred Shareholders, Fitch, Moodys, Standard & Poors. | |
Alesco XVII:
Collateral Management Agreement |
Issuer, Majority-in-Interest of the First Tier Preferred Shareholders, Fitch, Moodys, Standard & Poors. |
2
Schedule 4(e)
Proceedings
(i) Cohen & Company is named as one of fifteen defendants in a lawsuit filed by Riverside National Bank of Florida (Riverside) on November 13, 2009 in the Supreme Court of the State of New York, County of New York. (A substantially similar action was filed by Riverside on August 6, 2009 in the Supreme Court of the State of New York, County of Kings, and subsequently discontinued without prejudice and refiled in New York County.) The action, titled Riverside National Bank of Florida v. The McGraw-Hill Companies, Inc., Moodys Investors Service, Inc., Fitch, Inc., Taberna Capital Management, LLC, Cohen & Company Financial Management, LLC f/k/a Cohen Bros. Financial Management LLC, FTN Financial Capital Markets, Keefe Bruyette & Woods, Inc., Merrill Lynch, Pierce, Fenner & Smith, Inc., JPMorgan Chase & Co., J.P. Morgan Securities Inc., Citigroup Global Markets, Credits Suisse Securities (USA) LLC, ABN Amro, Inc., Cohen & Company, and SunTrust Robinson Humphrey, Inc., asserts claims for common law fraud, negligent misrepresentation, breach of fiduciary duty, and breach of contract in connection with Riversides purchase of certain CDO securities, including, but not limited to, securities from the Alesco I, II, VII, IX, X and XIII CDOs. Riverside alleges that offering materials issued in connection with the CDOs it purchased did not adequately disclose the process by which the rating agencies rated each of the securities. Riverside also alleges, among other things, that the offering materials should have disclosed an alleged conflict of interest of the rating agencies as well as the role that the rating agencies played in structuring each CDO. Riverside seeks damages in excess of $132 million, rescission of its purchases of the securities at issue, an accounting of certain amounts received by the defendants together with the imposition of a constructive trust, and punitive damages of an unspecified amount. On December 11, 2009, the defendants moved to dismiss all of Riversides claims. Riverside filed an opposition to the defendants motion on February 19, 2010, voluntarily dismissing its contract causes of action and opposing the remainder of defendants motion to dismiss.
(ii) Alesco Preferred Funding X, Ltd. is named as a defendant in a lawsuit filed by Leawood Bancshares, Inc. (Leawood) and CrossFirst Holdings, LLC (CrossFirst) on July 23, 2010 in the United States District Court for the Southern District of New York. The action, titled Leawood Bancshares, Inc. and CrossFirst Holdings, LLC v. Alesco Preferred Funding X, Ltd. alleges that Alesco breached a March 1, 2010 letter agreement between Leawood and Alesco by failing to sell $4 million of trust preferred securities to Leawood for $1 million on or before June 7, 2010. The complaint alleges that Leawood was a party to an Asset Contribution Agreement with CrossFirst and other parties, which agreement contained a pre-condition that the trust preferred securities be sold to Leawood. The complaint alleges that the failure by Alesco Preferred Funding X, Ltd. to complete such sale prevented Leawood and CrossFirst from closing the Asset Contribution Agreement, thereby depriving the plaintiffs from the benefits thereof.
Schedule 4(f)
Material Contracts
CDO Agreements
Collateral Management Agreements
(1) | Collateral Management Agreement, dated as of September 25, 2003, by and between Alesco Preferred Funding I, Ltd. and Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC). |
(2) | Collateral Management Agreement, dated as of December 19, 2003, by and between Alesco Preferred Funding II, Ltd. and Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC). |
(3) | Collateral Management Agreement, dated as of March 25, 2004, by and between Alesco Preferred Funding III, Ltd. and Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC). |
(4) | Collateral Management Agreement, dated as of May 18, 2004, by and between Alesco Preferred Funding IV, Ltd. and Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC). |
(5) | Collateral Management Agreement, dated as of September 14, 2004, by and between Alesco Preferred Funding V, Ltd. and Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC). |
(6) | Collateral Management Agreement, dated as of December 21, 2004, by and between Alesco Preferred Funding VI, Ltd. and Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC). |
(7) | Collateral Management Agreement, dated as of April 19, 2005, by and between Alesco Preferred Funding VII, Ltd. and Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC). |
(8) | Collateral Management Agreement, dated as of August 4, 2005, by and between Alesco Preferred Funding VIII, Ltd. and Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC). |
(9) | Collateral Management Agreement, dated as of December 15, 2005, by and between Alesco Preferred Funding IX, Ltd. and Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC). |
(10) | Collateral Management Agreement, dated as of March 15, 2006, by and between Alesco Preferred Funding X, Ltd. and Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC). |
(11) | Collateral Management Agreement, dated as of June 29, 2006, by and between Alesco Preferred Funding XI, Ltd. and Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC). |
(12) | Collateral Management Agreement, dated as of October 12, 2006, by and between Alesco Preferred Funding XII, Ltd. and Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC). |
(13) | Collateral Management Agreement, dated as of November 30, 2006, by and between Alesco Preferred Funding XIII, Ltd. and Cohen & Company Financial Management, LLC. |
(14) | Collateral Management Agreement, dated as of December 21, 2006, by and between Alesco Preferred Funding XIV, Ltd. and Cohen & Company Financial Management, LLC. |
(15) | Collateral Management Agreement, dated as of March 29, 2007, by and between Alesco Preferred Funding XV, Ltd. and Cohen & Company Financial Management, LLC. |
(16) | Collateral Management Agreement, dated as of June 28, 2007, by and between Alesco Preferred Funding XVI, Ltd. and Cohen & Company Financial Management, LLC. |
(17) | Collateral Management Agreement, dated as of October 30, 2007, by and between Alesco Preferred Funding XVII, Ltd. and Cohen & Company Financial Management, LLC. |
Sandler Sub-Advisory Agreements
(1) | Financial Sub-Advisory Agreement, dated as of September 25, 2003, by and between Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC) and Sandler ONeill & Partners, L.P. |
(2) | Financial Sub-Advisory Agreement, dated as of December 19, 2003, by and between Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC) and Sandler ONeill & Partners, L.P. |
(3) | Financial Sub-Advisory Agreement, dated as of March 25, 2004, by and between Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC) and Sandler ONeill & Partners, L.P. |
Collateral Administration Agreements
(1) | Collateral Administration Agreement, dated as of September 25, 2003, by and among Alesco Preferred Funding I, Ltd., Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC) and The Bank of New York Mellon Trust Company, National Association (successor to JPMorgan Chase Bank, National Association). |
(2) | Collateral Administration Agreement, dated as of December 19, 2003, by and among Alesco Preferred Funding II, Ltd., Cohen Bros. Financial Management, LLC (now known |
as Cohen & Company Financial Management, LLC) and The Bank of New York Mellon Trust Company, National Association (successor to JPMorgan Chase Bank, National Association). |
(3) | Collateral Administration Agreement, dated as of March 25, 2004, by and among Alesco Preferred Funding III, Ltd., Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC) and The Bank of New York Mellon Trust Company, National Association (successor to JPMorgan Chase Bank, National Association). |
(4) | Collateral Administration Agreement, dated as of May 18, 2004, by and among Alesco Preferred Funding IV, Ltd., Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC) and The Bank of New York Mellon Trust Company, National Association (successor to JPMorgan Chase Bank, National Association). |
(5) | Collateral Administration Agreement, dated as of September 14, 2004, by and among Alesco Preferred Funding V, Ltd., Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC) and The Bank of New York Mellon Trust Company, National Association (successor to JPMorgan Chase Bank, National Association). |
(6) | Collateral Administration Agreement, dated as of December 21, 2004, by and among Alesco Preferred Funding VI, Ltd., Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC) and The Bank of New York Mellon Trust Company, National Association (successor to JPMorgan Chase Bank, National Association). |
(7) | Collateral Administration Agreement, dated as of April 19, 2005, by and among Alesco Preferred Funding VII, Ltd., Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC) and The Bank of New York Mellon Trust Company, National Association (successor to JPMorgan Chase Bank, National Association). |
(8) | Collateral Administration Agreement, dated as of August 4, 2005, by and among Alesco Preferred Funding VIII, Ltd., Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC) and The Bank of New York Mellon Trust Company, National Association (successor to JPMorgan Chase Bank, National Association). |
(9) | Collateral Administration Agreement, dated as of December 15, 2005, by and among Alesco Preferred Funding IX, Ltd., Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC) and U.S. Bank National Association. |
(10) | Collateral Administration Agreement, dated as of March 15, 2006, by and among Alesco Preferred Funding X, Ltd., Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC) and U.S. Bank National Association. |
(11) | Collateral Administration Agreement, dated as of June 29, 2006, by and among Alesco Preferred Funding XI, Ltd., Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC) and U.S. Bank National Association. |
(12) | Collateral Administration Agreement, dated as of October 12, 2006, by and among Alesco Preferred Funding XII, Ltd., Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC) and U.S. Bank National Association. |
(13) | Collateral Administration Agreement, dated as of November 30, 2006, by and among Alesco Preferred Funding XIII, Ltd., Cohen & Company Financial Management, LLC and Wells Fargo Bank, National Association. |
(14) | Collateral Administration Agreement, dated as of December 21, 2006, by and among Alesco Preferred Funding XIV, Ltd., Cohen & Company Financial Management, LLC and U.S. Bank National Association. |
(15) | Collateral Administration Agreement, dated as of March 29, 2007, by and among Alesco Preferred Funding XV, Ltd., Cohen & Company Financial Management, LLC and LaSalle Bank National Association. |
(16) | Collateral Administration Agreement, dated as of June 28, 2007, by and among Alesco Preferred Funding XVI, Ltd., Cohen & Company Financial Management, LLC and U.S. Bank National Association. |
(17) | Collateral Administration Agreement, dated as of October 30, 2007, by and among Alesco Preferred Funding XVII, Ltd., Cohen & Company Financial Management, LLC and Wells Fargo Bank, National Association. |
Indentures
(1) | Indenture, dated as of September 25, 2003, by and among Alesco Preferred Funding I, Ltd., Alesco Preferred Funding I, Inc. and The Bank of New York Mellon Trust Company, National Association (successor to JPMorgan Chase Bank, National Association). |
(2) | Indenture, dated as of December 19, 2003, by and among Alesco Preferred Funding II, Ltd., Alesco Preferred Funding II, Inc. and The Bank of New York Mellon Trust Company, National Association (successor to JPMorgan Chase Bank, National Association). |
(3) | Indenture, dated as of March 25, 2004, by and among Alesco Preferred Funding III, Ltd., Alesco Preferred Funding III, Inc. and The Bank of New York Mellon Trust Company, National Association (successor to JPMorgan Chase Bank, National Association). |
(4) | Indenture, dated as of May 18, 2004, by and among Alesco Preferred Funding IV, Ltd., Alesco Preferred Funding IV, Inc. and The Bank of New York Mellon Trust |
Company, National Association (successor to JPMorgan Chase Bank, National Association). |
(5) | Indenture, dated as of September 14, 2004, by and among Alesco Preferred Funding V, Ltd., Alesco Preferred Funding V, Inc. and The Bank of New York Mellon Trust Company, National Association (successor to JPMorgan Chase Bank, National Association). |
(6) | Indenture, dated as of December 21, 2004, by and among Alesco Preferred Funding VI, Ltd., Alesco Preferred Funding VI, Inc. and The Bank of New York Mellon Trust Company, National Association (successor to JPMorgan Chase Bank, National Association). |
(7) | Indenture, dated as of April 19, 2005, by and among Alesco Preferred Funding VII, Ltd., Alesco Preferred Funding VII, Inc. and The Bank of New York Mellon Trust Company, National Association (successor to JPMorgan Chase Bank, National Association). |
(8) | Indenture, dated as of August 4, 2005, by and among Alesco Preferred Funding VIII, Ltd., Alesco Preferred Funding VIII, Inc. and The Bank of New York Mellon Trust Company, National Association (successor to JPMorgan Chase Bank, National Association). |
(9) | Indenture, dated as of December 15, 2005, by and among Alesco Preferred Funding IX, Ltd., Alesco Preferred Funding IX, Inc. and U.S. Bank National Association. |
(10) | Indenture, dated as of March 15, 2006, by and among Alesco Preferred Funding X, Ltd., Alesco Preferred Funding X, Inc. and U.S. Bank National Association. |
(11) | Indenture, dated as of June 29, 2006, by and among Alesco Preferred Funding XI, Ltd., Alesco Preferred Funding XI, Inc. and U.S. Bank National Association. |
(12) | Indenture, dated as of October 12, 2006, by and among Alesco Preferred Funding XII, Ltd., Alesco Preferred Funding XII, Inc. and U.S. Bank National Association. |
(13) | Indenture, dated as of November 30, 2006, by and among Alesco Preferred Funding XIII, Ltd., Alesco Preferred Funding XIII, Inc. and Wells Fargo Bank, National Association. |
(14) | Indenture, dated as of December 21, 2006, by and among Alesco Preferred Funding XIV, Ltd., Alesco Preferred Funding XIV, Inc., Alesco Preferred Funding XIV (L2), Ltd. and U.S. Bank National Association. |
(15) | Indenture, dated as of March 29, 2007, by and among Alesco Preferred Funding XV, Ltd., Alesco Preferred Funding XV, LLC, Alesco Preferred Funding XV (L2), Ltd. and LaSalle Bank National Association. |
(16) | Indenture, dated as of June 28, 2007, by and among Alesco Preferred Funding XVI, Ltd., Alesco Preferred Funding XVI, LLC, Alesco Preferred Funding XVI (L2), Ltd. and U.S. Bank National Association. |
(17) | Indenture, dated as of October 30, 2007, by and among Alesco Preferred Funding XVII, Ltd., Alesco Preferred Funding XVII, LLC, Alesco Preferred Funding XVII (L2), Ltd. and Wells Fargo Bank, National Association. |
Hedge Agreements
(1) | ISDA Master Agreement, dated as of September 25, 2003, by and between Merrill Lynch Capital Services, Inc. and Alesco Preferred Funding I, Ltd. |
(2) | ISDA Master Agreement, dated as of March 25, 2004, by and between Merrill Lynch Capital Services, Inc. and Alesco Preferred Funding III, Ltd. |
(3) | ISDA Master Agreement, dated as of May 18, 2004, by and between Merrill Lynch Capital Services, Inc. and Alesco Preferred Funding IV, Ltd. |
(4) | ISDA Master Agreement, dated as of September 14, 2004, by and between Merrill Lynch Capital Services, Inc. and Alesco Preferred Funding V, Ltd. |
(5) | ISDA Master Agreement, dated as of December 21, 2004, by and between Merrill Lynch Capital Services, Inc. and Alesco Preferred Funding VI, Ltd. |
(6) | ISDA Master Agreement, dated as of April 19, 2005, by and between Merrill Lynch Capital Services, Inc. and Alesco Preferred Funding VII, Ltd. |
(7) | ISDA Master Agreement, dated as of August 4, 2005, by and between Merrill Lynch Capital Services, Inc. and Alesco Preferred Funding VIII, Ltd. |
(8) | ISDA Master Agreement, dated as of December 15, 2005, by and between Merrill Lynch Capital Services, Inc. and Alesco Preferred Funding IX, Ltd. |
(9) | ISDA Master Agreement, dated as of March 15, 2006, by and between Merrill Lynch Capital Services, Inc. and Alesco Preferred Funding X, Ltd. |
(10) | ISDA Master Agreement, dated as of June 29, 2006, by and between Merrill Lynch Capital Services, Inc. and Alesco Preferred Funding XI, Ltd. |
(11) | ISDA Master Agreement, dated as of October 12, 2006, by and between Bear Stearns Capital Markets, Inc. and Alesco Preferred Funding XII, Ltd. |
(12) | ISDA Master Agreement, dated as of November 30, 2006, by and between Bear Stearns Capital Markets, Inc. and Alesco Preferred Funding XIII, Ltd. |
(13) | ISDA Master Agreement, dated as of December 21, 2006, by and between ABN AMRO BANK N.V. and Alesco Preferred Funding XIV, Ltd. |
(14) | ISDA Master Agreement, dated as of March 29, 2007, by and between ABN AMRO BANK N.V. and Alesco Preferred Funding XV, Ltd. |
(15) | ISDA Master Agreement, dated as of June 28, 2007, by and between Merrill Lynch Capital Services, Inc. and Alesco Preferred Funding XVI, Ltd. |
(16) | ISDA Master Agreement, dated as of October 30, 2007, by and between The Bank of New York and Alesco Preferred Funding XVII, Ltd. |
*** Confidential material redacted and filed separately with the Commission.
Schedule 4(g)
List of Additional Defaulted Securities and Hedge Defaults
***
Peotone Bancorp | Alesco III |
American Community Mutual Insurance Company and Beach First National Bancshares | Alesco VII |
AMCORE Financial | Alesco XV |
Riverside Banking Company | Alesco XI, XII, XIV and XVII |
Schedule 4(h)
Waivers and Releases
On September 25, 2009, Cohen Financial provided notice to the holders of securities in Alesco Preferred Funding I, Ltd., Alesco Preferred Funding II, Ltd., Alesco Preferred Funding III, Ltd., and Alesco Preferred Funding IV, Ltd. (Alesco I-IV) regarding the adoption of a Supplemental Indenture to clarify and adopt a policy relating to certain asset exchanges permitted under the applicable Indentures (the Supplemental Indenture). In response to the Supplemental Indenture, Hildene Capital Management, LLC (Hildene) objected, alleged that certain prior exchanges breached the terms of the Collateral Management Agreements and asserted that such breaches must be cured within 30 days. On December 7, 2009, Cohen Financial notified holders of securities in Alesco I-IV that it was withdrawing the Supplemental Indenture and that Cohen Financial was changing its policies and procedures with respect to exchanges based on feedback received from investors. On December 11, 2009 Hildene withdrew its proposal to remove Cohen Financial as the Collateral Manager in Alesco I-IV.
Schedule 4(k)
Notices
On September 25, 2009, Cohen Financial provided notice to the holders of securities in Alesco Preferred Funding I, Ltd., Alesco Preferred Funding II, Ltd., Alesco Preferred Funding III, Ltd., and Alesco Preferred Funding IV, Ltd. (Alesco I-IV) regarding the adoption of a Supplemental Indenture to clarify and adopt a policy relating to certain asset exchanges permitted under the applicable Indentures (the Supplemental Indenture). In response to the Supplemental Indenture, Hildene Capital Management, LLC (Hildene) objected, alleged that certain prior exchanges breached the terms of the Collateral Management Agreements and asserted that such breaches must be cured within 30 days. On December 7, 2009, Cohen Financial notified holders of securities in Alesco I-IV that it was withdrawing the Supplemental Indenture and that Cohen Financial was changing its policies and procedures with respect to exchanges based on feedback received from investors. On December 11, 2009 Hildene withdrew its proposal to remove Cohen Financial as the Collateral Manager in Alesco I-IV.
Schedule 4(l)
Waiver of Collateral Management Fees
None.
Schedule 4(n)
Brokers
None.
*** Confidential material redacted and filed separately with the Commission.
Schedule 4(p)
List of Fees and Expenses
*** [Two pages.]
*** Confidential material redacted and filed separately with the Commission.
Schedule 6(j)
ATP Wiring Instructions
***
*** Confidential material redacted and filed separately with the Commission.
Schedule 6(l)
List of Employees
***
Schedule 6(p)
List of Current Amendments, Restructuring, Waivers and Workouts
Potential restructuring and/or exchange of Cascade Bancorp trust preferred securities held in Alesco VI, X, XI and XIV, having an aggregate principal amount of $66,500,000, pursuant to that certain letter dated October 26, 2009.
Schedule 8(i)
Escrow Deposit
Maximum Services Fee |
Amount to be Delivered To Escrow Agent at Initial Closing |
Service Fee to be Paid at Initial Closing |
||||||||||
Alesco 1 |
$ | 502,423 | $ | | $ | | ||||||
Alesco 2 |
538,236 | | | |||||||||
Alesco 3 |
521,115 | | | |||||||||
Alesco 4 |
952,747 | | | |||||||||
Alesco 5 |
908,056 | | | |||||||||
Alesco 6 |
1,585,082 | | | |||||||||
Alesco 7 |
778,128 | | | |||||||||
Alesco 8 |
1,737,437 | | | |||||||||
Alesco 9 |
1,858,543 | | | |||||||||
Subtotal |
9,381,767 | | | |||||||||
Alesco 10 |
2,867,600 | 2,469,322 | 398,278 | |||||||||
Alesco 11 |
1,895,555 | 1,632,284 | 263,272 | |||||||||
Alesco 12 |
1,941,249 | 1,671,631 | 269,618 | |||||||||
Alesco 13 |
1,287,630 | 1,108,793 | 178,838 | |||||||||
Alesco 14 |
2,139,454 | 1,842,308 | 297,146 | |||||||||
Alesco 15 |
1,535,062 | 1,321,859 | 213,203 | |||||||||
Alesco 16 |
1,413,358 | 1,217,058 | 196,300 | |||||||||
Alesco 17 |
538,325 | 463,557 | 74,767 | |||||||||
Subtotal |
13,618,233 | 11,726,811 | 1,891,421 | |||||||||
Total |
$ | 23,000,000 | $ | 11,726,811 | $ | 1,891,421 |
EXHIBITS
Exhibit A | Form of Assignment and Assumption Agreement | |
Exhibit B | Form of Required Holders Consent | |
Exhibit C | Form of Issuers Consent | |
Exhibit D | Form of Escrow Agreement | |
Exhibit E | Form of Voting Agreement | |
Exhibit F | Form of Cohen Services Agreement |
Exhibit A
ASSIGNMENT AND ASSUMPTION AGREEMENT
AMONG
COHEN & COMPANY FINANCIAL MANAGEMENT, LLC,
AS EXISTING COLLATERAL MANAGER,
ATP MANAGEMENT LLC,
AS SUCCESSOR COLLATERAL MANAGER,
AND
ALESCO PREFERRED FUNDING [ ], LTD.,
AS ISSUER
DATED AS OF JULY , 2010
ASSIGNMENT AND ASSUMPTION AGREEMENT
This ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of July , 2010 (such agreement as amended, modified, waived, supplemented or restated from time to time, the Agreement), by and among COHEN & COMPANY FINANCIAL MANAGEMENT, LLC, a Delaware limited liability company (the Existing Collateral Manager), ATP MANAGEMENT LLC, a Delaware limited liability company (together with its successors and assigns, the Successor Collateral Manager), and ALESCO PREFERRED FUNDING [_], LTD., an exempted Cayman Islands company (together with its successors and assigns, the Issuer).
RECITALS:
WHEREAS, pursuant to that certain Collateral Management Agreement, dated as of , 20 , by and between the Issuer and the Existing Collateral Manager (such agreement as amended, modified, waived, supplemented or restated from time to time, the Collateral Management Agreement), the Existing Collateral Manager provides the services described in the Collateral Management Agreement;
WHEREAS, pursuant to that certain Collateral Administration Agreement, dated as of [ , 20 ], by and between the Issuer, the Existing Collateral Manager, and [U.S. Bank National Association] (Trustee) (such agreement as amended, modified, waived, supplemented or restated from time to time, the Collateral Administration Agreement and, together with the Collateral Management Agreement, the Assigned Agreements), the Existing Collateral Manager provides the services described in the Collateral Administration Agreement;
WHEREAS, in accordance with the terms and subject to the conditions of this Agreement and the Master Transaction Agreement dated as of July , 2010, by and among the Existing Collateral Manager, Cohen & Company Inc. and the Successor Collateral Manager (the Transaction Agreement), the Existing Collateral Manager desires to assign to the Successor Collateral Manager, effective as of the Effective Time (as defined below), all of its rights, title and interest in and to the Assigned Agreements and all duties and obligations of the Existing Collateral Manager arising under or in connection with the Assumed Liabilities (as defined below); and
WHEREAS, in accordance with the terms and subject to the conditions of this Agreement and the Transaction Agreement, the Successor Collateral Manager desires to assume, effective as of the Effective Time, all of the rights, title and interest of the Existing Collateral Manager in the Assigned Agreements and the liabilities, obligations and duties of the Existing Collateral Manager arising under or in connection with the Assumed Liabilities.
NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Existing Collateral Manager, the Successor Collateral Manager, and the Issuer agree as follows:
1. Defined Terms. Capitalized terms used herein but not otherwise defined shall have the respective meanings ascribed thereto in the Assigned Agreements.
2. Assignment and Assumption.
(a) Subject to the terms of this Agreement, effective as of the Effective Time, the Existing Collateral Manager does hereby sell, assign, convey, transfer and set over to the Successor Collateral Manager, in accordance with and subject to the Transaction Agreement, all of the Existing Collateral Managers right, title and interest in, under and with respect to the Assigned Agreements and any liabilities, obligations and duties of the Existing Collateral Manager arising under or in connection with the Assigned Agreements to the extent, and only to the extent, such liabilities, obligations and duties relate to the period from and after the Effective Time (the Assumed Liabilities).
Subject to the terms of this Agreement, effective as of the Effective Time, the Successor Collateral Manager accepts the foregoing assignment and assumes the foregoing rights, duties and obligations and confirms that the Successor Collateral Manager shall be deemed a party to the Assigned Agreements. For the avoidance of doubt, the Successor Collateral Manager is not making the representations and warranties contained in Section 16(b)(vi) of the Collateral Management Agreement and neither the Successor Collateral Manager, its Affiliates nor any of their respective directors, officers, employees, agents or representatives assumes any liability arising out of, or accruing under, the Assigned Agreements with respect to any period prior to the Effective Time, which shall include but not be limited to (i) any liabilities relating to the offering and issuance of the securities described in the Indentures, (ii) any information about, or relating to, the Existing Collateral Manager or any other information contained in the Final Offering Circular or any other information provided to investors prior to the Effective Time, (iii) any act or omission to act by the Existing Collateral Manager prior to the Effective Time, (iv) any breach of a representation or warranty made by the Existing Collateral Manager or (v) any failure of the Existing Collateral Manager to comply with any provision of the Assigned Agreements. The assignment and assumption hereunder shall be effective as of 12:01 a.m., New York City Time on July 29, 2010 (the Effective Time).
(b) In connection with the assignment evidenced hereby, subject to the terms of this Agreement, effective as of the Effective Time, the Successor Collateral Manager irrevocably agrees to be bound by all of the terms of, and to undertake, assume and perform all obligations of the Existing Collateral Manager as contained in the Assigned Agreements from and after the Effective Time. The Successor Collateral Manager hereby represents and warrants that (i) it has received copies of the Transaction Documents, (ii) has the ability to professionally and competently perform the duties imposed upon the Collateral Manager under the Collateral Management Agreement and (iii) is legally qualified and has the capacity to act as the Collateral Manager under the Collateral Management Agreement.
(c) The Existing Collateral Manager, the Successor Collateral Manager, and the Issuer agree that (a) all references in the Assigned Agreements and the Indenture to the Collateral Manager or any such similar term and all references in any other documents necessary or incidental to carrying out the terms of the foregoing documents (such documents, together with the Assigned Agreements, the Transaction Documents) to the Existing Collateral Manager shall, from and after the Effective Time, refer to the Successor Collateral Manager, (b) all references in Section 13 of the Collateral Management Agreement to Cohen Bros. Management shall, from and after the Effective Time, refer to ATP Management LLC and (c) the fourth and fifth sentences of Section 5 of the Collateral Management Agreement which refer to Cohen Bros. & Company, LLC, an Affiliate of the Collateral Manager are hereby deleted in their entirety. The Successor Collateral Managers signature hereto shall be deemed to be an executed counterpart to the Transaction Documents duly delivered to the Issuer and to Trustee.
(d) Upon the execution and delivery of this Agreement by the Successor Collateral Manager, the Existing Collateral Manager shall be released from further obligations pursuant to the Collateral Management Agreement arising from and after the Effective Time, except with respect to its obligations arising under Section 10 of the Collateral Management Agreement prior to the date hereof and except with respect to its obligations in Section 14 and Section 40 of the Collateral Management Agreement.
(e) The Existing Collateral Manager, the Successor Collateral Manager, and the Issuer shall, at any time and from time to time, promptly and duly execute and deliver any and all such further instruments and documents and take such further action as may reasonably be requested by any other party to obtain the full benefits of this Agreement, and of the rights and powers herein granted.
3. Waiver of Subordinate Management Fees and Incentive Management Fees.
(a) Notwithstanding anything herein to the contrary, the Successor Collateral Manager hereby waives any Subordinate Collateral Management Fee (the Subordinate Fee) and Incentive Management Fee (the Incentive Fee) it may otherwise be entitled to receive by reason of entering into this Agreement and the performance of services under the Assigned Agreements. The waiver of any Subordinate Fee and Incentive Fee will be effective as to any and all calendar years with respect to which such waiver has not been prospectively revoked in accordance with Section (3)(b) below.
(b) The Successor Collateral Manager may revoke the waiver of a Subordinate Fee or Incentive Fee annually as to any calendar year by delivering notice of such revocation to the Issuer and Trustee within the period beginning on December 15th and ending on December 31st of the preceding calendar year. Any such revocation will be effective only with respect to fees earned during the calendar year immediately following the year in which the waiver is revoked and will have no effect on any other calendar year, except to the extent interest may accrue in any such other calendar year on Subordinate Fees earned, but not paid, in the calendar year for which such revocation was effective.
4. Consent and Acknowledgement. The Issuer hereby consents to (i) the assignment by the Existing Collateral Manager to, and assumption by the Successor Collateral Manager of, the rights, title, interest, duties and obligations of the Existing Collateral Manager pursuant to the Collateral Management Agreement in accordance with Section 2(a) hereof and (ii) the release of the Existing Collateral Manager from further obligation under the Collateral Management Agreement in accordance with Section 2(d).
5. Notices; Agent for Service of Process. (a) The addresses for notice for the Existing Collateral Manager as set forth in any of the Transaction Documents, are deleted in their entirety and replaced with the following:
(i) | if to the Successor Collateral Manager: |
ATP Management LLC | ||
c/o Fortress Investment Group LLC | ||
1345 Avenue of the Americas, 46th Floor | ||
New York, New York 10105 | ||
Telephone: | (212) 479-1505 | |
Facsimile: | (212) 798-6090 | |
Attention: | Rick Noble | |
with copies, which shall not constitute notice, to: | ||
Joel A. Holsinger | ||
Fortress Investment Group LLC | ||
400 Galleria Parkway | ||
Suite 1500 | ||
Atlanta, GA 30339 | ||
Telephone: | (678) 385-5905 | |
Facsimile: | (678) 550-9105 | |
Joshua Pack | ||
Fortress Investment Group | ||
10250 Constellation Blvd., Suite 2350 | ||
Los Angeles, CA 90067 | ||
Telephone: | (310) 228-3015 | |
Facsimile: | (310) 228-3031 |
Hunton & Williams LLP | ||
600 Peachtree Street, N.E., Suite 4100 | ||
Atlanta, GA 30308 | ||
Facsimile: | (404) 602-8669 | |
Attention: | John R. Schneider, Esq. | |
Hunton & Williams LLP | ||
Riverfront Plaza, East Tower | ||
951 East Byrd Street | ||
Richmond, Virginia 23219-4074 | ||
Facsimile: | (804) 343-4833 | |
Attention: | S. Gregory Cope, Esq. |
(ii) | if to the Existing Collateral Manager: |
Cohen & Company Inc. | ||
Circa Centre | ||
2929 Arch Street | ||
17th Floor | ||
Philadelphia PA 19103 | ||
Facsimile: | (215) 701-8282 | |
Attention: | Joseph Pooler, Chief Financial Officer | |
and to: | ||
Cohen & Company Financial Management, LLC | ||
135 East 57th Street, 21st Floor | ||
New York, NY 10022 | ||
Facsimile: | (646) 673-8100 | |
Attention: | Rachel Fink, Esq., Chief Legal Officer | |
with copies, which shall not constitute notice, to: | ||
Cozen OConnor | ||
1900 Market Street | ||
Philadelphia, PA 19103 | ||
Facsimile: | (215) 701-2228 | |
Attention: | Anna M. McDonough, Esq. |
(b) The third sentence of Section 18 of the Collateral Management Agreement is hereby deleted in its entirety and the following is substituted therefor:
The Collateral Manager irrevocably consents to the service of any and all process in any action or proceeding by the mailing of certified mail, return receipt requested, or delivery requiring signature and proof of delivery of copies of such initial process to it at c/o Fortress Investment Group LLC, 1345 Avenue of the Americas, 46th Floor, New York, New York 10105, Attention: Rick Noble.
6. Successors and Assigns. This Agreement is binding upon and shall inure to the benefit of the heirs, successors and assigns of the parties.
7. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York applicable to agreements made and to be performed entirely within such State, without regard to the conflicts of law principles of such State.
8. Submission to Jurisdiction. Each of the Existing Collateral Manager and the Successor Collateral Manager irrevocably and unconditionally submits to the exclusive jurisdiction of (i) the Supreme Court of the State of New York, New York County, and (ii) the United States District Court for the Southern District of New York for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. Each of the Existing Collateral Manager and the Successor Collateral Manager agrees to commence any such action, suit or proceeding either in the United States District Court for the Southern District of New York or if such suit, action or other proceeding may not be brought in such court for jurisdictional reasons, in the Supreme Court of the State of New York, New York County. Each of the Existing Collateral Manager and the Successor Collateral Manager irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in (i) the Supreme Court of the State of New York, New York County, or (ii) the United States District Court for the Southern District of New York, and hereby and thereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.
9. Waiver of Jury Trial. Each of the Existing Collateral Manager, the Successor Collateral Manager and the Issuer irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect to any litigation directly or indirectly arising out of, under or in connection with this Agreement or any transaction contemplated hereby. Each of the Existing Collateral Manager, the Successor Collateral Manager and the Issuer hereby (i) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce that foregoing waiver and (ii) acknowledges that it and the other parties have been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section 9.
10. Headings. The Article and Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.
11. Counterparts. This Agreement may be executed in one or more counterparts (including by facsimile or portable document format (PDF)), all of which shall be considered an original copy of one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties hereto and delivered to the other parties.
12. Entire Agreement. This Agreement, together with the Transaction Agreement, constitutes the entire agreement among the parties hereto with respect to the subject matter contained in this Agreement and supersedes all prior agreements, understandings and negotiations between the parties.
13. Full Force and Effect. As modified under this Agreement, all the terms and conditions of the Assigned Agreements shall remain in full force and effect.
14. Transaction Agreement. The terms of the Transaction Agreement, including but not limited to the Existing Collateral Managers representations, warranties, covenants, agreements and
indemnities shall not be superseded hereby, but shall remain in full force and effect to the full extent provided therein. In the event of any direct conflict between the terms of the Transaction Agreement and this Agreement, the terms of this Agreement shall govern.
15. Amendments. This Agreement shall not be modified or amended, except by an instrument in writing executed and delivered on behalf of each of the parties hereto and upon the receipt of written confirmation from each Rating Agency (as defined in the Collateral Management Agreement) that such amendment will not cause the reduction or withdrawal of its then current ratings of any class of Rated Notes (as defined in the Collateral Management Agreement).
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Assignment and Assumption Agreement as of the day and year first above written.
COHEN & COMPANY FINANCIAL MANAGEMENT, LLC, as Existing Collateral Manager | ||
By: |
| |
Name: Joseph W. Pooler | ||
Title: Chief Financial Officer | ||
ATP MANAGEMENT LLC, as Successor Collateral Manager | ||
By: |
| |
Name: | ||
Title: | ||
ALESCO PREFERRED FUNDING [ ], LTD., the Issuer | ||
By: |
| |
Name: | ||
Title: |
Exhibit B
REQUEST FOR CONSENT
Majority-in-Interest of the First Tier Preferred Shareholders
Reference is made to the Indenture (as amended, modified, waived, supplemented or restated from time to time, the Indenture), dated as of , by and among Alesco Preferred Funding Ltd., as Issuer (the Issuer), Alesco Preferred Funding , LLC, as Co-Issuer (the Co-Issuer) and [LaSalle Bank National Association], a national banking association organized under the laws of the United States, as Trustee (Trustee); and the Collateral Management Agreement, dated as of , 20 by and between the Issuer and Cohen & Company Financial Management, LLC, a Delaware limited liability company, as Collateral Manager (the Collateral Manager or the Existing Collateral Manager) (such agreement as amended, modified, waived, supplemented or restated from time to time, the Collateral Management Agreement). Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Indenture and the Collateral Management Agreement.
This request seeks the consent of a majority of the interests of the holders of the First Tier Preferred Shares of the Issuer to (i) the assignment of the Collateral Managers rights, obligations and duties under the Collateral Management Agreement, in their entirety, to ATP Management, LLC, a Delaware limited liability company (together with its successors and assigns, the Successor Collateral Manager), pursuant to the Assignment and Assumption Agreement, by and among the Existing Collateral Manager, the Successor Collateral Manager and the Issuer, substantially in the form attached hereto as Exhibit A and (ii) the execution by the Issuer of the Assignment and Assumption Agreement (clauses (i) and (ii) collectively, the Proposal).
In connection therewith, you are requested to approve or reject the Proposal by completing the Ballot form attached hereto as Exhibit B. Completed forms must be returned to Joseph Pooler via facsimile 215.701.8280 at the number set forth in such form no later than , 2010 at 4 p.m., eastern time.
COHEN & COMPANY | ||||||
FINANCIAL MANAGEMENT, LLC | ||||||
Date: , 2010 | By: |
|
EXHIBIT A
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
(attached)
EXHIBIT B
BALLOT
COHEN & COMPANY FINANCIAL MANAGEMENT LLC
Cira Center
2929 Arch Street
17th Floor
Philadelphia, PA 19104
Facsimile: 215-701-8280
Ladies and Gentlemen:
Reference is hereby made to that certain (i) Indenture dated as of , 20 (as amended, modified or supplemented from time to time, the Indenture), by and among ALESCO PREFERRED FUNDING , LTD., as Issuer, ALESCO PREFERRED FUNDING , LLC, as Co-Issuer, and LASALLE BANK NATIONAL ASSOCIATION, as Trustee and (ii) Request for Consent of a Majority-in-Interest of the First Tier Preferred Shareholders dated as of , 2010 (the Request for Consent) from Cohen & Company Financial Management, LLC. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Indenture or the Request for Consent, as applicable.
This is to certify that the Person identified below on Addendum I was a First Tier Preferred Shareholder as of , 2010 (the Record Date), of the number of First Tier Preferred Shares specified below.
IN ADDITION TO COMPLETING THIS BALLOT AND COMPLETING AND SIGNING THE PROOF OF OWNERSHIP FORM ATTACHED HERETO AS ADDENDUM I, PLEASE CLEARLY INSERT THE NUMBER OF FIRST TIER PREFERRED SHARES THAT YOU HOLD AND/OR ARE AUTHORIZED TO VOTE.
NUMBER OF FIRST TIER PREFERRED SHARES HELD:
FIRST TIER PREFERRED SHARES:
CUSIP:
The undersigned Holder of the above referenced First Tier Preferred Shares as of the Record Date ([ ]) hereby (please check ONE only):
consents to the Proposal.
objects to the Proposal.
THE ABOVE VOTES MAY BE REVOKED IN A WRITING RECEIVED BY THE TRUSTEE BY 5:00 P.M. (NEW YORK CITY TIME) ON , 2010, AT WHICH TIME ALL BALLOTS NOT REVOKED SHALL BECOME IRREVOCABLE.
Addendum I
First Tier Preferred Shares
of
ALESCO PREFERRED FUNDING , LTD.
ALESCO PREFERRED FUNDING , LLC
PROOF OF OWNERSHIP
(First Tier Preferred Shares)
Registered Holder: |
|
|||
Signature of Registered Holder: |
|
|||
Registered Holder contact name: |
|
|||
Registered Holder contact number: |
|
|||
Registered Holder e-mail address: |
|
|||
CUSIP: |
|
|||
Number of First Tier Preferred Shares: |
|
|||
Date: |
|
|||
MEDALLION GUARANTEE: |
|
Exhibit C
REQUEST FOR CONSENT
Reference is made to the Indenture (as amended, modified, waived, supplemented or restated from time to time, the Indenture), dated as of December 15, 2005, by and among Alesco Preferred Funding IX, Ltd., as Issuer (the Issuer), Alesco Preferred Funding IX, Inc., as Co-Issuer (the Co-Issuer), and U.S. Bank National Association, a national banking association organized under the laws of the United States, as Trustee (Trustee); the Collateral Management Agreement, dated as of December 15, 2005, by and between the Issuer and Cohen Bros. Financial Management, LLC, a Delaware limited liability company (now known as Cohen & Company Financial Management, LLC), as Collateral Manager (the Collateral Manager or the Existing Collateral Manager) (such agreement as amended, modified, waived, supplemented or restated from time to time, the Collateral Management Agreement). Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Indenture and the Collateral Management Agreement.
This request seeks the consent of the Issuer to (i) the assignment by the Collateral Manager of the Collateral Management Agreement to ATP Management, LLC, a Delaware limited liability company (together with its successors and assigns, the Successor Collateral Manager), pursuant to the Assignment and Assumption Agreement, by and among the Existing Collateral Manager, the Successor Collateral Manager and the Issuer, substantially in the form attached hereto as Exhibit A and (ii) the execution by the Issuer of the Assignment and Assumption Agreement (clauses (i) and (ii) collectively, the Proposal).
In connection therewith, you are requested to approve or reject the Proposal by completing the Issuer Consent form attached hereto as Exhibit B. Completed forms must be returned to Joseph Pooler via facsimile at the number set forth in such form no later than May __, 2010 at 4:00 p.m., New York City time.
COHEN & COMPANY | ||||
FINANCIAL MANAGEMENT, LLC | ||||
Date: May , 2010 | By: |
|
2
EXHIBIT A
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
(attached)
3
EXHIBIT B
ISSUER CONSENT
ALESCO PREFERRED FUNDING IX, LTD.
Cira Center
2929 Arch Street
17th Floor
Philadelphia, PA 19104
Facsimile: 215-701-8280
Attention: Joseph Pooler
Ladies and Gentlemen:
Reference is hereby made to that certain (i) Indenture dated as of December 15, 2005 (as amended, modified or supplemented from time to time, the Indenture), by and among ALESCO PREFERRED FUNDING IX, LTD., as Issuer, ALESCO PREFERRED FUNDING IX, INC., as Co-Issuer, and U.S. BANK NATIONAL ASSOCIATION, as Trustee, and (ii) Request for Consent of Issuer dated as of May __, 2010 (the Request for Consent) from the Issuer. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Indenture or the Request for Consent, as applicable.
The undersigned Issuer hereby (please check ONE only):
consents to the Proposal
objects to the Proposal
ALESCO PREFERRED FUNDING IX, LTD., as Issuer | ||
By: |
||
Name: | ||
Title: |
4
Exhibit D
ESCROW AGREEMENT
This Escrow Agreement (this Agreement) is made this day of July, 2010, by and among ATP Management LLC, a limited liability company organized under the laws of the State of Delaware (the Collateral Manager), Cohen & Company Financial Management, LLC, a limited liability company organized under the laws of the State of Delaware (the Service Provider), and TD Bank, N.A., a national banking association, as escrow agent (the Escrow Agent).
WHEREAS, the Collateral Manager and the Service Provider are parties to that certain Services Agreement dated as of the date hereof (the Services Agreement) pursuant to which the Collateral Manager has retained the services of the Service Provider to deliver certain reports for the benefit of the Collateral Manager in fulfilling its obligations under those certain Collateral Management Agreements and Collateral Administration Agreements listed on Exhibit A hereto (which Exhibit A may be amended by the parties from time to time to include additional Collateral Management Agreements and Collateral Administration Agreements, each an Additional Agreement and together with the agreements listed on Exhibit A hereto, the Agreements); and
WHEREAS, as set forth more fully herein, the Collateral Manager has deposited the Initial Escrow Deposit (as hereinafter defined) with the Escrow Agent to secure the payment of the Service Fee (as defined in the Services Agreement).
NOW, THEREFORE, in consideration of the mutual promises and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
1. Establishment of the Escrow Fund.
1.1 Upon the execution and delivery of this Agreement, the Collateral Manager shall deposit with the Escrow Agent the sum of Eleven Million Seven Hundred Twenty Six Thousand Eight Hundred and Eleven Dollars ($11,726,811) (the Initial Escrow Deposit) to secure the payment of the Service Fee payable under the Services Agreement.
1.2 In connection with the closing pursuant to which any Additional Agreement is sold, assigned, transferred and conveyed to the Collateral Manager in accordance with the terms and conditions of the Master Transaction Agreement dated as of July , 2010, by and among the Service Provider, Cohen & Company Inc. and the Collateral Manager, the Collateral Manager shall deposit the sums identified on Exhibit B to secure the payment of the Service Fee payable under the Services Agreement.
1.3 Deposits made in accordance with Section 1.1 and Section 1.2 as from time to time invested and reinvested as herein provided, less any payments or distributions pursuant to Article 3, are herein called the Escrow Fund. Any amounts earned from the investment of the Escrow Fund (including interest, gains, amounts earned from investment of the interest earned on the Escrow Fund and other earnings realized with respect thereto) are herein called Escrow Income and shall be deemed to be a part of the Escrow Fund. The Escrow Agent will hold, invest and dispose of the Escrow Fund, and any accretions thereto or income with respect thereto, in accordance with the terms and conditions hereof.
1.4 The parties hereto acknowledge, that for federal, state and local income tax purposes, the Escrow Income earnings on the investment of the Escrow Fund shall be the income of the Collateral Manager and shall be reportable by the Collateral Manager on its applicable tax returns.
5
The parties agree that, for tax reporting purposes, all interest and other income from investment of the Escrow Fund shall, as of the end of each calendar year and to the extent required by the Internal Revenue Service (IRS) and other applicable state and local tax agencies, be reported as having been earned by the Collateral Manager whether or not such income was disbursed during such calendar year.
1.5 The Escrow Agent shall provide the Collateral Manager with such information or reports as are required by the Internal Revenue Code of 1986, as amended (the Code), or state or local law, including, but not limited to, IRS Form 1099-INT, within the time prescribed by the Code or the applicable state or local law. The Collateral Manager shall be responsible for paying taxes (including any penalties and interest thereon) on all interest earned in the Escrow Fund and for filing all necessary tax returns with respect to such income. Neither the Service Provider Manager nor the Escrow Agent shall have any obligation to file or prepare any tax returns or prepare any other reports for any taxing authorities concerning matters covered by this Escrow Agreement. The Collateral Manager shall indemnify, defend and hold harmless the Service Provider and the Escrow Agent from and against any tax, late payment, interest, penalty or other cost or expense that may be assessed against the Service Provider or the Escrow Agent on or with respect to the Escrow Fund and the investment thereof.
2. Investment of the Escrow Fund. The Escrow Agent shall invest and reinvest all of the Escrow Fund and Escrow Income in any of the following as instructed by the Collateral Manager and, in the absence of instructions from the Collateral Manager, in those items described in Section 2.5:
2.1 interest-bearing savings or similar accounts of the Escrow Agent or national banks or corporations endowed with trust powers having capital and surplus in excess of $100,000,000;
2.2 obligations issued or guaranteed by the United States of America or any agency or instrumentality thereof;
2.3 certificates of deposit of or accounts with the Escrow Agent or national banks or corporations endowed with trust powers having capital and surplus in excess of $100,000,000;
2.4 commercial paper at the time of investment rated A-1 by Standard & Poors Corporation or Prime-1 by Moodys Investors Service, Inc. (the Escrow Agent having no liability to determine or inquire into the rating of said investment); or
2.5 the Goldman Sachs Treasury Obligations Fund (Service Shares).
3. Procedures with Respect to Release of Funds.
3.1 General. Beginning on July 31, 2010 and continuing on the last day of each month thereafter until the earlier of (i) the Termination Date (as hereinafter defined), or (ii) the time at which the balance of funds within the Escrow Fund equals zero, the Escrow Agent shall automatically release to the Service Provider the amounts listed on Exhibit C as the Monthly Service Fee. The Service Provider and the Collateral Manager shall update Exhibit C to include any Additional Agreement.
3.2 Release upon Expiration or Termination. Upon the earlier expiration or termination of the Services Agreement or this Agreement, the Escrow Agent shall return all remaining funds in the Escrow Fund, including Escrow Income, to the Collateral Manager.
3.3 Joint Written Instructions. Upon receipt at any time or from time to time by the Escrow Agent of joint written instructions from the Collateral Manager and the Service Provider
6
directing that a payment be made to the Service Provider, the Escrow Agent shall, within five (5) days of the receipt of such instructions, deliver the portion of the Escrow Fund specified in such instructions to the party specified in such instructions.
3.4 Account Losses. Any loss or expenses incurred as a result of an investment or any action of the Escrow Agent, including but not limited to any error of judgment, mistake, negligence or misconduct (Account Losses), will be borne by the Escrow Fund, and the Collateral Manager shall have no obligation to make any additional deposits into the Escrow Fund on account of any such Account Losses.
3.5 Quarterly Escrow Income Release. Beginning on September 30, 2010 and continuing for each calendar quarter thereafter until the earlier of (i) the Termination Date, or (ii) the time at which the balance of funds within the Escrow Fund equals zero, the Escrow Agent shall automatically release to the Collateral Manager all Escrow Income earned by the Escrow Fund during the calendar quarter no later than the second business day immediately following the end of such quarter.
4. Termination. This Agreement shall terminate upon the earliest to occur of the following: (i) February 22 2013; and (ii) distribution of all of the Escrow Fund; or (iii) termination of Service Agreement.
5. Duties of the Escrow Agent.
5.1 Duties Limited. The Escrow Agent shall perform only the duties expressly set forth herein and shall not be liable, except for the performance of such duties and obligations as are specifically set forth in this Agreement, and no further duties or responsibilities shall be implied. The Escrow Agent shall have no liability under and no duty to inquire as to the provisions of any agreement other than this Agreement, including, without limitation, the Services Agreement. The Escrow Agent shall have no duty to solicit any payments that may be due it hereunder.
5.2 Reliance. The Escrow Agent may rely upon, and shall be protected in acting or refraining from acting upon, any written notice, instruction or request furnished to it hereunder and believed by it to be genuine and to have been signed or presented by the proper party or parties. The Escrow Agent shall be under no duty to inquire into or investigate the validity, accuracy or content of any such document.
5.3 Good Faith. The Escrow Agent shall not be liable for any action taken or omitted by it in good faith, except to the extent that a court of competent jurisdiction determines that the Escrow Agents gross negligence, bad faith or willful misconduct was the cause of any loss to the Collateral Manager or the Service Provider. The Escrow Agent may execute any of its powers and perform any of its duties hereunder directly or through agents or attorneys (and shall be liable only for the careful selection of any such agent or attorney) and may consult with counsel, accountants and other skilled persons to be selected and retained by it. The Escrow Agent shall not be liable for anything done, suffered or omitted in good faith by it in accordance with the advice or opinion of any such counsel, accountants or other skilled persons. In the event that the Escrow Agent shall be uncertain as to its duties or rights hereunder or shall receive instructions, claims or demands from any party hereto which, in its opinion, conflict with any of the provisions of this Escrow Agreement, it shall be entitled to refrain from taking any action and its sole obligation shall be to keep safely all property held in escrow until it shall be directed otherwise in writing by all of the other parties hereto or by a final order or judgment of a court of competent jurisdiction. Anything in this Agreement to the contrary notwithstanding, in no event shall the Escrow Agent be liable for special, indirect or consequential loss or damage of any kind whatsoever
7
(including but not limited to lost profits), even if the Escrow Agent has been advised of the likelihood of such loss or damage and regardless of the form of action.
5.4 Indemnification of Escrow Agent. The Service Provider shall indemnify the Escrow Agent and hold it harmless against any loss, liability or expense arising out of or in connection with this Agreement, including the costs and expenses incurred in defending and analyzing any such claim or potential claim of liability, except to the extent incurred as a result of gross negligence, bad faith or willful misconduct on the part of the Escrow Agent. The Escrow Agent may consult with its own counsel, and shall have full and complete authorization and protection for any action taken or suffered in good faith and in accordance with the opinion of such counsel.
6. Resignation and Termination of the Escrow Agent.
6.1 Resignation. The Escrow Agent may resign at any time by giving thirty (30) days prior written notice of such resignation to the Collateral Manager and the Service Provider. Thereafter, the Escrow Agent shall have no further obligation hereunder, except to hold the Escrow Fund as depository. In such event the Escrow Agent shall not take any action until the Collateral Manager and the Service Provider have jointly designated a banking corporation, trust company, attorney or other person as successor Escrow Agent. Upon receipt of such joint instructions, the Escrow Agent shall promptly deliver the Escrow Fund to such successor Escrow Agent and shall thereafter have no further obligations hereunder.
6.2 Termination. The Collateral Manager and the Service Provider together may terminate the appointment of the Escrow Agent hereunder upon a joint written notice specifying the date upon which such termination shall take effect. In the event of such termination, the Collateral Manager and the Service Provider shall within thirty (30) days of such notice jointly appoint a successor Escrow Agent (the Successor Escrow Agent). Upon the Successor Escrow Agents execution of this Agreement (or an agreement substantially similar to this Agreement), the Escrow Agent shall promptly deliver to such Successor Escrow Agent the Escrow Fund and Escrow Income and the Successor Escrow Agent shall thereupon be bound by all of the provisions hereof.
7. Miscellaneous.
7.1 Fees of Escrow Agent. As compensation for its services to be rendered under this Agreement the Escrow Agent shall receive an annual fee in the amount of $2,500, the first such annual fee to be payable upon the execution hereof, and the Escrow Agent shall also be reimbursed upon request for all reasonable out-of-pocket expenses, disbursements and advances, including reasonable fees of outside counsel, if any, incurred or made by it in connection with the carrying out of its duties under this Agreement. The Service Provider shall bear sole responsibility for any such compensation and expenses of the Escrow Agent. Without limiting Section 5.4 hereof, the Escrow Agent shall not deduct from, or charge against, the Escrow Fund any fees for the performance of its duties hereunder.
7.2 Taxpayer Identification Number. Each of the parties hereto will provide Escrow Agent with a completed and duly executed form W-8 or W-9, as applicable.
7.3 Notices. Any notice or other communication required or which may be given hereunder shall be in writing and shall be sent by facsimile transmission or sent by certified, registered or overnight mail, postage prepaid, and shall be deemed given when sent by facsimile transmission or if mailed, five (5) days after the date of mailing, as follows:
8
(i) | if to the Collateral Manager, to: | |||||
c/o Fortress Investment Group LLC 1345 Avenue of the Americas, 46th Floor New York, New York 10105 | ||||||
Telephone: Facsimile: Attention: |
(212) 479-1505 (212) 798-6090 Rick Noble | |||||
with a copy, which shall not constitute notice, to: | ||||||
Joshua Pack Fortress Investment Group 10250 Constellation Blvd., Suite 2350 Los Angeles, CA 90067 | ||||||
Telephone: Facsimile: |
(310) 228-3015 (310) 228-3031 | |||||
Joel A. Holsinger Fortress Investment Group LLC 400 Galleria Parkway Suite 1500 Atlanta, GA 30339 | ||||||
Telephone: Facsimile: |
(678) 385-5905 (678) 550-9105 | |||||
Hunton & Williams LLP 600 Peachtree Street, N.E., Suite 4100 Atlanta, GA 30308 | ||||||
Facsimile: Attention: |
(404) 602-8669 John R. Schneider, Esq. | |||||
Hunton & Williams LLP Riverfront Plaza, East Tower 951 East Byrd Street Richmond, VA 23219-4074 | ||||||
Facsimile: Attention: | (804) 343-4833 S. Gregory Cope, Esq. | |||||
(ii) | if to the Service Provider, to: | |||||
Cohen & Company Financial Management, LLC Cira Centre 2929 Arch Street, 17th Floor Philadelphia, PA 19103 | ||||||
Facsimile: Attention: |
(215) 701-8282 Joseph Pooler, Chief Financial Officer |
9
Cohen & Company Financial Management, LLC 135 East 57th Street, 21st Floor New York, NY 10022 | ||||||
Facsimile: Attention: | (646) 673-8100 Rachael Fink, Esq., General Counsel | |||||
with a copy, which shall not constitute notice, to: | ||||||
Cozen OConnor 1900 Market Street Philadelphia, PA 19103 | ||||||
Facsimile: Attention: | (215) 701-2228 Anna M. McDonough, Esq. | |||||
(iii) | if to the Escrow Agent, to: | |||||
Stephen R. Schaaf, Vice President TD Wealth Management Institutional Trust 1006 Astoria Blvd. Cherry Hill, NJ 08034 Phone - (856) 685-5113 / (888) 751-9000 ext. 236-5113 Fax - (856) 533-7136 |
Any party may by notice given in accordance with this Section 7.3 to the other parties designate another address or person for receipt of notice.
7.4 Entire Agreement. This Agreement is entered into and delivered pursuant to the Services Agreement and contains the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements, written or oral, with respect thereto.
7.5 Waivers and Amendments. This Agreement may be amended, modified, superseded, canceled, renewed or extended, and the terms and conditions hereof may be waived, only by a written instrument signed by the parties hereto, or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right, power or privilege hereunder, nor any single or partial exercise of any right, power or privilege hereunder, preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder.
7.6 Governing Law. This Agreement shall be governed, including as to validity, interpretation and effect, by, and construed in accordance with, the laws of the State of New York. Each party to this Agreement irrevocably and unconditionally submits to the exclusive jurisdiction of (a) the Supreme Court of the State of New York, New York County, and (b) the United States District Court for the Southern District of New York, for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each party to this Agreement agrees to commence any such action, suit or proceeding either in the United States District Court for the Southern District of New York or if such suit, action or other proceeding may not be brought in such court for jurisdictional reasons, in the Supreme Court of the State of New York, New York County. Each party to this Agreement further agrees that service of any process, summons, notice or document by U.S. registered mail to such partys respective address set forth above shall be effective service of process for any action, suit or proceeding in New York with respect to any matters to which it has submitted to jurisdiction in this Section 7.6. Each of the parties to this Agreement irrevocably and unconditionally
10
waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in (i) the Supreme Court of the State of New York, New York County, or (ii) the United States District Court for the Southern District of New York, and hereby and thereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.
7.7 Waiver of Jury Trial. Each party hereto waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect to any litigation directly or indirectly arising out of, under or in connection with this Agreement or any transaction contemplated hereby. Each party hereto (i) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (ii) acknowledges that it and the other parties have been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section 7.7.
7.8 Assignment. This Agreement shall not be assignable by any party hereto without the prior written consent of the other parties hereto, which consent shall not be unreasonably withheld. This Agreement shall inure to the benefit of and be binding upon the Collateral Manager, the Service Provider and the Escrow Agent and their respective permitted successors and assigns.
7.9 Further Assurances. Each of the parties shall execute such documents and other papers and take such further actions as may be reasonably required to carry out the provisions hereof and the transactions contemplated hereby.
7.10 Construction and Interpretation. All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the identity of the person or persons may require. The parties acknowledge and agree that this Agreement has been freely negotiated and shall be deemed to have been drafted by the parties jointly. Accordingly, no court should construe any provision for or against any party as a result of such party being involved in the drafting of this Agreement.
7.11 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. Counterparts of this Agreement (or applicable signature pages hereof) that are manually signed and delivered by facsimile transmission or electronic transmission in portable document format shall be deemed to constitute signed original counterparts hereof and shall bind the parties signing and delivering in such manner.
[SIGNATURE PAGE FOLLOWS]
11
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
COLLATERAL MANAGER: | ||||
ATP MANAGEMENT LLC | ||||
By: |
| |||
Name: | ||||
Title: | ||||
SERVICE PROVIDER: | ||||
COHEN & COMPANY FINANCIAL MANAGEMENT, LLC | ||||
By: |
| |||
Joseph W. Pooler, CFO | ||||
ESCROW AGENT: | ||||
TD BANK, NA: | ||||
By: |
| |||
Name: | Stephen R. Schaaf | |||
Title: | Vice President |
12
Exhibit A
Agreements
Collateral Management Agreement, dated as of March 15, 2006, by and between Alesco Preferred Funding X, Ltd. and Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC).
Collateral Management Agreement, dated as of June 29, 2006, by and between Alesco Preferred Funding XI, Ltd. and Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC).
Collateral Management Agreement, dated as of October 12, 2006, by and between Alesco Preferred Funding XII, Ltd. and Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC).
Collateral Management Agreement, dated as of November 30, 2006, by and between Alesco Preferred Funding XIII, Ltd. and Cohen & Company Financial Management, LLC.
Collateral Management Agreement, dated as of December 21, 2006, by and between Alesco Preferred Funding XIV, Ltd. and Cohen & Company Financial Management, LLC.
Collateral Management Agreement, dated as of March 29, 2007, by and between Alesco Preferred Funding XV, Ltd. and Cohen & Company Financial Management, LLC.
Collateral Management Agreement, dated as of June 28, 2007, by and between Alesco Preferred Funding XVI, Ltd. and Cohen & Company Financial Management, LLC.
Collateral Management Agreement, dated as of October 30, 2007, by and between Alesco Preferred Funding XVII, Ltd. and Cohen & Company Financial Management, LLC.
Collateral Administration Agreement, dated as of March 15, 2006, by and among Alesco Preferred Funding X, Ltd., Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC) and U.S. Bank National Association.
Collateral Administration Agreement, dated as of June 29, 2006, by and among Alesco Preferred Funding XI, Ltd., Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC) and U.S. Bank National Association.
Collateral Administration Agreement, dated as of October 12, 2006, by and among Alesco Preferred Funding XII, Ltd., Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC) and U.S. Bank National Association.
Collateral Administration Agreement, dated as of November 30, 2006, by and among Alesco Preferred Funding XIII, Ltd., Cohen & Company Financial Management, LLC and Wells Fargo Bank, National Association.
Collateral Administration Agreement, dated as of December 21, 2006, by and among Alesco Preferred Funding XIV, Ltd., Cohen & Company Financial Management, LLC and U.S. Bank National Association.
Collateral Administration Agreement, dated as of March 29, 2007, by and among Alesco Preferred Funding XV, Ltd., Cohen & Company Financial Management, LLC and LaSalle Bank National Association.
Collateral Administration Agreement, dated as of June 28, 2007, by and among Alesco Preferred Funding XVI, Ltd., Cohen & Company Financial Management, LLC and U.S. Bank National Association.
Collateral Administration Agreement, dated as of October 30, 2007, by and among Alesco Preferred Funding XVII, Ltd., Cohen & Company Financial Management, LLC and Wells Fargo Bank, National Association.
A-1
Exhibit B
Additional Agreements Deposit to Escrow Fund
Additional Agreement |
Escrowed Amount* | Monthly Service Fee | ||||||
Alesco I Collateral Management Agreement and Collateral Administration Agreement |
$ | 502,423 | $ | 13,956 | ||||
Alesco II Collateral Management Agreement and Collateral Administration Agreement |
$ | 538,236 | $ | 14,951 | ||||
Alesco III Collateral Management Agreement and Collateral Administration Agreement |
$ | 521,115 | $ | 14,475 | ||||
Alesco IV Collateral Management Agreement and Collateral Administration Agreement |
$ | 952,747 | $ | 26,465 | ||||
Alesco V Collateral Management Agreement and Collateral Administration Agreement |
$ | 908,056 | $ | 25,224 | ||||
Alesco VI Collateral Management Agreement and Collateral Administration Agreement |
$ | 1,585,082 | $ | 44,030 | ||||
Alesco VII Collateral Management Agreement and Collateral Administration Agreement |
$ | 778,128 | $ | 21,615 | ||||
Alesco VIII Collateral Management Agreement and Collateral Administration Agreement |
$ | 1,737,437 | $ | 48,262 | ||||
Alesco IX Collateral Management Agreement and Collateral Administration Agreement |
$ | 1,858,543 | $ | 51,626 |
* The Escrowed Amount shall be reduced by the amount paid by the Collateral Manager to the Service Provider in accordance with Section 3 (b) of the Services Agreement.
B-1
Exhibit C
Monthly Fee Schedule
Agreement |
Monthly Service Fee | |||
Alesco X Collateral Management Agreement and Collateral Administration Agreement |
$ | 79,656 | ||
Alesco XI Collateral Management Agreement and Collateral Administration Agreement |
$ | 52,654 | ||
Alesco XII Collateral Management Agreement and Collateral Administration Agreement |
$ | 53,924 | ||
Alesco XIII Collateral Management Agreement and Collateral Administration Agreement |
$ | 35,768 | ||
Alesco XIV Collateral Management Agreement and Collateral Administration Agreement |
$ | 59,429 | ||
Alesco XV Collateral Management Agreement and Collateral Administration Agreement |
$ | 42,641 | ||
Alesco XVI Collateral Management Agreement and Collateral Administration Agreement |
$ | 39,260 | ||
Alesco XVII Collateral Management Agreement and Collateral Administration Agreement |
$ | 14,953 |
1
Exhibit E
VOTING AGREEMENT
THIS VOTING AGREEMENT (this Agreement) is made and entered into as of July [__], 2010 between ATP Management LLC, a Delaware limited liability company (ATP), and Cohen Brothers LLC, a Delaware limited liability company (Cohen), which is a securityholder, either directly or through Affiliates, of each of the entities set forth on Exhibit A hereto (each, an Issuer and collectively, the Issuers).
WITNESSETH:
WHEREAS, pursuant to that certain Master Transaction Agreement (the MTA) dated as of July [ ], 2010 by and among ATP, Cohen & Company Inc., a Maryland corporation (the Parent), and Cohen & Company Financial Management LLC, a Delaware limited liability company (Cohen Financial), ATP has agreed to acquire each of the collateral manager agreements listed on Exhibit B hereto (each, a Collateral Management Agreement and collectively, the Collateral Management Agreements) whereby Cohen Financial provides the services specified therein with respect to obligations issued by the respective Issuers pursuant to the applicable Indenture (as defined below);
WHEREAS, Cohen is an Affiliate of the Parent and Cohen Financial and, as such, will receive economic benefits from the transactions contemplated by the MTA;
WHEREAS, as a condition to the willingness of ATP to enter into the MTA and as an inducement and in consideration therefor, Cohen has agreed to enter into this Agreement; and
WHEREAS, Cohen or one of its Affiliates is the beneficial owner (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the Exchange Act)) of such number of shares (or options or warrants to acquire such number of shares or derivatives which convey voting rights) of voting securities of each of the Issuers as indicated on Schedule 1.1 (the Securities) to the Proxy (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the parties hereto agree as follows:
1. Defined Terms. The following terms used herein have the meanings set forth below:
1.1 Affiliate shall mean, as to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Person. For purposes hereof, the term control means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through ownership of equity interests, by contract or otherwise.
1.2 Competing Transaction shall mean any of the following involving an Issuer:
(i) any solicitation in opposition to the approval of the MTA and consummation of the transactions contemplated thereby;
(ii) any solicitation to approve the assignment and sale of any of the Collateral Manager Agreement to any person or entity other than ATP; or
(iii) any public announcement of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing.
1.3 Effective Date means July [ ], 2010.
2
1.4 Expiration Date means the last date upon which any of the Collateral Management Agreements are in effect.
1.5 Indenture means any of the indentures and other equivalent documents listed on Schedule 1.2 to the MTA.
1.6 New Securities means:
(a) any voting securities of any of the Issuers that Cohen purchases, or with respect to which Cohen otherwise acquires beneficial ownership (whether through the exercise of any options, warrants or other rights to purchase shares of the Issuers securities or otherwise), after the date of this Agreement and prior to the Expiration Date; and
(b) any voting securities of any of the Issuers of which Cohen becomes the beneficial owner of as a result of any change in an Issuers voting securities by reason of a dividend, stock split, split-up, recapitalization, reorganization, business combination, consolidation, exchange of shares, or any similar transaction or other change in the capital structure of an Issuer affecting such Issuers voting securities.
1.7 Opposing Proposal means any of the actions or proposals described in clauses (b), (d) and (e) of Section 2.1.
1.8 Person means any individual, corporation, association, general partnership, limited partnership, venture, trust, association, firm, organization, company, business, entity, union, society, government (or political subdivision thereof) or governmental agency, authority or instrumentality.
2. Agreement to Vote Securities and Take Certain Other Action.
2.1 Subject to the terms and conditions hereof, after the Effective Date and prior to the Expiration Date, at every meeting of the securityholders of any Issuer at which any of the following matters is considered or voted upon, and at every adjournment or postponement thereof, and on every action or approval by written consent of the securityholders of any Issuer with respect to any of the following matters, Cohen shall vote or give written consent with respect to the Securities and any New Securities:
(a) in favor of the consent to the MTA and the transactions contemplated thereby;
(b) against any Competing Transaction from any party other than ATP or an affiliate of ATP;
(c) in favor of ATP assigning, selling or transferring its whole or partial rights and obligations under the Collateral Management Agreements to any third Person;
(d) against any other action that is intended, or could reasonably be expected, to impede, interfere with, delay, postpone, discourage or materially adversely affect the MTA or any of the other transactions contemplated by the MTA;
(e) against approval of any proposal made to remove ATP as collateral manager for any reason or terminate any of the Collateral Management Agreements; and
3
(f) in favor of a successor collateral manager identified by ATP if ATP is removed as collateral manager for any reason.
2.2 After the Effective Date and prior to the Expiration Date, Cohen, as the holder of voting securities of an Issuer, shall be present, in person or by proxy, at all meetings of securityholders of an Issuer at which the matters referred to in Section 2.1 are to be voted upon so that all Securities and New Securities are counted for the purposes of determining the presence of a quorum at such meetings.
2.3 Between the Effective Date and the Expiration Date, Cohen will not (a) solicit proxies or become a participant in a solicitation (as such terms are defined in Rule 14A under the Exchange Act) with respect to an Opposing Proposal, (b) initiate a securityholders vote with respect to an Opposing Proposal or (c) become a member of a group (as such term is used in Section 13(d) of the Exchange Act) with respect to any voting securities of an Issuer with respect to an Opposing Proposal.
2.4 Notwithstanding the foregoing, nothing in this Agreement shall limit or restrict Cohen from voting in Cohens sole discretion on any matter other than the matters referred to in Section 2.1.
3. Irrevocable Proxy. Cohen has delivered to ATP a duly executed proxy in the form attached hereto as Exhibit C (the Proxy), such Proxy covering the Securities and all issued and outstanding New Securities in respect of which Cohen is the beneficial owner and is entitled to vote at each meeting of the securityholders of an Issuer (including, without limitation, each written consent in lieu of a meeting) after the Effective Date and prior to the Expiration Date. Upon the execution of this Agreement by Cohen, Cohen hereby revokes any and all prior proxies or powers of attorney given by Cohen with respect to voting of the Securities on the matters referred to in Section 2.1 and agrees not to grant any subsequent proxies or powers of attorney with respect to the voting of the Securities or New Securities on the matters referred to in Section 2.1 until after the Expiration Date.
4. Representations, Warranties and Covenants.
4.1 Cohen hereby represents, warrants and covenants to ATP as follows:
(a) Cohen is the beneficial owner of the Securities set forth on Schedule 1.1 to the Proxy, which to Cohens knowledge, constitutes the approximate percentages of Issuers issued and outstanding voting securities as set forth on Schedule 1.1 to the Proxy, and (ii) Cohens principal place of business is accurately set forth in Section 6.5(a).
(b) Cohen is a limited liability company duly organized and validly existing under the laws of the State of Delaware and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement. This Agreement has been duly and validly executed and delivered by Cohen and constitutes the valid and binding obligation of Cohen, enforceable against Cohen in accordance with its terms, except as may be limited by (i) the effect of bankruptcy, insolvency, conservatorship, arrangement, moratorium or other laws affecting or relating to the rights of creditors generally, or (ii) the rules governing the availability of specific performance, injunctive relief or other equitable remedies and general principles of equity, regardless of whether considered in a proceeding in equity or at law.
4.2 ATP hereby represents, warrants and covenants to Company as follows: ATP is a limited liability company duly organized and validly existing under the laws of the State of Delaware and has taken all necessary limited liability company action to authorize the execution, delivery and performance of this Agreement. This Agreement has been duly and validly executed and delivered by ATP and
4
constitutes the valid and binding obligation of ATP, enforceable against ATP in accordance with its terms, except as may be limited by (i) the effect of bankruptcy, insolvency, conservatorship, arrangement, moratorium or other laws affecting or relating to the rights of creditors generally, or (ii) the rules governing the availability of specific performance, injunctive relief or other equitable remedies and general principles of equity, regardless of whether considered in a proceeding in equity or at law.
5. Termination. This Agreement and the Proxy delivered in connection herewith and all obligations of Cohen hereunder and thereunder, shall automatically terminate and shall have no further force or effect as of the Expiration Date.
6. Miscellaneous.
6.1 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.
6.2 Binding Effect and Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any party without the prior written consent of the other party; provided, however, ATP may, in its sole discretion, assign its rights and obligations hereunder to any direct or indirect wholly-owned subsidiary of ATP or to a purchaser of all or substantially all of the assets of ATP or an assignee by merger or reorganization. Any assignment in violation of the preceding sentence shall be void. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns.
6.3 Amendment and Modification. This Agreement may not be amended, except by an instrument in writing signed on behalf of each of the parties.
6.4 Specific Performance; Injunctive Relief. Until the Expiration Date, the parties hereto acknowledge that ATP will be irreparably harmed and that there will be no adequate remedy at law for a violation of any of the covenants or agreements of Cohen set forth herein. Therefore, it is agreed that ATP shall have the right to enforce such covenants and agreements by specific performance and injunctive relief in equity, and Cohen hereby waives any and all defenses that could exist in its favor in connection with such enforcement and waives any requirement for the security or posting of any bond in connection with such enforcement. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.
6.5 Notices. All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given if delivered personally, via facsimile (which is confirmed) or sent by overnight courier (providing proof of delivery) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):
(a) | If to Cohen, to: |
Cohen Brothers LLC
c/o Cohen & Company Inc.
Circa Centre
5
2929 Arch Street
17th Floor
Philadelphia PA 19103
Facsimile: (215) 701-8282
Attention: Joseph Pooler, Chief Financial Officer
(b) | if to ATP, to: |
ATP Management LLC
c/o Fortress Investment Group LLC
1345 Avenue of the Americas, 46th Floor
New York, New York 10105
Telephone: | (212) 479-1505 |
Facsimile: | (212) 798-6090 |
Attention: | Rick Noble |
with copies, which shall not constitute notice, to:
Joel A. Holsinger
Fortress Investment Group LLC
400 Galleria Parkway
Suite 1500
Atlanta, GA 30339
Telephone: | (678) 385-5905 |
Facsimile: | (678) 550-9105 |
Joshua Pack
Fortress Investment Group
10250 Constellation Blvd., Suite 2350
Los Angeles, CA 90067
Telephone: | (310) 228-3015 |
Facsimile: | (310) 228-3031 |
Hunton & Williams LLP
600 Peachtree Street, N.E., Suite 4100
Atlanta, GA 30308
Facsimile: | (404) 602-8669 |
Attention: | John R. Schneider, Esq. |
Hunton & Williams LLP
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219-4074
Facsimile: | (804) 343-4833 |
Attention: | S. Gregory Cope, Esq. |
or to such other address as any party hereto may designate for itself by notice given as herein provided.
6
6.6 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.
6.7 No Waiver. The failure of any party hereto to exercise any right, power or remedy provided under this Agreement or otherwise available in respect hereof at law or in equity, or to insist upon compliance by any other party hereto with its obligations hereunder, and any custom or practice of the parties at variance with the terms hereof, shall not constitute a waiver by such party of its right to exercise any such or other right, power or remedy or to demand such compliance.
6.8 Further Assurances. At any time or from time to time after the date of this Agreement, the parties agree to cooperate with each other, and at the request of any other party, to execute and deliver any further instruments or documents and to take all such further action as the other party may reasonably request in order to evidence or effectuate the consummation of the transactions contemplated hereby and to otherwise carry out the intent of the parties hereunder.
6.9 Entire Agreement; No Third-Party Beneficiaries. This Agreement and the Proxy (i) constitute the entire agreement, and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter of this Agreement and the Proxy and (ii) are not intended to confer upon any person or entity other than the parties any rights or remedies.
6.10 Counterpart. This Agreement may be executed by facsimile signature and in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties.
6.11 Effect of Headings. The section headings herein are for convenience only and shall not affect the construction or interpretation of this Agreement.
6.12 No Ownership Interest. Nothing contained in this Agreement shall be deemed to vest in ATP or any of its affiliates any direct or indirect ownership or incidence of ownership of or with respect to any Securities or New Securities. Except as specifically set forth herein with respect to the voting on certain express matters, all rights, ownership and economic benefits of or relating to the Securities and New Securities shall remain vested in and belong to Cohen.
[Signature Page Follows.]
7
IN WITNESS WHEREOF, the parties have caused this Voting Agreement to be executed as of the date first above written.
ATP MANAGEMENT LLC | COHEN BROTHERS LLC | |||||
By: |
| |||||
By: |
|
Joseph W. Pooler | ||||
Name: | Chief Financial Officer | |||||
Title: |
[Signature Page to Irrevocable Proxy]
8
EXHIBIT A
Exhibit A - 1
EXHIBIT B
Exhibit B - 1
EXHIBIT C
IRREVOCABLE PROXY
The undersigned, Cohen Brothers LLC, a Delaware limited liability company (the Cohen), hereby irrevocably appoints the managing members of ATP Management LLC, a Delaware limited liability company (ATP), and each of them, or any other designee of ATP, after the Effective Date and prior to the Expiration Date as the sole and exclusive attorneys and proxies of the undersigned, with full power of substitution and resubstitution, to vote and exercise all voting rights (to the full extent that the undersigned is entitled to do so) with respect to all of the voting securities of the Issuers (as defined in the MTA) that now are owned of record by Cohen and are owned as of any record date relevant for a vote (collectively, the Securities) in accordance with the terms of this Irrevocable Proxy. The Securities beneficially owned by Cohen as of the date of this Irrevocable Proxy are listed on Schedule 1.1 to this Irrevocable Proxy. Upon Cohens execution of this Irrevocable Proxy, any and all prior proxies given by the undersigned with respect to the voting of any Securities or New Securities on the matters referred to in the third full paragraph of this Irrevocable Proxy are hereby revoked and the undersigned agrees not to grant any subsequent proxies with respect to such matters until after the Expiration Date. Capitalized terms used herein but not otherwise defined shall have the meanings set forth in that certain Voting Agreement dated July [ ], 2010 by and between Cohen and ATP.
This Irrevocable Proxy is irrevocable, is coupled with an interest, and is granted in consideration of ATP entering into that certain Master Transaction Agreement dated as of July [ ], 2010 (the MTA) by and among ATP, Cohen & Company Inc. and Cohen Financial Management LLC and is effective until the Expiration Date.
The attorneys and proxies named above, and each of them are, hereby authorized and empowered by the undersigned, at any time after the Effective Date and prior to the Expiration Date, to act as the undersigneds attorney and proxy to vote the Securities and any New Securities, and to exercise all voting rights of the undersigned with respect to the Securities and any New Securities (including, without limitation, the power to execute and deliver written consents), at every annual, special or adjourned meeting of the securityholders of any Issuer and in every written consent in lieu of such meeting:
(a) in favor of the consent to the MTA and the transactions contemplated thereby;
(b) against any Competing Transaction from any party other than ATP or an affiliate of ATP;
(c) in favor of ATP assigning, selling or transferring its whole or partial rights and obligations under the Collateral Management Agreements to any third Person;
(d) against any other action that is intended, or could reasonably be expected, to impede, interfere with, delay, postpone, discourage or materially adversely affect the MTA or any of the other transactions contemplated by the MTA; and
(e) against approval of any proposal made to remove ATP as collateral manager for any reason or terminate any of the Collateral Management Agreements; and
(f) in favor of a successor collateral manager identified by ATP, if ATP is removed as collateral manager for any reason.
Exhibit C - 1
The attorneys and proxies named above may not exercise this Irrevocable Proxy on any other matter except as provided above. The undersigned may vote the Securities or New Securities on all other matters.
Any obligation of the undersigned hereunder shall be binding upon the successors and assigns of the undersigned.
[Signature Page Follows.]
Exhibit C - 2
This Irrevocable Proxy is coupled with an interest as aforesaid and is irrevocable.
Dated: July , 2010
COHEN BROTHERS LLC | ||
By: |
| |
Name: |
||
Title: |
[Signature Page to Irrevocable Proxy]
Exhibit C - 3
Schedule 1.1
ISSUER |
CUSIP |
SHARES HELD |
REGISTERED HOLDER | |||
ALESCO X | 01449X203 | 24,160 Preferred Shares (20,521 DTC; 3,639 Physical) | Physical Cohen Brothers, LLC DTC Royal Bank of Canada | |||
ALESCO XI | G01598104 | 17,600 Preferred Shares (10,000 DTC; 7,600 Physical) | Physical Alesco Holdings, Ltd. DTC Royal Bank of Canada | |||
ALESCO XII | 10449V207 | 17,624 Preferred Shares | Sunset Holdings, Ltd. | |||
ALESCO XIII | 014494207 | 22,950 Preferred Shares | Cohen Brothers, LLC | |||
ALESCO XIV | 014499AA5 | 20,800 First Tier Preferred Shares | Alesco Holdings, Ltd. | |||
ALESCO XV | 01449U209 | 15,600 First Tier Preferred Shares | Alesco Holdings, Ltd. | |||
ALESCO XVI | 01450E201 | 10,400 First Tier Preferred Shares | Alesco Holdings, Ltd. | |||
ALESCO XVII | 01450Y207 | 14,700 First Tier Preferred Shares | Alesco Holdings, Ltd. |
1
Exhibit F
SERVICES AGREEMENT
THIS SERVICES AGREEMENT (this Agreement) is made as of the ___th day of July, 2010, by and between ATP Management LLC, a limited liability company organized under the laws of the State of Delaware (the Collateral Manager), and Cohen & Company Financial Management LLC, a limited liability company organized under the laws of the State of Delaware (the Service Provider).
WHEREAS, the Collateral Manager is a party to those Collateral Management Agreements (the Collateral Management Agreements and Collateral Administration Agreements (Collateral Administration Agreements) listed on Exhibit A hereto (which Exhibit A may be amended by the parties from time to time (collectively, the Agreements)) by and among the Issuer, the Collateral Manager and the Trustee identified in each such Agreement;
WHEREAS, the Service Provider has experience in preparing certain Reports (as defined herein) related to the Issuers and the Collateral, which will assist the Collateral Manager in fulfilling its obligations under the Agreements;
WHEREAS, each of the Collateral Manager and the Service Provider desires that the Collateral Manager retain the services of the Service Provider to deliver the Reports for the benefit of the Collateral Manager; and
WHEREAS, the Collateral Manager has deposited the amounts identified on Exhibit B hereto as the Escrowed Amount (which amount shall be increased by the applicable amounts on Exhibit C to reflect any amendments to Exhibit A to include any additional Agreements (such amount, the Escrow Fund)) with TD Bank, N.A. (the Escrow Agent) to secure the payment of the Service Fees (as defined herein).
NOW, THEREFORE, in consideration of the mutual promises and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
Section 1. General. Except as otherwise expressly provided herein or unless the context otherwise requires, capitalized terms not otherwise defined herein shall have the meanings specified in those indentures listed on Exhibit D hereto (which Exhibit D may be amended by the parties from time to time) (each such indenture, an Indenture and together, the Indentures) or, if not defined therein, as defined in the Agreements.
Section 2. Service Provider Reports.
(a) No later than twenty-five (25) days following the last business day of each quarter during the Term (as defined herein), the Service Provider shall prepare and deliver a written report to the Collateral Manager for each of the Indentures which report shall include the Collateral Overview Report. As used herein the Collateral Overview Report means a summary, by Issuer, setting forth:
(i) | a Collateral Overview for Bank Collateral setting forth: (1) the Number of Companies, (2) Total Assets, (3) Loans/Deposits, (4) Tier-1 Ratio, (5) Total Risk Based Capital Ratio, (6) Net Income, (7) ROAA, (8) ROAE, (9) Efficiency Ratio, (10) NPLs/Loans and (11) Reserves to NPLs, for the most recent quarter end for which financial information is available; and |
2
(ii) | a Collateral Overview for Insurance Collateral setting forth: (1) Number of Companies, (2) Capitalization, (3) Admitted Assets, (4) NPW or Total Policy Revenue, (5) Combined Ratio, (6) NPW/PHS Leverage and (7) Return on Equity, for the most recent quarter end for which financial information is available. |
(b) No later than ninety (90) days following the last business day of each quarter during the Term (as defined herein), the Service Provider shall deliver a written report to the Collateral Manager for each of the Indentures which shall include: the Score for Collateral Debt Securities Report, and the Securities Watch List Report. As used herein the Score for Collateral Debt Securities Report means:
(i) | that score (1-5; with defaulted or deferring Collateral receiving a score of 6) for Bank Collateral prepared in accordance with the Service Providers internal system using the following categories: capitalization, profitability, asset quality and liquidity; and |
(ii) | that score (1-5; with defaulted or deferring Collateral receiving a score of 6) for Insurance Collateral prepared in accordance with the Service Providers internal system using certain Financial Strength Ratings and Security Ratings. |
As used herein the Securities Watch List Report means a list of certain Collateral that fails to meet certain internal tests that are consistent with the Service Providers past practice based upon a review of Profitability, Balance Sheet, Credit Quality and Capital Adequacy. In preparing the Watch List, the Service Provider may review reports of SNL Financial, LC and others.
The reports delivered in accordance with (a) and (b) above shall be referred to herein as, the Reports.
(c) The obligation of the Service Provider to deliver the Reports is subject to the Service Providers timely receipt of necessary reports and appropriate information from the applicable Issuer. To the extent that such reports and information are not timely received, the Service Provider shall notify the Collateral Manager and the Collateral Manager shall promptly request such reports and information from the applicable Issuer and shall use commercially reasonable efforts to obtain such information.
(d) The Service Provider shall follow its customary standards, policies and procedures in the performance of the Service Providers duties hereunder.
The Service Provider in performing its duties under this Agreement, shall dedicate the resources of the Alesco Portfolio Management Team (collectively, the Dedicated Resources). If, during the Term, the employment of any of the individuals who comprise the Dedicated Resources is terminated or such individuals are re-allocated to other portions of the Service Providers business, the Service Provider shall promptly replace such individual(s).
(e) Notwithstanding the foregoing, the Collateral Manager shall not be relieved of any of its duties under the Agreements, regardless of the Service Providers delivery of the Reports. In no event shall the Service Provider have any obligations under the Indenture or the Agreements or to the Issuer, the Trustee or the Collateral Administrator.
3
Section 3. Fees. In consideration of and as compensation for the preparation and delivery of the Reports and as an inducement to the Service Provider to prepare and deliver the Reports (the Service Fee):
(a) on the date hereof, for each Agreement, the Collateral Manager shall deliver an amount equal to the product of the Monthly Service Fee allocated to such Agreement on Exhibit B hereto and five (5);
(b) on the date the parties amend Exhibit A to include an additional Agreement, the Collateral Manager shall deliver an amount equal to the product of the Monthly Service Fee allocated to such Agreement on Exhibit C hereto and the number of months having passed between such date and February, 2010 (including February, 2010); and
(c) provided this Agreement has not been terminated in accordance with Section 8 herein, on the final business day of each month during the Term (defined below), on behalf of the Collateral Manager, the Escrow Agent shall automatically release from the Escrow Fund the amounts set forth on Exhibits B or C hereto, as applicable, as the Monthly Service Fee for each of the Agreements (including any Agreements which have been added to Exhibit A hereto) to the Service Provider. The Service Fees paid to the Service Provider shall in no event exceed the aggregate total of the amounts listed on Exhibits B or C under the heading Escrowed Amounts, which correspond to the Agreements listed on Exhibit A and the possible Additional Agreements. The Collateral Manager shall have no additional financial obligations to pay the Service Provider fees for the services to be performed hereunder upon deposit of the amount set forth on Exhibits B and C, as applicable, as the Escrowed Amount for each of the Agreements, including any Agreements which have been added to Exhibit A hereto.
Section 4. Expenses.
(a) Subject to Section 4(b) below, the Service Provider shall be responsible for all of the costs of preparing the Reports, including, without limitation, research and investment monitoring costs, its overhead costs and expenses, including, without limitation its employee compensation.
(b) To the extent that expenses are reimbursable by the Issuer (as set forth in the Agreements), upon request of the Service Provider, the Collateral Manager shall seek payment in full from the Issuer for such expenses incurred by the Service Provider on behalf of the Collateral Manager and the Collateral Manager, in accordance with the Indentures, shall instruct the Trustee to pay such reimbursements as directed by the Service Provider.
Section 5. Representations and Warranties.
(a) The Collateral Manager represents and warrants to the Service Provider and agrees as follows:
(i) It is duly organized, validly existing and in good standing under the laws of the State of Delaware. It has full limited liability company power and authority to enter into and perform its obligations under this Agreement and to conduct its business as currently being conducted. It is qualified to conduct its business and is in good standing in every jurisdiction in which the nature or conduct of its business requires such qualification and the failure to so qualify would reasonably be expected to have a material adverse effect on its ability to comply with or perform its obligations under this Agreement.
4
(ii) This Agreement has been duly and validly authorized, executed and delivered on behalf of it, and assuming the due authorization, execution and delivery by the Service Provider of this Agreement, is a valid and binding agreement of it enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar laws affecting creditors rights generally or by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).
(iii) The execution and delivery of this Agreement and the incurring and performance of the obligations contemplated in this Agreement by it will not conflict with, violate, breach or constitute a default under any term or provision of its formation documents, or any indenture, mortgage, deed of trust, loan agreement, or other agreement, document or instrument to which it is a party or by which it is bound, or to which any of its property or assets is subject, or any applicable law, rule, regulation, judgment, order or decree binding on the Collateral Manager or to its property or assets or other legal requirement applicable to it or to its property or assets, which conflict, violation, breach or default would reasonably be expected to have a material adverse effect on its ability to comply with or perform its obligations under this Agreement.
(iv) The Collateral Manager has complied with any applicable law having application to its business, properties and assets, the violation of which would reasonably be expected to materially and adversely affect its ability to comply with and perform its obligations under this Agreement There are no proceedings, notices of investigations or investigations pending or, to its knowledge and belief, threatened against it or any Affiliate regarding noncompliance with any applicable law, or at law or in equity, or before or by any court, any foreign, federal, state, municipal or other governmental department, commission, board, bureau, agency, or instrumentality or any other regulatory body, in which an adverse decision would reasonably be expected to adversely affect its ability to comply with or perform its obligations under this Agreement.
(v) The Collateral Manager has maintained all governmental, self regulatory and exchange licenses and approvals and has effected all filings and registrations with every regulatory body having jurisdiction over it, except as would not reasonably be expected to have an adverse effect on its ability to conduct its business or perform its obligations under this Agreement.
(vi) The foregoing representations and warranties and agreements shall be continuing during the Term, and if at any time any event shall occur which would make any of the foregoing incomplete or inaccurate, the Collateral Manager shall promptly notify the Service Provider of the occurrence of such event. The Collateral Manager shall also promptly notify the Service Provider of any breach of this Agreement by it.
(b) The Service Provider represents and warrants to the Collateral Manager and agrees as follows:
(i) The Service Provider is duly organized, validly existing and in good standing under the laws of the State of Delaware. The Service Provider has full limited liability company power and authority to enter into and perform its obligations under this Agreement and to conduct its business as currently being conducted. The Service Provider is qualified to conduct business and is in good standing in every jurisdiction in which the nature or conduct of its business requires such qualification and the failure to qualify would reasonably be expected to
5
have a material adverse effect on its ability to comply with or perform its obligations under this Agreement.
(ii) This Agreement has been duly and validly authorized, executed and delivered on behalf of the Service Provider, and assuming the due authorization, execution and delivery by the Collateral Manager of this Agreement, is a valid and binding agreement of the Service Provider enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar laws affecting creditors rights generally or by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).
(iii) The execution and delivery of this Agreement and the performance of the obligations contemplated in this Agreement by it will not conflict with, violate, breach or constitute a default under any term or provision of its formation documents, or any indenture, mortgage, deed of trust, loan agreement or other agreement, document or instrument to which it is a party or by which it is bound, or to which any of its property or assets is subject, or any applicable law, rule, regulation, judgment, order or decree binding on the Service Provider or to its property or assets or other legal requirement applicable to it or to its property or assets, which conflict, violation, breach or default would reasonably be expected to have a material adverse effect on its ability to comply with or perform its obligations under this Agreement.
(iv) The Service Provider has complied with any applicable law having application to its business, properties and assets, the violation of which would reasonably be expected to materially and adversely affect its ability to comply with and perform its obligations under this Agreement. There are no proceedings, notices of investigation or investigations pending or, to the knowledge and belief of the Service Provider, threatened against the Service Provider or any Service Provider Affiliate regarding noncompliance with any applicable law, or at law or in equity, or before or by any court, any foreign, federal, state, municipal, or other governmental department, commission, board, bureau, agency or instrumentality, or any other regulatory body, in which an adverse decision would reasonably be expected to adversely affect its ability to comply with or perform its obligations under this Agreement.
(v) The Service Provider has maintained all governmental, self-regulatory and exchange licenses and approvals and has effected all filings and registrations with every regulatory body having jurisdiction over it, except as would not reasonably be expected to have an adverse effect on its ability to conduct its business or perform its obligations under this Agreement.
(vi) The Service Provider has (a) complied with all conditions precedent, (b) provided all necessary notices and (c) obtained all required consents set forth in the Agreements in connection with the execution and delivery of this Agreement.
(vii) The foregoing representations and warranties and agreements shall be continuing during the Term, and if at any time any event shall occur which would make any of the foregoing incomplete or inaccurate, the Service Provider shall promptly notify the Collateral Manager of the occurrence of such event. The Service Provider shall also promptly notify the Collateral Manager of any breach of this Agreement by it.
Section 6. Covenants.
6
(a) Compliance with Laws. The Service Provider shall comply with any applicable law having application to its business, properties and assets, the violation of which would reasonably be expected to adversely affect its ability to comply with and perform its obligations under this Agreement. The Collateral Manager shall comply with any applicable law having application to its business, properties and assets, the violation of which would reasonably be expected to adversely affect its ability to comply with and perform its obligations under the Collateral Management Agreement.
(b) Regulatory Requirements. The Service Provider shall maintain all governmental, self-regulatory and exchange licenses and approvals and has effected all filings and registrations with every regulatory body having jurisdiction over it, except as would not reasonably be expected to have an adverse effect on its ability to conduct its business or perform its obligations under this Agreement. The Collateral Manager shall maintain all governmental, self-regulatory and exchange licenses and approvals and shall affect all filings and registrations with every regulatory body having jurisdiction over it, except as would not reasonably be expected to have an adverse effect on its ability to conduct its business or perform its obligations under this Agreement.
(c) Access. During the Term and for a period of three (3) years following the earlier expiration or termination of this Agreement, at the Collateral Managers sole expense, the Service Provider shall, and shall cause each of its Affiliates, to provide the Collateral Manager and its authorized agents, Affiliates, officers and representatives (a) reasonable access to the files, data and information used in the preparation of the Reports (Records), managers and officers of the Service Provider; provided, however, that such examinations and investigations shall be conducted during the Service Providers normal business hours and in the presence of a designated representative of the Service Provider and shall not unreasonably interfere with the operations and activities of the Service Provider; (b) copies of all Records as the Collateral Manager may reasonably request; and (c) such additional data and information relating to the services provided by the Service Provider under this Agreement, as the Collateral Manager may reasonably request.
(d) Confidentiality. In the process of preparing and delivering the Reports or otherwise in connection with this Agreement, the Service Provider may have access to Confidential Information (as hereinafter defined) of the Collateral Manager. Without limiting the applicability of any other obligation of confidentiality to which the Collateral Manager or its Affiliates may be bound, the Service Provider agrees to keep (and cause its Affiliates and its and their respective employees, agents and independent contractors to keep) any Confidential Information strictly in confidence, not to disclose it to any third party without prior written approval of the Collateral Manager and to use it only for the purposes set forth in this Agreement, except (a) as required by applicable law, in which case the Service Provider shall notify the Collateral Manager prior to disclosing such Confidential Information and shall use its commercially reasonable efforts to obtain a protective order or otherwise prevent or minimize disclosure of such Confidential Information, or (b) with the express prior written approval of the Collateral Manager. For purposes of this Agreement, Confidential Information means any confidential information with respect to the Collateral Manager or its business, including, without limitation, methods of operation, fees, costs, technology, inventions, trade secrets, know-how, software, marketing methods, plans, personnel, suppliers, competitors, markets or other specialized information or proprietary matters. The obligation of confidentiality set forth in this Section 6(d) shall not extend to: (i) information that at the time of disclosure was in the public domain or thereafter comes into the public domain without breach of this Agreement by the Service Provider or; and (ii) information that becomes known to the Service Provider from a source other than the Collateral Manager without breach of this Agreement by the Service Provider.
(e) For the avoidance of doubt, in connection with the Service Providers performance of its obligations under this Agreement, and except as otherwise expressly permitted by this
7
Agreement or as consented to by the Collateral Manager in writing, the Service Provider shall not, and shall cause its officers, employees, and agents not to take any action relating in any way to the Agreements not explicitly provided in this Agreement, including not to:
(i) | respond to any inquiry from any third persons (1) relating to the Reports or (2) addressing the Service Provider in its capacity as the former collateral manager under the Agreements (Inquiries); |
(ii) | fail to promptly provide notice of and deliver any Inquiries to the Collateral Manager; |
(iii) | make any asset management decisions for any Issuer that is a party to a Collateral Management Agreement listed on Exhibit A hereto, as amended from time to time, on behalf of the Collateral Manager; |
(iv) | represent to any person that the Service Provider is an agent of the Collateral Manager, whether under the Agreements or otherwise, or allow any person to falsely believe that the Service Provider is an agent of the Collateral Manager under the Agreements or otherwise; or |
(v) | communicate with any rating agencies regarding the securities issued under the Indentures for the Issuers that are a party to a Collateral Management Agreement listed on Exhibit A hereto, as amended from time to time. |
(f) In connection with the preparation of the Reports, the Service Provider shall promptly respond to any inquiries by the Collateral Manager relating to the preparation and delivery of the Reports, including but not limited to the methods of computation and source of data. Additionally, the Service Provider acknowledges and agrees that from time to time the Collateral Manager may make reasonable requests to consult with the Service Provider in connection with the preparation of the Reports and may request changes to the Reports as necessary or desireable, in its reasonable discretion to fulfill its obligations under the Agreements. In connection with any requested participation by the Collateral Manager in the preparation of the Reports, the Service Provide shall at all times work in good faith and use reasonable efforts to satisfy the requests of the Collateral Manager.
Section 7. Indemnity.
(a) Notwithstanding anything set forth in this Agreement to the contrary, the Service Provider assumes no responsibility under this Agreement other than to prepare and deliver the Reports in accordance with the terms of this Agreement. Notwithstanding anything to the contrary herein, the Service Provider shall not be liable to the CM Indemnified Persons (as defined below) for any expenses, losses, fines, damages, demands, charges, judgments, assessments, costs or other liabilities or claims of any nature whatsoever (collectively, Liabilities) incurred by the Collateral Manager that arise out of or in connection with the Service Providers preparation and delivery of the Reports or for any acts or omissions by the Service Provider or any Affiliate thereof under or in connection with this Agreement, except (i) by reason of acts or omissions of an Adviser Indemnified Person (as defined below) constituting bad faith, willful misconduct, gross negligence or reckless disregard in the preparation and delivery of the Reports, (ii) by reason of a violation of applicable law, (iii) by reason of any failure to timely prepare and deliver the Reports, for any reason, (iv) by reason of a breach of its representations, warranties or covenants in this Agreement or (v) by reason of any action by an Adviser Indemnified Person that is not required to be performed or permitted under the terms of this Agreement (the occurrences of the events described in subsections (i) through (v) above are collectively referred to for
8
purposes of this Section 7 as Service Provider Breaches). For avoidance of doubt, the indemnification obligations of the Service Provider set forth in this Agreement shall be in addition to the indemnification obligations set forth in Section 11(a)(i) of that certain Master Transaction Agreement dated as of July __, 2010, by and among Cohen & Company, Inc., the Collateral Manager and the Service Provider, and shall in no way limit amend, or modify the obligations set forth therein. In addition, the CM Indemnified Persons shall not be liable to the Adviser Indemnified Persons for any Liabilities incurred by the Service Provider that arise out of or in connection with any action by an Adviser Indemnified Person that is not required to be performed or permitted under the terms of this Agreement.
(b) The Collateral Manager shall defend, indemnify and hold harmless the Service Provider and each of its Affiliates and all of their respective officers, managers, directors, members, partners, employees, agents, successors and assigns thereof (Advisor Indemnified Person) from and against any Liabilities, and shall promptly reimburse the Service Provider or each Affiliate thereof for all reasonable fees and expenses (including reasonable fees and expenses of counsel) as such fees and expenses are incurred in investigating, preparing, pursuing or defending any claim, action, proceeding or investigation with respect to any pending or threatened litigation caused by, arising out of or in connection with (i) any liability, obligation or commitment, or any act or omission of the Collateral Manager, under the Agreements or the Indentures with respect to any period after the date hereof, or (ii) any action taken by, or any failure to act by, the Service Provider or any Affiliate thereof, and in each such case to the extent not constituting a Service Provider Breach; provided, however, that in no case shall the Collateral Manager be required to indemnify any Advisor Indemnified Person to the extent such Liabilities are the result of (x) the negligence, bad faith or willful misconduct of an Advisor Indemnified Person or (y) any action by an Advisor Indemnified Person that is not required to be performed or permitted under the terms of this Agreement.
(c) The Service Provider shall defend, indemnify and hold harmless the Collateral Manager and each of its Affiliates (the CM Indemnified Persons) from and against any Liabilities, and shall promptly reimburse the Collateral Manager or each Affiliate thereof for all reasonable fees and expenses (including reasonable attorneys and accountants fees and expenses) as such fees and expenses are incurred in investigating, preparing, pursuing or defending any claim, action, proceeding or investigation with respect to any pending or threatened litigation, in each case, to the extent and only to the extent that such Liabilities, fees, expenses and other amounts are caused by, arise out of or in connection with a Service Provider Breach or an action by an Adviser Indemnified Person that is not required to be performed or permitted under the terms of this Agreement.
(d) Procedures for Indemnification.
(i) For purposes of this Agreement (A) Third Party Claim means any claim, demand, commencement of any action, suit or proceeding, or other assertion of liability by any person or entity arising from the claim, demand, commencement of any action, suit or proceeding, or other assertion of Liability of another person or entity and (B) Net Tax Benefit means the tax benefit of any liability reduced by the tax detriment associated with the receipt of any amount for which indemnification is provided under this Agreement.
(ii) If any CM Indemnified Person or Advisor Indemnified Person (each an Indemnified Person) shall claim indemnification hereunder for any claim (other than a Third Party Claim) for which indemnification is provided in Section 7, the Indemnified Person shall promptly, and in any event within one hundred twenty (120) days, after such Indemnified Person first becomes aware of facts that give rise to the basis for such claim, give written notice (a Notice of Claim) to the Service Provider or the Collateral Manager, as applicable, setting forth the basis for such claim and the nature and estimated amount of the claim (which estimated
9
amount shall include, without limitation, an estimate of the Liabilities that may be incurred in connection with defending any such claim), all in reasonable detail. The failure to give a Notice of Claim to the Indemnifying Person shall not relieve the Indemnifying Person of any liability hereunder unless the Indemnifying Person was actually prejudiced by such failure and then only to the extent of such prejudice. If the Service Provider or the Collateral Manager, as applicable, disputes any claim set forth in the Notice of Claim, it shall deliver to such Indemnified Person that has given the Notice of Claim a written notice indicating its dispute of such Notice of Claim in reasonable detail (an Objection Notice) within thirty (30) days after the date the Notice of Claim is given (the Response Period).
(iii) If an Indemnified Person shall make a Third Party Claim for which indemnification is provided in Section 7 hereof, the Indemnified Person shall promptly, and in any event within ninety (90) days, after such Indemnified Person first becomes aware of facts which give rise to the basis for such claim, give written notice (a Third Party Notice) to the Service Provider or the Collateral Manager, as applicable (each, an Indemnifying Person), of the basis for such claim, setting forth the nature of the claim or demand in reasonable detail, and the estimated amount of the claim (which estimated amount shall include, without limitation, an estimate of the Liabilities that may be incurred in connection with defending any such claim). The failure to give a Third Party Notice to the Indemnifying Person shall not relieve the Indemnifying Person of any liability hereunder unless the Indemnifying Person was actually prejudiced by such failure and then only to the extent of such prejudice. The Indemnifying Person shall be entitled to participate therein and, to the extent that it wishes (but subject to the consent of the Indemnified Person), to assume the defense thereof with counsel reasonably satisfactory to such Indemnified Person so long as the Indemnifying Person notifies the Indemnified Person in writing within sixty (60) days after the Indemnified Person has given a Third Party Notice to the Indemnifying Person that the Indemnifying Person will indemnify the Indemnified Person from and against the entirety of any Liabilities the Indemnified Person may suffer resulting from, arising out of, relating to, in the nature of, or caused by the claim, and the Indemnifying Person assumes the defense of the Proceeding. If the Indemnifying Person (with the consent of the Indemnified Person) assumes the defense of such claim, the Indemnifying Person shall not be liable to such Indemnified Person for any fees of other counsel or any other expenses, incurred by such Indemnified Person in connection with the defense thereof; provided, however, that in the event that the interests of the Indemnified Person and the Indemnifying Person are, or may reasonably become, in conflict with or adverse to one another with respect to such Third Party Claim, the Indemnified Person may retain its own counsel at the Indemnifying Persons expense with respect to such Third Party Claim. If an Indemnifying Person assumes the defense of such an action, (A) no compromise or settlement thereof may be effected by the Indemnifying Person without the Indemnified Persons consent (which shall not be unreasonably withheld, conditioned or delayed) unless (1) there is no finding or admission of any violation of law or any violation of the rights of any Person and no effect on any other claims that may be made against the Indemnified Person and (2) the sole relief provided is monetary damages that are paid in full by the Indemnifying Person and (B) the Indemnifying Person shall have no liability with respect to any compromise or settlement thereof effected without its consent (which shall not be unreasonably withheld, conditioned or delayed). If notice is given to an Indemnifying Person of the commencement of any action and it does not, within sixty (60) days after the Indemnified Persons notice is given, give notice to the Indemnified Person of its election to assume the defense thereof (or the Indemnifying Person does not consent to the election by the Indemnifying Person to assume the defense thereof), the Indemnified Person shall, at the expense of the Indemnifying Person, undertake the defense of (with counsel selected by the Indemnified Person and reasonably acceptable to the Indemnifying Person) such claim, liability
10
or expense, and shall have the right to compromise or settle such claim, liability or expense with the consent of the Indemnifying Person.
(e) The amount of any Liabilities for which indemnification is provided for under this Agreement shall be (i) reduced by any amounts actually realized as a result of any indemnification, contribution or other payment by any Third Party, (ii) reduced by any insurance proceeds or other amounts actually recovered or received from third parties with respect to such Liabilities; provided that the amount of any insurance proceeds received by an Indemnified Person shall be equal to the difference between (A) the actual after-tax amount of such proceeds less any deductible paid by the applicable Indemnified Person and (B) the net present value (as determined by the applicable Indemnified Person in good faith) of the aggregate incremental premium costs which are incurred by an Indemnified Person as a consequence of the Liabilities or event which gives rise to the payment of insurance proceeds and (iii) reduced by any Net Tax Benefit actually realized in the year of the Liabilities from the incurrence or payment of any such Liabilities.
(f) If an Indemnified Person recovers any amount with respect to any Liabilities that were previously satisfied by the Indemnifying Person such Indemnified Person shall promptly pay such amount to the Indemnifying Person.
Section 8. Term and Termination.
This Agreement shall remain in force and effect until the earlier of (i) February 22, 2013 (the Term), and (ii) the termination of this Agreement in accordance with Section 9 hereof.
Section 9. Termination.
(a) This Agreement may be terminated by the Collateral Manager upon a Final Determination (in accordance with this Section 9) of Cause. For purposes of determining Cause, such term shall mean a material breach by the Service Provider of its obligations to deliver the Reports under Section 2 hereof; provided however that the Service Provider fails within 30 days of its receiving written notice from the Collateral Manager to cure such breach (the Cure Period). Notwithstanding the foregoing, the parties agree that if at the end of a Cure Period, with respect to a termination under Section 9(a), the Service Provider reasonably believes it has cured any alleged material breach, the matter shall be submitted to an independent mediator, selected in accordance with the American Arbitration Association Rules, who shall finally determine if (i) the Service Provider has materially breached Section 2 of this Agreement, and (ii) has failed to cure such breach within the Cure Period (such a determination, the Final Determination).
(b) If a Final Determination has been made that Cause exists and this Agreement is terminated (in accordance with (a) above) by the Collateral Manager, the Collateral Manager shall deliver written instructions to the Escrow Agent, along with a copy of the Final Determination, directing that the Escrow Fund shall be delivered to the Collateral Manager.
Section 10. Independent Contractor.
The Service Provider is and will hereafter act as an independent contractor and not as an employee of the Collateral Manager, and nothing in this Agreement may be interpreted or construed to create an employment, partnership, joint venture or other relationship between the Service Provider and the Collateral Manager. For the avoidance of doubt, the Service Providers sole client under this Agreement shall be the Collateral Manager and not the Issuer.
11
Section 11. Miscellaneous.
(a) Notices Generally. All notices, requests and other communications to any party hereunder shall be in writing (including facsimile or similar writing) and shall be given:
If to the Collateral Manager:
c/o Fortress Investment Group LLC
1345 Avenue of the Americas, 46th Floor
New York, New York 10105
Telephone: (212) 479-1505
Facsimile: (212) 798-6090
Attention: Rick Noble
with copies, which shall not constitute notice, to:
Joshua Pack
Fortress Investment Group
10250 Constellation Blvd., Suite 2350
Los Angeles, CA 90067
Telephone: (310) 228-3015
Facsimile: (310) 228-3031
Joel A. Holsinger
Fortress Investment Group LLC
400 Galleria Parkway
Suite 1500
Atlanta, GA 30339
Telephone: (678) 385-5905
Facsimile: (678) 550-9105
with copies, which shall not constitute notice, to:
Hunton & Williams LLP
600 Peachtree Street, N.E., Suite 4100
Atlanta, GA 30308
Facsimile: (404) 602-8669
Attention: John R. Schneider, Esq.
Hunton & Williams LLP
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219-4074
Facsimile: (804) 343-4833
Attention: S. Gregory Cope, Esq.
If to the Service Provider, to:
Cohen & Company Financial, Management LLC
Circa Centre
2929 Arch Street
12
17th Floor
Philadelphia PA 19103
Facsimile: (215) 701-8282
Attention: Joseph Pooler, Chief Financial Officer
and to:
Cohen & Company Financial Management LLC
135 East 57th Street, 21st Floor
New York, NY 10022
Facsimile: (646) 673-8100
Attention: Rachael Fink, Esq., General Counsel
with a copy, which shall not constitute notice, to:
Cozen OConnor
1900 Market Street
Philadelphia, PA 19103
Facsimile: (215) 701-2228
Attention: Anna M. McDonough, Esq.
or to such other address, facsimile number or electronic mail address as such party may hereafter specify for the purpose by notice to the other parties hereto. Each such notice, request or other communication shall be effective (x) if sent by mail, five days after such notice is deposited in the mails with first class postage prepaid, addressed to the address specified in this Section 10 or (y) if given by any other means, when delivered at the address specified in this Section 10. Each party may rely and shall be protected in acting upon any written instruction or communication believed by it to be genuine and to have been signed by the other party or parties.
Section 12. Specific Performance; Injunctive Relief. The parties hereto acknowledge that the Collateral Manager will be irreparably harmed and that there will be no adequate remedy at law for a violation of any of the covenants or agreements of the Service Provider set forth herein. Therefore, it is agreed that the Collateral Manager shall have the right to enforce such covenants and agreements by specific performance and injunctive relief in equity and the Service Provider hereby waives any and all defenses that could exist in its favor in connection with such enforcement and waives any requirement for the security or posting of any bond in connection with such enforcement. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.
Section 13. Entire Agreement. This Agreement constitutes the entire agreement and understanding among the parties hereto with respect to the matters set forth herein and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof.
Section 14. Amendment; Waiver. Except as provided otherwise herein, this Agreement may not be amended, nor may any rights hereunder be waived, except by an instrument in writing signed by the party sought to be charged with such amendment or waiver and, in each case, the written approval of the parties hereto.
Section 15. Assignment. The Service Provider shall not assign or delegate any of its rights or obligations under this Agreement to a third party without the prior written consent of the Collateral
13
Manager. The Collateral Manager shall assign this Agreement to any purchaser of its rights under the Agreements without the prior consent of the Service Provider, provided that such purchaser agrees in writing to be bound by the terms of this Agreement.
Section 16. Services Not Exclusive. The Service Provider and each Affiliate thereof may engage, simultaneously with their activities hereunder, in other businesses and make investments for their own accounts, and may render services similar to those described in this Agreement for other individuals, companies, trusts or persons, and shall not by reason of such engaging in other businesses, making such investments, or rendering of services for others, be deemed to be acting in conflict with the interests of the Collateral Manager, or the Issuer.
Section 17. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of New York. Each party to this Agreement irrevocably and unconditionally submits to the exclusive jurisdiction of (a) the Supreme Court of the State of New York, New York County, and (b) the United States District Court for the Southern District of New York, for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each party to this Agreement agrees to commence any such action, suit or proceeding either in the United States District Court for the Southern District of New York or if such suit, action or other proceeding may not be brought in such court for jurisdictional reasons, in the Supreme Court of the State of New York, New York County. Each party to this Agreement further agrees that service of any process, summons, notice or document by U.S. registered mail to such partys respective address set forth above shall be effective service of process for any action, suit or proceeding in New York with respect to any matters to which it has submitted to jurisdiction in this Section 16. Each of the parties to this Agreement irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in (i) the Supreme Court of the State of New York, New York County, or (ii) the United States District Court for the Southern District of New York, and hereby and thereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.
Section 18. Parties in Interest. Except as specifically set forth in Section 7 hereof, this Agreement shall be binding upon and inure solely to the benefit of each party hereto and their respective legal representatives, heirs, successors and assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person, any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
Section 19. Counterparts. This Agreement may be executed either directly or by an attorney-in-fact, in any number of counterparts, each of which shall constitute an original, but all of which upon delivery when taken together shall constitute a single contract.
Section 20. Waiver of Jury Trial. Each party hereto waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect to any litigation directly or indirectly arising out of, under or in connection with this Agreement or any transaction contemplated hereby. Each party hereto (i) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce that foregoing waiver and (ii) acknowledges that it and the other Parties have been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section 20.
Section 21. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or
14
other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.
Section 22. Survival. The provisions of Sections 4, 6(d), 6(e), 7, 9, 12, 17 and 20 hereof shall survive the termination of this Agreement.
Section 23. Miscellaneous. No failure on the part of either party to exercise, and no delay on its part in exercising, any right or remedy under this Agreement will operate as a waiver thereof, nor will any single or partial exercise of any right or remedy preclude any other or further exercise thereof or the exercise of any other right or remedy.
Section 24. Headings. The section and other headings contained in this Agreement are for reference only and are not intended to describe, interpret, define or limit the scope or intent of this Agreement or any provision hereof.
Section 25. Gender and Number. Whenever required by the context hereof, the singular shall include the plural and the plural shall include the singular. The neuter gender shall include the feminine and masculine genders.
[Signature Page Follows.]
15
IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Agreement as of the date first above written.
COHEN & COMPANY FINANCIAL MANAGEMENT, LLC | ||
By: |
| |
Name: | ||
Title: | ||
ATP MANAGEMENT LLC | ||
By: |
| |
Name: | ||
Title: |
Exhibit A
Collateral Management Agreements and Collateral Administration Agreements
Collateral Management Agreement, dated as of March 15, 2006, by and between Alesco Preferred Funding X, Ltd. and Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC).
Collateral Management Agreement, dated as of June 29, 2006, by and between Alesco Preferred Funding XI, Ltd. and Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC).
Collateral Management Agreement, dated as of October 12, 2006, by and between Alesco Preferred Funding XII, Ltd. and Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC).
Collateral Management Agreement, dated as of November 30, 2006, by and between Alesco Preferred Funding XIII, Ltd. and Cohen & Company Financial Management, LLC.
Collateral Management Agreement, dated as of December 21, 2006, by and between Alesco Preferred Funding XIV, Ltd. and Cohen & Company Financial Management, LLC.
Collateral Management Agreement, dated as of March 29, 2007, by and between Alesco Preferred Funding XV, Ltd. and Cohen & Company Financial Management, LLC.
Collateral Management Agreement, dated as of June 28, 2007, by and between Alesco Preferred Funding XVI, Ltd. and Cohen & Company Financial Management, LLC.
Collateral Management Agreement, dated as of October 30, 2007, by and between Alesco Preferred Funding XVII, Ltd. and Cohen & Company Financial Management, LLC.
Collateral Administration Agreement, dated as of March 15, 2006, by and among Alesco Preferred Funding X, Ltd., Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC) and U.S. Bank National Association.
Collateral Administration Agreement, dated as of June 29, 2006, by and among Alesco Preferred Funding XI, Ltd., Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC) and U.S. Bank National Association.
Collateral Administration Agreement, dated as of October 12, 2006, by and among Alesco Preferred Funding XII, Ltd., Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC) and U.S. Bank National Association.
Collateral Administration Agreement, dated as of November 30, 2006, by and among Alesco Preferred Funding XIII, Ltd., Cohen & Company Financial Management, LLC and Wells Fargo Bank, National Association.
Collateral Administration Agreement, dated as of December 21, 2006, by and among Alesco Preferred Funding XIV, Ltd., Cohen & Company Financial Management, LLC and U.S. Bank National Association.
17
Collateral Administration Agreement, dated as of March 29, 2007, by and among Alesco Preferred Funding XV, Ltd., Cohen & Company Financial Management, LLC and LaSalle Bank National Association.
Collateral Administration Agreement, dated as of June 28, 2007, by and among Alesco Preferred Funding XVI, Ltd., Cohen & Company Financial Management, LLC and U.S. Bank National Association.
Collateral Administration Agreement, dated as of October 30, 2007, by and among Alesco Preferred Funding XVII, Ltd., Cohen & Company Financial Management, LLC and Wells Fargo Bank, National Association.
18
Exhibit B
Fee Schedule
Agreement |
Escrowed Amount* | Monthly Service Fee | ||||||
Alesco X |
$ | 2,867,600 | $ | 79,656 | ||||
Alesco XI |
$ | 1,895,555 | $ | 52,654 | ||||
Alesco XII |
$ | 1,941,249 | $ | 53,924 | ||||
Alesco XIII |
$ | 1,287,630 | $ | 35,768 | ||||
Alesco XIV |
$ | 2,139,454 | $ | 59,429 | ||||
Alesco XV |
$ | 1,535,062 | $ | 42,641 | ||||
Alesco XVI |
$ | 1,413,358 | $ | 39,260 | ||||
Alesco XVII |
$ | 538,325 | $ | 14,953 | ||||
Total |
$ | 13,618,233 | $ | 378,285 |
* | The Escrowed Amount shall be reduced by the amount paid by the Collateral Manager to the Service Provider in accordance with Section 3. |
19
Exhibit C
Future Fee Schedule
Agreement |
Escrowed Amount* | Monthly Service Fee | ||||||
Alesco I |
$ | 502,423 | $ | 13,956 | ||||
Alesco II |
$ | 538,236 | $ | 14,951 | ||||
Alesco III |
$ | 521,115 | $ | 14,475 | ||||
Alesco IV |
$ | 952,747 | $ | 26,465 | ||||
Alesco V |
$ | 908,056 | $ | 25,224 | ||||
Alesco VI |
$ | 1,585,082 | $ | 44,030 | ||||
Alesco VII |
$ | 778,128 | $ | 21,615 | ||||
Alesco VIII |
$ | 1,737,437 | $ | 48,262 | ||||
Alesco IX |
$ | 1,858,543 | $ | 51,626 |
* | The Escrowed Amount shall be reduced by the amount paid by the Collateral Manager to the Service Provider in accordance with Sections 3. |
20
Exhibit D
Indentures
Indenture, dated as of March 15, 2006, by and among Alesco Preferred Funding X, Ltd., Alesco Preferred Funding X, Inc. and U.S. Bank National Association.
Indenture, dated as of June 29, 2006, by and among Alesco Preferred Funding XI, Ltd., Alesco Preferred Funding XI, Inc. and U.S. Bank National Association.
Indenture, dated as of October 12, 2006, by and among Alesco Preferred Funding XII, Ltd., Alesco Preferred Funding XII, Inc. and U.S. Bank National Association.
Indenture, dated as of November 30, 2006, by and among Alesco Preferred Funding XIII, Ltd., Alesco Preferred Funding XIII, Inc. and Wells Fargo Bank, National Association.
Indenture, dated as of December 21, 2006, by and among Alesco Preferred Funding XIV, Ltd., Alesco Preferred Funding XIV, Inc., Alesco Preferred Funding XIV (L2), Ltd. and U.S. Bank National Association.
Indenture, dated as of March 29, 2007, by and among Alesco Preferred Funding XV, Ltd., Alesco Preferred Funding XV, LLC, Alesco Preferred Funding XV (L2), Ltd. and LaSalle Bank National Association.
Indenture, dated as of June 28, 2007, by and among Alesco Preferred Funding XVI, Ltd., Alesco Preferred Funding XVI, LLC, Alesco Preferred Funding XVI (L2), Ltd. and U.S. Bank National Association.
Indenture, dated as of October 30, 2007, by and among Alesco Preferred Funding XVII, Ltd., Alesco Preferred Funding XVII, LLC, Alesco Preferred Funding XVII (L2), Ltd. and Wells Fargo Bank, National Association.
21
Exhibit 10.2
SERVICES AGREEMENT
THIS SERVICES AGREEMENT (this Agreement) is made as of the 29th day of July, 2010, by and between ATP Management LLC, a limited liability company organized under the laws of the State of Delaware (the Collateral Manager), and Cohen & Company Financial Management LLC, a limited liability company organized under the laws of the State of Delaware (the Service Provider).
WHEREAS, the Collateral Manager is a party to those Collateral Management Agreements (the Collateral Management Agreements and Collateral Administration Agreements (Collateral Administration Agreements) listed on Exhibit A hereto (which Exhibit A may be amended by the parties from time to time (collectively, the Agreements)) by and among the Issuer, the Collateral Manager and the Trustee identified in each such Agreement;
WHEREAS, the Service Provider has experience in preparing certain Reports (as defined herein) related to the Issuers and the Collateral, which will assist the Collateral Manager in fulfilling its obligations under the Agreements;
WHEREAS, each of the Collateral Manager and the Service Provider desires that the Collateral Manager retain the services of the Service Provider to deliver the Reports for the benefit of the Collateral Manager; and
WHEREAS, the Collateral Manager has deposited the amounts identified on Exhibit B hereto as the Escrowed Amount (which amount shall be increased by the applicable amounts on Exhibit C to reflect any amendments to Exhibit A to include any additional Agreements (such amount, the Escrow Fund)) with TD Bank, N.A. (the Escrow Agent) to secure the payment of the Service Fees (as defined herein).
NOW, THEREFORE, in consideration of the mutual promises and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
Section 1. General. Except as otherwise expressly provided herein or unless the context otherwise requires, capitalized terms not otherwise defined herein shall have the meanings specified in those indentures listed on Exhibit D hereto (which Exhibit D may be amended by the parties from time to time) (each such indenture, an Indenture and together, the Indentures) or, if not defined therein, as defined in the Agreements.
Section 2. Service Provider Reports.
(a) No later than twenty-five (25) days following the last business day of each quarter during the Term (as defined herein), the Service Provider shall prepare and deliver a written report to the Collateral Manager for each of the Indentures which report shall include the Collateral Overview Report. As used herein the Collateral Overview Report means a summary, by Issuer, setting forth:
(i) | a Collateral Overview for Bank Collateral setting forth: (1) the Number of Companies, (2) Total Assets, (3) Loans/Deposits, (4) Tier-1 Ratio, (5) Total Risk Based Capital Ratio, (6) Net Income, (7) ROAA, (8) ROAE, (9) Efficiency Ratio, (10) NPLs/Loans and (11) Reserves to NPLs, for the most recent quarter end for which financial information is available; and |
(ii) | a Collateral Overview for Insurance Collateral setting forth: (1) Number of Companies, (2) Capitalization, (3) Admitted Assets, (4) NPW or Total Policy Revenue, (5) Combined Ratio, (6) NPW/PHS Leverage and (7) Return on Equity, for the most recent quarter end for which financial information is available. |
(b) No later than ninety (90) days following the last business day of each quarter during the Term (as defined herein), the Service Provider shall deliver a written report to the Collateral Manager for each of the Indentures which shall include: the Score for Collateral Debt Securities Report, and the Securities Watch List Report. As used herein the Score for Collateral Debt Securities Report means:
(i) | that score (1-5; with defaulted or deferring Collateral receiving a score of 6) for Bank Collateral prepared in accordance with the Service Providers internal system using the following categories: capitalization, profitability, asset quality and liquidity; and |
(ii) | that score (1-5; with defaulted or deferring Collateral receiving a score of 6) for Insurance Collateral prepared in accordance with the Service Providers internal system using certain Financial Strength Ratings and Security Ratings. |
As used herein the Securities Watch List Report means a list of certain Collateral that fails to meet certain internal tests that are consistent with the Service Providers past practice based upon a review of Profitability, Balance Sheet, Credit Quality and Capital Adequacy. In preparing the Watch List, the Service Provider may review reports of SNL Financial, LC and others.
The reports delivered in accordance with (a) and (b) above shall be referred to herein as, the Reports.
(c) The obligation of the Service Provider to deliver the Reports is subject to the Service Provider's timely receipt of necessary reports and appropriate information from the applicable Issuer. To the extent that such reports and information are not timely received, the Service Provider shall notify the Collateral Manager and the Collateral Manager shall promptly request such reports and information from the applicable Issuer and shall use commercially reasonable efforts to obtain such information.
(d) The Service Provider shall follow its customary standards, policies and procedures in the performance of the Service Providers duties hereunder.
2
The Service Provider in performing its duties under this Agreement, shall dedicate the resources of the Alesco Portfolio Management Team (collectively, the Dedicated Resources). If, during the Term, the employment of any of the individuals who comprise the Dedicated Resources is terminated or such individuals are re-allocated to other portions of the Service Providers business, the Service Provider shall promptly replace such individual(s).
(e) Notwithstanding the foregoing, the Collateral Manager shall not be relieved of any of its duties under the Agreements, regardless of the Service Providers delivery of the Reports. In no event shall the Service Provider have any obligations under the Indenture or the Agreements or to the Issuer, the Trustee or the Collateral Administrator.
Section 3. Fees. In consideration of and as compensation for the preparation and delivery of the Reports and as an inducement to the Service Provider to prepare and deliver the Reports (the Service Fee):
(a) on the date hereof, for each Agreement, the Collateral Manager shall deliver an amount equal to the product of the Monthly Service Fee allocated to such Agreement on Exhibit B hereto and five (5);
(b) on the date the parties amend Exhibit A to include an additional Agreement, the Collateral Manager shall deliver an amount equal to the product of the Monthly Service Fee allocated to such Agreement on Exhibit C hereto and the number of months having passed between such date and February, 2010 (including February, 2010); and
(c) provided this Agreement has not been terminated in accordance with Section 8 herein, on the final business day of each month during the Term (defined below), on behalf of the Collateral Manager, the Escrow Agent shall automatically release from the Escrow Fund the amounts set forth on Exhibits B or C hereto, as applicable, as the Monthly Service Fee for each of the Agreements (including any Agreements which have been added to Exhibit A hereto) to the Service Provider. The Service Fees paid to the Service Provider shall in no event exceed the aggregate total of the amounts listed on Exhibits B or C under the heading Escrowed Amounts, which correspond to the Agreements listed on Exhibit A and the possible Additional Agreements. The Collateral Manager shall have no additional financial obligations to pay the Service Provider fees for the services to be performed hereunder upon deposit of the amount set forth on Exhibits B and C, as applicable, as the Escrowed Amount for each of the Agreements, including any Agreements which have been added to Exhibit A hereto.
Section 4. Expenses.
(a) Subject to Section 4(b) below, the Service Provider shall be responsible for all of the costs of preparing the Reports, including, without limitation, research and investment monitoring costs, its overhead costs and expenses, including, without limitation its employee compensation.
(b) To the extent that expenses are reimbursable by the Issuer (as set forth in the Agreements), upon request of the Service Provider, the Collateral Manager shall seek payment in full from the Issuer for such expenses incurred by the Service Provider on behalf of
3
the Collateral Manager and the Collateral Manager, in accordance with the Indentures, shall instruct the Trustee to pay such reimbursements as directed by the Service Provider.
Section 5. Representations and Warranties.
(a) The Collateral Manager represents and warrants to the Service Provider and agrees as follows:
(i) It is duly organized, validly existing and in good standing under the laws of the State of Delaware. It has full limited liability company power and authority to enter into and perform its obligations under this Agreement and to conduct its business as currently being conducted. It is qualified to conduct its business and is in good standing in every jurisdiction in which the nature or conduct of its business requires such qualification and the failure to so qualify would reasonably be expected to have a material adverse effect on its ability to comply with or perform its obligations under this Agreement.
(ii) This Agreement has been duly and validly authorized, executed and delivered on behalf of it, and assuming the due authorization, execution and delivery by the Service Provider of this Agreement, is a valid and binding agreement of it enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar laws affecting creditors rights generally or by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).
(iii) The execution and delivery of this Agreement and the incurring and performance of the obligations contemplated in this Agreement by it will not conflict with, violate, breach or constitute a default under any term or provision of its formation documents, or any indenture, mortgage, deed of trust, loan agreement, or other agreement, document or instrument to which it is a party or by which it is bound, or to which any of its property or assets is subject, or any applicable law, rule, regulation, judgment, order or decree binding on the Collateral Manager or to its property or assets or other legal requirement applicable to it or to its property or assets, which conflict, violation, breach or default would reasonably be expected to have a material adverse effect on its ability to comply with or perform its obligations under this Agreement.
(iv) The Collateral Manager has complied with any applicable law having application to its business, properties and assets, the violation of which would reasonably be expected to materially and adversely affect its ability to comply with and perform its obligations under this Agreement There are no proceedings, notices of investigations or investigations pending or, to its knowledge and belief, threatened against it or any Affiliate regarding noncompliance with any applicable law, or at law or in equity, or before or by any court, any foreign, federal, state, municipal or other governmental department, commission, board, bureau, agency, or instrumentality or any other regulatory body, in which an adverse decision would reasonably be expected to adversely affect its ability to comply with or perform its obligations under this Agreement.
4
(v) The Collateral Manager has maintained all governmental, self regulatory and exchange licenses and approvals and has effected all filings and registrations with every regulatory body having jurisdiction over it, except as would not reasonably be expected to have an adverse effect on its ability to conduct its business or perform its obligations under this Agreement.
(vi) The foregoing representations and warranties and agreements shall be continuing during the Term, and if at any time any event shall occur which would make any of the foregoing incomplete or inaccurate, the Collateral Manager shall promptly notify the Service Provider of the occurrence of such event. The Collateral Manager shall also promptly notify the Service Provider of any breach of this Agreement by it.
(b) The Service Provider represents and warrants to the Collateral Manager and agrees as follows:
(i) The Service Provider is duly organized, validly existing and in good standing under the laws of the State of Delaware. The Service Provider has full limited liability company power and authority to enter into and perform its obligations under this Agreement and to conduct its business as currently being conducted. The Service Provider is qualified to conduct business and is in good standing in every jurisdiction in which the nature or conduct of its business requires such qualification and the failure to qualify would reasonably be expected to have a material adverse effect on its ability to comply with or perform its obligations under this Agreement.
(ii) This Agreement has been duly and validly authorized, executed and delivered on behalf of the Service Provider, and assuming the due authorization, execution and delivery by the Collateral Manager of this Agreement, is a valid and binding agreement of the Service Provider enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar laws affecting creditors rights generally or by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).
(iii) The execution and delivery of this Agreement and the performance of the obligations contemplated in this Agreement by it will not conflict with, violate, breach or constitute a default under any term or provision of its formation documents, or any indenture, mortgage, deed of trust, loan agreement or other agreement, document or instrument to which it is a party or by which it is bound, or to which any of its property or assets is subject, or any applicable law, rule, regulation, judgment, order or decree binding on the Service Provider or to its property or assets or other legal requirement applicable to it or to its property or assets, which conflict, violation, breach or default would reasonably be expected to have a material adverse effect on its ability to comply with or perform its obligations under this Agreement.
(iv) The Service Provider has complied with any applicable law having application to its business, properties and assets, the violation of which would reasonably
5
be expected to materially and adversely affect its ability to comply with and perform its obligations under this Agreement. There are no proceedings, notices of investigation or investigations pending or, to the knowledge and belief of the Service Provider, threatened against the Service Provider or any Service Provider Affiliate regarding noncompliance with any applicable law, or at law or in equity, or before or by any court, any foreign, federal, state, municipal, or other governmental department, commission, board, bureau, agency or instrumentality, or any other regulatory body, in which an adverse decision would reasonably be expected to adversely affect its ability to comply with or perform its obligations under this Agreement.
(v) The Service Provider has maintained all governmental, self-regulatory and exchange licenses and approvals and has effected all filings and registrations with every regulatory body having jurisdiction over it, except as would not reasonably be expected to have an adverse effect on its ability to conduct its business or perform its obligations under this Agreement.
(vi) The Service Provider has (a) complied with all conditions precedent, (b) provided all necessary notices and (c) obtained all required consents set forth in the Agreements in connection with the execution and delivery of this Agreement.
(vii) The foregoing representations and warranties and agreements shall be continuing during the Term, and if at any time any event shall occur which would make any of the foregoing incomplete or inaccurate, the Service Provider shall promptly notify the Collateral Manager of the occurrence of such event. The Service Provider shall also promptly notify the Collateral Manager of any breach of this Agreement by it.
Section 6. Covenants.
(a) Compliance with Laws. The Service Provider shall comply with any applicable law having application to its business, properties and assets, the violation of which would reasonably be expected to adversely affect its ability to comply with and perform its obligations under this Agreement. The Collateral Manager shall comply with any applicable law having application to its business, properties and assets, the violation of which would reasonably be expected to adversely affect its ability to comply with and perform its obligations under the Collateral Management Agreement.
(b) Regulatory Requirements. The Service Provider shall maintain all governmental, self-regulatory and exchange licenses and approvals and has effected all filings and registrations with every regulatory body having jurisdiction over it, except as would not reasonably be expected to have an adverse effect on its ability to conduct its business or perform its obligations under this Agreement. The Collateral Manager shall maintain all governmental, self-regulatory and exchange licenses and approvals and shall affect all filings and registrations with every regulatory body having jurisdiction over it, except as would not reasonably be expected to have an adverse effect on its ability to conduct its business or perform its obligations under this Agreement.
6
(c) Access. During the Term and for a period of three (3) years following the earlier expiration or termination of this Agreement, at the Collateral Managers sole expense, the Service Provider shall, and shall cause each of its Affiliates, to provide the Collateral Manager and its authorized agents, Affiliates, officers and representatives (a) reasonable access to the files, data and information used in the preparation of the Reports (Records), managers and officers of the Service Provider; provided, however, that such examinations and investigations shall be conducted during the Service Providers normal business hours and in the presence of a designated representative of the Service Provider and shall not unreasonably interfere with the operations and activities of the Service Provider; (b) copies of all Records as the Collateral Manager may reasonably request; and (c) such additional data and information relating to the services provided by the Service Provider under this Agreement, as the Collateral Manager may reasonably request.
(d) Confidentiality. In the process of preparing and delivering the Reports or otherwise in connection with this Agreement, the Service Provider may have access to Confidential Information (as hereinafter defined) of the Collateral Manager. Without limiting the applicability of any other obligation of confidentiality to which the Collateral Manager or its Affiliates may be bound, the Service Provider agrees to keep (and cause its Affiliates and its and their respective employees, agents and independent contractors to keep) any Confidential Information strictly in confidence, not to disclose it to any third party without prior written approval of the Collateral Manager and to use it only for the purposes set forth in this Agreement, except (a) as required by applicable law, in which case the Service Provider shall notify the Collateral Manager prior to disclosing such Confidential Information and shall use its commercially reasonable efforts to obtain a protective order or otherwise prevent or minimize disclosure of such Confidential Information, or (b) with the express prior written approval of the Collateral Manager. For purposes of this Agreement, Confidential Information means any confidential information with respect to the Collateral Manager or its business, including, without limitation, methods of operation, fees, costs, technology, inventions, trade secrets, know-how, software, marketing methods, plans, personnel, suppliers, competitors, markets or other specialized information or proprietary matters. The obligation of confidentiality set forth in this Section 6(d) shall not extend to: (i) information that at the time of disclosure was in the public domain or thereafter comes into the public domain without breach of this Agreement by the Service Provider or; and (ii) information that becomes known to the Service Provider from a source other than the Collateral Manager without breach of this Agreement by the Service Provider.
(e) For the avoidance of doubt, in connection with the Service Providers performance of its obligations under this Agreement, and except as otherwise expressly permitted by this Agreement or as consented to by the Collateral Manager in writing, the Service Provider shall not, and shall cause its officers, employees, and agents not to take any action relating in any way to the Agreements not explicitly provided in this Agreement, including not to:
(i) | respond to any inquiry from any third persons (1) relating to the Reports or (2) addressing the Service Provider in its capacity as the former collateral manager under the Agreements (Inquiries); |
7
(ii) | fail to promptly provide notice of and deliver any Inquiries to the Collateral Manager; |
(iii) | make any asset management decisions for any Issuer that is a party to a Collateral Management Agreement listed on Exhibit A hereto, as amended from time to time, on behalf of the Collateral Manager; |
(iv) | represent to any person that the Service Provider is an agent of the Collateral Manager, whether under the Agreements or otherwise, or allow any person to falsely believe that the Service Provider is an agent of the Collateral Manager under the Agreements or otherwise; or |
(v) | communicate with any rating agencies regarding the securities issued under the Indentures for the Issuers that are a party to a Collateral Management Agreement listed on Exhibit A hereto, as amended from time to time. |
(f) In connection with the preparation of the Reports, the Service Provider shall promptly respond to any inquiries by the Collateral Manager relating to the preparation and delivery of the Reports, including but not limited to the methods of computation and source of data. Additionally, the Service Provider acknowledges and agrees that from time to time the Collateral Manager may make reasonable requests to consult with the Service Provider in connection with the preparation of the Reports and may request changes to the Reports as necessary or desireable, in its reasonable discretion to fulfill its obligations under the Agreements. In connection with any requested participation by the Collateral Manager in the preparation of the Reports, the Service Provide shall at all times work in good faith and use reasonable efforts to satisfy the requests of the Collateral Manager.
Section 7. Indemnity.
(a) Notwithstanding anything set forth in this Agreement to the contrary, the Service Provider assumes no responsibility under this Agreement other than to prepare and deliver the Reports in accordance with the terms of this Agreement. Notwithstanding anything to the contrary herein, the Service Provider shall not be liable to the CM Indemnified Persons (as defined below) for any expenses, losses, fines, damages, demands, charges, judgments, assessments, costs or other liabilities or claims of any nature whatsoever (collectively, Liabilities) incurred by the Collateral Manager that arise out of or in connection with the Service Providers preparation and delivery of the Reports or for any acts or omissions by the Service Provider or any Affiliate thereof under or in connection with this Agreement, except (i) by reason of acts or omissions of an Adviser Indemnified Person (as defined below) constituting bad faith, willful misconduct, gross negligence or reckless disregard in the preparation and delivery of the Reports, (ii) by reason of a violation of applicable law, (iii) by reason of any failure to timely prepare and deliver the Reports, for any reason, (iv) by reason of a breach of its representations, warranties or covenants in this Agreement or (v) by reason of any action by an Adviser Indemnified Person that is not required to be performed or permitted under the terms of this Agreement (the occurrences of the events described in subsections (i) through (v) above are collectively referred to for purposes of this Section 7 as Service Provider Breaches). For
8
avoidance of doubt, the indemnification obligations of the Service Provider set forth in this Agreement shall be in addition to the indemnification obligations set forth in Section 11(a)(i) of that certain Master Transaction Agreement dated as of July , 2010, by and among Cohen & Company, Inc., the Collateral Manager and the Service Provider, and shall in no way limit amend, or modify the obligations set forth therein. In addition, the CM Indemnified Persons shall not be liable to the Adviser Indemnified Persons for any Liabilities incurred by the Service Provider that arise out of or in connection with any action by an Adviser Indemnified Person that is not required to be performed or permitted under the terms of this Agreement.
(b) The Collateral Manager shall defend, indemnify and hold harmless the Service Provider and each of its Affiliates and all of their respective officers, managers, directors, members, partners, employees, agents, successors and assigns thereof (Advisor Indemnified Person) from and against any Liabilities, and shall promptly reimburse the Service Provider or each Affiliate thereof for all reasonable fees and expenses (including reasonable fees and expenses of counsel) as such fees and expenses are incurred in investigating, preparing, pursuing or defending any claim, action, proceeding or investigation with respect to any pending or threatened litigation caused by, arising out of or in connection with (i) any liability, obligation or commitment, or any act or omission of the Collateral Manager, under the Agreements or the Indentures with respect to any period after the date hereof, or (ii) any action taken by, or any failure to act by, the Service Provider or any Affiliate thereof, and in each such case to the extent not constituting a Service Provider Breach; provided, however, that in no case shall the Collateral Manager be required to indemnify any Advisor Indemnified Person to the extent such Liabilities are the result of (x) the negligence, bad faith or willful misconduct of an Advisor Indemnified Person or (y) any action by an Advisor Indemnified Person that is not required to be performed or permitted under the terms of this Agreement.
(c) The Service Provider shall defend, indemnify and hold harmless the Collateral Manager and each of its Affiliates (the CM Indemnified Persons) from and against any Liabilities, and shall promptly reimburse the Collateral Manager or each Affiliate thereof for all reasonable fees and expenses (including reasonable attorneys and accountants fees and expenses) as such fees and expenses are incurred in investigating, preparing, pursuing or defending any claim, action, proceeding or investigation with respect to any pending or threatened litigation, in each case, to the extent and only to the extent that such Liabilities, fees, expenses and other amounts are caused by, arise out of or in connection with a Service Provider Breach or an action by an Adviser Indemnified Person that is not required to be performed or permitted under the terms of this Agreement.
(d) Procedures for Indemnification.
(i) For purposes of this Agreement (A) Third Party Claim means any claim, demand, commencement of any action, suit or proceeding, or other assertion of liability by any person or entity arising from the claim, demand, commencement of any action, suit or proceeding, or other assertion of Liability of another person or entity and (B) Net Tax Benefit means the tax benefit of any liability reduced by the tax detriment associated with the receipt of any amount for which indemnification is provided under this Agreement.
9
(ii) If any CM Indemnified Person or Advisor Indemnified Person (each an Indemnified Person) shall claim indemnification hereunder for any claim (other than a Third Party Claim) for which indemnification is provided in Section 7, the Indemnified Person shall promptly, and in any event within one hundred twenty (120) days, after such Indemnified Person first becomes aware of facts that give rise to the basis for such claim, give written notice (a Notice of Claim) to the Service Provider or the Collateral Manager, as applicable, setting forth the basis for such claim and the nature and estimated amount of the claim (which estimated amount shall include, without limitation, an estimate of the Liabilities that may be incurred in connection with defending any such claim), all in reasonable detail. The failure to give a Notice of Claim to the Indemnifying Person shall not relieve the Indemnifying Person of any liability hereunder unless the Indemnifying Person was actually prejudiced by such failure and then only to the extent of such prejudice. If the Service Provider or the Collateral Manager, as applicable, disputes any claim set forth in the Notice of Claim, it shall deliver to such Indemnified Person that has given the Notice of Claim a written notice indicating its dispute of such Notice of Claim in reasonable detail (an Objection Notice) within thirty (30) days after the date the Notice of Claim is given (the Response Period).
(iii) If an Indemnified Person shall make a Third Party Claim for which indemnification is provided in Section 7 hereof, the Indemnified Person shall promptly, and in any event within ninety (90) days, after such Indemnified Person first becomes aware of facts which give rise to the basis for such claim, give written notice (a Third Party Notice) to the Service Provider or the Collateral Manager, as applicable (each, an Indemnifying Person), of the basis for such claim, setting forth the nature of the claim or demand in reasonable detail, and the estimated amount of the claim (which estimated amount shall include, without limitation, an estimate of the Liabilities that may be incurred in connection with defending any such claim). The failure to give a Third Party Notice to the Indemnifying Person shall not relieve the Indemnifying Person of any liability hereunder unless the Indemnifying Person was actually prejudiced by such failure and then only to the extent of such prejudice. The Indemnifying Person shall be entitled to participate therein and, to the extent that it wishes (but subject to the consent of the Indemnified Person), to assume the defense thereof with counsel reasonably satisfactory to such Indemnified Person so long as the Indemnifying Person notifies the Indemnified Person in writing within sixty (60) days after the Indemnified Person has given a Third Party Notice to the Indemnifying Person that the Indemnifying Person will indemnify the Indemnified Person from and against the entirety of any Liabilities the Indemnified Person may suffer resulting from, arising out of, relating to, in the nature of, or caused by the claim, and the Indemnifying Person assumes the defense of the Proceeding. If the Indemnifying Person (with the consent of the Indemnified Person) assumes the defense of such claim, the Indemnifying Person shall not be liable to such Indemnified Person for any fees of other counsel or any other expenses, incurred by such Indemnified Person in connection with the defense thereof; provided, however, that in the event that the interests of the Indemnified Person and the Indemnifying Person are, or may reasonably become, in conflict with or adverse to one another with respect to such Third Party Claim, the Indemnified Person may retain its own counsel at the Indemnifying Persons expense with respect to such Third Party Claim. If an
10
Indemnifying Person assumes the defense of such an action, (A) no compromise or settlement thereof may be effected by the Indemnifying Person without the Indemnified Persons consent (which shall not be unreasonably withheld, conditioned or delayed) unless (1) there is no finding or admission of any violation of law or any violation of the rights of any Person and no effect on any other claims that may be made against the Indemnified Person and (2) the sole relief provided is monetary damages that are paid in full by the Indemnifying Person and (B) the Indemnifying Person shall have no liability with respect to any compromise or settlement thereof effected without its consent (which shall not be unreasonably withheld, conditioned or delayed). If notice is given to an Indemnifying Person of the commencement of any action and it does not, within sixty (60) days after the Indemnified Persons notice is given, give notice to the Indemnified Person of its election to assume the defense thereof (or the Indemnifying Person does not consent to the election by the Indemnifying Person to assume the defense thereof), the Indemnified Person shall, at the expense of the Indemnifying Person, undertake the defense of (with counsel selected by the Indemnified Person and reasonably acceptable to the Indemnifying Person) such claim, liability or expense, and shall have the right to compromise or settle such claim, liability or expense with the consent of the Indemnifying Person.
(e) The amount of any Liabilities for which indemnification is provided for under this Agreement shall be (i) reduced by any amounts actually realized as a result of any indemnification, contribution or other payment by any Third Party, (ii) reduced by any insurance proceeds or other amounts actually recovered or received from third parties with respect to such Liabilities; provided that the amount of any insurance proceeds received by an Indemnified Person shall be equal to the difference between (A) the actual after-tax amount of such proceeds less any deductible paid by the applicable Indemnified Person and (B) the net present value (as determined by the applicable Indemnified Person in good faith) of the aggregate incremental premium costs which are incurred by an Indemnified Person as a consequence of the Liabilities or event which gives rise to the payment of insurance proceeds and (iii) reduced by any Net Tax Benefit actually realized in the year of the Liabilities from the incurrence or payment of any such Liabilities.
(f) If an Indemnified Person recovers any amount with respect to any Liabilities that were previously satisfied by the Indemnifying Person such Indemnified Person shall promptly pay such amount to the Indemnifying Person.
Section 8. Term and Termination.
This Agreement shall remain in force and effect until the earlier of (i) February 22, 2013 (the Term), and (ii) the termination of this Agreement in accordance with Section 9 hereof.
Section 9. Termination.
(a) This Agreement may be terminated by the Collateral Manager upon a Final Determination (in accordance with this Section 9) of Cause. For purposes of determining Cause, such term shall mean a material breach by the Service Provider of its obligations to deliver the Reports under Section 2 hereof; provided however that the Service Provider fails
11
within 30 days of its receiving written notice from the Collateral Manager to cure such breach (the Cure Period). Notwithstanding the foregoing, the parties agree that if at the end of a Cure Period, with respect to a termination under Section 9(a), the Service Provider reasonably believes it has cured any alleged material breach, the matter shall be submitted to an independent mediator, selected in accordance with the American Arbitration Association Rules, who shall finally determine if (i) the Service Provider has materially breached Section 2 of this Agreement, and (ii) has failed to cure such breach within the Cure Period (such a determination, the Final Determination).
(b) If a Final Determination has been made that Cause exists and this Agreement is terminated (in accordance with (a) above) by the Collateral Manager, the Collateral Manager shall deliver written instructions to the Escrow Agent, along with a copy of the Final Determination, directing that the Escrow Fund shall be delivered to the Collateral Manager.
Section 10. Independent Contractor.
The Service Provider is and will hereafter act as an independent contractor and not as an employee of the Collateral Manager, and nothing in this Agreement may be interpreted or construed to create an employment, partnership, joint venture or other relationship between the Service Provider and the Collateral Manager. For the avoidance of doubt, the Service Providers sole client under this Agreement shall be the Collateral Manager and not the Issuer.
Section 11. Miscellaneous.
(a) Notices Generally. All notices, requests and other communications to any party hereunder shall be in writing (including facsimile or similar writing) and shall be given:
If to the Collateral Manager:
c/o Fortress Investment Group LLC
1345 Avenue of the Americas, 46th Floor
New York, New York 10105
Telephone: (212) 479-1505
Facsimile: (212) 798-6090
Attention: Rick Noble
with copies, which shall not constitute notice, to:
Joshua Pack
Fortress Investment Group
10250 Constellation Blvd., Suite 2350
Los Angeles, CA 90067
Telephone: (310) 228-3015
Facsimile: (310) 228-3031
Joel A. Holsinger
Fortress Investment Group LLC
400 Galleria Parkway
12
Suite 1500
Atlanta, GA 30339
Telephone: (678) 385-5905
Facsimile: (678) 550-9105
with copies, which shall not constitute notice, to:
Hunton & Williams LLP
600 Peachtree Street, N.E., Suite 4100
Atlanta, GA 30308
Facsimile: (404) 602-8669
Attention: John R. Schneider, Esq.
Hunton & Williams LLP
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219-4074
Facsimile: (804) 343-4833
Attention: S. Gregory Cope, Esq.
If to the Service Provider, to:
Cohen & Company Financial, Management LLC
Circa Centre
2929 Arch Street
17th Floor
Philadelphia PA 19103
Facsimile: (215) 701-8282
Attention: Joseph Pooler, Chief Financial Officer
and to:
Cohen & Company Financial Management LLC
135 East 57th Street, 21st Floor
New York, NY 10022
Facsimile: (646) 673-8100
Attention: Rachael Fink, Esq., General Counsel
with a copy, which shall not constitute notice, to:
Cozen OConnor
1900 Market Street
Philadelphia, PA 19103
Facsimile: (215) 701-2228
Attention: Anna M. McDonough, Esq.
13
or to such other address, facsimile number or electronic mail address as such party may hereafter specify for the purpose by notice to the other parties hereto. Each such notice, request or other communication shall be effective (x) if sent by mail, five days after such notice is deposited in the mails with first class postage prepaid, addressed to the address specified in this Section 10 or (y) if given by any other means, when delivered at the address specified in this Section 10. Each party may rely and shall be protected in acting upon any written instruction or communication believed by it to be genuine and to have been signed by the other party or parties.
Section 12. Specific Performance; Injunctive Relief. The parties hereto acknowledge that the Collateral Manager will be irreparably harmed and that there will be no adequate remedy at law for a violation of any of the covenants or agreements of the Service Provider set forth herein. Therefore, it is agreed that the Collateral Manager shall have the right to enforce such covenants and agreements by specific performance and injunctive relief in equity and the Service Provider hereby waives any and all defenses that could exist in its favor in connection with such enforcement and waives any requirement for the security or posting of any bond in connection with such enforcement. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.
Section 13. Entire Agreement. This Agreement constitutes the entire agreement and understanding among the parties hereto with respect to the matters set forth herein and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof.
Section 14. Amendment; Waiver. Except as provided otherwise herein, this Agreement may not be amended, nor may any rights hereunder be waived, except by an instrument in writing signed by the party sought to be charged with such amendment or waiver and, in each case, the written approval of the parties hereto.
Section 15. Assignment. The Service Provider shall not assign or delegate any of its rights or obligations under this Agreement to a third party without the prior written consent of the Collateral Manager. The Collateral Manager shall assign this Agreement to any purchaser of its rights under the Agreements without the prior consent of the Service Provider, provided that such purchaser agrees in writing to be bound by the terms of this Agreement.
Section 16. Services Not Exclusive. The Service Provider and each Affiliate thereof may engage, simultaneously with their activities hereunder, in other businesses and make investments for their own accounts, and may render services similar to those described in this Agreement for other individuals, companies, trusts or persons, and shall not by reason of such engaging in other businesses, making such investments, or rendering of services for others, be deemed to be acting in conflict with the interests of the Collateral Manager, or the Issuer.
Section 17. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of New York. Each party to this Agreement irrevocably and unconditionally submits to the exclusive jurisdiction of (a) the Supreme Court of the State of New York, New York County, and (b) the United States District Court for the Southern District of New York, for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each party to this Agreement agrees to
14
commence any such action, suit or proceeding either in the United States District Court for the Southern District of New York or if such suit, action or other proceeding may not be brought in such court for jurisdictional reasons, in the Supreme Court of the State of New York, New York County. Each party to this Agreement further agrees that service of any process, summons, notice or document by U.S. registered mail to such partys respective address set forth above shall be effective service of process for any action, suit or proceeding in New York with respect to any matters to which it has submitted to jurisdiction in this Section 16. Each of the parties to this Agreement irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in (i) the Supreme Court of the State of New York, New York County, or (ii) the United States District Court for the Southern District of New York, and hereby and thereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.
Section 18. Parties in Interest. Except as specifically set forth in Section 7 hereof, this Agreement shall be binding upon and inure solely to the benefit of each party hereto and their respective legal representatives, heirs, successors and assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person, any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
Section 19. Counterparts. This Agreement may be executed either directly or by an attorney-in-fact, in any number of counterparts, each of which shall constitute an original, but all of which upon delivery when taken together shall constitute a single contract.
Section 20. Waiver of Jury Trial. Each party hereto waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect to any litigation directly or indirectly arising out of, under or in connection with this Agreement or any transaction contemplated hereby. Each party hereto (i) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce that foregoing waiver and (ii) acknowledges that it and the other Parties have been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section 20.
Section 21. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.
Section 22. Survival. The provisions of Sections 4, 6(d), 6(e), 7, 9, 12, 17 and 20 hereof shall survive the termination of this Agreement.
15
Section 23. Miscellaneous. No failure on the part of either party to exercise, and no delay on its part in exercising, any right or remedy under this Agreement will operate as a waiver thereof, nor will any single or partial exercise of any right or remedy preclude any other or further exercise thereof or the exercise of any other right or remedy.
Section 24. Headings. The section and other headings contained in this Agreement are for reference only and are not intended to describe, interpret, define or limit the scope or intent of this Agreement or any provision hereof.
Section 25. Gender and Number. Whenever required by the context hereof, the singular shall include the plural and the plural shall include the singular. The neuter gender shall include the feminine and masculine genders.
[Signature Page Follows.]
16
IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Agreement as of the date first above written.
COHEN & COMPANY FINANCIAL MANAGEMENT, LLC | ||
By: | /s/ Joseph W. Pooler, Jr. | |
Name: Joseph W. Pooler, Jr. | ||
Title: Chief Financial Officer | ||
ATP MANAGEMENT LLC | ||
By: | /s/ Marc K. Furstein | |
Name: Marc K. Furstein | ||
Title: Chief Operating Officer |
[Signature Page to Services Agreement]
Exhibit A
Collateral Management Agreements and Collateral Administration Agreements
Collateral Management Agreement, dated as of March 15, 2006, by and between Alesco Preferred Funding X, Ltd. and Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC).
Collateral Management Agreement, dated as of June 29, 2006, by and between Alesco Preferred Funding XI, Ltd. and Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC).
Collateral Management Agreement, dated as of October 12, 2006, by and between Alesco Preferred Funding XII, Ltd. and Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC).
Collateral Management Agreement, dated as of November 30, 2006, by and between Alesco Preferred Funding XIII, Ltd. and Cohen & Company Financial Management, LLC.
Collateral Management Agreement, dated as of December 21, 2006, by and between Alesco Preferred Funding XIV, Ltd. and Cohen & Company Financial Management, LLC.
Collateral Management Agreement, dated as of March 29, 2007, by and between Alesco Preferred Funding XV, Ltd. and Cohen & Company Financial Management, LLC.
Collateral Management Agreement, dated as of June 28, 2007, by and between Alesco Preferred Funding XVI, Ltd. and Cohen & Company Financial Management, LLC.
Collateral Management Agreement, dated as of October 30, 2007, by and between Alesco Preferred Funding XVII, Ltd. and Cohen & Company Financial Management, LLC.
Collateral Administration Agreement, dated as of March 15, 2006, by and among Alesco Preferred Funding X, Ltd., Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC) and U.S. Bank National Association.
Collateral Administration Agreement, dated as of June 29, 2006, by and among Alesco Preferred Funding XI, Ltd., Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC) and U.S. Bank National Association.
Collateral Administration Agreement, dated as of October 12, 2006, by and among Alesco Preferred Funding XII, Ltd., Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC) and U.S. Bank National Association.
Collateral Administration Agreement, dated as of November 30, 2006, by and among Alesco Preferred Funding XIII, Ltd., Cohen & Company Financial Management, LLC and Wells Fargo Bank, National Association.
Collateral Administration Agreement, dated as of December 21, 2006, by and among Alesco Preferred Funding XIV, Ltd., Cohen & Company Financial Management, LLC and U.S. Bank National Association.
Collateral Administration Agreement, dated as of March 29, 2007, by and among Alesco Preferred Funding XV, Ltd., Cohen & Company Financial Management, LLC and LaSalle Bank National Association.
Collateral Administration Agreement, dated as of June 28, 2007, by and among Alesco Preferred Funding XVI, Ltd., Cohen & Company Financial Management, LLC and U.S. Bank National Association.
Collateral Administration Agreement, dated as of October 30, 2007, by and among Alesco Preferred Funding XVII, Ltd., Cohen & Company Financial Management, LLC and Wells Fargo Bank, National Association.
Exhibit B
Fee Schedule
Agreement |
Escrowed Amount* | Monthly Service Fee | ||||||
Alesco X |
$ | 2,867,600 | $ | 79,656 | ||||
Alesco XI |
$ | 1,895,555 | $ | 52,654 | ||||
Alesco XII |
$ | 1,941,249 | $ | 53,924 | ||||
Alesco XIII |
$ | 1,287,630 | $ | 35,768 | ||||
Alesco XIV |
$ | 2,139,454 | $ | 59,429 | ||||
Alesco XV |
$ | 1,535,062 | $ | 42,641 | ||||
Alesco XVI |
$ | 1,413,358 | $ | 39,260 | ||||
Alesco XVII |
$ | 538,325 | $ | 14,953 | ||||
Total |
$ | 13,618,233 | $ | 378,285 |
* | The Escrowed Amount shall be reduced by the amount paid by the Collateral Manager to the Service Provider in accordance with Section 3. |
Exhibit C
Future Fee Schedule
Agreement |
Escrowed Amount* | Monthly Service Fee | ||||||
Alesco I |
$ | 502,423 | $ | 13,956 | ||||
Alesco II |
$ | 538,236 | $ | 14,951 | ||||
Alesco III |
$ | 521,115 | $ | 14,475 | ||||
Alesco IV |
$ | 952,747 | $ | 26,465 | ||||
Alesco V |
$ | 908,056 | $ | 25,224 | ||||
Alesco VI |
$ | 1,585,082 | $ | 44,030 | ||||
Alesco VII |
$ | 778,128 | $ | 21,615 | ||||
Alesco VIII |
$ | 1,737,437 | $ | 48,262 | ||||
Alesco IX |
$ | 1,858,543 | $ | 51,626 |
* | The Escrowed Amount shall be reduced by the amount paid by the Collateral Manager to the Service Provider in accordance with Sections 3. |
Exhibit D
Indentures
Indenture, dated as of March 15, 2006, by and among Alesco Preferred Funding X, Ltd., Alesco Preferred Funding X, Inc. and U.S. Bank National Association.
Indenture, dated as of June 29, 2006, by and among Alesco Preferred Funding XI, Ltd., Alesco Preferred Funding XI, Inc. and U.S. Bank National Association.
Indenture, dated as of October 12, 2006, by and among Alesco Preferred Funding XII, Ltd., Alesco Preferred Funding XII, Inc. and U.S. Bank National Association.
Indenture, dated as of November 30, 2006, by and among Alesco Preferred Funding XIII, Ltd., Alesco Preferred Funding XIII, Inc. and Wells Fargo Bank, National Association.
Indenture, dated as of December 21, 2006, by and among Alesco Preferred Funding XIV, Ltd., Alesco Preferred Funding XIV, Inc., Alesco Preferred Funding XIV (L2), Ltd. and U.S. Bank National Association.
Indenture, dated as of March 29, 2007, by and among Alesco Preferred Funding XV, Ltd., Alesco Preferred Funding XV, LLC, Alesco Preferred Funding XV (L2), Ltd. and LaSalle Bank National Association.
Indenture, dated as of June 28, 2007, by and among Alesco Preferred Funding XVI, Ltd., Alesco Preferred Funding XVI, LLC, Alesco Preferred Funding XVI (L2), Ltd. and U.S. Bank National Association.
Indenture, dated as of October 30, 2007, by and among Alesco Preferred Funding XVII, Ltd., Alesco Preferred Funding XVII, LLC, Alesco Preferred Funding XVII (L2), Ltd. and Wells Fargo Bank, National Association.
Exhibit 10.3
LOAN AND SECURITY AGREEMENT
DEKANIA INVESTORS, LLC
as Borrower
with
TD BANK, N.A.,
as Agent and Issuing Bank
and
THE FINANCIAL INSTITUTIONS
NOW OR HEREAFTER LISTED ON SCHEDULE A,
as Lenders
July 29, 2010
TABLE OF CONTENTS
Page | ||||||
SECTION 1. DEFINITIONS AND INTERPRETATION |
1 | |||||
1.1 |
Terms Defined |
1 | ||||
1.2 |
Other Capitalized Terms |
17 | ||||
1.3 |
Accounting Principles |
17 | ||||
1.4 |
Construction |
17 | ||||
SECTION 2. THE LOANS |
17 | |||||
2.1 |
Term Loan Facility - Description: |
17 | ||||
2.2 |
Letters of Credit-Description: |
18 | ||||
2.3 |
Reserved |
21 | ||||
2.4 |
Reserved |
21 | ||||
2.5 |
Advances and Payments |
22 | ||||
2.6 |
Interest: |
24 | ||||
2.7 |
Additional Interest Provisions: |
25 | ||||
2.8 |
Fees |
26 | ||||
2.9 |
Prepayments |
26 | ||||
2.10 |
Funding Indemnity |
27 | ||||
2.11 |
Use of Proceeds |
27 | ||||
2.12 |
Pro Rata Treatment and Payments |
27 | ||||
2.13 |
Inability to Determine Interest Rate |
29 | ||||
2.14 |
Illegality |
29 | ||||
2.15 |
Requirements of Law |
30 | ||||
2.16 |
Taxes |
31 | ||||
2.17 |
Replacement of Lenders |
33 | ||||
SECTION 3. COLLATERAL |
34 | |||||
3.1 |
Description |
34 | ||||
3.2 |
Lien Documents |
35 | ||||
3.3 |
Other Actions |
35 | ||||
3.4 |
Searches |
36 | ||||
3.5 |
[Reserved]. |
36 | ||||
3.6 |
Filing Security Agreement |
36 | ||||
3.7 |
Power of Attorney |
36 | ||||
SECTION 4. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES |
36 | |||||
4.1 |
Resolutions, Opinions, and Other Documents |
36 | ||||
4.2 |
Absence of Certain Events |
37 | ||||
4.3 |
Warranties and Representations at Closing |
38 | ||||
4.4 |
Compliance with this Agreement |
38 | ||||
4.5 |
Officers Certificate |
38 | ||||
4.6 |
Closing |
38 | ||||
4.7 |
Waiver of Rights |
38 | ||||
4.8 |
Conditions for Future Advances |
38 | ||||
4.9 |
Existing Notes |
39 |
i |
SECTION 5. REPRESENTATIONS AND WARRANTIES |
39 | |||||
5.1 |
Corporate Organization and Validity: |
39 | ||||
5.2 |
Places of Business |
40 | ||||
5.3 |
Pending Litigation |
40 | ||||
5.4 |
Title to Properties |
40 | ||||
5.5 |
Governmental Consent |
40 | ||||
5.6 |
Taxes |
40 | ||||
5.7 |
Financial Statements |
40 | ||||
5.8 |
Full Disclosure |
41 | ||||
5.9 |
Subsidiaries |
41 | ||||
5.10 |
Investments, Guarantees, Contracts, etc. |
41 | ||||
5.11 |
Government Regulations, etc. |
41 | ||||
5.12 |
Business Interruptions |
42 | ||||
5.13 |
Names and Intellectual Property: |
42 | ||||
5.14 |
Other Associations: |
43 | ||||
5.15 |
Environmental Matters |
43 | ||||
5.16 |
Regulation O |
44 | ||||
5.17 |
Capital Stock |
44 | ||||
5.18 |
Solvency |
44 | ||||
5.19 |
Perfection and Priority |
44 | ||||
5.20 |
Commercial Tort Claims |
45 | ||||
5.21 |
Letter of Credit Rights |
45 | ||||
5.22 |
Deposit Accounts |
45 | ||||
5.23 |
Anti-Terrorism Laws: |
45 | ||||
5.24 |
Investment Company Act |
46 | ||||
5.25 |
Transaction Documents |
46 | ||||
SECTION 6. BORROWERS AFFIRMATIVE COVENANTS |
46 | |||||
6.1 |
Payment of Taxes and Claims |
46 | ||||
6.2 |
Maintenance of Properties and Corporate Existence: |
46 | ||||
6.3 |
Business Conducted |
47 | ||||
6.4 |
Litigation |
48 | ||||
6.5 |
Issue Taxes |
48 | ||||
6.6 |
Bank Accounts |
48 | ||||
6.7 |
Employee Benefit Plans |
48 | ||||
6.8 |
Financial Covenants: |
48 | ||||
6.9 |
Financial and Business Information |
49 | ||||
6.10 |
Officers Certificates |
50 | ||||
6.11 |
Audits and Inspection |
51 | ||||
6.12 |
Reserved |
51 | ||||
6.13 |
Information to Participant |
51 | ||||
6.14 |
Material Adverse Developments |
51 | ||||
6.15 |
Places of Business |
51 | ||||
6.16 |
Commercial Tort Claims |
51 | ||||
6.17 |
Letter of Credit Rights |
52 | ||||
6.18 |
Pledged Collateral |
52 | ||||
6.19 |
Management Agreements |
52 | ||||
6.20 |
Sponsored CDO Equity Interests or Other Capital Stock |
52 | ||||
6.21 |
Post Closing Requirements |
52 |
ii
SECTION 7. BORROWERS NEGATIVE COVENANTS: |
52 | |||||
7.1 |
Asset Sales, Merger, Consolidation, Dissolution or Liquidation |
52 | ||||
7.2 |
Acquisitions |
53 | ||||
7.3 |
Liens and Encumbrances |
53 | ||||
7.4 |
Transactions With Affiliates or Subsidiaries |
53 | ||||
7.5 |
Guarantees |
53 | ||||
7.6 |
Distributions and Bonuses |
54 | ||||
7.7 |
Other Indebtedness |
54 | ||||
7.8 |
Loans and Investments |
54 | ||||
7.9 |
Use of Lenders Name |
54 | ||||
7.10 |
Miscellaneous Covenants |
54 | ||||
7.11 |
Jurisdiction of Organization |
55 | ||||
7.12 |
Organization Documents |
55 | ||||
SECTION 8. DEFAULT |
55 | |||||
8.1 |
Events of Default |
55 | ||||
8.2 |
Cure |
57 | ||||
8.3 |
Rights and Remedies on Default |
57 | ||||
8.4 |
Nature of Remedies |
58 | ||||
8.5 |
Set-Off |
59 | ||||
SECTION 9. AGENT |
59 | |||||
9.1 |
Appointment and Authority |
59 | ||||
9.2 |
Rights as a Lender |
59 | ||||
9.3 |
Exculpatory Provisions |
60 | ||||
9.4 |
Reliance by Agent |
60 | ||||
9.5 |
Delegation of Duties |
61 | ||||
9.6 |
Resignation of Agent |
61 | ||||
9.7 |
Non-Reliance on Agent and Other Lenders |
61 | ||||
9.8 |
Reserved: |
62 | ||||
9.9 |
Agent May File Proofs of Claim |
62 | ||||
9.10 |
Collateral and Guaranty Matters |
62 | ||||
9.11 |
Action on Instructions of Lenders |
63 | ||||
9.12 |
Designation of Additional Agents |
63 | ||||
SECTION 10. MISCELLANEOUS |
63 | |||||
10.1 |
GOVERNING LAW |
63 | ||||
10.2 |
Integrated Agreement |
63 | ||||
10.3 |
Waiver |
64 | ||||
10.4 |
Expenses; Indemnity |
64 | ||||
10.5 |
Time |
65 | ||||
10.6 |
Consequential Damages |
65 | ||||
10.7 |
Brokerage |
65 | ||||
10.8 |
Notices |
65 | ||||
10.9 |
Headings |
67 | ||||
10.10 |
Survival |
67 | ||||
10.11 |
Amendments |
67 | ||||
10.12 |
Successors and Assigns: |
68 | ||||
10.13 |
Confidentiality |
71 |
iii
10.14 |
Duplicate Originals |
71 | ||||
10.15 |
Modification |
72 | ||||
10.16 |
Signatories |
72 | ||||
10.17 |
Third Parties |
72 | ||||
10.18 |
Discharge of Taxes, Borrowers Obligations, Etc. |
72 | ||||
10.19 |
Withholding and Other Tax Liabilities |
72 | ||||
10.20 |
Consent to Jurisdiction |
73 | ||||
10.21 |
Waiver of Jury Trial |
73 | ||||
10.22 |
Termination |
73 | ||||
10.23 |
Patriot Act Notice |
73 | ||||
10.24 |
Nonliability of Lenders |
73 |
iv
EXHIBITS AND SCHEDULES
Exhibit A |
| Form of Assignment and Assumption Agreement | ||
Exhibit B |
| Form of Authorization Certificate | ||
Exhibit C |
| Form of Conversion/Extension | ||
Exhibit D |
| Form of Advance Request | ||
Exhibit E |
| Form of Compliance Certificate | ||
Schedule A |
| Schedule of Lenders | ||
Schedule B |
| Address of Lenders | ||
Schedule C |
| Excluded Management Agreements | ||
Schedule D |
| Management Agreements | ||
Schedule E |
| Permanent Investments | ||
Schedule F |
| Subsequent Assigned CDO Agreements | ||
Schedule 1.1(a) |
| Permitted Indebtedness | ||
Schedule 1.1(b) |
| Existing Liens and Claims | ||
Schedule 5.1 |
| Borrowers States of Qualifications | ||
Schedule 5.2 |
| Places of Business | ||
Schedule 5.3 |
| Judgments, Proceedings, Litigation and Orders | ||
Schedule 5.7 |
| Federal Tax Identification Numbers and Organizational Identification Numbers | ||
Schedule 5.9 |
| Subsidiary and Affiliates | ||
Schedule 5.10(a) |
| Existing Guaranties, Investments and Borrowings | ||
Schedule 5.10(b) |
| Leases | ||
Schedule 5.11(c) |
| Employee Benefit Plans | ||
Schedule 5.13(a) |
| Schedule of Names | ||
Schedule 5.13(b) |
| Trademarks, Patents and Copyrights |
Schedule 5.13(c) |
| Trademarks, Patents and Copyrights Required to Conduct Business | ||
Schedule 5.14(a) |
| Other Associations | ||
Schedule 5.14(b) |
| Sponsored CDO Offerings | ||
Schedule 5.15 |
| Environmental Disclosure | ||
Schedule 5.17 |
| Capital Stock | ||
Schedule 5.19 |
| Perfection | ||
Schedule 5.20 |
| Commercial Tort Claims | ||
Schedule 5.21 |
| Letter of Credit Rights | ||
Schedule 6.21 |
| Post Closing Matters | ||
Schedule 7.4(a) |
| Transactions with Affiliate and Subsidiaries |
ii
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (Agreement) is dated as of the 29th day of July, 2010, by and among Dekania Investors, LLC, a Delaware limited liability company (Borrower), TD Bank, N.A., a national banking association, in its capacity as agent (Agent), TD Bank, N.A., in its capacity as issuing bank (Issuing Bank) and each of the financial institutions which are now or hereafter identified as Lenders on Schedule A attached hereto and made a part of this Agreement (as such Schedule may be amended, modified or replaced from time to time), (each such financial institution, individually each being a Lender and collectively all being Lenders).
BACKGROUND
A. Borrower desires to establish financing with Lenders to permit its uninterrupted and continuous business operations. Lenders are willing to make loans and grant extensions of credit to Borrower under the terms and provisions hereinafter set forth.
B. The parties desire to define the terms and conditions of their relationship and reduce them to writing.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:
SECTION 1. DEFINITIONS AND INTERPRETATION
1.1 Terms Defined: As used in this Agreement, the following terms have the following respective meanings:
Acceptance Date Section 10.12.
Additional Agent Section 9.12.
Adjusted Base Rate The sum of the Base Rate plus two and three quarters percent (2.75%).
Adjusted LIBOR Rate For the LIBOR Interest Period for each LIBOR Rate Loan comprising part of the same borrowing (including conversions, extensions and renewals), a per annum interest rate equal to the greater of (a) one and one half percent (1.5%) or (b) as determined pursuant to the following formula:
Adjusted LIBOR Rate = | London Interbank Offered Rate | |
1 LIBOR Reserve Percentage |
Advance(s) Any monies advanced or credit extended to Borrower by any Lender under the Term Loan Facility, including without limitation cash advances and Letters of Credit.
Advance Request Section 2.5(b)(i).
1
Affiliate With respect to any Person, (i) any Person which, directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such Person, or (ii) any Person who is a director or officer (a) of such Person or (b) of any Subsidiary of such Person. For purposes of this definition, control of a Person shall mean the power, direct or indirect, (1) to vote 10% or more of the Capital Stock having ordinary voting power for the election of directors (or comparable equivalent) of such Person, or (2) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. Control may be by ownership, contract, or otherwise.
Agreement This Loan and Security Agreement, as it may hereafter be amended, supplemented or replaced from time to time.
Anti-Terrorism Laws Any statute, treaty, law (including common law), ordinance, regulation, rule, order, opinion, release, injunction, writ, decree or award of any Governmental Authority relating to terrorism or money laundering, including Executive Order No. 13224 and the USA Patriot Act.
Approved Fund Any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered by (i) a Lender, (ii) an Affiliate of a Lender or (iii) an entity or an Affiliate of an entity that administers or manages a Lender.
Asset Sale The sale, transfer, lease, license or other disposition, by Borrower or any Guarantor to any Person other than Borrower, or any Guarantor, of any Property now owned or hereafter acquired, of any nature whatsoever in any transaction or series of related transactions; provided, however, that an Asset Sale shall not include the sale of the Assigned CDO Agreements (as defined in the Master Agreement), pursuant to the Master Agreement. An Asset Sale, includes without limitation, a division.
Assignment Agreement An assignment and assumption agreement entered into by an assigning Lender and accepted by Agent, in accordance with Section 10.12, in the form of Exhibit A attached hereto.
ATP ATP Management LLC, a Delaware limited liability company.
Authorized Officer Any officer (or comparable equivalent) of Borrower authorized by specific resolution of Borrower to request Advances or execute Quarterly Compliance Certificates as set forth in the authorization certificate delivered to Agent substantially in the form of Exhibit B attached hereto.
Bankruptcy Code The United States Bankruptcy Code, 11 U.S.C. §101 et. seq. as amended from time to time.
Base Rate The highest of (i) Prime Rate of interest as published in the Money Rates Section of The Wall Street Journal on the applicable date (or the highest Prime Rate if more than one is published) as such rate may change from time to time, (ii) the Federal Funds Rate plus fifty (50) basis points, and (iii) the Daily LIBOR Rate plus one hundred (100) basis points. If The Wall Street Journal ceases to be published or goes on strike or is otherwise not published, Agent
2
may use a similar published prime or base rate. The Base Rate is not necessarily the lowest or best rate of interest offered by Agent or any Lender to any borrower or class of borrowers.
Base Rate Loans That portion of the Loans (including any unreimbursed draws on any Letter of Credit), accruing interest based on a rate determined by reference to the Base Rate.
Blocked Person Section 5.23.
Broker Entity Collectively, Cohen & Company Securities LLC, a Delaware limited liability company and Fairfax I. S. (US) LLC, a Delaware limited liability company.
Business Day (i) Any day that is not a Saturday or Sunday or day on which Agent or any Lender is required or permitted to close in Philadelphia, Pennsylvania or (ii) with respect to any LIBOR Rate Loan, any day which is a Business Day described in clause (i) and which is also a day for trading by and between banks in dollar deposits in the London interbank market.
Capital Expenditures For any period, the aggregate of all expenditures (including that portion of Capitalized Lease Obligations attributable to that period) made in respect of the purchase, construction or other acquisition of fixed or capital assets, determined in accordance with GAAP.
Capital Stock Any and all shares, equity interests, or other equivalents (however designated) of capital stock of a corporation, any and all other ownership interests in a Person (other than a corporation) and any and all warrants or options to purchase any of the foregoing.
Capitalized Lease Obligations Any Indebtedness represented by obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP.
CCFM Cohen & Company Financial Management, LLC, a Delaware limited liability company.
Change of Control The result caused by the occurrence of any event which results in (i) Parent owning (beneficially, legally, or otherwise) less than one hundred percent (100%) of the voting power of the issued and outstanding Capital Stock of Borrower entitled to vote, and with respect to any Person included in the Dekania Group, the result caused by Parent owning, directly or indirectly, less than fifty-one percent (51%) of any class of the issued and outstanding Capital Stock of such Person entitled to vote or (ii) with respect to Parent, any Person or group of Persons (other than Cohen & Company, Daniel G. Cohen, any Affiliate of Daniel G. Cohen, or trusts for the benefit of Daniel G. Cohen or one or more of his family members) obtaining (beneficially, legally or otherwise) more than fifty percent (50%) of the voting power of issued and outstanding Capital Stock of Parent entitled to vote.
Closing Section 4.6.
Closing Date Section 4.6.
Code The Internal Revenue Code of 1986, as amended from time to time.
3
Cohen & Company Cohen & Company Inc., a Maryland corporation.
Cohen Securities Funding Cohen Securities Funding LLC, a Delaware limited liability company.
Collateral All of the Property and interests in Property described in Section 3.1 of this Agreement and in any Security Document, and all other Property and interests in Property that now or hereafter secure payment of the Obligations and satisfaction by Borrower of all covenants and undertakings contained in this Agreement and the other Loan Documents.
Collateral Pledge Agreement That certain Collateral Pledge Agreement executed by Parent, Borrower and certain other Guarantors in favor of Agent, on or prior to the Closing Date, as the same may be amended, modified, confirmed, supplemented or restated from time to time.
Collateralized Debt Offering An offering, by a special purpose entity, of interests in secured debt obligations, and other investments permitted under the organizational and operating documents of such entity, which interests are sold to third party investors.
Consolidated Amortization Expense For any period, the aggregate consolidated amount of amortization expense of the Dekania Group, as determined in accordance with GAAP.
Consolidated Cash Flow For any period, the Dekania Groups Consolidated Net Income (or deficit) plus (i) Consolidated Interest Expense, plus (ii) Consolidated Depreciation Expense, plus (iii) Consolidated Amortization Expense, plus (iv) Consolidated Tax Expense, plus (v) all other non-cash expenses (including non-cash stock compensation), minus (vi) extraordinary gains, plus (vii) Non-Controlling Interest Expense, minus (viii) non-cash deferred sub-advisory revenue plus (ix) the release of restricted cash from the escrow account established under the Escrow Agreement, all as determined in accordance with GAAP.
Consolidated Depreciation Expense For any period, the aggregate, consolidated amount of depreciation expense of the Dekania Group, as determined in accordance with GAAP.
Consolidated Funded Debt At any time (without duplication), the aggregate principal amount of interest bearing Indebtedness of the Dekania Group on a consolidated basis, as determined in accordance with GAAP.
Consolidated Interest Expense For any period (without duplication), the aggregate, consolidated amount of interest expense required to be paid or accrued during such period on all Indebtedness of the Dekania Group outstanding during all or any part of such period, as determined in accordance with GAAP.
Consolidated Net Income For any period, consolidated net income after taxes of the Dekania Group as such would appear on Borrowers consolidated statement of income, prepared in accordance with GAAP
Consolidated Net Worth At any time, the sum of the amount by which all of (i) the Dekania Groups consolidated assets (excluding assets attributable to Non-Consolidation Entities),
4
plus Subordinated Debt, exceed all of (ii) Consolidated Total Liabilities, all as would be shown on the Dekania Groups consolidated balance sheet prepared in accordance with GAAP.
Consolidated Tax Expense For any period, the aggregate consolidated amount of income tax expense of the Dekania Group, as determined in accordance with GAAP
Consolidated Total Liabilities At any time, the aggregate total amount of the Dekania Groups consolidated liabilities as would be shown on the Dekania Groups consolidated balance sheet prepared in accordance with GAAP.
Daily LIBOR Rate For any day, the rate per annum determined by Agent by dividing (x) the Published Rate by (y) a number equal to 1.00 minus the LIBOR Reserve Percentage.
Debt Payments For any period, the sum of scheduled principal payments on account of the Dekania Groups long term Indebtedness for such period then ended plus Consolidated Interest Expense.
Debt Service Coverage Ratio For each period of four full fiscal quarters ended on the last day of each fiscal quarter, the ratio of (i) Consolidated Cash Flow to (ii) Debt Payments; all as determined in accordance with GAAP as of the last day of each such fiscal quarter; provided however that: (I)(A) for the test period ending September 30, 2010, Debt Payments shall be equal to Debt Payments for the fiscal quarter ending September 30, 2010 multiplied by 4, (B) for the test period ending on December 31, 2010, Debt Payments shall be equal to the sum of Debt Payments for the two consecutive fiscal quarters ending December 31, 2010 multiplied by 2, and (C) for the test period ending March 31, 2011, Debt Payments shall be equal to the sum of Debt Payments for the three consecutive fiscal quarters ending March 31, 2011 multiplied by one and one third (1-1/3) and (II)(A) for the test period ending September 30, 2010, Consolidated Cash Flow shall be equal to Consolidated Cash Flow for the fiscal quarter ending September 30, 2010, multiplied by 4, (B) for the test period ending December 31, 2010, Consolidated Cash Flow shall be equal to Consolidated Cash Flow for the two consecutive fiscal quarters ending on December 31, 2010 multiplied by 2, and (3) for the test period ending on March 31, 2011, Consolidated Cash Flow shall be equal to Consolidated Cash Flow for the three consecutive fiscal quarters ending on March 31, 2011 multiplied by one and one third (1-1/3).
Deep Value Collectively, Strategos Deep Value Mortgage Fund LP and Strategos Deep Value (Offshore) Mortgage Fund.
Default An event which with the passage of time, the giving of notice, or both would constitute an Event of Default.
Default Rate Section 2.7(b).
Dekania Group Collectively, Borrower, CCFM, Dekania Capital Management, LLC, a Delaware limited liability company, CIRA ECM, LLC, a Delaware limited liability company and any other Person that, subject to the limitations of this Agreement, becomes a Subsidiary of Borrower.
5
Disqualified Stock Any Capital Stock which by its terms (or by terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event (i) matures or is mandatorily redeemable for any reason, (ii) is convertible or exchangeable for Indebtedness or Capital Stock that meets the requirements of clauses (i) and (ii), or (iii) is redeemable at the option of the holder thereof, in whole or in part in each case on or prior to the Term Loan Maturity Date.
Distribution (i) Cash dividends or other cash distributions on any now or hereafter outstanding Capital Stock of any Person included in the Dekania Group; (ii) the redemption, repurchase, defeasance or acquisition of such Capital Stock or of warrants, rights or other options to purchase such Capital Stock; and (iii) any loans or advances (other than salaries), to any shareholder(s), partner(s), or member(s) of Borrower or any Guarantor; provided, however, a Distribution shall not include cash dividends or other cash distributions on any now or hereafter outstanding Capital Stock of any Person included in the Dekania Group or loans or advances, to any shareholder(s), partner(s), or member(s) of Borrower, or any Gurantor or any other Subsidiary of the foregoing, that are comprised of (A) cash proceeds received on a Closing Date (as defined in the Master Agreement) attributable to the sale of an Assigned CDO Agreement (as defined in the Master Agreement), which for the Closing Date (as defined in the Master Agreement) on or about the date of this Agreement was $3,158,771.81, (B) the $1,891,421.21 received by any such Person from the Service Fees (as defined in the Service Agreement) payable pursuant to Section 3(a) of the Services Agreement, (C) amounts received by any such Person from the Service Fees (as defined in the Service Agreement) payable pursuant to Section 3(b) of the Service Agreement, or (D) amounts received by any such Person in connection with the Loan Agreement.
Draw Down Period The period commencing on the Closing Date and ending on September 30, 2010.
Environmental Laws Any and all Federal, foreign, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees and any and all common law requirements, rules and bases of liability regulating, relating to or imposing liability or standards of conduct concerning pollution, protection of the environment, or the impact of pollutants, contaminants or toxic or hazardous substances on human health or the environment, as now or may at any time hereafter be in effect.
ERISA The Employee Retirement Income Security Act of 1974, as the same may be amended, from time to time.
Escrow Agreement That certain Escrow Agreement among ATP, CCFM and TD Bank, N.A. dated July 29, 2010 and as amended from time to time.
Event of Default Section 8.1.
Excluded Management Fees Fees received by Borrower or a Guarantor under any of the Management Agreements set forth on Schedule C attached hereto, as such Schedule C may be amended, supplemented, replaced or restated from time to time, which fees are to be paid to a sub-advisor or other Person in accordance with agreements entered into in connection with the Management Agreements set forth on Schedule C attached hereto.
6
Excluded Property 35% of total foreign Subsidiary voting stock of any foreign Subsidiary.
Executive Order No. 13224 The Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, as the same has been, or shall hereafter be, renewed, extended, amended or replaced.
Existing Loan Agreement That certain Amended and Restated Loan and Security Agreement dated as of June 1, 2009 among Cohen Brothers, LLC, TD Bank, N.A. and the financial institutions party thereto from time to time.
Existing Letters of Credit Those certain Letters of Credit issued by Issuing Bank (i) dated September 5, 2007 bearing L/C Number 136192070362 with a beneficiary of 181 West Madison CF Borrower LLC in the original amount of $50,000 and (ii) dated November 25, 2009 bearing L/C Number 20003379 with a beneficiary of GSME Acquisition Partners I in the amount of $1,242,000.
Expenses Section 10.4.
Fed Funds Rate For any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day on the day next succeeding such day (or if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or if such rate is not so published for any day which is a Business Day, the average of quotations for such day on such transactions received by Agent from three Federal funds brokers of recognized standing selected by Agent.
Fin 46 Entity Any entity that is required pursuant to the requirements of the Financial Accounting Standards Boards Interpretation Number 46 to be consolidated in the financial statements of Parent.
Fixed Charge Coverage Ratio For each period of four full fiscal quarters ended on the last day of each fiscal quarter, the ratio of (i) Consolidated Cash Flow to (ii) the sum of Debt Payments, plus Distributions made by the Dekania Group (net of cash contributions by Parent or Affiliates of Borrower to a Person included in the Dekania Group) all as determined in accordance with GAAP on the last day of each such fiscal quarter; provided however that: (I)(A) for the test period ending September 30, 2010, Debt Payments plus Distributions shall be equal to Debt Payments for the fiscal quarter ending September 30, 2010 multiplied by 4 plus Distributions for the fiscal quarter ending September 30, 2010 (B) for the test period ending on December 31, 2010, Debt Payments plus Distributions shall be equal to the sum of Debt Payments for the two consecutive fiscal quarters ending December 31, 2010 multiplied by 2 plus Distributions for the two consecutive fiscal quarters ending December 31, 2010 and (C) for the test period ending March 31, 2011, Debt Payments plus Distributions shall be equal to the sum of Debt Payments for the three consecutive fiscal quarters ending March 31, 2011 multiplied by one and one third (1-1/3) plus Distributions for the three consecutive fiscal quarters ending March 31, 2011 and (II)(A) for the test period ending September 30, 2010, Consolidated Cash Flow shall be equal to Consolidated Cash Flow for the fiscal quarter ending September 30, 2010, multiplied by 4, (B) for the test period ending
7
December 31, 2010, Consolidated Cash Flow shall be equal to Consolidated Cash Flow for the two consecutive fiscal quarters ending on December 31, 2010 multiplied by 2, and (3) for the test period ending on March 31, 2011, Consolidated Cash Flow shall be equal to Consolidated Cash Flow for the three consecutive fiscal quarters ending on March 31, 2011 multiplied by one and one third (1-1/3).
Fronting Fee Section 2.8(b)(ii).
GAAP Generally accepted accounting principles as in effect on the Closing Date applied in a manner consistent with the most recent audited financial statements of Cohen & Company furnished to Lender and described in Section 5.7 herein, subject, however, in the case of determination of compliance with the financial covenants in Section 6.8, to the provisions of Section 1.3.
Government Acts Section 2.2.
Government Authority Any federal, state or local government or political subdivision, or any agency, authority, bureau, central bank, commission, department or instrumentality of either, or any court, tribunal, grand jury, or arbitration.
Guarantors Collectively, Parent and each Subsidiary Guarantor.
Guarantor Security Agreement That certain security agreement executed by each Guarantor in favor of Agent, dated on or prior to the Closing Date, as the same may be amended, modified, confirmed, supplemented or restated from time to time.
Hazardous Substances Any substances defined or designated as hazardous or toxic waste, hazardous or toxic material, hazardous or toxic substance or similar term, under any Environmental Law.
Hedging Agreements Any Interest Hedging Instrument or any other interest rate protection agreement, foreign currency exchange agreement, commodity purchase or option agreement, or any other interest rate hedging device or swap agreement (as defined in 11 U.S.C. § 101 et. seq.).
Indebtedness Of any Person at any date, without duplication, (i) all indebtedness of such Person for borrowed money (including with respect to Borrower, the Obligations) or for the deferred purchase price of property or services (other than current trade liabilities and other accruals incurred in the ordinary course of business and payable in accordance with customary practices), (ii) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (iii) all Capitalized Lease Obligations of such Person, (iv) the face amount of all letters of credit (including the Letters of Credit), issued for the account of such Person and all drafts drawn thereunder, (v) all obligations of other Persons described in this definition of Indebtedness which such Person has guaranteed (other than endorsements of instruments), (vi) Disqualified Stock, (vii) all obligations of such Person under Hedging Agreements (provided that the amount of such obligations to be included in Indebtedness shall be equal to the amount payable by such Person after giving effect to all legally enforceable netting agreements, if such Hedging Agreements were terminated on such date), and (viii) all liabilities secured by any Lien on any property owned by such
8
Person even though such Person has not assumed or otherwise become liable for the payment thereof.
Information All information received from Borrower or any Guarantor relating to Borrower, any Guarantor or any of their respective businesses, other than any such information that is available to Agent, any Lender or Issuing Bank on a non-confidential basis prior to disclosure by Borrower or any Guarantor, provided that, in the case of information received from Borrower or any Guarantor after the date of this Agreement, such information is clearly identified at the time of delivery as confidential.
Interest Hedging Instrument Any documentation evidencing any interest rate swap, interest cap or collar or any other interest rate hedging device or swap agreement (as defined in 11 U.S.C. § 101 et. seq.) between Borrower or any Guarantor and a Lender (or any Affiliate of a Lender).
IRS Internal Revenue Service.
Issuing Bank TD Bank, N.A.
L/C Fees Section 2.8(b)(i).
L/C Sublimit At any time, an amount not to exceed $1,300,000.
Letter of Credit Those certain stand-by letters of credit (as amended, supplemented, replaced or restated from time to time) issued from time to time pursuant to Section 2.2 of this Agreement, including the Existing Letters of Credit.
Letter of Credit Documents Any Letter of Credit, any amendment thereto, any documents delivered in connection therewith, any application therefor, or any other documents (all in form and substance reasonably satisfactory to Issuing Bank), governing or providing for (i) the rights and obligations on the parties concerned or at risk, or (ii) any collateral security for such obligations.
Leverage Ratio At any time, the ratio of the Dekania Groups (i) Consolidated Funded Debt less Subordinated Debt, to (ii) Consolidated Cash Flow for each period of four full fiscal quarters ended on the last day of each fiscal quarter; provided however that: (I) for the test period ending September 30, 2010, Consolidated Cash Flow shall be equal to Consolidated Cash Flow for the fiscal quarter ending September 30, 2010 multiplied by 4, (II) for the test period ending on December 31, 2010, Consolidated Cash Flow shall be equal to Consolidated Cash Flow for the two consecutive fiscal quarters ending December 31, 2010 multiplied by 2, and (III) for the test period ending March 31, 2011, Consolidated Cash Flow shall be equal to Consolidated Cash Flow for the three consecutive fiscal quarters ending March 31, 2011 multiplied by one and one third (1-1/3).
LIBOR Interest Period As to LIBOR Rate Loans, a period of one month, two months or three months, as selected by Borrower pursuant to the terms of this Agreement (including continuations and conversions thereof); provided however, (i) if any LIBOR Interest Period would end on a day which is not a Business Day, such LIBOR Interest Period shall be extended to the next
9
succeeding Business Day (except that where the next succeeding Business Day falls in the next succeeding calendar month, then on the next preceding Business Day), (ii) no LIBOR Interest Period shall extend beyond the Term Loan Maturity Date, and (iii) any LIBOR Interest Period with respect to a LIBOR Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such LIBOR Interest Period) shall end on the last Business Day of the relevant calendar month at the end of such LIBOR Interest Period.
LIBOR Rate The sum of Adjusted LIBOR Rate plus four and one half percent (4.50%).
LIBOR Rate Loans That portion(s) of the Loans accruing interest based on a rate determined by reference to the Adjusted LIBOR Rate.
LIBOR Reserve Percentage For any day, that percentage (expressed as a decimal) which is in effect from time to time under Regulation D, as such regulation may be amended from time to time or any successor regulation, as the maximum reserve requirement (including, without limitation, any basic, supplemental, emergency, special, or marginal reserves) applicable with respect to Eurocurrency liabilities as that term is defined in Regulation D (or against any other category of liabilities that includes deposits by reference to which the interest rate of LIBOR Rate Loans is determined), whether or not a Lender has any Eurocurrency liabilities subject to such reserve requirement at that time. LIBOR Rate Loans shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefits of credits for proration, exceptions or offsets that may be available from time to time to a Lender. The Adjusted LIBOR Rate shall be adjusted automatically on and as of the effective date of any change in the LIBOR Reserve Percentage.
Lien Any interest of any kind or nature in property securing an obligation owed to, or a claim of any kind or nature in Property by, a Person other than the owner of the Property, whether such interest is based on the common law, statute, regulation or contract, and including, but not limited to, a security interest or lien arising from a mortgage, encumbrance, pledge, conditional sale or trust receipt, a capitalized lease, consignment or bailment for security purposes, a trust, or an assignment. For the purposes of this Agreement, Borrower or any Guarantor (as applicable) shall be deemed to be the owner of any Property which it has acquired or holds subject to a conditional sale agreement or other arrangement pursuant to which title to the Property has been retained by or vested in some other Person for security purposes.
Loans Collectively, the unpaid balance of cash Advances under the Term Loan Facility which may be Base Rate Loans or LIBOR Rate Loans and any unreimbursed draws under any Letter of Credit.
Loan Documents Collectively, this Agreement, the Notes, the Security Documents, the Letter of Credit Documents, the Perfection Certificate, the Notice Letters, and all agreements, instruments and documents executed and/or delivered from time to time pursuant to this Agreement or in connection therewith, as amended, modified, confirmed, supplemented, or restated from time to time.
10
London Interbank Offered Rate With respect to any LIBOR Rate Loan for the LIBOR Interest Period applicable thereto, the rate of interest per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the British Bankers Association LIBOR Rate (BBA LIBOR) as published by Bloomberg (or such other commercially available source providing quotations of BBA LIBOR as designated by Agent from time to time) at approximately 11:00 A.M. (London time) 2 Business Days prior to the first day of such LIBOR Interest Period for a term comparable to such LIBOR Interest Period; provided however, if more than one BBA LIBOR Rate is specified, the applicable rate shall be the arithmetic mean of all such rates. If, for any reason, such rate is not available, the term London Interbank Offered Rate shall mean, with respect to any LIBOR Rate Loan for the LIBOR Interest Period applicable thereto, the rate of interest per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by Agent to be the average rates per annum at which deposits in dollars are offered for such LIBOR Interest Period to major banks in the London interbank market in London, England at approximately 11:00 A.M. (London time) 2 Business Days prior to the first day of such LIBOR Interest Period for a term comparable to such LIBOR Interest Period.
Management Agreements Collectively, those certain agreements set forth on Schedule D attached hereto, as such Schedule may be amended, supplemented, replaced or restated from time to time and any other collateral management agreement (whether now existing or hereafter created or acquired) pursuant to which Borrower or a Guarantor shall serve as collateral manager in connection with a Collateralized Debt Offering, a warehouse offering, a hedge fund or any other transaction.
Master Agreement. That certain Master Transaction Agreement among CCFM, Cohen & Company and ATP dated as of July 29, 2010 and as amended from time to time.
Material Adverse Effect A material adverse effect with respect to (i) the business, assets, properties, financial condition, stockholders equity, contingent liabilities, or results of operations of Borrower or Borrower and all Guarantors on a consolidated basis, or (ii) Borrowers ability to pay the Obligations in accordance with the terms hereof, or (iii) the validity or enforceability of this Agreement or any of the other Loan Documents or the rights and remedies of Agent, Issuing Bank or any Lender hereunder or thereunder.
Net Cash Proceeds Section 2.9(d).
Non-Consolidation Entities Collectively, the Fin 46 Entities.
Non-Controlling Interest Expense For any period, the amount of any non-controlling interest expense as shown on Borrowers statement of income as determined in accordance with GAAP, that is deducted in the calculation of Consolidated Net Income for such period.
Notes Collectively, the Term Loan Notes.
Notice Section 10.8.
Notice Letter Each Payment Instruction Letter in the form attached to the Guarantor Security Agreement as Exhibit A, which has been or will be issued by each applicable Guarantor
11
and delivered to, and acknowledged by, the applicable trustee under the indenture related to the applicable Management Agreement.
Notice of Conversion/Extension A written notice of conversion of a LIBOR Rate Loan to a Base Rate Loan, or of a Base Rate Loan to a LIBOR Rate Loan or extension of a LIBOR Rate Loan, in each case substantially in the form of Exhibit C attached hereto.
Obligations All existing and future debts, liabilities and obligations of every kind or nature at any time owing by Borrower or any Guarantor to Lenders, Issuing Bank or Agent whether under this Agreement or any other Loan Document, whether joint or several, related or unrelated, primary or secondary, matured or contingent, due or to become due (including debts, liabilities and obligations obtained by assignment), and whether principal, interest, fees, indemnification obligations hereunder or Expenses (specifically including interest accruing after the commencement of any bankruptcy, insolvency or similar proceeding with respect to Borrower, whether or not a claim for such post-commencement interest is allowed), including, without limitation, debts, liabilities and obligations in respect of the Term Loan Facility, Reimbursement Obligations and any extensions, modifications, substitutions, increases and renewals thereof; any amount payable by Borrower or any Guarantor pursuant to an Interest Hedging Instrument; the payment of all amounts advanced by Agent on behalf of any Secured Party to preserve, protect and enforce rights hereunder and in the Collateral; and all Expenses. Without limiting the generality of the foregoing, Obligations shall include any other debts, liabilities or obligations owing to Agent in connection with any lock box, cash management, or other services (including electronic funds transfers or automated clearing house transactions) provided by Agent to Borrower.
Overadvance Section 2.1(a).
Parent Cohen Brothers, LLC, a Delaware limited liability company.
Participant Section 10.12.
Participant Register Section 10.12.
PBGC The Pension Benefit Guaranty Corporation.
Perfection Certificate The Perfection Certificate provided by Borrower and each Guarantor to Agent on or prior to the Closing Date in form and substance satisfactory to Agent.
Permanent Investments Those certain assets or investments owned by Borrower or a Guarantor and which are set forth on Schedule E attached hereto.
Permitted Indebtedness (i) Indebtedness to Agent, Issuing Bank and Lenders in connection with the Term Loan Facility and Letters of Credit or otherwise pursuant to the Loan Documents; (ii) trade payables incurred in the ordinary course of any Person included in the Dekania Groups business; (iii) purchase money Indebtedness (including Capitalized Lease Obligations) hereafter incurred by Borrower or any Guarantor to finance the purchase of fixed assets; provided that, (a) such Indebtedness incurred in any fiscal year shall not exceed $1,000,000 (b) such Indebtedness shall not exceed the purchase price of the assets funded and (c) no such Indebtedness may be refinanced for a principal amount in excess of the principal amount outstanding at the time of
12
such refinancing; (iv) Indebtedness existing on the Closing Date that is identified and described on Schedule 1.1(a) attached hereto and made part hereof; (v) Subordinated Debt; and (vi) Indebtedness under Hedging Agreements.
Permitted Investments (i)(a) obligations issued or guaranteed by the United States of America or any agency thereof, (b) commercial paper with maturities of not more than 180 days and a published rating of not less than A-1 or P-1 (or the equivalent rating) by a nationally recognized investment rating agency, (c) certificates of time deposit and bankers acceptances having maturities of not more than 180 days and repurchase agreements backed by United States government securities of a commercial bank if (1) such bank has a combined capital and surplus of at least $500,000,000, or (2) its debt obligations, or those of a holding company of which it is a Subsidiary, are rated not less than A (or the equivalent rating) by a nationally recognized investment rating agency, and (d) U.S. money market funds that invest solely in obligations issued or guaranteed by the United States of America or an agency thereof; (ii) loans to employees not to exceed $500,000 in the aggregate outstanding at any time; (iii) so long as no Default or Event of Default exists, or after giving effect to any such investment would exist, investments in the Broker Entity; (iv) investments existing on the Closing Date and disclosed on Schedule 5.10(a); (v) investments in Subsidiaries reflected on Schedule 5.9; provided however, that nothing contained herein shall prevent Borrower from organizing new Subsidiaries in accordance with all of the conditions set forth in this Agreement; and (vi) so long as no Default or Event of Default exists, or after giving effect to any such investment would exist, loans or advances to any shareholder(s), partner(s), or member(s) of Borrower or any Guarantor or any Subsidiary of the foregoing that are comprised of amounts received by any such Person from or in connection with (I) the sale of the Assigned CDO Agreements (as defined in the Master Agreement), (II) the Service Fees (as defined in the Services Agreement) payable pursuant to Sections 3(a) or 3(b) of the Services Agreement, or (III) the Loan Agreement.
Permitted Liens (i) Liens securing taxes, assessments or governmental charges or levies or the claims or demands of materialmen, mechanics, carriers, warehousemen, and other like persons not yet due; (ii) Liens incurred or deposits made in the ordinary course of business in connection with workers compensation, unemployment insurance, social security and other like laws; (iii) Liens on fixed assets security purchase money Indebtedness permitted under Section 7.6; provided that, (a) such Lien is attached to such assets concurrently, or within 20 days of the acquisition thereof, and only to the assets so acquired, and (b) a description of the asset acquired is furnished to Lender; and (iv) Liens existing on the Closing Date and shown on Schedule 1.1(b) attached hereto and made part hereof.
Person An individual, partnership, corporation, trust, unincorporated association or organization, joint venture, limited liability company or partnership, or any other entity.
Property Any interest of Borrower or any Guarantor in any kind of property or asset, whether real, personal or mixed, tangible or intangible.
Pro Rata Percentage As to each Lender, the pro rata percentage set forth opposite each Lenders name on Schedule A hereto.
13
Published Rate The rate of interest published each Business Day in The Wall Street Journal Money Rates listing under the caption London Interbank Offered Rates for a one month period. If The Wall Street Journal ceases to be published or goes on strike or is otherwise not published, Agent may use a similar published eurodollar rate for a one month period.
Quarterly Compliance Certificate Section 6.10.
Register Section 10.12.
Regulation D Regulation D of the Board of Governors of the Federal Reserve System, comprising Part 204 of Title 12, Code of Federal Regulations, as amended, and any successor thereto.
Reimbursement Obligations Collectively, Borrowers reimbursement obligation for any and all draws under any Letter of Credit.
Related Parties With respect to any specified Person, such Persons Affiliates and the respective directors, managers, officers, employees and agents of such Person and such Persons Affiliates.
Requirement of Law As to any Person, each law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
Secured Parties Collectively, Agent, Issuing Bank, Lenders and any Lender (or Affiliate of a Lender) that is a counterparty to any Interest Hedging Instrument, permitted under the Loan Agreement and any permitted successors and assigns.
Securities Act The Securities Act of 1933, as the same may be amended from time to time.
Security Documents Collectively, the Surety and Guaranty Agreement, the Guarantor Security Agreement, the Collateral Pledge Agreement, and the Trademark Security Agreement, each executed by Cohen Bros. Financial, LLC, Borrower, Parent or Subsidiary Guarantors (as applicable), and any other agreements, instruments and documents executed and/or delivered from time to time or in connection therewith related to any guaranty or suretyship obligation or the granting of any security interest or pledge off any Property to secure the repayment of the Obligations.
Services Agreement That certain Services Agreement between ATP and CCFM dated as of July 29, 2010 and as amended from time to time.
Sponsored CDO Equity Interests Collectively, those certain equity interests in the Collateralized Debt Offerings set forth on Schedule 5.14(b) attached hereto, as such Schedule may be amended, supplemented, replaced or restated from time to time and any other equity interests in additional Collateralized Debt Offerings sponsored by Borrower or any Guarantor (whether now existing or hereafter created or acquired).
14
Sponsored CDO Offerings A Collateralized Debt Offering structured by a Guarantor and for which Borrower or a Guarantor acts as collateral manager pursuant to a Management Agreement.
Subordinated Debt Indebtedness of a Person included in the Dekania Group subject to payment terms and subordination provisions acceptable to Agent in its sole discretion.
Subsequent Assigned CDO Agreement Sale The sale by CCFM, under the terms of the Master Agreement, of all or any of the Assigned CDO Agreements (as defined in the Master Agreement) described on Schedule F hereto, after the Closing Date.
Subsidiary With respect to any Person at anytime, (i) any corporation more than fifty percent (50%) of whose voting stock is legally and beneficially owned directly or indirectly by such Person or owned by a corporation more than fifty percent (50%) of whose voting stock is legally and beneficially owned directly or indirectly by such Person; (ii) any trust of which a majority of the beneficial interest is at such time owned directly or indirectly, beneficially or of record, by such Person or one or more Subsidiaries of such Person; and (iii) any partnership, joint venture, limited liability company or other entity of which ownership interests having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions are at such time owned directly or indirectly, beneficially or of record, by, or which is otherwise controlled directly, indirectly or through one or more intermediaries by, such Person or one or more Subsidiaries of such Person. Notwithstanding the foregoing, Non-Consolidation Entities shall be deemed not to be Subsidiaries.
Subsidiary Guarantor Alesco Collateral Holdings I, L.P., Alesco Funding, LLC, Alesco Holdings, Ltd., Alesco Loan Holdings, LLC, Alesco Loan Holdings Trust, Alesco TPS Holdings, LLC, Alesco Warehouse Conduit, LLC, CIRA ECM, LLC, Cohen & Compagnie, Cohen & Company Financial Management, LLC, Cohen & Company Funding, LLC, Cohen & Company Management, LLC, Cohen & Company Ventures, LLC, Cohen Asia Investments, Ltd., Cohen Bros. Acquisitions, Cohen Securities Funding, Dekania Capital Management, LLC, EuroDekania Management Limited, Strategos Capital Management, LLC, Sunset Financial Holdings, LLC, Sunset Funding, LLC, Sunset Holdings, Ltd., Sunset Investment Vehicle, LLC, Sunset Loan Holdings Trust, Sunset TPS Holdings, LLC, and any other Person who may hereafter guaranty, as surety, all of the Obligations. Notwithstanding inclusion of each of Cohen & Compagnie and EuroDekania Management Limited as a Subsidiary Guarantor hereunder, neither of Cohen & Compagnie or EuroDekania Management Limited shall be required to execute the Surety and Guaranty Agreement or Guaranty Security Agreement.
Surety and Guaranty Agreement That certain surety and guaranty agreement executed by each Guarantor, in favor of Agent dated on or prior to the Closing Date, as the same may be amended, modified, confirmed, supplemented or replaced from time to time.
Taxes Section 2.16(a).
Term Loan A Section 2.1(a)(ii)
Term Loan B Section 2.1(a)(ii)
15
Term Loan Facility Section 2.1(a).
Term Loan Limit The sum of $14,600,000.
Term Loan Maturity Date September 30, 2012.
Term Loan Notes Those notes described in Section 2.1(b), as amended, modified, supplemented or restated from time to time.
Term Loan Pro Rata Share As to any Lender, at any time, such Lenders Pro Rata Percentage of the outstanding balance of the Term Loan Facility plus unreimbursed Letters of Credit and outstanding and undrawn Letters of Credit.
Term Loans Section 2.1(a)(i).
Trademark Security Agreements Collectively, those certain Trademark Security Agreements executed by Parent and CCFM in favor of Agent on or prior to the Closing Date as the same may be amended, modified, confirmed, supplemented or restated from time to time.
Trading Assets Collectively, the net trading assets that comprise the following line items (including similar variations thereof) classified, in accordance with GAAP, on Cohen & Companys balance sheet; provided however that Trading Assets shall not include Permanent Investments or any fee arising under any Management Agreement:
Assets
| Receivables from brokers, dealer, clearing agencies; |
| Investments trading; |
| Receivables under resale agreements; |
| Restricted cash; |
| Securities borrowed; |
| Deposits with clearing agent; |
| Fails to receive; and |
| Fees receivable |
Liabilities
| Payables to brokers, dealers, and clearing agencies; |
| Trading securities sold, but not yet purchased; |
16
| Securities sold under agreements to repurchase; |
| Securities loaned; |
| Margin payable; and |
| Fails to deliver. |
Transaction Documents Collectively, the Master Agreement, Services Agreement, Escrow Agreement and any other agreements, instruments and documents executed and delivered from time to time in connection therewith.
UCC The Uniform Commercial Code as adopted in the Commonwealth of Pennsylvania, as the same may be amended from time to time.
Website Posting Section 10.8.
1.2 Other Capitalized Terms: All capitalized terms used without further definition herein shall have the respective meaning set forth in the UCC.
1.3 Accounting Principles: Where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be made for the purposes of this Agreement, this shall be done in accordance with GAAP as in effect on the Closing Date, to the extent applicable, except as otherwise expressly provided in this Agreement. If there are any changes in GAAP after the Closing Date that would affect the computation of the financial covenants in Section 6.8, such changes shall only be followed, with respect to such financial covenants, from and after the date this Agreement shall have been amended to take into account any such changes.
1.4 Construction: No doctrine of construction of ambiguities in agreements or instruments against the interest of the party controlling the drafting shall apply to this Agreement or any other Loan Documents.
SECTION 2. THE LOANS
2.1 Term Loan Facility - Description:
(a)(i) Subject to the terms and conditions of this Agreement, each Lender hereby severally establishes for the benefit of Borrower a term loan facility (collectively, the Term Loan Facility) which shall include Letters of Credit issued by Issuing Bank and cash Advances extended by Lenders to or for the benefit of Borrower from time to time hereunder (such cash Advances are referred to herein as Term Loans). The aggregate principal amount of all Term Loans, unreimbursed Letters of Credit plus outstanding and undrawn Letters of Credit shall not, at any time, exceed the Term Loan Limit. Amounts repaid under the Term Loans may not be reborrowed as Term Loans. If the aggregate principal amount of all Term Loans, unreimbursed Letters of Credit plus outstanding and undrawn Letters of Credit at any time exceeds the Term Loan Limit (such excess amount, an Overadvance), Borrower shall within five (5) Business Days after notice from Agent, repay the Overadvance in full.
17
(ii) Subject to the terms and conditions of this Agreement, during the Draw Down Period, Borrower may request that Lenders make Term Loans and each Lender severally agrees to lend to Borrower an amount equal to such Lenders Pro Rata Percentage of the Term Loan requested by Borrower. Borrowers shall not request and Lenders shall not make more than two (2) Term Loans. The first Term Loan (Term Loan A) shall be in the amount of $9,300,000 and shall be advanced on the Closing Date. The second Term Loan (Term Loan B) shall be advanced during the Draw Down Period and shall (subject to the dollar limitations in Section 2.1(a)(i) above) be in an amount equal to the lesser of $4,000,000 or 55% of the amount deposited into escrow pursuant to the Escrow Agreement, with respect to the Subsequent Assigned CDO Agreement Sale. The outstanding balance of Term Loans, unreimbursed Letters of Credit plus outstanding and undrawn Letters of Credit of each Lender shall not exceed such Lenders respective Term Loan Pro Rata Share. After the expiration of the Draw Down Period, Borrower shall not request and Lenders shall not make any further cash Advances.
(b) At Closing with respect to Term Loan A and at the time of the advance of Term Loan B, Borrower shall execute and deliver a promissory note to each Lender for such Lenders Pro Rata Percentage of the original principal amount of each such Term Loan (collectively, as may be amended, supplemented, replaced or restated from time to time, the Term Loan Notes). Each Note shall evidence Borrowers absolute, unconditional obligation to repay such Lender for all outstanding Term Loans, unreimbursed Letters of Credit plus outstanding and undrawn Letters of Credit owed to such Lender, with interest as herein and therein provided. Each and every Term Loan under the Term Loan Facility shall be deemed evidenced by the Term Loan Notes, which are deemed incorporated herein by reference and made a part hereof.
(c)(i) The principal balance of Term Loan A shall be paid in seven equal consecutive quarterly installments in the amount of $1,162,500 each, commencing on September 30, 2010 and continuing on the last day of each December, March, June, and September thereafter. A final installment of all unpaid principal and all accrued interest shall be due and payable in full on the Term Loan Maturity Date.
(ii) The principal balance of Term Loan B shall be paid in six equal consecutive quarterly installments, each in an amount equal to 10% of the original principal balance of Term Loan B commencing on December 31, 2010 and continuing on the last day of each March, June, September and December thereafter. A final installment of all unpaid principal and all accrued interest shall be due and payable in full on the Term Loan Maturity Date.
2.2 Letters of Credit-Description:
(a) As part of the Term Loan Facility and subject to its terms and conditions, Issuing Bank shall, upon the written request of Borrower which request shall not be given less than five (5) days prior to the issuance date, on behalf of and for the benefit of all Lenders, make available the Letters of Credit; the outstanding face amount of which shall not exceed, at any time, in the aggregate, the L/C Sublimit. Each Letter of Credit issued from time to time under the Term Loan Facility which remains undrawn (and the amounts of draws on Letters of Credit prior to payment as hereinafter set forth) shall reduce dollar for dollar, the amount available to be borrowed under the Term Loan Facility. Notwithstanding the foregoing, all Letters of Credit shall be in form and substance satisfactory to Issuing Bank and Agent. No Letter of Credit shall have an expiry date
18
later than (i) 365 days from the date of issuance, provided that any such Letter of Credit may be extendable for successive periods each of up to one year, but not beyond ten (10) Business Days prior to the Term Loan Maturity Date or (ii) 10 Business Days prior to the Term Loan Maturity Date. Borrower shall execute and deliver to Issuing Bank all Letter of Credit Documents required by Issuing Bank for such purpose. Each Letter of Credit shall comply with the Letter of Credit Documents.
(b) Immediately upon the issuance of any Letter of Credit, Issuing Bank is deemed to have granted to each other Lender, and each other Lender is hereby deemed to have acquired, an undivided participating interest (without recourse or warranty), in accordance with each such other Lenders respective Pro Rata Percentage, in all of Issuing Banks rights and liabilities with respect to such Letter of Credit. Each Lender shall be absolutely and unconditionally obligated without deduction or setoff of any kind, to Issuing Bank, according to its Pro Rata Percentage, to reimburse Issuing Bank on demand for any amount paid pursuant to any draws made at any time (including, without limitation, following the commencement of any bankruptcy, reorganization, receivership, liquidation or dissolution proceeding with respect to Borrower) under any Letter of Credit.
(c) In the event of any drawing under a Letter of Credit, Issuing Bank will promptly notify Borrower and Agent. Borrower shall, no later than 1:00 p.m. Eastern time on the Business Day such notice is given (if given prior to 11:00 a.m. Eastern time on such Business Day) or on the next Business Day if such notice is given after 11:00 a.m. Eastern time, absolutely and unconditionally reimburse Issuing Bank without offset or deduction of any kind, for any draws made under a Letter of Credit. All of Borrowers Reimbursement Obligations hereunder with respect to Letters of Credit shall apply unconditionally and absolutely to all Letters of Credit issued hereunder on behalf of Borrower.
(d) The obligation of Borrower to reimburse Issuing Bank for drawings made under the Letters of Credit shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances including, without limitation, the following circumstances:
(i) any lack of validity or enforceability of any Letter of Credit;
(ii) the existence of any claim, setoff, defense or other right that Borrower or any other Person may have at any time against a beneficiary or any transferee of any Letter of Credit (or any persons or entities for whom any such beneficiary or transferee may be acting), Agent, Issuing Bank, any Lender or any other Person, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction;
(iii) any draft, demand, certificate or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;
(iv) payment by Issuing Bank under any Letter of Credit against presentation of a demand, draft or certificate or other document that does not comply with the terms
19
of such Letter of Credit unless Issuing Bank shall have acted with willful misconduct or gross negligence in issuing such payment;
(v) any other circumstances or happening whatsoever that is similar to any of the foregoing; or
(vi) the fact that a Default or Event of Default shall have occurred and be continuing.
(e) If by reason of (i) any change after the Closing Date in any Requirement of Law or (ii) compliance by Issuing Bank or Lenders with any direction, reasonable request or requirement (whether or not having the force of law) of any governmental or monetary authority including, without limitation, Regulation D:
(A) Issuing Bank or Lenders shall be subject to any tax or other levy or charge of any nature or to any variation thereof (except for Taxes for which payments are due pursuant to, or excluded from, Section 2.16) or to any penalty with respect to the maintenance or fulfillment of its obligations under this Section 2.2, whether directly or by such being imposed on or suffered by Issuing Bank or Lenders;
(B) any reserve, deposit or similar requirement is or shall be applicable, imposed or modified in respect of any Letter of Credit issued by Issuing Bank; or
(C) there shall be imposed on Issuing Bank or any Lender any other condition regarding this Section 2.2 or any Letter of Credit; and the result of the foregoing is to directly or indirectly increase the cost to Issuing Bank or any Lender of issuing, creating, making or maintaining any Letter of Credit or to reduce the amount receivable in respect thereof by Issuing Bank or any Lender, then and in any such case, Issuing Bank shall, after the additional cost is incurred or the amount received is reduced, notify Borrower and Borrower shall pay on demand such amounts as may be necessary to compensate Issuing Bank or any Lender for such additional cost or reduced receipt, together with interest on such amount from the date demanded until payment in full thereof at a rate per annum equal at all times to the Adjusted Base Rate; provided that Borrower shall not be obligated for any amounts which may be payable as a result of changes occurring more than one hundred eighty (180) days prior to the date Agent notifies Borrower of such changes. A certificate signed by an officer of Issuing Bank or such Lender as to the amount of such increased cost or reduced receipt showing in reasonable detail the basis for the calculation thereof, submitted to Borrower by Issuing Bank or such Lender shall, except for manifest error and absent written notice from Borrower to Issuing Bank or such Lender within ten (10) days from submission, be final, conclusive and binding for all purposes.
(f)(i) In addition to amounts payable as elsewhere provided in this Section 2.2, without duplication, Borrower hereby agrees to protect, indemnify, pay and save Agent, Issuing Bank and each Lender harmless from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable attorneys fees) which Agent, Issuing Bank and each Lender may incur or be subject to as a consequence, direct or indirect, of (a) the issuance of the Letters of Credit or (b) the failure of Issuing Bank to honor a drawing under any Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or
20
future de jure or de facto government or Government Authority (all such acts or omissions herein called Government Acts) in each case except for claims, demands, liabilities, damages, losses, costs, charges and expenses arising from acts or conduct of Issuing Bank constituting gross negligence or willful misconduct.
(ii) As among Borrower and Issuing Bank, Borrower assumes all risks of the acts and omissions of or misuse of the Letters of Credit issued by Issuing Bank by the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, unless caused by the gross negligence or willful misconduct of Issuing Bank, Issuing Bank shall not be responsible: (A) for the form, validity, sufficiency, accuracy, genuineness or legal effects of any document submitted by any party in connection with the application for and issuance if such Letters of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (B) for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, that may prove to be invalid or ineffective for any reason; (C) for failure of the beneficiary of any such Letter of Credit to comply fully with conditions required in order to draw upon such Letter of Credit; (D) for errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they are in cipher; (E) for errors in interpretation of technical terms; (F) for any loss or delay in the transmission of any document or required in order to make a drawing under such Letter of Credit or of the proceeds thereof; (G) for the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; and (H) for any consequences arising from causes beyond the control of Issuing Bank, including, without limitation, any Government Acts. None of the above shall affect, impair or prevent the vesting of any of Issuing Banks rights or powers hereunder.
(iii) In furtherance and extension and not in limitation of the specific provisions hereinabove set forth, any action taken or omitted by Issuing Bank in connection with the Letters of Credit issued by it or the related certificates, if taken or omitted in good faith and in the absence of gross negligence, shall not create any liability on the part of Issuing Bank to Borrower.
2.3 Reserved:
2.4 Reserved:
21
2.5 Advances and Payments:
(a) (i) Except to the extent otherwise set forth in this Agreement (or in the case of an Interest Hedging Instrument under the applicable agreements), all payments of principal and of interest on the Term Loans, Reimbursement Obligations, the L/C Fees, Expenses, indemnification obligations and all other fees, charges and any other Obligations of Borrower hereunder, shall be made to Agent at its main banking office, 1701 Route 70 East, Cherry Hill, New Jersey, 08034, in United States dollars, in immediately available funds. Alternatively, Agent, on behalf of all Lenders, shall have the unconditional right and discretion (and Borrower hereby authorizes Agent) to charge Borrowers operating and/or deposit account(s) with Agent or any Lender for all of Borrowers Obligations as they become due from time to time under this Agreement including without limitation, interest, principal, fees and reimbursement of Expenses. Any payments received prior to 2:00 p.m. Eastern time on any Business Day shall be deemed received on such Business Day. Any payments (including any payment in full of the Obligations), received after 2:00 p.m. Eastern time on any Business Day shall be deemed received on the immediately following Business Day.
(ii) Agent will have the right to collect and receive all payments of the Obligations, and to collect and receive all reimbursements for draws made under the Letters of Credit, together with all fees, charges or other amounts due under this Agreement and the Loan Documents and shall promptly distribute such payments to Lenders and Issuing Bank in accordance with the terms of Sections 2.5 and 2.12.
(iii) If any such payment received by Agent is rescinded, determined to be unenforceable or invalid or is otherwise required to be returned for any reason at any time, whether before or after termination of this Agreement and the Loan Documents, each Lender shall, upon written notice from Agent, promptly pay over to Agent its Pro Rata Percentage of the amount so rescinded, held unenforceable or invalid or required to be returned, together with interest and other fees thereon if also required to be rescinded or returned.
(iv) All payments by Agent and Lenders to each other hereunder shall be in immediately available funds. Agent will at all times maintain proper books of account and records reflecting the interest of each Lender in the Term Loans and the Letters of Credit, in a manner customary to Agents keeping of such records, which books and records shall be available for inspection by each Lender at reasonable times during normal business hours, at such Lenders sole expense. In the event that any Lender shall receive any payments (whether prior to or after the occurrence of an Event of Default) in reduction of the Obligations in an amount greater than its applicable Pro Rata Percentage in respect of indebtedness to Lenders evidenced hereby (including, without limitation, amounts obtained by reason of setoffs), such Lender shall hold such excess in trust (to the extent such Lender is lawfully able to do so) for Agent (on behalf of all other Lenders) and shall promptly remit to Agent such excess amount so that the amounts received by each Lender hereunder shall at all times be in accordance with its applicable Pro Rata Percentage. To the extent necessary for each Lenders actual percentage of all outstanding Term Loans to equal its applicable Pro Rata Percentage, the Lender having a greater share of any payment(s) than its applicable Pro Rata Percentage shall acquire a participation in the applicable outstanding balances of the Term Loan Pro Rata Shares of the other Lenders as determined by Agent.
22
(b) (i) Term Loans which may be made by Lenders from time to time under the Term Loan Facility shall be made available for the use and benefit of Borrower by crediting such proceeds to Borrowers operating account with Agent as designated in the Advance Request.
(ii) All cash Advances requested by Borrower under the Term Loan Facility are to be in writing pursuant to a written request (Advance Request) executed by an Authorized Officer in the form of Exhibit D attached hereto. Requests for Base Rate Loans must be requested by 10:00 A.M., Eastern time, on the date such Advance is to be made. Requests for LIBOR Rate Loans must be requested by 10:00 A.M. Eastern time, three (3) Business Days in advance of the date such Advance is to be made and must specify the amount of the LIBOR Rate Loan and the LIBOR Interest Period. If no LIBOR Interest Period is specified, the LIBOR Interest Period shall be deemed to be a one month period.
(iii) (A) Agent shall provide Lenders with notice that Borrower has requested a Base Rate Loan, on the same Business Day as such request and request each Lender to provide Agent with such Lenders Pro Rata Percentage of such requested Base Rate Loan prior to Agents making such Base Rate Loan. Upon receipt of such notice from Agent prior to 11:00 A.M. Eastern time, each Lender shall remit to Agent its respective Pro Rata Percentage of such requested Base Rate Loan, prior to 2:00 P.M. Eastern time, on the Business Day Agent is scheduled to make such Base Rate Loan in accordance with Section 2.5(b)(i) hereof. If notice is received after 11:00 A.M. Eastern time, each Lender shall remit its respective Pro Rata Percentage of the Base Rate Loan on the next Business Day.
(B) Agent shall provide Lenders with notice that Borrower has requested a LIBOR Rate Loan, three (3) Business Days in advance of the requested LIBOR Rate Loan and request each Lender to provide Agent with such Lenders Pro Rata Percentage of such requested LIBOR Rate Loan prior to Agents making such LIBOR Rate Loan. Upon receipt of such notice from Agent, each Lender shall remit to Agent its respective Pro Rata Percentage of such requested LIBOR Rate Loan, prior to 2:00 P.M. Eastern time, on the Business Day Agent is scheduled to make such LIBOR Rate Loan in accordance with Section 2.5(b)(i) hereof.
(C) Neither Agent nor any other Lender shall be obligated, for any reason whatsoever, to remit or advance the share of any other Lender. Agent shall not be required to make the full amount of the requested cash Advance unless and until it receives funds representing each other Lenders Pro Rata Percentage of such requested cash Advance, but Agent shall advance to Borrower that portion of the requested cash Advance equal to the Pro Rata Percentages of such requested cash Advance which it has received from Lenders.
(D) If Agent does not receive each other Lenders Pro Rata Percentage of such requested cash Advance, and Agent elects, in its sole discretion, to make the requested cash Advance on behalf of Lenders or any of them, Agent shall be entitled to recover each Lenders Pro Rata Percentage of each cash Advance together with interest at a per annum rate equal to the Federal Funds Rate during the period commencing on the date such cash Advance is made and ending on (but excluding) the date Agent recovers such amount. Each Lender is absolutely and unconditionally obligated, without deduction or setoff of any kind, to forward to Agent its Pro Rata Percentage of each cash Advance made pursuant to the terms of this Agreement. To the extent Agent is not reimbursed by such Lender, Borrower shall repay Agent immediately on demand, such
23
amount. Agent shall also be entitled to recover any and all actual losses and damages (including, without limitation, reasonable attorneys fees) from any Lender failing to so advance upon demand of Agent. Agent may set off the obligations of a Lender under this paragraph against any distributions or payments of the Obligations, which Agent would otherwise make available to such Lender at any time.
(E) To the extent and during the time period in which any Lender fails to provide or delays providing its respective payment to Agent pursuant to clause C or D above, such Lenders percentage of all payments of the Obligations (but not the Pro Rata Percentage of future Advances required to be funded by such Lender) shall decrease to reflect the actual percentage which its actual outstanding Loans bears to the total outstanding Loans of all Lenders. During the time period in which any Lender fails to provide or delays providing its respective payment to Agent pursuant to clause C or D above, such Lender shall not be entitled to give instructions to Agent or to approve, disapprove, consent to or vote on any matters relating to this Agreement and the other Loan Documents. All amendments, waivers and other modifications of this Agreement and the Loan Documents may be made without regard to such Lender.
2.6 Interest:
(a) The unpaid principal balance of the Term Loan shall bear interest, subject to the terms hereof at a per annum rate equal to, at Borrowers option, the Adjusted Base Rate or LIBOR Rate. The unpaid balance of any unreimbursed draws under any Letter of Credit shall bear interest at a per annum rate equal to the Adjusted Base Rate.
(b) Changes in the interest rate applicable to Base Rate Loans shall become effective on the same day that there is a change in the Base Rate.
(c) Interest on Base Rate Loans shall be payable monthly, in arrears, on the first day of each month, beginning on the first day of the first full calendar month after the Closing Date, and on the Term Loan Maturity Date. Interest on LIBOR Rate Loans shall be payable on the last day of the LIBOR Interest Period, and on the Term Loan Maturity Date.
(d) Borrower may elect from time to time to convert Base Rate Loans (other than unreimbursed draws on any Letter of Credit) to LIBOR Rate Loans, by delivering a Notice of Conversion/Extension to Agent at least three (3) Business Days prior to the proposed date of conversion. In addition, Borrower may elect from time to time to convert all or any portion of a LIBOR Rate Loan to a Base Rate Loan by giving Agent irrevocable written notice thereof by 12:00 noon one (1) Business Day prior to the proposed date of conversion. LIBOR Rate Loans may only be converted to Base Rate Loans on the last day of the applicable LIBOR Interest Period. If the date upon which a LIBOR Rate Loan is to be converted to a Base Rate Loan is not a Business Day, then such conversion shall be made on the next succeeding Business Day and during the period from such last day of a LIBOR Interest Period to such succeeding Business Day such Loan shall bear interest as if it were a Base Rate Loan. All or any part of outstanding Base Rate Loans may be converted as provided herein; provided that unless Agent otherwise consents thereto, no Loan may be converted into a LIBOR Rate Loan when any Event of Default has occurred and is continuing.
24
(e) Borrower may continue any LIBOR Rate Loans upon the expiration of a LIBOR Interest Period with respect thereto by delivering a Notice of Conversion/Extension to Agent at least three (3) Business Days prior to the proposed date of extension; provided that, unless Agent otherwise consents thereto, no LIBOR Rate Loan may be continued as such when any Event of Default has occurred and is continuing, in which case such Loan shall be automatically converted to a Base Rate Loan at the end of the applicable LIBOR Interest Period with respect thereto. If Borrower shall fail to give timely notice of an election to continue a LIBOR Rate Loan, or the continuation of LIBOR Rate Loans is not permitted hereunder, each such LIBOR Rate Loan shall be automatically converted to a Base Rate Loan at the end of the applicable LIBOR Interest Period with respect thereto.
(f) Borrower may not have more than five (5) LIBOR Rate Loans outstanding at any time.
2.7 Additional Interest Provisions:
(a) Interest on the LIBOR Rate Loans shall be based on a three hundred sixty (360) day year but charged for the actual number of days elapsed. Interest on Base Rate Loans shall be based on a three hundred sixty five (365)/three hundred sixty six (366) day year but charged for the actual number of days elapsed.
(b) After the occurrence and during the continuance of an Event of Default hereunder, Agent may increase the per annum effective rate of interest on all Loans, including amounts drawn and not yet reimbursed under Letters of Credit, to a rate equal to two hundred (200) basis points in excess of the applicable interest rate (Default Rate). Such increase shall be retroactive from and after the date of the occurrence of the Event of Default.
(c) Borrower shall not request and Lenders shall not make any LIBOR Rate Loans while an Event of Default exists.
(d) All contractual rates of interest chargeable on outstanding Loans, shall continue to accrue and be paid even after a Default or Event of Default, maturity, acceleration, judgment, bankruptcy, insolvency proceedings of any kind or the happening of any event or occurrence similar or dissimilar.
(e) In no contingency or event whatsoever shall the aggregate of all amounts deemed interest hereunder and charged or collected pursuant to the terms of this Agreement exceed the highest rate permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. In the event that such court determines Lenders have charged or received interest hereunder in excess of the highest applicable rate, Agent, on behalf of Lenders, shall in its sole discretion, apply and set off such excess interest received by Lenders against other Obligations due or to become due and such rate shall automatically be reduced to the maximum rate permitted by such law.
25
2.8 Fees:
(a) Borrower shall pay to Agent for the ratable benefit of all Lenders in accordance with their Pro Rata Percentage a closing fee in the amount of $250,000. The Closing Fee shall be paid on the Closing Date, shall be deemed fully earned and shall be non-refundable.
(b) (i) Borrower shall pay to Agent, for the ratable benefit of Lenders in accordance with their Pro Rata Percentage, letter of credit fees at a per annum rate equal to four and one-half percent (4.50%) of the average daily maximum amount available to be drawn under each Letter of Credit on the first day of each calendar quarter in arrears. Such fees are the L/C Fees.
(ii) Borrower shall also pay to Issuing Bank for the account of Issuing Bank all of Issuing Banks standard charges (including without limitation all cable and wire transfer charges) for the account of Issuing Bank for the issuance, amendment, negotiation/payment, extension and cancellation of each such Letter of Credit. In addition, Borrower shall pay to Issuing Bank for Issuing Banks own account an additional fronting fee equal to one quarter of one percent (0.25%) per annum (Fronting Fee) on the average daily maximum amount available to be drawn under each Letter of Credit on the first day of each calendar quarter in arrears.
(c) All fees provided for in this Section 2.8 shall be based on a three hundred sixty (360) day year and charged for the actual number of days elapsed.
2.9 Prepayments:
(a) Borrower may, upon three (3) Business Days prior notice, voluntarily prepay the Term Loans in whole or in part (but in no event may such prepayment be less Five Hundred Thousand Dollars ($500,000)) at any time or from time to time; provided that, any prepayment of a LIBOR Rate Loan shall be subject to Section 2.10. Any prepayment shall be accompanied by all accrued and unpaid interest. Any partial prepayment of the Term Loan shall be applied as set forth in Section 2.9(f).
(b) To the extent that an Overadvance exists, Borrower shall repay such Overadvance as provided in Section 2.1(a).
(c) Subject to any limitations under Section 7.1 hereof, upon any Asset Sale or series of Asset Sales (other than an Asset Sale or series of Asset Sales consisting of Trading Assets), in either event outside of the ordinary course of Borrowers or any Guarantors business, Borrower shall prepay or cause to be prepaid the Obligations in an amount equal to with respect to any Asset Sales by a Person included in the Dekania Group, seventy five percent (75%) of the net cash proceeds of such sale or disposition (i.e., the gross proceeds less the reasonable and customary costs of such sale or other dispositions) (Net Cash Proceeds), or with respect to any other Guarantor, ten percent (10%) of the Net Cash Proceeds, in either event upon Borrowers or any Guarantors receipt thereof. Such prepayments shall be applied as set forth in Section 2.9(f).
(d) Contemporaneously with the receipt by a Person included in the Dekania Group of any proceeds from the incurrence of any Indebtedness (other than Permitted Indebtedness) or receipt by a Person included in the Dekania Group of additional contributions on account of Capital Stock (other than from Parent or Affiliates of Borrower) or Net Cash Proceeds from the
26
issuance of additional Capital Stock of a Person included in the Dekania Group (other than from Parent or Affiliates of Borrower and excluding for all purposes any Net Cash Proceeds attributable to a return of capital from Deep Value), Borrower shall prepay or cause to be prepaid the Obligations in an aggregate amount equal to one hundred percent (100%) of such proceeds. Such prepayments shall be applied as set forth in Section 2.9(f).
(e) Contemporaneously with the receipt thereof by Borrower or any Guarantor of any additional consideration paid by ATP related to earn-out payments under Section 3(b) of the Master Agreement, Borrower shall prepay or cause to be prepaid the Obligations in an aggregate amount equal to one hundred percent (100%) of such payments. Such prepayments shall be applied as set forth in Section 2.9(f).
(f) All amounts prepaid pursuant to Sections 2.9(a), (b), (c), (d) and (e) shall be applied ratably to Term Loan A and Term Loan B in the inverse order of maturity, after payment of accrued and unpaid interest thereon. Subject to the application described above, prepayments shall first be applied to Base Rate Loans, and then to LIBOR Rate Loans. All prepayments of LIBOR Rate Loans shall be subject to Section 2.10.
2.10 Funding Indemnity: Borrower shall indemnify each Lender, and hold each Lender harmless from any loss, damages, liability, or expense which such Lender may sustain or incur (other than through such Lenders gross negligence or willful misconduct) as a consequence of (a) default by Borrower in making a borrowing of, conversion into, or extension of, LIBOR Rate Loans after Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by Borrower in making any prepayment of a LIBOR Rate Loan after Borrower has given a notice thereof in accordance with the provisions of this Agreement, or (c) the making of a prepayment of LIBOR Rate Loans on a day which is not the last day of a LIBOR Interest Period with respect thereto. With respect to LIBOR Rate Loans, such indemnification shall equal the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted, or extended, for the period from the date of such prepayment, or of such failure to borrow, convert, or extend to the last day of the applicable LIBOR Interest Period (or in the case of a failure to borrow, convert, or extend, the LIBOR Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such LIBOR Rate Loans provided for herein over (ii) the amount of interest (as reasonably determined by Agent) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank Eurodollar market. This covenant shall survive the termination of this Agreement, and the payment of the Obligations.
2.11 Use of Proceeds: The extensions of credit under and proceeds of the Term Loan Facility shall be used, in part, on the Closing Date to refinance all existing Indebtedness of Parent under the Existing Loan Agreement and after the Closing Date, for working capital and general corporate purposes and investments in Affiliates of Borrower.
2.12 Pro Rata Treatment and Payments:
(a) Each borrowing shall be made pro rata according to the respective Pro Rata Percentages of Lenders. Unless otherwise required by the terms of this Agreement, each payment under this Agreement, or any Note, shall be applied first, to any fees then due and owing by
27
Borrower pursuant to Section 2.8; second, to interest then due and owing hereunder and under the Notes; third, to principal then due and owing hereunder and under the Notes; and fourth, to cash collateralize the Reimbursement Obligations. Each payment on account of any fees pursuant to Section 2.8 shall be made pro rata in accordance with the respective amounts due and owing (except as to the Fronting Fees expressly owing to Issuing Bank). Each payment by Borrower on account of principal of, and interest on, the Term Loans shall be applied to such Loans, as applicable, on a pro rata basis in accordance with the terms hereof. All payments (including prepayments) to be made by Borrower on account of principal, interest, Expenses and fees shall be made without defense, set-off, or counterclaim; provided no such payment shall be, or constitute, a waiver of any rights or claims Borrower may have. Agent shall distribute such payments to Lenders entitled thereto, on a pro rata basis promptly upon receipt, in the like funds as received. If any payment hereunder (other than payments on the LIBOR Rate Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension.
(b) Notwithstanding any other provisions of this Agreement to the contrary, after the exercise of remedies (other than the invocation of the Default Rate) by Agent or Lenders, pursuant to Section 8.3, or after the Term Loans (with accrued interest thereon), and all other amounts under the Loan Documents (including without limitation, the maximum amount of all contingent liabilities under Letters of Credit), shall automatically become due and payable in accordance with the terms hereof, all amounts collected or received by Agent, or any Lender, on account of the Obligations, or any other amounts outstanding under any of the Loan Documents, or with respect to the Collateral, shall be paid over or delivered as follows (irrespective of whether the following costs, expenses, fees, interest, premiums, scheduled periodic payments, or Obligations are allowed, permitted, or recognized as a claim in any proceeding resulting from the commencement of any bankruptcy, insolvency, or similar proceeding):
FIRST, to the payment of all Expenses (including without limitation, reasonable attorneys fees) of Agent in connection with enforcing the rights of Lenders under the Loan Documents, and any protective advances made by Agent with respect to the Collateral under or pursuant to the terms of the Loan Documents;
SECOND, to the payment of any fees owed to Agent, and payable or reimbursable hereunder;
THIRD, to the payment of all reasonable and documented out-of-pocket costs and expenses (including without limitation, reasonable attorneys fees) of each Lender in connection with enforcing its rights under the Loan Documents, or otherwise with respect to the Obligations owing to such Lender, as required by Section 10.4;
FOURTH, to the payment of all of the Obligations consisting of accrued fees and interest, and including with respect to any Interest Hedging Instrument, any fees, premiums, and scheduled periodic payments due under such Interest Hedging Instrument, and any interest accrued thereon;
FIFTH, to the payment of outstanding principal amount of the Obligations, and the payment or cash collateralization of the outstanding Reimbursement Obligations, and issued
28
but undrawn amount of outstanding Letters of Credit, and including with respect to any Interest Hedging Instrument, any breakage, termination, or other payments due under such Interest Hedging Instrument, and any interest accrued thereon;
SIXTH, to all other Obligations, and other obligations which shall be become due and payable under the Loan Documents, or otherwise, and not repaid pursuant to clauses FIRST through FIFTH above; and
SEVENTH, to the payment of the surplus, if any, to Borrower, or whoever may be lawfully entitled to receive such surplus.
In carrying out the foregoing, (i) amounts received shall be applied in numerical order provided until exhausted prior to application to the next succeeding category; (ii) each Lender shall receive an amount equal to its Pro Rata Percentage of amounts available to be applied pursuant to clauses THIRD, FOURTH, FIFTH, and SIXTH above; and (iii) to the extent that any amount available for distribution pursuant to clause FIFTH above, are attributable to the issued but undrawn amount of outstanding Letters of Credit, such amounts shall be held by Agent in a cash collateral account and applied (A) first, to reimburse Issuing Bank from time to time, for any drawings under such Letters of Credit; and (B) then, following the expiration of all Letters of Credit, to all other obligations of the types described in clauses FIFTH, and SIXTH above in the manner provided in this Section 2.12. Notwithstanding the foregoing terms of this Section 2.12, only Collateral proceeds, and payments under the Surety and Guaranty Agreements (as opposed to ordinary course principal, interest, and fee payments hereunder) shall be applied to obligations under any Interest Hedging Instrument.
2.13 Inability to Determine Interest Rate:
Notwithstanding any other provision of this Agreement, if Agent shall reasonably determine (which determination shall be conclusive and binding absent manifest error) that, by reason of circumstances affecting the relevant market, reasonable and adequate means do not exist for ascertaining the Adjusted LIBOR Rate for a LIBOR Interest Period, Agent shall forthwith give telephone notice of such determination, confirmed in writing, to Borrower, and Lenders at least two (2) Business Days prior to the first day of such LIBOR Interest Period. Unless Borrower shall have notified Agent upon receipt of such telephone notice that it wishes to rescind or modify its request regarding such LIBOR Rate Loans, any Loans that were requested to be made as LIBOR Rate Loans shall be made as Base Rate Loans and any Loans that were requested to be converted into or continued as LIBOR Rate Loans shall remain as or be converted into Base Rate Loans. Until any such notice has been withdrawn by Agent, no further Loans shall be made as, continued as, or converted into, LIBOR Rate Loans for the LIBOR Interest Periods so affected.
2.14 Illegality:
Notwithstanding any other provision of this Agreement, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof to any Lender by the relevant Governmental Authority shall make it unlawful for such Lender to make or maintain LIBOR Rate Loans as contemplated by this Agreement, or to obtain in the interbank Eurodollar market, the funds with which to make such Loans, (a) such Lender shall promptly notify Agent and Borrower thereof,
29 |
(b) the commitment of such Lender hereunder to make LIBOR Rate Loans or continue LIBOR Rate Loans as such shall forthwith be suspended until Agent shall give notice that the condition or situation which gave rise to the suspension shall no longer exist, and (c) such Lenders Loans then outstanding as LIBOR Rate Loans, if any, shall be converted on the last day of the LIBOR Interest Period for such Loans, or within such earlier period as required by law as Base Rate Loans. Borrower hereby agrees promptly to pay any Lender, upon its demand, any additional amounts necessary to compensate such Lender for actual and direct costs (but not including anticipated profits) reasonably incurred by such Lender in connection with any repayment in accordance with this Section 2.14, including but not limited to, any interest or fees payable by such Lender to lenders of funds obtained by it in order to make or maintain its LIBOR Rate Loans hereunder. A certificate as to any additional amounts payable pursuant to this Section 2.14 submitted by such Lender, through Agent to Borrower shall be presumptive evidence of such amounts owing. Each Lender agrees to use reasonable efforts to avoid or to minimize any amounts which may otherwise be payable pursuant to this Section 2.14; provided however, that such efforts shall not cause the imposition on such Lender of any additional costs or legal or regulatory burdens deemed by such Lender in its reasonable discretion to be material.
2.15 Requirements of Law:
(a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof:
(i) shall subject such Lender to any tax of any kind whatsoever with respect to any Letter of Credit, or any application relating thereto, any LIBOR Rate Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Taxes for which payments are due pursuant to, or excluded from, Section 2.16);
(ii) shall impose, modify, or hold applicable, any reserve, special deposit, compulsory loan, or similar requirement against assets held by, deposits or other liabilities in, or for the account of, advances, loans, or other extension of credit (including participations therein) by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the LIBOR Rate hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to materially increase the cost to such Lender of making or maintaining LIBOR Rate Loans, or the Letters of Credit, or the participation interest therein, or to reduce any amount receivable hereunder, or under any Note, then, in any such case, Borrower shall promptly pay such Lender, upon its demand, any additional amounts necessary to compensate such Lender for such additional costs or reduced amount receivable which such Lender reasonably deems to be material as determined by such Lender, with respect to its LIBOR Rate Loans or Letters of Credit; provided that Borrower shall not be obligated for any amounts which may be payable as a result of changes occurring more than one hundred eighty (180) days prior to the date Agent notifies Borrower of such changes. A certificate as to any additional amounts payable pursuant to this Section 2.15 submitted by such Lender, through Agent, to Borrower shall be presumptive evidence
30 |
of such amounts owing. Each Lender agrees to use reasonable efforts to avoid, or to minimize, any amounts which might otherwise be payable pursuant to this paragraph of this Section 2.15; provided however, that such efforts shall not cause the imposition on such Lender of any additional costs or legal regulatory burdens deemed by such Lender in good faith to be material.
(b) If any Lender shall have reasonably determined that the adoption of, or any change in, any Requirement of Law regarding capital adequacy, or in the interpretation or application thereof, or compliance by such Lender, or any corporation controlling such Lender, with any request or directive regarding capital adequacy (whether or not having the force of law) from any central bank or Governmental Authority made subsequent to the date hereof, does or shall have the effect of reducing the rate of return on such Lenders or such corporations capital as a consequent of its obligations hereunder to a level below that which such Lender or such corporation could have achieved, but for such adoption, change, or compliance (taking into consideration such Lenders or such corporations policies with respect to capital adequacy) by an amount reasonably deemed by such Lender to be material, then from time to time, within fifteen (15) days after such demand by such Lender, Borrower shall pay to such Lender such additional amount as shall be certified by such Lender as being required to compensate it for such reduction; provided that Borrower shall not be obligated for any amounts which may be payable as a result of changes occurring more than one hundred eighty (180) days prior to the date Agent notifies Borrower of such changes. Such a certificate as to any additional amounts payable under this Section 2.15 submitted by a Lender (which certificate shall include a description of the basis for the computation), through Agent, to Borrower shall be presumptive evidence of such amounts owing.
(c) The agreements in this Section 2.15 shall survive the termination of this Agreement and payment of the Obligations.
2.16 Taxes:
(a) All payments made by Borrower hereunder or under any Note shall be, except as provided in Section 2.16(b), made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any Governmental Authority or by any political subdivision or taxing authority thereof or therein with respect to such payments (but excluding any tax imposed on or measured by the net income or profits of a Lender (including franchise taxes imposed in lieu thereof) pursuant to the laws of the jurisdiction in which Agent or such Lender, as the case may be, is organized or the jurisdiction in which the principal office or applicable lending office of Agent or such Lender is located or any subdivision thereof or therein and any branch profit taxes imposed by the United States or any similar tax imposed by any jurisdiction described above) and all interest, penalties or similar liabilities with respect thereto (all such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges being referred to collectively as Taxes). If any Taxes are so levied or imposed, except as provided in Section 2.16(b), Borrower agrees to pay the full amount of such Taxes, and such additional amounts as may be necessary so that every payment of all amounts due under this Agreement or under any Note, after withholding or deduction for or on account of any Taxes, will not be less than the amount provided for herein or in such Note. Borrower will furnish to Agent as soon as practicable after the date the payment of any Taxes is due pursuant to applicable law certified copies (to the extent reasonably available and required by law) of tax receipts evidencing such payment by Borrower, except as provided in Section 2.16(b), Borrower
31 |
agrees to indemnify and hold harmless each Lender, and reimburse such Lender upon its written request, for the amount of any Taxes so levied or imposed and paid by such Lender.
(b) Each Lender that is not a United States person (as such term is defined in Section 770 l(a)(30) of the Code) (each, a Foreign Lender) agrees to deliver to Borrower and Agent on or prior to the Closing Date, or in the case of a Lender that is an assignee or transferee of an interest under this Agreement pursuant to Section 10.12 (unless the respective Lender was already a Lender hereunder immediately prior to such assignment or transfer), on the date of such assignment or transfer to such Lender, (i) if such Lender is a bank within the meaning of Section 881(c)(3)(a) of the Code, two accurate and complete original signed copies of Internal Revenue Service Form W-8BEN, W-8ECI or W-81MY, with appropriate attachments (or successor forms), certifying such Lenders entitlement to a complete exemption from United States withholding tax with respect to payments to be made under this Agreement and under any Note, or (ii) if such Lender is not a bank within the meaning of Section 88l(c)(3)(a) of the Code, Internal Revenue Service Form W-8BEN, W-8ECI or W-8IMY with appropriate attachments as set forth in clause (i) above, or (x) a certificate in form and substance satisfactory to Agent, and (y) two accurate and complete original signed copies of Internal Revenue Service Form W-8BEN (or successor form) certifying such Lenders entitlement to an exemption from United States withholding tax with respect to payments of interest to be made under this Agreement and under any Note. In addition, each Lender agrees that it will deliver updated versions of the foregoing, as applicable, whenever the previous certification has become inaccurate in any material respect, together with such other forms as may be required in order to confirm or establish the entitlement of such Lender to a continued exemption from or reduction in United States withholding tax with respect to payments under this Agreement and any Note. Notwithstanding anything to the contrary contained in Sections 2.15(a) and 2.16(a), but subject to the immediately succeeding sentence, (x) Borrower shall be entitled, to the extent it is required to do so by law, to deduct or withhold Taxes imposed by the United States (or any political subdivision or taxing authority thereof or therein) from interest, fees or other amounts payable hereunder for the account of any Lender, to the extent that such Lender has not provided to Borrower, IRS Forms that establish a complete exemption from such deduction or withholding, and (y) Borrower shall not be obligated pursuant to Sections 2.15(a) and 2.16(a) hereof to gross-up payments to be made to a Lender in respect of Taxes imposed by the United States or to indemnify such Lender for any withholding Taxes imposed by the United States if (i) such Lender has not provided to Borrower the IRS Forms required to be provided to Borrower pursuant to this Section or (ii) in the case of a payment, other than interest, to a Lender described in clause (ii) above, to the extent that such Forms do not establish a complete exemption from withholding of such Taxes. Notwithstanding anything to the contrary contained in the preceding sentence or elsewhere in this Section, Borrower agrees to pay additional amounts and to indemnify each Lender in the manner set forth in Sections 2.15(a) and 2.16(a) (without regard to the identity of the jurisdiction requiring the deduction or withholding) in respect of any amounts deducted or withheld by it as described in the immediately preceding sentence as a result of any changes after the Closing Date in any applicable law, treaty, governmental rule, regulation, guideline or order, or in the interpretation thereof, relating to the deducting or withholding of Taxes.
(c) Each Lender agrees to use reasonable efforts to avoid or to minimize any amounts which might otherwise be payable pursuant to this Section 2.16; provided however, that such efforts shall not cause the imposition on such Lender of any additional costs or legal or regulatory burdens deemed by such Lender in its sole discretion to be material.
32 |
(d) If Borrower pays any additional amount pursuant to this Section 2.16, with respect to a Lender, such Lender shall use reasonable efforts to obtain a refund of tax or credit against its tax liabilities on account of such payment; provided that, such Lender shall have no obligation to use such reasonable efforts if either (i) it is in an excess foreign tax credit position or (ii) it believes in good faith, in its sole discretion, that claiming a refund or credit would cause materially adverse tax consequences to it. In the event that such Lender receives such a refund or credit, such Lender shall pay to Borrower an amount that such Lender reasonably determines is equal to the net tax benefit obtained by such Lender as a result of such payment by Borrower. In the event that no refund or credit is obtained with respect to Borrowers payments to such Lender pursuant to this Section, then such Lender shall upon request provide a certification that such Lender has not received a refund or credit for such payments. Nothing contained in this Section shall require a Lender to disclose or detail the basis of its calculation of the amount of any tax benefit or any other amount or the basis of its determination referred to in the proviso to the first sentence of this Section 2.16 to Borrower or any other party.
(e) The agreements in this Section 2.16 shall survive the termination of this Agreement and the payment of the Obligations.
2.17 Replacement of Lenders:
(a) Borrower shall be permitted to replace any Lender that (i) requests (or requests on behalf of a participant) reimbursement for amounts owing, or payment of any amount required, pursuant to Sections 2.14, 2.15, or 2.16; or (ii) defaults in its obligation to make Loans or to reimburse Issuing Bank for any draws on any Letter of Credit hereunder, with a replacement financial institution; provided that, (A) such replacement does not conflict with any Requirement of Law, (B) no Event of Default shall have occurred and be continuing at the time of such replacement, (C) prior to any such replacement, such Lender shall have taken no action so as to eliminate the continued need for payment of amounts owing pursuant to Sections 2.14, 2.15, or 2.16; (D) the replacement financial institution shall purchase, at par, all Loans and other amounts owing to such replaced Lender on or prior to the date of replacement, (E) Borrower shall be liable to such replaced Lender under Section 2.10 if any LIBOR Rate Loan owing to such replaced Lender shall be purchased other than on the last day of the LIBOR Interest Period relating thereto, (F) the replacement financial institution, if not already a Lender, shall be reasonably satisfactory to Agent and Borrower (such approvals not to be unreasonably withheld), (G) the replaced Lender shall be obligated to make such replacement in accordance with the provisions of Section 10.12 (provided that, Borrower shall be obligated to pay the registration and processing fee referred to therein), (H) until such time as such replacement shall be effective, Borrower shall pay all additional amounts (if any) required pursuant to Sections 2.14, 2.15, or 2.16, as the case may be, and (I) any such replacement shall not be deemed to be a waiver of any rights that Borrower, Agent or any other Lender shall have against the replaced Lender. It is understood and agreed that if any Lender replaced hereunder fails to execute an Assignment Agreement, it shall be deemed to have entered into such Assignment Agreement and such Assignment Agreement shall be effective as against such Lender.
(b) In the event that Borrower requests but does not obtain the consent required by Section 10.11 for any amendment, waiver or consent requiring the consent of all Lenders, then Borrower shall be permitted to replace all (but not less than all) non-consenting Lenders with one or
33 |
more replacement financial institutions; provided that, (i) such replacement does not conflict with any Requirement of Law, (ii) each replacement financial institution shall purchase, at par, all Loans and other amounts owing to such replaced Lender on or prior to the date of replacement, (iii) Borrower shall be liable to such replaced Lender under Section 2.10 if any LIBOR Rate Loan owing to such replaced Lender shall be purchased other than on the last day of the LIBOR Interest Period relating thereto, (iv) each replacement financial institution, if not already a Lender, shall be reasonably satisfactory to Agent and Borrower (such approvals not to be unreasonably withheld), and (v) the replaced Lender shall be obligated to make such replacement in accordance with the provisions of Section 10.12 (provided that, Borrower shall be obligated to pay the registration and processing fee referred to therein). It is understood and agreed that if any Lender replaced hereunder fails to execute an Assignment Agreement, it shall be deemed to have entered into such Assignment Agreement.
SECTION 3. COLLATERAL
3.1 Description: As security for the payment of the Obligations, and satisfaction by Borrower of all covenants and undertakings contained in this Agreement and the other Loan Documents, Borrower hereby assigns and grants to Agent, for the ratable benefit of Secured Parties, a continuing first lien on and security interest in, upon and to all assets of Borrower, including but not limited to the following property, all whether now owned or hereafter acquired, created or arising and wherever located (other than Excluded Property):
(i) Accounts - All Accounts;
(ii) Chattel Paper - All Chattel Paper;
(iii) Documents - All Documents;
(iv) Instruments - All Instruments;
(v) Inventory - All Inventory;
(vi) General Intangibles - All General Intangibles;
(vii) Equipment - All Equipment;
(viii) Fixtures - All Fixtures;
(ix) Deposit Accounts - All Deposit Accounts;
(x) Goods - All Goods;
(xi) Letter of Credit Rights - All Letter of Credit Rights;
(xii) Supporting Obligations - All Supporting Obligations;
(xiii) Investment Property - All Investment Property (including all equity interests in any Sponsored CDO Offering);
34 |
(xiv) Management Fees - All fees arising under any Management Agreement except for the Excluded Management Fees;
(xv) Commercial Tort Claims - All Commercial Tort Claims identified and described on Schedule 5.20 (as amended or supplemented from time to time);
(xvi) Property in Agents, Issuing Banks or any Lenders Possession - All Property of any Borrower, now or hereafter in Agents, Issuing Banks or any Lenders possession; and
(xvii) Proceeds - The Proceeds (including, without limitation, insurance proceeds), whether cash or non-cash, of all of the foregoing property described in clauses (i) thorough (xvi).
3.2 Lien Documents: As Agent deems necessary at Closing and thereafter, Borrower shall execute and deliver to Agent, or have executed and delivered (all in form and substance reasonably satisfactory to Agent):
(a) Financing statements pursuant to the UCC, which Agent may file in any jurisdiction where Borrower is organized and in any other jurisdiction that Agent deems appropriate;
(b) Duly executed Notice Letters to be sent to, and acknowledged by, each trustee under each Management Agreement; and
(c) Any other agreements, documents, instruments and writings, including, without limitation, intellectual property security agreements, reasonably required by Agent to evidence, perfect or protect Lenders liens and security interest in the Collateral or as Agent may reasonably request from time to time.
3.3 Other Actions: (a) In addition to the foregoing, Borrower shall do anything further that may be reasonably required by Agent to secure Lenders and effectuate the intentions and objects of this Agreement, including, but not limited to, the execution and delivery of security agreements, contracts and any other documents required hereunder. At Agents reasonable request, Borrower shall also promptly deliver (with execution by Borrower of all necessary documents or forms to reflect Agents Lien thereon) to Agent as bailee for Lenders, all items for which Lenders must receive possession to obtain a perfected security interest, including without limitation, all certificates (including any certificates representing an equity interest in a Sponsored CDO Offering), notes, letters of credit, documents of title, Chattel Paper, Warehouse Receipts, Instruments, and any other similar instruments constituting Collateral.
(b) Agent is hereby authorized to file financing statements and amendments to financing statement without Borrowers signature, in accordance with the UCC. Borrower hereby authorizes Agent to file all such financing statement and amendments to financing statement describing the collateral in any filing office as Agent, in its sole discretion may determine, including financing statement listing All Assets in the collateral description therein. Borrower agrees to comply with the requests of Agent in order for Agent to have and maintain a valid and perfected first security interest in the Collateral including, without limitation, executing and causing any other
35 |
Person to execute such documents as Agent may require to obtain Control (as defined in the UCC) over all Deposit Accounts, Letter of Credit Rights and Investment Property.
3.4 Searches: (a) Agent shall, prior to or at Closing, and thereafter as Agent may reasonably determine from time to time, at Borrowers expense, obtain the following searches (the results of which are to be consistent with the warranties made by Borrower in this Agreement):
(i) UCC searches with the Secretary of State and local filing office of each state where Borrower or any Guarantor is organized, maintains its executive office, a place of business, or assets; and
(ii) Judgment, federal tax lien and corporate tax lien searches, in all applicable filing offices of each state searched under subparagraph (a) above.
(b) Borrower shall, prior to or at Closing and at its expense, obtain and deliver to Agent good standing certificates showing each Borrower and each Guarantor to be in good standing in its state of organization and in each other state in which it is doing and presently intends to do business.
3.5 [Reserved].
3.6 Filing Security Agreement: A carbon, photographic or other reproduction or other copy of this Agreement or of a financing statement is sufficient as and may be filed in lieu of a financing statement.
3.7 Power of Attorney: Each of the officers of Agent is hereby irrevocably made, constituted and appointed the true and lawful attorney for Borrower (without requiring any of them to act as such) with full power of substitution to: (a) execute and/or file in the name of Borrower any financing statements, schedules, assignments, instruments, documents and statements that Borrower is obligated to give Agent hereunder or is necessary to perfect (or continue or evidence the perfection of such security interest or Lien) Agents security interest or Lien in the Collateral; and (b) following the occurrence of an Event of Default to (i) endorse the name of Borrower upon any and all checks, drafts, money orders and other instruments for the payment of monies that are payable to Borrower and constitute collections on Borrowers Accounts or proceeds of other Collateral and (ii) do such other and further acts and deeds in the name of Borrower that Agent may reasonably deem necessary or desirable to enforce any Account or other Collateral.
SECTION 4. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES
Closing under this Agreement is subject to the following conditions precedent (all documents other than those set forth in Section 4.9 to be in form and substance satisfactory to Agent and Agents counsel):
4.1 Resolutions, Opinions, and Other Documents: Borrower shall have delivered or caused to be delivered to Agent the following:
(a) this Agreement, the Term Loan Notes and the Security Documents, all properly executed by Borrower and Guarantors, as applicable;
36 |
(b) certified copies of (i) resolutions of the board of directors or managers (as applicable) of Borrower and each Guarantor authorizing the execution, delivery and performance of this Agreement, the Notes to be issued hereunder and each other Loan Document required to be executed by any Section hereof and (ii) Borrowers and each Guarantors Articles or Certificate of Incorporation or Certificate of Organization (as applicable) and By-laws or Operating Agreement (as applicable) or written certifications that there have been no amendments, modifications or other changes to any such organizational document since such documents were delivered in conjunction with the Existing Loan Agreement;
(c) an incumbency certificate for Borrower identifying all Authorized Officers, with specimen signatures and an incumbency certificate for each Guarantor identifying all individuals authorized to execute any applicable Loan Document, with specimen signatures;
(d) a written opinion of Borrowers and each Guarantors independent counsel addressed to Agent for the benefit of all Lenders and opinions of such other counsel as Agent deems necessary;
(e) certification by the chief financial officer of Borrower that there has not occurred any material adverse change in the operations and condition (financial or otherwise) of Borrower since December 31, 2009;
(f) payment by Borrower of all fees owing to Agent and/or Lenders and Expenses associated with Loans or Letters of Credit incurred to the Closing Date;
(g) Searches and certificates required by Section 3.4 above;
(h) Deposit Account control agreements, if necessary;
(i) Copies of all Management Agreements or written certifications that there have been no amendments, modifications or other changes to any such document since such documents were delivered in conjunction with the Existing Loan Agreement;
(j) Sponsored CDO Equity Interests;
(k) A certified copy of the Master Agreement and all other Transaction Documents and a certification that the initial transactions contemplated thereunder have closed and that an amount not less than $11,700,000 has been deposited in the escrow account established under the Escrow Agreement;
(l) Borrower shall have repaid all existing Indebtedness of Borrower under the Existing Loan Agreement, including payment of the sum of $450,000 required under the terms of the Fee Letter (as defined in the Existing Loan Agreement); and
(m) Such other documents reasonably requested by Agent.
4.2 Absence of Certain Events: At the Closing Date, no Event of Default or Default hereunder shall have occurred and be continuing.
37 |
4.3 Warranties and Representations at Closing: The warranties and representations contained in Section 5 as well as any other Section of this Agreement shall be true and correct in all respects on the Closing Date.
4.4 Compliance with this Agreement: Borrower shall have performed and complied with all agreements, covenants and conditions contained herein including, without limitation, the provisions of Sections 6 and 7 hereof, which are required to be performed or complied with by Borrower before or at the Closing Date.
4.5 Officers Certificate: Agent shall have received a certificate dated the Closing Date and signed by the chief financial officer of Borrower certifying that all of the conditions specified in this Section have been fulfilled.
4.6 Closing: Subject to the conditions of this Section, the Loans and Letters of Credit shall be made available on such date (the Closing Date) and at such time as may be mutually agreeable to the parties contemporaneously with the execution hereof (Closing).
4.7 Waiver of Rights: By completing the Closing hereunder, or by making Advances hereunder, Agent does not thereby waive a breach of any warranty or representation made by Borrower hereunder or under any agreement, document, or instrument delivered to Agent or otherwise referred to herein, and any claims and rights of Agent resulting from any breach or misrepresentation by Borrower are specifically reserved by Agent.
4.8 Conditions for Future Advances: The making of Advances under the Term Loan Facility in any form following the Closing Date is subject to the following conditions precedent (all instruments, documents and agreements to be in form and substance satisfactory to Agent and its counsel) following the Closing Date:
(a) This Agreement and each of the other Loan Documents shall be effective;
(b) No event or condition shall have occurred or become known to Borrower, or would result from the making of any requested Advance, which could have a Material Adverse Effect;
(c) No Default or Event of Default then exists or after giving effect to the making of the Advance would exist;
(d) Each Advance is within and complies with the terms and conditions of this Agreement including, without limitation, the notice provisions contained in Section 2.4 hereof;
(e) No Lien (other than a Permitted Lien or Lien permitted under Section 7 of this Agreement) has been imposed on Borrower or any Subsidiary Guarantor;
(f) Each representation and warranty set forth in Section 5 and any other Loan Document in effect at such time (as amended or modified from time to time) is then true and correct in all material respects as if made on and as of such date except to the extent (i) Schedule 5.10(b), 5.11(c), 5.14(b), Schedule C, Schedule D or any other Schedule attached to this Agreement have been updated by Borrower in writing from time to time, provided that any such update and
38 |
acceptance by Agent and Lenders shall not constitute a waiver of any Default or Event of Default that may be created by such updates and (ii) such representations and warranties are made only as of a specific earlier date; and
(g) Borrower shall certify that, pursuant to the Master Agreement, ATP has acquired additional Assigned CDO Agreements (as defined in the Master Agreement) in connection with the Subsequent Assigned CDO Agreement Sale and provide a list of such Assigned CDO Agreements as well as a schedule showing all amounts attributable thereto deposited into escrow in accordance with the Escrow Agreement.
4.9 Existing Notes: Agent shall use its reasonable efforts to obtain from each Lender under the Existing Loan Agreement the promissory notes issued in connection with the Existing Loan Agreement and return such notes to Parent.
SECTION 5. REPRESENTATIONS AND WARRANTIES
To induce Agent, Lenders and Issuing Bank to complete the Closing and make the initial Advances under the Term Loan Facility to Borrower, Borrower represents and warrants to Agent, Issuing Bank and Lenders that:
5.1 Corporate Organization and Validity:
(a) Borrower and each Guarantor (i) is duly organized and validly existing under the laws of the jurisdiction of its organization, (ii) has the appropriate power and authority to operate its business and to own its Property and (iii) is duly qualified, is validly existing and in good standing and has lawful power and authority to engage in the business it conducts in each state where the nature and extent of its business requires qualification, except where the failure to so qualify does not and could not have a Material Adverse Effect. A list of all states and other jurisdictions where Borrower and each Guarantor is qualified to do business is shown on Schedule 5.1 attached hereto and made part hereof.
(b) The making and performance of this Agreement and the other Loan Documents will not violate any Requirement of Law, or Borrowers or any Guarantors certificate of formation, operating agreement or any other organizational documents, or violate or result in a default (immediately or with the passage of time) under any contract, agreement or instrument to which Borrower or such Guarantor is a party, or by which Borrower or such Guarantor is bound. Neither Borrower nor any Guarantor is in violation of any term of any agreement or instrument to which it is a party or by which it may be bound which violation has or could have a Material Adverse Effect, or of its respective charter, minutes or bylaw provisions, or certificate of formation, operating agreement or any other organizational document.
(c) Borrower and each Guarantor has all requisite power and authority to enter into and perform this Agreement and any Loan Documents to which it is a party, and to incur the obligations herein provided for, and has taken all proper and necessary action to authorize the execution, delivery and performance of this Agreement, and the other Loan Documents as applicable.
39 |
(d) This Agreement, the Notes to be issued hereunder, and all of the other Loan Documents, when delivered, will be valid and binding upon Borrower and each Guarantor, and enforceable in accordance with their respective terms except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the enforcement of creditors rights generally and by general equitable principles.
5.2 Places of Business: The only places of business of Borrower and each Guarantor, and the places where Borrower and each Guarantor keeps and intends to keep its Property, are at the addresses shown on Schedule 5.2 attached hereto and made part hereof.
5.3 Pending Litigation: There are no judgments or judicial or administrative orders or proceedings pending, or to the knowledge of Borrower, threatened, against Borrower or any Guarantor in any court or before any Governmental Authority except as shown on Schedule 5.3 attached hereto and made part hereof or to the extent such judgments, administrative orders or proceedings could not result in a Material Adverse Effect. To the knowledge of Borrower, there are no investigations (civil or criminal) pending or threatened against Borrower or any Guarantor, in any court or before any Governmental Authority. Neither Borrower nor any Guarantor is in default with respect to any order of any Governmental Authority except where such default could not result in an Material Adverse Effect. To the knowledge of Borrower, no shareholder or executive officer of Borrower or any Guarantor, has been indicted in connection with or convicted of engaging in any criminal conduct, or is currently subject to any lawsuit or proceeding or under investigation in connection with any anti-racketeering or other conduct or activity which may result in the forfeiture of any property to any Governmental Authority.
5.4 Title to Properties: Borrower and each Guarantor has good and marketable title in fee simple (or its equivalent under applicable law) to all the Property it purports to own, free from Liens and free from the claims of any other Person, except for Permitted Liens.
5.5 Governmental Consent: Neither the nature of Borrower or any Guarantor or of its respective business or property, nor any relationship between Borrower or any Guarantor, and any other Person, nor any circumstance affecting Borrower or any Guarantor in connection with the issuance or delivery of this Agreement, the Notes or any other Loan Documents is such as to require a consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority on the part of Borrower or any Guarantor, except those that have been made or obtained or where such failure could not result in an Material Adverse Effect.
5.6 Taxes: All tax returns required to be filed by Borrower and any Guarantor in any jurisdiction have been filed, and all taxes, assessments, fees and other governmental charges upon Borrower and any Guarantor, or upon any of its respective Property, income or franchises, which are shown to be due and payable on such returns have been paid, except for those taxes being contested in good faith with due diligence by appropriate proceedings for which appropriate reserves have been maintained under GAAP and as to which no Lien has been entered. Borrower is not aware of any proposed additional tax assessment or tax to be assessed against or applicable to Borrower and any Guarantor.
5.7 Financial Statements: The annual audited consolidated (if applicable) balance sheet of Cohen & Company as of December 31, 2009, and the related statements of profit and loss,
40 |
stockholders equity and cash flow as of such date accompanied by reports thereon from Cohen & Companys independent certified public accountants (complete copies of which have been delivered to Agent), and the interim consolidated (if applicable) balance sheet of Cohen & Company as of March 31, 2010, and the related statements of profit and loss, stockholders equity and cash flow as of such date have been prepared in accordance with GAAP and present fairly the financial position of Cohen & Company and its Subsidiaries as of such dates and the results of its operations for such periods. The fiscal year for Borrower currently ends on December 31. Borrowers and each Guarantors federal tax identification number and state organizational identification number for UCC purposes are as shown on Schedule 5.7 attached hereto and made part hereof.
5.8 Full Disclosure: The financial statements referred to in Section 5.7 of this Agreement do not, nor does any other written statement of Borrower to Agent or any Lender in connection with the negotiation of the Loans, contain any untrue statement of a material fact. Such statements do not omit a material fact, the omission of which would make the statements contained therein misleading. There is no fact known to Borrower which has not been disclosed in writing to Agent which has or could have a Material Adverse Effect.
5.9 Subsidiaries: No Guarantor has any Subsidiaries or Affiliates, except as shown on Schedule 5.9 attached hereto and made part hereof.
5.10 Investments, Guarantees, Contracts, etc.:
(a) Other than Permitted Investments, neither Borrower nor any Guarantor owns or holds equity or long term debt investments in, or has any outstanding advances to, any other Person, except as shown on Schedule 5.10(a), attached hereto and made part hereof.
(b) Neither Borrower nor any Guarantor has entered into any leases for real or personal Property (whether as landlord or tenant or lessor or lessee), except as shown on Schedule 5.10(b), attached hereto and made part hereof.
(c) Neither Borrower nor any Guarantor is a party to any contract or agreement, or subject to any charter or other corporate restriction, which has or could have a Material Adverse Effect.
(d) Except as otherwise specifically provided in this Agreement, neither Borrower nor any Guarantor has agreed or consented to cause or permit any of its Property whether now owned or hereafter acquired to be subject in the future (upon the happening of a contingency or otherwise), to a Lien not permitted by this Agreement.
5.11 Government Regulations, etc.:
(a) The use of the proceeds of and Borrowers issuance of the Notes will not directly or indirectly violate or result in a violation of Section 7 of the Securities Exchange Act of 1934, as amended, or any regulations issued pursuant thereto, including, without limitation, Regulations U, T and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II. Borrower does not own or intend to carry or purchase any margin stock within the meaning of said Regulation U.
41 |
(b) Borrower and each Guarantor has obtained all licenses, permits, franchises or other governmental authorizations necessary for the ownership of its Property and for the conduct of its business.
(c) As of the date hereof, no employee benefit plan (Pension Plan), as defined in Section 3(2) of ERISA, maintained by Borrower or under which Borrower could have any liability under ERISA (i) has failed to meet the minimum funding standards established in Section 302 of ERISA, (ii) has failed to comply in a material respect with all applicable requirements of ERISA and of the Internal Revenue Code, including all applicable rulings and regulations thereunder, (iii) has engaged in or been involved in a prohibited transaction under Section 406 of ERISA or Section 4975 of the Internal Revenue Code which would subject Borrower to any material liability, or (iv) has been terminated if such termination would subject Borrower to any material liability. Borrower has not assumed, or received notice of a claim asserted against Borrower for, withdrawal liability (as defined in Section 4207 of ERISA) with respect to any multi employer pension plan and is not a member of any Controlled Group (as defined in ERISA). Borrower has timely made all contributions when due with respect to any multi employer pension plan in which it participates and no event has occurred triggering a claim against Borrower for withdrawal liability with respect to any multi employer pension plan in which Borrower participates. All Employee Benefit Plans and multi employer pension plans in which Borrower participates are shown on Schedule 5.11(c) attached hereto and made part hereof.
(d) Neither Borrower nor any Guarantor is in violation of or receipt of written notice that it is in violation of any applicable statute, regulation or ordinance of the United States of America, or of any state, city, town, municipality, county or of any other jurisdiction, or of any agency, or department thereof (including without limitation, Environmental Laws or securities laws and regulations), a violation of which causes or could cause a Material Adverse Effect.
(e) Borrower and each Guarantor is current with all reports and documents required to be filed with any state or federal securities commission or similar agency and is in full compliance in all material respects with all applicable rules and regulations of such commissions.
5.12 Business Interruptions: Within five (5) years prior to the date hereof, none of the business, Property or operations of Borrower or any Guarantor have been materially and adversely affected in any way by any casualty, strike, lockout, combination of workers, order of the United States of America, or any state or local government, or any political subdivision or agency thereof, directed against Borrower or any Guarantor. There are no pending or, to Borrowers knowledge, threatened labor disputes, strikes, lockouts or similar occurrences or grievances affecting Borrower or any Guarantor. No labor contract of Borrower or any Guarantor is scheduled to expire prior to the Term Loan Maturity Date.
5.13 Names and Intellectual Property:
(a) Within five (5) years prior to the Closing Date, Borrower has not and no Guarantor has conducted business under or used any other name (whether corporate or assumed) except for the names shown on Schedule 5.13(a) attached hereto and made part hereof. Borrower and each Guarantor, as applicable, is the sole owner of all names listed on such Schedule 5.13(a) and any and all business done and all invoices issued in such trade names are Borrowers or such
42 |
Guarantors sales, business and invoices. Each trade name of Borrower and each Guarantor, as applicable, represents a division or trading style of Borrower and such Guarantor, and not a separate Subsidiary or Affiliate or independent entity.
(b) All trademarks, service marks, patents or copyrights which Borrower or any Guarantor uses, plans to use or has a right to use are shown on Schedule 5.13(b) attached hereto and made part hereof, and Borrower and such Guarantor, as applicable, is the sole owner of such Property except to the extent any other Person has claims or rights in such Property, as such claims and rights are shown on Schedule 5.13(b). Borrower is not in violation of any rights of any other Person with respect to such Property.
(c) Except as shown on Schedule 5.13(c) attached hereto and made part hereof, (i) neither Borrower nor any Guarantor requires any copyrights, patents, trademarks or other intellectual property, or any license(s) to use any patents, trademarks or other intellectual property in order to provide services to its customers in the ordinary course of business; and (ii) Agent will not require any copyrights, patents, trademarks or other intellectual property or any licenses to use the same in order to provide such services after the occurrence of an Event of Default.
5.14 Other Associations:
(a) Neither Borrower nor any Guarantor is engaged, and has any interest in, any joint venture or partnership with any other Person except as shown on Schedule 5.14(a), attached hereto and made part hereof.
(b) Schedule 5.14(b), attached hereto and made part hereof, shows, as of the Closing Date, all equity interests owned or held by Borrower or a Guarantor in connection with or related to, a Sponsored CDO Offering or which is otherwise related to a structured finance transaction sponsored, managed or originated by Borrower or a Guarantor.
5.15 Environmental Matters: Except as shown on Schedule 5.15, attached hereto and made part hereof:
(a) To the best of Borrowers knowledge, no Property presently owned, leased or operated by Borrower or any Guarantor contains, or has previously contained, any Hazardous Substances in amounts or concentrations which (i) constitute or constituted a violation of, or (ii) could give rise to liability under, any Environmental Law.
(b) To the best of Borrowers knowledge, Borrower and each Guarantor is in compliance, and for the duration of all applicable statutes of limitations periods, has been in compliance with all applicable Environmental Laws in all material respects, and there is no contamination at, under or about any properties presently owned, leased, or operated by Borrower or any Guarantor or violation of any Environmental Law with respect to such properties which could reasonably be expected to interfere with any of their continued operations or reasonably be expected to impair the fair saleable value thereof.
(c) Neither Borrower nor any Guarantor has received any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or
43 |
compliance assessment with Environmental Laws and Borrower has no knowledge that any such notice will be received or is being threatened.
(d) Hazardous Substances have not been transported or disposed of in a manner or to a location which are reasonably likely to give rise to liability of Borrower or any Guarantor under any applicable Environmental Law.
(e) No judicial proceeding or governmental or administrative action is pending, or to the knowledge of Borrower, threatened under any Environmental Law to which Borrower or any Guarantor is, or to Borrowers knowledge will be, named as a party, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding, the implementation of which is reasonably likely to have a Material Adverse Effect on any natural resources or on Borrowers business, financial condition, Property or prospects under any Environmental Law.
5.16 Regulation O: No director, executive officer or principal shareholder of Borrower or any Guarantor is a director, executive officer or principal shareholder of Agent or any Lender. For the purposes hereof the terms director, executive officer and principal shareholder (when used with reference to Agent or any Lender), have the respective meanings assigned thereto in Regulation O issued by the Board of Governors of the Federal Reserve System.
5.17 Capital Stock: As of the Closing Date, the authorized and outstanding Capital Stock of Borrower, each Guarantor and each other Subsidiary is as shown on Schedule 5.17 attached hereto and made part hereof. All of the Capital Stock of Borrower, each Guarantor and each other Subsidiary has been duly and validly authorized and issued and is fully paid and non-assessable and has been sold and delivered to the holders thereof in compliance with, or under valid exemption from, all Federal and state laws and the rules and regulations of all Governmental Authorities governing the sale and delivery of securities. Except for the rights and obligations shown on Schedule 5.17, there are no subscriptions, warrants, options, calls, commitments, rights or agreements by which Borrower or any of the shareholders of Borrower or any Subsidiary Guarantor is bound relating to the issuance, transfer, voting or redemption of shares of its Capital Stock or any pre-emptive rights held by any Person with respect to the shares of Capital Stock of Borrower. Except as shown on Schedule 5.17, neither Borrower nor any Subsidiary Guarantor has issued any securities convertible into or exchangeable for shares of its Capital Stock or any options, warrants or other rights to acquire such shares or securities convertible into or exchangeable for such shares.
5.18 Solvency: After giving effect to the transactions contemplated under this Agreement, Borrower and the Guarantors taken as a whole are solvent, are able to pay their debts as they become due, and have capital sufficient to carry on their business and all businesses in which they are about to engage, and now own Property having a value both at fair valuation and at present fair salable value greater than the amount required to pay Borrowers and Guarantors debts. Neither Borrower nor the Guarantors, taken as a whole, will be rendered insolvent by the execution and delivery of this Agreement or any of the other Loan Documents executed in connection with this Agreement or by the transactions contemplated hereunder or thereunder.
5.19 Perfection and Priority: This Agreement and the other Loan Documents are effective to create in favor of Agent, for the ratable benefit of Agent, Issuing Bank and Lenders legal, valid
44 |
and enforceable Liens in all right, title and interest of Borrower and each Guarantor in the Collateral, and under existing financing statements or when financing statements have been filed in the offices of the jurisdictions shown on Schedule 5.19, attached hereto and made part hereof under Borrowers or such Guarantors name, Borrower and each Guarantor will have granted to Agent, for the ratable benefit of Secured Parties and Agent will have perfected first priority Liens in the Collateral, superior in right to any and all other Liens, existing or future other than Permitted Liens.
5.20 Commercial Tort Claims: As of the Closing Date, neither Borrower nor any Guarantor is a party to any Commercial Tort Claims, except as shown on Schedule 5.20 attached hereto and made part hereof.
5.21 Letter of Credit Rights: As of the Closing Date, neither Borrower nor any Guarantor has any Letter of Credit Rights, except as shown on Schedule 5.21, attached hereto and made part hereof.
5.22 Deposit Accounts: Borrower has furnished to Agent a certified list of each Borrowers and Guarantors Deposit Accounts, which list is true, accurate and complete as of the Closing Date.
5.23 Anti-Terrorism Laws:
(a) General. Neither Borrower nor any Affiliate of Borrower is in violation of any Anti-Terrorism Law or engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law.
(b) Executive Order No. 13224. Neither Borrower nor any Affiliate of Borrower, or to Borrowers knowledge, any of its respective agents acting or benefiting in any capacity in connection with the Loans, Letters of Credit or other transactions hereunder, is any of the following (each a Blocked Person):
(i) a Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order No. 13224;
(ii) a Person owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order No. 13224;
(iii) a Person with which Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law;
(iv) a Person that commits, threatens or conspires to commit or supports terrorism as defined in the Executive Order No. 13224;
(v) a Person that is named as a specially designated national on the most current list published by the U.S. Treasury Department Office of Foreign Asset Control at its official website or any replacement website or other replacement official publication of such list; or
45 |
(vi) a Person who is affiliated with a Person listed above.
5.24 Investment Company Act: Neither Borrower nor any Guarantor is (a) an investment company registered or required to be registered under the Investment Company Act of 1940, as amended, nor is it controlled by such a company; or (b) subject to any other law which purports to regulate or restrict the ability to borrow money or to consummate the transactions contemplated by this Agreement or the other Loan Documents.
5.25 Transaction Documents: Borrower has delivered to Agent true and correct copies of the Transaction Documents and all amendments, waivers and side letters or agreements relating thereto. The Transaction Documents are valid and binding upon CCFM and Cohen & Company and, to Borrowers knowledge, upon the other parties thereto, and are enforceable in accordance with their terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the enforcement of creditors rights generally and by general equitable principles. All of the transactions contemplated under the Transaction Documents are, and consummation thereof shall be, in compliance with all material Requirements of Law.
SECTION 6. BORROWERS AFFIRMATIVE COVENANTS
Borrower covenants that until all of the Obligations are paid and satisfied in full and the Term Loan Facility and Letters of Credit have been terminated, that:
6.1 Payment of Taxes and Claims: Borrower shall pay, and shall cause each Guarantor to pay, before they become delinquent, all taxes, assessments and governmental charges, or levies imposed upon it, or upon Borrowers or any Guarantors Property, and all claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other Persons, entitled to the benefit of statutory or common law Liens which, in any case, if unpaid, would result in the imposition of a Lien upon its Property; provided however, that, neither Borrower nor any Guarantor shall be required to pay any such tax, assessment, charge, levy, claim or demand if the amount, applicability or validity thereof, shall at the time, be contested in good faith and by appropriate proceedings, and if adequate reserves in respect thereof have been set aside, if so required in accordance with GAAP; which deferment of payment is permissible so long as no Lien other than a Permitted Lien has been entered and Borrowers or such Guarantors title to, and its right to use, its Property are not materially adversely affected thereby.
6.2 Maintenance of Properties and Corporate Existence:
(a) Property - Each Person included in the Dekania Group shall maintain its Property in good condition (normal wear and tear excepted) make all necessary renewals, replacements, additions, betterments and improvements thereto and will pay and discharge when due the cost of repairs and maintenance to its Property, and will pay all rentals when due for all leased real estate.
(b) Property Insurance, Public and Products Liability Insurance - Each Person included in the Dekania Group shall maintain insurance (or have insurance maintained on its behalf) (i) on all insurable tangible Property against fire, flood, casualty and such other hazards (including, without limitation, extended coverage, workmens compensation, boiler and machinery, with
46 |
inflation coverage by endorsement) and (ii) against public liability, product liability and business interruption, in each case in such amounts, with such deductibles and with such insurers as are customarily used by companies operating in the same industry as Borrower. At or prior to Closing, Borrower shall furnish Agent with duplicate original policies of insurance or such other evidence of insurance as Agent may require, and any certificates of insurance shall be issued on Acord Form-27. In the event Borrower fails to procure or cause to be procured any such insurance or to timely pay or cause to be paid the premium(s) on any such insurance, Agent may do so for Borrower, but Borrower shall continue to be liable for the same. The policies of all such casualty insurance shall contain standard Lenders Loss Payable Clauses (and, with respect to liability and interruption insurance, additional insured clauses) issued in favor of Agent. Such policies shall expressly provide that the requisite insurance cannot be altered or canceled without thirty (30) days prior written notice to Agent and shall insure Agent notwithstanding the act or neglect of any Person included in the Dekania Group. Effective upon an Event of Default, Borrower hereby appoints Agent as Borrowers attorney-in-fact, exercisable at Agents option to endorse any check which may be payable to any Person included in the Dekania Group in order to collect the proceeds of such insurance and any amount or amounts collected by Agent pursuant to the provisions of this Section may be applied by Agent, in its sole discretion, to any Obligations or to repair, reconstruct or replace the loss of or damage to Collateral as Agent in its discretion may from time to time determine. Borrower further covenants that all insurance premiums owing under its current policies have been paid. Borrower shall notify Agent, immediately, upon Borrowers receipt of a notice of termination, cancellation, or non-renewal from its insurance company of any such policy.
(c) Financial Records - Borrower shall keep, and shall cause each Guarantor to keep, current and accurate books of records and accounts in which full and correct entries will be made of all of its business transactions, and will reflect in its financial statements adequate accruals and appropriations to reserves, all in accordance with GAAP. Borrower shall not change its fiscal year end date without the prior written consent of Agent.
(d) Corporate Existence and Rights - Borrower shall do, and shall cause each Guarantor to do (or cause to be done), all things necessary to preserve and keep in full force and effect its existence, good standing, rights and franchises except which failure to do so could not cause or result in a Material Adverse Effect.
(e) Compliance with Laws - Borrower shall be, and shall cause each Guarantor to be, in compliance with any and all Requirements of Laws to which it is subject, (including, without limitation, Environmental Laws and securities laws regulations) and shall obtain any and all licenses, permits, franchises or other governmental authorizations necessary to the ownership of its Property or to the conduct of its businesses, which violation or failure to obtain causes or could cause a Material Adverse Effect. Borrower shall timely satisfy, and shall cause each Guarantor to timely satisfy, all assessments, fines, costs and penalties imposed (after exhaustion of all appeals, provided a stay has been put in effect during such appeal) by any Governmental Authority against Borrower or such Guarantor, or any Property of Borrower.
6.3 Business Conducted: Each Person included in the Dekania Group shall continue in the business presently operated by it using its commercially reasonable efforts to maintain its customers and goodwill. No such Person shall engage directly or indirectly, in any material respect
47 |
in any line of business substantially different from the businesses conducted by such Person immediately prior to the Closing Date.
6.4 Litigation: Borrower shall give prompt notice to Agent of any litigation claiming in excess of One Million Dollars ($1,000,000) from Borrower or any Guarantor, or which may otherwise have a Material Adverse Effect.
6.5 Issue Taxes: Borrower shall pay, and shall cause each Guarantor to pay, all taxes (other than taxes based upon or measured by any Lenders income or revenues or any personal property tax), if any, in connection with the issuance of the Notes and the recording of any lien documents. The obligations of Borrower hereunder shall survive the payment of Borrowers Obligations hereunder and the termination of this Agreement.
6.6 Bank Accounts: (a) Borrower shall maintain, and shall cause each Guarantor located in the United States to maintain, major depository and disbursement account(s) with Agent and (b) Borrower shall establish and shall cause each Guarantor to establish, within sixty (60) days of the date of this Agreement, with respect to each Guarantor located outside of the United States that receives Management Fees, arrangements reasonably satisfactory to Agent for the deposit of, or transfer of, all Management Fees to an account controlled by Agent.
6.7 Employee Benefit Plans: Each Person included in the Dekania Group shall (a) fund and cause each such Person to fund all of its Pension Plan(s) in a manner that will satisfy the minimum funding standards of Section 302 of ERISA, (b) furnish Agent, promptly upon Agents request, with copies of all reports or other statements filed with the United States Department of Labor, the PBGC or the IRS with respect to all Pension Plan(s), or which Borrower, or any member of a Controlled Group, may receive from the United States Department of Labor, the IRS or the PBGC, with respect to all such Pension Plan(s), and (c) promptly advise Agent of the occurrence of any reportable event (as defined in Section 4043 of ERISA, other than a reportable event for which the thirty (30) day notice requirement has been waived by the PBGC) or prohibited transaction (under Section 406 of ERISA or Section 4975 of the Internal Revenue Code) with respect to any such Pension Plan(s) and the action which Borrower proposes to take with respect thereto. Borrower shall make, and shall cause each Person included in the Dekania Group to make, all contributions when due with respect to any multi employer pension plan in which it participates and will promptly advise Agent upon (x) its receipt of notice of the assertion against Borrower or any Person included in the Dekania Group of a claim for withdrawal liability, (y) the occurrence of any event which, to the best of Borrowers knowledge, would trigger the assertion of a claim for withdrawal liability against any Person included in the Dekania Group, and (z) upon the occurrence of any event which, to the best of Borrowers knowledge, would place any Person included in the Dekania Group in a Controlled Group as a result of which any member (including Borrower) thereof may be subject to a claim for withdrawal liability, whether liquidated or contingent.
6.8 Financial Covenants:
(a) Consolidated Net Worth - The Dekania Group shall maintain at all times Consolidated Net Worth of not less than $40,000,000, to be tested quarterly at the end of each fiscal quarter.
48 |
(b) Fixed Charge Coverage Ratio - The Dekania Group shall maintain, commencing with the fiscal quarter ending September 30, 2010, a Fixed Charge Coverage Ratio, to be tested quarterly as of each fiscal quarter end, of not less than 1.20 to 1.0.
(c) Leverage Ratio - The Dekania Group shall maintain, commencing with the fiscal quarter ending September 30, 2010, a Leverage Ratio, to be tested quarterly as of each fiscal quarter end, of not greater than 1.30 to 1.0:
(d) Debt Service Coverage Ratio - The Dekania Group shall maintain, commencing with the fiscal quarter ending September 30, 2010, a Debt Service Coverage Ratio, to be tested quarterly as of each fiscal quarter end, of not less than 1.50 to 1.0.
6.9 Financial and Business Information: Borrower shall deliver or cause to be delivered to Agent and Lenders the following:
(a) Financial Statements and Collateral Reports: such data, reports, statements and information, financial or otherwise, as Lender may reasonably request, including, without limitation:
(i) within forty five (45) days after the end of each calendar quarter, the consolidated cash flow statement and consolidated and consolidating income statement of Cohen & Company and its Subsidiaries and the consolidated cash flow statement and consolidated income statement of the Dekania Group for such quarter and for the expired portion of the fiscal year ending with the end of such quarter, setting forth in comparative form the corresponding figures for the corresponding periods of the previous fiscal year, and the consolidated and consolidating balance sheet of Cohen & Company and its Subsidiaries and the consolidated balance sheet of the Dekania Group as at the end of such quarter, setting forth in comparative form the corresponding figures as at the end of the previous fiscal year, all in reasonable detail and certified by Cohen & Companys chief financial officer to have been prepared from the books and records of Cohen & Company;
(ii) within ninety (90) days after the end of each fiscal year of Cohen & Company, the consolidated cash flow statement, the consolidated and consolidating income statement of Cohen & Company and its Subsidiaries for such year, and the consolidated and consolidating balance sheet of Cohen & Company and its Subsidiaries as at the end of such fiscal year, setting forth in each case in comparative form the corresponding figures as at the end of and for the previous fiscal year, all in reasonable detail, including all supporting schedules, and audited by an independent public accounting firm acceptable to Agent, and unqualifiedly certified to have been prepared in accordance with GAAP, and such independent public accountants shall also unqualifiedly certify that in making the examinations necessary to their certification mentioned above they have reviewed the terms of this Agreement and the accounts and conditions of Cohen & Company during the accounting period covered by the certificate and that such review did not disclose the existence of any condition or event which constitutes a Default or an Event of Default (or if such conditions or events existed, describing them) together with copies of any management letters provided by such accountants to management of Cohen & Company;
49 |
(iii) within one hundred twenty (120) days of each fiscal year-end, the Dekania Groups annual consolidated financial statement projections for the upcoming three-year period, in form and substance satisfactory to Agent;
(b) Notice of Event of Default - promptly upon becoming aware of the existence of any condition or event which constitutes a Default or an Event of Default under this Agreement, a written notice specifying the nature and period of existence thereof and what action Borrower or any Guarantor is taking (and proposes to take) with respect thereto;
(c) Notice of Claimed Default - promptly upon receipt by Borrower, notice of default, oral or written, given to Borrower or any Guarantor by any creditor for Indebtedness for borrowed money, otherwise holding long term Indebtedness of Borrower or such Guarantor in excess of Two Million Five Hundred Thousand Dollars ($2,500,000);
(d) Securities and Other Reports - if Borrower or any Guarantor shall be required to file reports with the Securities and Exchange Commission pursuant to Section 13(a) or 15(d) of the Exchange Act, promptly upon its becoming available, one copy of each financial statement, report, notice or proxy statement sent by Borrower or any Guarantor to stockholders generally, and, a copy of each regular or periodic report, and any registration statement, or prospectus in respect thereof, filed by Borrower or any Guarantor with any securities exchange or with federal or state securities and exchange commissions or any successor agency; and
(e) Transaction Documents - immediately upon knowledge thereof, notice that (i) ATP (or any successor thereto) has provided notice of a breach of, or default under the Services Agreement or any other Transaction Document, (ii) ATP (or any successor thereto) has breached or defaulted under any Transaction Documents or (iii) or that the Services Agreement or any other Transaction Document has been terminated.
6.10 Officers Certificates: Along with the set of financial statements delivered to Agent and Lenders at the end of each fiscal quarter pursuant to Section 6.9(a)(i) hereof and the annual financial statements delivered pursuant to Section 6.9(a)(ii) hereof, Borrower shall deliver to Agent and Lenders a certificate (Quarterly Compliance Certificate) (in the form of Exhibit E, attached hereto and made part hereof) from the chief financial officer, chief executive officer or president of Borrower (and as to certificates accompanying the annual financial statements of Cohen & Company, also certified by Cohen & Companys independent certified public accountant) setting forth:
(a) Event of Default - that the signer has reviewed the relevant terms of this Agreement, and has made (or caused to be made under his/her supervision) a review of the transactions and conditions of Borrower from the beginning of the accounting period covered by the financial statements being delivered therewith to the date of the certificate, and that such review has not disclosed the existence during such period of any condition or event which constitutes a Default or an Event of Default or, if any such condition or event exists, specifying the nature and period of existence thereof and what action Borrower has taken or proposes to take with respect thereto.
50 |
(b) Covenant Compliance - the information (including detailed calculations) required in order to establish that Borrower is in compliance with the requirements of Section 6.8 of this Agreement, as of the end of the period covered by the financial statements delivered.
6.11 Audits and Inspection: Borrower shall permit, and shall cause each Guarantor to permit, at Agents expense, any of Agents officers or other representatives to visit and inspect upon reasonable notice during business hours any of the locations of Borrower or any Guarantor, to examine all of Borrowers or any Guarantors books of account, records, reports and other papers, to make copies and extracts therefrom and to discuss its affairs, finances and accounts with its officers, employees and independent certified public accountants. Notwithstanding the foregoing, all such inspections shall, during the continuance of an Event of Default, be at Borrowers expense at the standard rates charged by Agent for such activities (plus Agents reasonable out-of-pocket expenses).
6.12 Reserved:
6.13 Information to Participant: Agent and Lenders may divulge to any participant, assignee or co-lender or prospective participant, assignee or co-lender it may obtain in the Loans or any portion thereof, all information, and furnish to such Person copies of any reports, financial statements, certificates, and documents obtained under any provision of this Agreement, or related agreements and documents.
6.14 Material Adverse Developments: Borrower agrees that immediately upon becoming aware of any development or other information outside the ordinary course of business and excluding matters of a general economic, financial or political nature which would reasonably be expected to have a Material Adverse Effect it shall give to Agent telephonic notice specifying the nature of such development or information and such anticipated effect. In addition, such verbal communication shall be confirmed by written notice thereof to Agent on the same day such verbal communication is made or the next Business Day thereafter.
6.15 Places of Business: Borrower shall give thirty (30) days prior written notice to Agent of any changes in the location of any of its respective principal places of business, provided that Borrower may not relocate its principal place of business outside of the United States. Borrower shall give prompt written notice to Agent of any changes in the location of the places where its business and financial records are kept, or the establishment of any new place of business, or the discontinuance of any existing place of business.
6.16 Commercial Tort Claims: Borrower will, and shall cause each Guarantor to, immediately notify Agent in writing in the event that Borrower or any Guarantor becomes a party to or obtains any rights with respect to any Commercial Tort Claim. Such notification shall include information sufficient to describe such Commercial Tort Claim, including, but not limited to, the parties to the claim, the court in which the claim was commenced, the docket number assigned to such claim, if any, and a detailed explanation of the events that gave rise to the claim. Borrower shall execute and deliver to Agent all documents and/or agreements necessary to grant Agent a security interest in such Commercial Tort Claim to secure the Obligations. Borrower authorizes, and shall cause each Guarantor to authorize, Agent to file (without Borrowers or any Guarantors
51 |
signature) initial financing statements or amendments, as Agent deems necessary to perfect its security interest in the Commercial Tort Claim.
6.17 Letter of Credit Rights: Borrower shall, and shall cause each Guarantor to, provide Agent with written notice of any Letters of Credit for which Borrower is the beneficiary. Borrower shall execute and deliver (or cause to be executed or delivered) to Agent, all documents and agreements as Agent may require in order to obtain and perfect its security interest in such Letter of Credit Rights.
6.18 Pledged Collateral: In the event that any Capital Stock of Borrower pledged by Parent or of a Subsidiary Guarantor pledged by Parent, Borrower or any other Guarantor is transferred or otherwise exchanged or conveyed to Borrower, another Guarantor or another Subsidiary of Borrower or any Guarantor (herein a Transferee) as permitted hereunder, Borrower shall cause such Transferee to execute, and deliver to Agent, a collateral pledge agreement in form and substance substantially similar to the Collateral Pledge Agreement.
6.19 Management Agreements: Borrower shall notify Agent in writing whenever any Guarantor enters into a Management Agreement and directs Agent to unilaterally amend Schedule D to include such additional Management Agreement. Borrower shall execute and deliver or cause such Guarantor to execute and deliver a Notice Letter with respect to such Management Agreement.
6.20 Sponsored CDO Equity Interests or Other Capital Stock: Borrower shall notify Agent in writing whenever Borrower or any Guarantor acquires any additional Sponsored CDO Equity Interests or Capital Stock of any Person and directs Agent to unilaterally amend Schedule 5.14(b) to include the additional Sponsored CDO Equity Interests on Schedule 5.14(b). Borrower shall execute and deliver or cause such Guarantor to execute and deliver an amendment to the Collateral Pledge Agreement or any applicable Loan Document, granting Agent, for the ratable benefit of Secured Parties, a first priority security interest in such additional Sponsored CDO Equity Interests or Capital Stock.
6.21 Post Closing Requirements: Borrower shall complete each of the post closing obligations and/or provide to Agent each of the documents, instruments and agreements listed on Schedule 6.21 attached hereto and made a part hereof on or before the date set forth in such Schedule.
SECTION 7. BORROWERS NEGATIVE COVENANTS:
Borrower covenants that until all of the Obligations are paid and satisfied in full and the Term Loan Facility and each Letter of Credit has been terminated, that:
7.1 Asset Sales, Merger, Consolidation, Dissolution or Liquidation:
(a) Each Person included in the Dekania Group shall not engage in any Asset Sale other than: (i) so long as no Default or Event of Default exists or would exist after giving effect to such Asset Sale and any proceeds are applied as required under Section 2.9, liquidation of its investments (other than Trading Assets) in the ordinary course of such Persons business and transfers, sales and dispositions of the Permanent Investments, (ii) so long as no Default or Event of Default exists or would exist after giving effect to such Asset Sales, transfers, sales and dispositions
52 |
of Trading Assets, by such Person in the ordinary course of such Persons business, (iii) equipment that is replaced by other equipment comparable or superior quality and value within ninety (90) days of such Asset Sale; or (iv) the sale of Capital Stock of any Person included in the Dekania Group so long as such sale does not result in a Change of Control.
(b) No Person included in the Dekania Group shall merge or consolidate with any other Person or engage in a division, conversion, dissolution or liquidation; provided however, that such Person may merge or consolidate with a Person so long as (i) no Default or Event of Default exists, or would exist after giving effect to such merger or consolidation; (ii) such Person is the surviving entity of any such merger or consolidation; and (iii) Agent, for the ratable benefit of Secured Parties has a first priority Lien on all of the assets and the Capital Stock of the surviving entity of any such merger or consolidation, subject to Permitted Liens.
(c) Notwithstanding the foregoing, Borrower shall cause, no later than December 31, 2010, the dissolution of Brigadier Capital Management, LLC and Brigadier GP, LLC.
7.2 Acquisitions: No Person included in the Dekania Group shall acquire all or a material portion of the Capital Stock or assets of any Person in any transaction or in any series of related transactions or enter into any sale and leaseback transaction, other than any Capital Stock that is a Permitted Investment.
7.3 Liens and Encumbrances: Borrower shall not, and shall not permit any Guarantor to: (a) execute a negative pledge agreement with any Person covering (i) with respect to any Person included in the Dekania Group, any of its Property (except pursuant to agreements permitted under the definition of Permitted Indebtedness), or (ii) with respect to any other Guarantor, any of the Collateral or (b) cause or permit or agree or consent to cause or permit in the future (upon the happening of a contingency or otherwise), with respect to any Person included in the Dekania Group its Property (including, without limitation, the Collateral) or with respect to any other Guarantor, any of the Collateral, whether now owned or hereafter acquired, to be subject to a Lien or be subject to any claim except for Permitted Liens.
7.4 Transactions With Affiliates or Subsidiaries: Except pursuant to the Management Agreements, as otherwise set forth on Schedule 7.4(a) attached hereto and made part hereof, or in connection with the making of a Permitted Investment, Borrower shall not, and shall not permit any Guarantor to, enter into any transaction with any Subsidiary or other Affiliate, including, without limitation, the purchase, sale, or exchange of Property, or the loaning or giving of funds to any Affiliate or any Subsidiary unless: (i) transaction is in the ordinary course of and substantially related to the reasonable requirements of Borrowers or such Guarantors business and upon terms substantially the same and no less favorable to Borrower or such Guarantor as it would obtain in a comparable arms length transactions with any Person not an Affiliate or a Subsidiary, and so long as such transaction is not prohibited hereunder; or (ii) such transaction is intended for incidental administrative purposes.
7.5 Guarantees: Excepting the endorsement in the ordinary course of business of negotiable instruments for deposit or collection, no Person included in the Dekania Group shall become or be liable, directly or indirectly, primary or secondary, matured or contingent, in any
53 |
manner, whether as guarantor, surety, accommodation maker, or otherwise, for the existing or future Indebtedness of any kind of any Person except for Permitted Indebtedness.
7.6 Distributions and Bonuses: No Person included in the Dekania Group shall (a) declare or pay or make any forms of Distribution to holders of such Persons Capital Stock, if before and after giving effect to such Distributions a Default or Event of Default exists, or (b) declare or pay any bonus compensation to its officers, directors or members if a Default or an Event of Default exists or would result from the payment thereof.
7.7 Other Indebtedness: No Person included in the Dekania Group shall (a) hereafter incur or become liable for any Indebtedness other than Permitted Indebtedness; (b) make any prepayments on any existing or future Indebtedness (other than the Obligations); or (c) make any payments on Subordinated Debt in violation of the subordination provisions thereof.
7.8 Loans and Investments: Except as permitted in Section 7.4 hereof, no Person included in the Dekania Group shall make or have outstanding loans, advances, extensions of credit or capital contributions to, or investments in, any Person other than Permitted Investments.
7.9 Use of Lenders Name: Except as may be required by applicable law or the rules or regulations of a Governmental Authority, including but not limited to the Securities and Exchange Commission, Borrower shall not, and shall not permit any Guarantor to, use Lenders name in connection with any of its business operations. Nothing herein contained is intended to permit or authorize Borrower or any Guarantor to make any contract on behalf of Agent or any Lender.
7.10 Miscellaneous Covenants:
(a) Borrower shall not, and shall not permit any Guarantor to, become or be a party to any contract or agreement which at the time of becoming a party to such contract or agreement materially impairs Borrowers or any Guarantors ability to perform under this Agreement, or under any other instrument, agreement or document to which Borrower or any Guarantor is a party or by which it is or may be bound.
(b) Each Person included in the Dekania Group shall not carry or purchase any margin stock within the meaning of Regulations U, T or X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II.
(c) Borrower shall not, and shall not permit any Guarantor to (i) amend or modify any Transaction Document or any Management Agreement except for technical amendments and modifications with respect to the administration of the Management Agreement which are not adverse to the interests of Lenders, (ii) assign any of its rights, duties or obligations under any Management Agreement (except as permitted under Section 7.1 or, with respect to any Guarantor not included in the Dekania Group, to the extent proceeds are applied as required under Section 2.9) or Transaction Document to any other Person or (iii) transfer any Permanent Investment to any other Person other than a Guarantor (except as permitted under Section 7.1 or, with respect to any Guarantor not included in the Dekania Group, to the extent proceeds are applied as required under Section 2.9).
54 |
7.11 Jurisdiction of Organization: If a Registered Organization, neither Borrower nor any Guarantor shall change its jurisdiction of organization.
7.12 Organization Documents: Borrower shall not, and shall not permit any Guarantor to, amend or modify any of its respective organizational documents, including its certificate of formation and operating agreement, in a manner which would be materially adverse to Secured Parties.
SECTION 8. DEFAULT
8.1 Events of Default: Each of the following events shall constitute an event of default (Event of Default):
(a) Payments - if Borrower fails to make any payment of principal or interest on the Loans on the date such payment is due and payable; or
(b) Other Charges - if Borrower fails to pay any other charges, fees, Expenses or other monetary obligations owing to Agent, Issuing Bank or any Lender arising out of or incurred in connection with this Agreement within thirty (30) days of the date of any invoice; or
(c) Particular Covenant Defaults - if Borrower fails to perform, comply with or observe any covenant or undertaking contained in this Agreement and (other than with respect to the covenants contained in Section 6.8 and Section 7 for which no cure period shall exist), such failure continues for twenty (20) Business Days after the occurrence thereof; or
(d) Financial Information - if any statement, report, financial statement, or certificate made or delivered by Borrower or any of its officers, employees or agents, to Agent or any Lender is not true and correct, in all material respects, when made; or
(e) Uninsured Loss - if there shall occur any uninsured damage to or casualty loss, theft, or destruction in excess of Two Million Five Hundred Thousand Dollars ($2,500,000) in the aggregate with respect to any portion of any Property of any Person included in the Dekania Group; or
(f) Warranties or Representations - if any warranty, representation or other statement by or on behalf of Borrower or any Guarantor contained in or pursuant to this Agreement, the other Loan Documents or in any document, agreement or instrument furnished in compliance with, relating to, or in reference to this Agreement, is false, erroneous, or misleading in any material respect when made; or
(g) Agreements with Others - (i) if Borrower or any Guarantor shall default beyond any grace period in the payment of principal or interest of any Indebtedness in excess of One Million Dollars ($1,000,000) in the aggregate; or (ii) if Borrower or any Guarantor defaults under the terms of any such Indebtedness in a manner other than as described in subclause (i) above and the effect of such default is to enable the holder of such Indebtedness to accelerate the payment of Borrowers or any such Guarantors obligations, which are the subject thereof, prior to the maturity date or prior to the regularly scheduled date of payment; or
55 |
(h) Other Agreements with Lenders - if Borrower or any Guarantor breaches or violates the terms of, or if a default (and expiration of any applicable cure period), or an Event of Default, occurs under, any Interest Hedging Instrument or any other existing or future agreement (related or unrelated) (including, without limitation, the other Loan Documents) between or among Borrower or any Guarantor and Agent, Issuing Bank or any Lender; or
(i) Judgments - if any final judgment for the payment of money (i) in excess of One Million Dollars ($1,000,000) with respect to any Person included in the Dekania Group or (ii) in excess of Ten Million Dollars ($10,000,000) with respect to any other Guarantor, in either event in the aggregate (A) which is not fully and unconditionally covered by insurance or (B) for which such Person has not established a cash or cash equivalent reserve in the full amount of such judgment, shall be rendered by a court of record against any such Person and such judgment shall continue unsatisfied and in effect for a period of thirty (30) consecutive days without being vacated, discharged, satisfied or bonded pending appeal; or
(j) Assignment for Benefit of Creditors, etc. - if Borrower or any Guarantor makes or proposes in writing, an assignment for the benefit of creditors generally, offers a composition or extension to creditors, or makes or sends notice of an intended bulk sale of any business or assets now or hereafter owned or conducted by Borrower; or
(k) Bankruptcy, Dissolution, etc. - upon the commencement of any action for the dissolution or liquidation of Borrower or any Guarantor, or the commencement of any proceeding to avoid any transaction entered into by Borrower or any Guarantor, or the commencement of any case or proceeding for reorganization or liquidation of Borrowers or any Guarantors debts under the Bankruptcy Code or any other state or federal law, now or hereafter enacted for the relief of debtors, whether instituted by or against Borrower or any Guarantor; provided however, that Borrower or any Guarantor shall have sixty (60) days to obtain the dismissal or discharge of involuntary proceedings filed against it, it being understood that during such thirty (30) day period, Lenders shall not be obligated to make Advances hereunder and Lenders may seek adequate protection in any bankruptcy proceeding; or
(l) Receiver - upon the appointment of a receiver, liquidator, custodian, trustee or similar official or fiduciary for any Borrower or any Guarantor or for Borrowers or any Guarantors Property; or
(m) Execution Process, etc. - the issuance of any execution or distraint process against any Property of Borrower or any Guarantor; or
(n) Termination of Business - other than in connection with an Asset Sale or series of Asset Sales permitted under Section 7.1(a), if Borrower ceases any material portion of its business operations as presently conducted, or if any Guarantor ceases any material portion of its business operations as presently conducted except in the ordinary course its business following written notice to Lender; or
(o) Pension Benefits, etc. - if any Person included in the Dekania Group fails to comply with ERISA so that proceedings are commenced to appoint a trustee under ERISA to administer such Persons employee plans or the PBGC institutes proceedings to appoint a trustee to
56 |
administer such plan(s), or a Lien is entered to secure any deficiency or claim or a reportable event as defined under ERISA occurs; or
(p) Investigations - any indication or evidence received by Agent or any Lender that reasonably leads it to believe Borrower or any Guarantor may have directly or indirectly been engaged in any type of activity which, would be reasonably likely to result in the forfeiture of any material property of Borrower or any Guarantor to any Governmental Authority; or
(q) Change of Control - if there shall occur a Change of Control other than a Change of Control that occurs in connection with an Asset Sale or series of Asset Sales permitted under Section 7.1(a) of this Agreement; or
(r) Other Loan Documents - - if any breach or default occurs under any other Loan Documents or if the Surety and Guaranty Agreement, or any obligation to perform thereunder is terminated; or
(s) Liens - if any Lien in favor of Agent shall cease to be valid, enforceable and perfected and prior to all other Liens other than Permitted Liens unless the failure of such Lien to be valid, enforceable and perfected and prior to all other Liens is the result of the negligence of Agent, or if Borrower or any Guarantor or any Governmental Authority shall assert any of the foregoing; or
(t) Transaction Documents - if any Transaction Document is terminated by any party thereto.
8.2 Cure: Nothing contained in this Agreement or the Loan Documents shall be deemed to compel Agent, Issuing Bank or any Lender to accept a cure of any Event of Default hereunder.
8.3 Rights and Remedies on Default:
(a) In addition to all other rights, options and remedies granted or available to Agent, Issuing Bank or Lenders under this Agreement or the Loan Documents, or otherwise available at law or in equity, upon or at any time after the occurrence and during the continuance of a Default or an Event of Default, Agent may, in its discretion, direct Lenders to withhold or cease making Advances under the Term Loan Facility.
(b) In addition to all other rights, options and remedies granted or available to Agent under this Agreement or the Loan Documents (each of which is also then exercisable by Agent), Agent may, in its discretion, upon or at any time after the occurrence and during the continuance of an Event of Default, terminate the Term Loan Facility and declare the Obligations immediately due and payable, all without demand, notice, presentment or protest or further action of any kind (it also being understood that the occurrence of any of the events or conditions set forth in Sections 8.1(j),(k) or (l) shall automatically cause an acceleration of the Obligations).
(c) In addition to all other rights, options and remedies granted or available to Agent, under this Agreement or the Loan Documents (each of which is also then exercisable by Agent), upon or at any time after the occurrence and during the continuance of an Event of Default Agent may, in its discretion, direct Borrower to deliver and pledge to Agent, for the ratable benefit
57 |
of Agent, all Lenders and Issuing Bank, cash collateral in the amount of all outstanding Letters of Credit.
(d) In addition to all other rights, options and remedies granted or available to Agent under this Agreement or the Loan Documents (each of which is also then exercisable by Agent), Agent may, upon or at any time following the occurrence of an Event of Default, exercise all rights under the UCC and any other applicable law or in equity, and under all Loan Documents permitted to be exercised after the occurrence of an Event of Default, including the following rights and remedies (which list is given by way of example and is not intended to be an exhaustive list of all such rights and remedies):
(i) The right to take possession of, send notices regarding and collect directly the Collateral, with or without judicial process (including without limitation the right to notify the United States postal authorities to redirect mail addressed to Borrower to an address designated by Agent); or
(ii) By its own means or with judicial assistance, enter Borrowers premises and take possession of the Collateral, or render it unusable, or dispose of the Collateral on such premises in compliance with sub-Section (e) below, without any liability for rent, storage, utilities or other sums, and Borrower shall not resist or interfere with such action; or
(iii) Require Borrower at Borrowers expense to assemble all or any part of the Collateral and make it available to Agent at any place designated by Agent; or
(iv) The right to enjoin any violation of Section 7.1, it being agreed that Lenders remedies at law are inadequate.
(e) Borrower hereby agrees that a notice received by it at least seven (7) days before the time of any intended public sale or of the time after which any private sale or other disposition of the Collateral is to be made, shall be deemed to be reasonable notice of such sale or other disposition. If permitted by applicable law, any perishable inventory or Collateral which threatens to speedily decline in value or which is sold on a recognized market may be sold immediately by Agent without prior notice to Borrower. Borrower covenants and agrees not to interfere with or impose any obstacle to Agents exercise of its rights and remedies with respect to the Collateral, after the occurrence of an Event of Default hereunder. Agent shall have no obligation to clean up or prepare the Collateral for sale. If Agent sells any of the Collateral upon credit, Borrower will only be credited with payments actually made by the purchaser thereof, that are received by Agent. Agent may, in connection with any sale of the Collateral specifically disclaim any warranties of title or the like.
8.4 Nature of Remedies: All rights and remedies granted Agent, Issuing Bank or Lenders hereunder and under the Loan Documents, or otherwise available at law or in equity, shall be deemed concurrent and cumulative, and not alternative remedies, and Agent may proceed with any number of remedies at the same time until all Obligations are satisfied in full. The exercise of any one right or remedy shall not be deemed a waiver or release of any other right or remedy, and Agent, upon or at any time after the occurrence of an Event of Default, may proceed against Borrower, any
58 |
Guarantor or any of the Collateral, at any time, under any agreement, with any available remedy and in any order.
8.5 Set-Off:
(a) In addition to all other rights, options and remedies granted or available to Agent under this Agreement or the Loan Documents (each of which is also then exercisable by Agent), upon or at any time after the occurrence and during the continuance of an Event of Default, Agent or any Lenders (and any participant) shall have and be deemed to have, without notice to Borrower, the immediate right of set-off against any bank account of Borrower with Agent or any Lender, or of Borrower with any other subsidiary or Affiliate or any participant and may apply the funds or amount thus set-off against any of Borrowers Obligations hereunder.
(b) If any bank account of Borrower with any Lender, any other subsidiary or Affiliate or any participant is attached or otherwise liened or levied upon by any third party, Agent or such Lender (and such participant) or Affiliate shall have and be deemed to have, without notice to Borrower, the immediate right of set-off and may apply the funds or amount thus set-off against any of Borrowers Obligations hereunder.
SECTION 9. AGENT
9.1 Appointment and Authority: (a) Each Lender and Issuing Bank hereby irrevocably appoints TD Bank, N.A. to act on its behalf as Agent hereunder and under the other Loan Documents and authorizes Agent to take such actions on its behalf and to exercise such powers as are delegated to Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The provisions of this Article are solely for the benefit of Agent, Lenders and Issuing Bank, and no Borrower or Guarantor shall have rights as a third party beneficiary of any of such provisions.
(b) Agent shall also act as the collateral agent under the Loan Documents, and each Lender (in its capacities as a Lender and potential provider of an Interest Hedging Instrument) and Issuing Bank hereby irrevocably appoints and authorizes Agent to act as Agent of such Lender and Issuing Bank for purposes of acquiring, holding and enforcing any and all Liens on Collateral granted by Borrower or any Guarantor to secure any of the Obligations, together with such powers and discretion as are reasonably incidental thereto. In this connection, Agent, as collateral agent and any co-agents, sub-agents and attorneys-in-fact appointed by Agent pursuant to Section 9.5 for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Loan Documents, or for exercising any rights and remedies thereunder at the direction of Agent), shall be entitled to the benefits of all provisions of this Section 9 and Section 10 (including Section 10.4), as though such co-agents, sub-agents and attorneys-in-fact were the collateral agent under the Loan Documents) as if set forth in full herein with respect thereto.
9.2 Rights as a Lender: The Person serving as Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not Agent and the term Lender or Lenders shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, act
59 |
as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with Borrower, any Guarantor or other Subsidiary or Affiliate thereof as if such Person were not Agent hereunder and without any duty to account therefor to any Lender.
9.3 Exculpatory Provisions: Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, Agent:
(a) shall not be subject to any fiduciary or other implied duties, regardless of whether a Default or Event of Default has occurred and is continuing;
(b) shall not have any duty to take any discretionary action or exercise any discretionary powers; and
(c) shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to Borrower, any Guarantor or any other Subsidiary or Affiliate thereof that is communicated to or obtained by the Person serving as Agent or any of Agents Affiliates in any capacity.
Agent shall not be liable for any action taken or not taken by it (i) with the consent of Lenders (or such other number or percentage of Lenders as shall be necessary, or as Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 10.11 and 8.3) or (ii) in the absence of its own gross negligence or willful misconduct. Agent shall be deemed not to have knowledge of any Default of Event of Default unless and until written notice describing such Default or Event of Default is given to Agent by Borrower, a Lender or Issuing Bank.
Agent shall not be responsible for or have any duty to ascertain or inquire into or pass upon (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default of Event of Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, or the creation, perfection or priority of any Lien purported to be created by the Loan Documents, (v) the value or the sufficiency of any Collateral, or (v) the satisfaction of any condition set forth in Section 4 or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to Agent.
9.4 Reliance by Agent: Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan, or the issuance of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or
60 |
Issuing Bank, Agent may presume that such condition is satisfactory to such Lender or Issuing Bank unless Agent shall have received notice to the contrary from such Lender or Issuing Bank prior to the making of such Loan or the issuance of such Letter of Credit. Agent may consult with legal counsel (who may be counsel for Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
9.5 Delegation of Duties: Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by Agent. Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Affiliates. The exculpatory provisions of this Section 9 shall apply to any such sub-agent and to the Affiliates of Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Agent.
9.6 Resignation of Agent: Agent may at any time give notice of its resignation to Lenders, Issuing Bank and Borrower. Upon receipt of any such notice of resignation, Lenders shall have the right, in consultation with Borrower, to appoint a successor, which shall be a bank with an office in the United States, or an Affiliate of any such bank with an office in the United States. If no such successor shall have been so appointed by Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation, then the retiring Agent may on behalf of Lenders and Issuing Bank, appoint a successor Agent meeting the qualifications set forth above; provided that if Agent shall notify Borrower, Issuing Bank and Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (a) retiring Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by Agent on behalf of Lenders or Issuing Bank under any of the Loan Documents, retiring Agent shall continue to hold such collateral security until such time as a successor Agent is appointed) and (b) all payments, communications and determinations provided to be made by, to or through Agent shall instead be made by or to each Lender and Issuing Bank directly, until such time as Lenders appoint a successor Agent as provided for above in this Section. Upon the acceptance of a successors appointment as Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Agent, and the retiring Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section). The fees payable by Borrower to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between Borrower and such successor. After the retiring Agents resignation hereunder and under the other Loan Documents, the provisions of this Section 9 and Section 10.4 shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Affiliates in respect of any actions taken or omitted to be taken by any of them while the retiring Agent was acting as Agent.
9.7 Non-Reliance on Agent and Other Lenders: Each Lender and Issuing Bank acknowledges that it has, independently and without reliance upon Agent or any other Lender or any of their Affiliates and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender and Issuing Bank also acknowledges that it will, independently and without reliance upon Agent or any other Lender
61 |
or any of their Affiliates and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.
9.8 Reserved:
9.9 Agent May File Proofs of Claim: In case of the pendency of any proceeding under the Bankruptcy Code or any other judicial proceeding relative to Borrower or any Guarantor, Agent (irrespective of whether the principal of any Loan or Reimbursement Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether Agent shall have made any demand on Borrower or any Guarantor) shall be entitled and empowered, by intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, Reimbursement Obligations and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of Lenders, Issuing Bank and Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of Lenders, Issuing Bank and Agent and their respective agents and counsel and all other amounts due Lenders, Issuing Bank and Agent under this Agreement) allowed in such judicial proceeding; and
(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and Issuing Bank to make such payments to Agent and, if Agent shall consent to the making of such payments directly to Lenders and Issuing Bank, to pay to Agent any amount due for the reasonable compensation, expenses, disbursements and advances of Agent and its agents and counsel, and any other amounts due Agent under this Agreement.
9.10 Collateral and Guaranty Matters: Lenders and Issuing Bank irrevocably authorize Agent, at its option and in its discretion,
(a) to release any Lien on any property granted to or held by Agent under any Loan Document (i) upon termination of the Term Loan Facility and payment in full of all Obligations (other than contingent indemnification obligations) and the expiration or termination (or cash collateralization) of all Letters of Credit, (ii) that is sold or to be sold as part of or in connection with any sale permitted hereunder or under any other Loan Document, or (iii) if approved, authorized or ratified in writing in accordance with Section 10.11;
(b) to release any Guarantor from its obligations under the Guaranty if such Person ceases to be a Guarantor as a result of a transaction permitted hereunder; and
(c) to subordinate any Lien on any property granted to or held by Agent under any Loan Document to the holder of any Lien on such property that is permitted by Section 7.3.
62
Upon request by Agent at any time, Lenders will confirm in writing Agents authority to release or subordinate its interest in particular types or items of property, or to release any Guarantor from its obligations under the Surety and Guaranty Agreement pursuant to this Section 9.10. In each case as specified in this Section 9.10, Agent will, at Borrowers expense, execute and deliver such documents as may reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted under the Loan Documents or to subordinate its interest in such item, or to release such Guarantor from its obligations under the Surety and Guaranty Agreement, in each case in accordance with the terms of the Loan Documents and this Section 9.10.
9.11 Action on Instructions of Lenders: With respect to any provision of this Agreement, or any issue arising thereunder, concerning which Agent is authorized to act or withhold action by direction of all Lenders, Agent shall in all cases be fully protected in so acting, or in so refraining from acting, hereunder in accordance with written instructions signed by all Lenders. Such instructions and any action taken or failure to act pursuant thereto shall be binding on all Lenders.
9.12 Designation of Additional Agents:
The parties hereto covenant and agree TD Bank, N.A. shall be the Agent, and that no additional party designated as a syndication agent, documentation agent, collateral agent or in any other agent capacity (each such person an Additional Agent) shall, except in the case of the appointment of a successor Agent in accordance with Section 9.6 hereof, have any rights, duties, responsibilities, obligations, liabilities, responsibilities or duties, except for those received, undertaken or incurred by such party in its capacity as a Lender hereunder, if applicable. No duty, responsibility, right or option granted to Agent herein is delegated or transferred, in whole or in part, to any Additional Agent and no compensation payable to Agent shall be shared with, or paid to, any such Additional Agent. No Additional Agent shall be entitled to any fees or reimbursement of Expenses except as such Additional Agent shall otherwise be entitled in its capacity as a Lender. Notwithstanding anything to the contrary contained in this Agreement, no amendment to this Section 9.12 shall be effective without the written consent of Agent.
SECTION 10. MISCELLANEOUS
10.1 GOVERNING LAW: THIS AGREEMENT, AND ALL MATTERS ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND ALL RELATED AGREEMENTS AND DOCUMENTS, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA. THE PROVISIONS OF THIS AGREEMENT AND ALL OTHER AGREEMENTS AND DOCUMENTS REFERRED TO HEREIN ARE TO BE DEEMED SEVERABLE, AND THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION SHALL NOT AFFECT OR IMPAIR THE REMAINING PROVISIONS WHICH SHALL CONTINUE IN FULL FORCE AND EFFECT.
10.2 Integrated Agreement: The Loan Documents, all related agreements, and this Agreement shall be construed as integrated and complementary of each other, and as augmenting and not restricting Lenders, Issuing Banks and Agents rights and remedies. If, after applying the foregoing, an inconsistency still exists, the provisions of this Agreement shall constitute an amendment thereto and shall control.
63
10.3 Waiver: No omission or delay by Secured Parties in exercising any right or power under this Agreement or any related agreements and documents will impair such right or power or be construed to be a waiver of any default, or Event of Default or an acquiescence therein, and any single or partial exercise of any such right or power will not preclude other or further exercise thereof or the exercise of any other right, and as to Borrower no waiver will be valid unless in writing and signed by Agent and such Lenders (as required pursuant to Section 10.11) and then only to the extent specified.
10.4 Expenses; Indemnity: (a) Borrower shall pay (i) all reasonable and documented out-of-pocket expenses incurred by Agent and Agents Affiliates (including the reasonable fees, charges and disbursements of counsel for Agent), in connection with the syndication of the credit facilities provided for herein, the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all out-of-pocket expenses incurred by Agent, any Lender or Issuing Bank (including the fees, charges and disbursements of any counsel for Agent, any Lender or Issuing Bank) in connection with the enforcement or protection of its rights (A) under or related to this Agreement and the other Loan Documents, including its rights under this Section, or (B) in connection with Loans made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit (all such out-of-pocket expenses, fees, charges and disbursements are referred to herein collectively, as Expenses).
(b) Indemnification by Borrower; Lenders. Borrower shall indemnify Agent (and any sub-agent thereof), each Lender and Issuing Bank, and each Related Party (each such Person being called an Indemnitee) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the fees, charges and disbursements of any counsel for any Indemnitee), incurred by any Indemnitee or asserted against any Indemnitee by any third party or by Borrower or any Guarantor arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, or, in the case of Agent (and any sub-agent thereof) and its Indemnitees only, the administration of this Agreement and the other Loan Documents, (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any violation of any Requirement of Law by Borrower or any Guarantor, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party (including any creditor of Borrower or any Guarantor) or by Borrower or any Guarantor or any of Borrowers or any Guarantors directors, shareholders or creditors, and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct
64
of such Indemnitee or (y) result from a claim brought by Borrower or any Guarantor against an Indemnitee for breach in bad faith of such Indemnitees obligations hereunder or under any other Loan Document, if such Borrower or such Guarantor has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction.
(c) To the extent that Borrower for any reason fails to indefeasibly pay any amount required under sub-Section (a) or (b) of this Section to be paid by it to Agent (or any sub-agent thereof), Issuing Bank or any Indemnitee of any of the foregoing, each Lender severally agrees to pay to Agent (or any such sub-agent), Issuing Bank or such Indemnitee, as the case may be, such Lenders Pro Rata Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against Agent (or any such sub-agent) or Issuing Bank in its capacity as such, or against any Indemnitee of any of the foregoing acting for Agent (or any such sub-agent) or Issuing Bank in connection with such capacity. The obligations of Lenders under this sub-Section (c) are several and not joint.
10.5 Time: Whenever Borrower shall be required to make any payment, or perform any act, on a day which is not a Business Day, such payment may be made, or such act may be performed, on the next succeeding Business Day. Time is of the essence in the performance under all provisions of this Agreement and all related agreements and documents.
10.6 Consequential Damages: Neither Agent, Issuing Bank or any Lender nor any agent or attorney of Agent, Issuing Bank or any Lender, shall be liable for any consequential damages arising from any breach of contract, tort or other wrong relating to the establishment, administration or collection of the Obligations.
10.7 Brokerage: This transaction was brought about and entered into by Agent, Lenders and Borrower acting as principals and without any brokers, agents or finders being the effective procuring cause hereof. Borrower represents that it has not committed Agent or any Lender to the payment of any brokerage fee, commission or charge in connection with this transaction. If any such claim is made on Agent or any Lender by any broker, finder or agent or other person, Borrower hereby indemnifies, defends and saves such party harmless against such claim and further will defend, with counsel satisfactory to Agent, any action or actions to recover on such claim, at Borrowers own cost and expense, including such partys reasonable counsel fees. Borrower further agrees that until any such claim or demand is adjudicated in such partys favor, the amount demanded shall be deemed a liability of Borrower under this Agreement.
10.8 Notices:
(a) Any notice or request hereunder may be given to Borrower or to Agent or any Lender at their respective addresses set forth below or at such other address as may hereafter be specified in a notice designated as a notice of change of address under this Section. Any notice, request, demand, direction or other communication (for purposes of this Section 10.8 only, a Notice) to be given to or made upon any party hereto under any provision of this Agreement shall be given or made by telephone or in writing (which includes by means of electronic transmission (i.e., e-mail) or facsimile transmission or by setting forth such Notice on a site on the World Wide
65
Web (a Website Posting) if Notice of such Website Posting (including the information necessary to access such site) has previously been delivered to the applicable parties hereto by another means set forth in this Section 10.8) in accordance with this Section 10.8. Any such Notice must be delivered to the applicable parties hereto at the addresses and numbers set forth under their respective names set forth herein or in accordance with any subsequent unrevoked Notice from any such party that is given in accordance with this Section 10.8. Any Notice shall be effective:
(b) In the case of hand-delivery, when delivered;
(c) If given by mail, four days after such Notice is deposited with the United States Postal Service, with first-class postage prepaid, return receipt requested;
(d) In the case of a telephonic Notice, when a party is contacted by telephone, if delivery of such telephonic Notice is confirmed no later than the next Business Day by hand delivery, a facsimile or electronic transmission, a Website Posting or an overnight courier delivery of a confirmatory Notice (received at or before noon on such next Business Day);
(e) In the case of a facsimile transmission, when sent to the applicable partys facsimile machines telephone number, if the party sending such Notice receives confirmation of the delivery thereof from its own facsimile machine;
(f) In the case of electronic transmission, when actually received;
(g) In the case of a Website Posting, upon delivery of a Notice of such posting (including the information necessary to access such site) by another means set forth in this Section 10.8; and
(h) If given by any other means (including by overnight courier), when actually received.:
If to Agent to: | TD Bank, N.A. | |
1006 Astoria Boulevard | ||
Cherry Hill, NJ 08034 | ||
Attn: Richard A. Zimmerman | ||
Telecopier: 856-751-6884 | ||
With copies to: | Ballard Spahr LLP | |
1735 Market Street, 51st Floor | ||
Philadelphia, PA 19103 | ||
Attn: Steven M. Miller | ||
Telecopier: 215-864-8310 | ||
If to Borrower to: | Dekania Investors, LLC | |
2929 Arch Street | ||
Philadelphia, PA 19104-2868 | ||
Attn: Joseph Pooler | ||
Telecopier: 215-701-9603 |
66
With copies to: | Duane Morris LLP | |
30 S. 17th Street | ||
Philadelphia, PA 19103 | ||
Attn: Darrick M. Mix | ||
Telecopier: 215-405-2906 | ||
If to Lenders: | to the addresses set forth on Schedule B |
(i) Agent shall be fully entitled to rely upon any facsimile transmission, e-mail, or other writing purported to be sent by any Authorized Officer (whether requesting an Advance or otherwise) as being genuine and authorized.
10.9 Headings: The headings of any paragraph or Section of this Agreement are for convenience only and shall not be used to interpret any provision of this Agreement.
10.10 Survival: All warranties, representations, and covenants made by Borrower herein, or in any agreement referred to herein or on any certificate, document or other instrument delivered by it or on its behalf under this Agreement, shall be considered to have been relied upon by Agent and Lenders, and shall survive the delivery to Lenders of the Notes, regardless of any investigation made by Lenders or on their behalf. All statements in any such certificate or other instrument prepared and/or delivered for the benefit of Agent and any and all Lenders shall constitute warranties and representations by Borrower hereunder. Except as otherwise expressly provided herein, all covenants made by Borrower hereunder or under any other agreement or instrument shall be deemed continuing until all Obligations are satisfied in full. All indemnification obligations under this Agreement, including under Section 2.2, 2.10, 2.14, 2.15, 2.16, 6.5, 10.4 and 10.7, shall survive the termination of this Agreement and payment of the Obligations for a period of two (2) years.
10.11 Amendments:
(a) Neither the amendment or waiver of any provision of this Agreement or any other Loan Document (other than Letter of Credit Documents), nor the consent to any departure by Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by Agent, and each such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that no amendment, waiver or consent shall do any of the following: (i) increase the Term Loan Limit or L/C Sublimit or the Pro Rata Percentage of any Lender without the written consent of such Lender, (ii) except as otherwise expressly provided in this Agreement with respect to the floating nature of the Base Rate or Adjusted LIBOR Rate, reduce the principal of, or interest on, any Note or any Reimbursement Obligations or any fees hereunder without the written consent of each Lender affected thereby, (iii) postpone any date fixed for any payment in respect of principal of, or interest on, any Note or any Reimbursement Obligations or any fees hereunder without the written consent of each Lender affected thereby, (iv) amend or waive Section 2.12 or this Section 10.11 or any provision under this Agreement or any Loan Document that expressly provided for consent or other action by all Lenders, (v) except as otherwise expressly provided in this Agreement, and other than in connection with the financing, refinancing, sale or other disposition of any Property of Borrower permitted under this Agreement, release any Liens in favor of Lenders on any portion of the Collateral in excess of $1,000,000 in any calendar year without the written consent of each Lender, (vi) permit Borrower or any Guarantor to
67
delegate, transfer or assign any of its, obligations to any Lender without the written consent of each Lender, (vii) extend the Term Loan Maturity Date without the written consent of each Lender affected thereby, or (viii) release or compromise the obligations of Borrower or any Guarantor to any Lender without the written consent of each Lender; provided further, that no amendment, waiver or consent affecting the rights or duties of Agent or Issuing Bank under any Loan Document shall in any event be effective, unless in writing and signed by Agent and/or Issuing Bank, as applicable, in addition to Lenders required hereinabove to take such action. Notwithstanding any of the foregoing to the contrary, the consent of Borrower shall not be required for any amendment, modification or waiver of the provisions of Section 9 of this Agreement. In addition, Borrower and Lenders hereby authorize Agent to modify this Agreement by unilaterally amending or supplementing Schedule A, or Schedule B from time to time in the manner requested by Borrower, Agent or any Lender in order to reflect any assignments or transfers of the Loans as provided for hereunder and to amend Schedule C, Schedule D, Schedule 5.10(b), 5.11(c) or Schedule 5.14(b) as permitted under Section 4.8, Section 6.19 and Section 6.20; provided, however, that Agent shall promptly deliver a copy of any such modification to Borrower and each Lender.
(b) After an acceleration of the Obligations, Agent shall have the right, with communication (to the extent reasonably practicable under the circumstances) with all Lenders, to exercise or refrain from exercising any and all right, remedies, privileges and options under the Loan Documents and available at law or in equity to protect and enforce the rights of Lenders and collect the Obligations, including, without limitation, instituting and pursuing all legal actions against Borrower or to collect the Obligations, or defending any and all actions brought by Borrower or any other Person; or incurring Expenses or otherwise making expenditures to protect the Loans, the Collateral or Lenders rights or remedies.
(c) To the extent Agent is required to obtain or otherwise elects to seek the consent of Lenders to an action Agent desires to take, if any Lender fails to notify Agent, in writing, of its consent or dissent to any request of Agent hereunder within ten (10) Business Days of such Lenders receipt of such request, such Lender shall be deemed to have given its consent thereto.
(d) Notwithstanding the fact that the consent of all Lenders is required in certain circumstances as set forth above, (i) each Lender is entitled to vote as such Lender sees fit on any bankruptcy reorganization plan that affects the Loans, and each Lender acknowledges that the provisions of Section 1126(c) of the Bankruptcy Code supersedes the unanimous consent provisions set forth herein and (ii) Agent may consent to allow Borrower or a Guarantor to use cash collateral in the context of a bankruptcy or insolvency proceeding.
10.12 Successors and Assigns:
(a) Assignments Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of Issuing Bank that issues any Letter of Credit) except that (i) Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the
68
parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of Issuing Bank that issues any Letter of Credit), Participants (to the extent provided in paragraph (c) of this Section) and, to the extent expressly contemplated hereby, the Related Parties of each of Agent, Issuing Bank and Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
(b) Assignments by Lenders.
(i) Assignments Generally. Subject to the conditions set forth in subclause (b)(ii) below, any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Pro Rata Share and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld) of:
1) Borrower; provided that no consent of Borrower shall be required for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if an Event of Default has occurred and is continuing, any other assignee; and
2) each of Agent and Issuing Bank; provided that no such consent shall be required for an assignment to a Lender.
(ii) Certain Conditions to Assignments. Assignments shall be subject to the following additional conditions:
1) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lenders Loans or Term Loan Pro Rata Share, the amount of the Term Loan Pro Rata Share or Loans of the assigning Lender subject to each such assignment (determined as of the date of the Assignment Agreement with respect to such assignment is delivered to Agent) shall not be less than $5,000,000, unless each of Borrower and Agent otherwise consent; provided that no such consent of Borrower shall be required if an Event of Default has occurred and is continuing;
2) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lenders rights and obligations under this Agreement; and
3) the parties to each assignment shall execute and deliver to Agent an Assignment Agreement, together with a processing and recordation fee of $3,500; and
(iii) Effectiveness of Assignments. Subject to acceptance and recording thereof pursuant to subclause (b)(iv) of this Section, from and after the effective date specified in each Assignment Agreement, the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment Agreement, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment Agreement, be released from its obligations under this Agreement (and, in the case of an Assignment Agreement covering all of the assigning Lenders rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.14, 2.15, 2.16 and 10.4). Any assignment or transfer by a Lender of the rights or obligations under this Agreement that does not comply with this Section shall be treated for
69
purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (c) of this Section.
(iv) Maintenance of Register. Agent, acting for this purpose as an agent of Borrower, shall maintain at one of its offices a copy of each Assignment Agreement delivered to it and a register for the recordation of the names and addresses of Lenders, and the Term Loan Pro Rata Share, and principal amount of the Loans and Reimbursement Obligations (and interest thereon) owing to, each Lender pursuant to the terms hereof from time to time (the Register). The entries in the Register shall be conclusive, and Borrower, Agent, Issuing Bank and Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by Borrower, Issuing Bank and any Lender, at any reasonable time and from time to time upon reasonable prior notice.
(v) Acceptance of Assignments by Agent. Upon its receipt of a duly completed Assignment Agreement executed by an assigning Lender and an assignee, the processing and recordation fee referred to in subclause (b) of this Section and any written consent to such assignment required by subclause (b) of this Section, Agent shall accept such Assignment Agreement and record the information contained therein in the Register (Acceptance Date). No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.
(c) Participations.
(i) Participations Generally. Any Lender may, without the consent of Borrower, Agent, Issuing Bank sell participations to one or more banks or other entities (a Participant) in all or a portion of such Lenders rights and obligations under this Agreement and the other Loan Documents (including all or a portion of its Term Loan Pro Rata Share and the Loans owing to it); provided that (A) such Lenders obligations under this Agreement and the other Loan Documents shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (C) Borrower, Agent, Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lenders rights and obligations under this Agreement and the other Loan Documents. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and the other Loan Documents and to approve any amendment, modification or waiver of any provision of this Agreement or any other Loan Document; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 10.11 that affects such Participant. Subject to subclause (c)(ii) of this Section, Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.14, 2.15 and 2.16 (subject to the requirements and limitations of such Sections) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section.
(ii) Limitations on Rights of Participants. A Participant shall not be entitled to receive any greater payment under Section 2.14, 2.15 or 2.16 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with Borrowers prior written consent. A
70
Participant that would be a Non-U.S. Lender if it were a Lender shall not be entitled to the benefits of Section 2.16 unless Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of Borrower, to comply with Section 2.16 as though it were a Lender.
(iii) Participation Register. In the event that any Lender sells participations in a Loan or its Term Loan Pro Rata Share, such Lender, acting solely for this purpose as a non-fiduciary agent of Borrower, shall maintain a register on which it enters the names and addresses of all participants, the Term Loan Pro Rata Share held by, and the principal amount of the Loans and Reimbursement Obligations (and interest thereon) owing to, them (the Participant Register). The entries in the Participant Register shall be conclusive in the absence of manifest error, and the participating Lender shall treat each Person whose name is recorded in the Participant Register as the Participant for all purposes of this Agreement and the other Loan Documents, notwithstanding any notice to the contrary.
(d) Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including without limitation any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.
10.13 Confidentiality: Each of Agent, Lenders and Issuing Bank agrees to maintain the confidentiality of the Information, except that Information may be disclosed (i) to its Affiliates and to its and its Affiliates respective partners, directors, officers, employees, agents, advisors and other representatives (it being understood that Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (ii) to the extent requested by any regulatory authority purporting to have jurisdiction over it, (iii) to the extent required by applicable Laws or regulations or by any subpoena or similar legal process, (iv) to any other party hereto, (v) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (vi) subject to an agreement containing provisions substantially the same as those of this Section, to (A) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (B) any actual or prospective counterparty (or its advisors) to any Hedging Agreement, swap or derivative transaction relating to Borrower, (vii) with the consent of Borrower or (viii) to the extent such Information (A) becomes publicly available other than as a result of a breach of this Section or (B) becomes available to Agent, any Lender, Issuing Bank or any of their respective Affiliates on a non-confidential basis from a source other than Borrower or any Guarantor. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.
10.14 Duplicate Originals: Two or more duplicate originals of this Agreement may be signed by the parties, each of which shall be an original but all of which together shall constitute one
71
and the same instrument. This Agreement may be executed in counterparts, all of which counterparts taken together shall constitute one completed fully executed document.
10.15 Modification: No modification hereof or any agreement referred to herein shall be binding or enforceable unless in writing and signed by Borrower, Agent, Issuing Bank and Lenders except as provided in Section 10 hereof. Any modification in accordance with the terms hereof shall be binding on all parties hereto, whether or not each is a signatory thereto.
10.16 Signatories: Each individual signatory hereto represents and warrants that he is duly authorized to execute this Agreement on behalf of his principal and that he executes the Agreement in such capacity and not as a party.
10.17 Third Parties: No rights are intended to be created hereunder, or under any related agreements or documents for the benefit of any third party donee, creditor or incidental beneficiary of Borrower. Nothing contained in this Agreement shall be construed as a delegation to Agent, Issuing Bank or any Lender of Borrowers duty of performance, including, without limitation, Borrowers duties under any account or contract with any other Person.
10.18 Discharge of Taxes, Borrowers Obligations, Etc.: Agent, in its sole discretion, shall have the right at any time, and from time to time, if Borrower fails to timely perform, to: (a) pay for the performance of any of Borrowers Obligations hereunder, and (b) discharge taxes or Liens, at any time levied or placed on any of Borrowers Property in violation of this Agreement unless such entity is in good faith with due diligence by appropriate proceedings contesting such taxes or Liens and maintaining proper reserves therefore in accordance with GAAP. Expenses and advances shall bear interest at the highest rate applied to the Loans until reimbursed to Agent. Such payments and advances made by Agent shall not be construed as a waiver by Agent or Lenders of an Event of Default under this Agreement.
10.19 Withholding and Other Tax Liabilities: Agent shall have the right to refuse to make any Advances from time to time unless Borrower shall, at Agents request, have given to Agent evidence, reasonably satisfactory to Agent, that it has properly deposited or paid, as required by law, all withholding taxes and all federal, state, city, county or other taxes due up to and including the date of the requested Advance. Copies of deposit slips showing payment shall likewise constitute satisfactory evidence for such purpose. In the event that any lien, assessment or tax liability against Borrower shall arise in favor of any taxing authority, whether or not notice thereof shall be filed or recorded as may be required by law, Agent shall have the right (but shall not be obligated, nor shall Agent or any Lender hereby assume the duty) to pay any such lien, assessment or tax liability by virtue of which such charge shall have arisen; provided, however, that Agent shall not pay any such tax, assessment or lien if the amount, applicability or validity thereof is being contested in good faith and by appropriate proceedings by such entity. In order to pay any such lien, assessment or tax liability, Agent shall not be obliged to wait until said lien, assessment or tax liability is filed before taking such action as hereinabove set forth. Any sum or sums which Agent (shared ratably by Lenders) shall have paid for the discharge of any such lien shall be paid by Borrower to Agent with interest thereon at the highest rate applicable to the Loans, upon demand, and Agent shall be subrogated to all rights of such taxing authority against Borrower.
72
10.20 Consent to Jurisdiction: Borrower, Agent, Issuing Bank and each Lender hereby irrevocably consent to the non-exclusive jurisdiction of the Courts of the Commonwealth of Pennsylvania or the United States District Court for the Eastern District of Pennsylvania in any and all actions and proceedings whether arising hereunder or under any other agreement or undertaking. Borrower waives any objection which Borrowers may have based upon lack of personal jurisdiction, improper venue or forum non conveniens. Borrower irrevocably agrees to service of process by certified mail, return receipt requested to the address of the appropriate party set forth herein.
10.21 Waiver of Jury Trial: BORROWER, AGENT, ISSUING BANK AND EACH LENDER HEREBY WAIVE ANY AND ALL RIGHTS IT MAY HAVE TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION, PROCEEDING OR COUNTERCLAIM ARISING WITH RESPECT TO RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO OR UNDER THE LOAN DOCUMENTS OR WITH RESPECT TO ANY CLAIMS ARISING OUT OF ANY DISCUSSIONS, NEGOTIATIONS OR COMMUNICATIONS INVOLVING OR RELATED TO ANY PROPOSED RENEWAL, EXTENSION, AMENDMENT, MODIFICATION, RESTRUCTURE, FORBEARANCE, WORKOUT, OR ENFORCEMENT OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS.
10.22 Termination: Borrower may terminate this Agreement at any time upon ten (10) days prior written notice upon payment in full of the Obligations. In connection with any request for a termination hereunder and upon Borrowers request, Agent shall issue a pay-off letter to Borrower. The termination of this Agreement shall not affect Borrowers or Agents, Issuing Banks or any Lenders rights, or any of the Obligations having their inception prior to the effective date of such termination, and the provisions hereof shall continue to be fully operative until all Obligations (including payment of all obligations arising under Section 2.10 of this Agreement) have been paid in full, and all outstanding Letters of Credit have been cash collateralized or backstopped to Issuing Banks satisfaction; provided that, any indemnification provisions that expressly survive termination shall continue. The security interests, Liens and rights granted to Agent hereunder and the financing statements filed hereunder shall continue in full force and effect, notwithstanding the termination of this Agreement or the fact that the Obligations may from time to time be temporarily in a zero or credit position, until all of the Obligations (including payment of all obligations arising under Section 2.10 of this Agreement) of Borrower have been paid or performed in full, this Agreement has been terminated, and all outstanding Letters of Credit have been cash collateralized or backstopped to Issuing Banks satisfaction, or Borrower has furnished Agent with an indemnification satisfactory to Agent with respect thereto.
10.23 Patriot Act Notice: To help fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verity and record information that identifies each Person who opens an account. For purposes of this Section 10.23, account shall be understood to include loan accounts.
10.24 Nonliability of Lenders: The relationship between Borrower on the one hand and Lenders, Issuing Bank and Agent on the other hand shall be solely that of borrower and lender. Neither Agent, Issuing Bank, nor any Lender shall have any fiduciary responsibility to Borrower.
[Remainder of Page Intentionally Left Blank]
73
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement the day and year first above written.
BORROWER: | DEKANIA INVESTORS, LLC | |||
By: | /s/ Joseph W. Pooler, Jr. | |||
Name: | Joseph W. Pooler, Jr. | |||
Title: | Chief Financial Officer | |||
AGENT | ||||
AND ISSUING BANK: | TD BANK, N.A., as Agent and Issuing Bank | |||
By: | /s/ Richard A. Zimmerman | |||
Name: | Richard A. Zimmerman | |||
Title: | Vice President | |||
LENDERS: | TD BANK, N.A., as Lender | |||
By: | /s/ Richard A. Zimmerman | |||
Name: | Richard A. Zimmerman | |||
Title: | Vice President |
[Signature Page to Loan and Security Agreement]
EXHIBIT A
ASSIGNMENT AND ASSUMPTION
Dated as of:
Reference is made to the Loan and Security Agreement dated as of , 2010 (as amended, restated or otherwise modified from time to time, the Loan Agreement), by and among Dekania Investors, LLC (Borrower), the lenders a party thereto (the Lenders), and TD Bank, N.A., as administrative agent (Agent) and issuing bank. Capitalized terms used herein which are not defined herein shall have the meanings assigned thereto in the Loan Agreement.
(the Assignor) and (the Assignee) agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, as of the Effective Date (as defined below), all of the Assignors interests, rights and obligations with respect to the Loans set forth on Schedule 1, including such percentage of the outstanding Letters of Credit and Reimbursement Obligations, and the Assignor thereby retains its interest (if any) therein set forth on Schedule 1. This Assignment and Assumption is entered pursuant to, and authorized by, Section 10.12 of the Loan Agreement.
2. The Assignor (i) represents that, as of the date hereof, its Pro Rata Percentage (without giving effect to assignments thereof which have not yet become effective) under the Loan Agreement is with respect to the Loans, including its Pro Rata Percentage of the outstanding Letters of Credit and Reimbursement Obligations (unreduced by any assignments thereof which have not yet become effective) set forth on Schedule 1; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Agreement or any other Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Agreement or any other instrument or document furnished pursuant thereto, other than that the Assignor is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of Borrower or the performance or observance by Borrower of any of its obligations under the Loan Agreement or any other instrument or document furnished or executed pursuant thereto; and (iv) attaches the Notes delivered to it under the Loan Agreement and requests that Borrower exchange such Notes for new Notes payable to each of the Assignor and the Assignee as follows:
Note Payable to the Order of: |
Principal Amount of Note: | |||||
|
$ | |||||
|
$ |
3. The Assignee (i) represents and warrants that it is legally authorized to enter into this Assignment and Assumption; (ii) confirms that it has received a copy of the Loan Agreement, together with copies of the most recent financial statements delivered pursuant to the terms thereof,
A-1 |
and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption; (iii) agrees that it will, independently and without reliance upon the Assignor or any other Lender or Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Agreement; (iv) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Loan Agreement and the other Loan Documents as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (v) agrees that it will perform in accordance with their terms all the obligations which by the terms of the Loan Agreement and the other Loan Documents are required to be performed by it as a Lender; (vi) agrees to hold all confidential information in a manner consistent with the provisions of the Loan Agreement; and (vii) includes herewith for the Agent the two forms required by Section 2.16 of the Loan Agreement (if not previously delivered).
4. The effective date for this Assignment and Assumption shall be as set forth in Section 1 of Schedule 1 hereto (the Effective Date). Following the execution of this Assignment and Assumption, it will be delivered to Agent for acceptance, recording in its books and records and, to the extent required by the Loan Agreement, consent by Borrower. Effectiveness of this Assignment and Assumption is expressly conditioned upon payment of the processing fee required under Section 10.12 of the Loan Agreement.
5. Upon such consents, acceptance and recording and payment, from and after the Effective Date, (i) the Assignee shall be a party to the Loan Agreement and the other Loan Documents to which Lenders are parties and, to the extent provided in this Assignment and Assumption, have the rights and obligations of a Lender under each such agreement, and (ii) the Assignor shall, to the extent provided in this Assignment and Assumption, relinquish its rights and be released from its obligations under the Loan Agreement and the other Loan Documents.
6. Upon such consents, acceptance and recording and payment, from and after the Effective Date, the Agent shall make all payments in respect of the interest assigned hereby (including payments of principal, interest, fees and other amounts) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments for periods prior to the Effective Date or with respect to the making of this assignment directly between themselves.
7. THIS ASSIGNMENT AND ASSUMPTION SHALL BE DEEMED TO BE A CONTRACT UNDER SEAL AND, TOGETHER WITH ALL MATTERS ARISING HEREUNDER OR RELATED HERETO, SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
A-2 |
WITNESS the following signatures as of the day of , 20 .
ASSIGNOR: |
| |||||
By: |
| |||||
Name: | ||||||
Title: | ||||||
ASSIGNEE: |
| |||||
By: |
| |||||
Name: | ||||||
Title: | ||||||
Acknowledged and Consented to: | ||||||
DEKANIA INVESTORS, LLC | ||||||
By: |
|
|||||
Name: | ||||||
Title: | ||||||
Consented to and Accepted by: | ||||||
TD BANK, N.A., as Agent | ||||||
By: |
|
|||||
Name: | ||||||
Title: |
SCHEDULE 1
TO
ASSIGNMENT AND ASSUMPTION
1. | Effective Date , | |||||||||
2. | Assignors Interest Prior to Assignment | |||||||||
(a) | Pro Rata Percentage | |||||||||
(i)Term Loans |
% | |||||||||
(b) | Outstanding balance of Term Loans | $ | ||||||||
(c) | Outstanding balance of Assignors Pro Rata Percentage of the Letters of Credit and Reimbursement Obligations | $ | ||||||||
3. | Assigned Interest of Loans | |||||||||
(a) | Term Loans | % | ||||||||
(b) | Letters of Credit and Reimbursement Obligations | % | ||||||||
4. | Assignees Extensions of Credit After Effective Date | |||||||||
(a) | Total outstanding balance of Assignees Term Loans (line 2(b) times line 3(a)) | $ | ||||||||
(b) | Total outstanding balance of Assignees Pro Rata Percentage of the Letters of Credit and Reimbursement Obligations (line 2(c) times line 3(b)) $ | |||||||||
5. | Retained Interest of Assignor after Effective Date | |||||||||
(a) | Retained Interest of Pro Rata Percentage | |||||||||
(i)Term Loans |
% | |||||||||
(ii)Letters of Credit |
% | |||||||||
(b) | Outstanding balance of Assignors Term Loans (line 2(b) times line 5(a)(i)) | $ | ||||||||
(c) | Outstanding balance of Assignors Pro Rata Percentage of Letters of Credit and Reimbursement Obligations (line 2(c) times line 5(a)(ii)) | $ |
6. | Payment Instructions | |||
(a) | If payable to Assignor, to the account of Assignor to: | |||
ABA No.: | ||||
Account Name: | ||||
Account No.: | ||||
Attn: | ||||
Ref: | ||||
(b) | If payable to Assignee, to the account of Assignee to: | |||
ABA No.: | ||||
Account Name: | ||||
Account No.: | ||||
Attn: | ||||
Ref: |
EXHIBIT B
FORM OF AUTHORIZATION CERTIFICATE
(Borrower Letterhead)
Date:
TD Bank, N.A.
1701 Route 70 East
Cherry Hill, NJ 08034
Attention:
Dear :
RE: | That certain Loan and Security Agreement dated , 2010 (as may be amended, restated, or otherwise modified from time to time, the Loan Agreement), by and among Dekania Investors, LLC (Borrower), TD Bank, N.A., as administrative agent (Agent) and issuing bank, and various financial institutions as lenders (Lender) |
Capitalized terms used herein without definition shall have the meanings given to them in the Loan Agreement.
The following individuals are authorized to request Advances against the Term Loan Facility, execute Quarterly Compliance Certificates, and transfer funds from any of the Borrowers accounts per written instructions received via fax:
Authorized Person |
Title |
Signature | ||||||||
1. |
|
|
| |||||||
2. |
|
|
| |||||||
3. |
|
|
|
Acknowledged and approved: | ||
By: |
| |
Name: | ||
Title: |
B-1 |
EXHIBIT C
FORM OF NOTICE OF CONVERSION/EXTENSION
Dated as of:
TD Bank, N.A., as Agent
1701 Route 70 East
Cherry Hill, NJ 08034
Ladies and Gentlemen:
This irrevocable Notice of Conversion/Extension (the Notice) is delivered to you under Section 2.6 of the Loan and Security Agreement dated as of , 2010 (as amended, restated or otherwise modified from time to time, the Loan Agreement), by and among Dekania Investors, LLC (Borrower), TD Bank, N.A., as agent for the various financial institutions (Agent) and as issuing bank, and the financial institutions a party thereto from time to time as lenders.
1. This Notice is submitted for the purpose of:
(Check one and complete applicable information in accordance with the Loan Agreement.)
¨ | Converting all or a portion of a Base Rate Loan into a LIBOR Rate Loan |
(a) | The aggregate outstanding principal balance of such Loan is $ . |
(b) | The principal amount of such Loan to be converted is $ . |
(c) | The requested effective date of the conversion of such Loan is . |
(d) | The requested LIBOR Interest Period applicable to the converted Loan is . |
¨ | Converting a portion of LIBOR Rate Loan into a Base Rate Loan |
(a) | The aggregate outstanding principal balance of such Loan is $ . |
(b) | The last day of the current LIBOR Interest Period for such Loan is . |
(c) | The principal amount of such Loan to be converted is $ . |
(d) | The requested effective date of the conversion of such Loan is . |
¨ | Continuing all or a portion of a LIBOR Rate Loan as a LIBOR Rate Loan |
(a) | The aggregate outstanding principal balance of such Loan is $ . |
C-1 |
(b) | The last day of the current LIBOR Interest Period for such Loan is . |
(c) | The principal amount of such Loan to be continued is $ . |
(d) | The requested effective date of the continuation of such Loan is . |
(e) | The requested LIBOR Interest Period applicable to the continued Loan is . |
2. All of the conditions applicable to the conversion or continuation of the Loan requested herein as set forth in the Loan Agreement have been satisfied or waived as of the date hereof and will remain satisfied or waived to the date of such Loan.
3. No Default or Event of Default Exists.
4. Capitalized terms used herein and not defined herein shall have the meanings assigned thereto in the Loan Agreement.
IN WITNESS WHEREOF, the undersigned, on behalf of Borrower, has executed this Notice of Conversion/Extension this day of , 20 .
DEKANIA INVESTORS, LLC | ||
By: |
| |
Name: | ||
Title: |
C-2 |
EXHIBIT D
FORM OF ADVANCE REQUEST
Dekania Investors, LLC
2929 Arch Street
Philadelphia, PA 19104
(Borrower)
To: TD Bank, N.A.
1701 Route 70 East
Cherry Hill, NJ 08034
(Agent)
Borrower hereby requests an Advance in the amount of $ pursuant to Section 2.5 of that certain Loan and Security Agreement by and among Borrower, Agent, Issuing Bank and the financial institutions party thereto, from time to time, dated , 2010 (as amended, restated or otherwise modified from time to time, the Loan Agreement). Capitalized terms used herein without definition shall have the meaning given to them in the Loan Agreement. Borrower hereby requests that such Advance accrue interest at the (select one) [Adjusted Base Rate/ LIBOR Rate]. If a LIBOR Rate Loan, the LIBOR Interest Period is _________. The proposed date of the Advance is .
Borrower hereby represents and warrants to Lender as follows:
a. There exists no Default or Event of Default under the Loan Agreement.
b. All representations, warranties and covenants made in the Loan Agreement are true and correct in all material respects as of the date hereof.
c. The aggregate principal amount of all Advances outstanding under the Term Loan Facility, prior to giving effect to this Advance, is $ .
d. The number of LIBOR Rate Loans outstanding after giving effect to this Advance request will be (cannot exceed five (5)).
DEKANIA INVESTORS, LLC | ||
By: |
| |
Name: | ||
Title: |
Date: , 20
D-1 |
EXHIBIT E
QUARTERLY COMPLIANCE CERTIFICATE
TD Bank, N.A. 1701 Route 70 East Cherry Hill, NJ 08034 Attention: |
, 20 |
The undersigned, an Authorized Officer of Dekania Investors, LLC (Borrower), gives this certificate to TD Bank, N.A. (Agent), in accordance with the requirements of Section 6.10 of that certain Loan and Security Agreement dated , 2010, by and among Borrower, Agent, Issuing Bank and the financial institutions party thereto, from time to time (as amended, restated or otherwise modified from time to time, Loan Agreement). Capitalized terms used in this Certificate, unless otherwise defined herein, shall have the meanings ascribed to them in the Loan Agreement.
1. Based upon my review of the consolidated balance sheets and statements of income of Borrower for the fiscal period ending , 20 , copies of which are attached hereto, I hereby certify that as at/for such period (as applicable):
a. The Consolidated Net Worth of the Dekania Group is ;
b. The Fixed Charge Coverage Ratio of the Dekania Group is ;
c. The Leverage Ratio of the Dekania Group is ;
d. The Debt Service Coverage Ratio of the Dekania Group is .
Attached as Schedule A are the details underlying such financial covenant calculations.
2. No Default exists on the date hereof, other than: [if none, so state]; and
3. No Event of Default exists on the date hereof, other than: [if none, so state].
E-1 |
Very truly yours, | ||
DEKANIA INVESTORS, LLC | ||
By: |
| |
Name: | ||
Title: |
E-2 |
SCHEDULE A
Lenders |
Pro Rata Percentage |
Term Loan Pro Rata Share |
||||||
TD Bank, N.A. |
100 | % | $ | 14,600,000 | ||||
SCHEDULE B
TD Bank, N.A.
1701 Route 70 East
Cherry Hill, NJ 08034
Attn: Richard A. Zimmerman
Telecopier: 856-751-6884
SCHEDULE C
Excluded Management Fees
33% of Alesco CDO I (33% paid to Sandler ONeill as sub-advisor)
33% of Alesco CDO II (33% paid to Sandler ONeill as sub-advisor)
33% of Alesco CDO III (33% paid to Sandler ONeill as sub-advisor)
SCHEDULE D
Management Agreements
CDO Deals
Issuer |
Manager |
Closing Date | ||
Alesco I | Cohen & Company Financial Management, LLC | 09/23/03 | ||
Dekania I | Dekania Capital Management, LLC | 09/30/03 | ||
Alesco II | Cohen & Company Financial Management, LLC | 12/21/03 | ||
Alesco III | Cohen & Company Financial Management, LLC | 03/23/04 | ||
Dekania II | Dekania Capital Management, LLC | 04/27/04 | ||
Alesco IV | Cohen & Company Financial Management, LLC | 05/14/04 | ||
Alesco V | Cohen & Company Financial Management, LLC | 09/10/04 | ||
Alesco VI | Cohen & Company Financial Management, LLC | 12/17/04 | ||
Alesco VII | Cohen & Company Financial Management, LLC | 04/18/05 | ||
Kleros I | Strategos Capital Management, LLC | 06/03/05 | ||
Alesco VIII | Cohen & Company Financial Management, LLC | 08/08/05 | ||
Dekania Europe I | Dekania Capital Management, LLC | 09/07/05 | ||
Alesco IX | Cohen & Company Financial Management, LLC | 12/14/05 | ||
Kleros II | Strategos Capital Management, LLC | 01/10/06 | ||
Libertas I | Strategos Capital Management, LLC | 05/25/06 | ||
Kleros Real Estate I | Strategos Capital Management, LLC | 06/30/06 | ||
Kleros Real Estate II | Strategos Capital Management, LLC | 08/03/06 | ||
Kleros III | Strategos Capital Management, LLC | 09/26/06 | ||
Dekania Europe II | Dekania Capital Management, LLC | 09/27/06 |
Kleros IV | Strategos Capital Management, LLC | 12/15/06 | ||
Kleros V | Strategos Capital Management, LLC | 01/10/07 | ||
Libertas II | Strategos Capital Management, LLC | 02/15/07 | ||
Kleros RE IV | Strategos Capital Management, LLC | 02/27/07 | ||
Kleros VII | Strategos Capital Management, LLC | 04/05/07 | ||
Dekania Europe III | EuroDekania Management Limited | 06/07/07 | ||
Kleros VIII | Strategos Capital Management, LLC | 06/26/07 | ||
Libertas V | Strategos Capital Management, LLC | 07/19/07 | ||
Kleros IX | Strategos Capital Management, LLC | 11/06/07 | ||
Neptuno CLO III B.V. | EuroDekania Management Limited (Junior Manager) | 12/05/07 | ||
Xenon Capital Public Limited Company | EuroDekania Management Limited | 08/13/08 |
SCHEDULE E
Permanent Investments
Section 1
Description |
# of Shares |
Value as
of 6-30-10 |
||||||
Star Asia Finance, Ltd. |
3,508,876 | 30,899,162 | ||||||
Star Asia Finance, LLC |
15,000 | 132,091 | ||||||
Muni Funding Company of America, LLC |
1,000,200 | 2,450,490 | ||||||
EuroDekania Ltd |
525,002 | 474,282 | ||||||
Non-Profit Preferred Funding I Preferred Shares |
250 | 132,987 | ||||||
Alesco VI Preferred Shares |
100 | | ||||||
Alesco VII Preferred Shares |
500 | | ||||||
Alesco IX Preferred Shares |
2,655 | | ||||||
Kleros I Preferred Shares |
1,500 | | ||||||
Kleros II Preferred Shares |
600 | | ||||||
34,089,012 | ||||||||
Description |
LP Units | Value as of 6-30-10 |
||||||
Brigadier Capital, LP |
326,582 | 326,582 | ||||||
Brigadier Capital, LP |
86,917 | 86,917 | ||||||
Strategos Deep Value Onshore Fund, LP |
5,000,000 | 5,764,338 | ||||||
Strategos Deep Value Offshore Fund, LP |
10,000,000 | 11,573,522 | ||||||
17,751,359 | ||||||||
Total | 51,840,371 | |||||||
Page 1 of 3 |
Section 2
Description - Structured Finance Investments |
# of Shares
or Notional Amount |
Value as
of 6-30-10 |
||||||
Alesco Preferred Funding X, Ltd. Preference Shares |
24,162 | $ | | |||||
Alesco Preferred Funding XI, Ltd. Preference Shares |
17,600 | | ||||||
Alesco Preferred Funding XII, Ltd. Preference Shares |
17,600 | | ||||||
Alesco Preferred Funding XIII, Ltd. Preference Shares |
13,440 | | ||||||
Alesco Preferred Funding XIV, Ltd. Preference Shares |
20,800 | | ||||||
Alesco Preferred Funding XV, Ltd. Preference Shares |
15,600 | | ||||||
Alesco Preferred Funding XVI, Ltd. Preference Shares |
10,400 | | ||||||
Alesco Preferred Funding XVII, Ltd. Preference Shares |
14,700 | | ||||||
Kleros Real Estate CDO I, Ltd. Preference Shares |
4,000 | | ||||||
Kleros Real Estate CDO II, Ltd. Preference Shares |
4,000 | | ||||||
Kleros Real Estate CDO IV, Ltd. Preference Shares |
12,000 | | ||||||
Libertas Preferred Funding I, Ltd. |
2,000 | | ||||||
Kleros Preferred Funding V |
3,000 | | ||||||
Kleros Preferred Funding VII |
3,200 | | ||||||
Bear Stearns Adjustable Rate Mortgage Trust 2007-02 |
11,230,602 | 185,753 | ||||||
185,753 |
Page 2 of 3 |
Description - Other Investments |
Notional Amount |
Value as of 6-30-10 |
||||||
Peerless Commercial Loan |
11,745,590 | 1,200,000 | ||||||
WDC Exploration & Wells Holding LLC |
500,000 | | ||||||
Yarhouse USA, Inc. |
500,000 | 250,000 | ||||||
On-Balance Sheet Residential Mortgage Loans |
1,480,000 | 262,849 | ||||||
REO Property |
80,143 | 0 | ||||||
1,712,849 |
Page 3 of 3 |
SCHEDULE F
Subsequent Assigned CDO Agreements
(1) | Collateral Management Agreement, dated as of September 25, 2003, by and between Alesco Preferred Funding I, Ltd. and Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC). |
(2) | Collateral Management Agreement, dated as of December 19, 2003, by and between Alesco Preferred Funding II, Ltd. and Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC). |
(3) | Collateral Management Agreement, dated as of March 25, 2004, by and between Alesco Preferred Funding III, Ltd. and Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC). |
(4) | Collateral Management Agreement, dated as of May 18, 2004, by and between Alesco Preferred Funding IV, Ltd. and Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC). |
(5) | Collateral Management Agreement, dated as of September 14, 2004, by and between Alesco Preferred Funding V, Ltd. and Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC). |
(6) | Collateral Management Agreement, dated as of December 21, 2004, by and between Alesco Preferred Funding VI, Ltd. and Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC). |
(7) | Collateral Management Agreement, dated as of April 19, 2005, by and between Alesco Preferred Funding VII, Ltd. and Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC). |
(8) | Collateral Management Agreement, dated as of August 4, 2005, by and between Alesco Preferred Funding VIII, Ltd. and Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC). |
(9) | Collateral Management Agreement, dated as of December 15, 2005, by and between Alesco Preferred Funding IX, Ltd. and Cohen Bros. Financial Management, LLC (now known as Cohen & Company Financial Management, LLC). |
Schedule 1.1(a)
Permitted Indebtedness
Unsecured Subordinated Promissory Note dated June 25, 2008 with Christopher Ricciardi for $1,056,233.91 as of June 30, 2010.
Unsecured Subordinated Promissory Note dated June 25, 2008 with Daniel Cohen for $2,112,447.80 as of June 30, 2010.
Unsecured Subordinated Promissory Notes dated December 16, 2009 issued to the former Cohen Financial Group, Inc. (CFG) stockholders for $6,338,675 as of June 30, 2010. In connection with the dissolution of CFG in connection with the Merger, each Class A stockholder of CFG received a new promissory note (New Holder Note) evidencing Borrowers obligation to pay to such holder its pro rata share of the original Unsecured Subordinated Promissory Note (plus any interest that is then accrued and unpaid) and which otherwise has substantially the same terms and provisions (as more fully discussed below) as contained in the original Unsecured Subordinated Promissory Note. Mr. Cohen and Mr. Ricciardi are Class A stockholders of CFG and received their pro rata share of the original Unsecured Subordinated Promissory Note.
The Unsecured Subordinated Promissory Notes mature on June 20, 2013 and bear interest at an annual rate of 12%. A portion of this interest, 9%, is payable in cash semiannually on May 1 and November 1 of each year commencing on November 1, 2008. The remaining portion, 3%, is paid in-kind at an annual rate of 3% which is also payable semiannually. All accrued in-kind interest will be added to the unpaid principal balance of the Unsecured Subordinated Promissory Notes on each May 1 and November 1, and thereafter the increased principal balance shall accrue interest at the annual rate of 12%.
Cohen Securities Funding LLC repurchase agreement liabilities with South Street Securities, LLC, which, as of June 30, 2010, were $776,937.48.
Cohen Securities Funding LLC repurchase agreement liabilities with Pennant Management, Inc., which, as of June 30, 2010, were $2,689,500.
Schedule 1.1(b)
Existing Liens and Claims
Security Deposit paid to NetJets Aviation, Inc. - 74,424
Security Deposit paid to 135 East 57th Street LLC, - $1,440,000
Security Deposit paid to Regus Group Boston - $2,800
Security Deposit paid to Preferred Offices Bethesda - $2,795
Security Deposit paid to Gateway Center, LLC - $11,000
Security Deposit paid to Regus Group San Francisco - $1,969
Security Deposit paid to Regus Group Los Angeles - $10,000
Cohen Securities Funding LLC repurchase agreement liabilities with South Street Securities, LLC, which, as of June 30, 2010, were $776,937.48.
Cohen Securities Funding LLC repurchase agreement liabilities with Pennant Management, Inc., which, as of June 30, 2010, were $2,689,500.
Schedule 5.1
State & Jurisdictions Where Borrower & Subsidiary Guarantors Are Qualified To Do Business
Company Name |
State of Formation | Foreign
Qualification States | ||
Alesco Collateral Holdings I, L.P. | DE | PA | ||
Alesco Funding LLC | DE | |||
Alesco Holdings, Ltd. | Cayman | |||
Alesco Loan Holdings Trust | MD | NY, PA | ||
Alesco Loan Holdings, LLC | DE | PA | ||
Alesco TPS Holdings, LLC | DE | NY, PA | ||
Alesco Warehouse Conduit, LLC | DE | PA | ||
Brigadier Capital Management LLC | DE | NY | ||
Brigadier GP LLC | DE | |||
Cira ECM, LLC | DE | |||
Cohen & Compagnie | FR | |||
Cohen & Company Financial Management, LLC | DE | NY, PA | ||
Cohen & Company Funding, LLC | DE | PA | ||
Cohen & Company Management, LLC | DE | NY, PA | ||
Cohen & Company Ventures, LLC | DE | |||
Cohen Asia Investments Ltd. | Cayman | |||
Cohen Bros. Acquisitions, LLC | DE | PA | ||
Cohen Brothers, LLC d/b/a Cohen & Company | DE | IL, NY, PA | ||
Cohen Securities Funding LLC | DE | PA | ||
Dekania Capital Management, LLC | DE | PA | ||
Dekania Investors, LLC | DE | PA | ||
EuroDekania Management Limited | UK | |||
Strategos Capital Management, LLC | DE | PA | ||
Sunset Financial Holdings, LLC | DE | PA | ||
Sunset Funding LLC | DE | |||
Sunset Holdings, Ltd. | Cayman | |||
Sunset Investment Vehicle, LLC | DE | |||
Sunset Loan Holdings Trust | MD | PA | ||
Sunset TPS Holdings, LLC | DE | PA |
Schedule 5.2
Places of Business
10100 Santa Monica Boulevard
Suite 300
Los Angeles, CA 90067
One Market Street
36th Floor
San Francisco, CA 94111
433 Plaza Real
Suite 275
Boca Raton, FL 33432
181 West Madison Street
Suite 3775
Chicago, IL 60602
101 Federal Street
16th Floor
Boston, MA 02110
3 Bethesda Metro Center
Bethesda, MD 20814
135 E. 57th Street, 21st Floor
New York, NY 10022
20 East 46th Street
Suite 1202
New York, NY 10017
2929 Arch Street
17th Floor and 15th Floor
Philadelphia, PA 19104
Gateway Center, Suite 208
136 Heber Avenue
Park City, Utah 84060
35, Avenue Franklin D. Roosevelt
5th Floor
Paris, France 75008
Cannon Bridge House
25 Dowgate Hill, 4th Floor
London EC4
U.K.
Schedule 5.3
Judgments, Proceedings, Litigation and Orders
Cohen & Company Securities, LLC (CCS) is a party to litigation commenced in 2009 in the United States District Court for the Northern District of Illinois (the Illinois Court) under the caption Frederick J. Grede, not individually, but as Liquidation Trustee and Representative of the Estate of Sentinel Management Group, Inc. v. Delores E. Rodriguez, Barry C. Mohr, Jr., Jacques de Saint Phalle, Keefe, Bruyette & Woods, Inc., and Cohen & Company Securities, LLC . The plaintiff in this case is the Liquidation Trustee for the Estate of Sentinel Management Group, Inc., or Sentinel, which filed a bankruptcy petition in August 2007. The liquidation trustee alleges that CCS sold Sentinel securities, mainly collateralized debt obligations, that the liquidation trustee contends were unsuitable for Sentinel and that CCS violated Section 10(b) of the Exchange Act and Rule 10b-5. The liquidation trustee also seeks relief under the Illinois Blue Sky Law, the Illinois Consumer Fraud Act, the United States Bankruptcy Code, and under common law theories of negligence and unjust enrichment. CCS is vigorously defending the claims. By order dated July 8, 2009, the Illinois Court dismissed the Liquidation Trustees Illinois Consumer Fraud Act claim. Discovery is ongoing with respect to the remaining claims. No contingent liability was recorded in Borrowers consolidated financial statements related to this litigation. Although CCS does not currently believe it is reasonably likely than an adverse judgment will be rendered against it, such adverse judgment could potentially have a Material Adverse Effect.
CCS is also party to litigation commenced on May 21, 2009 in the Illinois Court under the caption Frederick J. Grede, not individually, but as Liquidation Trustee of the Sentinel Liquidation Trust, Assignee of certain claims v. Keefe, Bruyette & Woods, Inc., Cohen & Company Securities, LLC., Delores E. Rodriguez, Barry C. Mohr, Jr., and Jacques de Saint Phalle. The plaintiff in this case is the Liquidation Trustee of the Sentinel Liquidation Trust, which emerged from the bankruptcy of Sentinel, filed in August 2007. The Liquidation Trustee, purportedly as the assignee of claims of Sentinels customers, alleges that, by recommending that Sentinel purchase securities, mainly collateralized debt obligations, that the Liquidation Trustee deems to have been unsuitable for Sentinels customer accounts, CCS aided and abetted breaches of fiduciary duties purportedly owed by Sentinel and its head trader to Sentinels customers, in violation of Illinois common law. The complaint also alleges claims under common law theories of negligence and unjust enrichment. CCS will vigorously defend all claims. CCS filed a motion to dismiss the Liquidation Trustees complaint on July 21, 2009. On July 28, 2009, the Illinois Court dismissed what management believes to be a substantively identical case brought by the Liquidation Trustee against The Bank of New York Mellon Corp. (BNYM). On August 19, 2009, the Illinois Court stayed this action indefinitely, pending a decision in the Liquidation Trustees appeal of the judgment of dismissal in the action involving BNYM, and held CCSs motion to dismiss in abeyance. The dismissal has been reversed and remanded to the Illinois Court in the BNYM case, but no action has been taken by the Illinois Court in the litigation against CCS. No contingent liability was recorded in Borrowers consolidated financial statements related to this litigation. Although CCS does not currently believe it is reasonably likely than an adverse judgment will be rendered against it, such adverse judgment could potentially have a Material Adverse Effect.
Cohen and its registered investment advisor subsidiary, Cohen & Company Financial Management, LLC (f/k/a Cohen Bros. Financial Management, LLC) are also named in a lawsuit filed on August 6, 2009 in the Supreme Court of the State of New York, County of Kings, captioned Riverside National Bank of Florida v. Taberna Capital Management, LLC, Trapeza Capital Management, LLC, Cohen & Company Financial Management, LLC f/k/a Cohen Bros. Financial Management LLC, FTN Financial Capital Markets, Keefe, Bruyette & Woods, Inc., Merrill Lynch, Pierce, Fenner & Smith, Inc., Bank of America Corporation, as successor in interest to Merrill Lynch & Co., JP Morgan Chase, Inc., JP Morgan Securities, Citigroup Global Markets, Credit Suisse (USA) LLC, ABN AMRO, Cohen & Company, Morgan Keegan & Co., Inc., SunTrust Robinson Humphrey, Inc., The McGraw-Hill Companies, Inc., Moodys Investors Services, Inc. and Fitch Ratings, Ltd. On September 28, 2009, after a demand was made by Cohen and its co-defendants to change venue, plaintiff filed a stipulation with the Supreme Court of the State of New York, County of Kings, consenting to a change in venue from Kings County to New York County.
On or about November 13, 2009, plaintiff filed a new complaint in the Supreme Court of the State of New York, County of New York and filed a discontinuance of the original action on November 23, 2009. The new complaint is captioned Riverside National Bank of Florida v. The McGraw-Hill Companies, Inc., Moodys Investors Service, Inc., Fitch, Inc., Taberna Capital Management, LLC, Trapeza Capital Management, LLC, Cohen & Company Financial Management, LLC f/k/a Cohen Bros. Financial Management LLC, FTN Financial Capital Markets, Keefe Bruyette & Woods, Inc., Merrill Lynch, Pierce, Fenner & Smith, Inc., JP Morgan Chase & Co. (1) , J.P. Morgan Securities, Inc., Citigroup Global Markets, Credit Suisse Securities (USA) LLC, ABN Amro, Cohen & Company and Suntrust Robinson Humphrey, Inc., and alleges that offering memoranda issued in connection with certain interests in securitizations it purchased failed to disclose alleged rating agencies conflicts of interest. Plaintiff alleges, among other things, common law fraud and breaches of certain alleged duties.
On April 16, 2010, Riverside was closed by the Office of the Comptroller of the Currency. Subsequently, the Federal Deposit Insurance Corporation (the FDIC) was named receiver of the bank. By letter dated April 19, 2010, Riverside requested a 30 day extension for the oral argument on the defendants motions to dismiss which was originally scheduled for May 12, 2010. On May 4, 2010, the FDIC filed a motion to substitute as plaintiff and for an order staying the litigation for 90 days which was subsequently granted. On June 3, 2010, Cohen and its co-defendants removed the action to the United States District Court for the Southern District of New York and on June 25, 2010, Judge Deborah Batts signed an order providing that defendants are to re-file their motions to dismiss by August 24, 2010, after which the FDIC will have 60 days to respond and defendants will have 30 days for their reply. Although Borrower does not currently believe it is reasonably likely than an adverse judgment will be rendered against it, such adverse judgment could potentially have a Material Adverse Effect.
1 | The action was dismissed without prejudice against J.P Morgan Chase & Co. by stipulation dated December 10, 2009. |
Schedule 5.7
Federal Tax Identification Numbers of Borrower & Subsidiary Guarantors
Company Name |
State of Formation |
EIN | State / Country ID Number | |||
Alesco Collateral Holdings I, L.P. |
DE | 68-0664894 | 4463772 | |||
Alesco Funding LLC |
DE | 27-0138974 | 4095760 | |||
Alesco Holdings, Ltd. |
Cayman | 98-0489740 | WK-155682 | |||
Alesco Loan Holdings Trust |
MD | 04-7022042 | B11094505 | |||
Alesco Loan Holdings, LLC |
DE | 26-4286426 | 4370124 | |||
Alesco TPS Holdings, LLC |
DE | 83-0450244 | 4112109 | |||
Alesco Warehouse Conduit, LLC |
DE | 20-5975473 | 4259224 | |||
Brigadier Capital Management, LLC |
DE | 42-1709932 | 4183552 | |||
Brigadier GP, LLC |
DE | 87-0770835 | 4160506 | |||
Cira ECM, LLC |
DE | 65-1246012 | 3947923 | |||
Cohen & Compagnie |
FR | NA | 480 820 513 | |||
Cohen & Company Financial Management, LLC |
DE | 51-0483226 | 3692613 | |||
Cohen & Company Funding, LLC |
DE | 03-0601028 | 4197674 | |||
Cohen & Company Management, LLC |
DE | 14-1944454 | 4084630 | |||
Cohen & Company Ventures, LLC |
DE | 26-0272737 | 4340129 | |||
Cohen Asia Investments Ltd. |
Cayman | 98-0523411 | 181521 | |||
Cohen Bros. Acquisitions, LLC |
DE | 84-1703718 | 4117186 | |||
Cohen Brothers, LLC d/b/a Cohen & Company |
DE | 01-0825075 | 3867388 | |||
Cohen Securities Funding LLC |
DE | 27-0981262 | 4733960 |
Dekania Capital Management, LLC |
DE | 13-4265112 | 3672210 | |||
Dekania Investors, LLC |
DE | 54-2122809 | 3690116 | |||
EuroDekania Management Limited |
UK | 98-0510375 | 5894236 | |||
Strategos Capital Management, LLC |
DE | 30-0291839 | 3825891 | |||
Sunset Financial Holdings, LLC |
DE | 20-4928744 | 4161856 | |||
Sunset Funding LLC |
DE | 20-4934065 | 4161913 | |||
Sunset Holdings, Ltd. |
Cayman | 98-0500646 | WK-167838 | |||
Sunset Investment Vehicle, LLC |
DE | 20-1282350 | 3821364 | |||
Sunset Loan Holdings Trust |
MD | 20-5238835 | B11304482 | |||
Sunset TPS Holdings, LLC |
DE | 20-4932399 | 4161855 |
Schedule 5.9
Subsidiaries & Affiliates
Part 1
Section A Subsidiaries
Brigadier Capital Management LLC
Brigadier GP LLC
Cira ECM Funding, LLC - f/k/a Emporia Capital Funding, LLC
Cira ECM, LLC, f/k/a Emporia Capital Management, LLC
Cohen & Compagnie
Cohen & Company Financial Management, LLC
Cohen & Company Funding, LLC
Cohen & Company Management, LLC
Cohen & Company Securities, LLC
Cohen & Company Ventures, LLC
Cohen Asia Investments Ltd.
Cohen Bros. Acquisitions, LLC
Dekania Capital Management, LLC
Dekania Investors, LLC
EuroDekania Management Limited
Star Asia Management Ltd.
Strategos Capital Management, LLC
Strategos Deep Value Credit GP, LLC
Strategos Deep Value Credit II GP, LLC
Strategos Relative Value GP I, LLC
Section B Affiliates
Brigadier Capital LP
Brigadier Capital Master Fund Ltd.
Brigadier Capital Offshore Fund Ltd.
Brigadier Capital Offshore Holding Company Ltd.
Cohen Bros. Financial, LLC
Dekania Corp.
EuroDekania Limited
EuroDekania Operating Company, LLC
RAIT Financial Trust
Star Asia Finance, Limited
Star Asia Finance, LLC
Star Asia Management Japan Ltd.
Star Asia SPV, LLC
Strategos Deep Value Mortgage Fund LP
Strategos Deep Value Mortgage (Offshore) Fund L.P.
Strategos Deep Value Mortgage Master Fund Ltd.
Strategos Deep Value Mortgage (Offshore) Fund 1-A L.P.
Strategos Deep Value Mortgage Fund II LP - Fund II Offshore Entity
Strategos Deep Value Mortgage Master Fund II Ltd. - Fund II
Strategos Relative Value Mortgage Fund LP
Strategos Deep Value Mortgage Onshore Fund II LP
Part 2
Section A Subsidiaries
Alesco Collateral Holdings I, L.P.
Alesco Funding LLC
Alesco Holdings, Ltd.
Alesco Loan Holdings Trust
Alesco Loan Holdings, LLC
Alesco Real Estate Holdings, LLC
Cohen Securities Funding LLC
Alesco TPS Holdings, LLC
Emporia Preferred Funding IV, Ltd.
Alesco Warehouse Conduit, LLC
Kleros Real Estate III Common Holdings LLC
Kleros Real Estate IV Common Holdings LLC
Sunset Financial Holdings, LLC
Sunset Financial Statutory Trust I
Sunset Funding LLC
Sunset Holdings, Ltd.
Sunset Investment Vehicle, LLC
Sunset Loan Holdings Trust
Sunset Real Estate Holdings, LLC
Sunset TPS Holdings, LLC
Section B CDO / CLO Entities
Alesco CLO Funding, LLC
Alesco Preferred Funding X, Ltd.
Alesco Preferred Funding XI, Ltd.
Alesco Preferred Funding XII, Ltd.
Alesco Preferred Funding XIII, Ltd.
Alesco Preferred Funding XIV, Ltd.
Alesco Preferred Funding XV, Ltd.
Alesco Preferred Funding XVI, Ltd.
Alesco Preferred Funding XVII, Ltd.
Bear Stearns Adjustable Rate Mortgage Trust 2007-02
Emporia Preferred Funding II, Ltd.
Emporia Preferred Funding III, Ltd.
Kleros Preferred Funding V, PLC
Kleros Preferred Funding VII, Ltd.
Kleros Real Estate CDO I, Ltd.
Kleros Real Estate CDO II, Ltd.
Kleros Real Estate CDO IV, Ltd.
Libertas Preferred Funding I, Ltd.
Schedule 5.10(a)
Existing Guaranties, Investments and Borrowings
Description |
Type | Amount as of June 30, 2010 |
||||||
Star Asia Finance, Ltd. |
Investment | 30,889,162 | ||||||
Star Asia Finance, LLC |
Investment | 132,091 | ||||||
Muni Funding Company of America, LLC |
Investment | 2,450,490 | ||||||
EuroDekania Ltd |
Investment | 474,282 | ||||||
Non-Profit Preferred Funding I Preferred Shares |
Investment | 132,091 |
Description |
Type | Notional Amount as of June 30, 2010 |
Amount Due as of June 30, 2010 |
|||||||
Koch Bond Derivative Contract |
Potential Guarantee | $ | 8,750,000 | $ | |
$50,000 letter of credit for Chicago lease.
$1,424,000 letter of credit for GSME SPAC.
Schedule 5.10(b)
Leases
Leased Item |
Lessee |
Lessor | ||
IRC5180 (Cira) | Cohen & Company | Canon | ||
IRC5185i & IRC5050N (Cira) | Cohen & Company | Canon Busines | ||
IR6570 & IRC5050N | Cohen & Company | Canon Busines | ||
IRC5180 | Cohen & Company | Canon Busines | ||
IR4570 | Cohen & Company | Canon Busines | ||
IRC5185i | Cohen & Company | Canon Busines | ||
Citation Excel | Cohen Brothers, LLC | NetJets | ||
Paris - office space | Cohen Freres Sas | La Bailleur | ||
Phila office space (Cira, Suite 1703) | Cohen Brothers, LLC | Brandywine Cira, LP | ||
Phila office space (Cira, Suite 1525) | Cohen Brothers, LLC | Capsicum | ||
Phila office space (Cira, Suite 1525) | Cohen Brothers, LLC | Capsicum - addl | ||
Phila office space (Cira, old Capsicum) | Cohen Brothers, LLC | Brandywine Cira, LP | ||
NY office space | Cohen Bros. & Company | 135 East 57th Street LLC | ||
NY office space - 22nd Floor | Cohen Bros. & Company | 135 East 57th Street LLC | ||
Chicago - office space (181 West Madison) | Cohen Bros. & Company | 181 West Madison | ||
London - office space | EuroDekania Management, Ltd. | Cannon Bridge | ||
San Francisco | Cohen & Company | Regus | ||
Boston, MA | Cohen & Company | Regus | ||
Park City, Utah | Cohen & Company | Gateway Center LLC | ||
Los Angeles, CA | Cohen & Company | Regus | ||
Boca Raton, FL | Cohen & Company | Regus | ||
Bethesda, MD | Cohen & Company | BMC Office, LLC | ||
SUBLEASES | ||||
Phila office space (Cira sublease) | RAIT | Cohen & Company | ||
NY office space (Sublease 22nd Floor) | The Olnick Organization | Cohen & Company |
Schedule 5.11 (c)
Employee Benefit Plans
Benefit |
Provider | |
Health Insurance | Blue Cross/Blue Sheild (Personal Choice 10 & Keystone POS 10C) | |
Dental | Guardian | |
Life & AD&D Insurance | Guardian | |
Short & Long Term Disability Insurance | Guardian | |
NY Short Term Disability Insurance | Guardian | |
401K (Traditionl & Roth Plans) | John Hancock | |
Expat Medical, Dental, Life and Long Term Disability | Cigna International | |
Expat Medical | Cigna International | |
Expat Dental | Cigna International | |
Expat Life and Long Term Disability | Cigna International | |
Supplemental Life, STD, LTD, Cancer, Accident Insurance | Colonial | |
Flex Spending Accounts (Medical, Dependent Care, Transit) | Ameriflex | |
COBRA (Continuation of Benefits Program) | Ameriflex |
Schedule 5.13(a)
Schedule of Old Names
Alesco Securities Funding LLC
Alesco TPS Holdings II, LLC
Cohen & Company Financial Limited
Cohen Bros. & Company, LLC
Cohen Bros. Asset Backed Management, LLC
Cohen Bros. Securities, LLC
Cohen Bros. Toroian Investment Management, LLC
Cohen Brothers CLO Manager, LLC
Cohen Brothers Financial Management, LLC
Cohen Brothers Management, LLC
Cohen Freres
Cohen Securities Funding LLC
Dekania Acquisition Corp.
Dustcroft Limited
Emporia Capital Funding LLC
Emporia Capital Funding, LLC
Emporia Capital Holdings, LLC
Emporia Capital Management, LLC
Emporia Preferred Funding II, Ltd.
Peerless Holdings I, L.P.
Strategos Asset Management, LLC
Schedule 5.13(b)
Worldwide Trademark Registrations
Trademark |
Country |
Applicant |
Status |
Filing Date Reg. Date |
Appl No. Reg. No. |
International Class(es) & Goods/ Services |
Next Action | |||||||
ALESCO | EU | Cohen Bros. Financial Management, LLC | Registered | 2/15/06 1 /16/07 |
4903886 | Class: 35 Int. Business services, advice, information and consultancy related thereto
Class: 36 Int. Financial services; advice, information and consultancy related thereto |
2/15/16 - Renewal | |||||||
ALESCO PREFERRED FUNDING | US | Cohen Bros. Financial Management, LLC | Registered | 4/19/04 12/13/05 |
78/404272 3026980 |
Class: 36 Int. Financial services in the nature of an investment security | 12/13/11- Maintenance | |||||||
KLEROS | US | Cohen Brothers, LLC | Registered | 7/14/05 7/4/06 |
78/670772 3111872 |
Class: 36 Int. Financial services in the nature of an investment security | 1/4/12 - Affidavit of Use | |||||||
KLEROS | EU | Cohen Bros. Financial Management, LLC | Registered | 2/15/06 1/16/07 |
4903837 | Class: 35 Int. Business services, advice, information and consultancy related thereto
Class: 36 Int. Investment services; financial services in the nature of an investment security |
2/15/16 - Renewal |
DEKANIA | EU | Cohen Bros. Financial Management, LLC | Registered | 2/15/06 5/2/07 |
4903639 | Class: 16 Printed matter; printed publications
Class: 35 Business services; advice, information and consultancy related thereto
Class: 36 Financial services; advice, information and consultancy relating thereto |
2/15/16- Renewal | |||||||
DEKANIA | US | Cohen Brothers, LLC | Registered | 7/14/05 5/30/06 |
3098262 | Class: 36 Financial services in the nature of an investment security | 5/30/12 Maintenance | |||||||
FGC | US | Cohen Brothers, LLC | Pending | 4/23/10 | 85/021958 | Class: 36 Financial services, namely, security brokerage and money management services; private equity fund investment services; hedge fund investment services | ||||||||
CHREOS | US | Cohen Brothers, LLC | Abandoned | 7/14/05 | 78/670737 | Class: 36 Financial services in the nature of an investment security |
Schedule 5.13 (c)
Necessary Trademarks, Patents and Copyrights
None.
Schedule 5.14(a)
Other Associations
Description |
Type of investment | |
Star Asia Management Ltd. (50% ownership of the joint venture that manages Star Asia Finance Ltd) |
Equity method investment | |
Strategos Deep Value Credit GP, LLC (50% ownership of the general partner that manages the Deep Value Funds) |
Equity method investment | |
Strategos Deep Value Credit GP II, LLC (40% ownership of the general partner that manages the Deep Value II Funds) |
Equity method investment | |
Duart Capital Management, LLC (20% ownership of the joint venture) |
Equity method investment | |
Star Asia SPV, LLC (25.48% ownership of the entity) |
Equity method investment |
Schedule 5.14(b)
Sponsored CDO Offerings
Section 1
CDO |
Asset Type |
Preferred Share Ownership as of 6-30-2010 |
Total
Preferred Shares Outstanding |
Percent Owned |
Owning Entity | |||||||||||
Alesco VI |
Bank & Insurance Trust Preferred Securities | 100 | 62,300 | 0.16 | % | Cohen Bros Financial Management, LLC | ||||||||||
Alesco VII |
Bank & Insurance Trust Preferred Securities | 500 | 63,500 | 0.79 | % | Cohen Bros Financial Management, LLC | ||||||||||
Alesco IX |
Bank & Insurance Trust Preferred Securities | 2,655 | 44,400 | 5.98 | % | Cohen Bros Financial Management, LLC | ||||||||||
Kleros I |
High Grade ABS, MBS & CDO Securities | 1,500 | 15,500 | 9.68 | % | Cohen Bros Financial Management, LLC | ||||||||||
Kleros II |
High Grade ABS, MBS & CDO Securities | 600 | 8,000 | 7.50 | % | Cohen Brothers, LLC | ||||||||||
Total |
6,555 | 260,800 |
Section 2
CDO |
Asset Type |
Preferred Share Ownership as Of 6-30-10 |
Total
Preferred Shares Outstanding |
Percent Owned |
Owning Entity | |||||||||||
Alesco X |
Bank & Insurance Trust Preferred Securities | 24,162 | 60,404 | 40 | % | Alesco Financial Holdings, LLC | ||||||||||
Alesco XI |
Bank & Insurance Trust Preferred Securities | 17,600 | 43,998 | 40 | % | Alesco Holdings, Ltd. |
Alesco XII |
Bank & Insurance Trust Preferred Securities | 17,600 | 44,060 | 40 | % | Sunset Holdings, Ltd. | ||||||||||
Alesco XIII |
Bank & Insurance Trust Preferred Securities | 13,440 | 33,600 | 40 | % | Alesco Financial Holdings, LLC | ||||||||||
Alesco XIV |
Bank & Insurance Trust Preferred Securities | 20,800 | 52,000 | 40 | % | Alesco Holdings, Ltd. | ||||||||||
Alesco XV |
Bank & Insurance Trust Preferred Securities | 15,600 | 39,000 | 40 | % | Alesco Holdings, Ltd. | ||||||||||
Alesco XVI |
Bank & Insurance Trust Preferred Securities | 10,400 | 26,000 | 40 | % | Alesco Holdings, Ltd. | ||||||||||
Alesco XVII |
Bank & Insurance Trust Preferred Securities | 14,700 | 36,749 | 40 | % | Alesco Holdings, Ltd. | ||||||||||
Kleros Real Estate I Preference Shares |
MBS and RMBS | 4,000 | 4,000 | 100 | % | Alesco Financial Holdings, LLC | ||||||||||
Kleros Real Estate II Preference Shares |
MBS and RMBS | 4,000 | 4,000 | 100 | % | Sunset Financial Holdings, LLC | ||||||||||
Libertas I |
High Grade ABS, MBS & CDO Securities | 2,000 | 19,000 | 11 | % | Alesco Holdings, Ltd. | ||||||||||
Kleros V |
High Grade ABS, MBS & CDO Securities | 3,000 | 8,500 | 35 | % | Alesco Holdings, Ltd. |
KlerosVII |
High Grade ABS, MBS & CDO Securities | 3,200 | 8,000 | 40 | % | Alesco Holdings, Ltd. | ||||||||||
Total |
150,500 | 379,311 |
Schedule 5.15
Environmental Matters
None.
Schedule 5.17
Capital Stock of Borrower & Subsidiary Guarantors
Section 1
Cohen Brothers, LLC owns 100% of the membership interests in the following entities:
Brigadier Capital Management, LLC
Brigadier GP, LLC
Cohen & Company Funding, LLC
Cohen & Company Management, LLC
Cohen & Company Securities, LLC
Cohen & Company Ventures, LLC
Cohen Asia Investment Ltd.
Cohen Bros. Acquisitions, LLC
Dekania Investors, LLC
EuroDekania Management Limited
Strategos Capital Management, LLC
Strategos Deep Value Credit GP, LLC
Strategos Deep Value Credit II GP, LLC
Cohen Brothers, LLC owns 100% of the ownership interests in:
Cohen & Compagnie, SAS
Cohen & Company Securities, LCC owns 100% of the membership interests in the following entities:
Cira ECM Funding, LLC, f/k/a Emporia Capital Funding LLC
Cohen Bros. Acquisitions, LLC currently owns Dekania Corp.
Dekania Corp. is currently in the process of dissolution. The company has liquidated all its assets.
Dekania Investors, LCC owns 100% of the membership interests in the following entities:
Cohen & Company Financial Management, LLC
Dekania Capital Management, LLC
Cira ECM, LLC, f/k/a Emporia Capita1 Management, LLC
Cohen Brothers, LLC Capital Stock: (Numbers below are as of June 30, 2010)
Cohen Brothers, LLC Outstanding Membership Units = 15,626,903
Cohen Brothers, LLC Restricted Units representing, in the aggregate, the contractual right to receive 1,258,176 Membership Units
Section 2
Cohen Brothers, LLC, owns 100% of the membership interests in the following entities:
Alesco Loan Holdings, LLC
Sunset Investment Vehicle, LLC
Kleros Real Estate III Common Holdings, LLC
Kleros Real Estate IV Common Holdings, LLC
Sunset Financial Holdings, LLC
Alesco Warehouse Conduit, LLC
Alesco Loan Holdings Trust
Alesco TPS Holdings, LLC
Cohen Brothers, LLC, owns the percentages of preferred stock set forth below:
Alesco Preferred Funding X, Ltd. 40%
Alesco Preferred Funding XIII, Ltd. 40%
Kleros Real Estate CDO IV, Ltd. 100%
Cohen Brothers, LLC, owns 50% of the limited partnership interests in the following entity:
Alesco Collateral Holdings I, L.P.
The following entities own the equity interests set forth below:
Debtor |
Collateral |
% of Interest Owned |
Class of Interests | |||||
Alesco Loan Holdings Trust |
Alesco Real Estate Holdings, LLC | 100 | % | Membership Interests/ Units | ||||
Alesco Loan Holdings Trust |
Kleros Real Estate CDO I, Ltd. | 100 | % | Preferred | ||||
Alesco Real Estate Holdings, LLC |
Kleros Real Estate CDO I, Ltd. | 100 | % | Common | ||||
Alesco TPS Holdings, LLC |
Alesco Holdings, Ltd. | 100 | % | Common | ||||
Alesco TPS Holdings, LLC |
Alesco Funding, LLC | 100 | % | Membership Interests/ Units | ||||
Alesco Holdings, Ltd. |
Alesco Preferred Funding XVII, Ltd. | 40 | % | Preferred | ||||
Alesco Holdings, Ltd. |
Alesco Preferred Funding XVI, Ltd. | 40 | % | Preferred | ||||
Alesco Holdings, Ltd. |
Alesco Preferred Funding XV, Ltd. | 40 | % | Preferred | ||||
Alesco Holdings, Ltd. |
Alesco Preferred Funding XIV, Ltd. | 40 | % | Preferred |
Alesco Holdings, Ltd. |
Alesco Preferred Funding XI, Ltd. | 40 | % | Preferred | ||||
Alesco Holdings, Ltd. |
Kleros Preferred Funding VII, Ltd. | 40 | % | Preferred | ||||
Alesco Holdings, Ltd. |
Kleros Preferred Funding V, PLC | 35.29 | % | Preferred | ||||
Alesco Holdings, Ltd. |
Libertas Preferred Funding III, Ltd. | 12.5 | % | Preferred | ||||
Alesco Holdings, Ltd. |
Libertas Preferred Funding I, Ltd. | 10.53 | % | Preferred | ||||
Alesco Warehouse Conduit, LLC |
Cohen Securities Funding LLC | 100 | % | Membership Interests/ Units |
Debtor |
Collateral |
% of Interest Owned |
Class of Interests | |||||
Sunset Financial Holdings, LLC |
Sunset Loan Holdings Trust | 100 | % | Common | ||||
Sunset Financial Holdings, LLC |
Sunset TPS Holdings, LLC | 100 | % | Membership Interests/ Units | ||||
Sunset Loan Holdings Trust |
Sunset Real Estate Holdings, LLC | 100 | % | Membership Interests/ Units | ||||
Sunset Loan Holdings Trust |
Kleros Real Estate CDO II, Ltd. | 100 | % | Preferred | ||||
Sunset TPS Holdings, LLC |
Sunset Funding, LLC | 100 | % | Membership Interests/ Units | ||||
Sunset TPS Holdings, LLC |
Sunset Holdings, Ltd. | 100 | % | Common | ||||
Sunset Real Estate Holdings, LLC |
Kleros Real Estate CDO II, Ltd. | 100 | % | Common | ||||
Sunset Holdings, Ltd. |
Emporia Preferred Funding III, Ltd. | 79.49 | % | Preferred | ||||
Sunset Holdings, Ltd. |
Emporia Preferred Funding II, Ltd. | 59 | % | Preferred | ||||
Sunset Holdings, Ltd. |
Alesco Preferred Funding XII, Ltd. | 40 | % | Preferred | ||||
Sunset Funding, LLC |
Alesco CLO Funding, LLC | 100 | % | Membership Interests/ Units | ||||
Sunset Funding, LLC |
Emporia Preferred Funding IV, Ltd. | 100 | % | Common | ||||
Kleros Real Estate IV Common Holdings, LLC |
Kleros Real Estate CDO IV, Ltd. | 100 | % | Common | ||||
Sunset Investment Vehicle, LLC |
Alesco Collateral Holdings I, L.P. | 50 | % | Partnership |
Schedule 5.19
Perfection and Priority - Borrower & Subsidiary Guarantors
All financing statements related to entities mentioned below shall be filed with the Secretary of State for the State of Delaware.
Alesco Collateral Holdings I, L.P.
Alesco Funding, LLC
Alesco Loan Holdings, LLC
Alesco Securities, LLC
Alesco TPS Holdings, LLC
Alesco Warehouse Conduit, LLC
Cira ECM, LLC, f/k/a Emporia Capital Management, LLC
Cohen & Company Financial Management, LLC
Cohen & Company Funding, LLC
Cohen & Company Management, LLC
Cohen & Company Ventures, LLC
Cohen Securities Funding LLC
Cohen Bros. Acquisitions, LLC
Cohen Brothers, LLC, d/b/a Cohen & Company
Dekania Capital Management, LLC
Dekania Investors, LLC
Strategos Capital Management, LLC
Sunset Financial Holdings, LLC
Sunset Funding, LLC
Sunset Investment Vehicle, LLC
Sunset TPS Holdings, LLC
All financing statements related to entities mentioned below shall be filed with the Secretary of State for the State of Maryland
Alesco Loan Holdings Trust
Sunset Loan Holdings Trust
Perfection of a Security Interest in this entity below shall be done in compliance with Cayman Island Law.
Alesco Holdings, Ltd.
Sunset Holdings, Ltd.
Cohen Asia Investments Ltd.
Schedule 5.20
Commercial Tort Claims
None.
Schedule 5.21
Letter of Credit Rights
$992,000 Letter of Credit for the benefit of Cohen & Company for the sublease of 135 East 57th, 22nd Floor, New York office space.
Schedule 6.21
Post Closing Requirements
1) Borrower shall deliver within 30 days of the Closing Date a control agreement or agreements reasonably satisfactory to Agent between Borrower and the appropriate securities intermediary with respect to the ownership interests of Borrower in the following entities held in an account with such securities intermediary:
Star Asia Finance LTD
Star Asia Finance LLC
Star Asia SPV LLC
Muni-Funding Company of America, LLC
EuroDekania Limited
Strategos Deep Value Mortgage Fund, LP
Strategos Deep Value Mortgage (Offshore) Fund, LP
Alesco Preferred Funding X, Ltd.
Alesco Preferred Funding XI, Ltd.
Libertas Preferred Funding I, Ltd.
Kleros Preferred Funding V, Plc
2) Borrower shall deliver within 30 days of the Closing Date a control agreement or agreements between Cohen Brothers, LLC and The Bancorp Bank for deposit accounts held by Cohen Brothers, LLC with The Bancorp Bank.
3) Borrower shall deliver within 60 days of the Closing Date Subsidiary Guarantors Alesco Preferred Funding XII, Ltd. and Alesco Preferred Funding XIII, Ltd. stock certificates pledged as collateral under the Collateral Pledge Agreement.
4) Borrower shall deliver within 30 days of the Closing Date a filed UCC Financing Statement Amendment terminating the UCC Financing Statement (#2007048099) filed, on April 6, 2007, with the Washington, D.C. Recorder of Deeds by Royal Bank of Canada, as secured party, with respect to the assets described therein of Alesco Holdings, Ltd., as debtor.
Schedule 7.4
Transactions with Affiliates and Subsidiaries
Monthly rental charge of $4,162 to RAIT Financial Trust for Cira Centre Office Space.
Unsecured Subordinated Promissory Note dated June 25, 2008 with Christopher Ricciardi for $1,056,233.91.
Unsecured Subordinated Promissory Note dated June 25, 2008 with Daniel Cohen for $2,112,447.80.
Unsecured Subordinated Promissory Note dated December 19, 2009 with Christopher Ricciardi for $108,958.22
Unsecured Subordinated Promissory Note dated December 19, 2009 with Daniel Cohen for $523,277.16
The Companys bank deposits held with The Bancorp, Inc.
The Company recognizes dividend income on its investment in Star Asia.
The Company recognizes unrealized and realized gains and losses on its investment in Star Asia. The unrealized gains and losses and realized gains and losses, if any, are recorded as a component of principal transactions in the consolidated statements of operations.
The Company earns management and incentive fees on its management contract with EuroDekania.
The Company recognizes dividend income on its investment in EuroDekania.
The Company recognizes unrealized and realized gains and losses on its investment in EuroDekania.
The Company recognizes its share of the income or loss of Star Asia Manager as income or loss from equity method affiliates in the consolidated statements of operations. From time to time, the Company may advance Star Asia Manager funds for normal operating purposes; such advances are a component of due from related party in the consolidated balance sheets.
The Company recognizes its share of the income or loss of Star Asia SPV, LLC as income or loss from equity method affiliates in the consolidated statements of operations.
The Company recognizes dividend income on its investment in MFCA, as a component of principal transactions and other income in the consolidated statements of operations.
Under the fair value option of SFAS No. 159, the Company recognizes unrealized and realized gains and losses on its investment in MFCA.
Deep Value General Partner has been identified as a related party because (i) the Deep Value General Partner is an equity method affiliate of the Company; and (ii) certain employees of the
Company own 50% of the Deep Value General Partner. The Company recognizes its share of the income or loss of the general partner since it is accounted for under the equity method. The income or loss is recorded as income or loss from equity method affiliates in the consolidated statements of operations.
The Company earns management and incentive fees on its management contract with Deep Value Offshore Fund
The Company began reimbursing RAIT for certain costs incurred by RAIT for office space in New York that is occupied by the Companys chairman and principal of its majority member.
Exhibit 31.1
SECTION 302 CEO CERTIFICATION
I, Daniel G. Cohen, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Cohen & Company Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Signed: | /s/ Daniel G. Cohen | |
Name: | Daniel G. Cohen | |
Title: Chief Executive Officer and Chief Investment Officer |
Date: November 9, 2010
2
Exhibit 31.2
SECTION 302 CFO CERTIFICATION
I, Joseph W. Pooler, Jr., certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Cohen & Company Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Signed: | /s/ Joseph W. Pooler, Jr. | |
Name: | Joseph W. Pooler, Jr. | |
Title: Executive Vice President, Chief Financial Officer and Treasurer |
Date: November 9, 2010
4
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Cohen & Company Inc. (the Company) for the three months ended September 30, 2010, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Daniel G. Cohen, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Signed: | /s/ Daniel G. Cohen | |
Name: | Daniel G. Cohen | |
Title: Chief Executive Officer and Chief Investment Officer |
Date: November 9, 2010
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Cohen & Company Inc. (the Company) for the three months ended September 30, 2010, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Joseph W. Pooler, Jr., Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Signed: | /s/ Joseph W. Pooler, Jr. | |
Name: | Joseph W. Pooler, Jr. | |
Title: Executive Vice President, Chief Financial Officer and Treasurer |
Date: November 9, 2010